Deadline to Sue for Fraud or Breach of Fiduciary Duty in Texas

The basic rule: four years

Section 16.004(a) of the Texas Civil Practice and Remedies Code lists the claims that must be brought within four years after the day the cause of action accrues. Fraud is item (4). Breach of fiduciary duty is item (5). The Legislature added both in 1999 to settle a split among the courts of appeals, some of which had applied two years to fiduciary claims.

Four years sounds generous. In practice the question is never the length of the period but the day it starts, because business fraud and fiduciary breaches are frequently discovered long after they begin.

When the clock starts: accrual

Texas follows what courts call the legal injury rule. A claim accrues when a wrongful act causes a legal injury, even if the injury is not discovered until later and even if all the resulting damages have not yet occurred. For a fraud claim, that is generally when the plaintiff acted in reliance on the false statement and was harmed, usually the closing, the signing or the payment. For a fiduciary breach, it is when the fiduciary's disloyal act caused harm or produced the fiduciary's gain.

The consequence is that a business can lose a claim it never knew it had. Texas tempers that result with two doctrines, both of which the plaintiff must plead and prove.

The discovery rule

The discovery rule defers accrual until the plaintiff knew, or in the exercise of reasonable diligence should have known, of the wrongful act and resulting injury. It applies only to a category of cases, not case by case: the injury must be inherently undiscoverable, meaning by its nature unlikely to be discovered within the limitations period despite due diligence, and the evidence of injury must be objectively verifiable.

The Texas Supreme Court has repeatedly described the rule as a narrow exception for exceptional cases. In Marcus & Millichap Real Estate Investment Services v. Triex Texas Holdings (Tex. 2023) the court reaffirmed that framework and declined to defer accrual where the plaintiff had the means to learn the facts. Fraud and fiduciary breach are categories where the rule is often argued, because concealment is part of the wrong, but it is not automatic. A plaintiff who had access to the books, received statements it did not read, or was told facts that should have prompted inquiry will usually be charged with knowledge from that point.

Fraudulent concealment

Fraudulent concealment is a separate doctrine with a different basis. It does not change when the claim accrued; it stops the defendant from relying on limitations for as long as the defendant's own concealment kept the plaintiff from discovering the wrong. The plaintiff must show that the defendant actually knew of the wrong and concealed it, by affirmative acts or, where there was a duty to disclose, by silence. The tolling ends when the plaintiff discovers the wrong or, with reasonable diligence, should have.

The doctrine matters most in fiduciary cases. A fiduciary has a duty of full disclosure, so a fiduciary's silence about his own breach can amount to concealment in a way that a stranger's silence would not. Even so, the plaintiff must prove the concealment and the diligence; the court will not presume either.

Example

Suppose the managing member of a Dallas LLC began in March 2021 to pay a company he secretly owned for consulting services that were never performed. The payments appear in the general ledger as "professional fees." The other members receive annual financial statements that show the fees as a line item without detail. In February 2026 a new bookkeeper traces the vendor to the manager. The last payment was in 2024. Under the legal injury rule, the claims for 2021 payments accrued in 2021 and the four years ran in 2025. The members will argue the discovery rule: the self-dealing was inherently undiscoverable because the manager controlled the records and disguised the payments. They will also argue fraudulent concealment: he knew and said nothing while owing a duty to disclose. The manager will answer that the fees were on every statement and a question would have revealed the vendor. The outcome depends on what the statements showed and what a reasonably diligent member would have asked. The 2022 and later payments are within four years regardless.

The shorter deadlines that travel with fraud claims

A fraud case rarely carries one claim. The companions often have shorter periods, and a plaintiff who waits for the four-year fraud deadline may find the fallback theories already gone.

Negligent misrepresentation deserves particular attention. It is the claim that survives when the jury is not convinced the speaker knew the statement was false, and it generally expires two years before the fraud claim it accompanies. The claim is explained in negligent misrepresentation in Texas business disputes.

Federal court, arbitration and tolling agreements

Texas limitations periods apply to Texas claims wherever they are filed, including in federal court under diversity jurisdiction and in arbitration. Federal claims that accompany a fraud case, such as securities fraud, have their own federal periods.

When a deadline is approaching and the parties are negotiating, they can sign a tolling agreement that stops the clock for an agreed period. It avoids filing suit to preserve a claim that may settle, and it is enforceable as a contract. How one works, and what it should say, is covered in what is a tolling agreement.

How limitations is decided in the case

Limitations is an affirmative defense: the defendant must plead it and prove when the claim accrued. If the defendant does so, the burden shifts to the plaintiff to plead and prove the discovery rule or fraudulent concealment. These issues are often decided on summary judgment, before trial, on the documentary record of what the plaintiff received and when. The evidence that wins them is the same evidence that shows the fraud: the statements the plaintiff was given, the questions it asked, and the answers it received. Preserving that record from the moment of suspicion is the single most useful thing a business can do; the broader list is in what evidence to save before suing.

What to do if you think time may be short

Do not wait for certainty. A litigator can usually determine within a short review whether the four-year period has run on its face, whether the discovery rule or concealment has a realistic basis, which companion claims are already time-barred, and whether a tolling agreement or an immediate filing is the right step. Filing suit stops the clock; investigating does not. Tina Wysk evaluates and litigates fraud and fiduciary claims for businesses and individuals in Dallas, including the limitations questions that decide many of them.