17‐2704‐cv
Ajdler v. Province of Mendoza
In the
1 United States Court of Appeals
2 for the Second Circuit
3
4
5 AUGUST TERM 2017
6
7 No. 17‐2704‐cv
8
9 MOSHE MARCEL AJDLER,
10 Plaintiff‐Appellant,
11
12 v.
13
14 PROVINCE OF MENDOZA,
15 A Province of the Republic of Argentina,
16 Defendant‐Appellee.
17
18
19 On Appeal from the United States District Court
20 for the Southern District of New York
21
22
23 ARGUED: MARCH 9, 2018
24 DECIDED: MAY 11, 2018
25
26
27
28 Before: POOLER, RAGGI, DRONEY, Circuit Judges.
________________
17‐2704‐cv
Ajdler v. Province of Mendoza
On appeal from a judgment entered in the Southern District of
New York (Marrero, J.), dismissing as untimely this contract action
pertaining to defendant’s unpaid bonds, plaintiff challenges that part
of the district court’s ruling regarding his claim for interest. Plaintiff
maintains that, even if the statute of limitations—which he argues is
six years as provided by statute, rather than four years as stated in the
bonds’ Indenture—bars his claim for unpaid principal, interest
continued to accrue for as long as the principal remained unpaid, such
that his claim for interest accruing within six years of the filing of his
complaint is timely. Because existing New York law does not clearly
settle whether claims for interest on principal continue to accrue after
a claim for the principal itself is time‐barred, we certify questions
pertaining to that issue to the New York Court of Appeals, deferring
our resolution of this appeal in the interim.
DECISION RESERVED and QUESTIONS CERTIFIED.
DAVID S. HOFFNER, Hoffner PLLC,
New York, New York, for Plaintiff‐Appellant.
CARMINE D. BOCCUZZI (Richard Freeman, on
the brief), Cleary Gottlieb Steen & Hamilton
LLP, New York, New York, for Defendant‐
Appellee.
REENA RAGGI, Circuit Judge:
Plaintiff Moshe Marcel Ajdler sued defendant the Argentine
Province of Mendoza (“Mendoza”) in the United States District Court
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Ajdler v. Province of Mendoza
for the Southern District of New York (Victor Marrero, Judge) for
failing to pay principal and interest on certain of its bonds. Ajdler
now appeals from the dismissal of his claims as untimely. See Ajdler
v. Province of Mendoza, No. 17‐CV‐1530 (VM), 2017 WL 3635122
(S.D.N.Y. Aug. 2, 2017). Specifically, Ajdler argues that, even if his
claim for unpaid principal is time‐barred, interest continued to accrue
on that principal as long as it remained unpaid, with the statute of
limitations running anew for each failure to pay interest when due.
Thus, he maintains, he can timely sue for any interest that accrued on
unpaid principal within the limitations period prior to the filing of his
complaint. Ajdler’s argument raises significant and unsettled
questions of New York law, the answers to which will dictate the
outcome of this appeal. Accordingly, we certify these questions, as
stated at the conclusion of this opinion, to the New York Court of
Appeals, deferring our resolution of this appeal in the interim.
BACKGROUND
The stated facts derive from Ajdler’s complaint and the
documents attached thereto. See Goel v. Bunge, Ltd., 820 F.3d 554, 559
(2d Cir. 2016) (acknowledging that, on motion to dismiss, courts may
consider documents appended to complaint).
I. The 1997 Mendoza Bonds
In 1997, Mendoza issued bonds in the principal amount of $250
million (the “Bonds”) with a September 4, 2007 maturity date. Ajdler
holds a beneficial interest in $7,050,000 of these Bonds.
The Bonds were issued pursuant to an indenture dated
September 4, 1997, which included among its exhibits the Terms and
Conditions of the Bonds, and the Form of Registered Global Bond
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Ajdler v. Province of Mendoza
(collectively, the “Indenture”). The Indenture, which states that it is
governed by New York law, provides that “[e]ach Bond bears interest
from September 4, 1997 at the rate of 10% per annum,” which is
“payable annually in arrears on March 4 and September 4 in each
year, commencing on March 4, 1998.” Joint App’x 55; see also id. at 72
(providing for such interest “on any outstanding portion of the
unpaid principal amount”). Such “[i]nterest shall accrue from and
including the most recent date to which interest has been paid or duly
provided for . . . until payment of [the] principal has been made or
duly provided for.” Id. at 72. The Indenture also states that the Bonds
“will rank pari passu among themselves and at least pari passu in
priority of payment with all other present and future unsecured and
unsubordinated Indebtedness” of Mendoza. Id. at 54.
