Editor’s Note: The following is a reprint of a BakerHostetler Class Action Defense Team Executive Alert released earlier today. 

Due in part to efforts of the BakerHostetler Columbus office Class Action Defense Team, Ohio has adopted a new statute of limitations for breach of written contract that, effective September 28, 2012, reduces the limitations period from 15 to 8 years. This change will have a significant impact in reducing exposure in alleged class actions in Ohio based on contract claims.

Ohio’s excessively lengthy statute of limitations for written contracts has had a negative impact on businesses defending against class actions, unnecessarily increasing exposure by expanding alleged classes to 15 years prior to the filing of a class action and allowing some plaintiffs to pressure defendants into settlements regardless of the merits simply because of the significant exposure. This limitations period was equal to only one other state for the longest in the country, while 40 states have limitations periods of three to six years. Frustrated by how this long statute of limitations encouraged class actions, Mark Johnson and Rodger Eckelberry published an article, “Bad For Business: Ohio’s Statute of Limitations for Written Contracts,” in the January 2011 edition of Columbus Bar Lawyers Quarterly.

The article drew the attention of several trade groups and legislators, and HB 170 and SB 224 were introduced in 2011 in the Ohio legislature to shorten the statute of limitations. Mark Johnson testified before House and Senate committees in support of the legislation, with invaluable research assistance from associates Trischa Snyder Chapman (COL) and Jeremy Hart (COL). Faced with a shortened statute of limitations that would be prospective only, whose benefits would take years to realize, Columbus class action lawyers proposed an amendment that would allow the new statute of limitations to be applied retroactively in a constitutionally permissible manner, based on research by associate Maggie Reid (COL). The bill, which was passed by both houses and signed into law effective September 28, 2012, applies retroactively.

The new Ohio statute of limitations for breach of a written contract, codified at Ohio Rev. Code Section 2305.06, is now eight years. The law applies retroactively to claims accruing prior to the effective date, and for those claims the applicable statute of limitations is the shorter of eight years or the limitations period that otherwise would have applied under the prior 15-year statute of limitations. So, for class actions filed after September 28, 2012, which assert claims based on written contract, the class period can extend no longer than eight years. While still longer than the majority of states, the new shortened Ohio statute of limitations for written contracts should serve to reduce businesses’ exposure in class actions asserting claims based on written contract.

If you have any questions about this executive alert, please contact any member of BakerHostetler’s  Class Action Defense Team.