Norex v. Blavatnik - how the Court of Appeals "borrowed" first and "saved" later.

• Author: McGowan, Peter

1. INTRODUCTION

   In a case of first impression, Norex Petroleum Limited v. Blavatnik, (1) the New York State Court of Appeals decided

   whether a nonresident plaintiff who filed a timely action in a New York federal court may refile claims arising from the same transaction in state court within six months of the federal action's non-merits termination, even though the suit would be untimely in the out-of-state jurisdiction where the claims accrued. (2) In a unanimous decision reversing the appellate division, which had previously upheld the trial court's dismissal of the action, the Court of Appeals held that such a suit is not time barred and instructed the trial court to resolve whether or not six state law claims, pled for the very first time nearly nine years after the original action was commenced, ought to proceed to a final determination on the merits. (3)

   Since the opinion seeks to resolve an open question of law in New York civil practice, at the outset of its opinion, the Court of Appeals provided a review of the twelve-year procedural history of this case, which is essential to understand how the court reached its decision. The plaintiff initially commenced an action in federal court on February 26, 2002, alleging various federal causes of action under the Racketeer Influenced and Corrupt Organizations Act (RICO). (4) Defendants moved to dismiss on numerous grounds including forum non conveniens. (5) On February 18, 2004, the federal district court dismissed the action finding that the relevant factors favored a Russian venue. (6) On December 21, 2004, the plaintiff amended its complaint to assert claims for tortious interference and unjust enrichment under Russian law. (7) Defendants again moved to dismiss for lack of subject matter jurisdiction. (8) On September 24, 2007, the court granted the motion to dismiss. (9) Norex appealed to the U.S. Court of Appeals for the Second Circuit, which affirmed the dismissal on September 28, 2010. (10) Norex next sought a hearing en banc before the Second Circuit, and on January 18, 2011, the court denied Norex's petition. (11) Identifying CPLR section 205(a) as a potential savings statute, Norex moved to stay the mandate "to avoid potentially triggering the running of relevant 'savings action statutes'" so that it would have time to submit a petition for certiorari in the U.S. Supreme Court. (12) On March 7, 2011, Norex commenced a new action in New York State Supreme Court asserting several claims under Russian law. (13) Finally, on June 23, 2011, nearly eight years into litigation, Norex amended its complaint to add six New York state law claims that it had not previously asserted. (14) The New York trial court's dismissal of Norex's amended complaint is the subject of the appeal. (15)

   In order to determine the timeliness of Norex's new action, the court set out to address the interplay between two CPLR provisions, sections 202 and 205(a), which are New York State's borrowing and saving statutes, respectively. (16) While discussed in greater detail below, a brief introduction to both the borrowing and savings statutes is worthwhile. When filing a new action under CPLR section 202, a foreign plaintiff must "borrow" the statute of limitations from the jurisdiction where the claim arose if such time period is shorter than New York's. (17) Additionally, CPLR section 205(a) provides that if such a lawsuit was timely in the foreign jurisdiction, it will also be timely in New York under the "savings" statute. (18) The nonresident plaintiff who "borrows" from the foreign jurisdiction is permitted to refile the lawsuit in New York State court within six months after the action has been dismissed on nonsubstantive grounds, thus "saving" his cause of action. (19) Both of these statutes, standing alone, can greatly affect the outcome of a lawsuit. Individually, the potential impact of CPLR section 205(a) should never be underestimated, especially as Professor Siegel describes it as a "skyscraper on New York's procedural skyline." (20) Although only one sentence long, CPLR section 202 can also play an important role in the final outcome of a lawsuit in New York by determining the timeliness of an action.

