Accuray Incorporated v. Care LG 2016 Holdings, LLC

Background

Accuray brought a contract action against Care LG after Care LG allegedly failed to make payments under an amended payment schedule. The amended schedule concerned an outstanding balance of $836,900 and called for monthly payments of $50,000 beginning in August 2019, followed by a final payment of $36,900. The complaint alleged that Care LG defaulted in September 2019.

Accuray filed the action in Santa Clara Superior Court on September 13, 2023. It asserted claims for breach of contract, collection of an account receivable, and account stated. Care LG removed the case to federal court and moved to dismiss all claims as barred by the statute of limitations.

Parties’ Arguments

Care LG argued that the alleged breach occurred on September 5, 2019. Because California Code of Civil Procedure section 337 provides a four-year limitations period for an action based on a written contract, Care LG contended that Accuray’s September 13, 2023 filing was eight days late.

Accuray argued that California’s Emergency Rule 9 tolled, or paused, the limitations period for 178 days during the COVID-19 pandemic. Accuray also argued that the limitations period did not begin until September 20, 2019, based on the parties’ September 19 notice of default and the alleged formation of a new contract. The court’s ruling relied on the COVID-19 tolling argument.

Court’s Analysis

The court applied California law, including California’s statute of limitations, because the case was based on state-law claims and was in federal court under diversity jurisdiction.

Emergency Rule 9 provided that statutes of limitations longer than 180 days were tolled from April 6, 2020, through October 1, 2020. The court noted that federal courts had consistently applied the rule to California state-law claims. It rejected Care LG’s arguments that the rule did not apply because it was adopted by California’s Judicial Council rather than the legislature. The court also found that Care LG had not identified authority requiring Accuray to show that COVID-19 specifically prevented an earlier filing or requiring reasonable diligence before applying the tolling rule.

Assuming that the breach date was September 5, 2019, as alleged in the complaint, the court calculated that Emergency Rule 9 extended the filing deadline by 178 days—from September 5, 2023, to March 1, 2024. Accuray’s September 13, 2023 complaint was therefore timely.

Disposition

The court denied Care LG’s motion to dismiss. It also vacated the April 11, 2024 case management conference and continued it to May 15, 2024, with an updated joint case management statement due May 8, 2024.