The statute of limitations defense seems simple: when a party has waited too long to bring a claim, the claim is barred by the passage of time prescribed by the Legislature. Complexity arises when the following factors are considered: what is the applicable time period; when does it begin; are there circumstances when the time may be suspended from running; is a series of wrongs considered one wrong for which the time begins to run at the first in the series or is each item in the series treated as a separate wrong each with its own limitations period. These are the issues addressed by the California Supreme Court in the course of determining the applicable statute of limitations under the state’s Unfair Competition Law (“UCL”) in the case of Aryeh v Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185. Although framed as a decision under the UCL, the opinion succinctly summarizes and explains the relevant statute of limitations considerations that apply in every case while it also resolves differing interpretations by the lower courts as to the application of these principles to the UCL.
The plaintiff Jamshid Aryeh runs a copy business. Defendant Canon Business Solutions, Inc. (Canon) sells, leases, services, and repairs copiers and other office products. In November 2001 and February 2002, Aryeh entered agreements with Canon to lease copiers for a term of 60 months. The leases required Aryeh to pay monthly rent for each copier, subject to a maximum copy allowance. Copies in excess of the monthly allowance required payment of an additional per copy charge. Canon serviced the leased copiers periodically. Shortly after entering the two leases, Aryeh noticed discrepancies between meter readings taken by Canon employees and the actual number of copies made on each copier. When Canon would not respond to Aryeh’s complaints, Aryeh began compiling independent copy records. Aryeh concluded that during service visits, Canon employees were running test copies—according to the operative complaint, a total of at least 5,028 copies over the course of 17 service visits between February 2002 and November 2004. These copies resulted in Aryeh exceeding his monthly allowances and owing excess copy charges and late fees to Canon. Aryeh sued Canon in January 2008, alleging a single claim for violation of the UCL and seeking restitution of the excess amounts paid. 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.
Canon demurred, arguing that the claim was barred by, inter alia, the UCL statute of limitations, Business & ProfessionsCode, § 17208. After twice sustaining demurrers with leave to amend, the trial court finally sustained a demurrer without leave to amend and dismissed the action with prejudice. Its order recited several grounds, but the court made clear the primary basis for dismissal was the statute of limitations. 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 majority agreed with the trial court that neither delayed discovery nor the continuing violation doctrine could be applied to extend the statute of limitations for UCL claims; accordingly, Aryeh’s claim was untimely. The dissent would have reversed under the theory of continuous accrual, reasoning that even if some parts of Aryeh’s claim were stale, not all parts of it were barred. The Supreme Court granted review to resolve lingering uncertainty over the timing of accrual and the applicability of continuing-wrong accrual principles under the UCL.
The Court’s analysis began with a consideration of the dual purpose of a statute of limitations: (1) to promote the diligent assertion of claims and to ensure defendants the opportunity to collect evidence while still fresh and (2) to provide repose and protection from dilatory suits once excess time has passed. The Court then reviewed when the limitations period, the period in which a plaintiff must bring suit or be barred, begins to run and noted it runs from the moment a claim accrues. Traditionally at common law, a cause of action accrues when it is complete with all of its elements—those elements being wrongdoing, harm, and causation. This is “the last element accrual rule”: ordinarily, the statute of limitations runs from the occurrence of the last element essential to the cause of action.
To align the actual application of the limitations defense more closely with the policy goals behind it, the courts and the Legislature have over time developed a handful of equitable exceptions to and modifications of the usual rules governing limitations periods. These doctrines may alter the rules governing either the initial accrual of a claim, the subsequent running of the limitations period, or both. The most important of these doctrines, “the discovery rule”, where applicable, postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action. “Equitable tolling”, in turn, may suspend or extend the statute of limitations when a plaintiff has reasonably and in good faith chosen to pursue one among several remedies and the statute of limitations’ notice function has been served. The doctrine of “fraudulent concealment” tolls the statute of limitations where a defendant, through deceptive conduct, has caused a claim to grow stale. 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. Finally, under 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.
In deciding when a UCL claim accrues, the Court began with the language of the UCL’s statute of limitations: “Any action to enforce any cause of action pursuant to [the UCL] shall be commenced within four years after the cause of action accrued.” (§ 17208.) Neither section 17208 nor any other part of the UCL offers a definition of what it means for a UCL claim to accrue. The Court contrasted the UCL limitations language with that of other limitations statues in which the Legislature has assumed the task of articulating the specific ways in which established common law principles may or may not apply. As examples the Court noted that Code Civ. Proc.§ 340.1, legislatively supplants common law delayed-discovery principles and
Code Civ. Proc., § 340.6, legislatively supplants common law equitable-tolling principles.
The Court found that this Legislative silence triggers a presumption in favor of permitting settled common law accrual rules to apply and assumed the Legislature intended the well-settled body of law that has built up around accrual, including the traditional last element rule and its equitable exceptions, to apply fully to the UCL.
In this case, the trial court concluded “because this is a [UCL section] 17200 claim … there is no continuing practices doctrine that applies here.” Affirming, the Court of Appeal majority held that a UCL claim necessarily “accrues when the defendant’s conduct occurs, not when the plaintiff learns about the conduct.” It went on to conclude that in addition to delayed discovery, the continuing violation doctrine also is categorically inapplicable to UCL claims.
