Gordon & Rees Wins Appellate Victory for California Retail Client

June 2020

In January 2019, attorneys Jordan Altura and Quyen Le obtained summary judgment and dismissal of a complaint that sought damages for breach of written consignment agreements and open book account against the firm's client, a California retailer. With the assistance of Don Willenburg on appeal, the California First Appellate District affirmed summary judgment on May 28, 2020. In a published decision, The First Appellate District ruled that the breach of contract claim is barred by the four year statute of limitations and the open book account claim fails as a matter of law because there is no evidence supporting the creation of an open book account.

The plaintiff and firm's client had a contractual relationship for the consignment of goods provided by the plaintiff to the client. The firm's client disputed that it received goods the plaintiff claimed it sent in 2009, and refused to pay invoiced amounts for these items. Despite that dispute, the parties continued doing business until May 2016, when the plaintiff terminated the consignment agreements, purportedly based on the client’s refusal to pay the 2009 invoices.

In the trial court, the Gordon & Rees team filed a motion for summary judgment on the grounds that the four year statute of limitations applied to bar the plaintiff’s causes of action for breach of contract and open book account, as a matter of law. The plaintiff attempted to avoid application of the limitations periods by asserting it was not triggered until the plaintiff decided to terminate the agreement, and argued the open book account claim was not subject to the limitations period. However, the trial court agreed with the Gordon & Rees team's argument that the consignment agreements contemplated a series of discrete consignment transactions, each evidenced by a separate invoice, and therefore, the statute of limitations began running in May 2010 when payment would have been due under the contract.

The trial court further agreed with the firm's argument that the plaintiff’s count for open book account fails as a matter of law because: 1) monies due under an express contract cannot be recovered as an open book account in the absence of any contrary agreement; and 2) a plaintiff cannot plead a common count for open book in order to extend the statute of limitations when the basis of the common count is factually identical to the barred contract claim.

As the prevailing party, the trial court awarded attorneys’ fees of nearly $90,000 to the firm's client, based on a contractual attorneys’ fees provision contained in the contract. In August 2019, judgment was entered in the trial court in favor of the firm's client, which included an award of fees and costs totaling $91,426.23.

On appeal, the plaintiff relied on the rule of delayed commencement in contending that the breach of contract claim was timely because the four year statute of limitations period commenced when the plaintiff terminated the agreements in 2016. The First Appellate District was unpersuaded, finding that the express terms of the agreements, along with the subject matter of those agreements and conduct of the parties, establish that the agreements established divisible, interval performance by our client to pay discrete invoices issued by the plaintiff. Thus, the doctrine of continuous accrual applies, and the statute of limitations expired in May 2014, three years prior to plaintiff’s filing of the complaint.

For the open book cause of action, the plaintiff argued on appeal that an express agreement for an open book account is not required to establish the existence of an open book account, which is an exception to the general rule that an express contract is not an open book account. Although the First Appellate District agreed that an express contract for an open book account is unnecessary, it nevertheless held that the plaintiff failed to establish a triable issue of fact as to whether there was a “contrary agreement” sufficient to meet the exception. The plaintiff relied on four documents – accounts receivable statement, billing history, computer printout listing all the invoices issued, and a computer printout generated in December 2018 that listed the two unpaid invoices from 2009 – to show agreement or conduct evidencing an open book account. The First Appellate District concluded these documents were insufficient to create a triable issue of fact, finding that the documents were merely secondary records that do not establish a book account.

The First Appellate District awarded costs on appeal to our client. The appellate decision is certified for publication.