In a section entitled Unconditional Right of Bondholders to
Receive Principal and Interest (the “Unconditional Right provision”),
the Indenture states that,
[n]otwithstanding any other provision in this Indenture,
each Bondholder shall have the right, which is absolute
and unconditional, to receive payment of the principal of
and interest on . . . its Bond on the stated maturity
expressed in such Bond and to institute suit for the
enforcement of any such payment, and such right shall
not be impaired without the consent of such Bondholder.
Id. at 33. Under the Indenture’s Prescription provision, “[a]ll claims
against [Mendoza] for payment of principal of or interest . . . on or in
respect of the Bonds shall be prescribed unless made within four years
from the date on which such payments first became due.” Id. at 68.
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Ajdler v. Province of Mendoza
II. Mendoza’s 2004 Exchange Offer and Default
On June 30, 2004, Mendoza offered Bondholders the option to
exchange their Bonds for new securities paying a lower interest rate
and maturing in 2018 (the “New Bonds”). A majority of Bondholders,
holding some $230.6 million in Bonds, accepted the exchange offer.
Ajdler did not.
On August 23, 2004, Mendoza announced that it would make
no further interest payments on the Bonds. Thus, the last interest
payment Ajdler received on his Bonds was that for March 2004. He
received no interest payments thereafter, nor did he receive payment
of principal on the Bonds’ September 4, 2007 maturity date.1
III. Procedural History
Nearly a decade later, on March 1, 2017, Ajdler commenced this
contract action, charging Mendoza with breach of the Indenture in
failing to repay principal upon the Bonds’ maturity date and to pay
interest on that principal after March 2004. As to the latter, Ajdler
alleged that, under the terms of the Indenture, interest continued to
accrue on the Bonds, even after their maturity date, for as long as the
principal remained unpaid. Ajdler also pleaded that, by making
payments on other debts—such as the New Bonds and additional
bonds issued in 2016—but not on the Bonds, Mendoza breached the
Indenture’s pari passu clause. Thus, Ajdler sought damages in the
1 Although Mendoza asserts that the Bonds were accelerated and cites to an alleged Notice
of Acceleration dated December 14, 2004, Ajdler does not so allege in his complaint and
the purported Notice of Acceleration was neither produced for nor considered by the
district court. Accordingly, we accept Ajdler’s pleading that the principal became due on
September 4, 2007.
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Ajdler v. Province of Mendoza
amount of the unpaid principal and accrued interest, as well as
declaratory and injunctive relief enforcing the pari passu clause.
In an April 5, 2017 letter, filed pursuant to Judge Marrero’s
individual practice rules, Mendoza informed Ajdler and the court of
its intent to file a motion to dismiss Ajdler’s complaint as untimely.
Ajdler filed a letter in opposition, and when the parties were
thereafter unable to reach a resolution, Mendoza requested the court’s
permission to file the contemplated dismissal motion. After holding
a telephone conference, and permitting Ajdler to submit further
opposition to dismissal, the district court construed Mendoza’s letter
submissions as a motion to dismiss pursuant to Fed. R. Civ. P.
12(b)(6), which it granted on August 2, 2017. See Ajdler v. Province of
Mendoza, 2017 WL 3635122, at *10.2
In holding Ajdler’s contract claims time‐barred, the district
court concluded that the six‐year limitations period generally
applicable to such claims pursuant to N.Y. C.P.L.R. § 213(2), see id. at
*5, was here superseded by the Indenture’s Prescription provision,
which established a four‐year filing limit, see id. at *8. Further
concluding that the limitations period for Ajdler’s claims began to run
on the Bonds’ September 4, 2007 maturity date, when Mendoza failed
to meet its obligation to repay principal, the district court concluded
that Ajdler’s claims filed in 2017, both for principal and interest, were
untimely not only under the applicable four‐year period, but “[e]ven
2 In his appellate brief, Ajdler suggests that the district court’s construction of Mendoza’s
submissions as a motion to dismiss “severely limited” his ability to offer opposition.
