Express Services Inc v. King et al

Filing 127

ORDER granting in part and denying in part 108 Motion for Summary Judgment, as more fully set out. Signed by Honorable David L. Russell on 8/30/17. (jw)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
EXPRESS SERVICES, INC. d/b/a
EXPESS EMPLOYMENT
PROFESSIONALS, a Colorado
corporation,

)
)
)
)
)
Plaintiff,
)
)
v.
)
)
DON G. KING, an individual,
)
EMILY D. S. KING, an individual,
)
and SOUTHERN STAFFING, INC., )
a Georgia corporation,
)
)
Defendants.
)

Case No. CIV-15-1181-R

ORDER
Plaintiff Express Services (“Express”) is a national company that consists of over
700 franchised locations across the United States, Canada, and South Africa. This case
concerns one of its Georgia franchises, which Express alleges created a competing business
in violation of a franchise agreement. Defendants have moved for summary judgment
based on the statute of limitations [Doc. 108]. Express responded [Docs. 115 and 117], and
Defendants replied [Doc. 118]. For the reasons that follow, some of Express’s claims are
untimely. The Court will therefore GRANT IN PART and DENY IN PART Defendants’
Motion.
I. Background
In November 1998, Defendants Southern Staffing, Inc., and its owners, husband and
wife Don and Emily King, entered into a Franchise Agreement with Express to operate a

1

temporary personnel business in Georgia. The Franchise Agreement appeared mutually
beneficial. Out of the monthly gross profit generated by the Southern Staffing franchise,
Southern Staffing would receive 60% and Express the remaining 40%. And further
sweetening the deal, Express was a proven company. It is, in its own words, “one of the
top staffing companies in the United States and Canada.” Doc. 75, at 7. In return, Mr. King
and Southern Staffing agreed to develop Express services, preserve Express’s confidential
information on workplace management, and refrain from using software and training
programs not approved by Express. And—crucial for purposes of this Motion—the Kings
agreed not to operate any business competitive to Express or its other franchises.
The services that these Express and their franchises provide to their client businesses
include recruiting, human resource management, and staffing. Express supplies its clients
with what it terms a “contingent workforce,” which consists of “temporary associates”—
persons whom Express technically employs but who perform labor and services for the
client. These type of employers, known as PEOs (professional employer organizations),
essentially negate some of a client business’s payroll duties and personnel-management
responsibilities. Even though an employee labors for a PEO’s client, the PEO typically
pays the employee’s wages and withholds his or her payroll taxes. In return, the PEO
receives a fee from the client business.
Express disputes Defendants’ characterizing it as a PEO, likely because it offers
more than employee-leasing services. Yet there is no doubt that Express derives at least
some of its business from leasing employees. For example, King and his Southern Staffing
franchise entered into one such staffing agreement with Caterpillar, Inc., in 2001. The
2

contract called for Southern Staffing to provide temporary associates to Caterpillar to work
at two of its Georgia facilities. Like most if not all of Express’s staffing agreements, the
contract featured an “evaluation hire” provision, which allowed Caterpillar to hire full-time
one of the temporary employees it was leasing from Southern Staffing/Express once the
employee had spent 540 hours on Southern Staffing’s/Express’s payroll. As far as the Court
can tell, Southern Staffing’s/Express’s relationship with the temporary associate ends once
a client such as Caterpillar hires the employee full-time.
Yet three years into his Franchise Agreement with Express, Mr. King saw room for
growth in the employee-leasing industry. Express employed clients on a temporary basis,
but perhaps there was a business opportunity for when an Express client desired to hire one
of those employees full-time. So in 2001, Mr. King formed his own company, Impact
Outsourcing Solutions, Inc. The company, which began operating as a PEO under Georgia
law in early 2002, allegedly provides clients with employer and payroll services, human
resources administration, and employee leasing.
Though it is unclear which businesses Mr. King contacted about hiring Impact, no
dispute exists that in 2004 Mr. King presented to one of his Southern Staffing clients,
Caterpillar, the benefits of combining Southern Staffing’s temporary staffing service with
Impact’s new business model, which he coined “Hybrid Labor Management” or Core2.
Mr. King insists that his Core2 model is distinct from Express’s employee-leasing services.
As he explained in his deposition, while a PEO like Express employs a client’s entire
workforce, Impact employs only a portion of a client’s workforce. Doc. 108, Ex. 4, at 156.
Impact’s model is different from that of a traditional PEO because the client and the PEO
3

