On July 24, 2023, Justice Chan of the New York County Commercial Division issued a decision in Invesco Group Servs., Inc. v. AST Fund Solutions, LLC, 2023 NY Slip Op. 32538(U), refusing to dismiss claims based on an account stated defense because of allegations of fraud, explaining:
AST argues that OFI’s full and prompt payment of each of its four invoices without raising any objections for a period of eighteen months establishes an account stated and bars Invesco’s claim. . . . In opposition, Invesco argues that AST did not provide the
necessary details in its invoices in order for Invesco to determine the areas in which overcharges may have occured or the extent of the overcharges. Additionally, Invesco maintains that AST’s account stated defense is inapplicable.An account stated is an agreement between the parties to an account based upon prior transactions between them with respect to the correctness of the separate items composing the account and the balance due. Such an agreement may be implied where a debtor retains bills without objecting to them within a reasonable period of time, or makes partial payment on the account. This doctrine can be asserted both affirmatively as a cause of action, or as a defense against reopening of a paid account.
Under the account stated doctrine, a party who receives and retains a bill without objection for a reasonable period of time will be bound by them as accounts stated unless fraud, mistake or other equitable considerations are shown. What constitutes a reasonable time depends on the circumstances of the case. Here, AST contends that the time period of eighteen months that the Invesco held on to the invoices without objection sufficiently establishes an account stated. AST claims that the First Department has repeatedly found an account stated for invoices held for less time that eighteen months. Conversely, Invesco responds that this defense cannot survive as there are misrepresentation and falsification involved. According to Invesco, OFI did not overpay because of its own mistake but due to the purposeful misrepresentations of AST. Generally, when a party retains a bill without objecting within a reasonable period, they are bound to it by the account stated doctrine. However, this defense only applies unless fraud, mistake or other equitable considerations were shown. Thus, allegations of fraud or misrepresentations can preclude this defense. In other words, an account stated claim can always be opened upon proof of mistake or fraud.
Here, as alleged, Invesco could not have known whether the invoices accurately reflected the work done without conducting its own inquiry. Indeed, AS T’s invoices only list the most expensive category of without supplying any other details. The invoices do not categorize the type of calls, and whether they were made with a life operator. Although AST suggests that the invoices were never intended to categorize the calls, it nevertheless acknowledges that the highest rate was charged. The absence of any indication as to whether the charged calls were with or without a live operator supports an inference that there was an attempt to conceal or misrepresent the work done. Thus, absent Invesco’s deep dive review and investigation of the invoices, Invesco would not have been able to determine whether the charges for these line items were accurate.
(Internal quotations and citations omitted).