Some Canadian plaintiffs may believe they can avail themselves of sometimes quite long American limitation periods by suing in the U.S. For example, the New York limitation period for contract claims and fraud claims is six years, and for personal injury or product liability it is three years. In Massachusetts the period for breach of a contract, if written and under seal, is twenty years, otherwise six years. Tolling statutes can extend those limitation periods.[i] However, plaintiffs must beware “borrowing statutes” that require the court to “borrow” and apply the limitation period for the jurisdiction where the cause of action arose, if it is shorter than the limitation period under the law of the forum. These statutes, designed to discourage forum shopping, are found in the laws of several U.S. states including New York, California, Pennsylvania, Massachusetts, Virginia, Maine, and others. When deciding where to sue, it is important to ask local counsel about such statutes.
A recent decision of the Supreme Court of the State of New York is illustrative. In Norex v. Blavatniket al, a company based in Alberta, brought an action in Federal Court in 2002 under the Racketeering Influenced and Corrupt Organizations Act (“RICO”) in connection with alleged misappropriation of its interest in a Russian mining venture. After that action was dismissed (for reasons other than the merits) Norex brought a new action in the state court, relying on the New York tolling statute. Norex’s claim would be statute-barred under Alberta’s two year limitation period unless a tolling provision was available. However, there is no tolling provision in Alberta law, and the New York tolling provision does not apply because the statute does not expressly provide that it has extraterritorial effect.
Norex argued that the limitation period is substantive law, not procedural, and Alberta law is not the applicable substantive law for the New York proceeding, insofar as the tort did not occur in Alberta. However, the court ruled that New York’s “borrowing statute” -- Civil Procedure Law and Rules (“CPLR s. 202”) -- makes no distinction between substantive and procedural laws.
The cause of action was found to have accrued in Alberta, even though the tort was not committed there, because under New York law, the cause of action for economic loss accrues where the losses are felt, which is the principal place of business of the company.
CPLR s. 202 reads:
An action based on 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 favour of a resident of the state the time limited by the laws of the state shall apply.
In the result, because more than two years had passed since the cause of action had accrued, Norex’s action was statute barred, by operation of the Alberta limitation period.
Ironically, had Norex sued in Alberta, Norex might have gained the benefit of the New York limitation period. Because in Canada statutes of limitation are substantive law, not procedural, an Alberta court would not apply the Alberta statute if a foreign law was the applicable law (lex causae) under choice of law principles. Had Norex shown that New York law was the applicable law, Norex would face a six year limitation period instead of a two year one.