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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: March 24, 2020

Borrowing Statute Requires Use Not Just of Foreign State’s Statute of Limitations But Also its Tolling Rules

On March 4, 2020, Justice Sherwood of the New York County Commercial Division issued a decision in EPK Brand, Inc. v. Leret, 2020 NY Slip Op. 30705(U), holding that the borrowing statute requires the use not just of the foreign state’s statute of limitation but also of its tolling rules, explaining:

For purposes of the statute of limitations, a nonresident corporation’s claim based on a purely economic injury accrues where it sustained the economic impact of defendants’ conduct. It is not disputed that EKGB is a Delaware corporation with its principal place of business in Delaware. Accordingly, the causes of action accrued in Delaware. CPLR 202 requires our courts to borrow the Statute of Limitations of a foreign jurisdiction where a nonresident’s cause of action accrued, if that limitations period is s barter than New York’s.

In addition to borrowing Delaware’s statute of limitations, the court also borrows Deleware’s tolling statute. When borrowing foreign law pursuant to CPLR 202, foreign tolls and extensions must be imported, too. Here, the court must borrow Delaware’s tolling statute to determine whether under Delaware law plaintiff would have had the benefit of additional time to bring the action. The limitation period will toll where there has been active concealment or under the discovery rule the statute is tolled where the injury is inherently unknowable and the claimant is blamelessly ignorant of the wrongful act and the injury complained of.

Under such circumstance, the statute of limitations will begin to run only upon the discovery of facts constituting the basis of the cause of action or the existence of facts sufficient to put a person of ordinary intelligence and prudence on inquiry which, if pursued, would lead to the discovery of such facts. The inherently unknowable exception to the ordinary accrual rule occurs when there are no observable or objective factors which put laymen on notice of a problem. Inquiry notice, however, does not require actual discovery of the reason for the injury. Nor does it require plaintiffs’ awareness of all aspects of the alleged wrongful conduct. Once a plaintiff is in possession of facts sufficient to make him suspicious, or that ought to make him suspicious, he is deemed to be on inquiry notice. Whether a plaintiff has been placed on inquiry notice is an appropriate subject for determination on a motion to dismiss.

While it is not disputed that the Delaware’s statute of limitations for all the causes of action asserted against EPKB is three years, whether the tolling rule rendered this action timely commenced is disputed. On this motion, plaintiffs have failed to demonstrate that the statute of limitations was tolled or to otherwise defeat the Business Defendant’s showing that EPKR’s action is untimely. The complaint and the documentary proof belie plaintiffs’ assertions that plaintiffs were unaware of transfer of the Mark to Bridgewood and of the alleged diversion of funds as early as 2011. Moreover, plaintiffs were on inquiry notice as early as 2011, and, most certainly, at the time of and prior to the investigation request dated July 3, 2015. The court additionally notes that Bridgewood filed the trademark application with the TPO in May 2014. As EPKB slept on its rights and failed to take action despite repeated actual or inquiry notice, EPKR’s claims are not tolled and are untimely.

(Internal quotations and citations omitted).

It is not unusual for the statute of limitations to be an issue in complex commercial litigation. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding whether a claim is barred by the statute of limitations.

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