Opinion ID: 199274
Heading Depth: 2
Heading Rank: 1

Heading: Contractual Statute of Limitations

Text: 10 We review de novo allowance of a Rule 12(b)(6) motion to dismiss, accepting all well-pleaded facts as true and drawing all reasonable inferences in favor of Denman. See Massachusetts Sch. of Law v. American Bar Ass'n, 142 F.3d 26, 40 (1st Cir. 1998). A motion to dismiss should be granted only if it appears to a certainty that the plaintiff would be unable to recover under any set of facts. Roma Const. Co. v. aRusso, 96 F.3d 566, 569 (1st Cir. 1996); see alsoLaChapelle v. Berkshire Life Ins. Co., 142 F.3d 507, 509 (1st Cir. 1998) (Granting a motion to dismiss based on a limitations defense is entirely appropriate when the pleader's allegations leave no doubt that an asserted claim is time-barred.). We also review de novo the district court's interpretation of the contract, a question of law. Principal Mutual Life Ins. Co. v. Racal-Datacom, Inc., 233 F.3d 1, 3 (1st Cir. 2000). 11 The Stock Purchase Agreement specifies that Illinois law applies. Under Illinois law parties are free to contract for a time period within which a suit may be brought . . . which [is] less than the general statute of limitation period applicable to written contracts. Board of Educ. v. Hartford Acc. & Indem. Co., 504 N.E.2d 1000, 1005 (Ill. App. 1987); see Koclanakis v. Merrimack Mut. Fire Ins. Co., 899 F.2d 673, 675 (7th Cir. 1990) (Illinois law recognizes the validity of reasonable contractual limitations on the time to file suit.). 12 The dispute here is whether the parties intended to create a statute of limitations in their Agreement. Section 8.1(c) of the Agreement, which expressly applies to the warranty at issue, states that EIPC's representations and warranties shall expire on the second (2nd) anniversary of the Closing . . .. Denman argues that the language of the Agreement is ambiguous and so the district court erred in dismissing and not considering relevant extrinsic evidence. The Agreement, Denman argues, should be read as imposing only a notice requirement for breach of warranty claims, and not a limitations period. Under this theory, its suit is not barred because it notified EIPC of its claim on June 11, 1998, well within two years of the closing on October 1, 1996. 13 EIPC argues that the plain language of the Agreement demonstrates that the parties agreed to a two-year statute of limitations for bringing claims under the Agreement, and so Denman's suit, filed in 1999, is too late. Whether contract terms are ambiguous is a question of law for the court. See Outboard Marine Corp. v. Liberty Mut. Ins. Co., 607 N.E.2d 1204, 1212 (Ill. 1992). Ambiguity does not exist where there is mere disagreement about the proper interpretation of a contract, but only if the contractual language is reasonably susceptible to more than one meaning. See Johnstowne Centre Partnership v. Chin, 458 N.E.2d 480, 481 (Ill. 1983); Seven Bridges Courts Ass'n v. Seven Bridges Development, Inc., 714 N.E.2d 601, 606 (Ill. App. 1999). The district court concluded that the terms shall expire operated as a statute of limitations. 14 Courts applying Illinois law have construed similar contract language as unambiguously requiring a party to file suit within the stated period. In Latek v. LeaseAmerica Corp., 1992 WL 170546 (N.D. Ill. July 16, 1992), aff'd, 7 F.3d 238 (7th Cir. 1993), the court rejected the defendant's ambiguity argument, finding that a provision that warranties shall survive for 18 months from the closing date clearly describes a contractual statute of limitations. Id. at . See also Commonwealth Fin. Corp. v. USAmeribancs, Inc., 1987 WL 19142, at  (N.D. Ill. Oct. 20, 1987) (cause of action filed over one year after closing was time-barred where provision stated seller shall indemnify buyer for one year after closing). To say that something shall survive for a period of time, which the Latek court found to unambiguously imposed a statute of limitations for filing a breach of warranty claim, is very much like saying something shall expire after a period of time, the language in the Agreement between EIPC and Denman/Pensler. 15 We reject Denman's interpretation of the Agreement as merely requiring notice of a breach of warranty claim. Like the Agreement between EIPC and Denman/Pensler, the contract in Latek did not include any language stating that a claim for breach of warranty must be filed within the limitations period. Nevertheless, the court found that the language was reasonably susceptible to only one meaning: that any claim based on warranties contained in the Purchase Agreement must be brought within [the specified time period] of the closing. 1992 WL 170546, at ; see also Commonwealth Fin. Corp., 1987 WL 19142, at  (rejecting plaintiff's argument that limitations period only requires defendant to indemnify plaintiff for any breach that occurs within one year of the closing regardless of when the actions are actually brought). Because Illinois law forecloses the argument, Denman's contract claim filed in 1999 is barred, and so the district court appropriately granted EIPC's motion to dismiss Denman's cross-claim.