| House of Spices (India), Inc. v SMJ Servs., Inc. |
| 2013 NY Slip Op 01236 [103 AD3d 848] |
| February 27, 2013 |
| Appellate Division, Second Department |
| House of Spices (India), Inc., Respondent, v SMJServices, Inc., Appellant, et al., Defendants. (And a Third-PartyAction.) |
—[*1] Michael A. Katz, New York, N.Y. (Steven Finell of counsel), forrespondent.
In an action, inter alia, to recover damages for fraud and for violations of the FederalRacketeer Influenced and Corrupt Organizations Act (18 USC § 1961 etseq.), the defendant SMJ Services, Inc., appeals, as limited by its brief, from so muchof an order of the Supreme Court, Queens County (Kitzes, J.), entered March 9, 2011, asdenied those branches of its motion which were pursuant to CPLR 3211 (a) (5) and (7) todismiss the first and third causes of action insofar as asserted against it.
Ordered that the order is modified, on the law, by deleting the provision thereofdenying that branch of the motion of the defendant SMJ Services, Inc., which waspursuant to CPLR 3211 (a) (7) to dismiss the third cause of action insofar as assertedagainst it, and substituting therefor a provision granting that branch of the motion; as somodified, the order is affirmed insofar as appealed from, without costs or disbursements.
The plaintiff, House of Spices, Inc., an importer of South Asian food products,employed the defendant Atul Puri as an accountant. The plaintiff alleged that Puri andthe defendant Davinder Singh formed a conspiracy to embezzle money from it by issuingchecks drawn on the plaintiff's account and cashed at the defendant Triboro CheckCashing Corp. (hereinafter Triboro), and then subsequently at the defendant SMJServices, Inc. (hereinafter SMJ), after SMJ purchased the check-cashing business fromTriboro. The scheme allegedly was discovered by the plaintiff's president in August2009, by which time, it was alleged, the sum of $868,480.75 had been taken. As relevantto this appeal, the plaintiff alleged, inter alia, that SMJ had knowledge of the conspiracyto commit fraud against the plaintiff and, in furtherance of the conspiracy, failed torecord the name and address of the person or persons cashing the checks drawn on theplaintiff's account.
The Supreme Court properly denied those branches of SMJ's motion which werepursuant to CPLR 3211 (a) (5) to dismiss the first cause of action, alleging fraud, and thethird cause of action, alleging violations of section 1962 (c) and (d) of the FederalRacketeer Influenced and Corrupt Organizations Act (18 USC § 1962 [c], [d][hereinafter RICO]), insofar as asserted against it. On a motion to dismiss a cause ofaction pursuant to CPLR 3211 (a) (5) upon the ground that it [*2]is time-barred, the defendant bears the initial burden ofestablishing, prima facie, that the time in which to sue had expired (see Cottone v Selective Surfaces,Inc., 68 AD3d 1038, 1040 [2009]). In this regard, the facts as alleged in thecomplaint must be construed in the light most favorable to the plaintiff (see id. at1041).
Here, the plaintiff alleged that the statute of limitations with regard to the fraud andthe RICO causes of action against SMJ accrued, at the earliest, on April 19, 2004, whenSMJ purchased the check-cashing business from Triboro, or at the latest, in August 2009,when the plaintiff actually discovered the fraud and the actions underlying the RICOallegations.
A fraud cause of action must be interposed within the greater of six years from thedate the cause of action accrued, i.e., when the plaintiff was damaged by the allegedmisconduct, or two years from the time the plaintiff discovered, or with reasonablediligence could have discovered, the fraud (see CPLR 213 [8]; Sargiss v Magarelli, 12 NY3d527, 532 [2009]; Shalik vHewlett Assoc., L.P., 93 AD3d 777, 778 [2012]; Sandpebble Bldrs., Inc. vMansir, 90 AD3d 888, 889 [2011]). Here, because the action was commencedagainst SMJ on December 16, 2009, the fraud cause of action was timely interposed.Furthermore, to the extent that SMJ contends that the Supreme Court should have heldthe plaintiff to some earlier, though unidentified, date, upon which the plaintiff should befound to have possessed knowledge of the facts on which the fraud could havereasonably been inferred, we reject this contention. An inquiry into when a plaintiff"should have discovered" an alleged fraud presents a mixed question of law and fact(see Trepuk v Frank, 44 NY2d 723, 724-725 [1978]; Vilsack v Meyer, 96 AD3d827 [2012]). However, once a plaintiff demonstrates that an action is timely, as theplaintiff has done here, it is the defendant's burden to demonstrate, prima facie, that thefraud could have been discovered earlier with reasonable diligence (see Sargiss vMagarelli, 12 NY3d at 532; Vilsack v Meyer, 96 AD3d 827, 829 [2012]). Here, SMJdid not establish, as a matter of law, by its conclusory assertions, that the fraud couldhave been discovered by the plaintiff earlier (see Vilsack v Meyer, 96 AD3d 827 [2012]; JP Morgan Chase Bank, N.A. vKalpakis, 91 AD3d 722, 723 [2012]).
