James I. Peck, Iv v. Kenneth James Donovan

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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 12-1213
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JAMES I. PECK, IV
v.
KENNETH JAMES DONOVAN,
Appellant
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Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil No. 2-07-cv-05500)
District Judge: Honorable Jose L. Linares
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Submitted Under Third Circuit LAR 34.1(a)
November 16, 2012
Before: RENDELL, FUENTES and CHAGARES, Circuit Judges
(Opinion Filed: December 11, 2012)
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OPINION OF THE COURT
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RENDELL, Circuit Judge.
Kenneth Donovan appeals a District Court judgment entered against him on a
breach of contract claim brought by Appellee, James Peck IV, an attorney who is
proceeding pro se. Following a bench trial solely on the issue of statute of limitations,
the District Court determined that Peck‟s breach of contract claim accrued on November

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29, 2001 and that his suit was timely filed within the six-year limitations period. For the
reasons explained below, we will vacate the judgment and remand the matter to the
District Court for further proceedings consistent with this opinion.
I.
On August 16, 1993, Peck and Donovan executed a retainer agreement under
which Peck agreed to legally represent Donovan and his company, Impact Profiles, in an
ongoing federal lawsuit, American Cyanamid Company v. Donovan (D.N.J. Civ. No. 91-
1856) (“American Cyanamid Litigation”). Under the agreement, Donovan had the option
to have Peck advance the costs and expenses of the litigation with Donovan ultimately
responsible for repaying all expenditures advanced regardless of the outcome of the
litigation. The agreement stated: “At the conclusion of the litigation, all such monies
[for advanced costs and expenses], including principal and interest, shall be reimbursed in
full by the Client to the Attorney.”
The attorney-client relationship fractured in the fall of 1994 when a disagreement
arose between Peck and Donovan. On May 31, 1995, a court order approved Peck‟s
withdrawal from the representation. In the course of his representation, Peck had
incurred $35,326.27 in advanced costs and expenses, which included expert witness fees.
Donovan eventually retained other counsel to represent him. On September 28,
2000, the district court entered a judgment in favor of Donovan in the American
Cyanamid Litigation. That same day, the court awarded Donovan attorneys‟ fees and
costs, but this order later was vacated on November 29, 2000. Final judgment was
entered on December 15, 2000, but did not provide for attorneys‟ fees or costs.

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The judgment entered in the American Cyanamid Litigation was then appealed,
and the execution of judgment was stayed on January 31, 2001. Our Court affirmed the
judgment on October 18, 2001, and American Cyanamid filed notice of its satisfaction of
judgment before the district court on November 29, 2001. Peck did not receive any
disbursement of the judgment proceeds.
Following his withdrawal of appearance and prior to November 29, 2001, Peck
sent a few communications and submitted itemized costs and expenses to Donovan‟s
counsel concerning reimbursement. For example, in a December 14, 2000 letter, Peck
commended Donovan‟s attorney for prevailing before the district court and stated:
“Pursuant to the retainer agreement between Mr. Donovan and me I was to be reimbursed
for those payments and expenses at the conclusion of the case. That point has now
arrived.” Donovan‟s counsel submitted a bill of costs to the clerk of the district court
which included Peck‟s advanced expenditures, although ultimately the clerk rejected
those expenditures.
Neither Donovan, nor his agents, ever reimbursed Peck for the advanced costs and
expenses, and on November 15, 2007, Peck filed the instant suit seeking recovery.
Following pre-trial proceedings, including two summary judgment motions, the District
Court presided over a two-day non-jury trial concerning solely whether the six-year
statute of limitations barred Peck‟s breach of contract claim.
The parties agreed that the Retainer Agreement provided that the advanced
litigation costs became due “[a]t the conclusion of the litigation,” but disputed the
meaning of “conclusion of the litigation,” which was undefined by the contract. 1 App.

