First Department Definitively Holds that an Account Stated Cause of Action is Independent, and Not Duplicative, of a Breach of Contract Cause of Action
Print Article- Posted on: May 17 2024
Today’s BLOG article touches on two areas of the law on which we have previously written – account stated1 and duplication.2 “An account stated is an agreement between parties to an account based on prior transactions between them with respect to the correctness of the account items and balance due.” Accent Collections, Inc. v. Cappelli Enterprises, Inc., 94 A.D.3d 1026 (2nd Dep’t 2012) (Citations and internal quotation marks omitted.) See also Whiteman, Osterman & Hanna, LLP v. Oppitz, 105 A.D.3d 1162, 1163 (3rd Dep’t 2013).
“To establish its prima facie entitlement to judgment as a matter of law to recover on an account stated, a plaintiff must show that the defendant received the plaintiff’s account statements for payment and retained these statements for a reasonable period of time without objection.” Cach, LLC v. Aspir, 137 A.D.3d 1065, 1066 (2nd Dep’t 2016) (citation omitted).
“An account stated assumes the existence of some indebtedness between the parties, or an express agreement to treat a statement of debt as an account stated.” Simplex Grinnell v. Ultimate Realty, LLC, 38 A.D.3d 600, 600 (2nd Dep’t 2007). Accordingly, “an account stated cannot be made the instrument to create liability when none existed….” Gurney, Becker & Bourne, Inc. v. Benderson Development Co., Inc., 47 N.Y.2d 995, 996 (1979). An account stated cause of action “cannot be utilized simply as another means to attempt to collect under a disputed contract.” Simplex Grinnell, 38 A.D.3d at 600 (citations omitted); see also Ross v. Sherman, 57 A.D.3d 758, 759 (2nd Dep’t 2008). “In the case of existing indebtedness, the agreement may be implied as well as express.” Cach, LLC, 137 A.D.3d at 1066 (citations omitted). Implied agreements may be found where “a defendant retains bills without objecting to them within a reasonable period of time, or makes partial payment on the account.” Id. (citations omitted).3
On May 14, 2024, the Appellate Division, First Department, decided Aronson Mayefsky & Sloan, LLP v. Praeger, a case solidifying the First Department’s position on whether account stated causes of action are duplicative of breach of contract causes of action. The First Department’s ruling holds that they are not. At the outset the Court noted that while “it has long been the rule that a plaintiff may simultaneously assert both an account stated claim and a breach of contract claim arising from the same relationship, there have been some recent decisions from the First Department that have suggested that an account stated claim is duplicative of a breach of contract claim. (Citations omitted.) Considering the articulated inconsistency, the purpose of the Aronson decision “is to make clear that the rule in the First Department is that an account stated claim is an independent cause of action that is not duplicative of a claim for breach of contract.” (Citations omitted.)
The plaintiffs in Aronson are law firms that represented the defendant in a divorce proceeding pursuant to retainer agreements. The plaintiffs rendered monthly bills. When the defendant stopped making payments, the plaintiffs continued to represent the defendant for four months before moving to withdraw as counsel. After being relieved, the plaintiffs sued the defendant for unpaid legal fees, asserting claims for account stated and breach of their respective retainer agreements. The plaintiffs moved for summary judgment on their respective account stated cause of action and the defendant cross-moved to dismiss same. The motion court granted the Plaintiffs’ motion and the defendant appealed.
After discussing the law on account stated, the Court recognized that it “has issued numerous decisions where [it] granted summary judgment to attorneys on their claim for an account stated based on their clients having received and retained invoices for professional services rendered, and having failed to object within a reasonable time” “despite the fact that there was a retainer agreement entered into by the parties that could have been the basis for a breach of contract claim.” (Citations omitted.)
The Court noted a “very narrow” exception to the rule that account stated and breach of contract claims can peacefully coexist in a complaint “where the plaintiff is attempting to use a claim for an account stated simply as another means to attempt to collect under a disputed contract.” (Citations and internal quotation marks omitted.) The Court noted that in such cases the resort to the exception was not based on duplication, but, rather, the account stated claim was “not … sustainable … because a contractual relationship had not been established whereby the defendant agreed to pay for the services or goods provided by plaintiff.”
After listing numerous cases from the First Department in which account stated claims were dismissed as duplicative, the Court explained that the inconsistencies have caused “confusion in the trial courts as to whether an account stated claim can be asserted simultaneously with a breach of contract claim.” In holding that they can, the Court stated:
[t]herefore, this Court wants to make clear that an account stated is an independent cause of action that can be asserted simultaneously with a breach of contract claim and that an account stated claim should not be dismissed as duplicative of a breach of contract claim. This case falls squarely within our well-established precedent that an attorney can be granted summary judgment on an account stated claim based on the defendant’s receipt and retention of a plaintiff law firm’s invoices seeking payment for professional services rendered, without objection within a reasonable time, even where there is a retainer agreement. As a result, the court properly granted summary judgment to plaintiffs on their account stated claims.
(Citations omitted.)
Footnotes
- This BLOG has previously written on account stated [here], [here] and [here].
- This BLOG frequently addresses issues related to duplication of claims. See, e.g., [here], [here], [here], [here], [here], [here], [here], [here], [here], [here], [here], [here], [here], [here]. For the full scope of BLOG articles related to the duplication doctrine search for “duplication” in the “Blog” tile on the home page of Freiberger Haber’s website.
- A more fulsome discussion of account stated causes of action can be found in one of our prior BLOG articles.
Jonathan H. Freiber is a partner and co-founder of Freiberger Haber LLP.
This article is for informational purposes and is not intended to be, and should not be taken as, legal advice.
