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Importing Delaware SOL


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I am in California.

Does anyone know if importing SOL from Delaware (as the credit card agreement has a Delaware choice of law provision) is an effective strategy or is there case law that generally shows that local state laws has precedent?

Delaware's 3-year SOL would put one of my cases outside SOL (3.5 years), but it's still within California's 4-year SOL.

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Here's a reply on similar question from another board. I've made minor edits to keep it within context of this thread.

The trend is for the states to treat SOL as substantive law rather than procedural (which it traditionally was), but that requires the state in which suit is brought to get up to speed on and apply correctly the law of some more or less random other state. They may not want to bother, and then it would be up to the party bothered by that to appeal. So figure on the trial judge wanting to apply his own state's SOL as a procedural matter unless you make the argument that DE's SOL should apply.

If DE's SOL favors you, the argument that it would apply is twofold. One, that's what the contract says: DE law applies across the board. Two, if SOLs were to be handled differently than the contract says because they were procedural law, that would create an ambiguity in the contract (which could have been cured by the contract specifying that the SOL of the state of the customer would apply or would not apply), and ambiguities should be resolved in favor of the non-drafting party ... again, that would make DE SOL apply.

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From https://www.acainternational.org/Compliance.aspx?cid=10552

Additionally, contracts may contain a contractual choice of law provision. This contractual provision indicates which state’s law will govern the agreement and any of its terms or provisions. An example of such language is “This contract shall be interpreted under the laws of [state].” This venue may be different than the state in which the contract was signed and the state in which the consumer resides.

Ultimately, courts may conclude whether to uphold a contractual choice of law provision or to apply another state’s laws. Generally, according to the Restatement on Conflicts of Laws, a court will enforce a contractual choice of law provision “unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice, or (B) the application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue…”

In Coady v. Cross Country Bank Inc., the Wisconsin Court of Appeals held a credit card agreement that barred class-action relief and contained a foreign choice of law clause was unenforceable. In Coady, the plaintiffs entered into a written credit card agreement that included a choice of law clause stating it was governed by federal law and Delaware law.

The court held that Wisconsin, rather than Delaware, law applied to the dispute. The court reasoned the Wisconsin Consumer Act, which expressly invalidated choice of law clauses specifying that another state’s laws would apply, was an important state public policy. Thus, the court concluded the choice of law provision in the contract was invalid. Therefore, it is important for collectors to be aware that state law may prohibit parties from requiring a contract be governed by the laws of a jurisdiction that has no relation to the parties or their agreement.

The terms of the contract also come into play when determining the applicable statute of limitations. If the contract specifies which state’s laws govern the transaction, that state’s statute of limitations will be applicable. However, if the contract is silent, general contract law provides the applicable statute of limitations will most likely be the state in which the transaction took place.

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Not a consumer debt issue, but relevant to "choice of law" provision in general.

From http://www.businesslawalert.com/2008/07/articles/general-business/enforceability-of-choice-of-law-provisions/

July 28, 2008

Enforceability of Choice of Law Provisions

A recent California Appeals case held that a out-of-state choice of law provision is not enforceable where California has a greater interest in the parties’ transaction. Since the California loans were made to California consumers, secured with collateral located in California, provided cash that was likely spent in the California, and deprived California competitors of the opportunity to make those loans, the Appeals court held that California had a greater interest in the parties’ transaction and, thus, the Nevada choice of law provision was unenforceable.

Omni Loan Company is a Nevada corporation, with its principal place of business also located in Nevada; it is in the business of providing consumer loans to members of the military. Omni opened loan offices in Oceanside and San Diego, California. Joshua Brack was a nonresident member of the military stationed at Camp Pendleton. Brack applied for a loan with Omni, and his loan agreement included the Nevada choice of law provision. Brack filed a class action suit against Omni, alleging that Omni’s practices violated the borrower’s rights under the California Finance Lenders Law. The trial court held that Nevada had a substantial relationship to the loan contracts because Omni incorporated in Nevada and the loans were approved in Nevada, entering judgment in favor of Omni. The California Appeals Court reversed. While California Courts will generally enforce a contractual choice of law if he state whose law was has an interest in the parties’ controversy, if California’s interests are materially greater than the interests of the state whose law was contractually chosen by the parties, California State law applies. Here, the Appeals Court found the Nevada choice of law provision unenforceable because the application of Nevada law conflicts with the fundamental policy set forth in the Finance Lenders Law and California has a greater interest in the parties’ transaction. Brack v. Omni Loan Company, CA Court of Appeal - 4th District, No. D049198, July 16, 2008.

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2004 article but good, too long to post here.

Discusses California "Borrowing Statute" and choice of law in general, includes SOL discussion.

