State Workers' Comp. Bd. v. Wang

• Decision Date: 05 January 2017
• Citation: 147 A.D.3d 104,2017 N.Y. Slip Op. 00057,46 N.Y.S.3d 230
• Parties: STATE of New York WORKERS' COMPENSATION BOARD, as Administrator of the Workers' Compensation Law and attendant regulations, and as Successor in Interest to The Health Care Providers Self–Insurance Trust, Respondent–Appellant, v. Phyllis WANG, et al., Respondents, and Program Risk Management, Inc., et al., Appellants–Respondents, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

147 A.D.3d 104

46 N.Y.S.3d 230

2017 N.Y. Slip Op. 00057

STATE of New York WORKERS' COMPENSATION BOARD, as Administrator of the Workers' Compensation Law and attendant regulations, and as Successor in Interest to The Health Care Providers Self–Insurance Trust, Respondent–Appellant,

v. Phyllis WANG, et al., Respondents,andProgram Risk Management, Inc., et al., Appellants–Respondents, et al., Defendants.

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

Jan. 5, 2017.

Miranda Sambursky Slone Sklarin Verveniotis LLP, Mineola (Maurizio Savoiardo of counsel), for Program Risk Management, Inc. and others, appellants-respondents.

Denlea & Carton LLP, White Plains (Peter N. Freiberg of counsel), for Albert Johansmeyer and another, appellants-respondents.

Phillips Lytle LLP, Buffalo (Craig R. Bucki of counsel), for Todd Brason and others, appellants-respondents.

Corrigan, McCoy & Bush, PLLC, Rensselaer (Scott W. Bush of counsel), for Joel Hodes, appellant-respondent.

Hinman Straub PC, Albany (Joseph M. Dougherty of counsel), for respondent-appellant.

Dreyer Boyajian LLP, Albany (John J. Dowd of counsel), for Phyllis Wang, respondent.

David R. Sheridan, Delmar, for Robert Callaghan and others, respondents.

Cooper Erving & Savage LLP, Albany (Michael A. Kornstein of counsel), for Nelson Carpentar and another, respondents.

Couch White, Albany (Joel M. Howard III of counsel), for Thomas Gosdeck, respondent.

Before: GARRY, J.P., EGAN JR., ROSE, DEVINE and MULVEY, JJ.

EGAN JR., J.

Cross appeals from an order and an amended order of the Supreme Court (McNamara, J.), entered March 3, 2015 and May 12, 2015 in Albany County, which, among other things, partially granted certain defendants' motions to dismiss the complaint.

The Health Care Providers Self–Insurance Trust, a group self-insured trust, was formed in 1992 to provide mandated workers' compensation coverage to employees of the trust's members (see Workers' Compensation Law § 50[3–a] ; 12 NYCRR 317.2 [i]; 317.3). The trust contracted with defendant Program Risk Management, Inc. (hereinafter PRM) to serve as its program administrator, which, in turn, employed defendants Thomas Arney, Colleen Bardascini, John M. Conroy, Gail Farrell and Edward Sorenson (hereinafter collectively referred to as the PRM individual defendants). Additionally, the trust contracted with defendant PRM Claims Services, Inc. (hereinafter PRMCS) to serve as its claims administrator (see 12 NYCRR 317.2 [d] ). Arney and defendants Judy Balaban–Krause, Robert Callaghan, Nelson Carpentar, Laura Donaldson, Ronald Field, Thomas Gosdeck, Joel Hodes, Albert Johansmeyer¹ and Michael Reda (hereinafter collectively referred to as the trustee defendants), among others, served as trustees.²

In 2009, plaintiff determined that the trust was insolvent and assumed the administration thereof (see 12 NYCRR 317.20 ). Thereafter, plaintiff obtained a forensic audit, which allegedly revealed that the trust had an accumulated deficit of over $188 million. On July 8, 2011, plaintiff commenced this action, later amended in January 2012, in its capacity as the governmental entity charged with the administration of the Workers' Compensation Law and attendant regulations, and as successor in interest to the trust. Plaintiff alleged 32 causes of action against certain defendants sounding in, among other things, breach of contract, breach of good faith and fair dealing, breach of fiduciary duty, fraud, fraud in the inducement, negligent misrepresentation, gross negligence, alter ego liability and indemnification.³ The complaint asserts that, as a result of defendants' failures and wrongdoings, plaintiff has incurred liability for, among other things, "certain [t]rust [m]embers' assessments," "significant additional administrative expenses of the [t]rust" and "the amount of the total deficit of the [t]rust."

Balaban–Krause, Callaghan, Donaldson and Field, collectively, and Arney, Carpentar, Gosdeck,⁴ Hodes, Johansmeyer and Reda, individually, moved to dismiss the complaint pursuant to, among other provisions, CPLR 3211(a)(5) (statute of limitations) and CPLR 3211(a)(7) (failure to state a cause of action). PRM, PRMCS and the PRM individual defendants (hereinafter collectively referred to as the PRM defendants) moved to dismiss the complaint pursuant to, among other provisions, CPLR 3211(a)(1) (documentary evidence), CPLR 3211(a)(3) (capacity to sue) and CPLR 3211(a)(7). Plaintiff opposed defendants' motions to dismiss and cross-moved for leave to amend the complaint to include aiding and abetting breach of fiduciary duty and fraud claims against certain defendants.

