Court Analyzes Application of Saving Statue to Case That had Been Transferred Multiple Times

On March 25, 2019, Justice Cohen of the New York County Commercial Division issued a decision in Federal Home Loan Bank of Boston v. Moody's Corp., 2019 NY Slip Op. 30921(U), analyzing the application of New York's saving statute (CPLR 205) to an action that had been transferred multiple times, explaining:

This case presents a vexing question regarding the application of CPLR § 205(a). The parties agree that the FHLBB' s claim in this Court, viewed in isolation, would be time barred because the alleged fraud occurred more than six years before the case was filed on November 2, 2017. The FHLBB's claim can be saved from dismissal only if its filing date is deemed to relate back to the timely filing date of Moody's I (April 20, 2011), or at least to the removal date of Moody's II (May 27, 2011). That is where section 205(a) comes in.

CPLR § 205(a), sometimes referred to as the "saving" statute, provides in relevant part that:

If an action is timely commenced and is terminated in any other manner than by a voluntary discontinuance, a failure to obtain personal jurisdiction over the defendant, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits, the plaintiff . . . may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months after the termination provided that the new action would have been timely commenced at the time of commencement of the prior action.

As the Court of Appeals recently observed, section 205(a) implements the Legislature's policy preference for the determination of actions on the merits. The statute is remedial in nature and, where applicable, allows plaintiffs to avoid the harsh consequences of the statute of limitations and have their claims determined on the merits where a prior action was commenced within the limitations period, thus putting defendants on notice of
the claims.

The Appellate Division has determined that an out-of-state action is not a prior action within the meaning of section 205(a). The rule appears to have been first announced in Baker v. Commercial Travelers Mutual Accident Ass'n of Am., 3 A.D.2d 265, 266 (4th Dep't 1957), in which the Fourth Department, addressing a precursor to section 205(a), explained:

Limitations of actions are matters within the concern of the forum. Commencement of suit in another State will not toll or otherwise affect the provisions for limitation of actions in the State of the forum. It follows therefore that, assuming an action was commenced in the United States District Court in Florida where the cause of action arose within the contractual time limit, still that does not make available to the plaintiff the saving statute of New York.

This case presents the unusual (perhaps unique) situation in which the prior action was commenced outside of New York (Moody's I) but terminated within New York (Moody's IV). The parties have not cited, nor has the Court found, a case addressing the applicability of CPLR § 205(a) in that context. In the absence of binding authority on point, the Court finds that the most natural reading of the text of section 205(a) is that the FHLBB's complaint in this case is timely because it was filed within six months of the termination of its prior action by a federal court sitting in New York. That conclusion is bolstered by the Court of Appeals' admonition that the provision's broad and liberal purpose is not to be frittered away by any narrow construction.

Here, there is a direct - albeit tumultuous - path from Moody's I through Moody's IV. Despite its travels between and among state and federal courts, it was one continuous action. Under federal law, the removal of the case from Massachusetts state court (Moody's I) to Massachusetts federal court (Moody's II) did not affect the filing date, which remains the time it was filed in state court.

In turn, after the transfer of the action from Massachusetts federal district court to the SDNY (Moody's IV), 28 U.S.C. § 1631 provides that the action or appeal shall proceed as if it had been filed in or noticed for the court to which it is transferred on the date upon which it was actually filed in or noticed for the court from which it is transferred.

Although the Court is not bound to take account of federal court procedural rules in its application of CPLR § 205(a), doing so in this case is consistent with the overarching remedial purpose of the New York statute. The federal rules serve the same remedial purpose of avoiding the harsh application of the statute of limitations when the plaintiff is seeking to continue its timely-filed case in the proper forum. The Defendants here plainly have been on notice of the FHLBB's claims since 2011. Moreover, the final resting place of the action immediately prior to the initiation of the instant case was a New York federal court, and thus applying section 205(a) is consistent with Baker and its progeny.

In sum, the Court finds that the FHLBB's claim is timely, under CPLR § 205(a), because its prior action was timely commenced in 2011 and the instant case was initiated and served within six months of the termination of that action by the SDNY.

(Internal quotations and citations omitted).

It is not unusual for the statute of limitations to be an issue in complex commercial litigation. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding whether a claim is barred by the statute of limitations.