Luna Innovations Inc. v. Kiss Techs., Inc.

601 F.Supp.3d 1

LUNA INNOVATIONS INC., Plaintiff,

v.KISS TECHNOLOGIES, INC., Defendant.

Case No. 7:21-cv-00188

United States District Court, W.D. Virginia, Roanoke Division.

Signed May 3, 2022

Justin E. Simmons, Woods Rogers PLC, Roanoke, VA, for Plaintiff.

Conor T. Fitzpatrick, Miller, Canfield, Paddock & Stone, P.L.C., Detroit, MI, Harold David Gibson, Gentry Locke Rakes & Moore, Roanoke, VA, Robert L. DeJong, Miller Canfield, Grand Rapids, MI, for Defendant.

MEMORANDUM OPINION

Michael F. Urbanski, Chief United States District Judge

This matter is before the court on defendant Kiss Technologies, Incorporated's motion to dismiss plaintiff Luna Innovations Incorporated's First Amended Complaint, ECF No. 16, for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons explained at the April 7, 2022, hearing and herein, the court DENIES the motion to dismiss.

I. BACKGROUND

Kiss Technologies, Incorporated ("Kiss") requested quotes from Luna Innovations Incorporated ("Luna") for certain goods in December 2017; June 7, 2018; October 25, 2018; June 7, 2018; and May 2, 2019. Am. Compl., ECF No. 16, at 3–4. Kiss accepted the quotes for each of the orders and the accompanying terms and conditions, Luna shipped the goods, and Luna issued invoices to Kiss. Id. Kiss did not pay Luna in full for any of the orders. Id. Luna's Sales Terms and Conditions contained a Virginia choice of law provision stating "[t]hese Terms shall be interpreted in accordance with the substantive laws of the Commonwealth of Virginia." Am. Compl., Ex. A, ECF No. 16-1, at 10, ¶ 14(k). Kiss "agreed to pay Luna ‘a late payment charge of 1.5 percent per month, or the maximum rate permitted by applicable law, whichever is less, on any unpaid amount for each calendar month or fraction thereof that any payments are in arrears to Luna.’ " Am. Compl., ECF No. 16 at 5, ¶ 12. Kiss also agreed that if it breached its obligations, it would "be liable for Luna's costs of collection, including reasonable attorney's fees." Id. Paragraph 14(i) of the Luna Sales Terms and Conditions contains a contractual period of limitations, stating "[a]ny cause of action arising out of or related to these Terms must be brought no later than one year after the cause of action has accrued." Am. Compl., Ex. A, ECF No. 16-1, at 10, ¶ 14(i).

On July 16, 2020, Kiss's Chief Executive Officer, J. Michael Kiss, admitted to Luna through a signed writing that Kiss's debt for the goods it ordered, received, and accepted "was due and owing and promised that Kiss would pay that debt by making monthly payments of $5,000 until Kiss could pay the outstanding balance in full." Id. ¶ 13. Kiss made one $5,000 payment to Luna in July 2020 and one in August 2020. Id. ¶ 14. However, since then, Kiss has not made any more payments to Luna. Id. ¶ 15. Kiss still owes Luna no less than $246,492.26 for its orders. Id. at 6, ¶ 17.

Luna argues that Kiss's July 16, 2020, admission of debt and promise to pay that debt was a "new promise" under Va. Code § 8.01-229(G), and that is thus "restarted any applicable limitations period for Luna to bring any cause of action against Kiss for failing or refusing to pay for those goods." Id. at 5–6, ¶ 16.

II. LEGAL STANDARD

Under Rule 12(b)(6), a party may move to dismiss a complaint for failure to state a claim upon which relief can be granted. At this stage, the court must accept as true all well-pleaded allegations and draw all reasonable factual inferences in the plaintiff's favor. Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal citation and quotation marks omitted). To survive dismissal, "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ).

III. DISCUSSION

A. Luna's breach of contract claim is not time-barred by the contractual limitations period.

This case is governed by Virginia law, both because it is founded on diversity jurisdiction and because the parties agreed that Virginia law governs. Under Virginia law, "[p]arties to a contract properly may agree that a claim under the contract must be enforced within a shorter time limit than that fixed by statute if the contractual provision is not against public policy and if the agreed time is not unreasonably short." Bd. of Supervisors of Fairfax Cnty. v. Sampson, 235 Va. 516, 520, 369 S.E.2d 178 (1988). Under the Uniform Commercial Code, the statute of limitations in contracts for sale is four years. Va. Code § 8.2-725(1). Parties to a contract are permitted to "reduce the period of limitation to not less than one year," but they are not permitted to extend it. Id.

