Monday, July 21, 2014

New York Account Stated and Crazy Jello

A long summer weekend has ended after a wild toddler party that included crazy jello, water features, mermaids and lots of cake (is there any better way to spend a weekend?). As the children splashed and generally enjoyed the festivities, the parents get to sit around and discuss whatever comes to mind. In my case, it was a discussion on an account stated and collections for a friend who has some customers who aren’t paying their bills.

On its most basic level, the principle of an account stated is:
To properly assert an account stated claim under New York law, a plaintiff must plead that "(1) an account was presented, (2) it was accepted as correct, and (3) debtor promised to pay the amount stated." Camacho Mauro Mulholland LLP v. Ocean Risk Retention GroupInc., No. 09 Civ. 9114, 2010 WL 2159200, at *2 (S.D.N.Y. May 26, 2010); IMG Fragrance Brands, LLC v. Houbigant, Inc., 679 F.Supp.2d 395, 411 (S.D.N.Y.2009) (Preska, C.J.); Leepson v. Allan Riley Co., Inc.,No. 04 Civ. 3720, 2006 WL 2135806, at *4 (S.D.N.Y. July 31, 2006)accordLeBoeuf, Lamb, Greene & MacRae, L.L.P. v. Worsham, 185 F.3d 61, 64 (2d Cir.1999) (holding that an account stated claim "requires `an agreement between the parties to an account based upon prior transactions between them'" (quotingChisholm-Ryder Co., Inc. v. Sommer & Sommer, 421 N.Y.S.2d 455, 457, 70 A.D.2d 429 (App.Div. 1979))). "[A] claim for an account state[d] requires evidence that the debtor accepted, either explicitly or by his actions, the account as being correct."Exp. Dev. Can. v. Elec. Apparatus & Power, L.L.C., No. 03 Civ. 2063, 2008 WL 4900557, at *16 (S.D.N.Y. Nov. 14, 2008). The latter two elements—acceptance as correct and a promise to pay the amount stated—are implied where a defendant receives and retains invoices without objecting to them in a reasonable period of time. See Leepson, 2006 WL 2135806, at *4see also LeBoeuf, 185 F.3d at 64(explaining that acceptance "may be implied if a party receiving a statement of account keeps it without objecting to it within a reasonable time or if the debtor makes partial payment" (citation and internal quotation marks omitted)); Eastside Food Plaza, Inc. v. "R" Best Produce, Inc., No. 03 Civ. 106, 2003 WL 21727788, at *4 (S.D.N.Y. July 23, 2003) ("An account stated may be implied when a creditor sends a statement of an account to a debtor and the debtor... keeps it for a reasonable time without objecting to the correctness of the account.").

In the case of my friend, he has a variety of customers who owe him small balances and they all seem to be trying to negotiate down their bills. Even when they do, however, they don’t honor their agreement to pay the negotiated amount and my friends is left with too many small balances that add up to one big amount in the liabilities category of his balance sheet.

So while the children splashed, we devised a plan going forward to get these small accounts resolved in an economic fashion so that we can all get back to our parties…

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