NYAHSA Services, Inc., Self-Insurance Trust v. Recco Home Care Services, Inc. , 36 N.Y.S.3d 270 ( 2016 )

State of New York
Supreme Court, Appellate Division
Third Judicial Department
Decided and Entered: July 7, 2016 521954
________________________________
NYAHSA SERVICES, INC.,
SELF-INSURANCE TRUST,
Plaintiff,
v
RECCO HOME CARE SERVICES, INC.,
Defendant
and Third-
Party MEMORANDUM AND ORDER
Plaintiff-
Appellant;
COOL INSURING AGENCY, INC.,
et al.,
Third-Party
Defendants-
Respondents.
________________________________
Calendar Date: April 29, 2016
Before: McCarthy, J.P., Egan Jr., Rose, Lynch and Aarons, JJ.
__________
Barclay Damon, LLP, Albany (David M. Cost of counsel), for
defendant and third-party plaintiff-appellant.
Keidel, Weldon & Cunningham, LLP, White Plains (Robert J.
Grande of counsel), for Cool Insuring Agency, Inc. and another,
third-party defendants-respondents.
Peckar & Abramson, PC, River Edge, New Jersey (Kevin J.
O'Connor of counsel), for LeadingAge New York Services, Inc. and
another, third-party defendants-respondents.
__________
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Egan Jr., J.
Appeal from an order of the Supreme Court (Platkin, J.),
entered December 31, 2014 in Albany County, which, among other
things, partially granted third-party defendants' motions to
dismiss the third-party complaint.
Defendant, an employer of home health care providers, was
a member of plaintiff, a group self-insured trust, that was
formed in July 1995 to provide mandated workers' compensation
coverage to defendant's employees (see Workers' Compensation Law
§ 50 [3-a]; 12 NYCRR 317.2 [i]; 317.3). In 1999, plaintiff
contracted with third-party defendant Cool Insuring Agency, Inc.
to serve as its third-party administrator and third-party
defendant Cool Risk Management, Inc. to serve as its program
administrator (hereinafter collectively referred to as Cool).
Defendant was a member of the trust from 1997 until 2008, which
encompassed policy periods of March 3, 1997 to March 3, 2009.
The trust's annual contribution agreements provided, among other
things, that defendant was obligated to pay a deposit
contribution, which consisted of administrative fees and
projected losses. In the event that defendant's annual deposit
contribution exceeded its annual containment contribution, the
latter of which reflected its actual incurred losses, then
defendant would receive a refund. On the other hand, if
defendant's deposit contribution was less than its containment
contribution, then it was obligated to pay the deficit to the
trust.
Upon termination of its membership in the trust, defendant
received two final adjustment bills of $595,816 and $90,574,
which purported to reconcile its estimated annual contributions
with its actual incurred expenses. After defendant failed to pay
the final adjustment bills, plaintiff commenced the instant
action against defendant for breach of contract and unjust
enrichment. Defendant joined issue and, on July 26, 2013,
commenced a third-party action alleging 13 causes of action
sounding in breach of contract, breach of good faith and fair
dealing, breach of fiduciary duty, fraud and negligence against
Cool, as well as indemnification and contribution, conversion,
unjust enrichment, negligent misrepresentation, fraud in the
-3- 521954
inducement, alter ego liability and violations of General
Business Law §§ 349 and 350 against third-party defendant
LeadingAge New York Services, Inc., third-party defendant
LeadingAge New York, Inc. (hereinafter collectively referred to
as LeadingAge) and Cool.
Cool and LeadingAge then moved to dismiss the third-party
complaint pursuant to CPLR 3211 (a) (1), (5) and (7). 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, conversion, unjust enrichment, negligence,
negligent misrepresentation, violations of General Business Law
§§ 349 and 350 and alter ego liability. Supreme Court also
limited the temporal scope of the causes of action for fraud and
fraud in the inducement, and denied the motions as to the cause
of action for indemnification and contribution.1 Defendant now
appeals, contending that Supreme Court erred in dismissing and/or
limiting the temporal scope of its assorted claims against Cool
and LeadingAge.2
1
Supreme Court "informally consolidated" this action with
NYAHSA Servs., Inc., Self-Insurance Trust v People Care Inc. (___
AD3d ___ [decided herewith]) and issued a single order resolving
both actions. As is relevant here, we address only that part of
the order related to defendant.
