Opinion ID: 6497766
Heading Depth: 2
Heading Rank: 4

Heading: Transit’s Suit Against Allegheny Casualty Is

Text: Time-Barred Allegheny argues that it is not liable on the Bond because Transit’s lawsuit against it was time-barred. That’s how we see it as well. Final payment fell due on July 18, 2011, commencing the two-year limitations period under the Bond, and Transit did not bring suit until March 31, 2015. Allegheny, as surety provider, executed the Bond on behalf of Fiber-Span and in favor of Transit for $704,382 – the amount of the original Purchase Order. Typically, under New York’s statute of limitations, actions on a contract accrue on 37 and are to be commenced within six years of the date of breach. N.Y. C.P.L.R. § 213. Here, however, the parties negotiated a shorter time period, providing that “[a]ny suit under this bond must be instituted before the expiration of two (2) years from the date on which final payment under the Contract falls due.” (J.A. at 462.) They were free to do that. See Sidik v. Royal Sovereign Int’l Inc., 348 F. Supp. 3d 206, 213 (E.D.N.Y. 2018) (“Under New York State law, parties to a contract may agree to shorten the applicable statutory limitations period.”). Under Milestone 7, final payment was due upon “successful commissioning and [having the Nodes] ready for commercial service or 3 months after delivery of [the Nodes] to [Transit,] whichever is the earlier.” (J.A. at 398.) Delivery occurred on April 18, 2011, and three months from then was July 18, 2011. Commissioning, i.e., when the network went live, occurred later, on September 27, 2011, so the limitations period started accruing on July 18, 2011. The Bankruptcy Court said that a “strict reading” of the Purchase Agreement would support a finding that final payment fell due on either July 18, 2011, or September 27, 2011. Nevertheless, it employed a “liberal interpretation of the [Purchase] Agreement, in an attempt to reach a reasonable and fair conclusion[,]” and it found that final payment became due on the date of Transit’s acceptance of the Nodes, which it said was no later than July 23, 2012. (J.A. at 69.) Because Transit did not institute a suit until March 31, 2015, more than two years later, the Bankruptcy Court held that Transit’s suit was time-barred. The District Court, like the Bankruptcy Court, looked to the date of acceptance instead of delivery. It, however, decided that the suit was not time-barred because Transit rejected the 38 non-conforming Nodes, so final payment never fell due. Allegheny, of course, challenges that conclusion. It asserts that the “limitations period by its express, unambiguous terms[] was not conditioned upon anything other than Fiber-Span’s delivery of the [Nodes] or the successful commissioning thereof” and that “unambiguous contracts [must] be read according to their ordinary meaning.” (Allegheny Op. Br. at 28 (citing White v. Cont’l Cas. Co., 878 N.E.2d 1019, 1021 (N.Y. 2007)).) That is correct. As an initial matter, “acceptance” and “delivery” are independent concepts, and, pursuant to the Purchase Agreement, Transit’s payment obligation arose upon delivery, not acceptance. Even if Transit had rejected the Nodes, “[t]ender of delivery is not defeated … by the buyer’s refusal to accept the goods offered by the seller.” Rouse v. Elliot Stevens, Ltd., 2016 WL 8674688, at  (S.D.N.Y. June 24, 2016) (citing Uchitel v. F.R. Tripler & Co., 434 N.Y.S.2d 77, 79 (App. Div. 1980)). And while the Purchase Agreement fails to define what is required for the Nodes to be deemed “delivered[,]” courts applying N.Y. U.C.C. § 2-503 have found that the tender of goods, regardless of their conformity, constitutes delivery and triggers the limitations period. See, e.g., Long Island Lighting Co. v. Transamerica Delaval, Inc., 646 F. Supp. 1442, 1455 (S.D.N.Y. 1986) (finding that “even tender of nonconforming goods is considered delivery” and holding that contractual four-year statute of limitations period began to run on the date of delivery); Uchitel, 434 N.Y.S.2d at 79 (“To argue that … accrual does not occur until a proper tender is made, would be to substitute in place of [the] four year limitation period a statute of non-limitation and allow the buyer a perpetuity in which to bring suit.”). 39 Because delivery occurred on April 18, 2011, final payment fell due three months after that, on July 18, 2011, at which point the Bond’s two-year limitations period began to run. Such an interpretation is consistent with a commonsense understanding of what Allegheny would have agreed to: a bond that lasts two years from a date certain, not two years from the uncertain moment when Transit might actually choose to accept the goods. The limitations period thus expired on July 18, 2013. Because Transit did not bring suit until March 31, 2015, its claim is time-barred.