| NYAHSA Servs., Inc., Self-Ins. Trust v People CareInc. |
| 2016 NY Slip Op 05418 [141 AD3d 785] |
| July 7, 2016 |
| Appellate Division, Third Department |
[*1]
| NYAHSA Services, Inc., Self-Insurance Trust,Respondent, v People Care Incorporated, Defendant and Third-PartyPlaintiff-Appellant; Cool Insuring Agency, Inc., et al., Third-PartyDefendants-Respondents. |
Barclay Damon, LLP, Albany (David M. Cost of counsel), for defendant andthird-party plaintiff-appellant.
Bond, Schoeneck & King, PLLC, Albany (Stuart F. Klein of counsel), forrespondent.
Keidel, Weldon & Cunningham, LLP, White Plains (Robert J. Grande ofcounsel), for Cool Insuring Agency, Inc. and another, third-partydefendants-respondents.
Peckar & Abramson, PC, River Edge, New Jersey (Kevin J. O'Connor ofcounsel), for LeadingAge New York Services, Inc. and another, third-partydefendants-respondents.
Egan Jr., J. Appeal from an order of the Supreme Court (Platkin, J.), enteredDecember 31, 2014 in Albany County, which, among other things, partially grantedthird-party defendants' motions to dismiss the third-party complaint.
Defendant, a home health care provider, was a member of plaintiff, a groupself-insured trust, that was formed in July 1995 to provide mandated workers'compensation coverage to defendant's employees (see Workers' CompensationLaw § 50 [3-a]; 12 NYCRR 317.2 [i]; [*2]317.3). Defendant was a member of the trust for policyperiods of June 15, 2000 through June 15, 2008. In July 2010, plaintiff commenced theinstant action against defendant for breach of contract and unjust enrichment, allegingthat defendant failed to pay $3,332,427 in adjustment bills that purported to reconcile itsestimated annual contributions with its actual incurred expenses.[FN1] In September 2010, defendant joinedissue and counterclaimed for injunctive relief/accounting, unjust enrichment, fraud/fraudin the inducement, breach of fiduciary duty, breach of the duty of good faith and fairdealing, breach of contract, negligence, conversion and violations of General BusinessLaw §§ 349 and 350. Plaintiff then moved to dismiss thecounterclaims asserted against it pursuant to CPLR 3211 (a) (1), (3), (6) and (7).
On July 26, 2013, defendant commenced a third-party action alleging 13 causes ofaction sounding in breach of contract, breach of good faith and fair dealing, breach offiduciary duty, fraud and negligence against third-party defendants Cool InsuringAgency, Inc. and Cool Risk Management, Inc. (hereinafter collectively referred to asCool), as well as indemnification and contribution, conversion, unjust enrichment,negligent misrepresentation, fraud in the inducement, alter ego liability and violations ofGeneral Business Law §§ 349 and 350 against third-party defendantLeadingAge New York Services, Inc., third-party defendant LeadingAge New York, Inc.(hereinafter collectively referred to as LeadingAge) and Cool.[FN2] Cool and LeadingAge then moved todismiss the third-party complaint pursuant to CPLR 3211 (a) (1), (3), (6) and (7).
