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January 2013

California Supreme Court Applies Common LawContinuing-Wrong Accrual Doctrine to UCL Claim

In a notable ruling affecting Business & Professions Code §17200 (Unfair Competition Law) cases, the California Supreme Court held in Jan. 24’s Aryeh v. Canon Business Solutions, Inc. that common law equitable exceptions to the statute of limitations applied to UCL claims. Reversing the Second District Court of Appeal, which denied applying the common law doctrines of “delayed discovery” and “continuing violation” to Jamshid Aryeh’s UCL claim, the Supreme Court unanimously concluded that these equitable exceptions to the usual running of the statute of limitations were not categorically precluded from UCL claims. In other words, a UCL claim challenging a recurring wrong may accrue not once, but each time a new wrong is committed.

The dispute arose from a photocopy equipment lease between Aryeh and Canon Business Solutions, Inc. Under the lease, Aryeh was permitted a certain number of copies per machine, overage of which would result in additional charges. In 2002, after incurring substantial overage copying charges, Aryeh discovered that Canon was charging for “test copies” made during Canon equipment maintenance visits. Aryeh filed suit in January 2008 alleging a single claim for violation of the UCL.

Canon demurred to Aryeh's complaint on the grounds that the UCL claim was barred by the statute of limitations set forth under Business & Professions Code §17208. The trial court and the Second District agreed with Canon’s argument that the “delayed discovery” and “continuing violation” common law doctrines did not apply to UCL claims. The Supreme Court reversed.

Analyzing the statutory language and legislative history of the UCL, Justice Kathryn M. Werdegar, writing for the majority, held that the UCL’s silence on the issue of when a UCL claim accrues triggered a presumption in favor of applying settled common law accrual principles to UCL claims. The court recognized that the UCL affords relief from a variety of wrongs and invokes a widely varying nature of rights (e.g. misrepresentation, price fixing, interference with prospective economic advantage, etc.). As such, the application of equitable accrual provisions should follow the “nature of the right sued upon” and not merely its UCL form (e.g. if the nature of a UCL claim is a fraudulently concealed misrepresentation, the doctrine of fraudulent concealment should toll the statute).

Recognizing a split among the courts of appeal, the Supreme Court overturned Stutz Motor Car v. Reebok Intern, Ltd. (C.D. Cal. 1995) 909 F. Supp. 1353, and its progeny, which asserted the UCL categorically forecloses a common law modification of the “last element” accrual rule. The court rejected Stutz’s reasoning that the federal Sherman Act and Clayton Antitrust Act (which do not permit delayed accrual) are applicable to California’s antitrust statute (the Cartwright Act), and thus equally applicable to the UCL. To the contrary, the high court held, the Cartwright and UCL statutes are markedly different in origin and scope, each to be interpreted separately by respective statutory language and legislative histories.

The court concluded that the UCL is governed by common law accrual rules to the same extent as any other statute and that the nature of the right sued upon and the circumstances attending its invocation control the point of accrual. 

The impact of Aryeh will be, on one hand, to clarify the presence (or not) of viable accrual arguments in complaints, thus eliminating fruitless demurrers based upon the statute of limitations defense. On the other hand, foreclosing a categorical elimination of equitable accrual exceptions for UCL claims is a boon to plaintiffs seeking to toll UCL claims.

Commercial Litigation


Commercial Litigation

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