CPLR 205(a) Can Only Be Invoked by the Original Plaintiff if Plaintiff Is Still Alive

July 12, 2022 | Benjamin J. Wisher | Commercial Litigation

CPLR 205(a) is a well-known safety net in New York litigation, generally providing that a timely commenced action dismissed without prejudice can be refiled by “the plaintiff” within six months of dismissal, despite the statute of limitations expiring, saving the claim from being untimely. This statute’s reference to “the plaintiff” was recently debated and brought before the New York Court of Appeals.

On June 16, the Court decided Ace Securities Corp..[1], holding that the definition of “the plaintiff” under CPLR 205(a) only means “the plaintiff who prosecuted the initial action,”[2] and therefore, the statute “‘applies only where the second action is brought by the same plaintiff” or an estate representative in the event of the plaintiff’s death.[3] This article explains the Ace Securities Corp. decision and its practical takeaways.

CPLR 205(a), Generally

Sometimes referred to as New York’s “savings statute,”[4] CPLR 205(a) was enacted to rescue claims that were timely commenced, but later dismissed on procedural grounds.[5]  The “savings statute” reads as follows:

If an action is timely commenced and is terminated in any other manner than by a voluntary discontinuance, a failure to obtain personal jurisdiction over the defendant, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits, the plaintiff, or, if the plaintiff dies, and the cause of action survives, his or her executor or administrator, may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months after the termination provided that the new action would have been timely commenced at the time of commencement of the prior action and that service upon defendant is effected within such six-month period.[6]

In more concise and clearer terms:

The effect of [CPLR 205(a)] is quite simple: if a timely brough action has been terminated for any reason other than one . . . specified in the statute, the plaintiff may commence another action based on the same transactions or occurrences within six months of the dismissal of the first action” and obtain the benefit of the prior timely filing for statute of limitations purposes.[7]

The Ace Securities Corp. Decision

Although the purpose of CPLR 205(a) seems clear, who is the “savings statute” intended to rescue? Well, “the plaintiff”[8] of course, right? Yes, but whom exactly is “the plaintiff?” [9]  That was the exact question at issue before the New York Court of Appeals in Ace Securities Corp.

The relevant facts of Ace Securities Corp. are the following. In 2006, Defendant, DB Structured Products, Inc. (“DB”), purchased 8,800 mortgage loans and sold them to its affiliate, Ace Securities Corp. (“Ace”). As part of the sale to Ace, DB made various representations and warranties regarding the nature of the mortgage loans. Ace deposited the loans into a trust, operated by HSBC Bank USA (“HSBC”) where the loans acted as collateral for $500 million in certificates issued by the trust. While the loans were in HSBC’s trust, they were governed by an agreement between HSBC and Ace whereby Ace transferred to HSBC all of Ace’s rights in the agreement between Ace and DB that governed the initial sale and purchase of the mortgage loans.[10]

Thereafter, in 2012, two certificate holders of the trust discovered that the mortgage loans did not meet the representations and warranties initially made by DB to Ace in the original sale. Because the applicable statute of limitations was set to expire,[11] the certificate holders quickly commenced an action against DB based on an alleged breach of the mortgage loan sale agreement.[12] That action was ultimately dismissed on appeal due to procedural defects; namely the certificate holders’ failure to fulfill a condition precedent in the mortgage loan sale agreement prior to commencing their action.[13]

However, after the trial court and Appellate Division[14] dismissed the certificate holders’ action, and it was pending appeal at the New York Court of Appeals (where it was ultimately dismissed),[15] HSBC commenced an action against DB, seeking to invoke the saving graces of CPLR 205(a).[16] Without CPLR 205(a), HSBC’s newly commenced action was untimely.[17]

DB moved to dismiss HSBC’s action, arguing that CPLR 205(a) could only be invoked by the original plaintiffs in the prior action and, therefore, HSBC’s untimely action could not be saved by the “savings statute.” HSBC disagreed, asserting that it was seeking to enforce the same rights as the certificate holders and HSBC’s action was based on “the same transaction.”[18] The trial court agreed with DB and dismissed the action, holding that CPLR 205(a) can only be invoked by the plaintiff from the original action.[19] The Appellate Division, First Department affirmed on the same grounds, and the matter made its way to New York Court of Appeals.[20]

The New York Court of Appeals affirmed in a 6-1 decision (Judge Wilson dissenting),[21] holding that CPLR 205(a) can only be invoked by the plaintiff from the original action and cannot be utilized by a different plaintiff who seeks to enforce the same rights as the original plaintiff.[22]

The Court’s analysis to reach that conclusion was rather simple. The Court first went to the plain text of the “savings statute,” which is generally the first step the Court takes when “presented with a question of statutory interpretation.”[23] As stated by the Court, HSBC’s argument about being able to invoke CPLR 205(a) “cannot be reconciled with the text of the saving’s statute,” as nowhere in CPLR 205(a) does it mention that a different plaintiff asserting the “same rights” as the original plaintiff can also benefit from its salvation.[24] Accepting HSBC’s position, as the Court explained, would result in disregarding the unambiguous text of CPLR 205(a).[25] Reasoning further, the Court expressed:

Had the legislature intended the statutory reference to “the plaintiff” to impliedly and broadly allow any entity seeking to vindicate the “same rights” as the original plaintiff or any entity claiming to represent the same ‘real party in interest’ to benefit from CPLR 205(a), there would be no need for the statute to specifically bestow such benefit on executors and administrators . . . .

