Friday, August 3, 2007
C.A. Clairifies Statue of Limitations, Revives Suit Against Employment Agency Over Embezzlement
By a MetNews Staff Writer
The limitations period governing an employer’s suit against the agency that placed an employee who stole $1 million from the company was triggered when the plaintiff learned that the employee was a convict with falsified credentials, rather than when the theft occurred, the Sixth District Court of Appeal has ruled.
“[C]laims based on two independent legal theories against two separate defendants can accrue at different times,” Justice Richard McAdams wrote for the court. His July 16 opinion was certified yesterday for publication.
In this case, while the claim against embezzler Vickie Hunt accrued when the plaintiff knew, or by the exercise of due diligence should have known, that she had stolen the plaintiff’s money, the case against Accountants, Inc. Services did not accrue until its negligence was, or should have been, discovered, McAdams said.
The defendant, which places accountants and bookkeepers in temporary and permanent positions, secured a job for Hunt with E-Fab, Inc., a designer and manufacturer of precision components and tools. Between 1996 and 2003, Hunt embezzled more than $1 million by various devices, including destruction of records and providing E-Fab management with erroneous information.
The embezzlement came to light when a prospective “new partner” in the company was investigating the books. When concerns were raised, E-Fab obtained copies of documents from the bank and notified police that it suspected embezzlement.
In the course of investigating, police discovered that Hunt had been convicted of theft and welfare fraud prior to going to work for E-Fab. The company claimed in its suit against the placement agency that it previously had no reason to suspect that Hunt was dishonest or, as it later discovered, that her credentials for the job were falsified.
Hunt was eventually sentenced to four years in prison and ordered to make $1.5 million in restitution.
Suing Accountants Inc. for breach of contract and negligence in August 2005, E-Fab said the company had breached its duty to run background checks on employees and had misrepresented having done so.
A Santa Clara Superior Court judge sustained the agency’s demurrer based on the statute of limitations, reasoning that had it exercised due diligence, the company would have discovered the embezzlement more than two years before it sued.
McAdams, writing for the Court of Appeal, questioned the judge’s reasoning. But even if he was correct about due diligence, he was wrong about when the claim accrued, the justice said.
Since the plaintiffs’ claims against Accountants Inc. were based not merely on the fact that Hunt embezzled, but on the allegation that the company failed to screen her adequately, the delayed discovery rule makes those claims timely if, as it alleged in its complaint, E-Fab did not discover the discrepancies in Hunt’s background prior to November 2003, McAdams said.
The case is E-Fab, Inc. v. Accountants, Inc. Services, 07 S.O.S. 4864.
Copyright 2007, Metropolitan News Company