Opinion
No. 1600–14.
08-22-2016
The KROG CORPORATION, Plaintiff, v. The VANNER GROUP, INC., f/k/a Ralph J. Vanner and Associates, Inc., Defendant.
Barclay Damon, LLP (Linda J. Clark and David M. Cost, of counsel), Albany, attorneys for plaintiff. Bond, Schoeneck & King (Charles C. Swanekamp and Bradley A. Hoppe, of counsel), Buffalo, attorneys for defendant.
Barclay Damon, LLP (Linda J. Clark and David M. Cost, of counsel), Albany, attorneys for plaintiff.
Bond, Schoeneck & King (Charles C. Swanekamp and Bradley A. Hoppe, of counsel), Buffalo, attorneys for defendant.
RICHARD M. PLATKIN, J.
Defendant The Vanner Group, Inc. f/k/a Ralph J. Vanner and Associates, Inc. ("Vanner") has filed this pre-answer motion pursuant to CPLR 3211(a)(1), (5) and (7), seeking the dismissal of the amended complaint filed by plaintiff The Krog Corporation ("Krog").
BACKGROUND
As alleged in plaintiff's amended complaint ("Complaint"), the Elite Contractors Trust of New York ("Trust") is a group self-insured trust ("GSIT") formed in or about August 1999 by Compensation Risk Managers, LLC ("CRM") pursuant to the Workers' Compensation Law ("WCL"). Members of the Trust were employers within the construction and contracting industry that conducted business in New York State and were required to provide workers' compensation insurance to their employees. The Trust retained CRM to serve as its group administrator pursuant to a Service Agreement.
Vanner was an insurance broker and consultant to Krog for many years. Vanner also is alleged to have been "a founder and marketing broker for the Trust who was involved in the creation and assisted with the administration and oversight of the Trust" (Complaint ¶ 4). The Complaint further alleges that Vanner "was designated as the Trust's Managing General Agent and Trusted Marketing Partner' pursuant to a marketing agreement it entered into with CRM" (id. ¶ 17).
In or about September 1999, Krog joined the Trust, allegedly based upon the solicitation, recommendation and counseling of Vanner. Krog remained a member of the Trust through April 17, 2008, when the Trust ceased providing workers' compensation coverage (Complaint ¶ 21). The New York State Workers' Compensation Board ("WCB") assumed administration of the Trust on April 1, 2010.
Following its takeover of the Trust, the WCB commissioned a forensic audit that was completed and issued on or about December 31, 2010. The audit showed an accumulated deficit in excess of $82 million. On the basis of that analysis, the WCB issued assessment letters to all Trust members, including Krog. A second forensic accounting occurred sometime in 2013, showing a deficit of almost $58 million. Thereafter, the WCB levied assessments on Krog and other former Trust members, which Krog has challenged.
According to Krog, Vanner continually recommended that it become a member of the Trust and never recommended that Krog cease Trust membership, despite the Trust's mounting deficit—a deficit of which Vanner knew or should have known based upon its involvement in the creation, marketing, administration and oversight of the Trust. Krog alleges that it would not have joined or remained a member of the Trust if not for the recommendation of, and placement by, Vanner, its long-time insurance broker in which Krog reposed confidence. Accordingly, Krog seeks damages related to the "improper continuous placement and retention of its membership in the Trust, as well as for [Vanner's] role in facilitating the overall Trust deficit that the [WCB] now seeks to collect ... due to [Vanner's] various contractual, common law and statutory duties, as well as for fraudulent conduct as an insurance broker" (Complaint ¶ 7).
With respect to CRM, Krog alleges that the GSIT administrator entered into relationships with certain insurance brokers, including Vanner, pursuant to which CRM "paid additional, inflated, excessive and/or undisclosed fees and commissions in exchange for placing and keeping certain employers with the Trust, including [Krog]" (Complaint ¶ 39). Vanner also is alleged to have received a perpetual two-percent override on all business produced by other agents based on its status as the Trust's Managing General Agent and Trusted Marketing Partner. All of this is said by Krog to be part of a scheme by CRM and Vanner to place employers in GSITs for their own financial benefit, with Vanner assisting CRM in marketing the Trust, touting the benefits of membership, and providing "marketing intelligence" to CRM.
