New York Law Review

Tag: debt collection

  • Portfolio Recovery Associates, LLC v. King, 14 N.Y.3d 410 (2010): Application of Borrowing Statute to Assigned Debt

    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.

  • Varela v. Investors Ins. Holding Corp., 81 N.Y.2d 958 (1993): Limits on Private Rights of Action Under Consumer Protection Laws

    Varela v. Investors Ins. Holding Corp., 81 N.Y.2d 958 (1993)

    New York’s General Business Law Article 29-H, regulating debt collection practices, does not create a private right of action; only the Attorney General or a District Attorney can bring such actions.

    Summary

    Varela sued Investors Insurance and their law firm after the firm initiated a collection action and obtained a default judgment based on the mistaken belief that Varela was delinquent on insurance premiums. Even after being informed of the error, the law firm refused to issue a satisfaction of judgment until Varela paid a $60 fee. Varela then sued, claiming damages and alleging violations of New York consumer protection statutes. The New York Court of Appeals held that Article 22-A of the General Business Law (deceptive acts) did not apply because the firm’s actions were not materially deceptive, and that Article 29-H (debt collection practices) does not provide for a private right of action. The court affirmed the dismissal of Varela’s claims.

    Facts

    Investors Insurance Company mistakenly believed that the Varelas were delinquent in paying their insurance premiums.

    The law firm representing Investors commenced a collection action against the Varelas and obtained a default judgment.

    Investors informed the law firm that the collection action was a mistake and that the Varelas did not owe the premium.

    The law firm refused to enter a satisfaction of judgment until the Varelas paid $60 for issuing and filing the satisfaction.

    The Varelas paid the $60 and then sued Investors and the law firm, alleging substantial damages and asserting claims under New York consumer protection statutes.

    Procedural History

    The lower courts dismissed Varela’s claims.

    The Appellate Division affirmed the dismissal.

    The New York Court of Appeals reviewed the Appellate Division’s decision.

    Issue(s)

    1. Whether the law firm’s actions constituted “deceptive acts” under Article 22-A of the General Business Law, thereby entitling plaintiffs to a private right of action?

    2. Whether Article 29-H of the General Business Law creates a private right of action for violations of its provisions?

    Holding

    1. No, because the law firm’s actions, even if improper, did not materially mislead the plaintiffs and thus did not constitute deceptive acts under Article 22-A.

    2. No, because Article 29-H authorizes only the Attorney General or a District Attorney to commence an action for violation of its provisions; it does not create a private right of action.

    Court’s Reasoning

    Regarding Article 22-A, the court reasoned that even if the law firm’s actions were improper, they did not materially mislead the Varelas. The statute prohibits “[deceptive acts or practices in the conduct of any business, trade or commerce” (General Business Law § 349). The court cited Genesco Entertainment v Koch, stating that the plaintiffs were not “injured by reason of any violation” of section 349 because the alleged misrepresentations did not constitute a deceptive practice within the meaning of the act.

    Regarding Article 29-H, the court emphasized the absence of an express provision for a private cause of action, contrasting this with Article 22-A (which was amended to expressly provide for one) and other sections of the General Business Law. The court stated, “Given the Legislature’s action in amending article 22-A to expressly provide for a private cause of action in that article… its provision for private causes of action in other portions of the General Business Law… and the absence of a similar provision for enforcing article 29-H, we conclude the Legislature did not intend to create a private cause of action for violations of article 29-H.” The court applied the principle that when a statute omits a specific remedy, particularly when other related statutes include it, the omission is intentional.