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SIX-MONTH CONTRACTUAL STATUTE OF LIMITATIONS EXPIRED BEFORE THE CLAIM ACCRUED AND WILL NOT BE ENFORCED TO PRECLUDE PAYMENT ON THE CLAIM (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Mazzarelli, reversing Supreme Court, determined that plaintiff's suit for payment on a contract was not precluded by the six-month statute of limitations in the contract. Plaintiff AWI contracted with defendant Whitestone to provide security at construction sites. Both Whitestone and AWI were named in a prevailing wage class action commenced by AWI workers. Whitestone, pursuant to a contractual provision, refused to pay AWI until the wage action was resolved. The case was not resolved within the six-month limitations period:

[AWI argues] on appeal that the contractual limitations provision is unenforceable because it enables the scenario where, even though a claim has not accrued by the time six months have passed since the last time physical work was performed, it is still time-barred. AWI is essentially arguing that, in light of Whitestone's stated position that payment was not due to AWI until such time as the Wage Action was resolved, it should not have been subjected to the “catch-22” of having to file a lawsuit to toll the statute of limitations where the claim was not yet ripe for adjudication. AWI analogizes to Executive Plaza, LLC v Peerless Ins. Co. (22 NY3d 511 [2014]). In that case, the defendant insurer issued a fire policy to the plaintiff insured which required the plaintiff to commence suit under the policy within two years of a fire. The policy further required the plaintiff, if seeking to recover replacement cost, to forbear on making any such claim until the property had actually been replaced. When the plaintiff's property burned down, it diligently acted to replace the property, but it recognized that the process would take more than two years. In an effort to protect its rights, it commenced an action on the two-year anniversary of the fire. The defendant successfully moved to dismiss the action as premature. When the replacement was complete, the plaintiff commenced a new action. The defendant removed the action to federal district court and moved to dismiss on statute of limitations grounds. After the court granted the motion, the Second Circuit certified a question to the Court of Appeals asking whether the limitations period was enforceable.

The Court of Appeals held that it was not. While recognizing the inherent reasonableness of contractually truncated statutes of limitations, the Court held that “[a] limitation period' that expires before suit can be brought is not really a limitation period at all, but simply a nullification of the claim” … . * * *

.. [W]we find that, under the circumstances, the limitations period cannot serve to bar AWI's claim … . AWI Sec. & Investigators, Inc. v Whitestone Constr. Corp., 2018 NY Slip Op 05907, First Dept 8-23-18

CIVIL PROCEDURE (SIX-MONTH CONTRACTUAL STATUTE OF LIMITATIONS EXPIRED BEFORE THE CLAIM ACCRUED AND WILL NOT BE ENFORCED TO PRECLUDE PAYMENT ON THE CLAIM (FIRST DEPT))/STATUTE OF LIMITATIONS (CONTRACT LAW, SIX-MONTH CONTRACTUAL STATUTE OF LIMITATIONS EXPIRED BEFORE THE CLAIM ACCRUED AND WILL NOT BE ENFORCED TO PRECLUDE PAYMENT ON THE CLAIM (FIRST DEPT))/CONTRACT LAW (STATUTE OF LIMITATIONS, SIX-MONTH CONTRACTUAL STATUTE OF LIMITATIONS EXPIRED BEFORE THE CLAIM ACCRUED AND WILL NOT BE ENFORCED TO PRECLUDE PAYMENT ON THE CLAIM (FIRST DEPT))

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