Enforcing California Professional Services and Employment Contracts: Tips on Bypassing the Statute of Limitations

The California Court of Appeal's decision in Zamora v. Lehman, 214 Cal.App.4th 193 (March 7, 2013), offers a useful roadmap for drafting an enforceable provision in a professional services or employment contract that cuts short by years the applicable statute of limitations.

Zamora involved a bankruptcy trustee's breach of fiduciary duty claims against three former executives of a direct marketing company. In December 2005, years after the company's 2001 bankruptcy, the trustee filed breach of fiduciary duty claims against the executives, alleging that they had engaged in and concealed a variety of corporate misdeeds.

As a sideshow to this article, the Court of Appeal in two prior decisions in the case affirmed the overruling of defendants' demurrer on statute of limitations grounds and reversed the trial court's grant of two of the three defendants' motions to compel arbitration. Back in court, those two defendants filed summary judgment motions, this time asserting the trustee's claims were barred by a one-year notice provision in their employment agreements. That provision in substance required that any claim between the company and the executive within the scope of the arbitration provision "must be presented in writing by the claiming party to the other within one year of the date the claiming party knew or should have known of the facts giving rise to the claim . . . . Unless the party against whom any claim is asserted waives the time limits set forth above, any claim not brought within the time periods specified shall be waived and forever barred. . . ." Id. at 200-201.

The defendants declared that they never received notice from the company or the trustee of any claim until the lawsuit was filed. While the trustee submitted various documents which she argued constituted timely notice, the trial court held that none of those documents effectively notified the defendants of the company's claims. In granting summary judgment, the trial court also rejected the trustee's argument that her failure to give timely notice was excusable, since the trustee's own complaint alleged that the trustee became aware of the facts giving rise to the claims in November 2002, which would have barred the claim for lack of notice at the latest by November 2003.

The Court of Appeal affirmed summary judgment for the defendants. The appellate court first rejected the trustee's argument that the one-year notice provision was unreasonable and invalid as a...