2
Preliminarily, insofar as defendant failed to address the
dismissal of its sixth cause of action for conversion in its
brief, its appeal related thereto is deemed abandoned (see Salzer
v Benderson Dev. Co., LLC, 130 AD3d 1226, 1229 [2015]; Towne v
Kingsley, 121 AD3d 1381, 1382 n [2014]). Likewise, as defendant
failed to address the dismissal of its eleventh cause of action
alleging that Cool and LeadingAge engaged in deceptive business
practices in contravention of General Business Law §§ 349 and
350, its appeal is deemed abandoned and, in any event, we agree
with Supreme Court that this cause of action is time-barred (see
CPLR 214 [2]; Statler v Dell, Inc., 775 F Supp 2d 474, 484 [ED NY
2011]; Gaidon v Guardian Life Ins. Co. of Am., 96 NY2d 201, 208-
210 [2001]; Pike v New York Life Ins. Co., 72 AD3d 1043, 1047-
1048 [2010]).
-4- 521954
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, accept the facts as alleged in the pleading as
true, confer on the [nonmoving party] the benefit of every
possible inference and determine whether the facts as alleged fit
within any cognizable legal theory" (Torok v Moore's Flatwork &
Founds., LLC, 106 AD3d 1421, 1421 [2013] [internal quotation
marks and citation omitted]; see Sim v Farley Equip. Co. LLC, 138
AD3d 1228, 1228 [2016]). Beginning with defendant's third cause
of action, wherein it alleges that Cool breached the duty of good
faith and fair dealing, and fourth cause of action, wherein it
alleges that Cool breached its fiduciary duty, we affirm Supreme
Court's dismissal of those claims – albeit on alternative
grounds. Upon review of the complaint, we find that defendant's
breach of the duty of good faith and fair dealing claim is
duplicative as it "arises from the same [operative] facts and
seeks the same damages as [the] breach of contract claim" –
specifically, Cool's alleged misrepresentation of the amount of
administrative fees, failure to properly capitalize the trust and
inadequate performance (Mill Fin., LLC v Gillett, 122 AD3d 98,
104 [2014]; see Fahs Constr. Group, Inc. v State of New York, 123
AD3d 1311, 1312-1313 [2014], lv denied 25 NY3d 902 [2015]; Amcan
Holdings, Inc. v Canadian Imperial Bank of Commerce, 70 AD3d 423,
426 [2010], lv denied 15 NY3d 704 [2010]).3 Defendant's breach
of fiduciary duty claim against Cool also was based upon the same
facts and theories "expressly raised in [its] breach of contract
claim" and, therefore, was duplicative (Brooks v Key Trust Co.
N.A., 26 AD3d 628, 630 [2006], lv dismissed 6 NY3d 891 [2006];
see Mawere v Landau, 130 AD3d 986, 990 [2015]; Canzona v
Atanasio, 118 AD3d 841, 843 [2014]). Having failed to set forth
allegations – apart from the terms of the subject contracts –
that would create the necessary relationship of "a higher level
of trust," defendant's cause of action for breach of a fiduciary
duty was properly dismissed (EBC I, Inc. v Goldman, Sachs & Co.,
5 NY3d 11, 19 [2005]; see Kaminsky v FSP Inc., 5 AD3d 251, 252
[2004]).
3
The viability of defendant's second cause of action for
breach of contract is discussed infra.
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With respect to the fifth and tenth causes of action, both
of which are based in fraud, defendant argues only that Supreme
Court miscalculated the applicable statute of limitations. We
disagree. Actions based on fraud are subject to the statute of
limitations of "the greater of six years from the date the cause
of action accrued or two years from the time the plaintiff . . .
discovered the fraud, or could with reasonable diligence have
discovered it" (CPLR 213 [8]; see Abele Tractor & Equip. Co.,
Inc. v Balfour, 133 AD3d 1171, 1171 [2015]). Defendant alleges
that Cool committed fraud and that all third-party defendants
committed fraudulent inducement between 1997 and 2009 by, among
other things, failing to disclose the true financial condition of
the trust and misrepresenting Cool's ability to administer the
trust.
