| Rodeo Family Enters., LLC v Matte |
| 2012 NY Slip Op 06793 [99 AD3d 781] |
| October 10, 2012 |
| Appellate Division, Second Department |
| Rodeo Family Enterprises, LLC, Plaintiffs, v Scott Matte etal., Defendants, Oyster Bay Group, LLC, Appellant, and Hertz, Herson & Co., LLP,Respondent. |
—[*1] LeClair Ryan, A Professional Corporation, New York, N.Y. (Ronald S. Herzog and ThomasFilardo of counsel), for respondent.
In an action, inter alia, to recover damages for breach of contract and breach of fiduciaryduty, the defendant Oyster Bay Group, LLC, appeals, as limited by its brief, from so much of anorder of the Supreme Court, Nassau County (Warshawsky, J.), entered April 28, 2011, as grantedthose branches of the motion of the defendant Hertz, Herson & Co., LLP, which were pursuant toCPLR 3211 (a) to dismiss its second, third, fourth, and fifth cross claims insofar as assertedagainst that defendant.
Ordered that the order is affirmed insofar as appealed from, with costs.
In 2004, the plaintiff Samir Shah, as principal of Shanti Holding Corp., thepredecessor-in-interest to Rodeo Family Enterprises, LLC (hereinafter Rodeo), entered into across-purchase agreement and a buy/sell agreement (hereinafter the 2004 Buy/Sell Agreement)with the defendant Oyster Bay Group, LLC (hereinafter OBG), a holding company that owns100% of three subsidiaries: RJM Acquisitions, LLC (hereinafter RJM), Island National Group,LLC, and LTR Support Services, LLC. The Cross-Purchase Agreement and the 2004 Buy/SellAgreement set forth the methods for determining the value, upon redemption, of each of OBG'ssubsidiaries.
In 2009, the relationship between Shah and the beneficial owners of OBG broke down, andthey were unable to reach agreement on a determination of RJM's valuation under the 2004Buy/Sell agreement. Consequently, in December 2009, Rodeo and Shah (hereinafter together theplaintiffs) commenced this action alleging, inter alia, a breach of the 2004 Buy/Sell Agreementdue to the refusal of OBG and several other defendants to determine Rodeo's interest in RJMaccording to the method set forth in the 2004 Buy/Sell Agreement. The plaintiffs later amendedtheir complaint to add, as a defendant, the accounting firm of Hertz, Herson & Co. LLP(hereinafter Hertz Herson), which allegedly served as outside auditor for, accountant of, andtrusted advisor to RJM and OBG. In its answer to the amended complaint, OBG asserted, interalia, cross claims against Hertz Herson sounding in negligence and breach of fiduciary duty.Thereafter, the Supreme Court granted those branches of Hertz Herson's motion which werepursuant to CPLR 3211 (a) to dismiss OBG's second, third, fourth, and fifth cross claims insofaras asserted against Hertz Herson. OBG [*2]appeals, and weaffirm the order insofar as appealed from for the reasons set forth below.
A motion to dismiss a complaint pursuant to CPLR 3211 (a) (1) may be granted only wherethe documentary evidence resolves all factual issues as a matter of law and conclusively disposesof the claims at issue (see CPLR 3211 [a] [1]; Goshen v Mutual Life Ins. Co. ofN.Y., 98 NY2d 314, 326 [2002]; Out of Box Promotions, LLC v Koschitzki, 55 AD3d 575, 576[2008]; Fleming v Kamden Props.,LLC, 41 AD3d 781, 781 [2007]). Here, the documentation submitted by Hertz Herson insupport of those branches of its motion which were to dismiss OBG's third and fifth cross claimsinsofar as asserted against it pursuant to CPLR 3211 (a) (1) based on documentary evidence and3211 (a) (3) for lack of standing conclusively established that there was no privity of contractbetween OBG and Hertz Herson. In this regard, Hertz Herson submitted engagement agreements,which demonstrate that it was retained by RJM, OBG's subsidiary, to conduct annual financialaudits for fiscal years 2006 through 2009, and that OBG was not a party to any of thoseengagement agreements. Moreover, the third and fifth cross claims were devoid of factualallegations that there was a relationship between OBG and Hertz Herson approaching that ofprivity (see Security Pac. Bus. Credit v Peat Marwick Main & Co.,79 NY2d 695, 706[1992]; Credit Alliance Corp. v Arthur Andersen & Co., 65 NY2d 536, 551 [1985]).Consequently, OBG lacks standing to assert the third and fifth cross claims against Hertz Herson,which were based upon Hertz Herson's alleged failure to properly conduct financial audits ofRJM's financial statements, since the right to pursue those cross claims belong to OBG'ssubsidiary, RJM (see Digital BroadcastCorp. v Ladenburg, Thalmann & Co., Inc., 63 AD3d 647, 648 [2009]; MineralsTech. v Pfizer Inc., 309 AD2d 525 [2003]; Diesel Sys., Ltd. v Yip Shing Diesel Eng'gCo., Ltd., 861 F Supp 179, 181 [1994]; Bross Utils. Serv. Corp. v Aboubshait, 618 FSupp 1442, 1445 [1985]).
