The court shall grant plaintiffs' motion to dismiss defendants' counterclaims and deny plaintiffs' motion to dismiss defendants' affirmative defenses in this breach of contract action seeking payment upon a loan.

Plaintiffs argue defendants' counterclaim for usury is time-barred and that defendants cannot raise such a claim as a defense in this action. Defendants' counterclaim asserts that the interest rate of 12% per annum charged on the loan made by the plaintiffs is above the permissible rate allowable under German Law based upon Section 10.07 of the Loan Agreement which provided that the agreement was to be governed by the laws of the Republic of Germany. Defendants also assert that the restricted stock and penalties granted in the loan agreements constitute part of the interest above the legally permissible rate. Defendants argue that based upon choice-of-law principles they are entitled to pursue their usury claim under German Law.

Pursuant to General Obligations Law 5-521 (1) "[n]o corporation shall hereafter interpose the defense of usury in any action." The statute in subdivision 3 provides an exception stating that "[t]he provisions of subdivision one of this section shall not apply to any action in which a corporation interposes a defense of criminal usury as described in section 190.40 of the penal law." The First Department has applied the statute stating that

While the statute expressly prohibits only the interposition of usury as a "defense", this court has employed the principle that a party may not accomplish by indirection what is directly forbidden to it and has accorded the rule a broader scope. Thus, it [*2]is well established that the statute generally proscribes a corporation from using the usury laws either as a defense to payment of an obligation or, affirmatively, to set aside an agreement and recover the usurious premium. The statutory exception for interest exceeding 25 percent per annum is strictly an affirmative defense to an action seeking repayment of a loan and may not, as attempted here, be employed as a means to effect recovery by the corporate borrower.

However, courts have applied substantive law embodied in foreign usury statutes in cases brought in this state based upon principles of comity and the situs of the transaction. See Industrial Development Bank of Israel Ltd. v Bier, 149 Misc 2d 797, 804 (Sup Ct, NY County, 1991) (defense of usury denied based upon application of foreign law where foreign country "has the most substantial relationship to these transactions"); but see North American Bank, Ltd. v Schulman, 123 Misc 2d 516, 521 (County Ct, Westchester County, 1984) ("this court would find those provisions of the instant loan agreement and accompanying guarantee providing that Israeli law shall control to be invalid and unenforceable" where the transaction is usurious under New York Law). Therefore, were the court to determine that the choice of law provision in the instant loan agreement was enforceable the court would apply German substantive law in the interpretation of the agreement.

The court does not reach the choice of law provision with respect to defendants' counterclaim because as argued by the plaintiff it is barred by the statute of limitations in CPLR 215 (6). "Viewed as pertaining to the remedy rather than the right, Statutes of Limitations have traditionally been characterized as procedural. Since under common-law rules matters of procedure are governed by the law of the forum, it has generally been held that the Statute of Limitations of the forum rather than that of the jurisdiction where the cause of action accrued governs the timeliness of a cause of action." Martin v Julius Dierck Equipment Co., 43 NY2d 583, 588 (1978). "In New York, Statutes of Limitation are generally considered procedural because they are viewed as pertaining to the remedy rather than the right. The expiration of the time period prescribed in a Statute of Limitations does not extinguish the underlying right, but merely bars the remedy. Nicely summarized elsewhere, the theory of the statute of limitations generally followed in New York is that the passing of the applicable period does not wipe out the substantive right; it merely suspends the remedy." Tanges v Heidelberg North America, Inc., 93 NY2d 48, 54-55 (1999). A choice of law provision in a contract operates only to import the substantive foreign law and not the foreign procedural statute of limitations. See Sears, Roebuck & Co. v. Enco Associates, Inc., 43 NY2d 389, 397 (1977).

Therefore, defendants' counterclaim for usury is barred by the statute of limitations irrespective of the agreement's choice of law provision and the court shall grant plaintiffs' motion to dismiss the counterclaim for usury. Furthermore, based upon the above, the court shall deny defendants' cross-motion to amend the answer under CPLR 3025 to assert a statute of limitations [*3]defense based upon German law as there is no basis to apply German procedural law in this action. The court shall deny plaintiffs' motion to dismiss defendants' affirmative defense of usury to the extent such a defense is permitted under General Obligations Law 5-521 (3).

The court shall grant plaintiffs' application to dismiss defendants' aiding and abetting breach of fiduciary duty claim on the grounds that it too is barred by the applicable statute of limitations. "New York law does not provide any single limitations period for breach of fiduciary duty claims. Generally, the applicable statute of limitations for breach of fiduciary claims depends upon the substantive remedy sought. Where the relief sought is equitable in nature, the six-year limitations period of CPLR 213 (1) applies. On the other hand, where suits alleging a breach of fiduciary duty seek only money damages, courts have viewed such actions as alleging injury to property,' to which a three-year statute of limitations applies (see CPLR 214 [4]). Kaufman v Cohen, 307 AD2d 113, 118 (1st Dept 2003) (citations omitted). Where the complaint does not allege fraud or the breach of a particular provision of an agreement, the three-year statute of limitations applies. See Kaszirer v Kaszirer, 286 AD2d 598, 599 (1st Dept 2001). In this case, there is no dispute that the alleged breach of duty occurred in 2002 upon the signing of the loan agreement modifications. Furthermore, defendants do not allege fraud on behalf of the plaintiff or that the plaintiff breached a specific provision of the loan in a fiduciary capacity. Therefore, defendants' counterclaim for aiding and abetting a breach of fiduciary duty is time-barred.

The court shall grant dismissal of defendants' counterclaim for unjust enrichment as it is derivative of the counterclaims for usury and breach of fiduciary duty. The court shall however deny dismissal of defendants' remaining affirmative defenses as they are sufficiently pleaded.

Accordingly, it is

ORDERED and ADJUDGED that defendants' cross-motion to amend the complaint is DENIED; and it is further

ORDERED that plaintiffs' motion to dismiss defendants' counterclaims and affirmative defenses is GRANTED to the extent of DISMISSING defendants' counterclaims for usury, breach of fiduciary duty and unjust enrichment; and it is further

ORDERED that plaintiffs' motion is DENIED as to defendants' remaining affirmative defenses and defendants' affirmative defense of usury is sustained only to the extent such a defense is permitted under General Obligations Law 5-521 (3); and it is further

ORDERED that the parties are directed to attend a preliminary conference on August 12, 2008, at 9:30 A.M., in IAS Part 59, Room 1254, 111 Centre Street, New York, New York 10013. [*4]

This is the decision and order of the court.

Plaintiff's attorney

Eric A. Lieberman, Esq.

Rabinowitz, Boudin, Standard, Krinsky & Lieberman PC

111 Broadway

New York, NY 10006

212-254-1111

Defendant's attorney

Peter S. Schram, Esq.

Massoud & Pashkoff, LLP

101 East 52nd Street - 10th Floor

New York, NY 10022

212-207-6771