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Posted: October 17, 2016

Broad Choice-of-Law Provision Does Not Preclude Application of Borrowing Statute (CPLR 202)

On October 11, 2016, the First Department issued a decision in 2138747 Ontario, Inc. v. Samsung C&T Corp., 2016 NY Slip Op. 06671, holding that “a broadly drawn contractual choice-of-law provision” providing “for the agreement to be ‘governed by, construed and enforced’ in accordance with New York law,” does not “preclude[] the application of New York’s borrowing statute (CPLR 202),” explaining:

Where, as here, the plaintiff is a nonresident, alleging an economic claim that took place outside of New York, the time limitations provisions in the borrowing statute apply, regardless of whether the parties’ contractual choice of law agreement can be broadly construed to include the application of New York’s procedural, as well as its substantive law. Pursuant to New York’s borrowing statute, the time within which plaintiff had to commence this action was the shorter of either Ontario’s or New York’s statute of limitations.

. . .

Statutes of limitations, however, have long been considered part of New York’s procedural law because they are deemed as pertaining to the remedy rather than the right. In Tanges v Heidelberg N. Am., Inc., the Court of Appeals explained New York’s procedural characterization of statutes of limitation as follows: The theory of the statute of limitations generally followed in New York is that the passing of the applicable period does not wipe out a substantive right; it merely suspends the remedy. The borrowing statute is considered a statue of limitations provision and not a choice-of-law provision. In referring to the borrowing statute the Court of Appeals observed: There is a significant difference between a choice-of-law question and this Statute of Limitations issue, which is governed by particular terms of the CPLR. Consistent with these principles, case law generally holds that a contractual choice-of-law provision does not bar the application of New York’s borrowing statute. We do not find support for plaintiff’s argument that where a contractual choice-of-law provision is broad enough to include the application of both substantive and procedural New York law, the borrowing statute does not apply. Preliminarily, we note that the NDA choice-of-law provision in this case does not expressly provide that the parties agree only to apply New York’s six-year statute of limitations to their contract-based disputes. In this regard, there is no need to resolve whether such a provision would be an unenforceable extension of the otherwise applicable statute of limitations. We do agree with plaintiff’s argument, that the language of the choice-of-law provision in this NDA, and in particular the use of the word enforcement, is broad and should be interpreted as reflecting the parties’ intent to apply both the substantive and procedural law of New York State to their disputes.

But even this broad reading of the NDA choice-of-law clause does not require that the borrowing statute be ignored in favor of New York’s domestic six year statute of limitations. The borrowing statute is itself a part of New York’s procedural law and is a statute of limitations in its own right, existing as a separate procedural rule within the rules of our domestic civil practice, addressing limitations of time. Thus, applying the borrowing statute is perfectly consistent with a broad choice-of-law contract clause that requires New York procedural rules to apply to the parties’ disputes.

(Internal quotations and citations omitted) (emphasis added).

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