Continuing Wrong Doctrine Does not Save Contract Claims Based on Failure to Recognize Ownership Share

On May 7, 2020, Justice Masley of the New York County Commercial Division issued a decision in Kaufman v. A.F. Kaufman, Inc., 2020 NY Slip Op. 31444(U), holding that the continuing wrong doctrine does not save contract claims based on the refusal to recognize an ownership share, explaining:

CPLR 213 (2) states, in relevant part, that an action upon a contractual obligation or liability, express or implied must be commenced within six years. The statutory period of limitations begins to run from the time when liability for wrong has arisen even though the injured party may be ignorant of the existence of the wrong or injury. New York does not apply the discovery rule to statute of limitations in contract actions. Thus, the breach of contract claim accrues at the time of the breach.

However, there is an exception to the time of breach rule. The continuous wrong doctrine is usually employed where there is a series of continuing wrongs and serves to toll the running of a period of limitations to the date of the commission of the last wrongful act. Where applicable, the doctrine will save all claims for recovery of damages but only to the extent of wrongs committed within the applicable statute of limitations. This doctrine is only predicated on continuing unlawful conduct, not the continuing effect of such conduct. There must be a series of independent, distinct wrongs.

Here, plaintiff alleges that defendants breached their agreement with plaintiff by failing to provide plaintiff with dividends from 1995 to 2018 and failing to memorialize plaintiff's ownership with local, state and federal tax authorities. Here, any alleged breach occurred when defendants first excluded plaintiff from his ownership interest in 1995 as alleged in the complaint. The continued failure to not pay him dividends or include his ownership interest in tax filings is not an independent, distinct wrong. Thus, this claim is time barred.

(Internal quotations and citations omitted).

It is not unusual for the statute of limitations to be an issue in complex commercial litigation. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding whether claims are barred by the statute of limitations.