Defendant concedes in its brief that it discovered the
alleged fraud upon receipt of the first disputed adjustment on
March 5, 2010, but it did not commence this third-party action
until July 2013. As defendant did not file the third-party
action within two years of discovery, the causes of action based
in fraud are time-barred under the discovery exception (see CPLR
213 [8]; Soghanalian v Young, 131 AD3d 744, 745 [2015]; Elhannon,
LLC v Brenda J. DeLuca Trust, 108 AD3d 911, 912-913 [2013];
compare Sargiss v Magarelli, 12 NY3d 527, 532 [2009]). However,
because the greater of the two statutes of limitations applies,
Supreme Court properly concluded that certain of defendant's
fraud and fraudulent inducement claims are timely, but only those
that accrued within six years from the commencement of its third-
party action (see CPLR 203 [a]; 213 [8]).4
4
We also reject defendant's alternative argument that the
statute of limitations has not begun to run because it has not
incurred damages – specifically, a judgment rendered against it
for the outstanding amounts due to the trust. We find that this
contention is without merit, as defendant's damages became
certain and ascertainable upon receipt of the March 2010 and
March 2011 adjustment bills (compare Sidamonidze v Kay, 304 AD2d
415, 416 [2003]). Furthermore, defendant pleaded damages
including "amounts already paid to the . . . [t]rust for
[d]eposit [c]ontributions and demanded payments for adjustments."
-6- 521954
We also reject defendant's contention that Supreme Court
erred in dismissing its seventh cause of action for unjust
enrichment, as we find that cause of action to be duplicative of
defendant's breach of contract claim. Defendant merely alleges
in its third-party complaint that the diversion of its trust
contributions by Cool and LeadingAge bestowed an unintended
benefit upon them for which defendant should be allowed to
recover. Without deciding whether Supreme Court was correct in
determining that Cool and LeadingAge did not have an equitable
obligation to defendant, we find that the assertions raised in
defendant's unjust enrichment claim echo those set forth in its
breach of contract claim – specifically, its allegation that Cool
and LeadingAge recruited unqualified employer members to reap
greater administration fees – and, therefore, such claim must be
dismissed (see Corsello v Verizon N.Y., Inc., 18 NY3d 777, 790-
791 [2012]; Hyman v Burgess, 125 AD3d 1213, 1214 [2015]; DiPizio
Constr. Co., Inc. v Niagara Frontier Transp. Auth., 107 AD3d
1565, 1567 [2013]).
Turning to its eighth cause of action, defendant asserts
that it incurred damages due to Cool's negligent administration
of the trust in the form of, among other things, "amounts already
paid" from 1997 to 2009 and "demanded payments for adjustments"
for which it first received notice of in March 2010. As the
statute of limitations for negligence that results in a loss of
funds is three years (see CPLR 214 [4]; Roslyn Union Free Sch.
Dist. v Barkan, 16 NY3d 643, 648 n 5 [2011]), and defendant did
not file the third-party action until July 2013, Supreme Court
properly dismissed the negligence claim as untimely (see IDT
Corp. v Morgan Stanley Dean Witter & Co., 12 NY3d 132, 139-140
[2009]; McCormick v Favreau, 82 AD3d 1537, 1539 [2011], lv denied
17 NY3d 712 [2011]; Kazakhstan Inv. Fund v Manolovici, 306 AD2d
36, 36 [2003]; Matter of Kaszirer v Kaszirer, 286 AD2d 598, 598-
599 [2001]).5
5
Despite defendant's contention that Supreme Court sua
sponte dismissed this claim, Cool requested "dismissal of each
and every cause of action" based upon "the running of [the]
applicable statute of limitations" in its motion to dismiss.
Therefore, we are satisfied that defendant received adequate
-7- 521954
Finally, defendant contends that Supreme Court erred in
dismissing its twelfth and thirteenth causes of action – each
requesting a declaratory judgment of alter ego liability –
against Cool and LeadingAge, respectively. Supreme Court
properly dismissed defendant's thirteenth cause of action as to
LeadingAge, as the allegations set forth in the third-party
complaint are conclusory and defendant 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 CPLR 3013, 3016 [b]; compare MPEG LA, L.L.C. v GXI Intl.,
LLC, 126 AD3d 641, 642 [2015]). In contrast, Cool concedes in
its brief that "there is no entity known as Cool Risk Management,
Inc.," which, instead, is a licensed assumed name for Cool
Insuring Agency, Inc. As this admission is sufficient to sustain
defendant's alter ego liability cause of action as to Cool (see
generally Len v State of New York, 74 AD3d 1597, 1599 [2010], lv
dismissed and denied 15 NY3d 912 [2010]), Supreme Court should
not have dismissed defendant's twelfth cause of action.
