Opinion
97-CV-4418 (ILG)
December 3, 2001
MEMORANDUM AND ORDER
SUMMARY
Plaintiff Adams Book Co., Inc. ("Adams Book Co." or "Adams") brings this diversity action seeking damages against Defendants Beatrice Ney as personal representative for the estate of Norman Ney ("Ney") and Carlos Raymond, claiming fraudulent concealment, breach of fiduciary duty, conversion and conspiracy to defraud. Ney now moves pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment on all claims against her.
For the reasons that follow, the motion is granted.
BACKGROUND
In 1945, Norman Ney was hired to work as an accountant at Adams by its founder, Albert Schattner. Mr. Ney was a trusted employee who had a close personal relationship with Mr. Schattner. Mr. Ney's responsibilities included maintaining the company's bank accounts, books and records, and filing corporate tax returns and financial statements. Mr. Ney was authorized to sign checks drawn on Adams' accounts. Mr. Schattner died in February 1983, and his son Glenn Schattner and brother-in-law Paul Davidson became "co-presidents" of Adams.
Unless otherwise noted, the facts in this background are derived from Ney's Rule 56.1 statement that were not controverted by Adams. See Local Rule 56.1(c) ("All material facts set forth in the statement required to be served by the moving party will be deemed to be admitted unless controverted by the statement required to be served by the opposing party.")
While Mr. Ney worked at Adams, the company had a policy of extending loans to executives and employees who requested them. Mr. Ney was not restricted in the amounts for which the loans could be made. Between January 1984 and April 1986, Mr. Ney signed 100 checks made payable to or for the benefit of Carlos Raymond, who was Adams' office manager at that time and had been employed by Adams for approximately thirty years. These checks were drawn on what was known as Adams' "special" or payroll account (the "Special Account"). Of the 100 checks, 24 were made payable to Mr. Raymond's wife (Carmen Raymond), and two were made payable to the University of Pennsylvania, where the Raymonds' daughter was then attending college. The word "loan" appeared in the upper left hand corner of twenty of the 100 checks.
The parties do dispute whether Mr. Schattner authorized Mr. Ney to make such loans. Prior to his death, Mr. Ney testified at his deposition not only that Mr. Schattner gave him the authority to make such loans (Ney Dep. at 69:19-23), but also that Mr. Ney was to advise Mr. Schattner in the event loans were made (Ney Dep. at 70:12-14), that after Mr. Schattner's death Mr. Ney never discussed with Glenn Schattner or anyone else his authority to make such loans, and that Mr. Ney never discussed with anyone the checks in controversy. (Ney Dep. at 73:4-14.)
For purposes of this motion, given that Adams "set forth specific facts showing that there is a genuine issue," Fed.R.Civ.P. 56(e), and drawing all inferences in favor of Adams as this Court must, this Court does not rely upon the assertion that Mr. Ney had unfettered authority to make loans since a fact finder reasonably could infer that any authority held by Mr. Ney was conditioned upon reporting the loan to the president of Adams. As will be seen, this genuine issue is not material to this decision.
Although not mentioned in Ney's Rule 56.1 statement, it appears undisputed that the Special Account primarily was used to pay out the payroll checks administered by Automatic Data Processing ("ADP") and the payroll checks for senior executives (administered internally by Adams). ADP would calculate what deductions should be made and inform Mr. Ney of Adams' net payroll amounts. (Ney Dep. at 37:17-38:2.) To cover this payroll and the net pay due the senior executives, monies would be transferred from Adams' general account to the Special Account. (Id.; see also Higgins Dep. at 45:8-22.)