Appellant Br. at 3. Ajdler does not explicitly urge vacatur on this ground, nor does the
record here warrant it. See McGinty v. New York, 251 F.3d 84, 90 (2d Cir. 2001) (ruling that
even where district court dismissed case without providing plaintiff opportunity to be
heard, reversal on that basis was unwarranted because parties “here have fully briefed all
the questions raised on this appeal” and “those issues are predominantly of a legal
nature”).
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Ajdler v. Province of Mendoza
if, for the sake of argument, the Court were to apply the six‐year
limitations period.” Id.
In so ruling, the district court rejected Ajdler’s argument that
he was entitled to twice‐a‐year interest payments for as long as
principal remained unpaid, such that his claims for interest payments
missed within four (or as Ajdler insisted, six) years of the filing of his
complaint were timely even if his claim for principal was not. See id.
at *8–9. It characterized Ajdler’s position on interest as “extreme”
because it would “permit a plaintiff to bring a claim for unpaid
interest at any time, any number of years later” if principal had not
been repaid in full, even though any claim for that principal would
itself be untimely. Id. at *8. Instead, the district court concluded that,
on the Bonds’ September 4, 2007 maturity date, “the statute of
limitations began to run” not only as to “principal,” but also as to “any
interest payments for which the clock had not already started.” Id. at
*7 n.3. Thus, because it concluded that no interest claim could be
timely after a principal claim was not, the district court ruled that
Ajdler’s claims for both principal and interest had to be filed no later
than September 2011, requiring the dismissal of his March 2017
complaint as time‐barred. See id. at *8.
The district court determined that Ajdler’s claims for equitable
relief were also untimely, see id. at *9, and that Ajdler failed in any
event to allege that Mendoza “engaged in the extraordinary conduct
necessary to find a breach of pari passu,” id. at *10.
Ajdler timely appealed, challenging only the dismissal of his
claim “for biannual interest payments on the Bonds that accrued
during the six‐year period prior to the filing of the complaint.”
Appellant Br. at 8.
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Ajdler v. Province of Mendoza
DISCUSSION
I. Standard of Review
This court “review[s] de novo a district court’s grant of a motion
to dismiss, including its . . . application of a statute of limitations.”
Deutsche Bank Nat’l Tr. Co. v. Quicken Loans Inc., 810 F.3d 861, 865 (2d
Cir. 2015). In doing so, we “accept[] all factual allegations in the
complaint as true, and draw[] all reasonable inferences in the
plaintiff’s favor.” Shomo v. City of New York, 579 F.3d 176, 183 (2d Cir.
2009) (internal quotation marks omitted).
II. The Indenture’s Four‐Year Limitations Period Determines
the Timeliness of Ajdler’s Claims
In his opening brief on appeal, Ajdler asserts that he can timely
claim interest payments accruing within six years of the filing of his
complaint even if his claim for principal is time‐barred. Before
considering whether interest can continue to accrue in such
circumstances, we consider Ajdler’s assumption—unsupported by
either argument or authority—that his interest claim is subject to a
six‐year statute of limitations rather than the four‐year period
specified in the Indenture’s Prescription provision.
Under New York law, the statute of limitations generally
applicable to “an action upon a contractual obligation” is six years.
N.Y. C.P.L.R. § 213(2). Nevertheless, where, as here, “a shorter time
is prescribed by written agreement,” both statute and controlling
precedent instruct that the shorter period controls as long as it is
reasonable. Id. § 201; see John J. Kassner & Co. v. City of New York, 46
N.Y.2d 544, 551, 415 N.Y.S.2d 785, 789 (1979) (recognizing written
“agreement which modifies the Statute of Limitations by specifying a
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Ajdler v. Province of Mendoza
shorter, but reasonable, period within which to commence an action
is enforceable”); accord Executive Plaza, LLC v. Peerless Ins. Co., 22
N.Y.3d 511, 518, 982 N.Y.S.2d 826, 828 (2014) (recognizing that
contractual limitations periods as short as six months have been held
reasonable and enforceable).
In his reply brief, Ajdler urges otherwise, arguing that the
Prescription provision’s four‐year limitations period is “trump[ed]”
by the Indenture’s Unconditional Right provision. Reply Br. at 18.
The latter provision states that each Bondholder has an “absolute and
unconditional[]” right “to receive payment of the principal of and
interest on . . . its Bond.” Joint App’x 33. Ajdler does not argue that
enforcement of this provision is subject to no statute of limitations.
