Hartshorne v. Roman Catholic Diocese of Albany

• Decision Date: 23 December 2021
• Docket Number: 531824
• Citation: 200 A.D.3d 1427,161 N.Y.S.3d 384
• Parties: Mary HARTSHORNE et al., Respondents, v. ROMAN CATHOLIC DIOCESE OF ALBANY, New York, et al., Appellants.
• Court: New York Supreme Court — Appellate Division

200 A.D.3d 1427

161 N.Y.S.3d 384

Mary HARTSHORNE et al., Respondents,

v.ROMAN CATHOLIC DIOCESE OF ALBANY, New York, et al., Appellants.

531824

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

Calendar Date: November 19, 2021

Decided and Entered: December 23, 2021

Tobin and Dempf, LLP, Albany (Michael L. Costello ), for Roman Catholic Diocese of Albany, New York, appellant.

Barclay Damon LLP, Albany (Brian E. Whiteley of counsel), for St. Clare's Corporation and others, appellants.

AARP Foundation, Washington, DC (Dara S. Smith of counsel, admitted pro hac vice), for respondents.

Before: Egan Jr., J.P., Lynch, Clark, Pritzker and Colangelo, JJ.

MEMORANDUM AND ORDER

Egan Jr., J.P.

Appeal from an order of the Supreme Court (Versaci, J.), entered July 16, 2020 in Schenectady County, which denied defendants’ motions to dismiss the amended complaint against them.

Defendant Roman Catholic Diocese of Albany, New York (hereinafter the Diocese) cofounded defendant St. Clare's Corporation (formerly known as St. Clare's Hospital of Schenectady, N.Y.; hereinafter the corporation) to operate a hospital in the City of Schenectady, Schenectady County. In the course of those operations, the corporation established defendant St. Clare's Hospital Retirement Income Plan (hereinafter the plan) to provide a pension benefit to retired hospital employees and their beneficiaries. As the plan was determined to be a "church plan" by the Internal Revenue Service (hereinafter IRS) in 1992, it was exempt from provisions of the Employment Retirement Income Security Act of 1974 ( 29 USC § 1001 et seq. [hereinafter ERISA]) holding pension plans to minimum funding requirements and obliging them to carry pension insurance (see 29 USC §§ 1003 [b][2]; 1321[b][3]; see generally Advocate Health Care Network v. Stapleton, ––– U.S. ––––, 137 S. Ct. 1652, 1656–1657, 1663, 198 L.Ed.2d 96 [2017] ). The corporation thereafter made inadequate contributions to the plan, which remained in precarious financial straits despite the closure of the plan to new members, limits on the ability of current members to accumulate additional years of service, and a cash infusion associated with the state-mandated merger that led to the hospital's closure in 2008. The situation became untenable and, in 2018, the corporation terminated the plan and advised pension recipients that their benefits would either be reduced or ended as of February 1, 2019. Defendant Joseph F. Pofit and the other members of the corporation's board of directors then filed a petition for judicial dissolution in which they represented, among other things, that the corporation owed over $50,000,000 to the plan and had no assets to make the plan whole.

Plaintiffs, former employees of the corporation, responded in September 2019 by commencing this action for, in relevant part, breach of contract and breach of fiduciary duty. The Diocese and its bishops during the relevant period, defendants Edward B. Scharfenberger and Howard J. Hubbard (hereinafter collectively referred to as the diocesan defendants), moved to dismiss the complaint against them as contradicted by documentary evidence and as failing to state a cause of action. The corporation, the plan and Pofit, as well as defendant Robert Perry (hereinafter collectively referred to as the St. Clare's defendants), separately moved to dismiss the complaint against them on those grounds and as time-barred. Plaintiffs thereafter amended the complaint, and all parties agreed to treat the pending motions as directed toward the amended complaint. Supreme Court denied the motions, prompting this appeal.

We affirm. Turning first to the contention of the St. Clare's defendants that the claims against them are time-barred, they were obliged to "demonstrat[e], prima facie, that the time within which to commence the action has expired" ( Krog Corp. v. Vanner Group, Inc., 158 A.D.3d 914, 915, 72 N.Y.S.3d 178 [2018] [internal quotation marks and citations omitted]; see Belair Care Ctr., Inc. v. Cool Insuring Agency, Inc., 168 A.D.3d 1162, 1166, 91 N.Y.S.3d 793 [2019] ). The statute of limitations for a breach of contract claim is six years and, although many of the alleged actions that eventually led to the termination of the plan payments occurred beyond that period, each failure to make promised pension payments to plaintiffs was itself a breach "actionable for six years from [its] occurrence" ( Bulova Watch Co. v. Celotex Corp., 46 N.Y.2d 606, 612, 415 N.Y.S.2d 817, 389 N.E.2d 130 [1979] ; see CPLR 213[2] ; Medalie v. Jacobson, 120 A.D.2d 652, 652, 502 N.Y.S.2d 247 [1986] ). As such, the St. Clare's defendants did not show plaintiffs’ breach of contract claim, which was asserted less than a year after the pension payments were first reduced or terminated in February 2019, to be untimely. Similarly, plaintiffs’ breach of fiduciary duty claim only accrued when the damages from the alleged breach were sustained – that is, the reduction or termination of pension payments in 2019 – and said claim is timely against the St. Clare's defendants regardless of whether a three- or six-year statute of limitations applies to it (see IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 140, 879 N.Y.S.2d 355, 907 N.E.2d 268 [2009] ; Vestal v. Pontillo, 158 A.D.3d 1036, 1041, 72 N.Y.S.3d 610 [2018] ).

