     07-3405-cv
     Cloverleaf Realty of N.Y., Inc. v. Town of W awayanda

 1                               UNITED STATES COURT OF APPEALS
 2
 3                                      FOR THE SECOND CIRCUIT
 4
 5                                              -------------
 6
 7                                           August Term 2008
 8
 9   Argued: December 8, 2008                                Decided: July 15, 2009
10
11                                       Docket No. 07-3405-cv
12
13   --------------------------------------------------X
14
15   CLOVERLEAF REALTY OF NEW YORK, INC. and SUNRISE PARK REALTY,
16
17
18                                              Plaintiffs-Appellants,
19
20                    - against -
21
22   TOWN OF WAWAYANDA and COUNTY OF ORANGE,
23
24                                              Defendants-Appellees.
25
26   --------------------------------------------------X
27
28           Before:          FEINBERG, LEVAL, and CABRANES Circuit Judges.
29
30           Appeal from an order of the United States District Court for

31   the Southern District of New York (Charles L. Brieant, Judge)

32   dismissing a procedural due process claim as precluded by an

33   earlier dismissal of a similar claim by a New York state court

34   for lack of timeliness. The Court holds that a dismissal on

35   statute of limitations grounds by a New York court does not

36   preclude the bringing of the same claim in another jurisdiction

37   with a longer statute of limitations, including a federal court

38   exercising its federal question jurisdiction.
 1        The order of the district court is vacated, and the matter

 2   remanded for further proceedings.

 3
 4                     JAMES G. SWEENEY, Goshen, N.Y., for Appellants.
 5
 6                     RICHARD J. GUERTIN, Middletown, N.Y.,        for
 7                          Defendant-Appellee Town of Wawayanda.
 8
 9                     MARIA CONDOLUCI, Goshen, N.Y., for Defendant-
10                          Appellee County of Orange (David L. Darwin,
11                          Orange County Attorney, on the brief).
12
13
14   FEINBERG, Circuit Judge:

15        Plaintiffs Cloverleaf Realty of New York, Inc. and Sunrise

16   Park Realty (collectively “Cloverleaf”) appeal from an order of

17   the United States District Court for the Southern District of

18   New York (Charles L. Brieant, Judge) dismissing their complaint

19   against defendants the Town of Wawayanda (the “Town”) and the

20   County of Orange (the “County”). We conclude that the District

21   Court erred in dismissing the complaint as precluded by an

22   earlier state court dismissal, and we vacate the order and

23   remand the case to the district court for further proceedings.

24

25   I.   Background

26        Cloverleaf owns two parcels of land in Wawayanda, New

27   York. In 2005, the Town prepared a tentative special assessment

28   roll to fund improvements to the water and sewer district that

29   included the parcels. Following a public hearing, the Town

30   approved the tentative assessment roll. The Town then

                                      -2-
 1   transmitted the assessment roll to the County, which levied the

 2   taxes against the property owners within the district. As a

 3   result, Cloverleaf received tax bills from the County totaling

 4   $38,642.01.1 On January 31, 2006, the last day the taxes could

 5   be paid without penalty, Cloverleaf paid the full amount under

 6   protest.

 7        In 2006, Cloverleaf brought a declaratory judgment action

 8   against the Town and the County in a New York state court. The

 9   complaint sought to invalidate the assessments on two grounds.

10   First, Cloverleaf argued that New York law required the

11   assessments to be made on a “benefit basis,” where taxes would

12   be based on the proportional share of the benefit each property

13   in the district would receive from the improvements. Instead,

14   the assessment roll was enacted on an ad valorem basis, so that

15   taxes were based purely on the assessed value of the

16   properties. Second, Cloverleaf argued that procedural due

17   process required providing actual notice of the objectors

18   hearing by mail, and that the City’s posting of a newspaper

19   advertisement was insufficient. The state trial court found

20   that the four-month statute of limitations contained in N.Y.

21   C.P.L.R. 217 applied to Cloverleaf’s claims, and it dismissed

22   the complaint as untimely.