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at 8. The District Court found that the term meant the date that the District Court entered
final judgment on December 15, 2000: “[F]or purposes of the Retainer Agreement, the
„conclusion of the litigation‟ was December 15, 2000 and it was at that point that the
costs and expenses advanced by Peck came due.” Id. at 10. However, in the District
Court‟s estimation the Retainer Agreement merely established the “point at which Peck
had the right to collect monies advanced by him on behalf of Donovan,” but did not
elucidate the issue of when Peck‟s breach of action claim accrued. Id. at 8.
The Court reasoned that Peck‟s breach of contract claim “did not accrue for statute
of limitations purposes until Donovan breached the Retainer Agreement.” Id. In
determining when Donovan was in breach, the Court followed the rule that a breach of
contract “occurs when one party has, by words or conduct, indicated to the other that the
agreement is being repudiated or breached.” Id. at 10 (quoting McFarland v. Harvey,
Doc. No. A-4520-09T2, 2011 WL 1261152, at *4 (N.J. Super. Ct. App. Div. Apr. 6,
2011)).
The Court commented extensively on the conduct of the parties after the advanced
costs and expenses came due. Upon examining the record, the Court determined that
“there was no evidence presented to this Court that Peck had any reason to know through
communications, conduct or otherwise from either Donovan or that of his appellate and
trial counsel that he would not be reimbursed.” Id. at 12. In the absence of such an
indication, the Court reasoned that Peck would not have been in a position to realize that
the contract had been breached. Id. at 11-12. The Court rejected Donovan‟s argument
that Peck should have known that he would not be repaid earlier, and instead concluded

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that the date when Peck had reason to know that the agreement was breached was “after
the eventual distribution of the proceeds by Greenman [Donovan‟s attorney] subsequent
to the satisfaction of judgment entered on November 29, 2001.” Id. at 12. The Court
thus determined that Peck‟s breach of contract claim did not accrue until November 29,
2001 “when Peck was fully able to ascertain that Donovan would not repay him.” Id. at
14.
The Court additionally explained that the discovery rule operated to delay the
accrual date given the equitable circumstances of the case. Because Peck had “acted
diligently” in requesting payment of his costs in a December 14, 2000 letter, and up until
November 29, 2001 Donovan and his agents‟ actions and communications had indicated
to Peck that he would be reimbursed, the Court concluded that “Defendant cannot now
benefit from what would amount to a deceptive course of conduct and representations
which prevented Peck from finding out Defendant‟s true intentions and filing suit
earlier.” Id. at 13-14 (citing Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping
Ctr. Assocs., 864 A.2d 387 (N.J. 2005)).
Given that Peck‟s cause of action for breach of contract accrued on November 29,
2001, the Court found that Peck had timely filed his claim within the six-year limitations
period and entered judgment in favor of Peck. Donovan timely filed a notice of appeal.
II.
The District Court had jurisdiction over this action under 28 U.S.C. § 1332. We
have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291.

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On appeal from a bench trial, we review the district court‟s findings for clear error
and exercise plenary review over conclusions of law and the court‟s “choice and
interpretation of legal precepts.” Post v. St. Paul Travelers Ins. Co., 691 F.3d 500, 514-
15 (3d Cir. 2012) (quoting Blasband v. Rales, 971 F.2d 1034, 1040 (3d Cir. 1992)). For
mixed questions of fact and law for a bench trial, “we apply the clearly erroneous
standard except that the District Court‟s choice and interpretation of legal precepts
remain subject to plenary review.” Gordon v. Lewistown Hosp., 423 F.3d 184, 201 (3d
Cir. 2005).
III.
Donovan claims that the District Court erred by concluding that Peck‟s cause of
action for breach of contract was not time-barred because it did not accrue until
November 29, 2001. According to Donovan, under a strict application of the statute of
limitations, Peck‟s cause of action accrued almost a year earlier on December 15, 2000—
the date that the District Court found was “the conclusion of the litigation.”1 Donovan
also argues that the discovery rule does not postpone the accrual date.
The relevant New Jersey statute requires that breach of contract claims be brought
within six years “after the cause of any such action shall have accrued.” N.J. Stat. Ann.
2A:14-2. The traditional rule followed by New Jersey courts “is that a cause of action
accrues on the date when „the right to institute and maintain a suit,‟ first arises.” Russo
Farms, Inc. v. Vineland Bd. of Educ., 675 A.2d 1077, 1083 (N.J. 1996) (citing Rosenau v.
1 Neither party challenged this ruling of the District Court on appeal.