As for whether plaintiffs have stated viable claims, "[o]n a motion to dismiss under CPLR 3211, the pleading is to be given a liberal construction, the allegations contained within it are assumed to be true and the plaintiff is to be afforded every favorable inference" ( Simkin v. Blank, 19 N.Y.3d 46, 52, 945 N.Y.S.2d 222, 968 N.E.2d 459 [2012] ; see McQuade v. Aponte–Loss, 195 A.D.3d 1219, 1220, 150 N.Y.S.3d 350 [2021] ; Shephard v. Friedlander, 195 A.D.3d 1191, 1192, 151 N.Y.S.3d 184 [2021] ). Affidavits and other proof provided by the plaintiff may be relied upon to remedy any inadequacies in the complaint, as "the criterion is whether the proponent of the pleading has a cause of action, not whether he [or she] has stated one" ( Guggenheimer v. Ginzburg, 43 N.Y.2d 268, 275, 401 N.Y.S.2d 182, 372 N.E.2d 17 [1977] ; see Carlson v. American Intl. Group, Inc., 30 N.Y.3d 288, 298, 67 N.Y.S.3d 100, 89 N.E.3d 490 [2017] ; He v. Apple, Inc., 189 A.D.3d 1984, 1985, 139 N.Y.S.3d 409 [2020] ). The liberal construction afforded to the complaint will not, however, "save allegations that consist of bare legal conclusions or factual claims that are flatly contradicted by documentary evidence" ( County of Saratoga v. Delaware Eng'g, D.P.C., 189 A.D.3d 1926, 1927, 139 N.Y.S.3d 381 [2020] [internal quotation marks and citations omitted]; see CPLR 3211[a][1], [7] ; Simkin v. Blank, 19 N.Y.3d at 52, 945 N.Y.S.2d 222, 968 N.E.2d 459 ; Vestal v. Pontillo, 158 A.D.3d at 1038, 72 N.Y.S.3d 610 ). As a result, even if a claim is adequately pleaded for purposes of CPLR 3211(a)(7), it will be dismissed under CPLR 3211(a)(1) if it is utterly refuted by documentary evidence such as "the terms of a written agreement that is complete, clear and unambiguous on its face" ( McQuade v. Aponte–Loss, 195 A.D.3d at 1220, 150 N.Y.S.3d 350 ; see Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP v. Matthew Bender & Co., Inc., 37 N.Y.3d 169, 175, 150 N.Y.S.3d 79, 171 N.E.3d 1192 [2021] ; Shephard v. Friedlander, 195 A.D.3d at 1193, 151 N.Y.S.3d 184 ).

There is no doubt here that, liberally construed, the amended complaint states a breach of contract claim via factual allegations that plaintiffs sustained damages when the corporation and the plan violated contractual commitments to, most notably, properly fund the plan and make promised payments following its termination. The St. Clare's defendants argue that the documentary evidence demonstrates that they had unfettered discretion to alter the plan in a manner that reduced or terminated benefits, but the documents are far from conclusive on that point. To the contrary, a 2000 restatement of the plan applicable to plaintiffs specifies that "[n]o pension or other benefit granted prior to the time of any amendment or modification of the [p]lan shall be reduced, suspended, or discontinued as a result thereof" unless necessary to comply with legal requirements, and that accrued benefits "shall be ... nonforfeitable" in the event of the plan's termination. A 2005 summary plan description contains similar assurances and, indeed, promises plaintiffs and other plan participants that "no modification, suspension or termination of the [p]lan may reduce" benefits that they had already accrued. The documentary evidence accordingly fails to conclusively refute the allegations that plaintiffs had contractually vested "rights to accrued benefits" that were violated, and Supreme Court correctly declined to dismiss the breach of contract claim against the St. Clare's defendants ( Pacella v. Town of Newburgh Volunteer Ambulance Corps. Inc., 164 A.D.3d 809, 813, 83 N.Y.S.3d 246 [2018] ; see Labor Law § 198–c [2] ; Matter of Horn & Hardart Co. v. Ross, 58 A.D.2d 518, 519, 395 N.Y.S.2d 180 [1977] ; Bisbing v. Sterling Precision Corp., 34 A.D.2d 427, 428–429, 312 N.Y.S.2d 305 [1970] ).

As for the contention of the St. Clare's defendants that plaintiffs’ breach of...