This part quoted from the end of that article:

Choice of Law in Contracts Cases

California's choice of law rules apply whether an action lies in contract or in tort. But an important exception applies in cases involving contracts with choice of law provisions. In Nedlloyd Lines B.V. v. Superior Court,37 the California Supreme Court officially adopted the principles set forth in the Restatement (Second) of Conflict of Laws, which strongly favors enforcement of choice of law provisions. Specifically, when a contract contains a choice of law provision, California courts will apply the substantive law of the state designated by the contract unless the state has no substantial relationship to the parties or the transaction at issue, or the application of the chosen state's law would be contrary to a fundamental policy of a state 1) that has a materially greater interest than the chosen state in the determination of the particular issue and 2) whose law would be applicable in the absence of the choice of law provision.38

The Nedlloyd Lines court further distilled these principles: A court must determine "either (1) whether the chosen state has a substantial relationship to the parties or their transaction, or (2) whether there is any other reasonable basis for the parties' choice of law."39 If neither of these two tests is met, that is the end of the inquiry. But if either test is met, the court must determine whether the chosen state's law is contrary to a fundamental policy of California (or the state whose law would have applied absent the provision).40 If no fundamental policy is threatened, the choice of law provision will be enforced. If, on the other hand, enforcing the provision would be inconsistent with a fundamental policy of, say, California, the court must determine whether California's interest in its fundamental policy is "materially greater" than the chosen state's interest in having its law applied.41

If a California court ultimately decides that a foreign jurisdiction's law will apply, the California court will determine and apply that law. The general rule is that the forum court will follow the foreign court's statutory construction.42 Also, courts and parties must respect the decision of a foreign intermediary appellate court if it is the highest court in that jurisdiction to have ruled on the issue.43 If the courts of a foreign jurisdiction have not construed a statute, the California court will need to determine how the highest court in the foreign jurisdiction would have interpreted the law if that court had ruled on the law under the same facts.44 It is improper for a California court to determine the law of another state based on hearing expert testimony.45

Choice of law issues are complex and very important to the outcome of a case. The key is to recognize potential choice of law issues early in the litigation process and to develop a strategy for determining the best time in the process to raise the issues and marshalling convincing arguments to win judicial support for the most favorable law to apply.

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From http://www.nvinc.com/california_approach.htm

The courts in California allow the parties to a contract to choose the state law which will apply to their contract, and the forum which will have jurisdiction to hear a suit arising out of the contract, if certain conditions are met. See, e.g., Smith, Valentino & Smith~ Inc. v. Superior Court, 17 Cal.3d 491, 551P.2d 1206, 131 Cal. Rptr. 374 (1976); Nedlloyd Lines B.V.v. Superior Court, 3 Cal. 4th 459, 834 P.2d 1148, 11 Cal. Rptr.2d 330 (1992); Hambrecht & Quist Venture Partners v. American Medical International, Inc., 38 Cal. App.4th 1532, 46 Cal. Rptr.2d 33 (1995); Guardian Savings and Loan Assoc. v. MD Assocs., 64 Cal. App.4th 309, 7 Cal. Rptr.2d 151 (1998). To allow this, the California Supreme Court adopted the rule laid out in § 187 of the Restatement (Second) of Conflict of Laws.

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Federal case but leads to more research:

http://bulk.resource.org/courts.gov/c/F2/990/990.F2d.1126.90-55759.90-55656.html

This case arises out of a claim by an ERISA plan against a beneficiary. The case turns on which statute of limitations applies, that of the state selected in a contractual choice of law provision, or that of the state where the claim was filed. We conclude that the choice of law provision in the plan controls. The plan won a summary judgment in district court, which we affirm.

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http://www.avvo.com/legal-answers/which-state-s-statute-of-limitations-would-i-use-f-11972.html

Many credit card agreements have a choice of law provision which provides the state law that applies. If you have been sued by the credit card company you should have an attorney help you determine the applicable SOL. Be sure to choose an attorney that has experience with credit card matters because the application of a foreign state's SOL is not a clear cut matter in county court litigation.

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Every credit card contract has a choice of law provision.

Choice of law applies only to substantive, not procedural law.

Statutes of limitations on contracts claims are usually considered procedural law.

Thus, the statute of limitations in a credit card breach of contract (debt collection) case is going to be determined by the laws of the forum state, notwistanding a choice of law provision in the contract that applies some other state's law.

In Capital One v. Gregorich, a Florida case against a Florida debtor, the court applied Virginia law pursuant to Cap One's choice of law provision in its contract. Virginia had a shorter SOL than Florida and the case would be timed barred under Virginia law. The Florida court held that because Florida now considers SOL to be substantive law, it must apply Virginia's SOL. Case dismissed.

The decision came out in June 2008.