The statute of limitations for civil RICO claims is four years (see AgencyHolding Corp. v Malley-Duff & Associates, Inc., 483 US 143, 156 [1987];Rotella v Wood, 528 US 549, 552 [2000]; Dempster v Liotti, 86 AD3d 169, 178 [2011]). A RICOclaim is deemed to have accrued when the plaintiff "knew or should have known of hisor her injury, regardless of when he or she discovered the underlying fraud"(Dempster v Liotti, 86 AD3d at 178). Here, since the plaintiff asserted its RICOclaim within four years after discovering its injury, it was timely. Accordingly, theSupreme Court properly denied that branch of SMJ's motion which was to dismiss thefirst and third causes of action insofar as asserted against it as time-barred.
"When a party moves to dismiss a complaint pursuant to CPLR 3211 (a) (7), thestandard is whether the pleading states a cause of action, not whether the proponent ofthe pleading has a cause of action" (Sokol v Leader, 74 AD3d 1180, 1180-1181 [2010]). Indetermining such a motion, the court must "accept the facts as alleged in the complaint astrue, accord plaintiffs the benefit of every possible favorable inference, and determineonly whether the facts as alleged fit within any cognizable legal theory" (Leon vMartinez, 84 NY2d 83, 87-88 [1994]).
"The elements of a cause of action sounding in fraud are a material misrepresentationof an existing fact, made with knowledge of the falsity, an intent to induce reliancethereon, justifiable reliance upon the misrepresentation, and damages" (Introna v Huntington LearningCtrs., Inc., 78 AD3d 896, 898 [2010]; see Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d553, 559 [2009]). All of the elements of a fraud claim "must be supported by factualallegations containing the details constituting the wrong" in order to satisfy the pleadingrequirements of CPLR 3016 (b) (Cohen v Houseconnect Realty Corp., 289AD2d 277, 278 [2001]; see 68Burns New Holding, Inc. v Burns St. Owners Corp., 18 AD3d 857 [2005]). Thepurpose of this pleading requirement "is to inform a defendant of the complained-ofincidents" (Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d at 559).Nonetheless it may be "almost impossible to state in detail the circumstances constitutinga fraud where those circumstances are peculiarly within the knowledge of [an adverse]party" (Jered Contr. Corp. v New York City Tr. Auth., 22 NY2d 187, 194[1968]). "Under such circumstances, the heightened pleading requirements of CPLR3016 (b) may be met when the material facts alleged in the [*3]complaint, in light of the surrounding circumstances, 'aresufficient to permit a reasonable inference of the alleged conduct' including the adverseparty's knowledge of, or participation in, the fraudulent scheme" (High Tides, LLC v DeMichele,88 AD3d 954, 957 [2011], quoting Pludeman v Northern Leasing Sys., Inc., 10 NY3d 486,492 [2008]). Here, the second amended complaint contains sufficient allegations of factfrom which it can be inferred that SMJ agreed to cooperate in a fraudulent scheme toembezzle funds from the plaintiff. The allegation that SMJ conspired with the otherdefendants gives rise to a reasonable inference that SMJ was aware of a fraud andintended to aid in the commission of the fraud (see generally First Keystone Consultants, Inc. v DDR Constr.Servs., 74 AD3d 1135 [2010]; Murray Hill Inv. v Adas Yereim, Inc.,233 AD2d 305, 306 [1996]). Accordingly, the Supreme Court properly denied thatbranch of SMJ's motion which was to dismiss the first cause of action insofar as assertedagainst it for failure to state a cause of action.
As to the third cause of action, asserting violations of the RICO Act, the complaintfails to state a cause of action. "Because the core of a RICO civil conspiracy is anagreement to commit predicate acts, a RICO civil conspiracy complaint, at the very least,must allege specifically such an agreement" (Hecht v Commerce Clearing House,Inc., 897 F2d 21, 25 [2d Cir 1990]). Here, there is no such allegation of a consciousagreement. Accordingly the Supreme Court should have granted that branch of SMJ'smotion which was to dismiss the third cause of action insofar as asserted against it forfailure to state a cause of action.
The plaintiff's argument on appeal regarding an application for leave to amend thethird cause of action is not properly before this Court. Balkin, J.P., Roman, Sgroi andCohen, JJ., concur. [Prior Case History: 2011 NY Slip Op 31072(U).]