Opinion
No. 11965/10.
2012-11-16
Alvin PANKIN, individually and derivatively on behalf of New York Safety Program, Inc., Plaintiff, v. Anthony PERLONGO, New York Safety Program, Inc., New Jersey Safety Program, Inc., New York Traffic Safety Program, Inc. and PKC Realty Ltd., Defendants.
Petter A. Cross, Esq., Eaton & Van Winkle, LLP, New York, for Plaintiff. Princess Tate, Esq., Fisher & Fisher, Staten Island, for Defendants.
Petter A. Cross, Esq., Eaton & Van Winkle, LLP, New York, for Plaintiff. Princess Tate, Esq., Fisher & Fisher, Staten Island, for Defendants.
DAVID SCHMIDT, J.
Defendants Anthony Perlongo, New York Safety Program, Inc., New Jersey Safety Program, Inc., New York Traffic Safety Program, Inc. and PKC Realty Ltd. move, pursuant to CPLR 3211, for an order dismissing the complaint.
The complaint alleges, among other things, various breaches of fiduciary duty, mismanagement and oppressive conduct by defendant Anthony Perlongo (Perlongo), in connection with his operation and control of New York Safety Program Inc. (N.Y.SP), a corporation formed by plaintiff Alvin Pankin and Perlongo, which offers an accredited driver safety course to New York drivers.
For the following reasons, the motion is denied.
I.Background
According to the complaint, Perlongo, the majority (75%) and controlling shareholder of NYSP, abused his position of control by causing NYSP to pay him an excessive salary, and by diverting money and resources from NYSP to fund and operate his other businesses, namely New York Traffic Safety Program (N.Y.TSP) and New Jersey Safety Program (NJSP). Plaintiff, a minority (25%) shareholder of NYSP, also alleges that Perlongo engaged in various acts of self-dealing and usurpation of corporate opportunities belonging to NYSP, further breaching his fiduciary duty to plaintiff. In particular, plaintiff alleges that Perlongo separately incorporated NJSP to operate a program to teach New Jersey drivers defensive driving, utilizing NYSP's approved program.
The complaint further alleges that Perlongo mismanaged NYSP by causing it to incur needless expenses, including paying exorbitant rent for NYSP's office space to PKC Realty Ltd. (PKC), a corporation owned by Perlongo's family. Plaintiff claims that, as a result of Perlongo's breaches of fiduciary duty and mismanagement, he was denied his agreed upon share of compensation from NYSP, including profits and salary. In addition, plaintiff alleges that Perlongo wrongfully ceased paying his salary as of December 2008.
Plaintiff commenced this action on May 12, 2010, asserting twelve causes of action: (1) breach of fiduciary duty (against Perlongo), (2) corporate waste (against Perlongo), (3) usurpation of corporate opportunity (against Perlongo), (4) misappropriation (against Perlongo and NJSP), (5) unjust enrichment (against Perlongo, NYTSP and PKC) (6) quantum meruit (against NYTSP), (7) prima facie tort (against Perlongo), (8) breach of an oral partnership agreement (against Perlongo), (9) breach of contract (against NYSP), (10) quantum meruit (against NYSP), (11) accounting, and (12) common law dissolution.
II.Discussion
When determining a motion to dismiss, the court must “accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory.” Arnav Indus., Inc. Retirement Trust v. Brown, Raysman, Millstein, Felder & Steiner, L.L.P., 96 N.Y.2d 300, 303 (2001). “Whether a plaintiff can ultimately establish its allegations is not part of the calculus.” Sokol v. Leader, 74 AD3d 1180, 1181 (2d Dept 2010) (citing EBC I, Inc. v. Goldman Sachs & Co., 5 NY3d 11, 19 [2005] ). However, the court will not accept as true factual and legal conclusions that are “either inherently incredible or flatly contradicted by documentary evidence.” Ullmann v. Norma Kamali, Inc., 207 A.D.2d 691, 692 (1st Dept 1994).
A. First through Eighth Causes of Action
The first, second and fifth through eighth causes of action relate to allegations that: (1) Perlongo caused NYSP to pay an “exorbitant” rent to PKC; (2) Perlongo caused NYSP to pay him an “excessive” salary; (3) Perlongo allowed NYTSP to use NYSP's office space, employees and instructors free of charge; (4) Perlongo failed to cause NYSP to pay plaintiff his full share of compensation; and (5) Perlongo ceased paying plaintiff any salary since December 2008.
The third and fourth causes of action relate to allegations that Perlongo breached his fiduciary obligations by diverting a corporate opportunity, i.e., separately incorporating NJSP under his own name to operate a program to teach New Jersey drivers defensive driving, utilizing NYSP's approved program without compensating NYSP for the use of its asset.
Defendants move to dismiss, primarily, on statute of limitations grounds, arguing that the conduct giving rise to these claims first occurred outside of the applicable statute of limitations period. Therefore, defendants contend that this group of claims are time-barred.
In response, plaintiff contends that the complaint, as supplemented by his affidavit, alleges a continuing wrong. Hence, even if the limitations periods started to run on these claims at the time of the original objectionable act, they were tolled, and started anew, each time plaintiff was subsequently injured by defendants' recurring wrongful conduct. Accordingly, plaintiff asserts that the statute of limitations does not bar claims for unlawful acts that occurred within the limitations period.
