Friday, January 22, 2010

UCC 4-Year Statute of Limitations in Commercial Collections

Can a plaintiff use an “account stated” or “open account” cause of action to avoid the Uniform Commercial Code’s four-year statute of limitations in a collection action where the underlying debt involves the sale of goods? While there is no Michigan case law directly on point, it is pretty clear that the 4-year statute of limitations applies regardless of how the causes of action might be pled.

There is a fair amount of law from outside of Michigan directly addressing this question, including cases from Oregon (Moorman Manufacturing Co of Cal v Hall, 830 P2d 606 (1992)), New York (Troy Boiler Works v Sterile Technologies, Inc, 777 NYS 2d 574 (2003)), West Virginia (Greer Limestone v Nestor, 332 SE 589 (1985)), Oklahoma (Sesow v Swearigen, 552 P2d 705 (1976)), and California (H Russell Taylor’s Fire Prevention v Coca Cola, 160 Cal Reporter 411 (1979)). These cases all direct that the UCC statute of limitations applies despite the existence of an account stated or open account cause of action.

When given the opportunity, Michigan Courts have consistently upheld the breadth and preemptive effect of the UCC and its statute of limitations. In fact, the genesis of the modern economic loss rule in Michigan involved a case where a tort claim was used to try to avoid the UCC’s statute of limitations. (Neibarger v Universal Cooperatives, 439 Mich 512 (1992)). In 2006, the Michigan Supreme Court found that Article III of the UCC preempted common law claims for accord and satisfaction. (Hoerstman Contracting v Hahn, 474 Mich 66 (2006).

Thus, when a court considers the tenor of the Michigan cases together with the persuasive foreign law, the outcome should be clear.