Nyahsa Servs., Inc. v. People Care Inc.

• Decision Date: 20 December 2018
• Docket Number: 526645
• Parties: NYAHSA SERVICES, INC., Self–Insurance Trust, et al., Respondents, v. PEOPLE CARE INCORPORATED, Appellant. (And a Third–Party Action.)
• Court: New York Supreme Court — Appellate Division

167 A.D.3d 1305

91 N.Y.S.3d 528

NYAHSA SERVICES, INC., Self–Insurance Trust, et al., Respondents,

v. PEOPLE CARE INCORPORATED, Appellant.(And a Third–Party Action.)

526645

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

Calendar Date: November 19, 2018

Decided and Entered: December 20, 2018

Barclay Damon LLP, Albany (David M. Cost of counsel), for appellant.

Bond, Schoeneck & King, PLLC, Albany (Stuart F. Klein of counsel), for respondents.

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

MEMORANDUM AND ORDER

Egan Jr., J.Appeal from that part of an order of the Supreme Court (Platkin, J.), entered June 26, 2017 in Albany County, which granted plaintiffs' motion to dismiss defendant's counterclaims and denied defendant's cross motion to renew and to amend its answer.

The facts and procedural history of this case are more fully discussed in a previous decision in this matter ( NYAHSA Servs., Inc., Self–Ins. Trust v. People Care Inc., 141 A.D.3d 785, 36 N.Y.S.3d 252 [2016] ). Briefly stated, plaintiff NYAHSA Services, Inc., Self–Insurance Trust (hereinafter the trust) is a group self-insured trust that was created to provide mandated workers' compensation coverage to defendant's employees (see Workers' Compensation Law § 50[3–a] ; 12 NYCRR 317.2 [i]; 317.3] ). Each year that defendant remained a member of the trust, it entered into annual contribution agreements and paid the corresponding invoices issued by the trust for periodic adjustments, reflecting those additional costs that the trust incurred with respect to workers' compensation claims paid on behalf of defendant's employees. In June 2008, defendant terminated its membership in the trust. Thereafter, on or about July 14, 2008, the trust sent defendant an invoice for payment of adjustments for additional expenses that the trust incurred with respect to claims that were filed while defendant was still a member of the trust. Defendant ultimately refused to pay any further adjustments, resulting in the instant litigation.

As relevant here, in February 2016, the trust moved to amend its complaint to add plaintiffs Denise Mitchell Alper, Rocco Meliambro, Emma Devito and Mark Pancirer, as trustees of the trust (hereinafter collectively referred to as the individual trustees), and to add a claim for additional unpaid adjustment invoices that were issued to defendant after commencement of this litigation. Supreme Court granted the trust's motion to amend, and plaintiffs thereafter filed a second amended complaint.¹ Defendant filed an answer to plaintiffs' second amended complaint and, as relevant here, asserted counterclaims against the individual trustees for fraud/fraud in the inducement, breach of fiduciary duty and negligence. Plaintiffs then moved to dismiss these counterclaims as time-barred by the applicable statutes of limitations. Defendant opposed the motion and cross-moved to, among other things, renew Supreme Court's prior December 2014 order and reinstate its previously dismissed counterclaim against the trust pursuant to General Business Law §§ 349 and 350 based upon a change of law and to amend its answer to assert said counterclaim against the individual trustees. Supreme Court granted plaintiffs' motion to dismiss defendant's counterclaims against the individual trustees, determining that the relation back doctrine was not applicable, no periods of equitable tolling applied and that said claims were therefore time-barred. Supreme Court also partially denied defendant's cross motion to the extent that it denied reinstatement of the General Business Law §§ 349 and 350 counterclaim as against the trust and leave to amend its answer to assert said counterclaim against the individual trustees. Defendant now appeals.

Defendant contends that Supreme Court erred when it determined that its counterclaims against the individual trustees were time-barred based upon its failure to establish its entitlement to the benefit of the relation back doctrine. Inasmuch as the statute of limitations on defendant's counterclaims against the individual trustees expired before defendant filed its answer to the second amended complaint, in order to avoid dismissal, it was defendant's burden to demonstrate that said counterclaims were entitled to the benefit of the relation back doctrine (see Branch v. Community Coll. of the County of Sullivan, 148 A.D.3d 1410, 1410, 48 N.Y.S.3d 861 [2017], lv denied 29 N.Y.3d 911, 63 N.Y.S.3d 1, 85 N.E.3d 96 [2017] ). In order to avail itself of the benefit of this doctrine, defendant had to demonstrate that the following three requirements were established: "(1) both claims must arise out of the same occurrence, (2) [the trust] and [the individual trustees] were united in interest, and by reason of that relationship can be charged with notice of the institution of the action such that it will not be prejudiced in maintaining a defense on the merits, and (3) [the individual trustees] knew or should have known that, but for a mistake by [defendant] as to the identity of the proper party, the action [against the trust] would have been brought against it as well" ( id. at 1411, 48 N.Y.S.3d 861 ; see Buran v. Coupal, 87 N.Y.2d 173, 178, 638 N.Y.S.2d 405, 661 N.E.2d 978 [1995] ; Matter of Ayuda Re Funding, LLC v. Town of Liberty , 121 A.D.3d 1474, 1475, 996 N.Y.S.2d 379 [2014] ).