Krog further alleges that representatives from Vanner attended each and every trustee meeting of the Trust, and that Vanner provided recommendations and advice on the direction, administration and marketing of the Trust. Thus, Krog alleges that Vanner was significantly and intimately involved with the Trust's marketing, oversight, administration and operation. Specifically, the Complaint alleges that Vanner assisted CRM by "providing information and advice on marketing strategy, member contribution rates, discounts, policy pricing, trust assets, trust reserves, as well as responses to other inquiries from CRM on the administration of the Trust" (Complaint ¶ 49).
Finally, the Complaint alleges that CRM and its principals failed to administer the Trust in accordance with its governing laws, regulations, organizational documents and common-law obligations, thereby breaching its fiduciary duties to Krog. Based upon reports in the industry of CRM's mismanagement and the poor and failing condition of the GSITs under its management, Vanner allegedly was on notice of CRM's fraudulent conduct and mismanagement.
This action was commenced on March 24, 2014. Oral argument was held on November 17, 2015, the motion was finally submitted as of May 19, 2016, and this Decision & Order follows.
LEGAL STANDARD
Under CPLR 3211(a)(1), dismissal is warranted if documentary evidence conclusively establishes a defense as a matter of law (Haire v. Bonelli, 57 A.D.3d 1354, 1356, 870 N.Y.S.2d 591 [3d Dept 2008], citing Beal Sav. Bank v. Sommer, 8 N.Y.3d 318, 324 [2007] ; see Goshen v. Mutual Life Ins. Co. of NY, 98 N.Y.2d 314, 326 [2002] ; Angelino v. Michael Freedus, D.D.S., P.C., 69 A.D.3d 1203, 893 N.Y.S.2d 668 [3d Dept 2010] ). On such a motion, "affidavits submitted by a defendant do not constitute documentary evidence upon which a proponent of dismissal can rely" (Crepin v. Fogarty, 59 A.D.3d 837, 838, 874 N.Y.S.2d 278 [3d Dept 2009] ).
On a motion pursuant to CPLR 3211(a)(7) to dismiss for failure to state a claim, "the Court must afford the pleadings a liberal construction, take the allegations of the complaint as true and provide plaintiff the benefit of every possible inference" (EBC 1, Inc. v. Goldman, Sachs & Co., 5 N.Y.3d 11, 19 [2005] ). The Court's "sole criterion is whether the pleading states a cause of action" (Polonetsky v. Better Homes Depot, 97 N.Y.2d 46, 54 [2001] [internal quotations omitted] ). However, the Court need not "accept as true legal conclusions or factual allegations that are either inherently incredible or flatly contradicted by documentary evidence" (1455 Washington Ave. Assoc. v. Rose & Kiernan, 260 A.D.2d 770, 771, 687 N.Y.S.2d 791 [3d Dept 1999] [internal citations omitted] ). As with a motion under CPLR 3211(a)(1), the Court must "ignore the affidavits submitted by defendants" (Henbest & Morrisey v. W.H. Ins. Agency, 259 A.D.2d 829, 830, 686 N.Y.S.2d 207 [3d Dept 1990] ).
Dismissal is warranted under CPLR 3211(a)(5) where the movant establishes that a cause of action may not be maintained due to the expiration of the statute of limitations. The movant bears the initial burden of supporting the motion with "an affidavit or other competent proof sufficient, if uncontroverted, to establish the [statute of limitations] defense as a matter of law" (State of New York Higher Educ. Services Corp. v. Starr, 158 A.D.2d 771, 771, 551 N.Y.S.2d 363 [3d Dept 1990] ; accord Romanelli v. DiSilvio, 76 A.D.3d 553, 554, 907 N.Y.S.2d 258 [2d Dept 2010] ). Upon such a showing, "the burden shifts to the party opposing the motion to aver evidentiary facts" sufficient to either defeat or at least raise factual questions concerning the defense (Hoosac Val. Farmers Exch. v. AG Assets, 168 A.D.2d 822, 823, 563 N.Y.S.2d 954 [3d Dept 1990] ; see Doyon v. Bascom, 38 A.D.2d 645, 326 N.Y.S.2d 896 [3d Dept 1971] ). Thus, the Court must employ what is, in essence, a summary-judgment type analysis (State of New York Higher Educ. Services, 158 A.D.2d at 772, 551 N.Y.S.2d 363 ; Suss v. New York Media, Inc., 69 A.D.3d 411, 411, 891 N.Y.S.2d 409 [1st Dept 2010] ).
