Portfolio Recovery Associates, LLC v. King, 14 N.Y.3d 410 (2010)
When a nonresident assignee of a cause of action accruing outside of New York brings suit in New York, the borrowing statute, CPLR 202, requires the action to be timely under the statute of limitations of both New York and the jurisdiction where the cause of action accrued; the court must also borrow the tolling provisions of the jurisdiction where the cause of action accrued.
Summary
Portfolio Recovery Associates, LLC, as assignee of Discover Bank, sued Jared King in New York to recover on a credit card debt. The credit card agreement contained a Delaware choice-of-law clause. King argued that Delaware’s three-year statute of limitations barred the action under New York’s borrowing statute (CPLR 202). The New York Court of Appeals held that CPLR 202 applied, requiring consideration of Delaware’s statute of limitations and its tolling provisions. Because the cause of action accrued in Delaware and Delaware’s tolling statute did not apply to King, a nonresident, the action was time-barred.
Facts
Jared King, while a resident of Connecticut, opened a credit card account with Greenwood Trust Company (later Discover Bank) in 1989. The agreement had a Delaware choice-of-law provision. King canceled the card in 1999 and made no payments after December 1998. In August 2000, Discover assigned King’s debt to Portfolio Recovery Associates, LLC. Portfolio sued King in New York in 2005, asserting breach of contract and account stated.
Procedural History
The Supreme Court granted summary judgment to Portfolio. The Appellate Division affirmed. The New York Court of Appeals reversed, holding that Portfolio’s claim was time-barred under the borrowing statute.
Issue(s)
Whether New York’s borrowing statute, CPLR 202, requires application of Delaware’s statute of limitations and tolling provisions to a debt collection action brought in New York by an assignee of a Delaware corporation against a New York resident, where the cause of action accrued in Delaware.
Holding
Yes, because CPLR 202 mandates that when a nonresident sues on a cause of action accruing outside New York, the action must be timely under the limitations periods of both New York and the jurisdiction where the cause of action accrued. Moreover, in determining whether the action would be barred in the other state, the court must also borrow that state’s tolling provisions.
Court’s Reasoning
The Court of Appeals reasoned that choice-of-law provisions generally apply to substantive issues, while statutes of limitations are procedural. Therefore, the Delaware choice-of-law clause did not automatically incorporate Delaware’s statute of limitations. However, CPLR 202 dictates that the statute of limitations of both New York and the state where the cause of action accrued must be considered. Since Discover Bank sustained the economic injury in Delaware, the cause of action accrued there. As such, Delaware’s three-year statute of limitations applied. The court then addressed Delaware’s tolling statute, which tolls the statute of limitations when a defendant is out of state. However, the court interpreted Delaware law as intending its tolling provision to apply only where the defendant had a prior connection to Delaware, meaning the defendant would at some point return to the state or be subject to service there. Since King had no prior connection to Delaware, the tolling provision did not apply. The court noted that its holding was consistent with the purpose of CPLR 202, “namely, to prevent forum shopping by nonresidents attempting to take advantage of a more favorable statute of limitations in this state.” Because the action was time-barred in Delaware, it was also time-barred in New York. The court reversed the grant of summary judgment to Portfolio, but noted that it could not grant summary judgment to King because King did not cross-move for that relief.