FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

IN RE RICHARD STERBA; OLGA

STERBA,

Debtors,

PNC BANK,

Appellant,

v.

RICHARD STERBA AND OLGA

STERBA,

Appellees.

LINDA S. GREEN, Chapter 7

Trustee,

Real-party-in-interest.

No. 14-60061

BAP No.

13-1590

OPINION

Appeal from the Ninth Circuit

Bankruptcy Appellate Panel

Kurtz, Dunn, and Jury, Bankruptcy Judges, Presiding

Submitted October 18, 2016*

San Francisco, California

Filed April 5, 2017

* The panel unanimously finds this case suitable for decision without

oral argument. See Fed. R. App. P. 34(a)(2)(C).
2 IN RE STERBA

Before: A. Wallace Tashima and Milan D. Smith, Jr.,

Circuit Judges, and Edward R. Korman,** District Judge.

Opinion by Judge Korman;

Concurrence by Judge Tashima

SUMMARY***

Bankruptcy

The panel reversed the Bankruptcy Appellate Panel’s

reversal of the bankruptcy court’s ruling that a creditor’s

claim was timely.

The creditor’s claim was based on a promissory note on

real property in California. The claim would be barred by a

four-year California statute of limitations but not by a sixyear Ohio statute of limitations. The bankruptcy court ruled

that the Ohio statute of limitations applied because the

promissory note stated that it would be governed by the laws

of Ohio.

The panel held that under federal common law, the

contractual choice-of-law provision did not expressly include

the statute of limitations and therefore was silent on the issue. 

Under § 142 of the Restatement (Second) of Conflict of

** The Honorable Edward R. Korman, United States District Judge for

the Eastern District of New York, sitting by designation.

*** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.
IN RE STERBA 3

Laws, the statute of limitations of the forum state, California,

would generallyapply. Exceptional circumstances, however,

directed the application of the Ohio statute of limitations

because the unique strictures of the Bankruptcy Code meant

that, through no fault of the creditor, the only forum for its

claim was the Northern District of California.

Concurring in the judgment, Judge Tashima wrote that,

under § 187 of the Restatement, the law of Ohio, the state

chosen by the parties, must be applied.

COUNSEL

Douglas B. Provencher and Janis H. Grattan, Provencher &

Flatt LLP, Santa Rosa, California, for Appellant.

Thomas P. Kelly III, Santa Rosa, California, for Appellees.
4 IN RE STERBA

OPINION

KORMAN, District Judge:

When it comes to conflicts of law, bankruptcy is a bit of

an odd duck. The substantive focus is often on state law, as it

always is in diversity cases. But where a federal court sitting

in diversity applies the forum state’s choice-of-law rules—a

straightforward policy that prevents the forum’s federal

character from determining the outcome of disputes that are

really about state law—we have held that in bankruptcy,

federal choice-of-law rules control which state’s law applies.

Lindsay v. Beneficial Reinsurance Co. (In re Lindsay),

59 F.3d 942, 948 (9th Cir. 1995).1

This case adds another wrinkle: The dispute here arises

out of a clause in a promissory note providing that it should

be construed according to Ohio law. So we face two

issues—one sounding in contract, the other in conflict of

laws. The first is whether such a general choice of law clause

encompasses issues relating to the statute of limitations, or

whether the parties to an agreement must select a limitations

period expressly if they want to do so at all? The second is, if

the parties must select a statute of limitations expressly and

fail to do so, how should a bankruptcy court determine which

state’s limitations period applies?

1 There is a circuit split on this issue. Compare In re Lindsay with

Bianco v. Erkins (In re Gaston & Snow), 243 F.3d 599, 605–7 (2d Cir.

2001) (holding that the forum state’s choice-of-law rules apply in the

absence of a strong federal interest), and Compliance Marine, Inc. v.

Campbell (In re Merritt Dredging Co., Inc.), 839 F.2d 203, 206 (4th Cir.

1988) (same). 
IN RE STERBA 5

BACKGROUND

In 2007, the Sterbas bought a condo in California. They

took out two loans secured by liens against the property, of

which National City Bank held the junior one. The Sterbas’

promissory note to National City provided in relevant part

that: “[T]he Bank is a national bank located in Ohio and

Bank’s decision to make this Loan . . . was made in Ohio.

Therefore, this Note shall be governed by and construed in

accordance with . . . the laws of Ohio . . . without regard to

conflict of law principles.” Less than a year after the loans

were made, the Sterbas defaulted, the senior lender

foreclosed, and National City was left holding the bag for

$42,000. 

When the Sterbas filed for bankruptcy in the Northern

District of California in 2013, PNC Bank (National City’s

successor in interest) filed a claim based on the 2007 note.