Rather, he submits that its “absolute and unconditional” language
mandates affording Bondholders the statutory six‐year limitations
period rather than a shorter four‐year period. We need not here
decide whether Ajdler waived this argument by failing to raise it until
his reply brief, see, e.g., JP Morgan Chase Bank v. Altos Hornos de Mexico,
S.A. de C.V., 412 F.3d 418, 428 (2d Cir. 2005) (stating “arguments not
made in an appellant’s opening brief are waived even if the appellant
pursued those arguments in the district court or raised them in a reply
brief”), because even if we were to resolve that question in Ajdler’s
favor, we would reject his argument on the merits.
Ajdler’s construction of the Unconditional Right provision
requires that the quoted language be construed in isolation. New
York law does not permit us to do so. It instructs that a contract must
be “construed so as to give full meaning and effect to all of its
provisions,” and “[a]n interpretation of a contract that has the effect
of rendering at least one clause superfluous or meaningless is not
preferred and will be avoided if possible.” Process Am., Inc. v. Cynergy
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Ajdler v. Province of Mendoza
Holdings, LLC, 839 F.3d 125, 133 (2d Cir. 2016) (internal quotation
marks omitted). As Ajdler himself acknowledges, his urged reading
of the Unconditional Right provision would render the Prescription
provision superfluous. We avoid that impermissible result by
construing the Unconditional Right provision together with the
Prescription provision to mean that Bondholders have an absolute
and unconditional right to receive payments as set forth in the former
provision, but that the right must be enforced within the four‐year
period specified in the latter provision.
Thus, the timeliness of Ajdler’s claims is properly considered
by reference to the Indenture’s four‐year limitations period.
III. The Timeliness of Ajdler’s Interest Claims
In an action to recover unpaid principal and interest, the
limitations period begins to run on the principal from the day after
the maturity date, and on each interest installment from the date it
becomes due. See Vigilant Ins. Co. of Am. v. Hous. Auth. of El Paso, 87
N.Y.2d 36, 43, 45, 637 N.Y.S.2d 342, 346–47 (1995). Here, the Bonds
matured on September 4, 2007. Applying the Prescription provision’s
four‐year limitations period from the following day, Ajdler had until
September 2011 to file a claim for principal, making the filing of his
March 2017 complaint plainly untimely in that respect.
As to interest installments on the Bonds, starting in March 1998,
these were due twice each year, on March 4 and September 4. Ajdler
argues that Mendoza’s obligation to make these interest payments
did not end with the Bonds’ maturity on September 4, 2007, because
Mendoza did not then discharge its obligation to repay principal.
Moreover, Ajdler maintains that Mendoza’s obligation to pay interest
did not end in September 2011, when a timely claim for principal
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Ajdler v. Province of Mendoza
could no longer be made. Rather, he insists that so long as the Bonds’
principal remained unpaid, “interest payments continued to become
due” on that principal “every six months,” giving rise to “new
claim[s] . . . upon which the statute of limitations began to run only
upon such accrual.” Appellant Br. at 20. Thus, Ajdler submits that he
has timely claims for “interest payments on the Bonds that accrued
during the [limitations] period prior to the filing of the complaint.”
Id. at 8. Applying a four‐year limitations period, Ajdler effectively
seeks to recover interest on the Bonds’ unpaid principal for the period
March 2013 through March 2017, even though any claim he might
have had for principal became time‐barred in 2011.
Mendoza urges us to reject Ajdler’s theory of accruing interest,
arguing that if we were to adopt it, interest on unpaid principal could
continue to accrue ad infinitum. It contends that when a principal debt
is barred by the statute of limitations, the claim for interest is also
barred. In the alternative, Mendoza submits that “new and
enforceable claims to interest cannot derive from unenforceable, time‐
barred principal.” Appellee Br. at 15.
As we proceed to explain, established New York law does not
clearly resolve the parties’ dispute.
Ajdler argues that his continuing accrual theory is supported
by NML Capital v. Republic of Argentina, 17 N.Y.3d 250, 928 N.Y.S.2d
666 (2011). In that action to recover principal and interest on
defaulted sovereign bonds, the New York Court of Appeals held that
a bond issuer’s obligation to make biannual interest payments on
principal “until the principal hereof is paid” was properly construed
as an obligation to pay interest “until the principal is actually repaid
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Ajdler v. Province of Mendoza
in full—and not merely until the bond maturity date.” Id. at 259–62,
928 N.Y.S.2d at 673–75 (internal quotation marks omitted).3
While NML Capital did not qualify this statement, we note that
it was made in the context of a timely claim for principal. See id. at 255,
928 N.Y.S.2d at 671 (observing that Argentina did not dispute that it
“was required to repay the principal indebtedness”). As the district
court here observed, the Court of Appeals had no occasion in NML
Capital to consider the timeliness of plaintiffs’ claims. See Ajdler v.
