NYAHSA Services, Inc., Self-Insurance Trust v. People Care Incorporated

State of New York
Supreme Court, Appellate Division
Third Judicial Department
Decided and Entered: July 7, 2016 521953
________________________________
NYAHSA SERVICES, INC.,
SELF-INSURANCE TRUST,
Respondent,
v
PEOPLE CARE INCORPORATED,
Defendant
and Third- MEMORANDUM AND ORDER
Party
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.
Bond, Schoeneck & King, PLLC, Albany (Stuart F. Klein of
counsel), for respondent.
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, a home health care provider, 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). Defendant was a member of the trust
for policy periods of June 15, 2000 through June 15, 2008. In
July 2010, plaintiff commenced the instant action against
defendant for breach of contract and unjust enrichment, alleging
that defendant failed to pay $3,332,427 in adjustment bills that
purported to reconcile its estimated annual contributions with
its actual incurred expenses.1 In September 2010, defendant
joined issue and counterclaimed for injunctive relief/accounting,
unjust enrichment, fraud/fraud in the inducement, breach of
fiduciary duty, breach of the duty of good faith and fair
dealing, breach of contract, negligence, conversion and
violations of General Business Law §§ 349 and 350. Plaintiff
then moved to dismiss the counterclaims 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 of action sounding in breach of contract,
breach of good faith and fair dealing, breach of fiduciary duty,
fraud and negligence against third-party defendants Cool Insuring
Agency, Inc. and Cool Risk Management, Inc. (hereinafter
collectively referred to as Cool), as well as indemnification and
contribution, conversion, unjust enrichment, negligent
misrepresentation, fraud in the 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
1
The details of the underlying financial arrangement are
set forth in NYAHSA Servs., Inc., Self-Insurance Trust v Recco
Home Care Servs., Inc. (___ AD3d ___ [decided herewith]).
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collectively referred to as LeadingAge) and Cool.2 Cool and
LeadingAge then moved to dismiss the third-party complaint
pursuant to CPLR 3211 (a) (1), (3), (6) and (7).
Supreme Court granted plaintiff's motion dismissing
defendant's counterclaims for injunctive 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
the temporal scope of defendant's counterclaims for breach of
contract, breach of fiduciary duty, fraud and fraud in the
inducement.3 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, unjust enrichment, negligence,
negligent misrepresentation, fraudulent inducement, violations of
General Business Law §§ 349 and 350 and alter ego liability, and
denied, in part, the motion as to the cause of action for
indemnification against Cool. Defendant now appeals.4
2
LeadingAge created the trust, which, in turn contracted
with Cool Insuring Agency, Inc. to serve as the trust's third-
party administrator and program administrator.
3
Supreme Court "informally consolidated" this action with
the claims at issue in NYAHSA Servs., Inc. Self-Insurance Trust v
Recco Home Care Servs., Inc. (supra) and issued a single order
resolving both actions. As is relevant here, we address only
that part of the order related to defendant.
4
Preliminarily, insofar as defendant failed to address in
its brief the dismissal of its first, third, sixth, eighth and
ninth 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 v
Professional Grade Constr., Inc., 137 AD3d 1440, 1441 n 1 [2016];
Goodnow Flow Assn. Inc. v Graves, 135 AD3d 1228, 1229 n 1
[2016]). Similarly, inasmuch as defendant does not raise any
issues in its brief with respect to its first, sixth and eleventh
third-party claims for indemnification and contribution,
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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 Tenney v Hodgson Russ, LLP, 97
AD3d 1089, 1090 [2012]). Beginning with defendant's
counterclaims, Supreme Court properly dismissed defendant's
second counterclaim for unjust enrichment as the rights of
defendant are governed and defined by the contribution agreements
and, therefore, "a quasi contract cause 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, 95 AD3d 545, 546 [2012]). We reach a
similar conclusion with respect to Supreme Court's dismissal of
defendant's fifth counterclaim for breach of the duty of good
faith and fair dealing as this claim is duplicative of the breach
of contract counterclaim (see Fahs Constr. Group, Inc. v State of
New York, 123 AD3d 1311, 1312-1313 [2014], lv denied 25 NY3d 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
as defendant failed to allege a legal duty independent of the
underlying contracts and demanded damages identical to those set
forth in its breach of contract claim (see Sutton v Hafner
Valuation Group, 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 fourth counterclaim 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
conversion and violations of General Business Law §§ 349 and 350,
any challenge thereto is deemed abandoned (see Salzer v Benderson
Dev. Co., LLC, 130 AD3d 1226, 1229 [2015]).
