No Account Stated Claim in Absence of Underlying Agreement

On November 3, 2022, Justice Robert R. Reed of the New York County Commercial Division issued a decision in AmTrust North America, Inc. v. Share, 2022 N.Y. Slip Op. 51081(U), dismissing a claim for account stated in the absence of an underlying contract, explaining:

"An account stated is an agreement between parties to an account based upon prior transactions between them with respect to the correctness of the account items and balance due" (Ryan Graphics, Inc. v Bailin, 39 AD3d 249, 250, 833 N.Y.S.2d 448 [1st Dept 2007] [internal quotation marks and citation omitted]). "An account stated exists where a party to a contract receives bills or invoices and does not protest within a reasonable time" (Bartning v Bartning, 16 AD3d 249, 250, 791 N.Y.S.2d 541 [1st Dept 2005]) or makes a partial payment (see Morrison Cohen Singer & Weinstein, LLP v Waters, 13 AD3d 51, 52, 786 N.Y.S.2d 155 [1st Dept 2004]). Such a claim "cannot be used to create liability where none otherwise exists" (M. Paladino, Inc. v. J. Lucchese & Son Contr. Corp., 247 AD2d 515, 515, 669 N.Y.S.2d 318 [2d Dept 1998]) and "may not be utilized simply as another means to attempt to collect under a disputed contract" (Martin H. Bauman Assoc. v H & M Intl. Transp., 171 AD2d 479, 485 [1st Dept 1991]).

Here, the account stated claim is simply another means to attempt to collect under the disputed contract alleged to exist in the fourth cause of action concerning return commissions. Further, "[i]n the absence [*17] of a claim establishing underlying liability, the account stated claim [is] not viable" (Unclaimed Prop. Recovery Serv., Inc. v UBS PaineWebber Inc., 58 AD3d 526, [**6] 526, 870 N.Y.S.2d 361 [1st Dept 2009]; see Michael R. Gianatasio, PE, P.C. v City of New York, 53 Misc 3d 757, 774, 37 N.Y.S.3d 828 [Sup Ct, NY County 2016], affd 159 AD3d 659, 70 N.Y.S.3d 834 [1st Dept 2018]).

Account stated can be a very powerful cause of action for any provider of goods or services that sends regular invoices to clients. But the mere sending of invoices, without an underlying agreement to pay, is insufficient to support a claim for account stated. (Check out partner Joshua Wurtzel's recent video on the law surrounding account stated.) Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning a claim for account stated.