OBG's second and fourth cross claims, which were premised upon Hertz Herson's allegedlynegligent advice and assistance in the drafting and incorporation of the valuation method forRJM in the 2004 Buy/Sell Agreement, were time-barred. A cause of action to recover damagesfor nonmedical professional malpractice must be commenced within three years after the causeof action accrues (see CPLR 214 [6]; Matter of R.M. Kliment & Frances Halsband, Architects [McKinsey & Co.,Inc.], 3 NY3d 538, 541-542 [2004]; Harris v Kahn, Hoffman, Nonenmacher & Hochman, LLP, 59 AD3d390 [2009]; RGH Liquidating Trustv Deloitte & Touche LLP, 47 AD3d 516, 517 [2008]). Moreover, a cause of actionalleging accountant malpractice "accrues upon the client's receipt of the accountant's workproduct" (Ackerman v Price Waterhouse, 84 NY2d 535, 541 [1994]; see Williamson v PricewaterhouseCoopersLLP, 9 NY3d 1, 8 [2007]). Hertz Herson demonstrated that OBG's second and fourthcross claims accrued when the advice it tendered was delivered, and no later than June 30, 2004,the date on which the 2004 Buy/Sell Agreement was executed (see Williamson vPricewaterhouseCoopers LLP, 9 NY3d at 8; Ackerman v Price Waterhouse, 84NY2d at 541). As OBG's cross claims were not interposed until August 17, 2010, which wasafter the expiration of the applicable three-year statute of limitations, Hertz Herson sustained itsinitial burden of proving that OBG's second and fourth cross claims were untimely (seeCPLR 214 [6]; Swift v New York Med.Coll., 25 AD3d 686, 687 [2006]; Gravel v Cicola, 297 AD2d 620, 620-621[2002]). The burden then shifted to OBG to raise a question of fact as to whether the statue oflimitations was tolled or was otherwise inapplicable (see Williams v New York City Health & Hosps. Corp., 84 AD3d1358, 1359 [2011]; Rakusin vMiano, 84 AD3d 1051 [2011]; Lessoff v 26 Ct. St. Assoc., LLC, 58 AD3d 610, 611 [2009];Gravel v Cicola, 297 AD2d at 621).
The continuous representation doctrine tolls the running of the statute of limitations forprofessional malpractice claims until the completion of the professional's ongoing servicesconcerning the matter out of which the malpractice claim arises, but not throughout thecontinuation of a general professional relationship (see Williamson vPricewaterhouseCoopers LLP, 9 NY3d at 9-10; Hasty Hills Stables, Inc. v Dorfman, Lynch, Knoebel & Conway, LLP,52 AD3d 566, 567 [2008]; Giarratano v Silver, 46 AD3d 1053, 1055 [2007]; Booth v Kriegel, 36 AD3d 312,314 [2006]). Additionally, the continuous representation doctrine applies only where there is "amutual understanding of the need for further representation on the specific subject matterunderlying the malpractice claim" (McCoy v Feinman, 99 NY2d 295, 306 [2002]; see Zorn v Gilbert, 8 NY3d 933,934 [2007]).
Contrary to OBG's contentions, the continuous representation doctrine did not toll the statuteof limitations. In this regard, Hertz Herson's alleged negligent advice regarding the [*3]drafting of the 2004 Buy/Sell Agreement was a subject distinct andseparate from Hertz Herson's subsequent work conducting audits of RJM's financial statements(see Williamson v PricewaterhouseCoopers LLP, 9 NY3d at 10-11; Weiss v Deloitte & Touche, LLP, 63AD3d 1045, 1048 [2009]; Giarratano v Silver, 46 AD3d at 1055; Mitschele v Schultz, 36 AD3d249, 253 [2006]). Moreover, OBG has not alleged that the parties mutually contemplatedthat Hertz Herson's work would continue on this specific subject matter or that Hertz Hersonagreed to remedy any deficiencies in the valuation method for RJM incorporated in the 2004Buy/Sell Agreement.
The parties' remaining contentions are without merit.
In light of the foregoing, the Supreme Court properly granted those branches of HertzHerson's motion which were pursuant to CPLR 3211 (a) (1) and (3) to dismiss the third and fifthcross claims asserted against it by OBG and those branches of Hertz Herson's motion which werepursuant to CPLR 3211 (a) (5) to dismiss, as time-barred, the second and fourth cross claimsasserted against it by OBG. Angiolillo, J.P., Dickerson, Belen and Miller, JJ., concur. [PriorCase History: 31 Misc 3d 1227(A), 2011 NY Slip Op 50883(U).]