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evaluate a plaintiff’s claims under the statute of limita-
tions of the plaintiff’s home jurisdiction, and apply the
shorter period pursuant to New York’s borrowing statute,
Civil Practice Law and Rules § 202, to bar claims. That
statute—which has remained substantially unchanged for
well over a century—provides:
An action based upon a cause of action
accruing without the state cannot be com-
menced 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 favor of a
resident of the state the time limited by
the laws of the state shall apply.
3
In sum, New York’s borrowing statute gives prefer-
ential treatment to residents, while requiring that a claim
brought by a non-resident on a cause of action accruing
outside of the state be timely under the law of both New
York and the jurisdiction where the cause of action ac-
crued. Thus, if the plaintiff is a New York resident, New
York’s own statute of limitations generally applies.
4
Dis-
putes that involve foreign (i.e., non-New York) parties,
however, may trigger New York’s “borrowing” statute
which, in turn, may determine the applicable statute of
limitations.
Broad Choice-of-Law Provisions May Not Preclude
“Borrowing”
The borrowing statute analysis is complicated with
the interplay of contractual choice-of-law and forum
selection clauses, leading to anomalous results and war-
ranting particular attention. Recent decisions emphasize
that even where contracting parties agree to apply New
York law to their dispute and agree to a forum selection
clause requiring them to litigate in New York, they may
still find themselves locked into the borrowing statute and
therefore subject to an entirely different limitations period
which may unexpectedly bar their claims. The analysis
turns largely on the citizenship of the litigants and the lo-
cation where the claim accrued.
New York’s intermediate appellate court recently ad-
dressed these points in 2138747 Ontario, Inc. v. Samsung C
& T Corp.
5
That case involved a non-disclosure agreement
(NDA) signed by five companies based in multiple juris-
dictions, which included a familiar choice-of-law clause
requiring it to be “governed by, construed and enforced in
accordance with the laws of the State of New York.”
6
The
Ontario-based plaintiff sued, in New York, defendants
Parties in countless commercial transactions include
provisions calling for their agreements to be “governed
by, construed and enforced in accordance with laws of the
State of New York.”
1
But recent decisions by New York’s
courts illustrate how such standard provisions often pose
as traps for the unwary, and could actually lead to the un-
intended and counterintuitive application of foreign laws
to a resulting dispute and extinguish claims as untimely.
Specifically, although parties may agree to a broadly
drawn choice of law clause applying New York’s substan-
tive and procedural laws, a claim filed by a party that is
squarely within New York’s statute of limitations period
may nonetheless be time-barred. The “procedural” limi-
tations period of a sister state or a foreign country may
apply while, at the same time, New York’s “substantive”
law applies to the same dispute (per agreement). This is
the case even where the parties are contractually bound
to litigate in New York courts. And, as if that weren’t con-
fusing enough, drastically different limitations periods
may apply depending on the nature of the claim, which
of the contracting parties is suing, and where they are
located.
Moreover, clever parties wishing to prospectively
contract their way around these results may be unable to
do so. So much for predictability, upholding the parties’
intent and encouraging them to use New York courts as
their forum for dispute resolution. All thanks to the inter-
play of New York’s “borrowing statute” and confusing
jurisprudence about choice-of-law provisions.
The “Borrowing” Statute
Figuring out the statute of limitations periods ap-
plicable to potential disputes is not as straightforward
as it appears. Practitioners often assume that courts will
apply the limitations periods of the jurisdictions in which
they sit. But pursuant to so-called “borrowing statutes”
of New York and other states, courts often apply limita-
tions periods that are drastically different (and usually
far shorter) than the periods in their home states (and in
cases involving choice of law clauses in agreements, what
the contracting parties intended).
Borrowing statutes, like New York’s, require a court
to “borrow” or apply, under certain circumstances, the
statute of limitations of another jurisdiction. These bor-
rowing statutes have generally been enacted to prevent
forum shopping by non-resident plaintiffs who come
to (in this case) New York to take advantage of more
favorable limitations periods than available to them else-
where.
2
Under these circumstances, courts will generally
Standard New York Choice of Law Provisions May Apply
Foreign Laws to Bar Claims
ByWilliamJ.HineandSevanOgulluk
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mer is a statute of limitations. This distinction reflects the
competing public policy concerns of preventing forum
shopping, while also providing certainty and encouraging
commercial parties to choose New York law.
Contracting Around Borrowing Statutes May
Prove Difficult
Notably, applying the borrowing statute to the facts
of Ontario results in the application of four different
statutes of limitation to claims brought by parties to the
NDA, who were based in Korea, New Jersey, New York,
and Ontario. This is clearly not the result envisioned by
these contracting parties, who no doubt strived for uni-
formity and predictability.
