containing the terms of the sale placed too much control over the entire transaction in the hands of Mr. Lustgarten. As evidence of this control, the court took particular note of the fact that Bruce Lustgarten was required, within the terms of the sale, to purchase shares of the mutual fund as the sole security on the indebtedness owed to his father. On this basis, the court concluded that a true installment sale, within the meaning of section 453, could not occur. Plaintiffs allege that the defendants were, at all times, aware of these specific factors, yet continually assured the Lustgartens that the transaction would qualify as a valid installment sale under section 453.
The Lustgartens filed their complaint in this court on September 25, 1979, alleging, on the basis of the foregoing recital, that defendants are liable to them for their negligent failure accurately to advise plaintiffs of the tax consequences of the stock sale. In a separate count, plaintiffs also allege that defendants are liable under a contractual theory for their breach of implied promises to render accurate tax advice and properly to structure a valid installment sale transaction.
Defendants contend that plaintiffs' claim is time-barred under what they deem to be the applicable statute of limitations and must therefore be dismissed. Because each of the various defendants advances similar arguments, their submissions will be considered as comprising a single motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
The central issue presented in this motion is whether the applicable statute of limitations is Florida's or Pennsylvania's.
The parties agree that plaintiffs' claim accrued no later than July 23, 1976, the date when the statutory notice of deficiency was issued against plaintiffs by the Miami Appellate Office. Defendants claim that the applicable statute of limitations is the Florida statute barring professional malpractice claims filed more than two years after they accrue.
Plaintiffs contend that the applicable period of limitation is either Pennsylvania's four-year limitation on contract actions or Pennsylvania's six-year catch-all limitation covering causes of action not otherwise specifically provided for.
The parties' divergent views derive from their disagreement over the appropriate choice-of-law principles to be applied in this case.
In cases where federal court jurisdiction is predicated on the diversity of the citizenship of the parties, federal courts sitting in Pennsylvania are required to apply the same period of limitation as would a Pennsylvania state court. Guaranty Trust Co. v. York, 326 U.S. 99, 65 S. Ct. 1464, 89 L. Ed. 2079 (1945). For federal courts in Pennsylvania choosing between conflicting state statutes of limitation, the rule in Guaranty Trust necessarily implies application of the Pennsylvania choice-of-law principle which governs in the limitations context. See Mack Trucks, Inc. v. Bendix-Westinghouse Automotive Air Brake Co., 372 F.2d 18, 20 (3d Cir. 1966), cert. denied, 387 U.S. 930, 87 S. Ct. 2053, 18 L. Ed. 2d 992 (1967); Jones & Laughlin Steel v. Johns-Manville Sales, 453 F. Supp. 527, 531 (W.D.Pa.1978); Gross v. McDonald, 354 F. Supp. 378, 382 (E.D.Pa.1973). Cf. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941).
That choice-of-law principle is a familiar one-namely, application of the appropriate Pennsylvania limitation period because Pennsylvania is the forum, Freeman v. Lawton, 353 Pa. 613, 617, 46 A.2d 205 (1946), subject, however, to the caveat that, when the cause of action accrues in a jurisdiction other than Pennsylvania, the limitation period to be applied is the appropriate limitation period of that other jurisdiction if it is shorter than Pennsylvania's. 42 Pa.Cons.Stat.Ann. § 5521(b) (Purdon's 1981 Pamphlet). Mack Trucks, supra, 373 F.2d at 20.
In this case, the action is barred if Florida's two-year limitation period applies, but survives under either of the arguably appropriate Pennsylvania limitation periods (four and six years respectively). Accordingly, the dispositive question is whether plaintiffs' cause of action arose in Florida or Pennsylvania.
Defendants contend that Florida is the place where the cause of action arose, since-as all parties agree-it was the receipt there of the statutory notice of tax deficiency which spelled accrual of the cause of action. Plaintiffs argue for Pennsylvania on the ground that here is where the disputed transaction was structured and the alleged negligent behavior occurred. Relying on the doctrine of interest analysis adopted for Pennsylvania in Justice Roberts' landmark opinion in Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796 (1964), plaintiffs contend that Pennsylvania's interest in the claims underlying this litigation is much greater than Florida's.
Plaintiffs' argument cannot prevail, for it runs afoul of the controlling language of Judge Hastie's opinion for the Third Circuit in Mack Trucks, supra, 372 F.2d at 21, emphasis supplied:
... Under the Pennsylvania borrowing statute a court is required to apply the statute of limitations of the state where the cause of action arose without regard to any contacts of any other state with the parties and their prior dealings. And certainly neither the Griffith case nor any other which we know suggests that the residence of the parties or the place of their earlier dealings before the claim became suable have any relevance to determining when or where the cause arose.