In treating the UCL as exceptional for accrual purposes, the trial court and the Court of Appeal joined one side of a split in the Courts of Appeal over whether the UCL should, like any other statute, be interpreted as subject to all the usual rules of accrual, or whether the statute categorically forecloses modified accrual based on delayed discovery, continuing-wrong principles, and their ilk.
The Supreme Court, after considering the appellate cases on both sides of the divide, determined that the UCL is governed by common law accrual rules to the same extent as any other statute. In the process, the Court noted that for limitations purposes the UCL is a chameleon. The UCL affords relief from unlawful, unfair, or fraudulent acts; moreover, under the “unlawful” prong, the UCL “borrows” violations of other laws and treats them as unlawful practices’ that the unfair competition law makes independently actionable. Depending upon which prong is invoked, a UCL claim may most closely resemble, in terms of the right asserted, an action for, misappropriation, price fixing, interference with prospective economic advantage or any of countless other common law and statutory claims. Given the widely varying nature of the right invoked, the Court felt it makes sense to acknowledge that a UCL claim in some circumstances might support the potential application of one or another exception and in others might not. That a cause of action is labeled a UCL claim is not dispositive; instead, the nature of the right sued upon and the circumstances attending its invocation control the point of accrual. The common law last element accrual rule is the default, while exceptions to that rule apply precisely to the extent the preconditions for their application are met, as would be true under any other statute. The Court disapproved of the contrary authorities to the extent they hold otherwise.
The Court then turned to the application of these principles to the case at hand and the process by which, when ruling on a demurrer, the court should decide the issue. Canon bears the initial burden of proving Aryeh’s claims are barred by section 17208’s four-year limitations period. Thereafter, the burden shifts to Aryeh to demonstrate his claims survive based on one or more nonstatutory exceptions to the basic limitations period. That burden may be imposed even at the pleading stage. The Court felt that Canon had shown that under the default last element accrual rule, a claim accrued in February 2002 because beginning in February 2002, Canon imposed excess copying charges for test copies. It follows that no later than February 2002, Canon’s alleged wrongdoing caused Aryeh injury and a claim accrued. Accordingly, in the absence of an exception, the four-year statute of limitations would have run no later than 2006, barring Aryeh’s 2008 suit.
To preserve his suit, Aryeh looked to continuing-wrong accrual principles. There are two main branches: “the continuing violation doctrine” and “the theory of continuous accrual”.
The continuing violation doctrine serves a number of equitable purposes. Some injuries are the product of a series of small harms, any one of which may not be actionable on its own. Those injured in such a fashion should not be handicapped by the inability to identify with certainty when harm has occurred or has risen to a level sufficient to warrant action. Moreover, from a court-efficiency perspective, it is unwise to impose a limitations regime that would require parties to run to court in response to every slight, without first attempting to resolve matters through extrajudicial means, out of fear that delay would result in a time-barred action. Allegations of a pattern of reasonably frequent and similar acts may, in a given case, justify treating the acts as an indivisible course of conduct actionable in its entirety, notwithstanding that the conduct occurred partially outside and partially inside the limitations period. Here, however, the Court could find nothing in the operative complaint that alleges the presence of factors that might warrant application of the continuing violation doctrine.
As an alternative to the continuing violation doctrine, Aryeh argued the theory of continuous accrual. This theory is a response to the inequities that would arise if the expiration of the limitations period following a first breach of duty or instance of misconduct were treated as sufficient to bar suit for any subsequent breach or misconduct. Parties engaged in long-standing misfeasance would thereby obtain immunity in perpetuity from suit even for recent and ongoing misfeasance. In addition, where misfeasance is ongoing, a defendant’s claim to repose, the principal justification underlying the limitations defense, is vitiated. To address these concerns, the Court has long settled that separate, recurring invasions of the same right can each trigger their own statute of limitations. Generally speaking, continuous accrual applies whenever there is a continuing or recurring obligation. Because each new breach of such an obligation provides all the elements of a claim—wrongdoing, harm, and causation—each may be treated as an independently actionable wrong with its own time limit for recovery. However, unlike the continuing violation doctrine, which renders an entire course of conduct actionable, the theory of continuous accrual supports recovery only for damages arising from those breaches falling within the limitations period.
The Court concluded that, at least at the demurrer stage, Aryeh is the master of his complaint, and it must accept his allegations at face value. Since he had alleged a recurring unfair act—the inclusion in monthly bills of charges for copies Canon itself made—then the theory of continuous accrual applies. Because the complaint alleges at least some such acts within the four years preceding suit, the suit is not time-barred with respect to those acts falling within the preceding four year period.
COMMENT AND EVALUATION
This case is noteworthy for two reasons. First, it resolves a conflict among the lower courts regarding whether the UCL four year statute of limitations is absolute or, like other limitation statutes, is subject to equitable considerations and determines that equitable considerations apply. Second, it systematically discusses virtually all possible aspects of the determination of how limitations statutes should be interpreted and applied to determine when being late is too late to file a complaint.
Link to opinion: http://www.courts.ca.gov/opinions/documents/S184929.PDF