Blogs

Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: June 20, 2018

Borrowing Statute Applies When Contract Provides That it Will be Enforced According to New York Law

On June 12, 2018, the Court of Appeals issued a decision in 2138747 Ontario, Inc. v. Samsung C&T Corp., 2018 NY Slip Op. 04274, holding that when a contract provides that it will be enforced according to New York law, the New York borrowing statute will be used to determine the appropriate statute of limitations, explaining:

CPLR 202 provides:

An action based upon a cause of action accruing without the state cannot be commenced after the expiration of the time limited by the laws of either the state or the place without the state where the cause of action accrued, except that where the cause of action accrued in favor of a resident of the state the time limited by the laws of the state shall apply.

In other words, when a nonresident sues on a cause of action accruing outside New York, CPLR 202 requires the cause of action to be timely under the limitation periods of both New York and the jurisdiction where the cause of action accrued. The parties agree that plaintiff’s claims asserted on behalf of SkyPower accrued in Ontario. Application of the borrowing statute would therefore require plaintiff’s action to be timely under Ontario’s two-year statute of limitations. Plaintiff contends, however, that the NDA’s broad contractual choice-of-law provision encompasses a choice of New York’s procedural law, including New York’s general six-year statute of limitations in CPLR 213 (2), to the exclusion of CPLR 202, which plaintiff equates to a statutory choice-of-law directive of the kind that we held should not be applied in Ministers and Missionaries Benefit Board v Snow (26 NY3d 466 [2015].

. . .

Contractual choice of law provisions typically apply to only substantive issues and statutes of limitations are considered procedural because they are deemed as pertaining to the remedy rather than the right. Here, however, the parties agree with the Appellate Division’s determination that the contract should be interpreted as reflecting the parties’ intent to apply both the substantive and procedural law of New York State to their disputes.

CPLR 202 is an abiding part of New York’s procedural law. CPLR 202 is a reenactment, without substantive change, of section 13 of the Civil Practice Act which in turn substantially reenacted section 390-a of the Code of Civil Procedure, added in 1902 (L 1902, ch 193). Earlier iterations of the borrowing statute predate the substantive choice-of-law interest analysis test used in tort cases and the grouping of contacts or center of gravity approach used in contract cases.

It is undisputed that had the NDA’s choice-of-law provision incorporated only New York substantive law and contained a New York forum selection clause, New York would apply its own procedural law as the law of the forum, including CPLR 202. Indeed, where the Court has held that parties have opted into New York procedural law in the past, it has suggested that CPLR 202 may apply. Thus, in Matter of Smith Barney, Harris Upham & Co. v Luckie (85 NY2d 193 [1995]), which involved contractual choice of law provisions similar to that at issue here, the Court remitted to the Appellate Division for a determination regarding statute of limitations issues and instructed the Appellate Division to consider, among other things, the applicability of the borrowing statute in making that determination.

Plaintiff argues that because the contract in this case specified that it would be enforced according to New York law, the parties intended to apply New York’s procedural law except for its statutory choice-of-law provisions, which, plaintiff alleges, includes CPLR 202. We conclude, however, that the mere addition of the word enforced to the NDA’s choice-of-law provision does not demonstrate the intent of the contracting parties to apply solely New York’s six-year statute of limitations in CPLR 213(2) to the exclusion of CPLR 202. Rather, the parties have agreed that the use of the word enforced evinces the parties’ intent to apply New York’s procedural law. CPLR 202 is part of that procedural law, and the statute therefore applies here.

(Internal quotations and citations omitted).

It is not unusual for the statute of limitations to be an issue in complex commercial litigation. And the particular issue here–the rule in CPLR 202 that the statute of limitations used by a New York court sometimes is the statute of limitations of another state (or even country)–is an issue our clients, which are located all over the world, sometimes face. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding which statute of limitations applies to an action brought by a non-New York litigant.

Click here to subscribe to this or another of Schlam Stone & Dolan’s blogs.

View posts