do not “co-employ” a client’s employees. Instead, a client using Impact’s Core2 program
designates temporary associates it wants to hire long-term. Impact then serves as the sole
employer of these employees. In short, Mr. King believes that Impact offers a solution for
national companies like Caterpillar: “Caterpillar is not going to outsource 35,000
worldwide employees to a PEO, but they want a portion of their full-time workforce to be
in a PEO environment.” Id. Impact, he believes, offers companies that option.
Mr. King created and operated Impact despite the fact that the Franchise Agreement
he signed in 1998 included a non-compete clause. Another contract he entered into, the
Developer Agreement (in which he agreed to develop Express franchises and consult them
for a fee) also included a non-compete clause. Yet whether Mr. King’s conduct violates
these contracts is not at issue in this Motion. The Court will assume it does for the sake of
deciding Defendants’ statute-of-limitations defense. That question depends on when
Defendants’ allegedly improper acts occurred. Defendants offer evidence that Impact was
at least offering services to clients by February 21, 2005, when Impact contracted by way
of a “Lease Agreement” to lease employees to Caterpillar. These employees would
comprise a portion of its workforce and would perform work at one or more Caterpillar
facilities. Pursuant to that agreement, on March 7, 2005, Caterpillar selected eleven of the
temporary associates it was then leasing from Express/Southern Staffing and designated
them for full-time hire with Impact.
The problem is that the parties’ contractual relationship continued. Express claims
it was unaware of Mr. King’s efforts to transfer Southern Staffing’s temporary associates
to Impact’s payroll in 2004 or 2005. Further, if it had been aware, it would not have
4

renewed and amended the Franchise Agreement in 2008 and 2013 and would have
doubtlessly sued before October 19, 2015.
The Court has already dismissed Express’s claim for tortious interference with
contractual relations. Express’s two remaining claims are for breach of the Franchise
Agreement and Developer Agreement, which it says Defendants violated by offering
services competitive to Express, by using Express’s name, trademarks, and confidential
information to solicit Express clients and employees, and by developing Impact to the
detriment of Defendants’ Express franchise. Defendants have moved for summary
judgment based on the statute of limitations.
II. Summary Judgment Standard
Summary judgment is appropriate “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). The moving party bears the initial burden of demonstrating the basis
for its motion and of identifying those portions of “the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any,” that
demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477
U.S. 317, 323 (1986) (internal quotations omitted). These specific facts may be shown “by
any of the kinds of evidentiary materials listed in Rule 56(c), except the mere pleadings
themselves.” Id.
“An issue is ‘genuine’ if there is sufficient evidence on each side so that a rational
trier of fact could resolve the issue either way . . . An issue of fact is ‘material’ if under the
substantive law it is essential to the proper disposition of the claim.” Adler v. Wal-Mart
5

Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citations omitted). In short, the Court must
inquire “whether the evidence presents a sufficient disagreement to require submission to
a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 251–52 (1986). While the Court construes all facts
and reasonable inferences in the light most favorable to the non-moving party, Macon v.
United Parcel Serv., Inc., 743 F.3d 708, 712–713 (10th Cir. 2014), “[t]he mere existence
of a scintilla of evidence in support of the [non-movant’s] position will be insufficient;
there must be evidence on which the [trier of fact] could reasonably find for the [nonmovant].” Anderson, 477 U.S. at 252. At the summary judgment stage, the Court’s role is
not “to weigh the evidence and determine the truth of the matter but to determine whether
there is a genuine issue for trial.” Id. at 249.
Because the statute of limitations is an affirmative defense, see Fed.R.Civ.P. 8(c), a
defendant moving for summary judgment has the initial burden of making a showing that
the statute of limitations defense is applicable. Blue Cross and Blue Shield of Alabama v.
Weitz, 913 F.2d 1544, 15512 (11th Cir. 1990). If it appears that statute of limitations bars
the action and there is no question of material fact in connection with the statute, then the
Court should grant the motion for summary judgment. Borum v. Coffeyville State Bank, 6
Fed. Appx. 709, *1 (Mar. 12, 2011, 10th Cir.).
III. Analysis
Defendants’ summary judgment argument is simple: the conduct Express complains
of began no later than March 7, 2005, when Impact began utilizing its Core2 program to
hire employees away from Southern Staffing/Express. Oklahoma law prescribes a five6

