The Court of Appeals has taken up a case to decide whether companies with offices outside the state that do business here should be held to New York's statute of limitations or their home state's, depending on where an action accrued.

The appeal involves a reversal from the Appellate Division, First Department, which granted a motion to dismiss a lawsuit against Barclays Bank and HSBC Bank from Deutsche Bank over alleged contract breaches related to the sale of residential mortgage-backed securities.

Harvey Wolkoff, previously of Ropes & Gray in Manhattan, represented Deutsche Bank on the appeal. He has since left the firm. Information on who will represent the bank at the Court of Appeals was not immediately available Wednesday.

Jeffrey Scott, a partner at Sullivan & Cromwell, and Michael Ware, a partner at Mayer Brown, represented Barclays and HSBC respectively. They did not immediately comment on the court's decision to hear the case.

Attorneys for the two defendant banks claim Deutsche Bank's claims are time-barred because their trust administration offices are located in California, which has a four-year statute of limitations for such breaches of contract. New York has a six-year statute of limitations.

It's another case involving the quality of home loans sold on the precipice of the recent financial downturn that was incited, in part, by a mortgage crisis, and whether the banks who originally sold those loans should face litigation.

Barclays and HSBC conveyed a portfolio of residential mortgage-backed securities in 2007 to Deutsche Bank, which became a trustee of those loans. As with any mortgage portfolio agreement, the package of loans came with a warranty about their quality and whether they met certain underwriting guidelines.

Separate investigations into the nature of those loans between 2011 and 2013 revealed that many of the securities were determined to be in breach of the representations and warranties of the original agreement, according to the complaints against both banks.

Deutsche Bank brought lawsuits against Barclays and HSBC in 2013 alleging they misrepresented the quality of the loans six years earlier.

The banks moved to dismiss their respective lawsuits, arguing the statute of limitations had elapsed in California. Barclays and HSBC claimed that, since Deutsche Bank's trust administration offices are located in California, they can only be held to California's four-year statute of limitations for contract breaches.

Manhattan Supreme Court Justice Marcy Friedman disagreed with the banks in a 2015 decision rejecting part of their motions to dismiss. The two cases were consolidated for a response to the motions. Friedman said she was unconvinced Barclays and HSBC should be held to the statute of limitations in California because that's not necessarily where the injury in the case occurred.

She cited the opinion in Maiden v. Biehl, a decision out of the Southern District of New York, that said using “the residency of the trustee as the sole factor to determine the place of accrual does not make sense as a practical matter, and is not required legally,” according to her decision.

“Here, the California residence of the trustees is not a reliable indicator of the place where the injury occurred,” Friedman wrote. “The trusts were established in the [Pooling and Servicing Agreements], pursuant to New York law.”

The Appellate Division, in a unanimous decision, reversed that opinion in 2017.

They cited a section of the state's “borrowing statute” that Friedman mentioned in her decision but did not apply in the same way.

The statute, CPLR 202, requires that an action brought by a nonresident plaintiff, “based upon a cause of action accruing without the state,” be timely under the respective statutes of limitations of both New York and “the place without the state where the cause of action accrued,” the Appellate Division said.

The Appellate Division interpreted that law to mean the shorter of the two statutes of limitations between New York and the state where the cause of action accrued should be used. The cause of action in this case, the court said, accrued in California, not New York.

“The subject trust in each action comprises a pool of mortgage loans, originated by California lenders and encumbering California properties, either exclusively (in the Barclays case) or predominantly (in the HSBC case), and, as previously discussed, administered in California by plaintiff, a California-based trustee,” the Appellate Division said.

The high court will be tasked with deciding whether the Appellate Division correctly interpreted the state's borrowing statute to mean New York's statute of limitations does not apply in the case. The decision could set a precedent for other cases where multiple jurisdictions with differing statutes of limitations are involved.

The decision could be as simple as determining which lower court was right about where the action accrued. That could inform how the borrowing statute is applied in the case.

The Court of Appeals will hear arguments in the case at some point next year. The average time between granting leave to appeal and oral arguments is about 11 months.