T & N PLC v. Fred S. James & Co. of New York, Inc.

• Decision Date: 06 July 1994
• Docket Number: D,No. 1317,1317
• Citation: 29 F.3d 57
• Court: U.S. Court of Appeals — Second Circuit
• Parties: T & N PLC, Plaintiff-Appellant, v. FRED S. JAMES & CO. OF NEW YORK, INC., Defendant-Appellee. ocket 93-9142.

Page 57

29 F.3d 57

T & N PLC, Plaintiff-Appellant, v. FRED S. JAMES & CO. OF NEW YORK, INC., Defendant-Appellee.

No. 1317, Docket 93-9142.

United States Court of Appeals, Second Circuit.

Argued March 23, 1994.

Decided July 6, 1994.

Charles E. Dorkey III, New York City (Thomas I. Sheridan, III, Karen B. Burrows, James P. Lynn, Haythe and Curley, of counsel), for plaintiff-appellant.

Joan M. Gilbride, New York City (Philip J. Walsh, Thomas R. Manisero, Douglas W. Hammond, Wilson, Elser, Moskowitz, Edelman & Dicker, of counsel), for defendant-appellee.

Before OAKES, MESKILL, and ALTIMARI, Circuit Judges.

ALTIMARI, Circuit Judge:

Plaintiff-appellant T & N plc ("T & N") appeals from a judgment entered in the United States District Court for the Southern District of New York (Haight, J.), dismissing its claims by summary judgment as barred by New York's six-year statute of limitations. T & N, a British manufacturer of products containing asbestos, commenced this action against Fred S. James & Co. of New York, Inc. ("James"), an insurance broker, alleging professional malpractice, breach of fiduciary On appeal, T & N contends that its action is not time-barred because the district court erroneously determined when its causes of action accrued. Alternatively, T & N argues that the district court erred by failing to enforce a "standstill agreement" between T & N and James that would have tolled the statute of limitations with respect to T & N's claims based on certain of the policies procured by James. For the reasons stated below, we find that T & N's action is barred by the statute of limitations, and accordingly we affirm the judgment of the district court.

duty, breach of contract, and negligent misrepresentation arising from James's alleged failure to procure adequate insurance coverage.

BACKGROUND

In 1979, T & N engaged James to procure product liability insurance for bodily injury and property damage claims arising from the sales of products in the United States by T & N and its United States subsidiaries. James procured ten policies from various insurers (the "Insurers") which purported to provide T & N with the coverage it sought. The policies were effective on various dates: one on January 31, 1980, two on May 21, 1980, three on December 31, 1980, and four on December 31, 1981.

T & N claims that during the application process, it provided James with all the information necessary to procure the policies, including information relating to pending asbestos-related claims against T & N. According to T & N, James failed to disclose this information to the Insurers. James, on the other hand, alleges that neither T & N nor its counsel provided James with any substantial information regarding the pending asbestos-related claims.

Since 1977, T & N has been sued in the United States by thousands of plaintiffs, including individuals, school boards, colleges, governments, and private property owners seeking recovery for alleged personal injury and property damage arising from exposure to asbestos. T & N argues that many of these claims should have been covered by the policies that James procured.

In March 1986, T & N sued the Insurers for indemnification and defense costs related to its property damage claims. The Insurers defended on several grounds, including that T & N and its agents failed to disclose certain underwriting risks. Specifically, the Insurers claimed that they were not informed of the pending asbestos-related claims against T & N.

In June 1987, shortly after learning of this defense, T & N entered into a standstill agreement with James to toll the statute of limitations in any future action against James. Although T & N believed that it had potential claims against James, it allegedly sought to avoid unnecessary litigation in the event that it received satisfactory payment from the Insurers. As such, T & N did not commence an action against James at that time. T & N ultimately settled with the Insurers for an amount substantially less than the aggregate limits of liability under the policies.

In November 1989, T & N initiated this action against James, asserting four causes of action: professional negligence, breach of fiduciary duty, breach of contract, and negligent misrepresentation. The basis of the action was that by failing to disclose essential information to the Insurers, James allowed the Insurers to assert a potentially valid defense to T & N's claim for coverage. T & N sought to recover the difference between the settlement amount obtained from the Insurers and the value that the policies would have had but for James's alleged misconduct.