The Sterbas objected, contending that the claim was barred by

California’s applicable four-year statute of limitations. See

CAL. CODE CIV. PROC. § 337. PNC, in turn, argued that the

claim was timely because the promissory note’s choice of

Ohio law incorporated Ohio’s six-year limitations period. See

OHIO REV. CODE § 1303.16. 

The bankruptcy judge agreed that the promissory note

selected Ohio’s six-year limitations period, and overruled the

Sterbas’ objection. The BankruptcyAppellate Panel reversed.

PNC appeals from the BAP’s decision.

DISCUSSION

Ordinarily, when parties to an agreement select the law

they want to govern an issue, federal courts will enforce that
6 IN RE STERBA

choice. See, e.g., Flores v. Am. Seafoods Co., 335 F.3d 904,

916–19 (9th Cir. 2003). But where a choice-of-law provision

does not expressly include the statute of limitations, we have

construed it as silent on the issue. In Des Brisay v. Goldfield

Corp.—a federal securities case—we applied federal

common law to hold that a clause providing for a contract to

“be governed by and interpreted according to the laws of the

[Canadian] province of British Columbia,” did not include the

statute of limitations. 637 F.2d 680, 682 (9th Cir. 1981). The

contractual choice-of-law provision in this case, adopting

Ohio law, is materially identical to the one we construed in

Des Brisay.

Our holding in Des Brisay was based on our recognition

that choice-of-law provisions are concerned mainly with

substantive law, and “generally do not contemplate . . .

statutes of limitation,” which are “usually considered” a

matter of local procedure “related to judicial administration.”

Id. (citing Restatement (Second) of Conflict of Laws § 122

cmt. a). Unbound by the contractual choice-of-law provision,

we went on to hold that “[t]he rule in federal securities

actions is to apply the applicable limitations period of the

state in which the federal court sits. Ernst & Ernst v.

Hochfelder, 425 U.S. 185, 210 n.29 (1976).” Id. (additional

citations omitted). As the citation to Ernst & Ernst suggests,

this holding was based on the principle that where “no statute

of limitations is provided for” a federal cause of action, “the

law of limitations of the forum State is followed.” Ernst &

Ernst, 425 U.S. at 210 n.29.

Unlike Des Brisay, this is not a federal securities case

premised on an implied right of action. Nor is this a case, like

those arising under 42 U.S.C. § 1983, where Congress has

created a right of action but remained silent as to the
IN RE STERBA 7

applicable limitations period. The fact that Des Brisay

involved a suit under an implied right of action allowed us, in

the absence of an effective choice by the parties, to apply the

simple, well-established rule that a federal right of action for

which no statute of limitations is provided is subject to the

limitations period which the forum state applies to analogous

claims. Wilson v. Garcia, 471 U.S. 261, 266–67 (1985).

Rather than an implied cause of action under federal law,

this case involves a common-law action on a promissory note,

for which both Ohio and California have statutorily

prescribed a statute of limitations. So while Des Brisay

resolves the contractual issue in this case, it does not dispose

of the conflicts-of-law problem that results. Under these

circumstances, the applicable rule is prescribed by § 142 of

the Restatement (Second) of Conflict of Laws, which

addresses conflicts between statutes of limitation. 

Federal choice-of-law rules in the Ninth Circuit follow the

Restatement (Second) of Conflict of Laws, see Liberty Tool,

& Mfg. (In re Vortex Fishing Systems), 277 F.3d 1057, 1069

(9th Cir. 2001), as a “source of general choice-of-law

principles,” and “an appropriate starting point for applying

federal common law in this area.” Harris v. Polskie Linie

Lotnicze, 820 F.2d 1000, 1003 (9th Cir. 1987). More recently,

in Flores v. American Seafoods Co., we observed that we

only “consider[ed] the principles stated in [the] Restatement

(Second) of Conflict of Laws § 187 to the extent we

conclude . . . that they are persuasive.” 335 F.3d 904, 919 (9th

Cir. 2003). We have directly adopted § 142, the particular

provision of the Second Restatement applicable here.

The 1971 version of § 142 provides that “(1) An action

will not be maintained if it is barred by the statute of
8 IN RE STERBA

limitations of the forum, including a provision borrowing the

statute of limitations of another state.” The 1988 version of

§ 142 is similarly worded, except that it provides a limited

carve-out for “exceptional circumstances.” Specifically and

in relevant part, it reads as follows: “[I]n general, unless the

exceptional circumstances of the case make such a result

unreasonable . . . The forum will apply its own statute of

limitations barring the claim.” (emphasis added).

