Courtesy of my esteemed bankruptcy partner, Daniel K. Astin, here is a summary of a recent decision of the U.S. Court of Appeals for the Third Circuit dealing with an issue of importance to all litigators: statutes of limitations.
Lafferty v. St. Riel, 2007 WL 2019537 (3rd Cir., July 13, 2007), read opinion here. This decision addressed the issue of "which filing date applies for statute of limitations purposes when a federal district court transfers venue to another district under 28 U.S.C. § 1406(a)." (For those readers out of the area, the Third Circuit covers Delaware, Pennsylvania and New Jersey.)
The federal district court in New Jersey transferred, rather than dismissed, a personal injury claim filed within the limitations statutes of both New Jersey and Pennsylvania to another federal district court in Pennsylvania due to improper venue. The lower court held that recovery was barred, stating that the transfer occurred after the running of Pennsylvania’s limitations period. The Third Circuit Court of Appeals reviewing the District Court’s ruling, held "[T]hat response in this uncertain area is well-reasoned, but we disagree."
In a scholarly and well reasoned opinion the Court of Appeals reviewed the District Court’s reliance on Erie and its progeny, indicating that "[f]or this case the issue is not so much whose statute of limitations applies; both are the same (two years). It is whether the first-filed complaint, which was timely but in an improper forum, may be heard when the case is transferred– rather than dismissed– to a proper venue where the action would have been timely if filed there initially." The lower court presumed "that the impropriety of filing an action in an incorrect forum is a prejudicial factor that bars transferee courts from hearing claims when § 1406(a) transfers are not completed within the transferee state’s statute of limitations and according to that state’s filing procedures" but the Court of Appeals disagreed with "this focus of impropriety as a prejudicial bar."
The appellate court held that: "When a district court transfers venue to another district under § 1406(a), for the purpose of calculating the limitations period of the transferee forum the initial filing date in the transferor forum applies." In this case, the plaintiff’s action was timely when initially filed in the District of New Jersey, thus obviating a review of the limitations statute of the forum where the case was transferred under § 1406(a). "