Vincent Pucciarelli, the order processing manager at Adams, was authorized by the company to cash checks drawn on Adams' accounts for his fellow employees. Employees regularly gave Adams' checks, generally payroll checks, to Mr. Pucciarelli after endorsing them so that he could cash the checks at a local branch of Adams' bank. Mr. Pucciarelli also cashed checks that were written to employees as loans. Mr. Raymond gave many of his checks to Mr. Pucciarelli to cash. Mr. Pucciarelli endorsed twenty of the 100 checks made payable to or for the benefit of Mr. Raymond between 1984 and 1986. Of the twenty checks endorsed by Mr. Pucciarelli, eight were made payable to Carmen Raymond or to "cash," and the remainder were made payable to Mr. Raymond himself. Three of the checks cashed by Mr. Pucciarelli were contemporaneously marked "loan" in the memorandum portion of the face of the check. Neither Mr. Ney nor Mr. Raymond asked Mr. Pucciarelli to keep the checks a secret. Mr. Pucciarelli testified that he would not have cashed any of the checks if he believed that by doing so he was participating in a plan to steal money or being disloyal to Adams. Upon their cancellation and return to Adams, Mr. Ney stored the checks on the premises at Adams.
In 1987, Mr. Ney retired from his employment with Adams after 42 years of service.
The Checks Are Located
In or around March 1997, David Roberts, who had been employed at Adams since 1992, located a box containing the checks written for Mr. Raymond between January 1984 and April 1986. The box included not only checks made payable to or for the benefit of Mr. Raymond, but also bank statements relating to the period between 1984 and 1986. The box was located in a storage closet. At the time Mr. Roberts located the box, he and other Adams employees had been cleaning the closet. The box did not appear to have been sealed and was found on the floor in a corner of the closet underneath other boxes. It is unknown who placed the box in the closet or when it was placed there. Mr. Roberts gave the box to Gail Higgins, who is currently Adams' controller.
The Dispute over the Corresponding Deposits
Both parties agree in essence that corresponding deposits exist for the checks, but disagree over their meaning. A review of the statements reveals that for each check drawn on the Special Account paid to Carlos Raymond, Carmen Raymond or the University of Pennsylvania, there was a corresponding deposit in the same or a greater sum (credited to Adams' account), often within one week. (See Kramer Decl. ¶ 2; Snitow Decl., Exs. F (the cancelled checks in question), K (the bank statements), and M (reconciliation of checks and statements).) No genuine issue exists as to the fact that corresponding deposits exist for each check.
As to the source of the deposits, the parties disagree whether the facts are in dispute. Mr. Ney stated that based on the fact that the Special Account never ran a deficit and on his contemporaneous review of the monthly statements, he knew the checks were repaid. (Ney Dep. at 87:7-19, 158:22-159:8.) Adams in its papers refuses to concede this fact and states that the corresponding deposits were like the regular weekly deposits made by Mr. Ney from Adams' general account (Schattner Decl. ¶ 5; Pl. Mem. Opp. S.J. at 6-10) (emphasis supplied). Adams argues that because Ney admitted that he would cause the general account to be drawn in favor of the Special Account to cover all payroll and loan checks, meaning that the Special Account could never fall out of balance, the fact that the Special Account never ran a deficit has little meaning. (Schattner Decl. ¶ 5.)
Specifically, Mr. Schattner states:
Contradicting these allegations [that the corresponding deposits were repayments by Mr. Raymond], are the admissions by defendant, Norman Ney, that at his behest and without further substantiation, a check would be drawn by Adams Book Company to cover all checks that were drawn from the special account for payroll and loans, which was deposited shortly after the checks were drawn. The fact, then that the specific accounts from which the checks were drawn always "zero balanced" can be attributed not to repayment, but rather to the deposit of funds from Adams to cover the said checks. Had the loans been repaid, the account would not have carried a zero balance as testified by Norman Ney, but rather a balance reflecting the amount of the loans.
(Schattner Decl., ¶ 5 (emphasis supplied).) It should be noted that nowhere in its papers does Adams submit evidence contradicting Ney's testimony that the corresponding deposits in fact are attributed to deposits for Mr. Raymond. Adams' arguments on this point are nothing more than impermissible conjecture. See Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir. 1991).
However, Ms. Higgins admitted at her deposition that she never determined that the corresponding deposits came from Adams itself. (Higgins Dep. at 98:6-12.) Furthermore, although Mr. Ney did admit that he would make sure that the Special Account could cover its checks by drawing against the general account, Mr. Ney explicitly denied that he included the checks drawn for Mr. Raymond's benefit in the general reimbursement of the payroll account. (Ney Dep. at 79:16-80:2.) Mr. Ney also stated that he reviewed the monthly statements to confirm that the individual checks drawn for Mr. Raymond's benefit were repaid. (Ney Dep. at 158:22-159:8.)