year statute of limitations to actions for breach of contract. Rather than sue within five
years, Express waited until October 19, 2015, far past the statute of limitations.
Express counters with several reasons why its action is timely. First, the statute of
limitations, if it began at all, did not begin to run until Express learned of Impact’s
competing business. Second, the statute of limitations cannot have lapsed because
Defendants continue to breach the Franchise and Developer Agreements. Third, at least
some of its actions are timely because the Agreements constitute continuing contracts that
allow for a separate action, and new limitations period, for each breach. Fourth and finally,
each time the parties amended the Franchise Agreement, a new contract formed, resetting
the limitations period.
Because this is a diversity case, federal law determines procedural issues while state
law controls substantive issues. Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). A federal
court sitting in diversity applies state law for statute of limitations purposes. Burnham v.
Humphrey Hosp. Reit Tr., Inc., 403 F.3d 709, 712 (10th Cir. 2005) (citing Guaranty Trust
Co. of New York v. York, 326 U.S. 99, 109–110, (1945)).When an action accrues for statute
of limitations purposes is a matter of state law. Id. (citing Walker v. Armco Steel Corp.,
446 U.S. 740, 751, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980)). The Court therefore applies
Oklahoma law to the question at hand.
A. The statute of limitations begins to run on a breach of contract claim upon the
breach, not when the injured party learns of the breach.
Express has sued under two contracts—the 1998 Franchise Agreement and the 2004
Developer Agreement, both of which contain non-compete clauses. Because those
7

agreements constitute written contracts, the statute of limitations for these claims is five
years. Okla. Stat. tit. 12, § 95(A)(1). Express and Defendants agree that for an action in
contract, the “cause of action accrues when a litigant first could have maintained his action
to a successful conclusion.” MBA Comm. Constr., Inc. v. Roy J. Hannaford Co., 818 P.2d
469, 473 (Okla. 1991). Yet their agreement ends there. Defendants argue that Express could
have brought this action in 2004, when Mr. King created Impact, or at least in 2005, when
Caterpillar began using Impact’s Core2 program to employ persons who had formerly been
Southern Staffing/Express temporary associates. Express responds that it could not have
sued until it learned that Mr. King was breaching the Franchise and Developer Agreements
by offering Impact’s competing services. When this was, though, Express refuses to say.
With this argument—that the limitations period does not commence until Express
learned of the breach—Express is essentially relying on the discovery rule. As the Court
explained in its earlier Order, the discovery rule typically only applies in tort cases, where
courts will toll the limitations period “until the injured party knows, or, in the exercise of
reasonable diligence, should have known of the injury.” See Doc. 81, at 14–15. Because
the Oklahoma Supreme Court has never definitively ruled one way or the other on whether
the discovery rule applies to a standard breach of contract action, let alone a suit under a
franchise agreement, this is a difficult question for the Court. The Tenth Circuit noted the
lack of direction from Oklahoma courts on this issue more than two decades ago. See
Chickasaw Tel. Co. v. Sw. Bell Mobile Sys., Inc., 1997 WL 290951, at *3, 113 F.3d 1245
(10th Cir. 1997) (unpublished) (“While Oklahoma courts have considered specific accrual
standards for certain contract and tort actions, the parties do not cite, nor have we found,
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any Oklahoma cases directly addressing accrual of the type of contract and tort claims
presented in this case). And indeed, Oklahoma courts have provided sparse direction since
that time. Because Express’s claims hinge on this question and Oklahoma authority
provides no definitive answer, the Court “must endeavor to predict how [Oklahoma’s] high
court would rule.” Houston v. Indep. Sch. Dist. No. 89 of Okla. Cty., 949 F.Supp.2d 1104,
1108 (W.D. Okla. 2013).
An exhaustive review of Oklahoma authority convinces the Court that the discovery
rule does not apply to breach of contract claims. Several observations underlie that
conclusion.
For starters, the Oklahoma Supreme Court has never discussed the discovery rule
as an element of contract law. Instead, it notes that the discovery rule is a feature of tort
law. See, e.g., Reynolds v. Porter, 760 P.2d 816, 820 n.8 (Okla. 1988) (explaining that the
discovery rule “allows limitations in tort cases to be tolled until the injured party” learns
of, or should have learned of, the injury”) (emphasis added); see also Calvert v. Swinford,
382 P.3d 1028, 1033 (Okla. 2016) (“A cause of action accrues when the injury occurs.
However, Oklahoma also follows the discovery rule allowing limitations in certain tort
cases to be tolled until the injured party knows or, in the exercise of reasonable diligence,
should have known of the injury.”) (emphasis added).
Second, the Oklahoma Supreme Court has twice had the opportunity to apply the
discovery rule to a claim for breach of contract—albeit a construction contract—and twice
declined to do so. See Samuel Roberts Noble Found., Inc. v. Vick, 840 P.2d 619, 623 (Okla.
1992); see Kirby v. Jean’s Plumbing & Air, 222 P.3d 21, 27 (Okla. 2009). In Vick, for
9

