Opinion
NO. 3:99-CV-2697-X
June 12, 2000
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant's Motion to Dismiss ("Motion"), filed on March 15, 2000. In the Motion, Defendant seeks to dismiss Plaintiffs' claims for negligence, gross negligence, negligent misrepresentation, and violations of the Texas Deceptive Trade Practices Act ("DTPA"). For the reasons stated below, Defendant's Motion is GRANTED.
I. FACTUAL BACKGROUND
Plaintiffs, Aegis Healtheare, P.A. and Medical Directions, Inc., brought suit against Defendant, Shared Medical Systems Corporation, alleging negligence, gross negligence, fraud, breach of contract, negligent misrepresentation, and violations of the Texas DTPA. Plaintiffs contend that Defendant failed to properly collect billing accounts for a group of physicians. Further, Plaintiffs allege that Defendant's failure to collect billing accounts led to Plaintiffs' financial ruin and bankruptcy in June 1997. Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, Defendant moves to dismiss Plaintiffs' claims for negligence, gross negligence, negligent misrepresentation, and violations of the DTPA, asserting that these claims are time-barred pursuant to the applicable two-year statutes of limitations. Defendant also seeks dismissal of the DTPA claim because Plaintiff Aegis Healtheare is not a "consumer" as defined by the DTPA.
In their responses to Defendant's Motion, Plaintiffs argue that pursuant to § 108(a) of the Bankruptcy Code, the two-year statute of limitations period was tolled, and thus, Plaintiffs' claims for negligence, gross negligence, negligent misrepresentation, and violations of the DTPA are timely.
II. ANALYSIS
Rule 12(b)(6) motions to dismiss for failure to state a claim are viewed with disfavor and are rarely granted. See Kaiser Alumimum Chem. Sales, Inc. v. A vondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982). A district court cannot dismiss a complaint for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief See Id. In reviewing a motion to dismiss pursuant to Rule 12(b)(6) the court must accept all well-pleaded facts in the complaint as true, and view them in the light most favorable to the plaintiff See Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). The court has the authority to dismiss a suit under Rule 12(b)(6) if the complaint demonstrates that the plaintiff cannot prove any set of facts that would entitle him to relief See Kaiser Aluminum Chem., 677 F.2d at 1050. A complaint that shows relief to be barred by the statute of limitations may be dismissed for failure to state a cause of action. See id.
Defendant moves to dismiss Plaintiffs' claims for negligence, gross negligence, negligent misrepresentation, and violations of the DTPA per Rule 12(b)(6) because Defendant argues that such claims are barred by the applicable statutes of limitations. Specifically, Defendant alleges that Plaintiffs' claims of negligence, gross negligence, and negligent misrepresentation are barred by the two-year statute of limitations on such claims as provided by TEX. Civ. PRAC. REM. CODE § 16.003 (West 1986). Defendant also argues that Plaintiffs' DTPA claim is barred by the two-year statute of limitations on such claims as provided by TEX. BUS. COM. CODE § 14.565 (West 1986). Assuming that the statutes of limitations began running in June 1997 at the latest, Defendant argues that Plaintiffs' claims are barred because Plaintiffs filed the claims in October 1999, more than two years later. Defendant adds that Plaintiffs' DTPA claim is barred because Plaintiff Aegis Healtheare is not a "consumer" as defined by the DTPA.
In response, Plaintiffs do not dispute the application of the two-year statutes of limitations to their claims and concede that the latest date on which their claims accrued was June 20, 1997. However, Plaintiffs argue that the statutes of limitations were tolled by Bankruptcy Code § 108(a) when they filed their Chapter II bankruptcy petition on June 20, 1997. Plaintiffs contend that because § 108(a) provides a two-year tolling of the statutes of limitations, their claims are timely.
Plaintiffs' arguments are unpersuasive. Bankruptcy Code § 108(a) states in relevant part:
If applicable nonbankruptcy law . fixes a period within which the debtor may commence an action, and such period has not expired before the date of filing of the petition, the trustee may commence such action only before the latter of —
(1) the end of such period, including any suspension of such period occurring on or after the commencement of the case, or
(2) two years after the order for relief
The date of the "order for relief' is the original filing date of the Chapter II bankruptcy petition. See In re Phillip, 948 F.2d 985, 988 (5th Cir. 1991). Section 108(a)(2) simply "provides for a temporary extension of statutes of limitations to allow the trustee or debtor additional time to regroup after bankruptcy has been filed. It does not anticipate a permanent suspension of all statutes of limitations." In re Armstrong, 200 F.3d 465, 472 (5th Cir. 2000) (emphasis added); see also Burcold Express, Inc. v. Parker Hannifin Corp., 808 F. Supp. 553, 557 (S.D. Tex. 1992). In this case, such extension expired on June 20, 1999 at the latest, and Plaintiffs' claims at issue are untimely.
