Opinion ID: 787600
Heading Depth: 2
Heading Rank: 1

Heading: What law supplies the statutes of limitations applicable to the common law claims?

Text: 24 As a preliminary matter, the Trustee submits that because the estate's claims arise out of the wrongful transfer and subsequent embezzlement of a bankruptcy estate's escrowed funds, they are governed by a federal common law of bankruptcy. The bankruptcy court noted that whether or not the Trustee's claims were state or federal in nature was unimportant because even if the claims were federal, state law would supply the applicable statutes of limitations pursuant to the Supreme Court's directive that when Congress has failed to provide a statute of limitations for a federal cause of action, a court `borrows' or `absorbs' the local time limitation most analogous to the case at hand. Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 355, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991) (citations omitted). This borrowing principle applies equally to federal common law actions. Oneida County, N.Y. v. Oneida Indian Nation of New York State, 470 U.S. 226, 240, 105 S.Ct. 1245, 84 L.Ed.2d 169 (1985). Along with state statutes of limitations, a borrowing court must also borrow from state law the relevant tolling principles. Island Insteel Systems, Inc. v. Waters, 296 F.3d 200, 210 n. 4 (3d Cir.2002) (citations omitted). 25 The Court in Oneida Indian Nation pointed out that borrowing would be impermissible where the borrowed state limitations period interfered with federal policies. Oneida Indian Nation, 470 U.S. at 240, 105 S.Ct. 1245. See also Island Insteel Systems, Inc., 296 F.3d at 207 (if borrowing an analogous statute of limitations from state law would `frustrate or interfere with the implementation of national policies,' courts must look to federal law for an analogous limitations period) (citations omitted). The Trustee directs us to no authority suggesting that application of state statutes of limitations to the common law claims here — common law claims asserted post-bankruptcy petition and based on post-petition wrongdoing — frustrates any national policy in effecting the administration and reorganization of a bankruptcy estate. To the contrary, the Bankruptcy Code itself imposes a two-year limitations period on post-petition claims seeking to avoid post-petition transfers of property of the bankruptcy estate. See 11 U.S.C. § 549(d). Thus, the suggestion that imposing state-law limitations periods of two or more years on common law claims asserted post-petition, and based on post-petition misconduct, interferes with federal bankruptcy principles — where the Bankruptcy Code itself imposes a two-year limitations period on certain post-petition claims based on post-petition misconduct — is simply without merit. We therefore agree with the bankruptcy and district courts that state law, specifically Pennsylvania law, 6 supplies the statutes of limitations applicable to the Trustee's common law claims. 26