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Appeals court examines statute of limitations issue

California businesses may have more time to file lawsuits based on forged endorsements on the back of checks after a recent ruling by the U.S. Court of Appeals for the Ninth Circuit. The appeals court reversed the ruling of the district court in its finding that the statute of limitations barred a claim.

The case involved a contractor who had subcontracted with another company to perform construction work on a hotel in El Segundo. The contract entered into the agreement with the subcontractor in May 2015. In January 2016, the subcontractor began forging endorsements on the backs of checks. After the contractor filed a claim with the insurance company, a lawsuit was subsequently filed against the California Bank and Trust for breach of contract and negligence. The bank filed a motion for summary judgment, arguing that the claim was time-barred because the statute of limitations started to run at the time that the contractor received his bank statements.

The district court agreed and dismissed the lawsuit against the bank. The appeals court found that the statute of limitations does not begin running when a customer receives a bank statement. Instead, it starts to run from the time that the customer should reasonably have discovered the forged endorsements. The lower court’s decision was reversed, and the case was sent back for a determination of when the forgeries should have reasonably been discovered.

Business disputes sometimes arise between contracting parties. Businesses that plan to file claims need to be aware of the relevant statutes of limitations. If companies wait too long to file lawsuits, their claims may be time-barred. Businesses that are involved in contract disputes might want to consult with experienced business law attorneys as early as possible to ensure that they will be able to protect their rights to recovery and not miss the limitations period.