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City of New Brunswick, 238 A.2d 169, 172 (N.J. 1968)). The Supreme Court of New
Jersey has explained that the “right to institute and maintain a suit” “refers to the
„combination of facts or events which permits maintenance of a lawsuit; the time of
occurrence of the last of these requisite facts is thereby made the critical point of initial
inquiry.‟” Id. at 1083-84 (citing Note, Developments in the Law—Statutes of Limitations,
63 Harv. L. Rev. 1177, 1200 (1950)). The Supreme Court occasionally has ascribed the
term “enforceable right” to these precepts—explaining that “ordinarily” a cause of action
accrues at the time when the party seeking to bring suit has an “enforceable right.”
Metromedia Co. v. Hartz Mountain Ass’n, 655 A.2d 1379, 1381 (N.J. 1995).
Generally under New Jersey law, a cause of action arising from a breach of
contract accrues when the defendant breached the contract. See Sodora v. Sodora, 768
A.2d 840, 842 (N.J. Super. Ct. Ch. Div. 2000) (acknowledging that “a strict application
of [the New Jersey] statute would bar the proceedings because the written agreement was
breached in 1978 when the real property was sold and the proceeds were not delivered to
the plaintiffs at that time” pursuant to the terms of a property settlement agreement); cf.
31 Williston on Contracts § 79:14 (4th ed. 2004) (“[O]rdinarily, in an action based on a
contract, accrual occurs as soon as there is a breach of contract . . . .”).2 That a “right to
2 The Supreme Court of New Jersey appears to recognize that in certain contract cases
particular circumstances may warrant deviation from this general rule. For example, in
Metromedia Co. v. Hartz Mountain Ass’n the Supreme Court followed an installment
contract approach for an agreement under which the defendant-landlord had agreed to
reimburse the plaintiff-tenant for monthly cleaning costs. 655 A.2d 1379. Under the
terms of the contract, the landlord‟s duty to reimburse was contingent upon the tenant
presenting the bills to the landlord, or in other words, making a demand for
reimbursement. Id. at 1380. However, the tenant never submitted any monthly bills to

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institute and maintain a suit” would first arise in a breach of contract claim when the
contract is breached is consistent with the elements of the action itself. Under New
Jersey law, “[t]o establish a breach of contract claim, a plaintiff has the burden to show
that the parties entered into a valid contract, that the defendant failed to perform his
obligations under the contract and that the plaintiff sustained damages as a result.”
Murphy v. Implicito, 920 A.2d 678, 689 (N.J. Super. Ct. App. Div. 2007). In an ordinary
breach of contract case where the plaintiff has suffered injury, the last requisite facts to
maintain such a suit will be those pertaining to the defendant‟s non-performance. See,
e.g., 31 Williston, supra (“[I]f the promise is to pay a debt or discharge the debtor from
liability, a right of action is complete, and the statute begins to run as soon as the debt is
due and unpaid.”); cf. Alnor Const. Co. v. Herchet, 90 A.2d 14, 16-17 (N.J. 1952) (“An
action at law [for breach of contract] is founded upon the mere nonperformance by the
defendant . . . .”).
Donovan‟s duty to perform under the Reimbursement Agreement was set forth as
follows: “At the conclusion of the litigation, all such monies [for advanced costs and
expenses], including principal and interest, shall be reimbursed in full by the Client to the
the landlord for over six years. Id. The Court held that the tenant‟s cause of action arose
on a monthly basis upon completion of the cleaning services, rather than after the tenant‟s
ostensibly belated demand for reimbursement. Id. at 1381. Because of the “unusual
circumstances of [the] case” in which the landlord‟s performance depended upon unclear
payment procedures which included a condition precedent, i.e., the tenant tendering a
demand for reimbursement, the Court reasoned it was appropriate that the “enforceable
right” arose upon completion of the cleaning services given that it “is a familiar method
for treatment of limitation issues under installment contracts when no acceleration clause
is present” and “[t]o hold otherwise would allow a claimant to trigger the statute of
limitations upon presentation of a claim rather than having the existence of the claim
trigger the statute of limitations.” Id.

