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AZAPP Blog Your resource for news and analysis of cases in Arizona's appellate courts.

Broadband Dynamics, LLC v. SatCom Marketing, Inc - 3/1/2018

Arizona Court of Appeals Division One holds that a party who brings suit to enforce a liquidated damages clause of a contract that also creates an open account must comply with the six-year statute of limitations on written contract claims and not the three-year statute of limitations on open accounts.


A telecommunications company entered into a service agreement to provide voice and telecommunications services to a marketing company.  The contract explicitly established an open account that would be invoiced monthly, and also contained a liquidated damages clause should the marketing company terminate the contract before it expired.  The marketing company terminated the contract without cause.  Arizona law establishes a three-year statute of limitations on claims for debt arising from an open account and a six-year statute of limitations on claims based on breach of a written contract.  The telecommunications company brought suit to enforce the liquidated damages clause after the three-year statute of limitations expired, but before the six-year statute of limitations expired.  The marketing company moved to dismiss based on the three-year statute of limitations.  Reasoning that the liquidated damages clause was part of a contract creating an open account, the superior court dismissed the case as barred by the three-year statute of limitations on open accounts.  The telecommunications company appealed. 

The Court of Appeals reversed, holding that the six-year statute of limitations for written contracts applies to claims arising out of the liquidated damages clause.  Although the Court agreed that a claim for unpaid debt owed on the open account would be subject to a three-year statute of limitations, it reasoned that a claim for liquidated damages was a separate claim that arose from the written contract, and not from the open account.  

Judge McMurdie delivered the unanimous opinion, in which Judges Winthrop and Campbell joined.

Posted by: Randy McDonald

 

Posted On: 4/4/2018