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Current Developments in the Commercial Divisions of the
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Posted: January 4, 2015

Breach of Contract Claim Does Not Accrue Until Plaintiff Had the Right to Demand Performance

On December 22, 2014, Justice Kornreich of the New York County Commercial Division issued a decision in Golden Tech. Management, LLC v. NextGen Acquisition, Inc., 2014 NY Slip Op. 33368(U), refusing to dismiss claims on statute of limitations grounds.

In Golden Tech. Management, the plaintiff brought claims for monies due under a share purchase agreement. The court rejected the defendants’ argument that the plaintiff’s breach of contract claims were time-barred because the SPA was executed seven years before the action was filed, explaining:

Pursuant to CPLR 213(2), breach of contract claims are subject to a 6-year statute of limitations. The claim accrues when the contract is breached, regardless if plaintiff suffered an injury or knows about the breach. When the claim is failure to pay money due under a contract, the claim accrues when the plaintiff had the right to demand payment.

Defendants argue that plaintiffs’ claim accrued at closing, in October 2006 and, hence, would be time barred since the instant action was not commenced until October 2013, 7 years thereafter. Tn opposition, plaintiffs argue that, pursuant to section 7.7 of the SPA, plaintiffs are not entitled to demand payment of the Hold back until one year after closing, in October 2007, unless NextGen collected $7.5 million in gross revenue before that time. In other words, the only situation where plaintiffs had the right to demand payment of the Hold back before October 2007 was if NcxtGen achieved this $7.5 million benchmark. Defendants do not claim that NextGcn did so. Consequently, as the SPA expressly provides, plaintiffs had no right to demand payment of the Hold back until October 2007. Their breach of contract claim, therefore, is timely.

(Internal quotations and citations omitted) (emphasis added).

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