The Second Restatement’s preference for the forum

state’s statute of limitations, in cases where it has the shorter

limitations period, is based on the policy that “[a] state has a

substantial interest in preventing the prosecution in its courts

of claims which it deems to be ‘stale.’” § 142, cmt. f (1988).2

In the ordinary case, that interest is treated as controlling

because vindicating it imposes no real prejudice on the timebarred party—dismissal of a claim as barred by the statute of

limitations generally “does not constitute a judgment on the

merits,” and following such a dismissal “the plaintiff will

usually remain free to sue” in a state with a more generous

limitations period. Id. But where a countervailing interest

exists such that “under the special circumstances of the case

2 We pass over the fact that, under the circumstances of this case,

California has no interest in barring PNC’s claim. California law would

allow the parties to select their own limitations period, even ifthey wanted

one longer than that prescribed by the California Legislature. See ABF

Capital Corp. v. Berglass, 30 Cal. Rptr. 3d 588, 594 (Cal. App. 2005).

California’s willingness to do so suggests that it is not concerned as much

with preventing the prosecution ofstale claims as it is with vindicating the

interest of contracting parties in seeing their agreements enforced. Indeed,

California has adopted § 187 of the Second Restatement, which broadly

enforces “[t]he law of the state chosen by the parties to govern their

contractual rights and duties.” See Nedlloyd Lines B.V. v. Superior Court,

834 P.2d 1148, 1150–51 (Cal. 1992).
IN RE STERBA 9

dismissal . . . would be unjust,” the forum (here, California)

will apply another state’s longer statute of limitations. Id.

The application of § 142 compels the conclusion that

California’s shorter statute of limitations does not apply here,

because this case presents the sort of “exceptional

circumstances” under which the 1988 version of the Second

Restatement looks past the law of the forum, and applies a

longer foreign limitations period. The Restatement, to be

sure, does not provide an exhaustive or technical definition of

an exceptional circumstance. Nevertheless, the comment to

the 1988 version of § 142 makes clear that the present case

comes within that category. Indeed, this case is on all fours

with the Restatement’s only example of what would

constitute such a “special,” “unjust” circumstance: “[W]hen

through no fault of the plaintiff an alternative forum is not

available as, for example, where jurisdiction could not be

obtained over the defendant in any [other] state . . . .” Id.

Here—exactly as the comment describes—the unique

strictures of the bankruptcy code mean that, through no fault

of PNC’s, there is no forum for its claim other than the

Northern District of California. This is not a case filed

voluntarily in California, in which a dismissal on statute of

limitations grounds would be without prejudice to bringing

the same claim in Ohio. See Mid-Century Ins. Co. v. Superior

Court, 41 Cal. Rptr. 3d 833, 837 (Cal. App. 2006). Rather,

once the Sterbas declared bankruptcy, PNC was obligated to

bring all its claims in the district where the Sterbas filed.

Under these circumstances, to reject PNC’s claim as timebarred would be the functional equivalent of a dismissal on

themerits.Where another jurisdiction—National City’s home

state of Ohio—would hear the claim, and has a substantial

interest in its resolution, disallowing it by mechanical
10 IN RE STERBA

adoption of California’s statute of limitations would be

wholly unreasonable. We hold that under these exceptional

circumstances, the bankruptcy court was correct to apply

Ohio’s six-year statute of limitations and overrule the

Sterbas’ objection to PNC’s claim.

Des Brisay’s decision to rely on the 1971 version of § 122

of the Second Restatement, to hold that an agreement

selecting a statute of limitations must do so expressly, does

not bind us to apply the 1971 version of § 142—which is

identical to the 1988 version, with the exception of the

narrow carve-out for “exceptional circumstances” on which

we base our decision. There is clear Ninth Circuit precedent

adopting the 1988 version of § 142. In Huynh v. Chase

Manhattan Bank, a federal-question case where the

underlying rights at stake (in deposits held by American

banks in Vietnam) were not created by federal law, we held

that “[f]ederal common law follows the approach outlined in

the Restatement (Second) of Conflict of Laws,” and that

“[a]ccordingly, barring exceptional circumstances”wewould

select a statute of limitations by following the approach

outlined in the 1988 version of § 142. 465 F.3d 992, 997 (9th

Cir. 2006) (emphasis added). While the panel in Huynh

eventually applied the statute of limitations dictated by a

straightforward application of § 142, it did so only after

expressly determining that such exceptional circumstances

were not in fact present. See id. at 1005.

