As we explained in our case summary, the question in this case was whether CPLR 204(a) tolled the statute of limitations on a claim whose prosecution was stayed by a federal bankruptcy stay. The Court (Garcia, J.) held that CPLR 204(a) did apply in such cases, even if the stayed action was commenced before the bankruptcy stay took effect.
At the outset, the majority addressed an open question about whether a bankruptcy stay comes within the tolling provision of CPLR 204(a). That provision tolled the statute of limitations where “the commencement of an action has been stayed by a court or by statutory prohibition.” The majority held that the bankruptcy stay under 11 USC § 362(a)(1), which automatically stayed certain actions related to a bankruptcy filing, qualified as a “statutory prohibition” even though a court could lift the bankruptcy stay in its discretion.
The majority next held that CPLR 204(a) tolling applies to an action that was already pending when the bankruptcy stay was imposed. To be sure, CPLR 204(a) applied where the “commencement” of an action was stayed by a statutory prohibition. But for the majority, this did not mean that the toll was unavailable if an action was already commenced when the statutory prohibition came into effect. Such a view, the majority explained, “loses sight of the forest for the trees, producing an outcome antagonistic to the purpose and design of the tolling provision.” This purpose, the majority explained, was to avoid penalizing a plaintiff by applying the statute of limitations to her claim, even though she acted diligently but was thwarted from pursuing her claim by a statutory stay.
The dissent (Stein, J.) would have held that CPLR 204(a) did not apply to an action commenced and then stayed by the bankruptcy stay. In the dissent’s view, this result was consistent with the plain text of CPLR 204(a), which applied to a statutory prohibition that prevents the “commencement” of an action. And the dissent viewed its rule as consistent with CPLR 205. That provision permitted a plaintiff to commence an otherwise untimely action within six months of the dismissal of an earlier timely action. For the dissent, this provision signaled that the Legislature knew how to provide relief for plaintiffs whose action became untimely due to something that happened after the action was commenced. And it further signaled that the Legislature intended CPLR 204(a) to provide relief for plaintiffs whose action became untimely due to something that happened before the action was commenced.
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