## Facts

- Hayim Kalmich, a Jewish businessman in Belgrade, Yugoslavia, owned a textile importing business before World War II.
- After Nazi Germany occupied Yugoslavia in 1941, occupation authorities implemented economic “Aryanization,” targeting Jewish-owned businesses for seizure.
- Karl Bruno allegedly submitted to the occupation economic authority and, after an order issued in June 1941, was appointed to manage Kalmich’s business and took control of it.
- In March 1942, Bruno allegedly understated the business’s value, purchased it from the occupation authority at a bargain price, and resold it to a third party for profit.
- Before the German defeat in Yugoslavia, Bruno allegedly fled to avoid accountability; Kalmich later expended substantial effort for years attempting to locate him.
- In 1972, Kalmich learned Bruno lived in Chicago and sued in federal court in Illinois seeking damages for the wartime taking and conversion.
- The district court dismissed under Rule 12, holding the action barred by the applicable Illinois statute of limitations.

## Issues

1. In a diversity case arising from alleged conversion in Yugoslavia, does Illinois apply Yugoslav law only to the merits while applying Illinois’s statute of limitations as a procedural forum rule?
2. Do allegations that the defendant fled and remained undiscovered for decades estop the defendant from asserting the Illinois statute of limitations?
3. Can a plaintiff avoid an otherwise applicable statute of limitations by pleading an equitable count governed only by laches?

## Decision

- The Seventh Circuit affirmed the dismissal.
- The court held Yugoslav law governed substantive rights because the cause of action arose in Yugoslavia.
- The court applied Illinois’s statute of limitations, treating limitations as procedural under Illinois conflict-of-laws rules and finding the Illinois period had long expired.
- The court rejected estoppel, concluding the allegations did not satisfy Illinois requirements for barring a limitations defense.
- The court rejected the attempt to proceed in equity to avoid limitations, concluding laches did not permit relief where the claim was time-barred under the analogous statute.

## Legal Principles

- In diversity, a federal court applies the forum state’s choice-of-law rules to determine governing substantive law.
- Under Illinois conflicts doctrine, substantive rights are typically governed by the law of the place where the cause of action arose, but statutes of limitations are generally procedural and governed by the forum unless the foreign time limit is part of the substantive right.
- A foreign jurisdiction’s exceptionally long or “perpetual” limitations period does not displace the forum’s limitations period when the forum treats limitations as procedural.
- Estoppel to assert a statute of limitations under Illinois law requires more than a plaintiff’s difficulty locating the defendant; the defendant must have engaged in conduct that prevented or misled the plaintiff regarding timely suit.
- A plaintiff may not evade an applicable statute of limitations by re-labeling a time-barred legal claim as an equitable claim; equity commonly measures timeliness by the analogous statutory period when the underlying right is subject to limitations.

## Conclusion

The Seventh Circuit held that although Yugoslav substantive law governed the alleged wartime conversion, Illinois limitations law controlled timeliness, rendering the decades-late action untimely; neither estoppel nor an equitable laches theory avoided the time bar.


Kalmich v. Bruno, 553 F.2d 549 (7th Cir. 1977)