STATE OF NEW YORK WORKERS’ COMPENSATION BOARD, as Administrator of the Workers’ Compensation Law and Attendant Regulations, and as Successor in Interest to the HEALTHCARE FACILITIES WORKERS’ COMPENSATION TRUST, Appellant-Respondent, v CATHY MADDEN et al., Respondents-Appellants, et al., Defendants.
Appellate Division of the Supreme Court of New York, Third Department
July 3, 2014
119 A.D.3d 1022 | 989 N.Y.S.2d 156
Garry, J. Cross appeals from an order of the Supreme Court (Platkin, J.), entered March 13, 2013 in Albany County, which
The Nеw York Healthcare Facilities Workers’ Compensation Trust, a group self-insured trust, was formed in 1996 to provide mandated workers’ compensation coverage to employees of trust members (see
In May 2011, plaintiff commenced this action against, among others, Berenson, Belgraier, Glaser (hereinafter collectively referred to as the professional defendants) and 12 former trustees, seeking to recover damages for, among other things, breach of fiduciary duty, breаch of contract, and common-law indemnification. The complaint asserts that, because of defendants’ failures, plaintiff was required by the
Plaintiff first challenges the dismissal of its common-law indemnification claims. As relevant here, common-law indemnification is an equitable remedy that avoids unfairness by shifting losses arising from an obligor’s discharge of a jоint duty when failure to do so would result in unjust enrichment (see McCarthy v Turner Constr., Inc., 17 NY3d 369, 374-375 [2011]). A contract to reimburse or indemnify is implied where a plaintiff has discharged a duty which is duly owed, but which, as between the plaintiff and another, in fairness should have been discharged by the other (see McDermott v City of New York, 50 NY2d 211, 217 [1980]; Murray Bresky Consultants, Ltd v New York Compensation Manager’s Inc., 106 AD3d 1255, 1258 [2013]; Germantown Cent. School Dist. v Clark, