Opinion ID: 398657
Heading Depth: 2
Heading Rank: 2

Heading: The Meaning of Cause of Action in the Borrowing Statute

Text: 9 Judge Mishler's conclusion that the reasoning of Arneil v. Ramsey should be followed was sound as far as it went. Unfortunately, perhaps because the issue was not stressed in the court below, the significance of the specific facts presented by the case at bar were not considered. The result of holding that Pennsylvania's limitations period applies under the borrowing statute is to bar the appellants' action against Eastco despite the fact that all the parties concede that Eastco has never had sufficient contact with Pennsylvania to permit it to be sued in that state. 10 This case presents an issue, therefore, that was not directly addressed by the court below and has not been definitively resolved by the New York Court of Appeals. The question is not simply where the cause of action accrued for purposes of New York's borrowing statute but whether a cause of action accrued in Pennsylvania for purposes of applying New York's borrowing statute. A 'cause of action' may mean one thing for one purpose and something different for another. United States v. Memphis Cotton Oil Co., 288 U.S. 62, 67-68, 53 S.Ct. 278, 280, 77 L.Ed. 619 (1933). We must consider whether a New York court would hold that a cause of action accrues (for purposes of applying its borrowing statute) in a jurisdiction which could not exercise jurisdiction over it. 5 11 The New York courts have not given this question much attention. The cases have generally assumed that the foreign jurisdiction in which the cause of action accrued was able to entertain the cause of action. See, e. g., Cellura v. Cellura, 24 A.D.2d 59, 263 N.Y.S.2d 843 (4th Dept. 1965); Daigle v. Leavitt, 54 Misc.2d 651, 283 N.Y.S.2d 328 (Sup.Ct., Rockland Co. 1967). 6 There is some language in the opinion of the New York Court of Appeals in the Martin case which could be read to indicate that it is not relevant whether personal jurisdiction over the defendants is available in the state whose limitations period is applied under the borrowing statute. 7 Martin v. Julius Dierck Equipment Co., 403 N.Y.S.2d at 190, 374 N.E.2d 97. The court's statements, however, were made in the context of a discussion regarding whether the foreign jurisdiction's tolling statute prevented the limitations period from running. The court was not squarely addressing the question of what effect a possible lack of jurisdiction over the defendant would have on the question of whether a cause of action accrued for purposes of applying the borrowing statute. At another place in the same opinion the New York Court of Appeals uses language which strongly suggests that were it considering this question it would hold that an action cannot accrue unless personal jurisdiction over the defendant is obtainable: 12 When it (the borrowing statute, CPLR 202) speaks of accrual of a cause of action, it must logically refer to a cause of action upon which a lawsuit may be brought.... 13 Id. 403 N.Y.S.2d at 189, 374 N.E.2d 97. Although the immediate occasion of the reference was to the time when a cause of action began, the statement reflects the New York court's perceptive awareness that application of New York's borrowing statute depends upon the presence of its key ingredient, a cause of action upon which a lawsuit may be brought. Id. 14 We are not bound by any decisive construction of the state court on this point. New York's highest court has not definitively spoken on the issue of whether a cause of action can accrue for borrowing purposes in a jurisdiction where the defendant is not amenable to suit. In attempting to estimate what the New York Court of Appeals would hold were it directly confronted with this issue, a federal court must keep in mind the basic purpose of its diversity jurisdiction, i.e. the enforcement of state-created rights and state policies going to the heart of those rights. Bernhardt v. Polygraphic Company of America, Inc., 350 U.S. at 208, 76 S.Ct. at 279 (Frankfurter, J., concurring) (emphasis added). The generally recognized purpose of borrowing statutes is to prevent forum shopping by plaintiffs who may be barred by the limitations period of one possible forum but not that of another. David H. Vernon, Statutes of Limitations In the Conflict of Laws: Borrowing Statutes, 32 Rocky Mtn.L.Rev. 287, 297 (1960). As to the New York statute, in reasoned dictum we have recognized that its purpose is: 15 to protect New York resident-defendants from suits in New York that would be barred by shorter statutes of limitations in other states where non-resident-plaintiffs could have brought suit. 16 Sack v. Low, 478 F.2d 360, 367 (2d Cir. 1973) (emphasis added). We reiterated this view in Arneil v. Ramsey, 550 F.2d at 779-80, when we emphasized by repeating: 17 To the extent New York has a concern in the case before us ... it is in the application of its borrowing statute, and that is 18 to protect New York resident-defendants from suits in New York that would be barred by shorter statutes of limitations in other states where non-resident-plaintiffs could have brought suit. 19 Sack v. Low, (478 F.2d) at 367. 20 Accord, Daigle v. Leavitt, 54 Misc.2d 651, 283 N.Y.S.2d 328 (Sup.Ct., Rockland Co. 1967). 