ANALYSIS
A. Breach of Contract (5th Cause of Action)
Krog alleges that Vanner breached oral and written agreements to perform insurance counseling and brokerage services. The claimed breaches of contract, which are alleged to have occurred "[t]hroughout the entire course of [Krog's] membership in the Trust", include: failing to procure suitable workers' compensation coverage; improperly placing Krog in the Trust; diverting Krog's assets for personal use; and failing to properly advise and counsel Krog on the risks of Trust membership (Complaint ¶ 130). On the basis of these allegations, Krog seeks to recover assessments claimed or levied by the WCB, any amounts due based upon unpaid claims of Krog employees, and the brokerage fees, commissions and/or compensation paid to or on behalf of Vanner pertaining to Krog's membership in the Trust (id. ¶ 131, 891 N.Y.S.2d 409 ).
Vanner contends that the breach-of-contract claim is time-barred. The statute of limitations for a breach of contract claim is six years (CPLR 213[2] ). Under New York law, "a breach of contract cause of action accrues at the time of the breach" (Ely–Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399, 402 [1993] ; see CPLR 203[a] ). The date of the breach is controlling even where damages from the breach are not sustained until later and the "injured party may be ignorant of the existence of the wrong or injury" (Ely–Cruikshank, 81 N.Y.2d at 403–404, 599 N.Y.S.2d 501, 615 N.E.2d 985 [internal quotation marks omitted] ).
Where, as here, "a contract provides for continuing performance over a period of time, each breach may begin the running of the statute anew such that accrual occurs continuously and plaintiffs may assert claims for damages occurring up to six years prior to filing of the suit" (Airco Alloys Div. v. Niagara Mohawk Power Corp., 76 A.D.2d 68, 80, 430 N.Y.S.2d 179 [4th Dept 1980] ). However, "so much of the causes of action asserted by [plaintiff] as accrued more than six years prior to the commencement of the instant action must be dismissed as time-barred" (Westchester County Correction Officers Benevolent Assn., Inc. v. County of Westchester, 65 A.D.3d 1226, 1228, 885 N.Y.S.2d 728 [2d Dept 2009] ).
Applying the foregoing principles, the Court concludes that Krog cannot recover for any breaches of contract allegedly committed by Vanner before March 24, 2008, six years prior to the commencement of this action. Further, Vanner has made a prima facie showing that the breaches of contract alleged by Krog—all of which pertain to the performance of a contract to perform insurance brokerage services, which Vanner allegedly breached by allowing Krog to join and remain a member of the Trust—occurred on or before Krog's final renewal of its Trust membership in Spring 2007, which is outside of the six-year limitations period.
In opposition, Krog argues that breaches of its contract with Vanner "for insurance consulting and brokerage services lasted beyond its termination date with the Trust, continues to this day, and that the breaches occurred during the entire course of its membership in the ELITE Trust" (Memorandum of Law in Opposition, at 12). Krog further maintains that its "obligations to the Trust still have not ended as the [WCB] has sued it for the Trust's residual liabilities" (id. ). Nonetheless, all of the breaches of contract delineated in the Complaint and in plaintiff's filings in opposition to the motion concern Vanner's role in inducing Krog to join and remain a member of the Trust, and there are no factual allegations demonstrating any breaches of contract by Vanner subsequent to Krog's final annual renewal of its Trust membership in Spring 2007. The fact that Krog may continue to feel the financial consequences of the alleged breaches committed more than six years prior to the commencement of this action does not and cannot serve to toll, extend or otherwise revive the statute of limitations.
Indeed, Krog was a member of the Trust for no more than 25 days of the statutory period, and even liberally construed, the Complaint does not allege a failure on the part of Vanner with respect to the performance of insurance brokerage and consulting services during this limited period.
Accordingly, the breach-of-contract claim is dismissed as time-barred.