Virginia Code § 8.01-229(G), titled "Effect of new promise in writing" provides as follows:

1. If any person against whom a right of action has accrued on any contract, other than a judgment or recognizance, promises, by writing signed by him or his agent, payment of money on such contract, the person to whom the right has accrued may maintain an action for the money so promised, within such number of years after such promise as it might be maintained if such promise were the original cause of action. An acknowledgment in writing, from which a promise of payment may be implied, shall be deemed to be such promise within the meaning of this subsection.

2. The plaintiff may sue on the new promise described in subdivision 1 or on the original cause of action, except that when the new promise is of such a nature as to merge the original cause of action then the action shall be only on the new promise.

" ‘A new promise, made before a debt is barred by the statute of limitations, is held not to create a new and substantive contract, but to be merely evidence of an existing liability, and to fix a new date from which the statute runs.’ " Ingram v. Harris, 174 Va. 1, 4, 5 S.E.2d 624, 625 (1939) (quoting 17 R.C.L. Limitation of Actions, section 254, page 895). A new promise " ‘made after the statute has run gives a new cause of action, for which the old debt is a consideration.’ " Id., 174 Va. at 5, 5 S.E.2d at 625 (quoting Wood on Limitations (4th Ed.), Vol. 1, section 81, p. 432).

In Ingram, in February 1938, the executor of an estate, R.E. Ingram ("Ingram"), sued J.C. Harris ("Harris") for the balance due on a sealed promise to pay a debt dated August 9, 1923. Harris claimed the suit was barred by the ten-year statute of limitations, but Ingram said he was relying on Harris's April 16, 1930 promise to pay. Harris then claimed that the suit was still barred because the five-year statute of limitations from the date of the new promise had run.¹ The Virginia Supreme Court held that the Halifax Circuit Court erred in ruling that the right to sue on the original promise was barred by the five-year statute of limitations on the new written promise, reasoning that after the new promise, the original statute of limitations "began anew and ran for the period applicable to the original contract," meaning ten years. Id.; 174 Va. at 6, 5 S.E.2d at 626.

Here, Luna and Kiss agreed that the period of limitations for which to bring any claims related to the contract would be one year. Memo. in Supp. of Mot. to Dismiss, ECF No. 18, at 4 (internal citations omitted). Under Virginia law, this was permissible. See Sampson, 235 Va. at 520, 369 S.E.2d at 180. Kiss argues that the "cause of action for nonpayment of the Luna invoices accrued when Kiss failed to submit full payment within the requisite payment period provided on the invoice." ECF No. 18, at 5. Luna seeks payment for six invoices, as to which payment was due on August 13, 2018; September 9, 2018; September 28, 2018; November 24, 2018; March 24, 2019; and June 5, 2019. For the first four invoices, Kiss asserts that the statute of limitations ran one year later, on August 14, 2019; September 10, 2019; September 29, 2019; and November 25, 2019. The last two invoices were subject to tolling orders issued by the Supreme Court of Virginia in response to the COVID-19 pandemic, and Kiss asserts that the statute of limitations on them ran on July 29, 2020; and October 11, 2020, respectively. Applying the one-year contractual limitations period, Kiss asserts that "even the most recent invoice upon which Luna sues is 172 days beyond the Terms and Conditions’ unambiguous one-year limitations period." Id.

Luna alleges that Kiss made a new promise to repay on July 16, 2020. Am. Compl. at 5, ¶13. The new promise to pay was made after the statute of limitations had expired on the first four invoices, but before the period expired as to the last two invoices.

Kiss argues that while Va. Code § 8.01-229(G) applies to statutes of limitations, it has no impact on contractually set periods of limitations. For its argument, Kiss relies on two Virginia Supreme Court cases holding that the tolling provision in the Virginia nonsuit statute did not apply to contractual periods of limitations. Massie v. Blue Cross and Blue Shield of Virginia, 256 Va. 161, 165, 500 S.E.2d 509, 511 (1998) ; Allstate Prop. and Cas. Ins. Co. v. Ploutis, 290 Va. 226, 233–34, 776 S.E.2d 793, 797 (2015).

In Massie, Larry and Sondra Massie sued Blue Cross and Blue Shield of Virginia ("Blue Cross"), their group health and hospitalization insurer, for payment of oral surgery bills under the terms of the Blue Cross policy. The policy provided that "[n]o action at law...