Opinion ID: 611861
Heading Depth: 3
Heading Rank: 2

Heading: Dismissal of the Aiding and Abetting Fraud Claim as Time-Barred

Text: 20 In January 1991, plaintiff filed suit against People's Bank in a Tennessee federal district court, asserting diversity jurisdiction. Ordinarily, a federal court sitting in diversity will apply the statute of limitations of the forum state. E.g., Hodge v. Service Mach. Co., 438 F.2d 347, 348 (6th Cir.1971). When a cause of action accrues in another state having a shorter statute of limitations that would bar the action, Tennessee law requires its courts to borrow and apply the non-forum state's shorter statute. Tenn.Code Ann. § 28-1-112 provides: 21 Application of foreign statutes.--Where the statute of limitations of another state or government has created a bar to an action upon a cause accruing therein, while the party to be charged was a resident in such state or such government, the bar is equally effectual in this state. 22 Under the Tennessee statute, then, the Virginia statute of limitations would apply if the following three conditions are met: (1) the defendant was a resident of Virginia when the cause of action accrued; (2) the cause of action is barred by Virginia's statute of limitations; and (3) the cause of action accrued in Virginia. 23 The district court properly concluded that each of these conditions was satisfied and therefore correctly applied Virginia's two-year statute. 24 First, there can be no dispute that People's Bank was a Virginia resident. Plaintiff concedes as much in his initial complaint and in his brief to this court. 25 Second, the Virginia statute of limitations would indeed bar his claims. The events complained of occurred in June 1988, and plaintiff filed suit against People's Bank in January 1991--over two and one-half years later. While Tennessee's three-year statute of limitations would permit the claims, Virginia has a shorter two-year limitations period which would not. Va.Code Ann., § 8.01-243 provides: 26 Personal action for injury to person or property generally ...--A. Unless otherwise provided in this section or by other statute, every action for personal injuries, whatever the theory of recovery, and every action for damages resulting from fraud, shall be brought within two years after the cause of action accrues. 27 (Emphasis added.) 28 Consequently, the aiding and abetting fraud claim is time-barred when Virginia's shorter statute of limitations is applied. 29 Finally, there is no question that the cause of action accrued in Virginia, rather than in Tennessee. It is well-established under Tennessee law that in tort cases, the cause of action accrues ... when the injury occurs or is discovered. E.g., McCroskey v. Bryant Air Conditioning Co., 524 S.W.2d 487, 491 (Tenn.1975). This court, applying Tennessee law, has held that [w]hen a person sustains loss by fraud, the place of wrong is where the loss is sustained, not where fraudulent representations are made. Bailey v. Chattem, Inc., 684 F.2d 386, 392 (6th Cir.1982). Together, these principles demonstrate that for purposes of Tennessee's borrowing statute, a cause of action for aiding and abetting fraud accrues where the loss from the fraud occurs. See id.; McCroskey, 524 S.W.2d at 491. 30 It is clear that plaintiff's loss occurred in Virginia. As soon as People's Bank accepted the $55,000 Florida cashier's check, issued $52,000 of its own cashier's checks, and deposited the remaining $3,000 into Hayes' account, Hayes had effectively converted plaintiff's check into cash, thereby consummating his loss. In addition, as the district court correctly observed in its June 6, 1991 order, [a]ll of the actions of the People's Bank in cashing the check and refusing to retrieve it from the collection process, occurred in Virginia. Plaintiff's argument that no loss of money occurred until Hayes cashed in Tennessee the two cashier's checks issued by People's Bank is unsupported by law or logic, and ignores the $3,000 deposit and the $2,200 cash given Hayes in reliance upon that deposit. Therefore, since plaintiff's loss occurred in Virginia, his fraud claim accrued in that state, not in Tennessee. 31 Accordingly, since the circumstances which trigger the application of Tennessee's borrowing statute were present in this case, we affirm the district court's conclusion that Virginia's two-year statute of limitations bars plaintiff's fraud claim. 32