California Supreme Court Finds Tolling Doctrine May Save Otherwise Time-Barred Unfair Competition Claims

In a ruling that could pave the way for additional consumer class action litigation in California, that state’s Supreme Court held in late January that equitable tolling doctrines apply to claims brought under the state’s Unfair Competition Law (UCL). In Aryeh v. Canon Bus. Solutions, No. S184929, 2013 WL 263509 (Cal. Jan. 24, 2013), the court unanimously concluded that UCL claims are governed by common law accrual rules for statute of limitations purposes. The decision paves the way for the UCL’s four-year statute of limitations to be extended in some instances where a plaintiff does not immediately discover a violation of law has occurred.

The case arose out of a photocopier lease between Canon Business Solutions and a copy store owner. The lease provided that Canon would periodically service the copiers. The plaintiff noticed discrepancies between Canon’s meter readings and the actual number of copies made on each copier. After Canon did not respond to inquiries regarding the discrepancies, the plaintiff began compiling independent copy records and found that Canon was running test copies during servicing, causing the plaintiff to face financial penalties for making more copies than allowed under its lease. The complaint, filed as a proposed class action in January of 2008, alleged that test copies began as early as February 2002 and that charging the plaintiff for excess test copies was both unfair and fraudulent.1 Because the plaintiff alleged that the first unfair and fraudulent test copy was made outside of the four-year statute of limitations window, the trial court dismissed the case, and the intermediate appellate court affirmed.2

The California Supreme Court reversed. The court held that the common law theory of “continuous accrual” applied, meaning that each wrong in a series triggered its own limitations period.3 Thus, although older events were time-barred, the suit was timely as to those within the limitations period.4 The court noted that while the statute was silent as to what it means for a UCL claim to accrue, the silence “triggers a presumption in favor of permitting settled common law accrual rules to apply” and that it “may assume the Legislature intended the well-settled body of law that has built up around accrual, including the traditional last element rule and its equitable exceptions, to apply fully here.”5

The court rejected Canon’s argument that the theory of continuous accrual would not apply because the theory of the case was, at its core, fraud, not unfair competition. Since the complaint alleged that the test copies and resulting imposition of excess charges was not only fraudulent but also unfair, the court found that the UCL would apply and that discovery could proceed.6

The court noted that there was a split in lower court and federal opinions on the issue. For example, the Central District of California held in Stutz Motor Car of America v. Reebok International7 that an accrual exception was not available under the UCL. That court based its reasoning on the fact that the federal Sherman and Clayton Acts did not permit delayed accrual based on ignorance of a claim. Because federal judicial interpretations are instructive for the Cartwright Act (the state’s antitrust statute), and given that courts are to look to the Cartwright Act to interpret the UCL, the Central District of California reasoned the UCL did not allow for delayed accrual.8

In Aryeh the California Supreme Court held that “[i]nterpretations of federal antitrust law are at most instructive, not conclusive, when construing the Cartwright Act, given that the Cartwright Act was modeled not on federal antitrust statutes but instead on statutes enacted by California’s sister states around the turn of the 20th century.  Though the Cartwright Act and the UCL each address aspects of unfair business competition, they have markedly different origins and scopes.”9

This case demonstrates that California unfair competition law will frequently take its own direction, following neither California nor federal antitrust law, and the case obviously expands the scope of potential liability for continuing conduct.

Endnotes    (↵ returns to text)
  1.  Id.
  2.  Id. at *2-3.
  3.  Id. at *4.
  4.  Id. at *4, *10.
  5.  Id. at *4.
  6.  Id. at *10.
  7. 909 F. Supp. 1353 (C.D. Cal. 1995).
  8.  Aryeh, 2013 WL 263509 at *4-5.
  9.  Id. at *5.