Contracting parties wishing to sidestep borrowing
statutes and avoid these headaches may find it difficult
to do so. Indeed, the appellate court in Ontario suggested
that parties may not be able to lawfully contract around
New York’s borrowing statute, but left that question open.
In the wake of the uncertainty that is now occasioned by
use of choice-of-law provisions, parties should consider
some practical issues while negotiating their agreements,
especially in complex transactions where parties are
based and claims may accrue in multiple jurisdictions.
First, although the court’s decision in Ontario
stressed that use of the word “enforced” in the NDA’s
choice-of-law clause signaled the parties’ intention to
apply New York’s procedural law (and therefore the bor-
rowing statute), the omission of that word would not
necessarily have rendered a different result. The court
could have applied New York’s borrowing statute (and
Ontario’s limitations period) even in the absence of the
agreement since “the plaintiff is a nonresident alleging an
economic claim that took place outside of New York, the
time limitations provisions in the borrowing statute ap-
ply, regardless of whether the parties’ contractual choice-
of-law agreement can be broadly construed to include
the application of New York’s procedural, as well as sub-
stantive law.”
15
Thus, stripping words like “enforced” or
“procedural” from standard provisions such as the one
used in the Ontario NDA will not avoid New York’s bor-
rowing statute, which applies even in absence of agree-
ment. Indeed, the whole point of the statute is to keep at
bay a forum-shopping plaintiff not bound by any agree-
ment (a policy goal which is now arguably turned on its
based in New Jersey and Korea for breach of the NDA.
The alleged breach occurred in 2009, but the action was
filed in 2014. Although the claim would have been timely
under New York’s six-year limitations period, New York’s
borrowing statute applied Ontario’s two-year limitations
period instead, rendering plaintiff’s claims time-barred.
In a unanimous decision, the Ontario appellate court held
that “a broadly drawn contractual choice-of-law provi-
sion” providing “for the agreement to be ‘governed by,
construed and enforced’ in accordance with New York
law,” does not “preclude the application of New York’s
borrowing statute . . . .”
7
It explained that “[t]he borrow-
ing statute is considered a [procedural] statute of limita-
tions provision and not a [substantive] choice-of-law
provision.”
8
It emphasized that although choice-of-law
provisions generally do not encompass procedural is-
sues, use of the word “enforced” in the provision of the
NDA required application of New York procedural law, of
which “the borrowing statute is itself a part . . . .”
9
This treatment of the borrowing statute is to be dis-
tinguished from other recent decisions implicating the
state’s “substantive” statutory choice of law rules. In this
latter context, the New York Court of Appeals has reiterat-
ed that when parties contract for a particular substantive
law to apply, courts need not follow the state’s statutory
choice-of-law directive and may simply apply the parties’
selected substantive law. In IRB-Brasil Resseguros, S.A.
v. Inepar Investments, S.A.
10
the “Court held that, where
parties include a New York choice-of-law clause in a con-
tract, such a provision demonstrates the parties’ intent
that courts not conduct a conflict-of-laws analysis.”
11
The
Court therefore did not engage in such analysis since “to
find. . .that courts must engage in a conflict-of-laws analy-
sis despite the parties’ plainly expressed desire to apply
New York law would frustrate the Legislature’s purpose
of encouraging a predictable contractual choice of New
York commercial law and, crucially, of eliminating uncer-
tainty regarding the governing law.”
12
Taking this logic a
step further in Ministers & Missionaries Ben. Bd. v. Snow
13
the Court of Appeals held that a New York choice of law
clause “obviates the application of both common-law con-
flict-of-laws principles and statutory choice-of-law direc-
tives, unless the parties expressly indicate otherwise.”
14
The Court of Appeals’ rationale for applying a borrowing
statute differently from a substantive choice-of-law stat-
ute is that while the latter is simply a codification of New
York common law principles on conflict of laws, the for-
“In Ministers & Missionaries Ben. Bd. v. Snow, the Court of Appeals
held that a New York choice of law clause ‘obviates the application of
both common-law conflict-of-laws principles and statutory choice-of-law
directives, unless the parties expressly indicate otherwise.’”
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tions. First, many states have borrowing statutes similar
to New York’s. For example, the borrowing statute in
Delaware—a common corporate domicile and favored
forum for commercial litigation—directs its courts to
compare the relevant limitations periods in Delaware
with the limitations period in the state in which the cause
of action arose, and then apply the shorter period.
23
Indeed, the court in Ontario noted that even foreign
jurisdictions (including Ontario) may have similar stat-
utes.
