The Power of New York’s Borrowing Statute

On October 11, 2016, the Supreme Court of New York, Appellate Division, First Department, decided 2138747 Ontario, Inc. v. Samsung C&T Corp., et al., which serves as a reminder to attorneys that New York’s borrowing statute applies even where the parties agreed to a New York choice-of-law provision.

The borrowing statute, CPLR 202, provides that, when a non-New York resident sues on a cause of action accruing outside New York, the complaint must be filed timely under the statute of limitations of both New York and the jurisdiction where the cause of action accrued. The statute’s underlying objective is to prevent forum shopping by nonresident plaintiffs.

In Ontario, the plaintiff, a corporation formed under the law of Ontario, Canada, was a creditor of SkyPower Corporation, a bankrupt Canadian renewable energy developer. SkyPower’s bankruptcy trustee assigned to the plaintiff all of its claims against the defendants. The plaintiff then sought damages against the defendants for a breach of a nondisclosure and confidentiality agreement (NDA), which contained a broad New York choice-of-law provision.

The plaintiff’s complaint was untimely under Ontario’s two-year statute of limitations but was timely under New York’s six-year statute of limitations. The trial court found that Ontario’s two-year statute of limitations applied and dismissed the case. The Appellate Division affirmed. Although the court found that the choice-of law-provision was broad enough to require application of New York’s procedural as well as substantive law and that a statute of limitations is part of New York’s procedural law, the borrowing statute is also a part of New York’s procedural law and that application of the borrowing statute was “perfectly consistent with a broad choice-of-law contract clause that requires New York procedural rules to apply to the parties’ disputes.”

The court also rejected the plaintiff’s alternative argument that, even if the New York borrowing statute applies, and requires the application of Ontario law, Ontario law mandates application of New York’s statute of limitations. The court’s rejection was based on the fact that the borrowing statute does not require the consideration of a foreign jurisdiction’s borrowing law.

This decision serves as a reminder of the power of the borrowing statute to commercial claims asserted by foreign plaintiffs, even when the parties choose New York law for the resolution of their disputes. In accordance with this decision, attorneys should anticipate the impact of the borrowing statute prior to filing any suit in New York and assert all claims as soon as practicable to avoid any statute of limitation challenge.