Aryeh v. Canon Business Solutions, Inc.

Citations: 55 Cal. 4th 1185; 292 P.3d 871; 151 Cal. Rptr. 3d 827; 2013 Cal. LEXIS 480Docket: S184929

Court: California Supreme Court; January 24, 2013; California; State Supreme Court

Original Court Document: View Document

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The Supreme Court of California is reviewing the case of Jamshid Aryeh against Canon Business Solutions, Inc. regarding the application of the common law theory of continuous accrual to claims under the Unfair Competition Law (UCL). The court analyzes whether ongoing violations can reset the statute of limitations for Aryeh's claim, which stems from alleged unfair billing practices related to excess copy charges incurred due to Canon's test copies. Aryeh entered into two copier lease agreements with Canon in 2001 and 2002, but discrepancies in meter readings led him to believe Canon charged him unfairly for test copies during service visits.

Aryeh filed his lawsuit in January 2008, claiming a violation of the UCL, but Canon demurred, asserting the claim was barred by the statute of limitations since the first violation occurred in 2002. The trial court, upholding the statute of limitations as the primary reason for dismissal, agreed with Canon, stating that the clock on UCL claims starts with the initial violation. The Court of Appeal affirmed this decision, but a dissenting opinion argued for the application of continuous accrual, suggesting that not all parts of Aryeh's claim were stale.

The Supreme Court concludes that UCL claims are subject to common law accrual rules and that continuous accrual principles apply, allowing Aryeh’s complaint to avoid dismissal on statute of limitations grounds. The court ultimately reverses the Court of Appeal's judgment and addresses the legal question of statute of limitations application based on undisputed facts.

Allegations in the operative complaint are presumed true to evaluate if Aryeh’s claim is legally barred. The statute of limitations serves as an affirmative defense, aiming to encourage timely claims, protect defendants from stale evidence, and provide repose against prolonged litigation. The limitations period begins when a claim accrues, defined traditionally as when all elements of the cause of action—wrongdoing, harm, and causation—are present. The last element accrual rule dictates that the statute of limitations starts from the occurrence of the last essential element. Various equitable exceptions to the statute of limitations exist, including the discovery rule, which delays accrual until the plaintiff discovers the cause of action; equitable tolling, which may extend the limitations period when a plaintiff pursues one of multiple remedies; fraudulent concealment, which tolls the statute when a defendant's deceptive actions delay a claim; the continuing violation doctrine, which aggregates multiple wrongs under a single accrual point; and continuous accrual, which allows each wrongful act to trigger its own limitations period, potentially making some claims timely while others are not.

The excerpt addresses the accrual of claims under the Unfair Competition Law (UCL) as governed by common law principles. It highlights that the UCL statute of limitations mandates initiating any action within four years after the cause of action accrues, yet it lacks a specific definition for "accrued." This absence implies a presumption favoring the application of established common law accrual rules, as statutes typically do not alter common law unless explicitly stated. The legislative history of Section 17208, enacted in 1977, indicates that the limitations period was meant to clarify rather than modify existing principles. Consequently, courts are tasked with determining the point of accrual, which may involve applying traditional rules, such as the last element rule and equitable exceptions.

The trial court ruled that UCL claims do not allow for a continuing practices doctrine, a point affirmed by the Court of Appeal, which stated that a UCL claim accrues when the defendant's conduct occurs, rather than when the plaintiff becomes aware of it. This decision reflects a broader division among appellate courts regarding whether UCL claims should adhere to standard accrual rules or be exempt from doctrines like delayed discovery and continuing violations.

The excerpt analyzes the legal interpretation of the accrual rule in relation to the Unfair Competition Law (UCL) and its comparison to California's Cartwright Act, as influenced by federal antitrust law. It highlights a division among California courts regarding the applicability of the discovery rule to UCL claims, tracing this split back to the federal case Stutz Motor Car of America v. Reebok International Ltd., which held that the UCL categorically prohibits common law modifications to the accrual rule. The reasoning in Stutz is critiqued for erroneously equating interpretations of federal antitrust law with state law, specifically the Cartwright Act, which was based on different historical statutes, rendering federal rulings only instructive rather than conclusive. The excerpt argues that the Stutz court failed to adequately justify applying principles from the Cartwright Act to UCL claims, despite their differing origins and scopes. It notes that the contrary view has been supported by subsequent cases, such as Broberg v. The Guardian Life Ins. Co. of America, which emphasized that the nature of the claim, rather than its form, should govern the applicability of the statute of limitations, allowing for equitable exceptions in UCL deceptive practices claims.

Broberg establishes that the Unfair Competition Law (UCL) does not categorically limit or guarantee the application of common law accrual exceptions. It emphasizes that the UCL is versatile, providing remedies for unlawful, unfair, or fraudulent acts and treating violations of other laws as independently actionable under its unlawful prong. Claims under the UCL can resemble various common law and statutory claims, suggesting that the nature of the asserted right influences the potential application of accrual exceptions. 

