Wednesday, July 15, 2009

Second Circuit: Claim Barred by Statute of Limitations in State Court Can be Brought in Federal Court

If an action is dismissed by the New York State courts on the grounds the action is barred by the statute of limitations, can the identical claim then be brought in federal court where the statute of limitations is longer?

In Cloverleaf Realty of New York, Inc. v. Town of Wawayanda the United States Court of Appeals for the Second Circuit today answers that question "Yes." The decision can be found here.

Following a public hearing, the town of Wawayanda, New York, imposed a special tax assessment on property owners. Property owner Cloverleaf brought a declaratory judgment action in state court arguing, inter alia, that the assessment violated procedural due process because the town had posted notice of the public hearing in a newspaper advertisement instead of providing actual notice by mail to property owners. The state court dismissed the action on the grounds it was commenced after the four-month statute of limitations under CPLR § 217.

Cloverleaf then brought an action in federal court under 42 U.S.C. § 1983 again alleging that the failure to give notice by mail violated due process of law. The District Court dismissed the action on the grounds the prior dismissal in the state court barred the action in federal court.

The Second Circuit reversed the dismissal and reinstated the claim. The statute of limitations for a § 1983 action in the New York federal courts is three years. The traditional rule is that a dismissal on statute-of-limitations grounds is not a determination on the merits--it bars the remedy but does not extinguish the right. Therefore, an action dismissed for untimeliness in one jurisdiction, can be brought in another jurisdiction with a longer statute of limitations.

The Second Circuit's examination of New York law leads it to conclude that New York follows the traditional rule. Because the state dismissal of Cloverleaf's claim was not a determination on the merits, the action can be brought in federal court where the statute of limitations is longer.

Cloverleaf Realty is important because there are many New York state claims which have a constitutional ingredient that are dismissed for untimeliness. The case raises the possibility that some of those claims can be brought anew in federal court.

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