We reach a similar conclusion with respect to Supreme
Court's dismissal of defendant's second cause of action for
breach of contract. In order to adequately plead a breach of
contract claim as a third-party beneficiary, defendant had to
establish "(1) the existence of a valid and binding contract
between [plaintiff and Cool], (2) that the contract was intended
for its benefit, and (3) that the benefit to it is sufficiently
immediate to indicate the assumption by [plaintiff and Cool] of a
duty to compensate it if the benefit is lost" (Mandarin Trading
Ltd. v Wildenstein, 16 NY3d 173, 182 [2011] [internal quotation
marks, brackets, ellipsis and citation omitted]; see Levine v
Harriton & Furrer, LLP, 92 AD3d 1176, 1177 [2012]).
Here, defendant's third-party claim for breach of contract
was premised upon the theory that defendant was an express and
intended third-party beneficiary of the administrator agreements
between the trust and Cool, by which Cool breached its
notice to respond (compare Matter of Level 3 Communications, LLC
v Essex County, 129 AD3d 1255, 1256 [2015], lv denied 26 NY3d 907
[2015]).
-8- 521954
contractual duties and implied promises when it failed to
properly capitalize the trust, misrepresented the amount of
administrative fees it collected and approved "excessive
discounts to non-qualified entities to induce them to join" the
trust. Notably, the agreements expressly provided that Cool was
obligated to indemnify the trust for loss sustained due to, among
other things, "any claim made by any [employer] [m]ember . . .
against the [t]rust to the extent that such claim arises out of a
breach by Cool of its obligations hereunder or the negligence or
willful misconduct of Cool."
Given the liberal construction afforded to pleadings (see
CPLR 3026), we find that defendant sufficiently alleged that it
was an intended third-party beneficiary of the agreements between
Cool and the trust. Accordingly, dismissal of this particular
claim under CPLR 3211 (a) (7) was not warranted (see Town of
Moriah v Cole-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 11 NY3d 706 [2008]). Additionally,
absent any language in the agreements expressly negating
enforcement by third parties, it cannot be said that defendant's
allegations on this point were completely refuted by documentary
evidence (see CPLR 3211 [a] [1]; Board of Educ. of Northport-E.
Northport Union Free Sch. Dist. v Long Is. Power Auth., 130 AD3d
953, 954-956 [2015]; compare Jacobs v Mazzei, 112 AD3d 1115,
1117-1118 [2013], lv dismissed 22 NY3d 1172 [2014]; Brown v BT-
Newyo, LLC, 93 AD3d 1138, 1140 [2012], lv denied 19 NY3d 815
[2012]).
Similarly, Supreme Court should not have dismissed
defendant's ninth cause of action for negligent misrepresentation
against Cool and LeadingAge. Defendant alleged, among other
things, that, in order to induce its continued participation in
the trust, Cool and LeadingAge misrepresented and omitted
material facts known to be false that were related to the trust's
financial solvency, the risk of membership in the trust and
Cool's capacity – all of which defendant relied upon to its
financial detriment. As such, we find that defendant's
allegations of negligent misrepresentation are not redundant but,
rather, sufficiently allege duties that are independent from
Cool's alleged failure to perform the terms of the contracts (see
-9- 521954
TIAA Global Invs., LLC v One Astoria Sq. LLC, 127 AD3d 75, 87
[2015]; 84 Lbr. Co., L.P. v Barringer, 110 AD3d 1224, 1226
[2013]). Accordingly, we find that defendant sufficiently
pleaded this cause of action for purposes of CPLR 3211 (a) (7).
Further, inasmuch as the underlying facts are based in fraud, the
six-year statute of limitations period applies (see Fromer v
Yogel, 50 F Supp 2d 227, 242 [SD NY 1999]; County of Ulster v
Highland Fire Dist., 29 AD3d 1112, 1115 [2006], lv denied 7 NY3d
710 [2006]; see also CPLR 213 [8]). Therefore, Supreme Court
should not have dismissed this claim as time-barred; rather,
consistent with the court's temporal limitation on defendant's
fraud claims, only those claims that accrued within six years
from the commencement of defendant's third-party action should be
allowed to proceed. Defendant's remaining arguments, to the
extent not specifically addressed, have been examined and found
to be lacking in merit.
McCarthy, J.P., Rose, Lynch and Aarons, JJ., concur.
ORDERED that the order is modified, on the law, without
costs, by reversing so much thereof as granted third-party
defendants' motions to dismiss the second, ninth and twelfth
causes of action of the third-party complaint; motions denied to
the extent set forth in this Court's decision; and, as so
modified, affirmed.
ENTER:
Robert D. Mayberger
Clerk of the Court