Finally, Adams argues that the existence of loss as a result of the checks is very much in dispute, but does not proffer any evidence to establish that it in fact has determined that it suffered any loss. (Pl. Rule 56.1 Counter-Statement, ¶ 5.) Instead, Adams claims that the evidence upon which Ney relies is either self-serving or taken out of context with regard to statements made by Mr. Schattner and Ms. Higgins at their depositions. (Id.) Adams claims that the depositions of Mr. Ney, Ms. Higgins, and Mr. Schattner "shed substantial light as to the source of the funds to `cover' the checks," (id.) but provides no citation to any testimony within those depositions that would establish a genuine issue exists as to whether Adams has in fact determined that it suffered any loss as a result of the checks made to Mr. Raymond. A review of the portions of the depositions submitted does not reveal what the sources of those funds are. Ney's statement of the fact that no loss resulted from the checks paid to Mr. Raymond is properly supported by the submission of admissible evidence (see, e.g., Schattner Dep. at 70:20-71:2) and otherwise unrebutted.
In any event, it is the party's responsibility to draw attention to specific evidence in the record. As the Court of Appeals for the Seventh Circuit recently noted, "an invitation to search [the record on appeal] without guidance is no more useful than a litigant's request to a district court at the summary judgment stage to paw through the assembled discovery material. `Judges are not like pigs, hunting for truffles buried in' the record." Albrechtson v. Bd. of Regents of the Univ. of Wisconsin System, 309 F.3d 433, 436 (7th Cir. 2002) (quoting United States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991)).
Procedural History
Adams initially filed its complaint in this matter on August 1, 1997, against Ney and both Carlos and Carmen Raymond. Before any hearing on an initial motion to dismiss, Adams amended its complaint on January 13, 1998. Defendants again moved to dismiss the complaint based on the statute of limitations, failure to state a cause of action, and failure to plead fraud with particularity. This Court granted that motion with regard to all claims against Carmen Raymond, but otherwise denied the motion by Memorandum and Order dated June 30, 1998. ("June 30, 1998 Order".)
In support of her motion for summary judgment, Ney submits a Local Rule 56.1 statement of undisputed facts, a declaration by Jonathan H. Kramer, a Certified Public Accountant, dated April 1, 2002, and numerous exhibits. In her brief, Ney argues first that Adams has failed to state a claim for a variety of reasons that need not be reached here. Ney also argues that the statute of limitations bars these claims, and that the 2-year discovery rule and equitable estoppel principles do not apply.
In opposing Ney's motion for summary judgment, Adams submitted a Local Rule 56.1 Statement, a declaration by Adams' co-president Glenn Schattner, two exhibits, and a memorandum of law opposing Ney's motion. Instead of contesting most of the legal arguments put forward by Ney in its brief in support of summary judgment, Adams instead claims that "the only argument that has not been disposed of by prior Order of this Court, pertains to defendants' allegations of `payment.'" (Def. Mem. Opp. S.J. at 3.)
Adams also argues that Ney's motion for summary judgment is faulty because no affidavit based on Norman Ney's personal knowledge was filed as required by Fed.R.Civ.P. 56(e). (Pl. Mem. Opp. S.J. at 2-3.)
However, Rule 56(e) does not require that the movant himself or herself submit an affidavit. Rule 56(e) requires simply that an affidavit be made on personal knowledge by an affiant competent to testify on the matters stated, and that such facts would be admissible. Ney's motion was supported initially by two declarations (submitted in lieu of affidavits pursuant to 28 U.S.C. § 1746) executed by Ney's attorney (introducing the various exhibits) and an accountant (providing a reconciliation of the checks and corresponding deposits) that set forth the basis for their knowledge of their statements. These declarations and the accompanying exhibits satisfy Rule 56(e). In any event, a party must move to strike a defective affidavit or else any such defect is waived. In re Teltronics Services, Inc., 762 F.2d 185, 192 (2d Cir. 1985).