           1
              Cloverleaf Realty of New York, Inc. was billed
      $28,574.39, and Sunrise Park Realty was billed $10,067.62.

                                   -3-
 1        Cloverleaf subsequently brought this action in the

 2   Southern District pursuant to 42 U.S.C. § 1983, again alleging

 3   that the failure to provide notice of the objectors hearing by

 4   mail violated its Fourteenth Amendment right to due process.

 5   Although this claim was essentially identical to the state

 6   court procedural due process claim, Cloverleaf sought to take

 7   advantage of the longer statute of limitations applied by

 8   federal courts to § 1983 actions against New York state

 9   officials. See Owens v. Okure, 488 U.S. 235, 251 (1989)

10   (holding that New York’s three-year statute of limitations for

11   general personal injury actions is applicable to § 1983 actions

12   filed in federal courts in New York). See also Jaghory v. New

13   York State Dep’t of Educ., 131 F.3d 326, 331 (2d Cir. 1997)

14   (observing that “the statute of limitations for a claim under §

15   1983 that accrued in New York is three years”); Meyer v. Frank,

16   550 F.2d 726, 728 (2d Cir. 1977) (“[T]he three year New York

17   statute of limitations governs [plaintiff’s] instant § 1983

18   claim.”); Romer v. Leary, 425 F.2d 186, 187 (2d Cir. 1970) (“It

19   is now settled...that in a suit seeking declaratory and

20   injunctive relief which is based on [§ 1983], the applicable

21   limitation in a case arising in New York is the three year

22   limitation...”).

23        The District Court dismissed the action on the pleadings,

24   concluding that the federal court claim was precluded by the


                                   -4-
 1   earlier state court dismissal. The district court then granted

 2   a motion by Cloverleaf to reconsider the dismissal, but

 3   ultimately adhered to its initial order. This appeal followed.

 4

 5   II. Discussion

 6        The difficulty in this case arises from the circumstance

 7   that Cloverleaf’s procedural due process claim was untimely

 8   under the law applied by the New York courts, but timely under

 9   the law applied by the federal courts. Federal courts “must

10   give to a state-court judgment the same preclusive effect as

11   would be given that judgment under the law of the State in

12   which the judgment was rendered.” Migra v. Warren City School

13   Dist. Bd. of Educ., 465 U.S. 75, 81 (1983). The district court

14   concluded that under New York preclusion law, a dismissal for

15   lack of timeliness is treated as a judgment “on the merits,”

16   and that the claim therefore could not be litigated in another

17   forum. Cloverleaf argues that the district court erred in

18   failing to apply an exception to claim preclusion where the

19   first claim was dismissed solely for lack of timeliness and the

20   second claim is brought in another state or jurisdiction. We

21   agree.

22        As the Supreme Court has recognized, “the traditional rule

23   is that expiration of the applicable statute of limitations

24   merely bars the remedy and does not extinguish the substantive


                                   -5-
 1   right, so that dismissal on that ground does not have claim-

 2   preclusive effect in other jurisdictions with longer, unexpired

 3   limitations periods.” Semtek Int’l Inc. v. Lockheed Martin

 4   Corp., 531 U.S. 497, 504. (2001); see also 18A Charles Alan

 5   Wright & Arthur R. Miller, Federal Practice and Procedure §

 6   4441, at 224 (2d. ed. 2002) (noting “the general conclusion

 7   that dismissal on limitations grounds merely bars the remedy in

 8   the first system of courts, and leaves a second system of

 9   courts free to grant a remedy that is not barred by its own

10   limitations rules”). Stated differently, unless a state’s

11   claim-preclusion law departs from the traditional rule and

12   treats a dismissal for timeliness as a ruling on the merits of

13   the claim, courts in another jurisdiction need not give claim-

14   preclusive effect to a dismissal on timeliness grounds. A

15   federal court, exercising its federal question jurisdiction, is

16   plainly a jurisdiction separate from that of the State of New

17   York. The remaining question, then, is whether New York’s

18   claim-preclusion law departs from the traditional rule, and

19   instead treats a dismissal for lack of timeliness as

20   extinguishing both the right and the remedy.