Province of Mendoza, 2017 WL 3635122, at *9. Consequently, it
expressed no view as to whether plaintiffs could continue to claim
post‐maturity interest after a principal claim was time‐barred. In the
absence of any discussion of that question, we hesitate to conclude
that, in NML Capital, the Court of Appeals intended to pronounce a
rule that interest continues to accrue indefinitely on unpaid principal,
even after the statute of limitations has run on any claim for that
principal.4
3 The New York Court of Appeals’ ruling responded to questions certified by this court.
See NML Capital v. Republic of Argentina, 621 F.3d 230, 244 (2d Cir. 2010).
4 Despite asserting that, as long as principal remains unpaid, “the Bonds . . . give rise, every
six months, to a new claim for interest,” Appellant Br. at 20, Ajdler maintains that a ruling
in his favor on this appeal would not afford him new interest claims indefinitely for as long
as the Bonds’ principal remained unpaid. He submits that NML Capital’s reference to “the
contract . . . merg[ing] in a judgment,” NML Capital v. Republic of Argentina, 17 N.Y.3d at
258, 928 N.Y.S.2d at 673 (internal quotation marks omitted), means that a favorable
judgment on his interest claims in this case “stop[s] the accrual of interest,” Appellant Br.
at 17. We identify nothing in NML Capital to impose such a limitation. The language on
which Ajdler seizes arises in the context of deciding whether interest should be calculated
according to the contract rate or the New York statutory rate. Settling that question in
favor of the contract rate, the Court of Appeals stated, “when an agreement involving an
indebtedness provides that the interest shall be at a specified rate until the principal shall
be paid, then the contract rate governs until payment of the principal, or until the contract
is merged in a judgment.” NML Capital v. Republic of Argentina, 17 N.Y.3d at 258, 928
N.Y.S.2d at 673 (internal quotation marks and emphasis omitted). This language cannot
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Ajdler v. Province of Mendoza
Our hesitancy is only reinforced by another Court of Appeals
decision, cited by Mendoza and not discussed in NML Capital, which
indicates that unpaid principal on which the limitations period has
run cannot give rise to new interest claims. See Chapin v. Posner, 299
N.Y. 31, 42 (1949) (stating that, after limitations period on principal
had run, plaintiffs could recover only interest that accrued during the
period between “six years prior to the commencement of this action”
and “termination of the limitation period as to principal”); see also
Nelson v. Fantino, 277 A.D. 1058, 1059, 100 N.Y.S.2d 874, 875 (2d Dep’t
1950) (same); Ernst v. Schaack, 271 A.D. 1012, 1013, 68 N.Y.S.2d 95, 96
(2d Dep’t 1947) (same).
Mendoza also points us to cases from New York lower courts
suggesting not only that claims for post‐maturity interest cannot
accrue once the principal is time‐barred, but that claims for interest on
unpaid principal expire when the limitations period has run for
recovery of the principal. See Quackenbush v. Mapes, 123 A.D. 242, 246,
107 N.Y.S. 1047, 1050 (1st Dep’t 1908) (recognizing interest “coupons
partake of the nature of the bond, and, while in a sense they may
become independent instruments, they are governed by the same
Statute of Limitations as the bond itself”); Tortora v. Malve Realty &
Constr. Corp., 96 N.Y.S.2d 388, 391–92 (Sup. Ct. N.Y. Cty. 1950) (stating
that “when the right to recover the principal sum is barred by the
statute of limitations the right to recover interest is likewise barred,”
but recognizing exception for mortgage interest); see also Braman v.
Westaway, 60 N.Y.S.2d 190, 198 (Sup. Ct. N.Y. Cty. 1945) (ruling that,
under Delaware statute that “creates a single cause of action” for both
reasonably be understood to hold that where a claim for principal is time‐barred—a
situation not contemplated in NML Capital in any event—a judgment for unpaid interest
up to the time of the filing of the complaint bars future claims for unpaid interest that
would otherwise accrue.