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Attorney.” This provision explicitly provides that Donovan was obligated to reimburse
Peck for the advanced costs and expenses, and that the reimbursement was due at a
specific time. Accordingly, the agreement does not merely govern when Peck had the
right to collect the advanced expenditures, but also provides when Donovan‟s
performance was due. It follows that the Reimbursement Agreement provides that
Donovan was to reimburse Peck for the advanced litigation costs on December 15, 2000.
When Donovan did not satisfy performance on this date, he was in immediate
breach of the contract. Accordingly, under a strict application of the statute of
limitations, Peck‟s cause of action against Donovan for breach of contract would have
accrued on December 15, 2000.
The District Court‟s analysis, however, strays from this principle based on the
discovery rule. This rule requires that “in an appropriate case a cause of action will be
held not to accrue until the injured party discovers, or by an exercise of reasonable
diligence and intelligence should have discovered that he may have a basis for an
actionable claim.” Lopez v. Swyer, 300 A.2d 563, 565 (N.J. 1973).
Donovan argues that the District Court‟s application of the discovery rule did not
support delaying the accrual of Peck‟s cause of action. We agree. As interpreted by New
Jersey courts, the discovery rule would not postpone when Peck‟s breach of contract
claim accrued. The rule operates merely to delay accrual until the point in time when the
plaintiff knew or should have known about his cause of action. “[T]he discovery rule
imposes on plaintiffs an affirmative duty to use reasonable diligence to investigate a
potential cause of action, and thus bars from recovery plaintiffs who had „reason to

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know‟ of their injuries.” County of Morris v. Fauver, 707 A.2d 958 (N.J. 1998). “[M]ost
contract actions presume that the parties to a contract know the terms of their agreement
and a breach is generally obvious and detectable with any reasonable diligence.” Id.; cf.
Sodora, 768 A.2d at 842 (observing that the discovery rule could not apply to a party to
an agreement “because she had knowledge of the breach” whereas third-party
beneficiaries who did not discover the existence of the contract or the breach after the
limitations period expired could benefit from the rule). The circumstances of this case
provide no exception to this axiom. Peck knew or reasonably should have known the
facts giving rise to his cause of action claim upon Donovan‟s immediate breach. As
discussed earlier, the Reimbursement Agreement explicitly provided that Donovan would
reimburse Peck the advanced expenditures “at the conclusion of the litigation” and
Donovan never reimbursed Peck at that specified time. Accordingly, the discovery rule
would not postpone the accrual of Peck‟s cause of action.
Notwithstanding this, however, we cannot ignore the very strong language used by
the District Court in decrying Donovan‟s conduct leading Peck to believe that he would
be paid, terming it at one point “deceptive.” Thus, we do not know if the District Court
would find its ruling nonetheless defensible under the doctrine of equitable tolling. This
issue was not addressed in the District Court‟s opinion, and it is unclear from the record
before us on appeal whether this argument was properly before the District Court at trial.
We thus decline to consider this issue ourselves. We will vacate the District Court‟s
judgment and remand the matter to the District Court to determine whether Peck properly

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advanced any alternative bases for tolling the limitations period or postponing the accrual
date,3 aside from the discovery rule, and whether any such argument is meritorious.
IV.
We conclude both that under a strict application of the statute of limitations Peck‟s
cause of action would accrue on December 15, 2000 and that the discovery rule would
not delay the date of accrual. Nonetheless, because Peck may have raised other equitable
defenses to the statute of limitations at trial, we will vacate the District Court‟s judgment
and remand with instructions for the District Court to proceed consistent with this
opinion.
3 See, e.g., Burlington County Country Club v. Midlantic Nat. Bank South, 538 A.2d 441,
445 (N.J. Super. Ct. Ch. Div. 1987) (recognizing that “a statute of limitations which
applies to a presently existing contractual debt or obligation may be tolled by an
acknowledgment or a promise to pay” and “if such acknowledgment or promise to pay is
made after the statute has run, it will act to revive the debt for the statutory period”).

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