Supreme Court granted plaintiff's motion dismissing defendant's counterclaims forinjunctive relief/accounting, unjust enrichment, breach of good faith and fair dealing,negligence, conversion and violations of General Business Law§§ 349 and 350. Supreme Court, among other things, also limited thetemporal scope of defendant's counterclaims for breach of contract, breach of fiduciaryduty, fraud and fraud in the inducement.[FN3] As to defendant's third-party claims,Supreme Court granted the motions as to the causes of action for breach of contract,breach of good faith and fair dealing, breach of fiduciary duty, fraud, conversion, unjustenrichment, negligence, negligent misrepresentation, fraudulent inducement, violationsof General Business Law §§ 349 and 350 and alter ego liability, anddenied, in part, the motion as to the cause of action for indemnification against Cool.Defendant now appeals.[FN4]
[*3] On a motion to dismiss pursuant to CPLR 3211 (a) (7)for failure to state a claim, "we must afford the complaint a liberal construction, acceptthe facts as alleged in the pleading as true, confer on the [nonmoving party] the benefit ofevery possible inference and determine whether the facts as alleged fit within anycognizable legal theory" (Torokv Moore's Flatwork & Founds., LLC, 106 AD3d 1421, 1421 [2013][internal quotation marks and citation omitted]; see Tenney v Hodgson Russ, LLP, 97 AD3d 1089, 1090[2012]). Beginning with defendant's counterclaims, Supreme Court properly dismisseddefendant's second counterclaim for unjust enrichment as the rights of defendant aregoverned and defined by the contribution agreements and, therefore, "a quasi contractcause of action does not lie" (Daley v County of Erie, 71 AD3d 1398, 1400 [2010];see Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 389 [1987]; compare Segal v Cooper, 95AD3d 545, 546 [2012]). We reach a similar conclusion with respect to SupremeCourt's dismissal of defendant's fifth counterclaim for breach of the duty of good faithand fair dealing as this claim is duplicative of the breach of contract counterclaim (see Fahs Constr. Group, Inc. vState of New York, 123 AD3d 1311, 1312-1313 [2014], lv denied 25NY3d 902 [2015]; Mill Fin.,LLC v Gillett, 122 AD3d 98, 104 [2014]; Amcan Holdings, Inc. v Canadian Imperial Bank of Commerce,70 AD3d 423, 426 [2010], lv denied 15 NY3d 704 [2010]). Finally,defendant's seventh counterclaim for negligence also was properly dismissed asdefendant failed to allege a legal duty independent of the underlying contracts anddemanded damages identical to those set forth in its breach of contract claim (see Sutton v Hafner ValuationGroup, Inc., 115 AD3d 1039, 1042 [2014]; Torok v Moore's Flatwork& Founds., LLC, 106 AD3d at 1422).
Upon further review of the pleadings, however, we find that defendant's fourthcounterclaim for breach of fiduciary duty should have been dismissed in its entirety.Supreme Court viewed this particular counterclaim as having both fraud and "non-fraud"components; the court dismissed the non-fraud aspect thereof as redundant, i.e.,duplicative, of the breach of contract counterclaim, but allowed the fraud-based portionthereof to stand and analyzed such claims upon statute of limitations grounds.Examination of the pleadings reveals, however, that defendant's counterclaim for breachof fiduciary duty alleges virtually identical facts and theories and requests the samedamages as set forth in defendant's counterclaim for breach of contract. Accordingly, theentirety of defendant's counterclaim for breach of fiduciary duty—including thefraud-based aspects thereof—is duplicative and, as such, must be dismissed (see Canzona v Atanasio, 118AD3d 841, 843 [2014]; Hylan Elec. Contr., Inc. v MasTec N. Am., Inc., 74 AD3d1148, 1150 [2010]; William Kaufman Org. v Graham & James, 269AD2d 171, 173 [2000]).[FN5]
[*4] Turning to defendant's third-party complaint, we notethat both the underlying facts and the causes of action set forth therein mirror thoseraised by Recco Home Care Services, Inc. in NYAHSA Servs., Inc., Self-Ins. Trust vRecco Home Care Servs., Inc. (141 AD3d 792 [2016] [decided herewith] [hereinafter Recco]). Accordingly, as defendant'sarguments and allegations here relative to certain of its third-party claims areindistinguishable from those raised by Recco Home Care Services in the related action,we affirm Supreme Court's dismissal of defendant's third cause of action for breach ofgood faith and fair dealing (see Fahs Constr. Group, Inc. v State of New York,123 AD3d at 1312-1313; Mill Fin., LLC v Gillett, 122 AD3d at 104; AmcanHoldings, Inc. v Canadian Imperial Bank of Commerce, 70 AD3d at 426), fourthcause of action for breach of fiduciary duty (see EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11,19 [2005]; Mawere vLandau, 130 AD3d 986, 990 [2015]; Brooks v Key Trust Co. N.A., 26 AD3d 628, 630 [2006],lv dismissed 6 NY3d 891 [2006]) and seventh cause of action for unjustenrichment (see Corsello vVerizon N.Y., Inc., 18 NY3d 777, 790-791 [2012]; Hyman v Burgess, 125 AD3d1213, 1214 [2015]; DiPizioConstr. Co., Inc. v Niagara Frontier Transp. Auth., 107 AD3d 1565, 1567[2013]) as duplicative of its breach of contract claim for the reasons set forth in ourdecision in Recco.[FN6]