 Where, as here, the legislature has created one statutory exception — executors and administrators — to the general rule that the second action must be commenced by the original plaintiff, we must infer that the legislature did not intend CPLR 205(a) to broadly apply to any party that seeks to vindicate the same rights.[26]

The Court also disagreed with HSBC’s assertion that the Court’s prior Reliance[27] decision permitted new plaintiffs to invoke CPLR 205(a) as long as they were attempting to enforce the “same rights” as the original plaintiff.[28] And the Court explained that HSBC’s invocation of CPLR 205(a), if permitted, would upset the policy behind CPLR 205(a), which “is a remedial statute that . . . is ‘designed to insure to the diligent suitor’” an opportunity to have a claim heard on the merits.”[29] “Where, as here, the litigant commencing the second action is not the original plaintiff, application of CPLR 205(a) would protect the rights of a dilatory — not a diligent — suitor” and “[b]y failing to bring the action within the statute of limitations, HSBC signaled that it had no intention to pursue its claims in court.”[30]

Practical Takeaways

The decision makes clear that only the original plaintiff can invoke CPLR 205(a). New plaintiffs, regardless of the rights they seek to enforce or their relation to the original plaintiff (except in the case of the original plaintiff’s death) cannot utilize CPLR 205(a) to save their untimely actions. Accordingly, potential litigants, as well as their legal counsel, need to be aware of the Ace Securities Corp. decision and ensure that their reliance on the “savings statute,” if any, is proper, and they are timely commencing their actions.

[1] See ACE Sec. Corp. v. DB Structured Prod., Inc., 2022 WL 2162621, at *5 (N.Y. June 16, 2022).

[2] See id. at *3.

[3] See id. (quoting Streeter v. Graham & Norton Co., 263 N.Y. 39, 43 (1933)) (emphasis in original).

[4] See supra note 2.

[5] See U. S. Fid. & Guar. Co. v. E. W. Smith Co., 46 N.Y.2d 498, 505 (1979).

[6] CPLR 205(a) (emphasis added).

[7] Ace Sec. Corp., 2022 WL 2162621, *3 (quoting George v. Mt. Sinai Hosp., 47 N.Y.2d 170, 175 (1979)) (emphasis added).

[8] See supra note 6.

[9] See id.

[10] See Ace Sec. Corp., 2022 WL 2162621, *1.

[11] See CPLR 213.

[12] See ACE Sec. Corp. v. DB Structured Prod., Inc., 40 Misc. 3d 562, 564 (Sup. Ct., New York County 2013), rev’d, 112 A.D.3d 522 (1st Dep’t 2013), aff’d, 25 N.Y.3d 581 (2015).

[13] See ACE Sec. Corp. v. DB Structured Prod., Inc., 25 N.Y.3d 581, 599 (2015).

[14] See ACE Sec. Corp. v. DB Structured Prod., Inc., 112 A.D.3d 522, 523 (1st Dep’t 2013), aff’d, 25 N.Y.3d 581 (2015).

[15] See supra note 12.

[16] See Ace Sec. Corp., 2022 WL 2162621, *2.

[17] See id.; supra note 11.

[18] See Ace Sec. Corp., 2022 WL 2162621, *2–*3.

[19] See Ace Sec. Corp. v. DB Structured Prod., Inc., 52 Misc. 3d 343, 346 (Sup. Ct., New York County 2016), aff’d sub nom., U.S. Bank Nat’l Ass’n v. UBS Real Est. Sec., Inc., 177 A.D.3d 493 (1st Dep’t 2019), aff’d sub nom., ACE Sec. Corp. v. DB Structured Prod., Inc., No. 34, 2022 WL 2162621 (N.Y. June 16, 2022).

[20] See Ace Sec. Corp., 2022 WL 2162621, *3.

[21] See id. at *10 (Wilson, J., dissenting).

[22] See id. at *4.

[23] See id. at *3.

[24] Id.

[25] See Ace Sec. Corp., 2022 WL 2162621, *4.

[26] Id.

[27] See Reliance Ins. Co. v. PolyVision Corp., 9 N.Y.3d 52, 57 (2007).

[28] See Ace Sec. Corp., 2022 WL 2162621, *4–*5.

[29] See id. at *5 (emphasis in original).

[30] Id. (emphasis in original).

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