The continuing violations doctrine “will toll the limitations period to the date of the commission of the last wrongful act where there is a series of continuing wrongs.” Shelton v. Elite Model Mgt., 11 Misc.3d 345, 361 (Sup Ct, New York County 2005); 78/79 York Assoc. v. Rand, 175 Misc.2d 960, 966 (Civ Ct, New York County 1998) (“Despite the general principle that a cause of action accrues when the wrong is done, regardless of when it is discovered, if the wrong is continuing, so that each day gives rise to a new cause of action, then each day will also bring a new statute of limitations”) (citing McLaughlin, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C203:1, at 141); 1050 Tenants Corp. v. Lapidus, 289 A.D.2d 145, 146 (1st Dept 2001) (same). However, “it will only be predicated on continuing unlawful acts and not on the continuing effects of earlier unlawful conduct.” Selkirk v. State of New York, 249 A.D.2d 818, 819 (3d Dept 1998).
Here, accepting plaintiff's allegations as true, the complaint states continuous and recurring wrongs with regard to: (i) NYSP's payment of excessive rent, (ii) Perlongo's receipt of an excessive salary from NYSP, (iii) NYTSP's uncompensated use of NYSP's resources, (iv) Perlongo's misappropriation, through NJSP, of NYSP's driving program, and (iv) Perlongo's failure to pay plaintiff his full compensation.
In short, all of the claims based on these allegations are timely, insofar, as they allege damages during the applicable limitations period.
Defendants' other contentions have been considered and are without merit.
B. Ninth and Tenth Causes of Action
The ninth and tenth causes of action, for breach of contract and quantum meruit, respectively, are asserted against NYSP for its failure to pay any salary to plaintiff since December 2008.
In moving to dismiss the breach of contract claim, defendants argue that plaintiff fails to allege all the essential elements of this claim. In particular, defendants claim that plaintiff does not identify which specific contract was breached. Going further, defendants assert that there is no contract between NYSP and plaintiff obligating NYSP to pay plaintiff a salary. Defendants are mistaken.
To state a claim for breach of contract, a plaintiff must allege: “the existence of a contract, the plaintiffs performance under the contract, the defendant's breach of that contract, and resulting damages.” JP Morgan Chase v. J.H. Elec. of NY, Inc., 69 AD3d 802, 803 (2d Dept 2010).
Here, reading the complaint in a light most favorable to plaintiff, a breach of contract claim is sufficiently stated. Plaintiff alleges that he entered into an oral partnership agreement with Perlongo to create NYSP, a driver safety school for drivers in New York. Compl. ¶ 108. Although, the parties did not reduce their agreement to written form, plaintiff alleges that he and Perlongo agreed to divide compensation along the same split as their ownership interests, i.e., 75% to Perlongo and 25% to plaintiff. Id., ¶¶ 111, 113. Plaintiff further alleges his performance under this contract in that he worked with Perlongo on “all aspects of the management of NYSP and was primarily responsible for dealing with government agencies, including the DMV, the New York State legislature and NYSP's lobbyists.” See affidavit of Alvin Pankin, sworn to July 2, 2012, ¶ 6; see also Compl. ¶¶ 26, 110, 121. Finally, the complaint alleges that, although plaintiff remained NYSP's Vice President, Perlongo breached the agreement by causing NYSP to stop paying plaintiff any salary since December 2008, thereby injuring plaintiff. Compl. ¶¶ 123, 125. Accordingly, plaintiff has adequately stated a claim for breach of contract.
The additional arguments that defendants raise for the first time in their reply papers will not be considered. See Pinkston v.. Weiss, 238 A.D.2d 393, 393 (2d Dept 1997).
For the same reason, plaintiff has adequately stated a claim for quantum meruit. Defendants' argument that plaintiff does not allege the performance of any services, is belied by the allegations the court found sufficient to support plaintiff's breach of contract claim. Accordingly, the motion to dismiss the tenth cause of action is denied.
C. Eleventh Cause of Action
Under the eleventh cause of action, plaintiff seeks an accounting. Defendants' sole argument in support of dismissal is that this cause of action is moot in light of their production of documents in response to plaintiff's discovery demands.
Nevertheless, plaintiff contends that there remains categories of documents that defendants may not have produced that are relevant to plaintiff's claims and that do not fall outside of the scope of the court's prior discovery orders. See affidavit of Paul Bella, sworn to June 27, 2012, ¶¶ 5, 8. Accordingly, this cause of action will not be dismissed.
D. Twelfth Cause of Action
Plaintiff's twelfth cause of action is for common law dissolution based on Perlongo's egregious breaches of his fiduciary obligations to plaintiff, and is plead in the alternative and as a last resort to plaintiff's other claims. See Gold v. 29–15 Queens Plaza Realty, LLC, 43 AD3d 866, 867 (2d Dept 2007) (holding that plaintiffs were entitled to plead alternative and inconsistent causes of action and seek alternative forms of relief).
Defendants argue that this claim must be dismissed because plaintiff has failed to make a showing that Perlongo has palpably breached his fiduciary duty to plaintiff.
However, before discovery is complete, there is no reason to believe that plaintiff cannot make this showing. In Matter of Breiterman v. Chemical Bank, 181 A.D.2d 675 (2d Dept 1992), relied on by defendants, the appellate court reversed the trial court's order of dissolution only because the record, including a hearing in which all parties gave testimony, did not support the trial court's determination. Id. at 675–76. At this stage of the proceedings, however, plaintiff is entitled to maintain this cause of action.
Accordingly, it is
ORDERED that defendants' motion to dismiss the complaint is denied.