Ohio House Bill 694 Proposes Shortening of Statute of Limitations

Ohio House Bill 694 Proposes Shortening of Statute of Limitations
by Stacie Hackel Snow

Creditors should keep a watchful eye on the state capital this new year, as there may be a significant updates to Ohio Revised Codes §2305.06 and 2305.07.  On May 22, 2018, Rep. George Lang introduced House Bill 694, which proposes to shorten the statute of limitations for all contracts.  Co-sponsors of the bill include: Rep. Reineke, Rep. Riedel, Rep. Romanchuk, and Rep. Becker.

As proposed, HB 694 would reduce the statute of limitation on written contracts from eight (8) years to three (3) years and reduce the statute of limitations on non-written contracts from six (6) years to three (3) years.  If enacted, the period of limitations for causes of action would be three years from the bill’s effective dates, or the expiration of the period of limitations that was in effect prior to the bill’s effective dates, whichever occurs first.

Rep. Lang believes HB 694 will, “help Ohio [small businesses] to flourish and prosper.” While it is unclear how much of a boon HB 694 will be to small businesses, there is no doubt HB 694 will have a negative effect on all creditors.  As of July 2018, the national average statute of limitations for written contracts is just over six years and approximately five years for non-written contracts. If HB 694 is enacted, a three year statute of limitations on all contracts would put Ohio well below the national average. As a result, Ohio will become known as a debtor friendly state, similar to Texas and Florida.  There are a myriad of likely additional unintended and cascading negative effects the bill would have, including but not limited to a rush to file claims against debtors, which will create significant strain on creditors and the judicial system, in order to protect creditors’ rights.

Two hearings were held on the bill in 2018.  During the second hearing witnesses from the National Federation of Independent Business, Ohio Chamber of Commerce, the Ohio Manufacturer’s Association and Ohio Alliance for Civil Justice testified in support of HB 694.  The organizations’ letters of support alleged vague and hard to quantify advantages such as: reducing the burden of paperwork and record keeping on small businesses, improving the business climate in Ohio, and providing Ohio businesses with more “predictability” and “certainty.” Inexplicably, the Fiscal Note and Local Impact Statement suggests if enacted into law, HB 694 will, “…create a savings effect on court operations, the magnitude of which is not readily measurable…”  The savings effect would most likely be exclusively at the expense of creditors.  After the second hearing, there were reportedly a flurry of emails and calls in opposition of HB 694, consequently it was pulled from committee consideration in early December, but will likely be re-introduced this year.  To see the latest updates on HB 694, please visit: https://www.legislature.ohio.gov/legislation/legislation-summary?id=GA132-HB-694

KWA encourages anyone concerned that HB 694 may negatively affect their business to contact their representatives regarding their objections and concerns. Find your representatives here: http://www.ohiohouse.gov/