example, it ruled that the limitations period commenced upon completion of a plumber’s
installation of a defective sewer line—not eleven years later when the plaintiff homeowner
discovered them. 840 P.2d at 622. Its reasoning there, that “under a discovery rule, a
defendant [builder] is never completely certain that time has extinguished his liability,” id.,
seems equally relevant here. Under Express’s theory, Mr. King and other franchise owners
could never be certain that their business ventures were in accordance with the franchise
agreement. A franchisee might carry on for years, even decades, before a franchise like
Express decided to sue.
Aside from these cases, however, the Oklahoma Supreme Court has offered no
direction. That said, one concurring justice did remark, in a case for failure to pay mineral
royalties, that “we don’t have a ‘discovery rule’ for breach of contract. Something would
have to toll the statute.” Goodall v. Trigg Drilling Co., 944 P.2d 292, 296 (Okla. 1997)
(Summers, J., concurring). And while this is far from conclusive, lower courts in Oklahoma
and federal courts have generally declined to apply the discovery rule to breach of contract
claims. The Oklahoma Court of Civil Appeals, for instance, not only refused to apply the
rule to a contract action for unpaid electrical services, but also noted that “the ‘discovery
rule’, for purposes of tolling the statute of limitations, is applicable to tort cases.” Kiamichi
Elec. Co-op. v. Underwood, 842 P.2d 358, 358 (Okla. Civ. App. 1992). Federal courts have
gone further, holding that the discovery rule is simply inapplicable to breach of contract
actions. See, e.g., Southcrest, L.L.C. v. Bovis Lend Lease, Inc., 2010 WL 4053544, at *3
(N.D. Okla. Oct. 14, 2010) (“[C]ourts have long rejected the extension of the discovery
rule to breach of contract claims.”); Wilson v. Johnson, No. CIV-05-0921-F, 2006 WL
10

1555809, at *3 n.5 (W.D. Okla. June 5, 2006) (“The discovery rule which applies to tort
claims in Oklahoma does not apply to claims based on contract theories of recovery.”).
In short, while this issue is far from resolved, the majority if not all authority
suggests that the limitations period for a breach of contract action commences upon the
breach, not when the injured party gains notice. Because the Court must forecast how
Oklahoma’s highest court would rule, it will not apply the discovery rule here.
Part of that decision stems from Express’s failure to cite any case in which an
Oklahoma court applied the discovery rule in a breach of contract action. This is not to say
that Express does not try. It relies on Kinzy v. State ex rel. Oklahoma Firefighters Pension
& Ret. Sys., 20 P.3d 818 (Okla. 2001). There, firefighters sued the state for its alleged
failure to pay them properly calculated retirement benefits from a state public trust. Id. at
820–21. The Oklahoma Supreme Court held that their claims were barred because the
statute of limitations began to run “upon [the firefighters’] first acquiring notice of the facts
which would support a breach-of-contract claim against [the pension] System that the class
could have sued.” Id. at 823. While no Oklahoma court has ever interpreted Kinzy as
holding that the discovery rule applies to breach of contract claims, Express cites the case
for that precise proposition.
To be fair, the Oklahoma Supreme Court in Kinzy did in fact construe the
firefighters’ breach of trust claims as contractual in nature before applying a five-year
limitations period. Id. at 823. But Kinzy’s similarities to this case generally end there. For
one, the parties in Kinzy were not arguing over the merits of applying the discovery rule to
all breaches of contract, or even all breaches of a trust. Their dispute was not over whether
11