In reply, Ney argues (for purposes relevant to this decision) that by failing to address its legal arguments, Adams either abandons the claim to which those arguments were addressed or concedes the argument's validity.
DISCUSSION
Summary judgment "shall be rendered forthwith if the pleadings, depositions . . . together with the affidavits . . . show that there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A "moving party is entitled to judgment as a matter of law [if] the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof" Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1985) (internal quotation marks and citations omitted). In deciding a summary judgment motion, a court should not resolve disputed issues of fact; rather, it simply must decide whether there is any genuine issue to be tried. Eastman Mach. Co. v. United States, 841 F.2d 469, 473 (2d Cir. 1988). A disputed fact is material only if it might affect the outcome of the suit under the governing law. A genuine factual issue exists if there is sufficient evidence favoring the nonmovant such that a reasonable jury could return a verdict in her favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). The motion "will not be defeated merely . . . on the basis of conjecture or surmise." Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir. 1991). In assessing the record to determine whether there is a genuine issue of fact, the court is required to draw all justifiable inferences in favor of the party against whom summary judgment is sought. Anderson, 477 U.S. at 255.
Federal courts may deem a claim abandoned when a party moves for summary judgment on one ground and the non-movant does not address the argument in any way. See, e.g., Douglas v. Victor Capital Group, 21 F. Supp.2d 379, 393 (S.D.N.Y. 1998) (collecting cases). As noted previously, in its brief Adams does not oppose many of Ney's arguments, including the statute of limitations arguments and whether the absence of any damages is an element of the claims for relief. On that basis alone, this Court could grant summary judgment to Ney.
However, summary judgment is also warranted because these claims were not timely brought, nor do any facts exist to show that the equitable estoppel or discovery rule doctrines apply. As stated in this Court's June 30, 1998 Order, the statute of limitations for the conversion claim is three years. N.Y.C.P.L.R. 214(3). A claim for a breach of fiduciary duty seeking money damages is normally considered injury to property, and therefore also governed by a three year statute of limitations. Cooper v. Parsky, 140 F.3d 433, 441 (2d Cir. 1998); N.Y.C.P.L.R. 214(4).
The court notes that a breach of fiduciary duty claim may have a six year statute of limitations where equitable relief is sought, see Leongard v. Santa Fe Indus., 70 N.Y.2d 262, 267 (1987), and that some courts have applied a shorter statute of limitations where the breach of fiduciary duty in essence sounds under another claim. See Tserotas v. Greek Orthodox Archdiocese, 251 A.D.2d 323, 324 (2d Dep't 1998) (applying one-year statute of limitations to claim for breach of fiduciary duty based on sexual assault).
Under any applicable statute of limitations, the time to file has elapsed in this case.
In its June 30, 1998 Order, this Court held that the doctrine of equitable estoppel saved these claims from dismissal. A prerequisite to successful invocation of the doctrine of equitable estoppel is that the plaintiff demonstrate that it was diligent in bringing the action when it became, or should have become, aware of the wrongdoing. In re Allstate Ins. Co. (Michel), 167 A.D.2d 208, 211 (1st Dep't 1988); see June 30, 1998 Order at 11. Adams had alleged that Ney had "full and unfettered control" over the Special Account books and records from which the checks to Mr. Raymond were drawn, that Ney and Raymond hid or destroyed the checks, and that the defendants concealed their wrongdoing, preventing Adams from learning of the wrongdoing. (June 30, 1998 Order at 10, 12-13.) Those allegations, accepted as true as they had to be for purposes of a 12(b)(6) motion, were sufficient to invoke the doctrine of equitable estoppel. However, the issue may be revisited on a motion for summary judgment, where the allegations are no longer presumed to be true. See Fed'l Deposit Ins. Co. v. Pelletreau Pelletreau, 965 F. Supp. 381, 389 (E.D.N.Y. 1997) ("When the factual record in this case is fully developed via discovery, the defendants may have reason to reassert their arguments in a summary judgment motion.")