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Ajdler v. Province of Mendoza
principal and interest, “where the principal liability is barred [by
statute of limitations], the liability for interest on such loans is
correspondingly barred”). While these cases all derive from the first
half of the last century, the conclusion Mendoza urges us to draw
therefrom also finds support in the latest version of one of the leading
treatises on contracts. See 3 Williston on Contracts § 7:33 (4th ed. 2017)
(stating “when the principal debt is barred by the Statute of
Limitations, the claim for interest . . . is also barred” (citing Tortora v.
Malve Realty & Constr. Corp., 96 N.Y.S.2d 388)).5
Thus, Mendoza’s argument might well persuade but for
Ajdler’s citation to language from New York Jurisprudence, an
encyclopedia of New York law, suggesting otherwise. It states that
“where the covenant in the contract to pay interest periodically is not
limited to the period antedating the maturity date of the principal,”
then “a separate action may be brought for default in . . . postmaturity
interest even though recovery of the principal of the debt is barred by
the statute of limitations.” 72 N.Y. Jur. 2d Interest and Usury § 54
(2018). Such a statement of New York law warrants consideration
because New York Jurisprudence—while of course not binding
authority—is regularly cited approvingly by both this court, see, e.g.,
McCulloch Orthopaedic Surgical Servs., PLLC v. Aetna Inc., 857 F.3d 141,
150 (2d Cir. 2017); Bank of New York Mellon Tr. Co. v. Morgan Stanley
Mortg. Capital, Inc., 821 F.3d 297, 312–13 (2d Cir. 2016); In re Sept. 11
Litig., 802 F.3d 314, 328–30 (2d Cir. 2015), and the New York Court of
Appeals, see, e.g., Al Rushaid v. Pictet & Cie, 28 N.Y.3d 316, 323 n.4, 45
5 Morris v. People’s Republic of China, 478 F. Supp. 2d 561 (S.D.N.Y. 2007), in which plaintiffs
sued for principal and interest on bonds issued nearly a century earlier, illustrates the far‐
reaching implications of adopting Ajdler’s argument that interest payments continue to
accrue so long as principal remains unpaid. See id. at 571–73 (holding that claims for
unpaid interest and principal on bonds issued in 1913, on which interest was not paid after
1939 and principal was not paid on 1960 maturity date, were time‐barred).
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N.Y.S.3d 276, 282 n.4 (2016); Larabee v. Governor of New York, 27 N.Y.3d
469, 475, 34 N.Y.S.3d 389, 393 (2016); Morpheus Capital Advisors LLC v.
UBS AG, 23 N.Y.3d 528, 535, 992 N.Y.S.2d 178, 183 (2014); see also Misut
v. Mooney, 475 N.Y.S.2d 233, 234 (Sup. Ct. Suffolk Cty. 1984)
(recognizing New York Jurisprudence as “eminent secondary
authorit[y]”).
We note, however, that the single case New York Jurisprudence
cites to support the quoted pronouncement, Union Trust Co. v. Kaplan,
249 A.D. 280, 292 N.Y.S. 152 (4th Dep’t 1936), involved claims for
principal and interest on a mortgage after enactment of the state’s
moratorium statute, see N.Y. Civ. Prac. Act §§ 1077‐a, 1077‐b. In ruling
that plaintiff could bring separate actions for mortgage interest and
principal, the court in Union Trust reasoned that, in adopting the
moratorium statute, the legislature “intended to separate, if the law
had not already done so, a cause of action to recover the principal of
a mortgage indebtedness and the interest thereon” in order “to save
mortgaged property from foreclosure, and to prevent an action being
brought on a bond, even though the principal indebtedness was due,
if the interest and taxes were paid.” Union Tr. Co. v. Kaplan, 249 A.D.
at 284, 292 N.Y.S. at 160. Accordingly, it is not clear to us that the
reasoning in Union Trust applies outside the context of mortgage
interest or even outside the special circumstances created by the post‐
Depression foreclosure moratorium enacted by the New York
legislature. See Gorgas v. Perito, 299 N.Y. 265, 270 (1949) (explaining
that moratorium statute created “special circumstances” in which
recovery of certain interest installments was permitted “even though
recovery of both principal and interest were held barred by the
Statute of Limitations”); see also Tortora v. Malve Realty & Constr. Corp.,
96 N.Y.S.2d at 391–92 (recognizing exception for mortgage interest
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Ajdler v. Province of Mendoza
from general rule that when right to recover principal is barred by
statute of limitations, right to recover interest is likewise barred);
Braman v. Westaway, 60 N.Y.S.2d at 198 (holding, in case involving
interest on corporations’ loans rather than mortgage interest, that
“where the principal liability is barred [by statute of limitations], the
liability for interest on such loans is correspondingly barred”). Thus,
even though the quoted pronouncement in New York Jurisprudence
is stated generally, we cannot confidently conclude that the New York
Court of Appeals would so hold in the circumstances of this case.
