A Shortened Statute Of Limitations Was Valid

Zamora v. Lehman
(Cal. Ct. of App., 2d Dist.), filed March 7, 2013

Three executives signed employment agreements with their corporate employer.  Each agreement contained a provision stating that if either party had “[a]ny claim” against the other, the claiming party had to present the claim in writing to the other party within one year of the date the claiming party knew or should have known about the facts giving rise to the claim.  Otherwise, the claim was forever barred.

The corporate employer filed for bankruptcy.  In the bankruptcy proceeding, the trustee filed an action against the three executives, alleging a breach of fiduciary duty.  The trustee dismissed one of the executives to avoid having to arbitrate the matter.  Litigation proceeded in the trial court as to the other two executives.

The trial court granted summary judgment in favor of the other two executives on the ground that neither the corporation nor the trustee in bankruptcy had satisfied the contractual one-year notice provision.

The Court of Appeal affirmed.

The court concluded that the one-year notice provision was not invalid and could legally be included in an employment contract.  It also rejected the argument that the executives had to show prejudice by the bringing of a late action.  In addition, the court rejected the trustee’s argument that the provision was inapplicable because she was unaware of it.