B. Unjust Enrichment (1st Cause of Action)
Krog alleges that Vanner diverted monies it paid for insurance consulting and brokerage services for Vanner's own personal use and was unjustly enriched as the result of the liability for assessments that Krog now faces (Complaint ¶ 102). Krog further alleges that Vanner, in concert with CRM, "provided inaccurate information in order to grow the Trust membership, which resulted in the liabilities exceeding the assets sufficient to cover it and causing the deficit, all while [Vanner] collected substantial monetary revenue on all business generated from insurance agents, at [Krog's] expense" (id. ¶ 103, 885 N.Y.S.2d 728 ).
A claim for unjust enrichment "is available only in unusual situations when the defendant has not breached a contract nor committed a recognized tort, but circumstances create an equitable obligation running from the defendant to the plaintiff" (Maya NY, LLC v. Hagler, 106 A.D.3d 583, 584–585, 965 N.Y.S.2d 475 [1st Dept 2013] ). "Under New York law, there is no identified statute of limitations period within which to bring a claim for unjust enrichment" (id. at 585, 965 N.Y.S.2d 475 ). The six-year limitations periods of CPLR 213(1) or (2) generally are applied, but a claim of unjust enrichment may be governed by the three-year limitations period of CPLR 214(3) where the allegations of wrongful conduct sound in a recognized tort, including conversion (compare Board of Managers of Chelsea 19 Condominium v. Chelsea 19 Associates, 73 A.D.3d 581, 582, 905 N.Y.S.2d 8 [1st Dept 2010], Dimatteo v. Cosentino, 71 A.D.3d 1430, 1431, 896 N.Y.S.2d 778 [4th Dept 2010]and Lambert v. Sklar, 30 A.D.3d 564, 566, 817 N.Y.S.2d 378 [2d Dept 2006]with Knobel v. Shaw, 90 A.D.3d 493, 495, 936 N.Y.S.2d 2 [1st Dept 2011]and Elliott v. Qwest Communications Corp., 25 A.D.3d 897, 898, 808 N.Y.S.2d 443 [3d Dept 2006] ). The cause of action accrues upon the occurrence of the wrongful act giving rise to the restitutionary duty (Yarbro v. Wells Fargo Bank, N.A., 140 AD3d 668 [1st Dept 2016] ).
According to Krog, Vanner "continuously diverted funds paid for insurance consulting services for its own personal use and was unjustly enriched as a result" throughout "the entire course of Krog's [Trust] membership" (Memorandum of Law in Opposition, at 9). Krog acknowledges, however, that the unjust enrichment ceased no later than the date that "the Trust stopped issuing coverage and accepting funds from Krog" (id. ).
Vanner makes a powerful case that a three-year limitations period should apply to plaintiff's allegations of diversion. These allegations sound in the tort of conversion and, therefore, should be governed by CPLR 214(3) (see supra ). But even if Krog were entitled to the residual six-year limitations period that generally is applied to claims of unjust enrichment, the record shows that Krog did not make any payments to Vanner subsequent to its final renewal of Trust membership in Spring 2007. Thus, the diversion branch of the unjust enrichment claim is untimely in any event.
Finally, the branch of the claim founded upon allegations that Vanner unjustly was enriched by growing Trust membership through the provision of inaccurate information is untimely under the six-year limitations period. Krog's final renewal of Trust membership occurred prior to March 24, 2008, and it has no standing to seek restitution on behalf of other employer-members of the Trust. Accordingly, the claim for unjust enrichment is dismissed.
C. Negligence (6th Cause of Action)
Krog alleges that Vanner was negligent in the provision of insurance consulting and brokerage services and in assisting with administration and marketing of the Trust (Complaint ¶¶ 133–134). Vanner's alleged breaches are said to include: failing to exercise reasonable care and skill in providing insurance consulting and brokerage services; failing to disclose the joint and several liability associated with the Trust; failing to ascertain and/or disclose the true financial condition of the Trust; failing to recognize and advise plaintiff that coverage from the Trust was not the same as traditional insurance coverage; acting in concert with CRM to increase the membership of the Trust, despite a mounting deficit, to plaintiff's detriment; compromising its professional judgment based upon its relationship with CRM; and negligently overseeing the operations of the Trust. On the basis of these allegations, Krog seeks the same measure of damages as on its contract claim.