Here, there is no dispute that the first two requirements of the doctrine were established – both claims unquestionably arose out of the same conduct, transaction or occurrence and the trust and the individual trustees were admittedly united in interest with the trust. With respect to the third requirement, Supreme Court determined that, because defendant was aware of the identity of the trustees when it interposed its original answer and counterclaims in September 2010, its failure to assert claims against the individual trustees between September 2010 and December 2016 represented "either a strategic litigation decision on its part or a mistake of law," neither of which it found would entitle defendant to application of the doctrine. We disagree.

There is nothing in the record before us demonstrating that defendant intentionally elected not to assert its counterclaims against the individual trustees and/or that it did so to obtain "a tactical advantage in the litigation" ( Buran v. Coupal, 87 N.Y.2d at 181, 638 N.Y.S.2d 405, 661 N.E.2d 978 ). A review of defendant's pleadings demonstrates that it intended to sue the individual trustees.² Although the specific names of the individual trustees could have been ascertained from certain documentation that the trust provided to defendant on an annual basis, "we need no longer consider whether [such a] mistake was excusable" ( De Sanna v. Rockefeller Ctr., Inc., 9 A.D.3d 596, 599, 780 N.Y.S.2d 651 [2004] ). Rather, as the Court of Appeals has recognized, the primary question – and "the linchpin of the relation back doctrine" – is whether the newly added party had actual notice of the claim ( Buran v. Coupal, 87 N.Y.2d at 180, 638 N.Y.S.2d 405, 661 N.E.2d 978 [internal quotation marks and citation omitted]; see Virelli v. Goodson–Todman Enters., 142 A.D.2d 479, 483–484, 536 N.Y.S.2d 571 [1989] ). As trustees of the trust, we find it implausible that the individual trustees were not aware of the trust's commencement of this action and the counterclaims that defendant asserted against the trust – such knowledge being imputed to them as trustees (see generally Yaniv v. Taub, 256 A.D.2d 273, 275, 683 N.Y.S.2d 35 [1998] ; Preferred Elec. & Wire Corp. v. Duracraft Prods., 166 A.D.2d 425, 426–427, 560 N.Y.S.2d 489 [1990] ). Moreover, insofar as the counterclaims asserted against the individual trustees are essentially the same counterclaims that defendant asserted against the trust in its original answer and answer to the first amended complaint, it cannot be said that the individual trustees were surprised or prejudiced in their ability to prepare a defense to defendant's counterclaims (see Buran v. Coupal, 87 N.Y.2d at 182, 638 N.Y.S.2d 405, 661 N.E.2d 978 ).³ Given these facts, we find that the individual trustees "knew or should have known that the action would have been brought against [them] in the absence of [defendant's] mistake" and, therefore, find that defendant established its entitlement to the benefit of the relation back doctrine ( De Sanna v. Rockefeller Ctr., Inc., 9 A.D.3d at 599, 780 N.Y.S.2d 651 ; see Buran v. Coupal, 87 N.Y.2d at 182, 638 N.Y.S.2d 405, 661 N.E.2d 978 ). Accordingly, Supreme Court should not have granted plaintiffs' motion to dismiss defendant's counterclaims for fraud/fraud in the inducement and breach of fiduciary duty against the individual trustees, and it should have granted defendant's cross motion for leave to amend the complaint to add a cause of action against the individual trustees pursuant to General Business Law §§ 349 and 350 (see CPLR 203[f] ; Buran v. Coupal, 87 N.Y.2d at 182, 638 N.Y.S.2d 405, 661 N.E.2d 978 ; De Sanna v. Rockefeller Ctr., Inc., 9 A.D.3d at 599, 780 N.Y.S.2d 651 ; see also Headley v. City of New York, 115 A.D.3d 804, 806–807, 982 N.Y.S.2d 149 [2014] ; Thomsen v. Suffolk County Police Dept., 50 A.D.3d 1015, 1018–1019, 857 N.Y.S.2d 181 [2008] ; compare Matter of Sullivan v. Planning Bd. of the Town of Mamakating, 151 A.D.3d 1518, 1520, 58 N.Y.S.3d 692 [2017], lv denied 30 N.Y.3d 906, 70 N.Y.S.3d 446, 93 N.E.3d 1211 [2017] ; Branch v. Community Coll. of the County of Sullivan, 148 A.D.3d at 1411, 48 N.Y.S.3d 861 ; Matter of Ayuda Re Funding, LLC v. Town of Liberty, 121 A.D.3d at 1475–1476, 996 N.Y.S.2d 379 ).

Notwithstanding the fact that defendant's negligence counterclaim was...