James moved for summary judgment on the grounds that T & N's claims were barred by New York's six-year contract statute of limitations. On January 13, 1993, the district court granted James's motion and dismissed T & N's action. T & N plc v. Fred S. James & Co. of New York, Inc., 89 Civ. 7688, 1993 WL 17336, 1993 U.S.Dist. LEXIS 530 (S.D.N.Y. Jan. 13, 1993). The district court determined that the causes of action accrued at the time James allegedly breached the brokerage contract, which occurred, if at all, no later than the issuance of the policies in 1980 and 1981. Because T & N did not commence this lawsuit until 1989, its action was time-barred. The district court also

held that the standstill agreement was invalid and unenforceable under New York law because it purported to extend the limitations period indefinitely. On September 29, 1993, the district court denied T & N's motion for reconsideration of its determination that the standstill agreement was void. T & N plc v. Fred S. James & Co. of New York, Inc., 89 Civ. 7688, 1993 WL 404100, 1993 U.S.Dist. LEXIS 13936 (S.D.N.Y. Sept. 29, 1993). T & N now appeals.

DISCUSSION

We review the grant of summary judgment by the district court de novo. See Burgos v. Hopkins, 14 F.3d 787, 789 (2d Cir.1994). On appeal, T & N argues that the district court erred in determining the time at which its causes of action accrued for purposes of the statute of limitations. Additionally, T & N argues that the district court erroneously determined that the standstill agreement purporting to toll the statute of limitations was unenforceable. We agree with the district court's resolution of both issues.

1. Statute of Limitations

a. Accrual of Claims

In holding that T & N's claims were barred by the statute of limitations, the district court determined that T & N's causes of action accrued at the time James allegedly breached the brokerage contract in 1980 and 1981. Consequently, because New York's six-year statute of limitations applies, see Video Corp. of America v. Frederick Flatto Assocs., Inc., 58 N.Y.2d 1026, 462 N.Y.S.2d 439, 439, 448 N.E.2d 1350, 1350 (1983), T & N's claims were time-barred when it brought this action in 1989. T & N, however, argues on appeal that its causes of action accrued in 1987 when it was first injured by the Insurers' disclaimer of liability. As discussed below, T & N misconstrues the governing case law.

Under New York law, a cause of action for breach of contract accrues and the statute of limitations commences when the contract is breached. See Ely-Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399, 599 N.Y.S.2d 501, 502, 615 N.E.2d 985, 986 (1993). Although conceding that contract-based claims typically accrue at breach, T & N contends that this is one of those "rare case[s] where the breach and the harm engendered by the breach are not simultaneous events, [so that] the cause of action for breach of contract accrues and the period of limitations runs only from the occurrence of the harm." Brooklyn Union Gas Co. v. Interboro Surface Co., 87 A.D.2d 833, 449 N.Y.S.2d 274, 275 (2d Dept.1982) (citing Ryan Ready Mixed Concrete Corp. v. Coons, 25 A.D.2d 530, 267 N.Y.S.2d 627 (2d Dept.1966)). In both Brooklyn Union Gas and Ryan Ready Mixed Concrete, the Second Department held that the statute of limitations did not run from breach, but from the time at which plaintiff first suffered injury. In the case at bar, however, the district court declined to rely on Brooklyn Union Gas and Ryan Ready Mixed Concrete, characterizing them as "anomalies" rather than as a sign that New York courts had adopted an accrual-at-injury rule where breach and damage are not simultaneous.

Our reading of the relevant decisions indicates that the Court of Appeals has rejected the decisions upon which T & N relies and has declined to adopt an accrual-at-injury rule, even where breach and damages are not simultaneous. In National Life Ins. Co. v. Frank B. Hall & Co., 67 N.Y.2d 1021, 503 N.Y.S.2d 318, 319, 494 N.E.2d 449, 450 (1986), the New York Court of Appeals held that in a suit against an insurance broker for malpractice in the performance of a contract, the statute of limitations commenced upon defendant's failure to timely notify the insurers, rather than when the insurers initially disclaimed liability for late notification. Although the majority in National Life did not explicitly discuss either Brooklyn Union Gas or Ryan Ready Mixed Concrete, the dissent argued that those cases should govern. See id. 503 N.Y.S.2d at 320, 494 N.E.2d at 450-51. Notably, an examination of the briefs submitted in National Life reveals that the appellant urged the Court of Appeals to apply Brooklyn Union Gas and Ryan Ready Mixed Concrete.

More recently, in Ely-Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399, 599 Nevertheless, T & N contends that National Life and Ely-Cruikshank are distinguishable from the instant case. T & N claims that because it was not injured until 1987, it could not assert an action against James prior to that time, unlike the plaintiffs in National Life and Ely-Cruikshank who were aware of their injuries within the limitations period. We find this to be a distinction without a difference, in light of the clear holdings of the Court of Appeals.

                N.Y.S.2d 501, 502, 615 N.E.2d 985, 986

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