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Statute of Limitation – Time May Not Be on Your Side

December 17, 2013

Posted in Business Litigation, Litigation Strategies

Photo by Earl37a

If you have a right to sue someone, because of something the other party did or didn’t do, unless you act upon it in a timely manner, you can lose that right.  The right to sue is not like a piece of granite, solid and everlasting.  It’s more like a piece of fruit that ripens (“ripe” is actually a legal term). Like any fruit, you need to enjoy your legal rights while they’re ripe.  If you don’t and enough time passes (the statute of limitations), all you’ll have is a rotten piece of fruit you can’t use.

It’s not just the uneducated, unsophisticated and those without attorneys who make this mistake.  Big businesses get caught too.  Apex Digital v. Sears is one example that made its way to the U.S. Court of Appeals for the Seventh Circuit.

Apex claimed they were cheated out of millions of dollars

Apex buys consumer electronics made by others, puts their name on them and sells them to retailers.  One of those retailers was Sears.  They entered into an agreement in September 2003. Apex sent Sears products and after they were received, Apex would send an invoice.  There was a ‘net 60’ payment term, meaning Apex wanted to get paid within 60 days of the date of the invoice.

Sears didn’t always pay the whole amount invoiced. It took deductions for expected returns and other costs it felt it was entitled to. The last invoice with an outstanding balance was dated November 9, 2004. It should’ve been paid in full by January 8, 2005.

Apex’ allegations didn’t mean anything because their lawsuit was filed too late

The lower court decided a four year statute of limitations applied, which gave Apex no later than January 8, 2009 to sue Sears for money owed. Apex’ suit, claiming Sears shorted it nearly $15 million, was actually filed March 6, 2009.

Apex argued Sears wasn’t really paying for the items on the invoices. Sears was advancing payments on its debt to Apex. That amount wouldn’t be determined until their relationship ended and Apex performed a full accounting.  Like those of us who purchased Sony, Samsung and Sharp products in Sears’ electronics department, the court wasn’t buying what Apex was selling.

The lower court interpreted the contract as showing the parties’ intention that there would be a number of ongoing transactions, not one big one, and the appeals court agreed. It ruled that Sears’ failure to pay in full each invoice started the clock on the statute of limitations because each invoice and each insufficient or nonexistent payment was its own transaction, not a tiny sub-part of one giant transaction as Apex contended.

The appeals court ruled Apex knew, or should’ve known, its rights were being violated with each less than full payment and failed to act on those rights in a timely manner. Neither court looked at the merits of Apex’ claims because the lawsuit was not timely filed. The appeals court upheld the lower court’s dismissal.

If you are in a similar situation as Apex, with an ongoing dispute with another party, call me so we can discuss the situation and make sure you’re not sitting on your legal rights.  If you’ve been sued, or have been threatened with legal action, by a party for an issue that’s been lingering for years, you should also contact me because you may have a valid defense against the claim.

Either way, as far as the courts are concerned, time is of the essence, so take the time to contact my office. You may be very glad you did.