The UCL's equitable nature supports the application of common law accrual rules, meaning that the label of a claim does not determine its accrual; rather, the specifics of the right and its circumstances do. The last element accrual rule serves as the default, with exceptions applicable when their preconditions are met. The document disapproves of prior cases that contradict this interpretation.

Turning to Canon’s statute of limitations defense, Canon must initially demonstrate that Aryeh's claims are barred by the four-year limitations period set by section 17208. If Canon meets this burden, Aryeh must then show that his claims are valid under nonstatutory exceptions. Canon has indicated that under the last element accrual rule, Aryeh's claim accrued in February 2002, aligning with the principle that a claim accrues when all elements—wrongdoing, harm, and causation—are present.

Aryeh and Canon entered into copier leases in November 2001 and February 2002, which did not permit charges for test copies. Despite this, Canon began imposing excess charges for test copies starting in February 2002, leading to Aryeh’s injury and the accrual of a claim by that date. Absent exceptions, the four-year statute of limitations would have expired by 2006, thus barring Aryeh’s 2008 lawsuit. To counter this, Aryeh invokes principles of continuing wrong accrual, particularly the continuing violation doctrine and continuous accrual theory. The continuing violation doctrine addresses situations where injuries result from a series of small harms, allowing a collective actionable claim despite some harms falling outside the limitations period. However, the complaint does not demonstrate factors justifying this doctrine, as it outlines discrete wrongs that Aryeh recognized as wrongful as early as 2002. Consequently, both the trial court and Court of Appeal correctly rejected its application. Aryeh subsequently emphasizes the continuous accrual theory, which allows for separate, recurring violations of the same right to trigger their own limitations period, preventing defendants from escaping liability for ongoing misfeasance. This principle is supported by precedents such as Dryden v. Board of Pension Commrs., where a widow's belated pension claim was still valid despite the expiration of a previous claims period.

The right to pension payments is ongoing, meaning the expiration of the limitations period does not prevent a plaintiff from seeking both present and future payments, as opposed to only past payments. In cases like Howard Jarvis Taxpayers Assn. v. City of La Habra, the court allowed a challenge to a municipal tax despite the limitations period for the ordinance having expired, as the ongoing collection of the tax constituted a continuous breach of state law. Each deficient payment is treated as a separate violation, initiating a new limitations period. Continuous accrual applies to recurring obligations, meaning a new cause of action arises with each wrongful act. This principle permits plaintiffs to recover damages only for breaches within the limitations period, as demonstrated in Jones v. Tracy School Dist., where recovery was limited to wages owed in the last two years of a six-year discriminatory practice. The continuing accrual rule restricts retroactive relief to obligations due within the limitations period. For example, in Tsemetzin v. Coast Federal Savings & Loan Assn., the court ruled that a landlord could pursue back rent for a recurring obligation without limitations barring the claim. Similarly, Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co. confirmed that each monthly payment in a lease creates its own statute of limitations. This rule is applicable to both public and private entities, allowing for recovery based on ongoing obligations.

The plaintiff is permitted to sue for underpayments within the applicable limitations period prior to filing suit. The continuous accrual doctrine applies, focusing on the nature of the obligation breached rather than the label of the claim. Canon billed Aryeh monthly, and the complaint alleges that these bills included unfair or fraudulent test copy charges. Each alleged breach of Canon's duty not to impose such charges is treated as triggering a new statute of limitations. Consequently, as long as the excess charges occurred within the four-year limitations period, Aryeh can seek recovery for those charges.

Canon contends that Aryeh's claim is fundamentally a fraud claim, arguing it describes a single act of fraud from 2001 or 2002 rather than a series of wrongful acts. Canon cites a case that rejected continuous accrual for fraudulent statements made before the limitations period. However, the court finds that it is incorrect to dismiss the complaint based on a single fraud theory, as the complaint alleges a recurring imposition of excess charges that are both fraudulent and unfair.

The determination of whether these charges fall under unfair business practices as defined by the UCL is not being decided at this stage. If the charges are deemed actionable, each instance would constitute a new unfair act, initiating its own limitations period. Canon's reliance on another case regarding misappropriation does not prevent the application of continuous accrual in this context, as the misappropriation occurred outside the limitations period.

Snapp does not address the theory of continuous accrual, leaving its applicability undecided. At the demurrer stage, the allegations made by Aryeh must be accepted as true. Aryeh claims a recurring unfair act regarding charges for copies made by Canon, which supports the theory of continuous accrual. Since the complaint alleges some acts within the four years prior to the suit, the entire claim is not time-barred. The court does not evaluate other defenses raised by Canon in the demurrer, only affirming that Aryeh’s complaint is not entirely barred by the statute of limitations. Consequently, the Court of Appeal's judgment, which was based solely on this limitation, is reversed, and the case is remanded for further proceedings.