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Norman v. Elkin, 2007 WL 2822798 (D.Del. Sept. 26, 2007)

The parties disagreed as to whether Delaware or Pennsylvania statute of limitations law governed. The Court rejected Plaintiff’s argument that Delaware’s internal affairs doctrine warranted application of the Delaware statute of limitations, concluding that it was inapplicable because it pertains only to substantive law, whereas the issue of statute of limitations is a procedural issue.

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Just curious with this scenario:

Debtor lives in a state where a 4 year SOL would apply

Credit card issuing company was based in a state with a 3 year SOL at the time the card was issued to the debtor.

Right before the charge-off, the issuing credit card company was bought by another CC company that is based in a 6 year SOL state.

If the debtor raised SOL as an affirmative defense which would apply?

Also raises another question - Would a JDB suing be an assignee of the original issuing credit card company or the company that purchased the original issuing CC.

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Just curious with this scenario:

Debtor lives in a state where a 4 year SOL would apply

Credit card issuing company was based in a state with a 3 year SOL at the time the card was issued to the debtor.

Right before the charge-off, the issuing credit card company was bought by another CC company that is based in a 6 year SOL state.

If the debtor raised SOL as an affirmative defense which would apply?

Also raises another question - Would a JDB suing be an assignee of the original issuing credit card company or the company that purchased the original issuing CC.

Depends if your state considers SOL procedural law.

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I might have a chance with this in California, though am not sure about the adhesion contract issue, but opposing party may not be either so it could be worth a shot.

This is the case reference in many choice-of-law SOL issues I've been reading:

Hambrecht & Quist Venture Partners v. American Medical Internat., Inc. (1995) 38 Cal.App.5th 1532 [45 Cap.Rptr.2d 33]

In general, California courts have permitted contracting parties to modify the length of the otherwise applicable California statute of limitations, whether the contract has extended or shortened the limitations period. (See 3 Witkin, Cal. Procedure (3d ed. 1985) Actions, §§ 333-334, pp. 363-366.)

...

As for shortening the limitations period, the courts will enforce the parties' agreement provided it is reasonable. (Capehart v. Heady (1962) 206 Cal.App.2d 386, 388-389 [23 Cal.Rptr. 851, 6 A.L.R.3d 1190]; C & H Foods Co. v. Hartford Ins. Co. (1984) 163 Cal.App.3d 1055, 1064 [211 Cal.Rptr. 765].) For instance, the parties can shorten California's four-year statute of limitations for breach of a written contract (Code Civ. Proc., § 337, subd. 1) to three months (Ward v. System Auto etc. Garages (1957) 149 Cal.App.2d Supp. 879 [309 P.2d 577]), six months (Tebbets v. Fidelity and Casualty Co. (1909) 155 Cal. 137, 139 [99 P. 501]), or a year (Capehart v. Heady, supra, 206 Cal.App.2d at p. 388). As provided by statute, parties to a sales contract governed by the California Uniform Commercial Code can shorten the four-year statute of limitations for breach of contract to not less than a year. (Cal. U. Com. Code, § 2725, subd. (1).)

Thus, except as restricted by statute, California courts accord contracting parties substantial freedom to modify the length of the statute of limitations. As the Supreme Court has stated in permitting parties to shorten the limitations period: "uch statutes [of limitations] are regarded as statutes of repose, carrying with them, not a right protected under the rule of public policy, but a mere personal right for the benefit of the individual, which may be waived.... We are unable to perceive that any distinction can be made upon the ground of public policy between the right of a party to waive the plea of the statute of limitations as a defense to an action, and his right to waive a portion of the time granted by the statute for the commencement of an action." (Tebbets v. Fidelity and Casualty Co., supra, 155 Cal. at p. 139, citations omitted.) fn. 16

...

Further, we can discern no fundamental state policy against applying a foreign jurisdiction's statutes of limitations to claims brought within {Page 38 Cal.App.4th 1549} California courts.

...

In this case, the choice-of-law provision results in the application of Delaware's three-year statute of limitations (Del. Code Ann. tit. 10, § 8106 (1975)) to claims (for breach of contract and declaratory relief) that otherwise would be governed by California's four-year statute of limitations (Code. Civ. Proc., § 337, subd. 1). This result does not conflict with any fundamental policy of California. If the parties to a contract can shorten California's four-year limitations period to three months, we perceive no obstacle to applying a foreign state's three-year statute of limitations. Accordingly, the choice-of-law clause is enforceable.