Vanner first contends that the negligence claim is time-barred. The Court agrees. A claim of negligence is governed by a three-year limitations period that accrues "as soon as the claim becomes enforceable, i.e., when all elements of the tort can be truthfully alleged in a complaint. As with other torts in which damage is an essential element, the claim ... is not enforceable until damages are sustained" (IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 140–141 [2009] [internal quotation marks omitted] ). Accordingly, the statute of limitations ordinarily begins to run on the earliest date upon which the alleged negligence causes the plaintiff to sustain damages (see Brooks v. AXA Advisors, LLC, 104 AD3d 1178, 1180 [4th Dept 2013] ; see also Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 94 [1993] ).
Here, Vanner's alleged negligence continued throughout the entire period in which it advised Krog to join and remain a member of the Trust. Moreover, the tangible fiscal consequences of this alleged negligence was felt by Krog no later than January 31, 2011, when the WCB transmitted to Krog (and other Trust members) an "Assessment Billing Package" that: (1) detailed each employer-member's pro rata share of the Trust's accumulated deficit; and (2) advised Trust members that they would be deemed in default of their contractual obligations to the Trust unless they paid the assessments or entered into repayment agreements. The same transmittal advised Krog that Trust members in default status may be subject to collection litigation.
Krog clearly sustained damages and felt the tangible fiscal consequences of Vanner's alleged negligence when it received the Assessment Billing Package. This is true even if the initial member assessments were subject to the prospect of subsequent and updated deficit reconstruction efforts, and the WCB had not yet commenced litigation to collect upon the contractual default in payment. As this case was commenced more than three years after the January 31, 2011 assessment, the claim of negligence is untimely (see NYAHSA Servs., Inc., Self–Ins. Trust v. People Care Inc., 2016 N.Y. Slip Op 05418, at 7–8 [3d Dept, July 7, 2016] ["PeopleCare "]; NYAHSA Servs., Inc., Self–Ins. Trust v. Recco Home Care Servs., Inc., 141 A.D.3d 792, 36 N.Y.S.3d 270, 2016 N.Y. Slip Op 05419 n. 4 [3d Dept, July 7, 2016] ["Recco "] ).
Even if the negligence claim had been timely interposed, the claim is duplicative of plaintiff's claim for breach of contract, as both claims are premised upon the same allegations of wrongful conduct and demand the same measure of damages (see Torok v. Moore's Flatwork & Founds., LLC, 106 A.D.3d 1421, 1422, 966 N.Y.S.2d 572 [3d Dept 2013] ).
D. Negligent Misrepresentation (2nd Cause of Action)
The second cause of action alleges negligent misrepresentation. By virtue of an alleged special relationship between the parties, Vanner allegedly owed Krog a duty to impart complete and accurate information concerning the financial status of the Trust, the risks associated with becoming a member of the Trust, the ongoing risk associated with remaining a member of the Trust, and the competency of CRM in acting as the administrator of the Trust. Krog alleges that the information provided by Vanner in this regard was inaccurate and/or incomplete, thereby denying it the opportunity "to take actions to protect its interests and to avoid incurring liability in connection with being a member of the Trust" (Complaint ¶ 111)
A claim of negligent misrepresentation is subject to a three-year limitations period, unless the claim is grounded upon essential allegations of actual fraud, in which case the claim is governed by a six-year statute of limitations (Colon v. Banco Popular N. Am., 59 A.D.3d 300, 301, 874 N.Y.S.2d 44 [1st Dept 2009] ). As the factual allegations supporting Krog's claim of negligent misrepresentation are not dependent upon allegations of actual fraud on Vanner's part, the Court concludes that the cause of action is governed by a three-year limitations period. But, regardless, Krog's claim that it was induced to join and remain a member of the Trust necessarily must have accrued prior to March 24, 2008, six years prior to the commencement of this action, inasmuch as Krog last renewed its annual Trust membership in the Spring of 2007.