24
Yet, other jurisdictions may have unique borrow-
ing statutes that may lead to opposite and even more
unconventional results. Oklahoma’s borrowing statute,
for example, requires courts in that state to compare the
relevant statute of limitations in Oklahoma with those
in the jurisdiction in which the claim accrued and apply
the longer period, an approach that runs counter to tra-
ditional borrowing statutes like those found in Delaware
and New York.
25
And Virginia’s borrowing statute ap-
plies only to breach of contract actions, which can result
in cases where a non-contract claim is governed by Vir-
ginia’s limitations period, while a contract-based claim is
governed by another state’s shorter limitations period.
26
Second, many other states also have statutes limit-
ing parties’ freedom to modify limitations periods. For
example, Arizona, Texas, Washington, Vermont and other
states have statutes that set minimum time periods ap-
plicable to efforts by contracting parties to shorten the
time to sue.
27
And some other states refuse to enforce any
agreements shortening applicable limitations periods.
28
Clearly, then, parties cannot avoid these issues altogether
by simply circumventing New York law.
Conclusion and Practical Considerations
How and to what extent choice of law provisions
are given effect across various jurisdictions is a critical
consideration during contract negotiations, especially for
transactions involving multi-jurisdictional parties and
the prospect of litigation. Given that the application of a
borrowing statute may result in the unexpected outright
dismissal of a case, it is important for parties to under-
stand the implications choice-of-law and forum selection
clauses may have in the context of their specific transac-
tion, should litigation arise. Efforts to contract around
borrowing statutes such as New York’s may not be suc-
cessful (and may even run afoul of other statutes). More-
over, not all states have borrowing statutes, and not all
are uniform. Evaluating litigation options prospectively
will require detailed analysis of issues such as the claims
involved, the applicable limitations periods in all relevant
jurisdictions, where claims will be deemed to have ac-
crued, and the citizenship of parties. And when the likeli-
hood of litigation does arise, parties need to be vigilant
in analyzing the limitations periods of the jurisdictions
implicated, considering the possibility that they may be
required to bring claims earlier than they might otherwise
have expected.
head with its application to contracting parties such as
those in Ontario).
Drafters seeking predictability and uniformity may
also wish to specify or modify limitations periods in their
contract. But such efforts may also prove difficult, as New
York courts have long recognized that “[b]ecause of the
combined private and public interests involved, indi-
vidual parties are not entirely free to waive or modify the
statutory defense.”
16
For example, parties may wish to
tailor choice-of-law provisions to expressly provide that
the parties agree to apply New York’s six-year statute of
limitations to their contract-based disputes. But the court
in Ontario raised the specter that such provisions could be
considered “an unenforceable extension of the otherwise
applicable statute of limitations.”
17
That is because, un-
der New York law, an agreement to waive or extend the
statute of limitations for contract claims made in advance
and before a claim has accrued is generally unenforceable
pursuant to section 17-103[1] of the General Obligations
Law, which requires such agreements to be adopted after
the cause of action has accrued.
18
Thus, using the facts
in the Ontario case to illustrate the point, such a provi-
sion applying New York’s six-year period may be held
unenforceable since it could be viewed as impermissibly
“extending” Ontario’s two year limitations period, made
applicable by the borrowing statute.
By contrast, New York does allow for parties to agree
to shorten limitations periods.
19
And where the limita-
tions period is reduced, New York courts will enforce it,
as long as the shortened time period is reasonable.
20
This
standard is context-dependent but is generally met when
“the plaintiff had a reasonable opportunity to commence
its action within the period of limitation.”
21
In the context
of commercial contracts a shorter limitations period that
nevertheless gives each party the reasonable opportunity
to bring suit is more likely to be enforceable (at least un-
der New York law). Although courts may, on occasion,
be reluctant to enforce provisions shortening the time to
sue, contracts routinely include provisions shortening the
time within which a party may file a lawsuit.
Another possible alternative would be to specify ap-
plication of the limitations period of a jurisdiction other
than New York. Thus, parties could choose New York
substantive law, and then add another provision specify-
ing that the law of some other state would determine the
applicable limitations period. For good measure, they
may even specify that “none of the provisions of Article
2 of New York’s Civil Practice Laws and Rules shall ap-
ply to any action arising out of this agreement.” Given
New York’s policy favoring enforcement of the parties’
choice of law, it is likely that such a provision would be
enforced, so long as it was not deemed counter to New
York public policy.
22
But parties wishing to embrace the laws of other ju-
risdictions to escape the labyrinth of New York’s rules on
limitations periods may find themselves in similar posi-