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The above case was referenced also in:

Hughes Electronics Corp v. Citibank Delaware (2004) 120 Cal.App.4th 251 [-- Cal.Rptr.3d --]

1. The choice of law provision is enforceable.

[1] When California is the forum, disputes arising out of contractual choice of law provisions are resolved in accordance with the decision in Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459 [11 Cal. Rptr. 2d 330, 834 P.2d 1148] (Nedlloyd). In Nedlloyd, the Supreme Court concluded California courts must apply the principles articulated in the Restatement Second of Conflict of Laws (Restatement) section 187, which strongly favor enforcement of choice of law provisions, so long as those provisions are freely and voluntarily agreed upon. (Nedlloyd, supra, 3 Cal.4th at pp. 464-465.) The proper analytical approach, under Nedlloyd and the Restatement, is to determine whether (1) the chosen state has a substantial relationship to the parties or their transaction, or (2) any other reasonable basis exists for the parties' choice of law. If either test is met, the choice of law provision will be enforced unless the chosen state's law is contrary to a fundamental public policy of California. (Id. at p. 466; Restatement § 187, subd. (2).) The requirements for enforcing the choice of law provision are satisfied here.

Our analysis is informed by the decision in Hambrecht, supra, 38 Cal.App.4th 1532, an action filed in California to rescind a contract for stock purchase agreements. The parties' contract provided that it " 'shall be governed by and construed in accordance with the laws of the State of Delaware.' " (Id. at p. 1538.) Defendant successfully demurred on the ground the plaintiffs' claims--which would have been timely under California's four-year statute of limitations for breach of a written contract (Code Civ. Proc., {Page 120 Cal.App.4th 260} § 337, subd. (1))--were barred by Delaware's three-year statute of limitations. (Hambrecht, supra, 38 Cal.App.4th at p. 1549.) On appeal, plaintiffs argued the trial court erred in construing the choice of law provision to incorporate Delaware's statute of limitations.

Our colleagues in Division One of this District concluded otherwise. Relying on the Restatement, decisions by the United States and California Supreme Courts, and several California appellate cases, the court found the agreement's unqualified reference to the "laws" of Delaware referred to all of that jurisdiction's statutory laws, including its statutes of limitation. (Hambrecht, supra, at pp. 1540, 1542; see also Restatement § 187(3) ["In the absence of a contrary indication of intention, the reference [in a choice of law provision] is to the local law of the [chosen] state."]; Restatement § 4, subd. (1) [defining "local laws" as the chosen state's "body of standards, principles, and rules, exclusive of its rules of Conflict of Laws, which the courts of that state apply in the decision of controversies brought before them."]; U.S. Fidelity & G. Co v. Guenther (1930) 281 U.S. 34, 37 [74 L. Ed. 683, 50 S. Ct. 165] ["Law" is defined as "rules of action or conduct duly prescribed by controlling authority, and having binding legal force"]; Miller v. Dunn (1887) 72 Cal. 462, 466 [14 P. 27] [The term "law" includes "the whole body or system of rules of conduct, including the decisions of courts as well as legislative acts ... ."]; Henderson v. Superior Court (1978) 77 Cal. App. 3d 583, 592-593 [142 Cal. Rptr. 478] [choice of Florida "law" in contract includes that state's statutes of limitation]; American Bank of Commerce v. Corondoni (1985) 169 Cal. App. 3d 368, 371-373 [215 Cal. Rptr. 331] [notwithstanding distinctions between "substantive" and "procedural" laws (the latter generally including statute of limitations), both categories must be considered part of a jurisdiction's "law."]; Ashland Chemical Co. v. Provence (1982) 129 Cal. App. 3d 790, 793 [181 Cal. Rptr. 340] (Ashland) [acknowledging, in dicta, that the parties' choice of law clause, by which contract was to be " 'governed by and construed in accordance with the laws of ... Kentucky,' " incorporated that state's statutes of limitations.] fn. 7.) The court in Hambrecht expressly rejected the argument DIRECTV implicitly urges us to accept, viz., when faced with an unqualified choice of {Page 120 Cal.App.4th 261} law contractual provision, a court is free to pick and choose which of a chosen jurisdiction's laws to apply. (Hambrecht, supra, 38 Cal.App.4th at p. 1542.)

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I have to comment on your Coady vs. Cross Country Bank comment.

First of all, it is only case holding in WI. So don't use that for anything in Californa.

Second of all, it had to do with the enforcability of the arbitration clause. Which was being used by Cross Country Bank to over-ride state law via FAA on Coady's class action claims. You are readng this case too liberally if you are lookng to apply it to foreign SOL's.

Third..... WI SOL...

http://www.legis.state.wi.us/statutes/Stat0893.pdf

893.07. Application of Foreign Statues of limitations.

WI allows shorter limitation if it favors the debtor and IF ITS A "FOREIGN CAUSE OF ACTION".

What does that mean? Read this.

http://www.wisbar.org/AM/Template.cfm?Section=Wisconsin_Lawyer&template=/CM/ContentDisplay.cfm&contentid=49960

About as clear as mud?

I hear you on DE law. I can guarantee you I will be in WI appeal courts in 2 years on 3 year DE vs. WI 6 year. The argument will be over what is a foreign cause of action. I will argue choice of contract law should apply under WI consumer law.

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