Borrowing statute (and sanctions)

Errant Gene Therapeutics, LLC v Sloan-Kettering Inst. for Cancer Research, 182 AD3d 506 [1st Dept. 2020]

Contrary to Bluebird’s contention, plaintiff’s unfair competition claim is timely. Since plaintiff is a resident of Illinois and it allegedly suffered damage in Illinois, where it does business, New York’s borrowing statute applies for statute of limitations purposes (CPLR 202). Under CPLR 202, plaintiff’s unfair competition claim must be timely under the shorter of New York and Illinois’ statute of limitations for unfair competition claims. In New York, plaintiff’s unfair competition claim is subject to a six-year statute of limitations because it is based on fraud (see Mario Valente Collezioni, Ltd. v AAK Ltd., 280 F Supp 2d 244, 258 [SD NY 2003]; see generally Katz v Bach Realty, 192 AD2d 307 [1st Dept 1993]). In Illinois, plaintiff’s unfair competition claim is subject to a five-year statute of limitations and it accrues when plaintiff either knew or should have known of the existence of the right to sue (Henderson Sq. Condominium Assn. v LAB Townhomes, LLC, 2015 IL 118139, 46 NE3d 706 [2015]). Thus, under CPLR 202, Illinois’ five-year statute of limitations applies to plaintiff’s unfair competition claim. Under that statute of limitations, the unfair competition claim is timely because it accrued less than five years before plaintiff commenced the action on January 27, 2017. Initially, there is no evidence that plaintiff discovered or could have discovered that Bluebird was engaging in fraudulent behavior, allegedly aimed at destroying plaintiff and controlling the market for a gene therapy treatment, prior to January 27, 2012. Plaintiff asserts that it did not discover the facts underlying Bluebird’s alleged fraudulent behavior until documents were produced in discovery in a separate litigation in June 2016. Moreover, at the earliest, plaintiff could have discovered Bluebird’s alleged fraudulent behavior in September 2012, when Bluebird circulated a presentation it had given in which it discussed the intellectual property that plaintiff alleges it copied. Bluebird’s assertion that the claim is untimely because plaintiff knew of the facts underlying its unfair competition claim as early as 2010 and 2011 based on emails sent by plaintiff’s CEO is without merit. The emails referenced by Bluebird merely demonstrate plaintiff’s suspicion that Bluebird was acting fraudulently, not that plaintiff had discovered or could have discovered the facts underlying its claim.

The court providently exercised its discretion in denying Bluebird’s motion to hold plaintiff in contempt after a hearing (see Matter of McCormick v Axelrod, 59 NY2d 574, 583 [1983]). However, the court improvidently exercised that discretion in awarding sanctions against Bluebird, because, among other reasons, Bluebird’s contempt motion was not so clearly meritless as to be deemed frivolous, and the court failed to satisfy the procedural requirements of 22 NYCRR 130-1.2 (see Gordon Group Invs., LLC v Kugler, 127 AD3d 592, 595 [1st Dept 2015]).

The bold is mine.

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