In arguing to the contrary, Krog maintains that Vanner's misrepresentations continued beyond its final renewal of Trust membership. Specifically, "Krog alleges that Vanner's misrepresentations occurred over the entire course of Krog's membership in the Trust, which kept Krog in the Trust until the termination of its membership in April of 2008" (Memorandum of Law in Opposition, at 9). Nonetheless, Krog does not allege that any deception on the part of Vanner subsequent to its final renewal of Trust membership in Spring 2007 caused Krog to sustain injury, and no such injury can be fairly inferred from the facts alleged in the Complaint. As a result, any allegation that Vanner imparted incorrect information to Krog subsequent to Spring 2007 cannot save the negligent misrepresentation claim from dismissal.
E. Aiding and Abetting Fraud (8th Cause of Action)
Krog alleges that Vanner aided and abetted CRM's fraud throughout the course of its Trust membership. CRM's fraud allegedly included misrepresentations and omissions concerning: (a) the level of risk associated with becoming a member of a GSIT; (b) CRM's qualifications and experience; (c) compliance with applicable laws, regulations and contracts; (d) the Trust's true financial condition; and (d) the potential liabilities and risks associated with Trust membership. Vanner is said to have knowingly induced and participated in this fraud by: (a) acting in concert with CRM to increase the membership of the Trust despite a mounting deficit; (b) aggressively marketing Trust membership as a relatively safe and conservative alternative, while negotiating, pursuing and accepting excessive and hidden commissions; (c) endorsing misleading and inaccurate information provided by CRM and the Trust; and (d) using marketing materials to convince Krog to join and/or remain in the Trust on an annual basis. As a result, Krog claims to have been denied the opportunity to make informed decisions regarding its continued membership in the Trust and the payment of contributions to the Trust.
"A fraud cause of action must be commenced within six years from the time the fraud was committed or within two years from the time the fraud was discovered or could have been discovered through reasonable diligence" (Giarratano v. Silver, 46 A.D.3d 1053, 1056, 847 N.Y.S.2d 698 [3d Dept 2007], citing CPLR 213[8] ; see State of N.Y. Workers' Compensation Bd. v. Madden, 119 A.D.3d 1022, 989 N.Y.S.2d 156 [3d Dept 2014] ; Prichard v. 164 Ludlow Corp., 49 A.D.3d 408, 854 N.Y.S.2d 53 [1st Dept 2008] [six years from "complet[ion of] the act that the alleged fraudulent statements had induced"]; Percoco v. Lesnak, 24 A.D.3d 427, 427, 806 N.Y.S.2d 674 [2d Dept 2005] ).
Krog's final decision to remain a Trust member came in Spring 2007, when it executed its last membership renewal. As a result, its claim that Vanner aided and abetted fraud is untimely under the six-year limitations period of CPLR 213(8).
With respect to the two-year discovery rule, the record shows that the WCB's forensic analysis was completed by December 31, 2010. This forensic report showed an accumulated deficit in excess of $82 million and identified numerous deficiencies in the operations and management of the Trust by CRM and others, including: the understatement of claims reserves; unfair and inequitable dividend policies; the failure to adhere to reporting requirements; and non-compliance with WCB directives (see e.g. pp 2–6). Together with the WCB's issuance of an Assessment Billing Package to Krog on or about January 31, 2011, detailing Krog's pro rata shares of the Trust's substantial deficit, plaintiff "was possessed of knowledge of facts from which the [alleged] fraud could be reasonably inferred" (Sargiss v. Magarelli, 12 N.Y.3d 527, 532 [2009] [internal quotations and citations omitted]; see New York State Workers' Compensation Bd. v. Consolidated Risk Servs., Inc., 125 A.D.3d 1250, 1254–1255, 4 N.Y.S.3d 680 [3d Dept 2015] ). Indeed, while Krog rejects Vanner's argument that the two-year discovery rule was triggered no later than January 31, 2011, Krog has failed to identify any other trigger for its discovery of the alleged fraud.
Based on the foregoing, the claim for aiding and abetting fraud is dismissed as time-barred.
