Posted on Tuesday, July 24, 2018In June, the New York Court of Appeals examined the application of a New York Choice of Law provision in a contract – a determinative issue for the case. In Ontario, Inc. v. Samsung C&T Corp., the issue was whether the plaintiff’s claims were subject to Ontario, Canada’s 2-year statute of limitations or New York’s 6-year statute of limitations for breach of contract where the contract contained a broad New York Choice of Law provision. The court found that pursuant to New York’s borrowing statute, Ontario’s more restrictive statute of limitations applied. The action was dismissed as time-barred, serving as a harsh reminder of the potential effects of choice of law and limitations periods.
The suit arose out of the following facts. In 2008, an Ontario renewable energy developer, SkyPower Corp. (“SkyPower”), entered into a Non-Disclosure Agreement (NDA) with the defendants which allowed the defendants to review SkyPower’s confidential and proprietary information. The review was conditioned on restricted disclosure and the requirement that the information would be destroyed after review.
The defendants allegedly made improper use of SkyPower’s proprietary information in violation of the terms of the NDA. Ontario, Inc. (the assignee of SkyPower’s claims in bankruptcy), brought this breach of contract and unjust enrichment action in 2014. The defendants moved to dismiss the complaint, claiming that it was time-barred by Ontario’s 2-year statute of limitations. The plaintiff contended that New York’s statute of limitations applied, which would allow the case to survive the motion to dismiss.
The NDA contained a choice of law provision providing that “[t]his Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York.” However, New York’s borrowing statute, CPLR 202, dictates that
“[w]hen a nonresident sues on a cause of action accruing outside of New York, CPLR 202 requires the cause of action to be timely under the limitation periods of both New York and the jurisdiction where the cause of action accrued.” Ontario, Inc. v. Samsung C&T Corp., 2018 N.Y. Slip Op. 04274 (June 12, 2018) (citing Global Fin. Corp. v. Triarc Corp., 93 N.Y.2d 525, 528 (1999)). If the borrowing statute applied, as the defendants argued, the case would be subject to Ontario’s shorter statute of limitations.
The parties did not dispute that the plaintiff’s claims accrued in Ontario. Instead, the crux of the plaintiff’s argument was that the NDA’s choice of law provision contemplated a choice of New York’s procedural law except for its statutory choice of law provisions (which include the borrowing statute).
The court found that the parties’ intent, determined from the broad choice of law language used, was to have both the substantive and procedural laws of New York apply. Thus, the borrowing statute, being procedural in nature, applied. Had the plaintiff wished to obtain the application of New York’s statute of limitations, the court explained that the NDA should have been drafted to contain (1) a substantive choice of law clause, and (2) a New York forum selection clause.
This case has important implications in the insurance context; many policies, especially professional liability and builders risk policies, contain choice of law provisions. Anticipating issues with the enforcement of such provisions and predicting application of state law can win (or lose) a case.
For more information, please contact Grace V. Hebbel at gvh@sdvlaw.com.
