Beware of the borrowing statute; time may run out.
He asked me if I knew what the statute of limitation period was in New York. I did not recall offhand, but I commented that it might not matter because New York could apply its "borrowing" statute.
"Oh no," my caller responded. "My client didn't borrow the ladder, he bought it."
Even good attorneys often are either unaware of the existence of a borrowing statute or do not understand how it works.
Borrowing statutes provide for one state's application of another state's statute of limitation. In essence, these statutes are used to "borrow" another jurisdiction's limitation period, barring any cause of action if the state in which the cause of action arose would bar the action due to its statute of limitation.
A majority of states have adopted some variation of a borrowing statute. The purpose underlying their enactment is to prevent a plaintiff from shopping for a jurisdiction that has a more lenient limitation period. This is why some states and courts refer to borrowing statutes as "anti-forum-shopping" statutes.
For instance, New York has a three-year statute of limitation for personal injury. Virginia, where the cause of action involving the ladder arose, has a two-year limitation period. The New York borrowing statute applies in all cases in which the plaintiff is not a citizen or resident of New York. Consequently, if my caller's client is not a citizen or resident of New York, the New York court will "borrow" Virginia's two-year limitation period to determine whether suit is timely filed.
Although the effect of all borrowing statutes is essentially the same, there are almost as many types and variations of them as there are states that have enacted them. The key to determining how and when a borrowing statute is applied is understanding the triggering mechanism. At least 15 different ones exist.
The triggering device used by most states is a residency requirement. In some states (California, Delaware, Hawaii, Idaho, Kansas, Michigan, Mississippi, Montana, Nevada, New York, North Carolina, Rhode Island, and Utah), the borrowing statute is triggered by the residency of the plaintiff.
In these jurisdictions, if the plaintiff is a resident or citizen of the forum state, the court generally will not apply the borrowing statute. If the plaintiff is not a resident of the forum state and the cause of action arose in another jurisdiction, the borrowing statute is applied. In that event, the statute of limitation of the jurisdiction in which the cause of action arose, usually referred to as the "foreign" jurisdiction, and not the forum state's limitation period, determines whether suit is timely filed.
For example, in Miller v. Stauffer Chemical Co., the plaintiff truck driver, an Oregon resident, was injured by the employees of a California corporation while his truck was being loaded in California.(1) More than a year after the accident, the plaintiff moved to Idaho. He filed suit there against the California corporation, relying on Idaho's two-year statute of limitation.
The California corporation moved for dismissal, claiming that suit was time barred because the Idaho borrowing statute required the court to apply California's one-year statute of limitation. The court agreed, and the case was then dismissed.
The Idaho Supreme Court affirmed. It held that under the state borrowing statute a cause of action that arises in another state or territory and is barred by that state or territory's statute of limitation cannot be maintained in Idaho "unless the plaintiff comes within the [borrowing statute's] exception for 'one who has been a citizen of this State.'"(2)
The court held that this exception did not apply to the plaintiff, although he was an Idaho resident at the time suit was filed, because the exception applied "only if the plaintiff is an Idaho citizen when the cause of action accrues."(3) The court reasoned that any other interpretation would circumvent the purpose of the statute - namely, to prevent forum shopping.
In other states (Alabama, Arizona, Indiana, Iowa, Massachusetts, Nebraska, and Tennessee), the defendant's residency is the determinative factor. In cases brought in these jurisdictions, the borrowing statute generally is triggered if the defendant is not a resident of the forum. Suit is barred if it was not filed within the limitation period of the jurisdiction where the cause of action arose. Conversely, if the defendant is a resident of the forum state, the borrowing statute is inapplicable.
For instance, in Drudge v. Overland Plazas Co., an Iowa resident was injured when he slipped and fell in Tennessee on property maintained by the defendant, a Missouri domiciliary.(4) The plaintiff brought a diversity suit in the federal court in Iowa, relying on that state's two-year statute of limitation. The defendant moved to dismiss, arguing that Iowa's borrowing statute required the court to apply Tennessee's one-year limitation period.
The court agreed and dismissed the suit, noting that Iowa's borrowing statute provides that "[w]hen a cause of action has been fully barred by the laws of any country where the defendant has previously resided, such bar shall be the same defense here...."(5)
The Eighth Circuit affirmed. Interestingly, the court did not directly apply the statute of limitation of Tennessee, where the cause of action arose. Instead, adopting the district court's reasoning, the Eighth Circuit held that the Iowa borrowing statute required the court to look to the law of Missouri, the defendant's domiciliary, to determine the applicable limitation period. The court noted that Missouri would look to its borrowing statute, which would apply the Tennessee statute of limitation. Although this adoption of a species of the renvoi doctrine is unusual in the context of a borrowing statute, it demonstrates the complexities of borrowing statutes and their interpretations.