Supreme Court partially granted certain defendants' motions by dismissing the breach of contract and breach of good faith and fair dealing claims against Arney (as trustee), Balaban–Krause, Callaghan, Hodes (as trustee), Johansmeyer and Reda, and limiting the temporal scope of such claims as to the PRM defendants, Donaldson and Field. The court also limited the temporal scope of plaintiff's breach of fiduciary duty cause of action against PRM, the PRM individual defendants and Carpentar, and dismissed the same claims against Hodes (as counsel) and the remaining trustee defendants. Similarly, the court limited the temporal scope of plaintiff's claims for fraud and fraud in the inducement and dismissed its negligent misrepresentation claim against the PRM defendants. Although the court also limited the temporal scope of the claims for negligence and gross negligence against Carpentar, it dismissed such claims as to the remaining trustee defendants, as well as the claim for gross negligence against Hodes (as counsel).

As to plaintiff's cause of action for alter ego liability, Supreme Court dismissed that portion of the complaint against Arney and Conroy, but denied the motion as it pertained to PRM, PRMCS, Bardascini, Farrell and Sorenson. Additionally, the court dismissed the common-law indemnification claim against PRMCS, but permitted such claim as alleged against PRM, the PRM individual defendants, Johansmeyer and Reda. Finally, the court, among other things, granted plaintiff leave to amend the complaint to add causes of action for aiding and abetting breach of fiduciary duty and fraud against certain defendants, including defendants Todd Brason, Thomas Buckley, Kenrick Cort, Gwen Eichorn, Carmen Flitt, John Fraher, Sanford Katz, Robert Kolb, Timothy McGorry, Phyllis Raymond, Robin Richards, Gregory Schaefer, Jordan Shames, David Slifkin, Suzanne Smith and Richard Swanson (hereinafter collectively referred to as the Phillips Lytle trustee defendants). Johansmeyer and Reda, collectively, the PRM defendants and the Phillips Lytle trustee defendants appeal, and plaintiff cross-appeals.⁵

As an initial matter, contrary to the claims of certain defendants, we find that plaintiff has standing to maintain this action as a successor in interest to the trust. Specifically, plaintiff "stands in the shoes of the [t]rust" (New York State Workers' Compensation Bd. v. Marsh U.S.A., Inc., 126 A.D.3d 1085, 1087, 5 N.Y.S.3d 547 [2015] [internal quotation marks and citation omitted] ) and, therefore, has standing to bring any claims that the trust may bring against defendants (see State of N.Y. Workers' Compensation Bd. v. Madden, 119 A.D.3d 1022, 1024, 989 N.Y.S.2d 156 [2014] ; see also New York State Workers' Compensation Bd. v. Marsh U.S.A., Inc., 126 A.D.3d at 1087 n. 5, 5 N.Y.S.3d 547 ; New York State Workers' Compensation Bd. v. SGRisk, LLC, 116 A.D.3d 1148, 1149–1150, 983 N.Y.S.2d 642 [2014] ).

Dismissal may be warranted under CPLR 3211(a)(5) where a defendant establishes, prima facie, that a cause of action is time-barred by the expiration of the applicable statute of limitations (see Stewart v. GDC Tower at Greystone, 138 A.D.3d 729, 729, 30 N.Y.S.3d 638 [2016] ; State of Narrow Fabric, Inc. v. UNIFI, Inc., 126 A.D.3d 881, 882, 5 N.Y.S.3d 512 [2015] ; J.A. Lee Elec., Inc. v. City of New York, 119 A.D.3d 652, 653, 990 N.Y.S.2d 223 [2014] ). "The burden then shifts to the plaintiff to raise a question of fact as to whether the statute of limitations has been tolled or was otherwise inapplicable, or whether the action was actually commenced within the period propounded by the defendant" (State of Narrow Fabric, Inc. v. UNIFI, Inc., 126 A.D.3d at 882, 5 N.Y.S.3d 512 [internal quotation marks and citation omitted]; see Picard v. Fish, 139 A.D.3d 1331, 1332–1334, 32 N.Y.S.3d 681 [2016] ; Geotech Enters., Inc. v. 181 Edgewater, LLC, 137 A.D.3d 1213, 1214, 28 N.Y.S.3d 457 [2016] ).

Beginning with plaintiff's first cause of action for breach of contract, as well as its second and third causes of action for breach of good faith and fair dealing, we agree with Supreme Court that such claims are time-barred by the applicable six-year statute of limitations to the extent that the alleged breaches occurred before July 8, 2005 (see CPLR 203[a] ; 213[2]; see also Town of Oyster Bay v. Lizza Indus., Inc., 22 N.Y.3d 1024, 1030, 981 N.Y.S.2d 643, 4 N.E.3d 944 [2013] ; Kosowsky v. Willard Mtn., Inc., 90 A.D.3d 1127, 1131, 934 N.Y.S.2d 545 [2011] ; Liberman v. Worden, 268 A.D.2d 337, 339, 701 N.Y.S.2d 419 [2000] ). Turning to plaintiff's fourth and fifth causes of action for breach of fiduciary duty, each is subject to a three-year statute of limitations as " the remedy sought is purely monetary in nature and it cannot be said that an allegation of fraud is essential to [these] claim[s]" (Weight v. Day, 134 A.D.3d 806, 808, 20 N.Y.S.3d 640 [2015] ; see CPLR 214[4] ; see generally IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 139, 879 N.Y.S.2d 355, 907 N.E.2d 268 [2009] ; compare New York State Workers' Compensation Bd. v. Consolidated Risk Servs., Inc., 125 A.D.3d 1250, 1253–1254, 4 N.Y.S.3d 680 [2015] ). Furthermore, the statute of limitations for breach of fiduciary duty claims begins to run on the date that the fiduciary's relationship with or administration of a trust ceases (see ...