Recently, New York’s highest court, the Court of Appeals, held that New York State’s “borrowing statute” for statute of limitations applies for non-resident plaintiffs even when the contracting parties have agreed that their agreement would be “enforced” according to New York law. The result was the dismissal of the complaint based on a Canadian two-year statute of limitations for breach of contract claims even though New York has a six-year statute of limitations for such claims. 2138747 Ontario, Inc. v. Samsung C&T Corp., 2018 NY Slip Op 04274 (June 12, 2018).
SkyPower Corp., an Ontario renewable energy developer, entered into a non-disclosure agreement with Samsung in connection with the evaluation of a potential transaction. The non-disclosure agreement (“NDA”) allowed Samsung to review SkyPower’s confidential and proprietary information, as well as other standard provisions.
The NDA contained pretty fulsome provisions as to the choice of law and forum selection. It provided that:
- This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York. You hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the State of New York and of the United States District Courts located in the County of New York for any lawsuits, actions or other proceedings arising out of or relating to this Agreement and agree not to commence any such lawsuit, action or other proceeding except in such courts. . . . You hereby irrevocably and unconditionally waive any objection to the laying of venue of any lawsuit, action or other proceeding arising out of or relating to this Agreement in the courts of the State of New York or the United States District Courts located in the County of New York, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such lawsuit, action or other proceeding brought in any such court has been brought in an inconvenient forum.
The anticipated transaction never materialized and Samsung subsequently entered into an agreement with the Ontario government for a renewable energy project. SkyPower alleged that, in connection therewith Samsung made use of its confidential and proprietary information.
SkyPower’s assignee (“Plaintiff”) sued Samsung in New York for breach of contract and unjust enrichment. Samsung alleged that the claims were time-barred pursuant to the two-year statute of limitations applicable in Ontario, which applied based on New York’s statute. Plaintiff relied upon New York’s general six-year statute of limitations for breach of contract actions. The parties agreed that the action was timely if New York’s statute of limitations governed and was time-barred if Ontario law applied. They also agreed that use of the word “enforced” indicated the intent that New York procedural law apply. The “borrowing statute”, CPLR 202, a procedural law, provides as follows:
- 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.
The trial court dismissed the claims as time-barred because the cause of action accrued in Ontario. The dismissal was affirmed by the Appellate Division. At the outset, the Court of Appeals noted the general rule that:
- 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. (Emphasis supplied.)
A nonresident’s contractual claim generally accrues where it resides and sustains the economic impact of the breach.
Plaintiff argued that the NDA’s broad contractual choice-of-law provision encompasses a choice of New York’s procedural law, including New York’s six-year statute of limitations in CPLR 213 (2), to the exclusion of CPLR 202. The Court, however, pointed out the long history of the borrowing statute from its original enactment in 1902. The primary purpose of the borrowing statute is to discourage forum shopping to obtain a longer limitations period. That purpose was not applicable here because the New York forum was selected in advance in the contract negotiated by sophisticated parties. The Court of Appeals noted, however, that the statute has other purposes including clarity to the law and provide certainty of uniform application to litigants. The Court also noted that New York various statutes of limitations are procedural, not substantive. The Court of Appeals concluded
- that the mere addition of the word “enforced” to the [agreement’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.
The Court of Appeals declined to address whether a contractual provision seeking to avoid application of CPLR 202 would run afoul of CPLR 201 (allowing for “a shorter time [to be] prescribed by written agreement”), GOL § 17-103 (addressing “agreements waiving the statute of limitation”) or New York’s public policy against contractual extensions of the statute of limitations before accrual of the cause of action.
Any nonresident clients that tend to choose New York law to govern their contracts should keep in mind that the applicable statute of limitations for a breach of contract claim might be less than six years. Even though it might not be enforceable, such clients should consider inclusion of an express waiver of CPLR 202 or a provision expressly adopting the limitation period set forth in CPLR 213 (2). Finally, if you are nonresident investigating whether to pursue a contractual breach claim in New York, make sure to check the limitations period in your home jurisdiction, which is where contractual breach claims generally accrue.