Commercial Division Blog
New York’s Borrowing Statute Applies Even Where Parties’ Contract Contains Mandatory New York Forum Selection Clause
On August 24, 2016, Justice Oing of the New York County Commercial Division issued a decision in All Children's Hospital, Inc. v. Citigroup Global Markets, 2016 NY Slip Op. 31626(U), holding that New York's "borrowing statute" applies even where the parties are required by contract to litigate their dispute in New York.
The borrowing statute, CPLR 202, provides that where a foreign plaintiff brings suit "based upon a cause of action accruing without the state," the claim must be timely under both the applicable New York statute of limitations and the limitations period of the forum where the claim accrued. In the case of claims alleging "purely economic" damages, the Court of Appeals has held that "the place of injury is usually where the plaintiff resides and sustains the economic impact of the loss." Global Fin. Corp. v. Triarc Corp., 93 N.Y.2d 525, 529 (1999).
In All Children’s Hosp., the plaintiff filed suit in New York against Citigroup asserting various claims arising from advice Citigroup gave the hospital in connection with a bond issuance. Citigroup argued that because the plaintiff was a Florida non-profit corporation operating in Florida, the borrowing statute required application of Florida's statutes of limitations, which are shorter than the limitations periods for the same claims under New York law. The plaintiff argued that because a mandatory forum selection clause in the parties' agreement required it to sue in New York, the borrowing statute was inapplicable, since "the public policy for which [the] statute was created, i.e., to prevent forum shopping, is not implicated." Justice Oing rejected the plaintiff's argument, explaining:
ACH's argument that the borrowing statute should not apply here because ACH is clearly not forum shopping and thus New York's longer limitations period applies is unavailing. The issue has been decided (Insurance Company of North America v ABB Power Generation, Inc.) 91 NY2d 180 ). There, the Court of Appeals held:
CPLR 202 requires that a court, when presented with a cause of action accruing outside New York, should apply the limitation period of the foreign jurisdiction if it bars the claim. Only where the cause of action accrues in favor of a New York resident is this rule rendered inapplicable. It matters not that jurisdiction is unobtainable over a defendant in the foreign jurisdiction or that the parties have contracted to be venued in this State.
Accordingly, contrary to ACH's argument, regardless of the fact that New York is the contractually selected forum, under the factual circumstances herein CPLR 202 applies, and, therefore, Florida's shorter limitations period applies as well.
Separately, plaintiff argued that the borrowing statute should not be applied because the choice-of-law clause in the parties' contract required application of New York law "without giving effect to principles of choice of law or conflicts of law." The court rejected this argument as well, explaining:
The principle is well established that choice of law provisions concern substantive law, while issues concerning statutes of limitations are procedural. As such, ACH's argument that the parties['] choice of law provision contained in the broker-dealer agreement applies to issues involving the appropriate statutes of limitations is unavailing. [The] choice of law provision concerns New York substantive law, and does not specifically provide for the application of New York procedural law governing statute of limitations.
(Citations omitted). The Court then proceeded to dismiss the complaint as time-barred under Florida law.
This decision illustrates that the importance of the borrowing statute to commercial claims asserted by foreign plaintiffs. Although ostensibly designed to discourage forum-shopping, it can apply even in cases where the parties have agreed in advance to litigate any disputes in New York. Counsel should consider the impact of the borrowing statute before filing suit in New York on behalf of, or bringing a motion to dismiss a claim brought by, a foreign plaintiff.