Moreover, earlier in the same section Ajdler cites, New York
Jurisprudence appears to support Mendoza’s contention that interest
claims stop accruing when recovery of the principal becomes time‐
barred. It explains that
even though an action on the principal [debt] may be
barred by the statute of limitations, recovery may still be
had for unpaid interest which accrued periodically up to
the date when action for recovery of the principal became
barred to the extent that these due dates fall within the
period of limitations running from the date of the
commencement of the cause of action.
72 N.Y. Jur. 2d Interest and Usury § 54. It cites, inter alia, Chapin v.
Posner, 299 N.Y. 31; Ernst v. Schaack, 271 A.D. 1012, 68 N.Y.S.2d 95, and
Nelson v. Fantino, 277 A.D. 1058, 100 N.Y.S.2d 874, for this proposition.
Id.
Nevertheless, further support for Ajdler’s position might be
located in Amrusi v. Nwaukoni, 155 A.D.3d 814, 65 N.Y.S.3d 62 (2d
Dep’t 2017). In that action to recover damages for breach of a
promissory note, the Appellate Division cited NML Capital in
concluding that interest payments continued to accrue after the loan’s
maturity date. See id. at 817, 65 N.Y.S.3d at 66. Applying the statutory
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six‐year limitations period, the court identified error in the dismissal
of plaintiff’s breach of contract claim as untimely to the extent plaintiff
sought to recover interest installment obligations that had come due
within six years of the March 3, 2016 filing of the complaint, i.e., on or
after March 3, 2010. See id. at 817–18, 65 N.Y.S.2d at 66. Given the
note’s September 2008 maturity date, a claim for principal would
presumably have been time‐barred by September 2014. Thus, it
appears that a portion of the interest payments that the Appellate
Division deemed recoverable—specifically, those between September
2014 and March 2016—would have accrued after the limitations
period had run on the principal. The Appellate Division did not
explicitly address that issue, however; nor is there any indication that
it contemplated the specific interest‐accrual arguments raised by the
parties in this case.
Thus, considering “the ability of both parties to cite colorable
but not authoritative support for their conflicting positions,” NML
Capital v. Republic of Argentina, 621 F.3d 230, 242 (2d Cir. 2010), we are
unable confidently to determine whether, under New York law,
claims for interest cease to accrue—or even expire—when the
limitations period has run for recovery of the principal. How that
question is answered determines whether Ajdler has a timely claim
for interest payments coming due in the four years prior to his filing
this action.
IV. Certification Standards
When “determinative questions of New York law are involved
in a case pending before [us] for which no controlling precedent of
the Court of Appeals exists,” we may certify those questions to New
York’s highest court for it to provide a controlling answer. N.Y.
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Comp. Codes R. & Regs. tit. 22, § 500.27(a); see also 2d Cir. Local R.
27.2(a) (“If state law permits, the court may certify a question of state
law to that state’s highest court.”). Despite this authority, we treat
certification as an “exceptional procedure, to which we resort only in
appropriate circumstances.” McGrath v. Toys ʺRʺ Us, Inc., 356 F.3d
246, 250 (2d Cir. 2004).
Three factors properly inform a decision to certify:
(1) whether the New York Court of Appeals has
addressed the issue and, if not, whether the decisions of
other New York courts permit us to predict how the
Court of Appeals would resolve it; (2) whether the
question is of importance to the state and may require
value judgments and public policy choices; and
(3) whether the certified question is determinative of a
claim before us.
Expressions Hair Design v. Schneiderman, 877 F.3d 99, 105–06 (2d Cir.
2017) (internal quotation marks omitted). Considering those factors
here, we conclude that this case warrants certification.