F. Aiding and Abetting Breach of Fiduciary Duty (7th Cause of Action)
Krog alleges that Vanner knowingly induced and participated in CRM's breaches of fiduciary duty throughout the entire course of its Trust membership. Krog is alleged to have acted in concert with CRM "to increase the membership of the Trust despite a mounting deficit; aggressively marketing Trust membership as a relatively safe and conservative alternative to regulated insurance products, while negotiating, pursuing and accepting excessive and hidden commissions that were dramatically higher than those customary in the industry; and by endorsing misleading and inaccurate information provided to them by CRM and the Trust to conceal the Trust deficit, and in using marketing materials to convince [Krog] to join and/or remain in the Trust on annual basis, rather than purchasing traditional insurance" (Complaint ¶ 142). On the basis of these allegations, plaintiff seeks to recover: assessments claimed or levied by the WCB; any amounts due based upon unpaid claims of Krog employees; and the brokerage fees, commissions and/or compensation paid to or on behalf of Vanner pertaining to Krog's membership in the Trust (Complaint ¶ 146).
A claim for aiding and abetting a breach of fiduciary duty is governed by the same limitations periods as a claim for breach of fiduciary duty. "[T]he choice of the applicable limitations period depends on the substantive remedy that the plaintiff seeks. Where the remedy sought is purely monetary in nature, courts construe the suit as alleging injuries to property' within the meaning of CPLR 214(4), which has a three-year limitations period. Where, however, the relief sought is equitable in nature, the six-year limitations period of CPLR 213(1) applies" (IDT Corp., 12 N.Y.3d at 139–140, 879 N.Y.S.2d 355, 907 N.E.2d 268, supra ). Further, a six-year limitations period is available where the claim for breach of fiduciary duty is grounded upon essential allegations of actual fraud (see Kaufman v. Cohen, 307 A.D.2d 113, 119, 760 N.Y.S.2d 157 [1st Dept 2003] ). A claim for breach of fiduciary duty generally accrues on the earliest date upon which the alleged breach of duty causes the plaintiff to sustain damages (see id. at 121, 760 N.Y.S.2d 157 n3 ).
Unlike the cause of action for aiding and abetting fraud, plaintiff's cause of action for breach of fiduciary duty does not rest upon essential allegations of actual fraud. As a result, the claim is subject to a three-year limitations period, and the cause of action accrued no later than January 31, 2011, when Krog was issued an assessment from the WCB that included damages attributable to Vanner's alleged misconduct. The claim for aiding and abetting a breach of fiduciary duty therefore must be dismissed as barred by the expiration of the statute of limitations.
G. RICO (3rd Cause of Action)
The elements that must be pleaded to state a civil Racketeer Influenced and Corrupt Organizations ("RICO") claim are "(1) conduct (2) of an enterprise (3) through a pattern ... (4) of racketeering activity" (Podraza v. Carriero, 212 A.D.2d 331, 335, 630 N.Y.S.2d 163 [4th Dept 1995] [internal citation and quotation omitted]; see 18 USC § 1962 [c] ). "[C]ourts have imposed a heightened pleading requirement" on RICO claims "because such assertion has been found to be "an unusually potent weapon—the litigation equivalent of a thermonuclear device" (Besicorp Ltd. v. Kahn, 290 A.D.2d 147, 151, 736 N.Y.S.2d 708 [3d Dept 2002] [internal quotation marks omitted] ).
The predicate act of "racketeering" alleged by Krog is mail fraud. Krog alleges that Vanner "committed multiple related acts of mail fraud in violation of 18 U.S.C. § 1341, including repeatedly using the U.S. mails to transmit fraudulent and misleading material to [Krog]" (Complaint ¶ 119). "To sustain a claim under the mail fraud statute, a plaintiff must establish the existence of a fraudulent scheme and a mailing in furtherance of the scheme. Aside from showing that defendant caused the mailing, it must further be demonstrated that the mailing was for the purpose of executing the scheme or incidental to an essential part of the scheme" (Besicorp, 290 A.D.2d at 151, 736 N.Y.S.2d 708 [internal quotations, citations and alterations omitted] ).
Krog's failure to allege particularized facts of an evidentiary nature concerning Vanner's use of the mail compels dismissal of the RICO claim. The Complaint's sole reference to the mail merely alleges that Vanner "repeatedly us[ed] the U.S. mails to transmit fraudulent and misleading material to the Plaintiff and to other employers in New York" (Complaint ¶ 119). There is nothing in the Complaint that particularizes the statements made in the alleged mailings, the time and place of the mailings, the manner in which the mailings mislead Krog, and the parties from whom the mailings were sent and by whom they were received. Nor are there factual allegations to particularize that any mailing was sent for the purpose of executing the fraudulent scheme or was incidental to an essential part of the alleged scheme.