Both Parties Nonresident
In some states (Alaska, Illinois, Maine, Oregon, and Washington), the borrowing statute is triggered when both the plaintiff and the defendant are nonresidents of the forum state. In these jurisdictions, if both were nonresidents of the forum state when the cause of action arose, the court generally will utilize the borrowing statute and apply the statute of limitation of the jurisdiction where the cause of action arose. If, however, either the plaintiff or defendant is a resident of the forum, the borrowing statute is not triggered.
For instance, in Ouellette v. Sturm, Ruger & Co., a plaintiff sought to recover for personal injuries sustained as a result of accidental discharge of a revolver made by a Delaware corporation. The company's principal place of business was in Connecticut.(6)
The plaintiff was a resident of Massachusetts when he bought the revolver, but one month after the purchase he moved to Maine, where the revolver discharged while he was on a hunting trip. After the accident, the plaintiff moved back to Massachusetts. He then brought suit in the federal court in Maine, taking advantage of Maine's six-year statute of limitation.
The defendant moved for summary judgment, contending that suit was barred because Maine's borrowing statute required the court to apply the Massachusetts three-year limitation period. The district court agreed with the defendant.
On appeal, the First Circuit certified the issue to the Supreme Judicial Court of Maine, and the court responded, holding that Maine's borrowing statute was not triggered and suit was timely filed under Maine's six-year statute of limitation. The court held that the trial court's interpretation of the statutory phrase "while all the parties have resided therein" was too broad.(7)
The court noted that the "plain language of the borrowing statute ... clearly provides that both parties must reside in the same state at the same time in order for the borrowing provision to be applicable."(8) Because the defendant was never a resident of Massachusetts at the same time as the plaintiff, the statute of limitation of the forum state applied in this case.
Other states (Florida, Kentucky, Missouri, Oklahoma, Pennsylvania, and Wisconsin) do not apply any residency requirement to determine whether to borrow another state's statute of limitation. In these jurisdictions, the borrowing statute generally applies any time the cause of action arose outside the forum state. In cases filed in these jurisdictions, even if the plaintiff and defendant are residents of the forum state, courts will apply the limitation period of the state in which the cause of action arose to determine whether suit is timely filed.
For example, two Pennsylvania residents, were parties to an accident in California resulting in personal injury to one of them. When suit was brought in Pennsylvania, under that state's borrowing statute, the California one-year limitation period was applied.(9)
A few states have enacted borrowing statutes that do not apply to tort or personal injury actions at all. For instance, Virginia and West Virginia statutes are limited to actions involving contracts. Louisiana borrows a foreign jurisdiction's limitation period only in actions founded upon contract or to enforce prior judgments.
Finally, it is important to note that most jurisdictions have ruled that even when the borrowing statute is triggered, they will not borrow a statute of limitation longer than the limitation period of the forum state. In essence, the court will apply the statute of limitation with the shortest duration. This concept prevents a plaintiff from using a state's borrowing statute offensively to bring an action that otherwise would be barred in the forum state.
For example, in Rodriguez v. Pacific Scientific Co., the plaintiffs were injured in a helicopter crash in Puerto Rico.(10) They brought a products liability suit in the Florida state court against the helicopter manufacturer and the seat-belt manufacturer.
Relying on Florida's borrowing statute, which is triggered any time a cause of action arises outside the forum, plaintiffs contended that Puerto Rico's statute of limitation applied. The Florida court disagreed and dismissed the suit, holding that it was barred by the shorter Florida statute of limitation. The court held that where an action is time barred by the forum state's statute of limitation, the borrowing statute does not apply.(11)
Because of the variation and complexity of state borrowing statutes, it is imperative to determine whether a forum state has enacted a borrowing statute and, if so, to review it and the case law to determine how it is triggered.
Beware. Lawyers who sit on a case, assuming they are well within the statute of limitation of the chosen forum, and fail to check the borrowing statute may limit their jurisdictional options. Worse, they could find themselves outside the statute of limitation period with nowhere to go.
(1) 581 P.2d 345, 346 (Idaho 1978). (2) Id. at.347 (quoting IDAHO CODE [sections] 5-239). (3) Id. (4) 531 F. Supp. 210, 211 (S.D. Iowa 1981), aff'd, 670 F.2d 92 (8th Cir. 1982). (5) Id. (quoting IOWA CODE ANN. [sections] 614.7 (West 1950)). (6) 466 A.2d 478 (Me. 1983). (7) Id. at 481 (quoting ME. REV. STAT. ANN. tit. 14, [sections] 866 (1980)). (8) Id. (9) Rostron v. Marriott Hotels, 677 F. Supp. 801 (E.D. Pa. 1987). (10) 536 So. 2d 270 (Fla. Dist. Ct. App. 1988), review denied, 545 So. 2d 1368 (Fla. 1989). (11) Id. at 271.
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|Title Annotation:||statute of limitations; includes related article on state borrowing statutes|
|Author:||Hansen, Barry C.|
|Date:||Jun 1, 1995|
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