Procedural Posture

Procedural Posture

Plaintiff, a trustee in bankruptcy, appealed a summary judgment from the Superior Court of Los Angeles County (California), which ruled that a breach of fiduciary duty claim against defendants, executives of the bankrupt corporation, was barred by the expiration of a contractual notice period in the executives’ employment agreements.

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Overview

The provision required presentation of a 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. Prior to filing bankruptcy, the corporation did not give written notice to the executives that the corporation had a breach of fiduciary duty claim against them. The complaint filed by the trustee alleged a specific date on which the corporation became aware of the facts underlying the breach of fiduciary duty claim. The trustee did not give written notice of the breach of fiduciary duty claim to the executives within one year after the date alleged in the complaint. The court held that the trial court correctly granted summary judgment in favor of the executives on the ground that neither the corporation nor the trustee in bankruptcy had satisfied the contractual one-year notice provision. Shortening the four-year statute of limitations in Code Civ. Proc., ยง 343, was permissible because the provision incorporated the delayed discovery rule and because its inclusion in an employment agreement did not violate public policy. The trustee’s ignorance of the provision did not excuse noncompliance.

Outcome

The court affirmed the judgment.