In the absence of a properly pleaded and particularized claim of mail fraud (see Richie v. Cavel Corp., 180 A.D.2d 786, 787, 580 N.Y.S.2d 455 [2d Dept 1992] ), the civil RICO claim cannot stand.
H. Common–Law Indemnification (4th Cause of Action)
"Implied indemnity is a restitution concept which permits shifting the loss because to fail to do so would result in the unjust enrichment of one party at the expense of the other" (Mas v. Two Bridges Assoc., 75 N.Y.2d 680, 690–691 [1990] ). "The underpinning of indemnity actions is the prevention of unjust enrichment. In cases where such unfairness would arise from the assumption by a third party of another's debt or obligation, a contract to reimburse or indemnify is implied by law" (State of New York v. Stewart's Ice Cream Co., 64 N.Y.2d 83, 88 [1984] [internal quotation marks and citation omitted] ). In such a case, "the key element ... is not a duty running from the indemnitor to the injured party, but rather is a separate duty owed the indemnitee by the indemnitor. The duty that forms the basis for the liability arises from the principle that every one is responsible for the consequences of his own negligence, and if another person has been compelled to pay the damages which ought to have been paid by the wrongdoer, they may be recovered from him" (Raquet v. Braun, 90 N.Y.2d 177, 183 [1997] [internal quotation marks and citation omitted] ).
Thus, to state a claim for implied indemnity, the cause of action must include allegations that Krog and Vanner owed a common duty to some other party that ought to be discharged by Vanner, rather than Krog. In Madden, the Third Department held that the professional advisors to a GSIT did not share a common duty with the WCB to maintain the solvency of the subject trust; the duties of the professional advisors were owed solely to the GSIT (119 A.D.3d at 1025, 989 N.Y.S.2d 156 ). On the other hand, the trustees shared with the WCB "a common duty to the covered employees to ensure that the [GSIT] maintained adequate reserves such that its assets would cover its liabilities" (id. ). To similar effect is Murray Bresky Consultants, Ltd. v. New York Compensation Manager's Inc. (106 A.D.3d 1255, 1258–1259, 968 N.Y.S.2d 595 [3d Dept 2013] ), in which a former trust member's claim for implied indemnity against the trustees was sustained "given their common duty to plaintiff's covered employees and to the [WCB] to maintain adequate reserves in the trust so that it was adequately funded and its assets would cover its liabilities" (id. ).
Applying these principles and applicable precedents (see also Workers' Compensation Bd. v. Compensation Risk Managers, LLC, 51 Misc.3d 683, 27 N.Y.S.3d 822 [Sup Ct, Albany County 2016] ), the Court concludes that the claim for implied indemnity must be dismissed. Neither Vanner's alleged "special relationship" with Krog nor "[Vanner's] relationship with CRM relative to the administration and oversight of the Trust" gave rise to a duty on the part of Vanner to maintain the solvency of the Trust or to otherwise ensure workers' compensation coverage for Krog's employees.
CONCLUSION
Based on the foregoing, it is
ORDERED that the Complaint is dismissed in all respects.
This constitutes the Decision & Order of the Court. The original Decision and Order is being transmitted to defendant's counsel for filing and service. The signing of this Decision and Order shall not constitute entry or filing under CPLR Rule 2220. Counsel is not relieved from the applicable provisions of that Rule respecting filing, entry and Notice of Entry.
Papers Considered:
Notice of Motion, dated June 5, 2015;
Affirmation of Bradley A. Hoppe, Esq. in Support of Motion, dated June 5, 2015, with Exhibits 1–8;
Memorandum of Law in Support of Motion, dated June 9, 2015;
Affirmation of David M. Cost, Esq. in Opposition to Motion, dated July 2, 2015;
Memorandum of Law in Opposition, dated July 2, 2015;
Reply Affirmation of Bradley A. Hoppe, Esq., dated July 14, 2015, with attached Exhibit A;
Reply Memorandum of Law, dated July 14, 2015;
Transcript of Oral Argument, held on December 14, 2015.