Thursday, July 16, 2009

A second bite of the apple

Some realters sued Orange County (in upstate New York) over a tax assessment. They filed a lawsuit in state court claiming, among other things, that due process requires actual notice to property owners of a tax assessment, not newspaper notice. The case was dismissed as untimely, as the statute of limitations for those cases in state court is four months. So the plaintiffs filed a lawsuit in federal court, also claiming a due process violation under the Fourteenth Amendment. The Second Circuit says you can do this.

The case is Cloverleaf Realty v. County of Orange, decided on July 15. At first glance, you would think that the realters cannot file an essentially identical lawsuit in federal court after the claim was dismissed in state court on statute of limitations grounds. After all, the realters gave it their best shot in state court but lost the case because it was untimely. Why should they get a second bite at the apple on the basis that the federal claim has a longer statute of limitations?

The state court declaratory judgment suit had a four-month deadline. But a civil rights case in federal court carries a three-year statute of limitations. As the Second Circuit (Feinberg, Leval and Cabranes) puts it, "[t]he difficulty in this case arises from the circumstance that Cloverleaf's procedural due process claim was untimely under the law applied by the New York courts, but timely under the law applied by the federal courts." It is true that federal court must respect state court judgments. In 1981, the New York Court of Appeals issued Smith v. Russell Sage College, 54 N.Y.2d 185 (1981), which was interpreted to mean that dismissals based on statute of limitations represent judgments on the merits, which means you can't sue again in a different court. But in 1999, the New York Court of appeals issued Tanges v. Heidelberg N. Am., Inc., 93 N.Y.2d 48 (1999), which stated that "[t]he expiration of the time period prescribed in a Statute of Limitations does not extinguish the underlying right, but merely bars the remedy."

Cutting through the legal mumbo-jumbo, the Tanges decision means that a state court action dismissed as untimely does not prevent the plaintiff from suing in a different jurisdiction with a longer statute of limitations. Since the state court dismissal is not "on the merits," the plaintiff is free to try again in federal court if a longer statute of limitations applies. Since three years (federal court) is a lot longer than four months (state court), the plaintiffs get that second bite at the apple.

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