Commercial Division Blog

Posted: October 15, 2016 / Categories Commercial, Contracts, Statute of Limitations/Laches

Breach of Contract Claim Accrues Anew for Each Breach of a Recurring Duty to Pay

On October 4, 2016, the First Department issued a decision in Lebedev v. Blavatnik, 2016 NY Slip Op. 06463, holding that a claim for breach of a contractual obligation to pay accrued anew for each breach of a recurring duty to pay, explaining:

This action was commenced within both limitations periods, because defendants had a recurring obligation to pay plaintiff his share of the profits generated by the joint venture. A new claim accrued when the obligation to do so was allegedly breached in 2013.

Defendants' reliance on Welwart v Dataware Elecs. Corp. (277 AD2d 372 [2d Dept 2000]) is misplaced. There, the basis of the plaintiff's claim was that the defendants had breached a 1981 agreement to issue to him shares of common stock in a closely-held corporation with which he was then employed; relatedly, he claimed a right to the dividends issued on those shares of stock that he said he had been promised. Thus, the right of the plaintiff in Welwart to claim payment of dividends was dependent on the issuance of shares of stock in his name, so it was the earlier failure to issue shares that constituted the accrual of the breach claim.

Here, in contrast, plaintiff's claimed rights to payment are not tied to or dependent on issuance of any physical document attesting to his investment in the venture; the damages as alleged are not, as defendants argue, the result of a failure to issue, in plaintiff's name, shares in the joint venture in 2001. His claimed right to payment from the proceeds of the 2013 sale is based on his investment and the resultant ownership interest, and that right to payment accrued at the time of the 2013 sale, not at the time plaintiff made his original investment.

Defendants remain free to attempt to establish that, as they claim, plaintiff does not possess the ownership interest or related rights he claims. But, the alleged investment agreement, and the ownership rights that it allegedly created, are not dependent as a matter of law on the issuance, or the failure to issue, a document establishing his ownership stake, as was the case in Welwart. The challenged claims relating to the sale to Rosneft accrued not in 2001, or 2003, but in 2013, and are therefore timely.

(Internal quotations and citations omitted).