Where Foreign Law Applies, Court Must Apply Limitations Period of Foreign Cause of Action Most Closely Analogous to the New York Causes of Action

On March 28, 2023, Justice Joel. M. Cohen of the New York County Commercial Division issued a decision in Andes Petroleum Ecuador Ltd. v. Occidential Petroleum Corp, 2023 N.Y. Misc. LEXIS 1385. In this action, where the claims accrued in Ecuador and thus the Ecuador statute of limitations applied, the Court had previously denied defendant’s motion to dismiss, “finding that [defendant] failed to meet its burden of showing that [plaintiff’s] claims were time-barred under Ecuadorian law.” The First Department reversed and remanded with the instruction that “the Court consider ‘the expert evidence provided by each side concerning what Ecuadorian causes of action are most closely analogous to the New York causes of action’ for fraudulent conveyance.” On remand, the Court held that the most closely analogous Ecuadorian cause of action had a four-year statute of limitations, and that because the claims had been filed more than four years after they accrued, the Court granted the motion to dismiss. The Court explained:

On remand, the parties submitted supplemental briefs and expert affidavits directed to the specific inquiry outlined by the First Department. After considering those submissions, together with the submissions made in connection with the original motion and oral argument by counsel, the Court concludes that delito civil (with a four-year statute of limitations) is the Ecuadorian cause of action most closely analogous to the various fraudulent conveyance claims asserted by Andes in this action. Although certain of Andes's New York law claims do not require proof of fraudulent intent, they all at a minimum involve claims of constructive fraud or fraudulent intent presumed by law. Moreover, under Ecuador's statutory scheme both intentional (delito civil) and unintentional torts (cuasidelito civil) are governed by the same four-year statute of limitations. "A cause of action for fraudulent conveyance is a species of tort" (Morgenthau v A.J. Travis Ltd., 184 Misc 2d 835, 843, 708 N.Y.S.2d 827 [Sup Ct New York County 2000] citing Sunrise Indus. Joint Venture v Ditric Optics, 873 F Supp 765, 770-771 [ED NY 1995]). To be sure, delito civil is not a precise fit, and the Court has considered Andes's argument that the form of relief under that cause of action (monetary damages) arguably differs from the form of relief for fraudulent conveyance (voiding the transfer, which in this case has the effect of monetary relief but is different in form), but in the end finds delito civil is the closest analogy that has been presented by the parties and their respective experts.

Andes's arguments in favor of the collusion-focused Ecuadorian cause of action for acción colusoria (with a 10-year statute of limitations) as the closest analogy to fraudulent conveyance are unavailing. Even assuming acción colusoria may apply outside the real property context, the record indicates that rarely, if ever, has been the case. Indeed, the Court finds that acción colusoria is not only less analogous than delito civil but also less so that acción pauliana, an Ecuadorian claim with a one-year statute of limitations on which OPC secondarily relies. Unlike acción colusoria (or delito civil, for that matter), acción pauliana focuses on the rights of creditors, which is the focus of Andes's claims [*5] in this case. A claim for accion pauliana requires "(1) a harm to the creditor; and (2) knowledge that the debtor will become insolvent after the transfer or its bad economic situation will be aggravated because of the transfer" (OPC Supp. Brief at 7-8 [NYSCEF 250]). In sum, based on the record presented by the parties

and their respective Ecuadorian legal experts, the Court finds that the closest Ecuadorian analogues to Andes's claims of fraudulent conveyance under New York's DCL are, in order, delito civil (four-year statute of limitations),acción pauliana (one-year statute of limitations) and then acción colusoria (ten-year statute of limitations). There is no dispute that Andes's Complaint in this action was filed more than four years after the alleged fraudulent conveyance at issue in this case. Accordingly, consistent with the First Department's mandate and the plain language of CPLR 202, Andes's claims against OPC in this action are time-barred and OPC's motion to dismiss must be granted

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning the application of a foreign statute of limitations or the timeliness of your claims.