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July 2010

California Court of Appeal Rules on Operation of Statute of Limitations for Unfair Competition Claims

Aryeh v. Canon Business Solutions, Inc. (Jun. 22, 2010) 2010 Cal. App. Lexis 941

A new decision of the California Court of Appeal has added to a varying body of law about the operation of the statute of limitations in the context of unfair competition claims under Business & Professions Code section 17200.

In Aryeh v. Canon Business Solutions, Inc. (Jun. 22, 2010), 2010 Cal. App. Lexis 941, plaintiff leased a photocopier from defendant Canon and agreed to pay a fee for each copy he made. Shortly after leasing the copier, plaintiff noticed that copier meter readings collected by Canon's field service personnel did not appear to reflect the number of copies he actually made. Plaintiff raised the discrepancies with Canon, and when Canon did not take action, began keeping his own records of the numbers of copies he made. Canon refused plaintiff's demand for reimbursement of overcharges he detected from his own records.

Approximately six years later, plaintiff filed suit against Canon, on behalf of himself and a putative class of similarly-situated lessees, alleging unfair competition in violation of Section 17200. Canon sought dismissal of the complaint on the grounds that it was time-barred by the 4-year statute of limitations applicable to unfair competition claims. After permitting two amendments to the complaint, the trial court ultimately dismissed the case without leave to amend, finding that plaintiff knew of the overcharges since at least 2002 and thus the claim was time-barred. The Court of Appeal affirmed.

The appellate court explained that, in general, the limitation clock does not start until a cause of action "accrues." Usually, accrual takes place simultaneously with the offending conduct, regardless of when the plaintiff learns of such conduct. In some instances, the so-called "discovery rule" delays accrual of the cause of action until the time that plaintiff gained actual or constructive knowledge of the facts giving rise to the claim. In the case before it, the Aryeh plaintiff tried to invoke the discovery rule, after having offered allegations of plaintiff's knowledge of the overcharges as early as 2002 in his original complaint. Even aside from such allegations, the Court of Appeal found that the discovery rule does not apply to unfair competition claims, thus contradicting the holding of a California Appellate Court in the same district, but a different division. (Broberg v. Guardian Life Ins. Co. (2009) 171 Cal.App.4th 921.) Accordingly, the appellate court held, plaintiff's claim remained time-barred.

As an alternative, plaintiff also contended on appeal that his claim was timely because Canon's conduct was continuous and repetitive. The Court of Appeal noted that, even when allegations regarding a defendant's conduct cover a period of time, the cause of action for limitation purposes accrues at the time of the initial conduct. The court could find no support in California case authorities for exempting unfair competition claims from this rule, even when the offending conduct was ongoing in nature.

As noted above, this decision competes with that of another appellate court decision on the issue, and may ultimately require resolution by the California Supreme Court. In the meantime, this line of authority exists as a potential defense to companies faced with an unfair competition claim.

Class Action

Justin D. Lewis

Class Action
Commercial Litigation
Unfair Competition