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counterclaim, but allowed the fraud-based portion thereof to
stand and analyzed such claims upon statute of limitations
grounds. Examination of the pleadings reveals, however, that
defendant's counterclaim for breach of fiduciary duty alleges
virtually identical facts and theories and requests the same
damages as set forth in defendant's counterclaim for breach of
contract. Accordingly, the entirety of defendant's counterclaim
for breach of fiduciary duty – including the fraud-based aspects
thereof – is duplicative and, as such, must be dismissed (see
Canzona v Atanasio, 118 AD3d 841, 843 [2014]; Hylan Elec. Contr.,
Inc. v MasTec N. Am., Inc., 74 AD3d 1148, 1150 [2010]; William
Kaufman Org. v Graham & James, 269 AD2d 171, 173 [2000]).5
Turning to defendant's third-party complaint, we note that
both the underlying facts and the causes of action set forth
therein mirror those raised by Recco Home Care Services, Inc. in
NYAHSA Servs., Inc., Self-Insurance Trust v Recco Home Care
Services, Inc. (___ AD3d ___ [decided herewith] [hereinafter
Recco]). Accordingly, as defendant's arguments and allegations
here relative to certain of its third-party claims are
indistinguishable 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 of good faith and
fair dealing (see Fahs Constr. Group, Inc. v State of New York,
123 AD3d at 1312-1313; Mill Fin., LLC v Fillett, 122 AD3d at 104;
Amcan Holdings, Inc. v Canadian Imperial Bank of Commerce, 70
AD3d at 426), fourth cause of action for breach of fiduciary
duty (see EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19
[2005]; Mawere v Landau, 130 AD3d 986, 990 [2015]; Brooks v Key
Trust Co. N.A., 26 AD3d 628, 630 [2006], lv dismissed 6 NY3d 891
5
Although plaintiff did not cross-appeal from the
underlying order, plaintiff expressly moved to dismiss this
particular counterclaim as duplicative – an argument with which
Supreme Court partially agreed. As defendant clearly was on
notice that plaintiff was seeking to dismiss the subject
counterclaim upon this ground, and as we agree with plaintiff
that such counterclaim indeed is duplicative, we see no reason
not to dismiss this counterclaim in its entirety (compare
Torrance Constr., Inc. v Jaques, 127 AD3d 1261, 1263 [2015]; Mann
v Rusk, 14 AD3d 909, 910 [2005]).
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[2006]) and seventh cause of action for unjust enrichment (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]) as
duplicative of its breach of contract claim for the reasons set
forth in our decision in Recco.6
Supreme Court also properly dismissed defendant's eighth
cause of action for negligence. 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]). Here, defendant's alleged damages arose from,
among other things, "amounts already paid" for policy periods of
2000 until 2006 and "demanded payments for adjustments" for which
it received notice of in 2008. As such damages were incurred
more 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., 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]).7
Finally, we discern no error in Supreme Court's dismissal
of defendant's thirteenth cause of action requesting a
declaratory judgment of alter ego liability as to LeadingAge
because the allegations set forth in the third-party complaint
are conclusory, and defendant failed to plead any particularized
facts with respect thereto (see Angejo Corp. v South St. Seaport
6
The viability of defendant's second cause of action for
breach of contract is discussed infra.
7
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
notice to respond (compare Matter of Level 3 Communications, LLC
v Essex County, 129 AD3d 1255, 1256 [2015], lv denied 26 NY3d 907
[2015]).
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Ltd. Partnership, 40 AD3d 407, 407 [2007]; see also CPLR 3013,
3106 [b]; compare MPEG LA, L.L.C. v GXI Intl., LLC, 126 AD3d 641,
642 [2015]). That said, Cool concedes in its brief – as it
maintained in Recco – 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 against Cool. Given the liberal construction
afforded to pleadings (see CPLR 3026), we find that defendant
sufficiently alleged that it was a third-party beneficiary of the
contracts between Cool and the trust (see Board of Educ. of
Northport-E. Northport Union Free Sch. Dist. v Long Is. Power
Auth., 130 AD3d 953, 954-956 [2015]). Specifically, the presence
of an express indemnification clause and the corresponding
absence of any language expressly negating enforcement by third
parties demonstrates that 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]).
Supreme Court also should not have dismissed defendant's
fifth, ninth and tenth causes of action for fraud, negligent
misrepresentation and fraudulent inducement in their entirety.
As each of these claims sound in fraud, defendant was entitled to
use the greater of the six-year statute of limitations or the
two-year discovery exception set forth in CPLR 213 (8) (see
Fromer v Yogel, 50 F Supp 2d 227, 242 [SDNY 1999]; 14 Bruckner
LLC v 14 Bruckner Blvd. Realty Corp., 78 AD3d 431, 431-432
[2010]). Defendant cannot avail itself of the two-year discovery
exception with respect to these causes of action as the third-
party complaint was not filed until July 26, 2013 – more than two
years from when defendant admittedly discovered the fraud on
September 17, 2010. As to defendant's fraud and fraudulent
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inducement causes of action, we conclude – consistent with our
holding in Recco – that only those claims that accrued within six
years of the filing of defendant's third-party complaint on July
26, 2013 should be permitted to proceed (see CPLR 213 [8];
Soghanalian v Young, 131 AD3d 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's
order 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 in Recco – specifically, that,
in order to induce its continued participation in the trust,
third-party defendants 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
to administer the trust – all of which defendant relied upon to
its detriment. As we did in Recco, we find that these
allegations are not redundant but, rather, allege duties
independent of Cool's and LeadingAge's duties under the subject
agreements and, therefore, are sufficient to survive a motion to
dismiss under CPLR 3211 (a) (7). That said, consistent with the
temporal limitation governing defendant's fraud and fraudulent
inducement causes of action, only those claims that accrued
within six years of the filing of the third-party complaint are
timely and, hence, 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.
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ORDERED that the order is modified, on the law, without
costs, by reversing so much thereof as (1) granted third-party
defendants' motions to dismiss the second, fifth, ninth, tenth
and twelfth causes of action of the third-party complaint and (2)
partially denied plaintiff's motion to dismiss defendant's fourth
counterclaim; third-party defendants' motions denied to the
extent set forth in this Court's decision and plaintiff's motion
granted to the extent of dismissing defendant's fourth
counterclaim in its entirety; and, as so modified, affirmed.
ENTER:
Robert D. Mayberger
Clerk of the Court