Does a forum selection clause prevent application of Utah's borrowing statute? Federated v. Libby Explained

In Federated Capital Corp. v. Libby, the Utah Supreme Court addressed whether a forum selection clause requiring application of Utah law prevents the operation of Utah’s borrowing statute. The case arose when credit card companies sued defaulting cardholders after Pennsylvania’s four-year statute of limitations had expired but within Utah’s six-year period.

Background and Facts

Appellees signed credit card agreements containing both a forum selection clause requiring suit in Utah courts and a choice of law provision selecting Utah law. The agreements required payments to be sent to Philadelphia addresses. When appellees defaulted in 2006, Federated filed suit in 2012—within Utah’s six-year statute of limitations but beyond Pennsylvania’s four-year period. The district court applied Utah’s borrowing statute, adopting Pennsylvania’s shorter limitations period and granting summary judgment for defendants.

Key Legal Issues

The central question was whether an enforceable forum selection clause precludes application of Utah’s borrowing statute, which requires Utah courts to apply a foreign jurisdiction’s statute of limitations when a cause of action arises in that jurisdiction and is “not actionable” there “by reason of the lapse of time.”

Court’s Analysis and Holding

The court rejected both of Federated’s arguments. First, it held that the contractual provisions selecting “all of Utah’s laws” necessarily included the borrowing statute itself. The borrowing statute does not merely apply foreign law but “borrows” and adopts it, making it Utah law for that dispute. Second, the court found that claims can be “not actionable by reason of the lapse of time” even when alternative grounds for dismissal exist, such as a forum selection clause preventing suit elsewhere.

Practice Implications

This decision clarifies that forum selection clauses alone cannot circumvent Utah’s borrowing statute. The court emphasized it would not create judicial exceptions to statutory requirements absent clear legislative direction. Associate Chief Justice Lee’s concurrence noted an important unresolved question: whether the borrowing statute’s “arises in” language should follow choice-of-law rules rather than traditional place-of-performance tests when contracts contain choice-of-law clauses.