the limitations period commenced upon the state’s failure to pay retirement benefits (the
actual breach) or when the firefighters learned of that failure. Id. at 822. The lone issue was
whether the limitations period for claims against private and public trusts commenced at
the same time. As the Kinzy court explained, for claims based on breach of a private trust,
the limitations period commences as soon as the trustee repudiates the trust. Id. at 823.
That, however, could never be the rule for claims based on breach of a public trust because
that would require the trustee—a public entity and agent of the state—to repudiate a trust,
an illegal action under state law and thus impossible. Id. at 823–24. The pensioner
firefighters thus had to sue when they learned that the state would not pay their benefits,
not when the Pension Board repudiated the trust, which would never happen. Id. at 824.
If Kinzy has value, then it is in the trust context in which it was decided. Indeed, the
Oklahoma Supreme Court continues to cite it in that context. See, e.g., Smith v. Baptist
Found. of Oklahoma, 50 P.3d 1132, 1137 n.8 (Okla. 2002) (citing Kinzy for the principle
that “the statute of limitations begins to run on a trust beneficiary’s claims when it learns
it has suffered damage that might be the trustee’s fault”); Nichols v. Nichols, 222 P.3d
1049, 1055 n.19 (Okla. 2003) (relying on Kinzy for the proposition that a “trustee cannot
repudiate a statutory trust.”). Given this, along with no state court ever having relied on
Kinzy to toll the limitations on a standard breach of contract claim, the Court will not
employ Kinzy to toll Express’s claims here.
And without Kinzy, Express cannot marshal any support for its argument that the
discovery rule applies. In fact, the other Oklahoma cases it cites for the discovery rule all
rely on Kinzy and involve claims for state pensions. See Bordwine v. Oklahoma Firefighters
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Pension & Ret. Sys., 99 P.3d 703, 704 (Okla. Civ. App. 2004); Steelman v. Oklahoma
Police Pension & Ret. Sys., 128 P.3d 1090, 1093 (Okla. Civ. App. 2005). Put simply,
whether Express had notice of the alleged breach does not matter for purposes of deciding
when its claims accrued.
Express believes that this is an absurd result; if the statute of limitations commences
upon the breach, then nothing is to stop a person from covertly breaching a contract until
the statute of limitations runs. But even a quick survey of state law reveals that many states
decline to apply the discovery rule to breach of contract claims. See, e.g., Dunn v. Dunn,
281 P.3d 540, 548 (Kan. Ct. App. 2012) (“A cause of action for breach of a written contract
. . . accrues at the time of the breach, regardless of when the breach is discovered or is
discoverable.”); Med. Jet, S.A. v. Signature Flight Support-Palm Beach, Inc., 941 So.2d
576, 578 (Fla. Dist. Ct. App. 2006) (“Florida has followed this general rule that a cause of
action for breach of contract accrues at the time of the breach, not from the time when
consequential damages result or become ascertained.”); Scherer v. Hellstrom, 716 N.W.2d
307, 310 (Mich. Ct. App. 2006) (“In Michigan, a breach of contract claim accrues “at the
time the wrong upon which the claim is based was done regardless of the time when
damage results.”); Cavanaugh v. City of Omaha, 580 N.W.2d 541, 544 (Neb. 1998) (A
“cause of action in contract accrues at the time of the breach or failure to do the thing that
is the subject of the agreement,” even though “the plaintiff may be ignorant of the existence
of the cause of action.”); Howarth v. First Nat'l Bank of Anchorage, 540 P.2d 486, 490–91
(Alaska 1975) (“[The statute of limitations] begins to run in contract causes of action” at
“the time of the breach of the agreement, rather than the time that actual damages are
13

