House of Spices (India), Inc. v. SMJ Services, Inc.
103 A.D.3d 848
N.Y. App. Div.2013Background
- House of Spices alleged a conspiracy to embezzle by checks drawn on its account, cashed at Triboro Check Cashing and later at SMJ after SMJ bought Triboro’s check-cashing business.
- Defendant SMJ Services, Inc. appeals from a Supreme Court order denying CPLR 3211(a)(5) and (a)(7) relief to dismiss the first and third causes of action.
- Plaintiff claimed SMJ knew of the fraud conspiracy and failed to record the check casters’ names and addresses.
- Fraud and RICO claims accrued at the earliest April 19, 2004 or latest August 2009 according to discovery.
- Plaintiff commenced the action against SMJ on December 16, 2009, rendering the fraud action timely under CPLR 213(8) and the RICO action timely under a four-year accrual rule.
- Court held the fraud action timely and the RICO action timely; but dismissed the third (RICO) claim for failure to state a claim and upheld denial of the 3211(a)(7) branch as to the third cause.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether fraud claim is time-barred under CPLR 3211(a)(5). | House of Spices contends timely under accrual rules. | SMJ argues actions barred by statute. | Fraud claim timely. |
| Whether RICO claim is timely under civil statute of limitations. | RICO claim timely within four years of discovery of injury. | RICO accrual same as fraud; timely if within four years of injury. | RICO claim timely. |
| Whether third cause (RICO) adequately states a claim for civil conspiracy. | Complaint alleges conspiracy countering fraud. | No explicit conscious agreement alleged. | Dismiss the third cause for failure to state a claim. |
| Whether the first cause of action (fraud) was properly sustained under heightened pleading. | Pleading suffices to show fraud by inference. | Requirements of CPLR 3016(b) not met. | Court upheld sufficiency; denial of 3211(a)(5) proper. |
| Whether leave to amend the third cause is properly before the court on appeal. | Unknown or not argued on appeal. | Not appropriately before appellate review. | Not properly before Court. |
Key Cases Cited
- Cottone v. Selective Surfaces, Inc., 68 AD3d 1038 (2010) (burden on movant to show time-bar; light favorable to plaintiff)
- Sargiss v. Magarelli, 12 NY3d 527 (2009) (timeliness and discovery rules for fraud claims)
- Vilsack v. Meyer, 96 AD3d 827 (2012) (burden shifts to show earlier discovery possible)
- JP Morgan Chase Bank, N.A. v Kalpakis, 91 AD3d 722 (2012) (earlier discovery not established as matter of law)
- Trepeuk v. Frank, 44 NY2d 723 (1978) (mixed questions of law and fact in discovery timing)
- Eurycleia Partners, L.P. v Seward & Kissel, LLP, 12 NY3d 553 (2009) (pleading requirements for fraud; gives leeway when within knowledge of adverse party)
- Cohen v. Houseconnect Realty Corp., 289 AD2d 277 (2001) (CPLR 3016(b) pleading detail guidance)
- High Tides, LLC v DeMichele, 88 AD3d 954 (2011) (pleading sufficiency to permit reasonable inference of fraud)
- First Keystone Consultants, Inc. v DDR Constr. Servs., 74 AD3d 1135 (2010) (agreement/participation in fraud plausibility inferences)
- Murray Hill Inv. v Adas Yereim, Inc., 233 AD2d 305 (1996) (supporting inference of conspiracy)
- Hecht v Commerce Clearing House, Inc., 897 F2d 21 (2d Cir. 1990) (core element requirement for RICO conspiracy)