Supreme Court also properly dismissed defendant's eighth cause of action fornegligence. The statute of limitations for negligence that results in a loss of funds is threeyears (see CPLR 214 [4]; Roslyn Union Free School Dist. v Barkan, 16 NY3d 643,648 n 5 [2011]). Here, defendant's alleged damages arose from, among other things,"amounts already paid" for policy periods of 2000 until 2006 and "demanded paymentsfor adjustments" for which it received notice of in 2008. As such damages were incurredmore than three years prior to the filing of defendant's third-party complaint in 2013,defendant's negligence claim was untimely (see IDT Corp. v Morgan Stanley Dean Witter & Co., 12NY3d 132, 139-140 [2009]; McCormick v Favreau, 82 AD3d 1537, 1539 [2011], lvdenied 17 NY3d 712 [2011]; Kazakhstan Inv. Fund v Manolovici, 306 AD2d36, 36 [2003]; Matter of Kaszirer v Kaszirer, 286 AD2d 598, 598-599[2001]).[FN7]
Finally, we discern no error in Supreme Court's dismissal of defendant's thirteenthcause of action requesting a declaratory judgment of alter ego liability as to LeadingAgebecause the allegations set forth in the third-party complaint are conclusory, anddefendant failed to plead any particularized facts with respect thereto (see Andejo Corp. v South St.Seaport Ltd. Partnership, 40 AD3d 407, 407 [2007]; see also CPLR3013, 3016 [b]; compare MPEGLA, L.L.C. v GXI Intl., LLC, 126 AD3d 641, 642 [2015]). That said, Coolconcedes in its brief—as it maintained [*5]inRecco—that "there is no entity known as Cool Risk Management, Inc.,"which, instead, is a licensed assumed name for Cool Insuring Agency, Inc. As thisadmission is sufficient to sustain defendant's alter ego liability cause of action as to Cool(see generally Len v State ofNew York, 74 AD3d 1597, 1599 [2010], lv dismissed and denied 15NY3d 912 [2010]), Supreme Court should not have dismissed defendant's twelfth causeof action.
We reach a similar conclusion with respect to Supreme Court's dismissal ofdefendant's second cause of action for breach of contract against Cool. Giventhe liberal construction afforded to pleadings (see CPLR 3026), we find thatdefendant sufficiently alleged that it was a third-party beneficiary of the contractsbetween Cool and the trust (seeBoard of Educ. of Northport-E. Northport Union Free Sch. Dist. v Long Is. PowerAuth., 130 AD3d 953, 954-956 [2015]). Specifically, the presence of an expressindemnification clause and the corresponding absence of any language expresslynegating enforcement by third parties demonstrates that dismissal of this particular claimunder CPLR 3211 (a) (7) was not warranted (see Town of Moriah vCole-Layer-Trumble Co., 200 AD2d 879, 880 [1994]; compare IMS Engrs.-Architects,P.C. v State of New York, 51 AD3d 1355, 1357 [2008], lv denied 11NY3d 706 [2008]).
Supreme Court also should not have dismissed defendant's fifth, ninth and tenthcauses of action for fraud, negligent misrepresentation and fraudulent inducement in theirentirety. As each of these claims sound in fraud, defendant was entitled to use the greaterof the six-year statute of limitations or the two-year discovery exception set forth inCPLR 213 (8) (see Fromer v Yogel, 50 F Supp 2d 227, 242 [SD NY 1999]; 14 Bruckner LLC v 14 BrucknerBlvd. Realty Corp., 78 AD3d 431, 431-432 [2010]). Defendant cannot availitself of the two-year discovery exception with respect to these causes of action as thethird-party complaint was not filed until July 26, 2013—more than two years fromwhen defendant admittedly discovered the fraud on September 17, 2010. As todefendant's fraud and fraudulent inducement causes of action, weconclude—consistent with our holding in Recco—that only thoseclaims that accrued within six years of the filing of defendant's third-party complaint onJuly 26, 2013 should be permitted to proceed (see CPLR 213 [8]; Soghanalian v Young, 131AD3d 744, 745 [2015]; Dowlings, Inc. v Homestead Dairies, Inc., 88 AD3d 1226,1228 [2011]). As such causes of action survive to this limited extent, Supreme Court'sorder must be modified accordingly.