Plaintiffs' argument that § 108(a)(2) tolls the statute of limitations is baseless. According to Plaintiffs,
[t]he first negligent conduct alleged by Plaintiffs occurred in November of 1995. The bankruptcy was filed June 20, 1997 tolling the statute of limitations until June 20, 1999. When the statute of limitations began to run again in June of 1999, Plaintiffs had four months remaining until their claims expired on November 1999. Plaintiffs filed suit on October 29, 1999, and thus, their claims are timely.
PI.'s Resp. at 3. According to Plaintiffs, the two-year statute of limitations would run from either November 1995 at the earliest or June 1997 at the latest, be tolled by § 108(a) (2) on June 20 1997 for two years, and then run again on June 20, 1999 to expire either in November 1999 or June 2001. Plaintiffs contend that because courts refer to § 108(a)(2) as a "tolling" provision, and because Black's Law Dictionary defines "tolling" as "[t]o suspend or stop temporarily," § 108(a)(2) tolled the applicable statutes of limitations from June 20, 1997 to June 20, 1999.
Unfortunately for Plaintiffs, there is no basis in the text of § 108(a)(2) or any other relevant authority in support of this argument. Nothing in § 108(a) suggests that it tolls or suspends any limitations period. As noted above, the U.S. Court of Appeals for the Fifth Circuit has stated that § 108(a)(2) does not suspend statutes of limitations but merely provides an extension of time. See In re Armstrong, 200 F.3d at 472. Plaintiffs fail to cite a single case in which § 108(a)(2) tolls the applicable statute of limitations. While Plaintiffs are correct that courts have referred to § 108(a)(2) as a "tolling" provision, such references are irrelevant because none of the cases Plaintiffs cite in support of their argument holds that § 108(a)(2) tolls or suspends a limitations period for two years, after which the limitations period runs again. Not only is such argument irreconcilable with the plain text of § l08(a)(2), but the very authority relied upon by Plaintiffs directly refute their argument. See In re Armstrong, 200 F.3d at 472 (noting in dicta that § 108(a)(2) does not suspend statutes of limitations but merely provides an extension of time), TLI Inc., v. United States, 100 F.3d 424, 426-27 (5th Cir. 1996) (holding plaintiffs claims to be time-barred because they were brought more than two years after plaintiff filed for bankruptcy protection); Askanase v. Fatjo, 828 F. Supp. 465, 470 (S.D. Tex. 1993) ("Section 108(a)(2) extends for two years beyond . . the date of the original bankruptcy filing, the period in which Askanase could commence an action on any claim that had not expired as of the bankruptcy filing date.").
In particular, while Plaintiffs correctly interpret Cunninghamqq v. Healthco, Inc., 824 F.2d 1448, 1460 (5th Cir. 1987), it does not support their argument. The Fifth Circuit held in Cunningham that the plaintiff's DTPA claim accrued on February 24, 1981. See id at 1461. Because the plaintiff filed for bankruptcy on February 24, 1983, the two-year statute of limitations for DTPA claims did not expire on that date, but was temporarily extended to February 24, 1985 per of § 108(a)(2). See id. The plaintiff's DTPA claim was timely when it was filed on July 2, 1984 because the extension was still in effect at that time. See id. However, there is nothing in Cunningham suggesting that any applicable limitations period is tolled by § 108(a)(2) for two years, after which any time remaining in the limitations period runs again until it expires.
Thus, Plaintiffs' claims for negligence, gross negligence, negligent misrepresentation, and violations of the DTPA are time-barred because they were brought on October 29, 1999, more than four months after the expiration of the two-year extension provided by § 108(a)(2). Since Plaintiffs' claims are time-barred, the Court need not address whether the DTPA claims are barred because Plaintiff Aegis Healtheare is not a "consumer" as defined by the DTPA.
II. CONCLUSION
For the foregoing reasons, Defendant's Motion to Dismiss is GRANTED, and Plaintiffs claims for negligence, gross negligence, negligent misrepresentation, and violations of the DTPA, alleged as the second, third, fourth, and fifth claims for relief in their First Amended Complaint, are hereby DISMISSED WITH PREJUDICE.
It is SO ORDERED