sustained as a consequence of the breach.”). Commencing the limitations period upon
Impact’s breach, then, is not the remarkable position that Express makes it out to be.
B. Express’s first breach of contract claim accrued in 2005.
The limitations period on Express’s claims thus began to run when the breach
occurred. But when was that? Defendants argue it was when King formed Impact in 2004,
or at the latest, shortly after when Impact hired the eleven Caterpillar employees that had
been co-employed by Southern Staffing/Express. Express contends that Defendants’
alleged breach of contract involves more than this conduct. In fact, Express argues that
Defendants are oversimplifying its claims in order to bolster their statute of limitations
defense.
If Defendants have overgeneralized Express’s claims, perhaps they can be forgiven.
Express’s allegations concerning which conduct of Defendants’ breached the Agreements
could be clearer. Express will not identify which Express employees were inappropriately
solicited and when, how Defendants solicited these employees and shared confidential
information, when Defendants first breached the Agreements, or even the specific
provisions of the Agreements that Defendants allegedly breached.
As best as the Court can tell, this lawsuit is at bottom about Mr. King’s forming
Impact and its new business model. Express President and Co-founder Bill Stoller testified
in his deposition that “this case is about [Defendants’] moving Express associates to
Impact’s payroll.” Doc. 108, Ex. 1, at 187. And he conceded that Express would have first
been harmed when Impact hired an Express temporary associate. Id. So if this case is about
more than the Mr. King’s forming and operating Impact, Express’s own filings suggest
14

otherwise. Its Response to Defendants’ Motion for Summary Judgment consistently singles
out Mr. King’s operating Impact.1
King formed Impact in 2001. The company billed its first Core2 client in 2004.
Defendants have offered March 7, 2005, as the point at which their conduct—to the extent
it constituted a breach—began. Consequently, no genuine dispute exists as to whether a
claim for breach of contract accrued at that time. Yet even if a cause of action accrued then,
this does not foreclose the possibility that later instances of breach gave rise to new causes
of action.
C. The Franchise Agreement and Developer Agreement constitute continuing
contracts that allow for partial breaches and new limitations period upon each
breach.
Perhaps realizing that Defendants’ allegedly improper conduct began in 2005,
Express offers alternative theories for why its claims are timely: one, Defendants’ breach
is ongoing and has not ceased, and two, the Agreements constitute continuing contracts,
thus allowing Express to bring a new cause of action for every separate “breach” by
Defendants.
Express’s first notion, what courts have termed the “continuing-wrong theory,” is
one that the Oklahoma Supreme Court has only acknowledged in the tort context. See Wing
v. Lorton, 261 P.3d 1122, 1126 n.1 (discussing the theory in the medical malpractice

1
See, e.g., Doc. 17, at 11 (“SSI/King and King’s separate company, Impact, are continuing to breach the
Franchise Agreement as amended and renewed and transfer Express associates to Impact through 2017.”);
id. at 14 (“Defendants offer limited summary judgment evidence which they contend shows . . . that King
did not hide the HLM/Core2 program from Express.”); id. (“In the most generous light, Defendants have
shown only that Express knew Defendants were operating a PEO of some kind.”); id. at 15 (“King intended
to implement or had initiated a program that would systematically divert the Express associates under his
control from his Express franchises to his other company.”).