We reach a similar conclusion with respect to the negligent misrepresentation claim.Again, defendant's allegations here mirror those made by the defendant inRecco—specifically, that, in order to induce its continued participation inthe trust, third-party defendants misrepresented and omitted material facts known to befalse that were related to the trust's financial solvency, the risk of membership in the trustand Cool's capacity to administer the trust—all of which defendant relied upon toits detriment. As we did in Recco, we find that these allegations are not redundantbut, rather, allege duties independent of Cool's and LeadingAge's duties under the subjectagreements and, therefore, are sufficient to survive a motion to dismiss under CPLR3211 (a) (7). That said, consistent with the temporal limitation governing defendant'sfraud and fraudulent inducement causes of action, only those claims that accrued withinsix years of the filing of the third-party complaint are timely and, hence, should beallowed to proceed. Defendant's remaining arguments, to the extent not specificallyaddressed, have been examined and found to be lacking in merit.
McCarthy, J.P., Rose, Lynch and Aarons, JJ., concur. Ordered that the order ismodified, on the law, without costs, by reversing so much thereof as (1) grantedthird-party defendants' motions to dismiss the second, fifth, ninth, tenth and twelfthcauses of action of the third-party complaint and (2) partially denied plaintiff's motion to[*6]dismiss defendant's fourth counterclaim; third-partydefendants' motions denied to the extent set forth in this Court's decision and plaintiff'smotion granted to the extent of dismissing defendant's fourth counterclaim in its entirety;and, as so modified, affirmed.
[Prior Case History: 45 Misc 3d 1225(A),2014 NY Slip Op 51711(U).]
Footnote 1:The details of theunderlying financial arrangement are set forth in NYAHSA Servs., Inc., Self-Ins.Trust v Recco Home Care Servs., Inc. (141 AD3d 792 [2016] [decided herewith]).
Footnote 2:LeadingAge created thetrust, which, in turn contracted with Cool Insuring Agency, Inc. to serve as the trust'sthird-party administrator and program administrator.
Footnote 3:Supreme Court"informally consolidated" this action with the claims at issue in NYAHSA Servs.,Inc., Self-Ins. Trust v Recco Home Care Servs., Inc. (supra) and issued asingle order resolving both actions. As is relevant here, we address only that part of theorder related to defendant.
Footnote 4:Preliminarily, insofar asdefendant failed to address in its brief the dismissal of its first, third, sixth, eighth andninth counterclaims for injunctive relief/accounting, fraud/fraud in the inducement,breach of contract, conversion and violations of General Business Law§§ 349 and 350, its appeal related thereto is deemed abandoned (see Matter of Siennikov vProfessional Grade Constr., Inc., 137 AD3d 1440, 1441 n 1 [2016]; Goodnow Flow Assn. Inc. vGraves, 135 AD3d 1228, 1229 n 1 [2016]). Similarly, inasmuch as defendantdoes not raise any issues in its brief with respect to its first, sixth and eleventh third-partyclaims for indemnification and contribution, conversion and violations of GeneralBusiness Law §§ 349 and 350, any challenge thereto is deemedabandoned (see Salzer vBenderson Dev. Co., LLC, 130 AD3d 1226, 1229 [2015]).
Footnote 5:Although plaintiff didnot cross-appeal from the underlying order, plaintiff expressly moved to dismiss thisparticular counterclaim as duplicative—an argument with which Supreme Courtpartially agreed. As defendant clearly was on notice that plaintiff was seeking to dismissthe subject counterclaim upon this ground, and as we agree with plaintiff that suchcounterclaim indeed is duplicative, we see no reason not to dismiss this counterclaim inits entirety (compare TorranceConstr., Inc. v Jaques, 127 AD3d 1261, 1263 [2015]; Mann v Rusk, 14 AD3d909, 910 [2005]).
Footnote 6:The viability ofdefendant's second cause of action for breach of contract is discussed infra.
Footnote 7:Despite defendant'scontention that Supreme Court sua sponte dismissed this claim, Cool requested"dismissal of each and every cause of action" based upon "the running of [the] applicablestatute of limitations" in its motion to dismiss. Therefore, we are satisfied that defendantreceived adequate notice to respond (compare Matter of Level 3 Communications, LLC v EssexCounty, 129 AD3d 1255, 1256 [2015], lv denied 26 NY3d 907 [2015]).