   While the scenario of a foreign plaintiff refiling a lawsuit seems to be a simple affair with CPLR sections 202 and 205(a) providing the procedural framework, the Norex case presented the Court of Appeals with an opportunity to fully address how the borrowing and savings statutes interact with each other in the context of the filing of a new action. In particular, the court held that the statute of limitations comparison required under CPLR section 202 occurs when the plaintiff files its initial action and does not occur again when the plaintiff refiles pursuant to CPLR section 205(a). (21) In reaching this conclusion, the court assumed that Norex had met all of the requirements of CPLR section 205(a) and expressly instructed the trial court to address the defendant's arguments in that regard. (22)

   This article will review the statutory text and case law related to CPLR section 202 and CPLR section 205(a) and analyze whether the Court of Appeals' decision in Norex truly resolved the "open question of New York civil procedure involving the interplay of ... New York's 'borrowing' statute, and ... New York's 'saving' statute." (23) This article will also address how the court's decision balances the need to prevent forum shopping by a foreign plaintiff with the goal of resolving lawsuits on the merits. Finally, the article will identify a number of issues under CPLR section 205(a) that the Court of Appeals left unresolved, which themselves could present additional open issues under New York procedural law. (24)

2. CPLR SECTION 202: CAUSE OF ACTION ACCRUING WITHOUT THE STATE (BORROWING STATUTE)

   While only one sentence in length, the text of CPLR section 202 is surprisingly complicated. It reads:

   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. (25) Having read the statute, one is left to wonder when a nonresident plaintiff will actually be able to benefit from CPLR section 202 and "borrow" the statute of limitations from a foreign jurisdiction. (26)

   This question is best answered by analyzing the purpose and intent behind the statute. Quite simply, the main goal of CPLR section 202 is to prevent forum shopping by a nonresident plaintiff looking to commence an action in New York based on an out-of-state claim. (27) Under CPLR section 202, the New York State court must look to the statute of limitations under the laws of the place where the cause of action accrued and then "borrow" the time limitation of the other jurisdiction only if it is shorter than New York's. (28) Contrary to the statute's nomenclature, Professor Siegel's understanding of CPLR section 202 is helpful. He sees it in terms of not necessarily borrowing anything but instead observes that "the statute really dictates a comparison, with a 'borrowing' of the foreign period only if it is the shorter of the two compared." (29) Whether one looks at the statute as a "comparison" or as a "borrowing," there is no doubt that CPLR section 202 is only applicable in the following instance: when the action is commenced by a foreign plaintiff and the cause of action accrued outside of New York State. (30) Assuming both of these criteria are present, the statute of limitations periods are compared, with the shorter of the two being applied. (31) Still left unclear is how to determine when a cause of action accrues "without the state." (32)

   The Court of Appeals answered that question in Global Financial Corp. v. Triare Corp. (33) by finding that when an injury is economic the alleged cause of action will accrue "where the plaintiff resides and sustains the economic impact of the loss." (34) Prior to Global Financial, courts had used the "most significant contacts" test in order to decide which state's substantive law would control "where" a cause of action accrued under CPLR section 202. (35) This doctrine was clearly articulated in 1963 by the New York State Court of Appeals in Babcock v. Jackson. (36) In Babcock, the court determined that it would no longer strictly apply the traditional choice of law rule,--"that the substantive rights and liabilities arising out of a tortious occurrence are determinable by the law of the place of the tort." (37) Instead, the court found that

   [w]here the issue involves standards of conduct, it is more than likely that it is the law of the place of the tort which will be controlling but the disposition of other issues must turn, as does the issue of the standard of conduct itself, on the law of the jurisdiction which has the strongest interest in the resolution of the particular issue presented. (38) The cases involving CPLR section 202 traditionally have focused on where the alleged injury took place and, once that was established, whether the action would have been timely in the foreign jurisdiction so that the borrowing statute could be applied. (39) The facts in Norex left no doubt that the situs of the alleged injuries was Alberta, Canada, since the plaintiff was an Alberta resident and the alleged economic injury had occurred in Canada. (40) Because of these factors, the plaintiff would be subject to any applicable Canadian statute of limitations. (41) The novel procedural question in Norex that the court had to decide was whether or not the refiled action was timely under Alberta law even though Alberta lacked any tolling provisions akin to CPLR section 205(a). (42) To resolve this question, the Norex court chose to "borrow" under CPLR section 202 only once--at the...