21 We believe that New York's borrowing statute would be read as applying only to statutes of limitations of states where suit could have been brought in order to effectuate the purpose which the statute was designed to serve. Other courts have also taken this approach and held that for purposes of construing borrowing legislation a claim accrues only where a defendant is amenable to process. E.g., Pattridge v. Palmer, 201 Minn. 387, 277 N.W. 18, 19 (1937); Strong v. Lewis, 204 Ill. 35, 68 N.E. 556 (1903). As the Supreme Court of Illinois stated: 22 The words when a cause of action has arisen, ... should be construed as meaning when jurisdiction exists in the courts of a state to adjudicate between the parties upon the particular cause of action, without regard to the place where the cause of action had its origin. 23 Id. 68 N.E. at 556. This view recognizes that the existence of jurisdiction over a defendant is essential to assure a rational relationship between the litigation and the statute of limitations being applied. As one commentator has concluded, (i)f a defendant has never been subject to service in a jurisdiction, it seems unrealistic to permit its law to control the disposition of the limitation question elsewhere. 32 Rocky Mtn.L.Rev. at 326. 24 The concept that a statute of limitations does not come into operation except against a suit which can be brought is not a late development. Even without a borrowing statute to consider, the same principle has been applied to statutes of limitations. In Anderson v. Gailey, 33 F.2d 589 (N.D.Ga.1929), the court held that where suit is a legal impossibility, statutes of limitations do not come into operation. 25 Where suit is a legal impossibility, judicial exceptions to the statute are implied, as where there is no competent plaintiff or defendant or no forum to sue in. 26 Id. at 592. In predicting that the New York Court of Appeals would construe a cause of action in its borrowing statute to mean a cause of action where suit could have been brought, we would be heeding the often noted admonition of Judge Learned Hand in Brooklyn Nat. Corp. v. Commissioner of Internal Revenue, 157 F.2d 450, 451 (2d Cir.), cert. denied, 329 U.S. 733, 67 S.Ct. 96, 91 L.Ed. 634 (1946), that there is often no surer way to misconceive the meaning of a statute or any other writing than to construe it verbally.... Insofar as the purpose of the borrowing statute is not to protect its residents from stale claims (as to which New York's own statute of limitations affords adequate protection), but to prevent a plaintiff from forum shopping, it makes no sense at all to apply the shorter limitation of a state where the defendant could not have been sued. 8 27 This court has, in dicta, implicitly endorsed this view although it has never before been directly confronted with the issue of how a defendant's amenability to suit affects the question of the applicability of New York's borrowing statute. In Arneil v. Ramsey, 550 F.2d 774 (2d Cir. 1977), we held, in a securities fraud action, that the statute of limitations of Washington, the state of the plaintiffs' residence, should be applied under New York's borrowing statute. Id. at 779. The rationale was that Washington was the state where the economic impact of the fraud was felt, whereas New York's only interest in the case was in the application of its borrowing statute. Its application raised no problem because (p)laintiffs here have demonstrated no reason why these defendants could not have been sued in Washington other than that Washington's statute of limitations had already run. Id. at 780. 28 The holding in Arneil, therefore, was premised on the ability of the plaintiff to have brought suit in the state whose limitations period was applied. Id. We now explicitly affirm what was implicit in our decision in Arneil : that our prediction is that New York's Court of Appeals would decide that New York's borrowing statute does not require the application of the statute of limitations of a jurisdiction if the cause of action could never have been brought in that jurisdiction. 29 It is clear that the policies underlying New York's borrowing statute are not served in any way by applying the limitations period of Pennsylvania to bar a cause of action which never could have been brought in Pennsylvania. The main purpose of the borrowing statute is to prevent forum shopping by plaintiffs. Arneil v. Ramsey, 550 F.2d at 779-80; Daigle v. Leavitt, 283 N.Y.S.2d at 330. The appellants in this case apparently chose to bring their action in New York, not to avoid the bar of Pennsylvania's shorter limitations period, but because one of the defendants, Eastco, was not amenable to suit in any jurisdiction except New York. In such a case the policies underlying New York's borrowing statute are not implicated and no interest of either New York or Pennsylvania is served by applying the borrowing statute to bar this action. We therefore hold that the New York Court of Appeals would decide that a cause of action cannot accrue for purposes of New York's borrowing statute in a state which could not exercise jurisdiction over the cause of action. 30 Up to this point we have attempted to avoid confusion by not considering how Pennsylvania's tolling statute would apply to this action were the borrowing statute applicable. We hold simply that since the borrowing statute is inapplicable, Pennsylvania's statute of limitations does not apply at all to the action against Eastco and, therefore, we do not reach the question of whether it would have or should have been tolled under Pennsylvania law. 9