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Posted: June 27, 2014

Foreign Statute of Limitations Does Not Apply in Actions Brought Under CPLR § 205(a)

On June 26, 2014, the Court of Appeals issued a decision in Norex Petroleum Ltd. v. Blavatnik, 2014 NY Slip Op. 04802, clarifying the interplay between CPLR § 202, the “borrowing statute,” and CPLR § 205(a), the “savings statute.”

CPLR § 202 provides that, when a cause of action accrues outside New York, the applicable statute of limitations is the shorter of the New York statute and the statute where the cause of action accrued. CPLR § 205(a) provides that if a timely-filed action is dismissed other than on the merits, the plaintiff has six months to file a new action “upon the same . . . transactions or occurrences.”

In Norex Petroleum, the parties were litigating over control of a Russian oil company and its oil reserves. The plaintiff, a resident of Alberta, Canada, began the action by bringing RICO claims and Russian law claims against the defendants in federal court in the Southern District of New York. The SDNY held that RICO was inapplicable to an extra-territorial dispute and declined to exercise pendant jurisdiction over the Russian law claims.

Within six months, the plaintiff brought a new action in New York Supreme Court, asserting Russian law claims and New York claims arising from the same transactions and occurrences as the SDNY action. The defendants moved to dismiss the action as time-barred. They argued that, because the claim was for economic damages only, it accrued where the plaintiff was located, in Alberta, Canada, and Alberta’s two-year statute of limitations does not have a savings statute. The second action would therefore be time-barred in Alberta, where the claim arose. And—so argued the defendants—because the second action would be time-barred in Alberta, under CPLR § 202 it must also be time-barred in New York.

The Supreme Court accepted this argument and dismissed the second action; the Appellate Division unanimously affirmed. The Court of Appeals, however, unanimously reversed and reinstated the action.

Judge Read found that the precedents relied upon by the defendants were unpersuasive or inapplicable. Instead, he looked to the purpose of the two statutes. The purpose of CPLR § 202 is to prevent forum-shopping by plaintiffs whose statute of limitations has run elsewhere, whereas the purpose of CPLR 205 (a) is to protect the right of plaintiffs who filed timely to have their case decided on the merits.

Once [plaintiff] timely commenced its federal court action in New York, the borrowing statute’s purpose to prevent forum shopping was fulfilled, and CPLR 202 had no more role to play . . . . Stated another way, it is irrelevant that Alberta law does not have a savings statute similar to CPLR 205(a) because at the point in time when Norex filed its “new” action in Supreme Court, the borrowing statute’s requirements had already been met. In our view, this reading of the way in which CPLR 202 and CPLR 205(a) interrelate best comports with statutory language, and honors both the borrowing statute’s purpose to prevent forum shopping and the savings statute’s goal to implement the vitally important policy preference for the determination of actions on the merits.

Accordingly, as long as the original lawsuit is timely filed pursuant to CPLR § 202, plaintiffs get the CPLR § 205(a) safe harbor regardless of whether the other jurisdiction has a similar savings statute.

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