Moreover, Des Brisay did not rely on either the 1971 or

1988 version of § 142. Rather, because it was decided in

1981, it relied on the comment to the 1971 version of § 122,

the text of which provides that a court will generally apply its

local law “prescribing how litigation shall be conducted,” and

does not specifically address the statute of limitations. The
IN RE STERBA 11

comment to which Des Brisay cites, however, does point to

the statute of limitations as an example of a rule “primarily

concern[ing] judicial administration,” with respect to which

“the forum will usually apply its own rule.” § 122 cmt. a

(1971) (citing § 142) (emphasis added).

We need not take issue with this aspect of Des Brisay’s

analysis, because it merely provided the basis for its holding

that contractual choice-of-law provisions “generally” do not

include the statute of limitations. See 637 F.2d at 682. Even

if we had not already decided the question in Huynh, nothing

in Des Brisay would require us to apply the 1971 version of

§ 142. Moreover, the difference between the 1971 and 1988

versions of § 142 is not significant. The 1988 version simply

creates a very narrow exception to the general rule—

essentially unchanged from 1971—that the law of the forum

governs issues relating to the statute of limitations. Thus,

even if we were forced by precedent to apply the 1971

version of § 142, adopting the kind of narrow exception to the

general rule that now appears in the 1988 version would

hardly create an “irreconcilable conflict,” Atonio v. Wards

Cove Packing Co., Inc., 810 F.2d 1477, 1478–79 (9th Cir.

1987) (en banc), or threaten the “uniformity of the court’s

decisions,” Fed. R. App. P. 35(a)(1), and we would not have

to go en banc to do so.

CONCLUSION

The judgement of the Bankruptcy Appellate Panel is

REVERSED, and the case is REMANDED to the

bankruptcy court for further proceedings consistent with this

opinion.
12 IN RE STERBA

TASHIMA, Circuit Judge, concurring in the judgment:

Although the majority reaches the correct result, it gets

there by an unnecessarily circuitous route. Because I believe

there is a more direct route, that is not only shorter, but

preferable, I concur in the judgment only.

The promissory note at issue in this case contains the

following choice-of-law provision:

[T]his Note shall be governed by and

construed in accordance with . . . the laws of

Ohio, to the extent Ohio laws are not

preempted by federal laws or regulations, and

without regard to conflict of law principles.1

(Emphasis added.) The question we should be asking

ourselves is whether there is any valid reason why the parties’

choice-of-law should not be honored? As the majority

recognizes, Maj. Op. at 4 & 7, because this is a federal

question case, federal choice-of-law rules, which generally

follow the Restatement (Second) of Conflict of Laws

(“Restatement”), apply. See Liberty Tool & Mfg. v. Vortex

Fishing Sys., Inc. (In re Vortex Fishing Sys., Inc.), 277 F.3d

1057, 1069 (9th Cir. 2001).

1 The majority completely ignores this italicized phrase in its analysis,

noting only that “[t]he contractual choice-of-law provision in this case,

adopting Ohio law, is materially identical to the one we construed in Des

Brisay.” Maj. Op. at 6. But, of course, the choice-of-law provision at

issue in Des Brisay did not include a provision like or comparable to the

italicized phrase quoted in the text, above. See Des Brisay v. Goldfield

Corp., 637 F.2d 680, 682 (9th Cir. 1981).
IN RE STERBA 13

In turn, § 187 of the Restatement provides that “[t]he law

of the state chosen by the parties . . . will be applied . . . .” 

We have consistently honored the parties’ choice-of-law,

including provisions of similar import to the italicized

provision in this case that the chosen law applies “without

regard to conflict of law principles.” See, e.g., Mortensen v.

Bresnan Comm’cns, LLC, 722 F.3d 1151, 1155 (9th Cir.

2013) (applying New York law “without regard to New

York’s choice of law principles” (footnote omitted)); FukuBonsai, Inc. v. E.I. DuPont de Nemours & Co., 187 F.3d

1031, 1033 n.3 (9th Cir. 1999) (applying Delaware law

“without giving effect to the conflict of laws or choice of law

provisions thereof”); id. at 1034 (“it is agreed that Delaware

law applies”) (Boochever, J., dissenting).

Under this line of cases and § 187, there is no reason not

to give effect to the parties’ choice-of-law, which included

their choice of the Ohio statute of limitations. That choice

was made by inclusion of the phrase “without regard to

conflict of law principles,” which, in this case, means without

regard to any analysis that would otherwise be called for

under § 142 of the Restatement. Thus, the majority’s

extended analysis of how § 142 should be applied in this case 

contravenes the parties’ choice-of-law that the Ohio statute of

limitations should apply, “without regard to conflict of law

principles.”

For these reasons, I concur in the judgment

REVERSING the judgment of the BAP and REMANDING

for further proceedings.