Lehman Brothers Holdings, Inc. v. First Priority Financial, Inc., 2:12-cv-02500

Lehman Brothers filed suit in the Eastern District of California for breach of contract and breach of express warranty arising from a 2005 broker agreement under which Lehman funded loans brokered by First Priority.
The broker agreement included duties to verify employment and analyze income/debt to determine affordable mortgage amounts and contained a New York choice-of-law clause.
Plaintiff alleges that loan packages contained misstated material facts known to First Priority, breaching the agreement and lender guidelines.
Defendant moved to dismiss as time-barred under California statute of limitations and for factual deficiencies, arguing discovery before funding should have occurred.
Plaintiff contends New York law applies, providing a six-year limitations period, potentially saving the claims from California’s four-year limit; defendant argued for California law and a shorter period.
The court denied the motion to dismiss, finding the choice-of-law clause enforceable and binding, and noting the timely issue under New York law was not addressed on the record.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Which statute of limitations governs the claims?	Lehman Brothers argues New York law applies.	First Priority argues California law applies.	Choice-of-law clause enforceable; New York law applies.
Are the claims timely under the applicable statute of limitations?	Under New York law, claims are timely.	Under California law, claims may be time-barred.	Not addressed/decided due to lack of argument on timing under New York law.
Should the complaint be dismissed with prejudice?	Amendment could save the complaint if defective.	Complaint is defective and should be dismissed.	Denied; dismissal with prejudice denied.

Huynh v. Chase Manhattan Bank, 465 F.3d 992 (9th Cir. 2006) (tool for determining applicable statute of limitations in choice-of-law analysis)
Cruz v. United States, 387 F. Supp. 2d 1057 (N.D. Cal. 2005) (method for applying choice-of-law to limitations period)
Ashland Chemical Co. v. Provence, 129 Cal.App.3d 790 (Cal. App. 4th Dist. 1982) (recognizes limited circumstances when foreign law may apply despite forum statute differences)
Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459 (Cal. 1992) (strong policy in honoring contract choice-of-law clauses with substantial relationship)
Hambrecht & Quist Venture Partners v. American Medical Int’l, Inc., 38 Cal.App.4th 1532 (2d Dist. 1995) (California’s policy favoring enforcement of negotiated choice-of-law provisions)