Apt v. Morgan Stanley DW, Inc.

• Decision Date: 11 March 2014
• Court: New York Supreme Court — Appellate Division
• Parties: Anita L. APT, et al., Plaintiffs–Appellants, v. Morgan Stanley DW, Inc., et al., Defendants–Respondents, Arunabha SENGUPTA, Defendant.

115 A.D.3d 466

981 N.Y.S.2d 680

2014 N.Y. Slip Op. 01541

Anita L. APT, et al., Plaintiffs–Appellants,

v. Morgan Stanley DW, Inc., et al., Defendants–Respondents,Arunabha SENGUPTA, Defendant.

Supreme Court, Appellate Division, First Department, New York.

March 11, 2014.

The Law Office of Christopher J. Gray, P.C., New York (Christopher J. Gray of counsel), for appellants.

Greenberg Traurig, LLP, New York (Michael P. Manning of counsel), for respondents.

GONZALEZ, P.J., TOM, FRIEDMAN, ANDRIAS, SAXE, JJ.

Order, Supreme Court, New York County (Jeffrey K. Oing, J.), entered December 11, 2012, which granted the motion of defendants Morgan Stanley DW, Inc. and Morgan Stanley & Co., Inc. (collectively Morgan Stanley) to dismiss the complaint pursuant to CPLR 3211(a)(5), unanimously affirmed, without costs.

In 2004 and 2005, nonparty Charles Winitch, while an employee of Morgan Stanley, allegedly churned trades on decedent Nellie Apt's brokerage accounts at the firm, obtaining at least $300,000 in commissions. On August 29, 2005, Morgan Stanley terminated Winitch after New York Stock Exchange investigators discovered similar churning activity by Winitch on other accounts. Plaintiff Anita Apt (Nellie's daughter) claims that she became aware of such wrongdoing by Winitch at the earliest in 2008, while she was examining the affairs of her mother after her mother's death. Anita, in her individual and other capacities, commenced this action in January 2012.

The court correctly dismissed the action as time-barred. Actions based upon fraud must be commenced within the greater of “six years from the date the cause of action accrued” or “two years from the time the plaintiff or the person under whom the plaintiff claims discovered the fraud, or could with reasonable diligence have discovered it” (CPLR 213[8]; see Saphir Intl., SA v. UBS PaineWebber Inc., 25 A.D.3d 315, 807 N.Y.S.2d 58 [1st Dept.2006]; TMG–II v. Price Waterhouse & Co., 175 A.D.2d 21, 22, 572 N.Y.S.2d 6 [1st Dept.1991], lv. denied79 N.Y.2d 752, 580 N.Y.S.2d 199, 588 N.E.2d 97 [1992] ).

Here, the wrongful conduct occurred at the latest on August 29, 2005 when Morgan Stanley terminated Winitch. Thus, the action, commenced in January 2012, more than six years later, is untimely. Contrary to plaintiffs' contention, the complaint alleges no facts showing that Morgan Stanley fraudulently concealed Winitch's commissions or his termination from Nellie so as to toll the statute of limitations. To the extent plaintiffs contend that Morgan Stanley's failure to disclose such facts warranted tolling the statute of limitations, there is no fiduciary relationship arising from an ordinary broker-client relationship ( see Matter of Dean Witter Managed Futures Ltd. Partnership Litig., 282 A.D.2d 271, 724 N.Y.S.2d 149 [1st Dept.2001] ) so as to give rise to a duty to disclose ( see Eurycleia Partners, LP v. Seward & Kissel, 12 N.Y.3d 553, 562, 883 N.Y.S.2d 147, 910 N.E.2d 976 [2009] ). Thus, plaintiffs' argument that Morgan Stanley is equitably estopped from asserting the statute of limitations defense is unavailing ( see Gonik v. Israel Discount Bank of N.Y., 80 A.D.3d 437, 438, 914 N.Y.S.2d 63 [1st Dept.2011] ).

Nor is the action timely under the two-year discovery rule. Nellie could have discovered facts constituting the fraud, or could have done so with reasonable diligence, in 2004 or at the latest on August 29, 2005 based on her receipt...