Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—CalSupCt: Continuous Accrual Doctrine Applies to California Unfair Competition Law Claims, (Jan 25, 2013)

By Jody Coultas, J.D.

A copy business owner’s California Unfair Competition Law (UCL) claim against Canon Business Solutions, Inc. should not have been dismissed for being filed outside the statute of limitations because the owner alleged a recurring unfair act occurring within the limitations period, the California Supreme Court has ruled (Aryeh v. Canon Business Solutions, Inc., January 24, 2013, Werdegar, K.).

Canon sells, leases, services, and repairs copiers and other office products. The owner entered into an agreement with Canon to lease copiers in which Canon agreed to periodically service the copiers. During those service appointments, Canon employees ran test copies resulting in the business owner exceeding his monthly allowances and owing excess copy charges and late fees to Canon. The owner filed a UCL claim for fraudulent and unfair business practices.

A trial court sustained Cannon’s demurrer without leave to amend and dismissed the action with prejudice on the grounds that the claim was filed outside the statute of limitations. Because the second amended complaint established a first violation in 2002 but was filed in 2008, the claim was barred by the four-year statute of limitations, the court held. A divided Court of Appeal affirmed, and 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.

Common law theory of continuous accrual posits that a cause of action challenging a recurring wrong may accrue not once but each time a new wrong is committed. There are two main branches of continuing-wrong accrual principles, the continuing violation doctrine and the theory of continuous accrual. No part of the UCL offers a definition of what it means for a UCL claim to accrue.

The UCL is governed by common law accrual rules to the same extent as any other statute, according to the court. Unless expressly provided, the court does not interpret a statute as altering the common law and construes it to avoid conflict with common law rules. The silence in the statute and the legislative history triggered a presumption in favor of permitting settled common law accrual rules to apply. The trial and appellate court followed one side of a split in California court holdings finding that the UCL foreclosed modified accrual. However, the holding finding that accrual did not apply in UCL cases was based on faulty interpretation. That a cause of action was pleaded under the UCL should not preclude application of an equitable exception to the usual accrual rule. As with common law claims challenging fraudulent conduct, a UCL deceptive practices claim should accrue only when a reasonable person would have discovered the factual basis for a claim.

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. However, nothing in the operative complaint alleged the presence of factors that might warrant application of the continuing violation doctrine. The owner identified a series of discrete, independently actionable wrongs. This was not a case in which a wrongful course of conduct became apparent only through the accumulation of a series of harms since the owner was aware of, recognized as wrongful, and was recording as early as 2002, Canon’s allegedly fraudulent and unfair acts.

Insofar as the complaint alleged at least some such acts within the four years preceding the suit, the court held that the owner’s UCL claim was not entirely time-barred. The last element accrual rule holds that a statute of limitations runs from the occurrence of the last element essential to the cause of action. Separate, recurring invasions of the same right can each trigger their own statute of limitations. Continuous accrual applies whenever there is a continuing or recurring obligation and allows for recovery only for damages arising from those breaches falling within the limitations period. To determine whether the continuous accrual doctrine applies, courts look at the nature of the obligation allegedly breached rather than the label as a UCL claim. On its face, the operative complaint alleged that the recurring imposition of excess charges was not only fraudulent but also unfair. If the claims are actionable, each monthly imposition of excess charges would constitute a new unfair act with its own attendant limitations period

The case is No. S184929.

Attorneys: R. Duane Westrup (Westrup Klick) for Jamshid Aryeh. Kent J. Schmidt (Dorsey & Whitney) for Canon Business Solutions, Inc.

Companies: Canon Business Solutions, Inc.

Cases: ConsumerProtection StateUnfairTradePractices CaliforniaNews