First, as we have just observed, the New York Court of Appeals
has not addressed whether, in light of its decision that interest
continues to accrue on principal that is not repaid on a bond’s
maturity, see NML Capital v. Republic of Argentina, 17 N.Y.3d at 259–
62, 928 N.Y.S.2d at 673–75, enforceable claims for interest can arise
even after a claim for principal becomes time‐barred. The case law
and authorities cited by the parties do not permit us confidently to
conclude how the Court of Appeals would answer that question.
As to the second factor, the importance of the disputed interest‐
accrual issue to New York and its public policy is evident. New York
is one of the world’s leading financial centers, and many bond
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indentures contain choice‐of‐law provisions invoking New York law.
See Trust for Certificate Holders of Merrill Lynch Mortg. Invʹrs, Inc. Mortg.
Pass‐Through Certificates, Series 1999‐C1 v. Love Funding Corp., 556 F.3d
100, 109 (2d Cir. 2009) (recognizing, in concluding certification to New
York Court of Appeals warranted, “importance of New York law to
the State’s preeminent role in world financial affairs”). The New York
Court of Appeals can ensure the clarity of New York law with more
authority than this court can. See Van Buskirk v. N.Y. Times Co., 325
F.3d 87, 89 (2d Cir. 2003) (recognizing “highest court of a state has the
final word on the meaning of state law,” and thus this court is “bound
to apply New York law as determined by the New York Court of
Appeals” (internal quotation marks omitted)). What limits, if any,
New York law places on the interest that can accrue on unpaid
principal after a claim for the principal itself becomes time‐barred is
a matter of great importance both to the many parties that choose
New York law to govern their debt offerings and to the many more
parties who acquire such instruments. Thus, because the question
before us both implicates important state concerns, and “is
significantly likely to recur,” NML Capital v. Republic of Argentina, 621
F.3d at 243, the second factor weighs in favor of certification so that
the New York Court of Appeals can speak conclusively on the matter.
Finally, resolution of the certified questions may well “dispose
of the case entirely.” Barenboim v. Starbucks Corp., 698 F.3d 104, 118
(2d Cir. 2012). Specifically, a New York Court of Appeals decision
holding that interest on unpaid principal continues to accrue not only
after a bond matures but even after a claim for principal becomes
untimely will likely mean that Ajdler’s claim for interest from 2013–
17 is timely, requiring vacatur of that part of the challenged judgment
of dismissal. On the other hand, a decision holding that interest does
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Ajdler v. Province of Mendoza
not accrue after a claim for principal becomes time‐barred will likely
warrant affirmance of the judgment of dismissal in its entirety.
In sum, this case provides “appropriate circumstances” for
certification in all respects. McGrath v. Toys ʺRʺ Us, Inc., 356 F.3d at
250.
CONCLUSION
To summarize, we defer decision in this case, and certify to the
New York Court of Appeals the following questions:
1. If a bond issuer remains obligated to make biannual interest
payments until the principal is paid, including after the date of
maturity, see NML Capital v. Republic of Argentina, 17 N.Y.3d 250,
928 N.Y.S.2d 666 (2011), do enforceable claims for such biannual
interest continue to accrue after a claim for the principal of the
bonds is time‐barred?
2. If the answer to the first question is “yes,” can interest claims arise
ad infinitum as long as the principal remains unpaid, or are there
limiting principles that apply?
In certifying these questions, we do not bind the Court of
Appeals to the particular questions stated. Rather, the Court of
Appeals may expand this certified inquiry to address any pertinent
questions of New York law involved in this appeal.6
6 While perhaps not necessary to the resolution of this case, another question that arises
from the identified legal ambiguity is whether, if the answer to the first question is “no,”
claims for interest that accrued before a claim for the principal of the bonds is time‐barred
expire when the principal claim becomes time‐barred. We leave to the New York Court of
Appeals whether to address this related question of New York law.
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This panel retains jurisdiction and will consider any issues that
may remain on appeal once the New York Court of Appeals has either
provided its guidance or declined certification.
It is therefore ORDERED that the Clerk of this court transmit to
the Clerk of the Court of Appeals of the State of New York a
Certificate, as set forth below, together with a complete set of briefs
and appendices, and the record filed in this court by the parties.
DECISION RESERVED AND QUESTIONS CERTIFIED.
CERTIFICATE
The foregoing is hereby certified to the Court of Appeals of the
State of New York pursuant to 2d Cir. Local R. 27.2 and N.Y. Comp.
Codes R. & Regs. tit. 22, § 500.27(a), as ordered by the United States
Court of Appeals for the Second Circuit.
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