21        We conclude that New York law does not depart from the

22   traditional rule. As the New York Court of Appeals explained in

23   Tanges v. Heidelberg N. Am., Inc., 93 N.Y.2d 48 (1999), “The

24   expiration of the time period prescribed in a Statute of


                                   -6-
 1   Limitations does not extinguish the underlying right, but

 2   merely bars the remedy.” Id. at 55. The dismissal of

 3   Cloverleaf’s procedural due process claim for lack of

 4   timeliness thus merely barred its ability to obtain relief in

 5   the courts of New York. The underlying right remains intact,

 6   and a remedy remains available in the federal courts.

 7        Some confusion has arisen from an earlier decision of the

 8   New York Court of Appeals in Smith v. Russell Sage College, 54

 9   N.Y.2d 185 (1981). That case affirmed the dismissal of an

10   employment discrimination claim on claim-preclusion grounds,

11   observing that a prior dismissal of the same claim on both

12   statute of limitations and statute of frauds grounds was

13   “sufficiently close to the merits for claim preclusion purposes

14   to bar a second action.” Id. at 194. We have in the past read

15   Russell Sage as establishing that under New York law, a

16   dismissal for lack of timeliness is a judgment “on the merits”

17   that destroys both the right and the remedy. See EFCO Corp. v.

18   U.W. Marx, Inc., 124 F.3d 394, 397 (2d Cir. 1997); Bray v. N.Y.

19   Life Ins., 851 F.2d 60, 64 (2d Cir. 1988).2

20        In light of the more recent statement of its own law by

21   the New York Court of Appeals in Tanges, such a reading of

22   Russell Sage is no longer appropriate given the earlier case’s


           2
             Neither Bray nor EFCO binds our decision in this case, as
      both were decided before the New York Court of Appeals clarified
      the effect of a dismissal for lack of timeliness in Tanges.

                                   -7-
 1   ambiguity. First, the initial dismissal in Russell Sage was not

 2   merely on statute of limitations grounds, but also on statute

 3   of frauds grounds. Russell Sage, 54 N.Y.2d at 194. The Court of

 4   Appeals appears to have concluded that the two grounds taken

 5   together lead to a conclusion that the prior dismissal was

 6   “sufficiently close to the merits” to give it claim-preclusive

 7   effect. Id. We do not read this as a statement that a dismissal

 8   for lack of timeliness is, standing alone, a judgment “on the

 9   merits.”

10        Second, in Russell Sage, “the motion to dismiss the first

11   action was treated as one for summary judgment on which the

12   court considered submissions of the parties” outside the

13   pleadings, making claim preclusion “especially” appropriate in

14   the eyes of the New York Court of Appeals. Id. That is not true

15   of the matter before us.

16        Third, the court in Russell Sage was not confronted by the

17   situation we face: a dismissal for lack of timeliness by a

18   court in another jurisdiction with a shorter statute of

19   limitations. Since that decision did not confront the question

20   of whether a claim originally dismissed as time-barred should

21   be precluded when later reasserted in another jurisdiction with

22   a longer statute of limitations, it should not be understood as

23   having settled that question.

24


                                     -8-
 1   III. Conclusion

 2        We hold that dismissal of a claim solely for lack of

 3   timeliness in a New York state court does not preclude the same

 4   claim from being brought in another jurisdiction with a longer

 5   statute of limitations, including a federal court exercising

 6   its federal question jurisdiction. Accordingly, the order of

 7   the district court dismissing Cloverleaf’s suit is VACATED, and

 8   the matter REMANDED for further proceedings consistent with

 9   this opinion. We express no opinion as to the County’s argument

10   that Cloverleaf’s complaint failed to state a claim upon which

11   relief may be granted, as the district court did not address

12   this argument in its order.




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