It is undisputed that Mr. Raymond gave many of the 100 checks to Mr. Pucciarelli to cash, and that twenty of the 100 checks in fact were endorsed by Mr. Pucciarelli. Of those twenty, twelve were made out to Mr. Raymond and the others were made payable to Carmen Raymond (who was not an employee of Adams) or simply to "cash." At no time did either Mr. Raymond or Mr. Ney ask Mr. Pucciarelli to keep quiet about these checks. In other words Ney and Raymond did not act in secret.
It is further undisputed that the cancelled checks and the bank statements relating to the Special Account on which the checks were drawn were stored together in a box, which was found by Mr. Roberts in 1997, in a storage closet on the premises of Adams. Adams does not draw the Court's attention to any evidence to support its allegations in the Complaint that Mr. Ney and Mr. Raymond sought to conceal the existence of the bank statements or cancelled checks. Indeed, it is evident that had Adams conducted a simple inventory of its premises at any time, these checks and statements would have been located.
Ney compares this case to Franceskin v. Meischenguiser, where a stepson accused his stepfather of improperly transferring money out of their joint account. 277 A.D.2d 118, 118 (1st Dep't 2000). The court held that no estoppel applied, since the stepson could have easily inquired at any time whether the funds remained in the joint account. Id. The "failure to exercise ordinary diligence periodically to ascertain the status of the joint accounts from which, he was on notice, funds might be freely transferred by either account holder, renders his estoppel claim untenable." Id. The same result is required here. There is no evidence that the transfers were concealed, especially since the actual statements and cancelled checks never left the premises of Adams, and Adams knew that Ney had the power to sign checks and cause funds to be transferred out of its accounts. At the very least, Adams should be held to the knowledge that any review of its accounts (which Adams had in its possession at all times) would have revealed.
The facts presented in this case implicate exactly the risks which a statute of limitations should prevent. Statutes of limitations not only afford a defendant individual protection against "stale claims," but also express the societal interest "of giving repose to human affairs." John J. Kassner Co., Inc. v. City of New York, 46 N.Y.2d 544, 550 (1980). In this case, the lapse of time means that a key witness, Norman Ney, has died, preventing a factfinder from assessing his demeanor and credibility — important factors for any witness, but especially for a witness accused of fraud. See In re Columbia Securities Litig., 155 F.R.D. 466, 479 (S.D.N.Y. 1994) (noting that scienter, motive and intent "generally require examination of a witness's demeanor and credibility"). Had Adams diligently inventoried its own premises and property between 1984 and 1992 (when the longest statute of limitations expired), all the witnesses would have been available. Absent material facts showing inequitable conduct by Mr. Ney that denied Adams the opportunity reasonably to discover the alleged wrongs, the statutes of limitations should apply.
It must be noted that the inability of any party to produce documentary evidence tracing the corresponding deposits may also be due to the passage of time.
A similar result is required for the other two claims. Claims of fraud and conspiracy to defraud must be brought within six years from the date of the fraud or two years from the time that a plaintiff discovered or could have, with reasonable diligence, discovered the alleged fraud. N.Y.C.P.L.R. 203(g), 213(8); D'Amico v. First Union Nat. Bank, 285 A.D.2d 166, 171 (1st Dep't 2001); Antonios A. Alevizopoulos and Assocs., Inc. v. Comcast International Holdings, Inc., 100 F. Supp.2d 178, 183 (S.D.N.Y. 2000) ("The statute of limitations for a conspiracy claim is measured by the underlying tort."). In other words, Adams' claim is timely only if Adams could not have discovered with reasonable diligence the alleged fraud until 1995. For the reasons stated above, with reasonable diligence Adams could have discovered the alleged wrongdoing as it happened or at any time thereafter. Adams has not proffered any evidence to the contrary. All the facts that support its claim were always in its possession, and presumably a routine inventory of its property or audit of its books would have given it the same facts it presents now.
CONCLUSION
For the foregoing reasons, the motion for summary judgment pursuant to Federal Rule of Civil Procedure 56 is granted.