Calif. SC says new wrong resets statute of limitations

SAN FRANCISCO - (Legal Newsline) - The California Supreme Court has ruled that actions under the Unfair Competition Law are subject to the common law rule of accrual which allows that when a new wrong is committed in a recurring wrong, the statute of limitations is reset for the prior wrongs committed.

Justice Kathryn M. Werdegar wrote the opinion of the unanimous seven-member Court.

The ruling comes out of a case filed by Jamshid Aryeh, owner and operator of ABC Copy & Print who entered into an agreement with Canon Business Solutions, the defendant, to lease copiers for a 60-month term.

As part of the arrangement, Canon serviced the copiers periodically and shortly after entering into two leases with Canon, Aryeh noticed discrepancies between meter readings done by Canon employees and the number of copies actually made on each copier, according to the opinion.

Aryeh concluded that Canon employees, as part of their maintenance, were running test copies and these copies, totaling over 5000 copies between February 2002 and November 2004, caused him to exceed monthly contractual allowance resulting in excess copy charges and late fees to Canon.

"Aryeh sued in January 2008, alleging a single claim for violation of the UCL. The original complaint alleged Canon knew or should have known it was charging for excess copies and that the practice of charging for test copies was both unfair and fraudulent.

"The complaint also included class allegations. Aryeh originally sought restitution and injunctive relief, but later amended his complaint to seek only restitution," the opinion states.

After several demurrers and leaves to amend, the trial court sustained a demurrer and dismissed the action with prejudice. Although the court cited several grounds, it made clear that the primary basis for the dismissal was the statute of limitations, according to the opinion.

"The trial court read state law as establishing that 'the clock [on a UCL claim] starts running when the first violation occurs.' Consequently, because the second amended complaint established a first violation in 2002, the claim was barred by the four-year statute of limitations."

A divided Court of Appeal affirmed the trial court with the majority agreeing that "neither delayed discovery nor the continuing violation doctrine could be applied to extend the statute of limitations for UCL claims" and so Aryeh's claim was untimely.

The dissent would have reversed the trial court under the theory of continuous accrual which would have found some of Aryeh's claim "stale" but some parts still subject to the claim.

Aryeh appealed the decision to the state's high court.

"An affirmative defense," Werdegar wrote, "the statute of limitations exists to promote the diligent assertion of claims, ensure defendants the opportunity to collect evidence while fresh, and provide repose and protection from dilatory suits once excess time has passed.

"The duration of the limitations period marks the legislatively selected point at which, for a given claim, these considerations surmount the otherwise compelling interest in adjudicating on their merits valid claims.

The Court discussed a number of doctrines which allow exceptions to the statute of limitations before defining the exception applicable to this case.

"The continuing violation doctrine aggregates a series of wrongs or injuries for purposes of the statute of limitations, treating the limitations period as accruing for all of them upon commission or sufferance of the last of them.

"[U]nder the theory of continuous accrual, a series of wrongs or injuries may be viewed as each triggering its own limitations period, such that a suit for relief may be partially time-barred as to older events but timely as to those within the applicable limitations period."

The Court discussed the Court of Appeals split on whether the doctrine of accrual applies on UCL cases before concluding "the UCL is governed by common law accrural rules to the same extent as any other statue."

"Canon billed Aryeh on a recurring monthly basis. Accepting the truth of the complaint's allegations solely for purposes of resolving Canon's limitations defense on demurrer, those bills periodically included test copy charges that were unfair or fraudulent.

"By its nature, the duty Canon owed - the duty not to impose unfair charges in monthly bills - was a continuing one, susceptible to recurring breaches. Accordingly, each alleged breach must be treated as triggering a new statute of limitations.

"Aryeh cannot recover alleged excess charges preceding the four-year limitations period, but is not foreclosed from seeking recovery for charges to the extent they fall within that period. Because the complaint alleges excess charges within the four years preceding suit, it is not completely barred by the statute of limitations.

Werdegar concludes, "In sum: At the demurrer stage, Aryeh is the master of his complaint, and we must accept his allegations at face value. He has alleged a recurring unfair act-the inclusion in monthly bills of charges for copies Canon itself made.

"The theory of continuous accrual applies to such allegations, and insofar as the operative complaint alleges at least some such acts within the four years preceding suit, the suit is not entirely time-barred."

"We express no opinion as to the validity of other defenses asserted by Canon in its demurrer or the availability of any defenses at a later stage of the proceedings. We hold only that, at the demurrer stage, Aryeh's complaint is not barred in its entirety by the statute of limitations.

"As that was the Court of Appeal's sole basis for affirming the trial court's dismissal of this action, its judgment must be reversed. We remand for further proceedings not inconsistent with this opinion.