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CONTRACTS - STATUTORY INTERPRETATION - STATUTE OF LIMITATIONS - NON-RESIDENT CLAIM ACCRUAL - PLACE OF INJURY

Under N.Y. C.P.L.R. 202, a non-resident plaintiff's cause of action for breach of contract or quantum meruit, for the purpose of the Statute of Limitations, accrues in the state where the injury occurred.

[SUMMARY] | [ISSUE & DISPOSITION] | [AUTHORITIES CITED] | [COMMENTARY]

SUMMARY

Plaintiff, a non-resident of New York, filed a suit against Defendant in the United States District Court for the Southern District of New York alleging breach of contract for failure to pay consulting fees. The complaint was dismissed for lack of subject matter jurisdiction and Plaintiff filed a similar suit in the Supreme Court of New York County.

Plaintiff argued that the cause of action accrued in New York State because most of the events relating to the contract - including negotiations, execution, performance and breach - occurred in New York.

Defendant argued that under N.Y. C.P.L.R. 202 the cause of action accrued in either Delaware, Plaintiff's state of incorporation, or in Pennsylvania, Plaintiff's principal place of business. In both states, the Plaintiff's claims would have been time barred by the Statute of Limitations.

The New York Supreme Court held that the Plaintiff's cause of action accrued at the place of injury, where Plaintiff resides or is incorporated. This place of injury is where the economic loss was sustained or where the injury occurred. The Appellate Division affirmed.

The Court granted leave to appeal to resolve this issue of first impression. The Court determined that according to the generally accepted meaning of "accrued" under N.Y. C.P.L.R. Article 2, a cause of action accrues in the place of injury. In cases of pure economic loss, this is usually where the plaintiff resides because that is where the loss is felt.

ISSUE & DISPOSITION

Issue(s)

Whether for purposes of N.Y. C.P.L.R. 202 a non-resident plaintiff's cause of action for breach of contract or quantum meruit accrues at the "center of gravity" (i.e., where most of the events relating to the contract took place), or where the economic impact of the alleged breach was felt.

Disposition

A non-resident plaintiff's cause of action for breach of contract or quantum meruit accrues at the place where the injury occurred. For economic claims, this is usually the place where Plaintiff resides and sustains the economic impact of the loss.

AUTHORITIES CITED

Cases Cited by the Court

Other Sources Cited by the Court

  • Mack Trucks, Inc. v. Bendix-Westinghouse Automotive Air Brake Co., 372 F.2d 18 (3d Cir. 1966).
  • Dymm v. Cahill, 730 F. Supp. 1245 (S.D.N.Y. 1990).
  • Davis v. State Farm Mut. Auto. Ins. Co., 507 P.2d 9 (Or. 1973).
  • Financial Bancorp, Inc. v. Pingree and Dahle, Inc., 880 P.2d 14 (Ut. Ct. App.1994).
  • Nadler v. Liberty Mut. Fire Ins. Co., 424 S.E.2d 256 (W. Va. 1992).
  • Abraham v. General Cas. Co. of Wis., 576 N.W.2d 46 (Wis. 1998).

COMMENTARY

State of the Law Before Global Financial

N.Y. C.P.L.R. 202 deals with the statute of limitations requirements for a non-resident's cause of action.The statute requires that the cause of action be timely under the limitation periods of both New York and where the cause of action accrued. N.Y. C.P.L.R. 202.

Before the instant case New York courts had never decided the meaning of accrued for a non-resident's contract claims.

When defining accrual for statutory purposes in other causes of action like tort, one standard exists: "the claim is subject to the limitations periods of the jurisdiction where the injury occurred." See Gorlin v. Bond Richman & Co., 706 F. Supp. 236, 240 (S.D.N.Y. 1989). The definition, however, of "where the injury occurred" differs between tort claims and economic claims. For tort and personal injury claims, the cause of action accrues at the time and place of the injury, as there existed no cause of action before the injury. See Martin v. Julius Dierck Equip. Co., 43 N.Y. 2d 583 (N.Y. 1978). For economic claims, the cause of action accrues in the place where the claimant resided and sustained the economic impact of the loss. See Dymm v. Cahill, 730 F. Supp. 1245 (S.D.N.Y. 1990).

N.Y. C.P.L.R. 202 has remained unchanged, in terms of its substance and its effect on disputes concerning statutes of limitations, since its adoption in 1902. See Antone v. General Motors Corp., 64 N.Y. 2d 20, 27-28 (N.Y. 1984).

Effect of Global Financial on Current Law

After Global Financial, a cause of action for contract disputes in which the plaintiff is not a resident of New York state accrues in the place of injury. The Court identifies the place of injury as where the plaintiff sustains the economic impact of his or her loss.

The Court rejected Plaintiff's argument that it should adopt a "center of gravity" approach. The Court clarified that this common law approach would be appropriate in a choice of law case. The Court found that the issue in the instant case did not deal with choice of law. Rather, it dealt with a statute of limitations issue. The Court thus held that this issue of first impression was governed by N.Y. C.P.L.R. 202. The Court extended the traditional definition of accrual used in tort cases, interpreting the statute to include contract claims. Following the line of contract cases dealing with purely economic injuries, the Court held that the place of injury is where the plaintiff resides and sustains the economic impact of the loss.

Unanswered Questions

The Court stated that when the alleged injury is purely economic, the place of injury is determined by looking at where the plaintiff resides and sustains the impact of the loss. However, the Court leaves open the question of how to determine that place of injury for a corporation. Would the place of injury be the corporation's state of incorporation or its principle place of business? Also, is the Court's holding limited to contract and quantum meruit claims, or would this decision reach to any case arising under N.Y. C.P.L.R. 202? Finally, the Court's rationale relies on extending the torts definition of accrual under the statute. This begs the question of whether accrual will apply to all other cases arising under N.Y. C.P.L.R. 202.

Survey of the Law in Other Jurisdictions

Most jurisdictions disagree with the Global Financial Court's determination that, for purposes of the statute of limitations, a nonresident's contract claim accrues where the plaintiff suffered injury. In Abraham v. General Casualty Co. of Wisconsin, 576 N.W.2d 46 (Wis. 1998), the Wisconsin Supreme Court used a comparison to tort law, similar to the comparison used by the Global Financial Court, to determine that a cause of action in contract "arises where as well as when the final significant event that is essential to a suable claim occurs." Id. at 53, citing Mack Trucks, Inc. v. Bendix-Westinghouse Automotive Air Brake Co., 372 F.2d 18, 20 (3d Cir. 1966). That court, however, determined that the "final significant event" occurred when and where the breach occurred, not when or where the plaintiff "sustained the economic impact of the loss." Global Financial at para. 11.

Alternatively, in many other jurisdictions, the cause of action accrues not where the actual breach happened, but where the contract was to be performed. See, e.g., Financial Bancorp, Inc. v. Pingree and Dahle, Inc., 880 P.2d 14 (Ut. Ct.App. 1994). This is especially true with regard to insurance policy disputes, where the place of the plaintiff's injury is viewed as "fortuitous." Davis v. State Farm Mutual Automobile Ins. Co., 507 P.2d 9, 10 (Or. 1973). See also Nadler v. Liberty Mutual Fire Ins. Co., 424 S.E.2d 256 (W.Va. 1992).

Prepared by:

  • Cassie R. Ehrenberg '00
  • Stacey Hanna '01
  • Richard Mills-Robertson '01
  • Matthew E. Morningstar '01
  • Eric M. Sprague '01
  • Rebecca J. Whitcombe '01