15

context and explaining that it applies “where a tort involves a continuing or repeated injury,
[in which case] the cause of action accrues at, and limitations begin to run from, the date
of the last injury”) (citing 54 C.J.S. Limitation of Actions § 177 (1987)). Under the
continuing-wrong theory, “the statute of limitations does not begin to run until the wrong
is over and done with.” Id. (citing Taylor v. Meirick, 712 F.2d 1112, 1118 (7th Cir. 1983)).
Under this theory, the limitations period on Express’s claims have not even commenced
because Defendants’ breach is ongoing. Express, though, never mentions the continuingwrong doctrine, and the Court cannot locate any case in which an Oklahoma court applied
it in a contract action.
At any rate, the continuing-wrong doctrine stands in contrast to the continuousaccrual doctrine, which treats each breach as an “an independently actionable wrong with
its own time limit for recovery,” meaning that it “supports recovery only for damages
arising from those breaches falling within the limitations period.” Aryeh v. Canon Business
Solutions, Inc., 292 P.3d 871, 880 (Cal. 2013). “Generally speaking, continuous accrual
applies whenever there is a continuing or recurring obligation.” Id. And according to
Express, that is precisely what the Franchise and Developer Agreements created.
Consequently, each time Defendants breached the contract, a new cause of action arise,
each of which had its own limitations period.
Of course, for the continuous-accrual doctrine to apply, Express has to demonstrate
that the Agreements did in fact create continuing obligations. The Court is satisfied that it
has. As the Tenth Circuit has pointed out, Oklahoma courts recognize the concept of a
“continuing contract”:
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There are contracts, however, that have been said to require
continuing (or continuous) performance for some specified
period of time, a period that may be definite or indefinite when
the contract is made. These contracts too are capable of a series
of ‘partial’ breaches, as well as of a single total breach by
repudiation or by such a material failure of performance when
due as to go ‘to the essence’ and to frustrate substantially the
purpose for which the contract was agreed to by the injured
party. For each ‘partial’ breach a separate action is
maintainable, just as in the case of an ‘instalment’ contract; and
for a series of ‘partial’ breaches occurring before any action is
brought only one action is maintainable.
Paul Holt Drilling, Inc. v. Liberty Mut. Ins. Co., 664 F.2d 252, 255–56 (10th Cir. 1981)
(citing 4 A. Corbin, Corbin on Contracts § 956, at 841 (1951)).
While Oklahoma courts have not addressed whether a franchise agreement creates
continuing obligations, they have found continuing obligations in a variety of other
contexts. See, e.g., Indian Territory Illum. Oil co. v. Rosamond, 120 P.2d 349, 352–353
(Okla. 1941) (finding an oil and gas lease created a continuing obligation to protect
adjacent land from drainage); Western Natural Gas Co. v. Cities Service Gas Co., 507 P.2d
1236, 1241–1242 (Okla. 1972) (construing the obligation in sale to make full and fair
disclosure to government agencies as a continuing covenant); Bowman v. Oklahoma
Natural Gas Co., 385 P.2d 440, 47 (Okla. 1963) (construing seller’s representations that
repairs will make the subject goods comply with a warranty as continuing covenant); see
also Paul Holt Drilling, Inc., 664 F.2d 252 at 256 (deeming an insurer’s duty to defend to
be a continuing obligation under Oklahoma law). Because each breach of these obligations
gives rise to a new cause of action, a plaintiff can only recover damages for those breaches
within the limitations period. So if the Franchise and Developer Agreements impose a
17

continuing obligation on Defendants, Express’s damages are limited to those incurred
within five years of its filing suit.
Faced again with a less-than-clear issue under Oklahoma law, the Court does agree
with Express that the Franchise and Developer Agreements constitute continuing contracts.
Though none of these Oklahoma cases deal with franchise agreements, other courts have
found that non-compete clauses, like the ones here, create continuing obligations. See, e.g.,
Dave & Buster’s, Inc. v. White Flint Mall, LLLP, 616 Fed.Appx. 552, 557 (4th Cir. 2015)
(“[T]he continued operation of a competing enterprise can constitute breach of a
contractual obligation so long as the contract under which the obligation arose is valid and
in effect.”); Sparano v. Southland Corp., 1996 WL 272515, *2 (N.D. Ill., May 17, 1996)
(“Plaintiffs are correct to identify the franchise agreements as continuous contracts since
the franchise agreements call for the provision of continuous services (advertising,
maintenance, etc.) to the franchisees by defendants.”); Segall v Hurwitz, 339 N.W.2d 333,
343 (Wis. Ct. App. 1983) (“The covenant not to compete and the agreement not to use the
business name for five years imposed continuing duties on [the parties] during that
period.”); but see Pinnacle Pizza Co. v. Little Caesar Enterprises, Inc., 598 F.3d 970, 978
(8th Cir. 2010) (finding that franchise’s repeated use of franchisee’s original advertising
materials constituted a single breach for statute of limitations purposes that accrued upon
the first use of the advertising materials). The Court is therefore satisfied that the Franchise
and Developer Agreements imposed continuing obligations upon the parties. Each time
that Impact allegedly stole an Express temporary employee, this constituted a new breach.
Express has submitted a 156-page document listing the names of all Express temporary
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associates that were allegedly hired by Impact in the five years preceding this suit.
Express’s claims are therefore timely to the extent they seek to recover damages for
Impact’s hiring of these employees and untimely to the extent they seek to recover damages
for those employees Impact hired more than five years before this suit.
IV. Conclusion
In review, any breach of contract claims that accrued prior more than five years
before this suit are barred. Because the Franchise and Developer Agreements constitute
continuing contracts, each independent “breach” by Defendants gave rise to a new cause
of action subject to its own limitations period.
Defendants’ Motion for Summary Judgment is therefore GRANTED IN PART and
DENIED IN PART.
IT IS SO ORDERED this 30th day of August 2017.

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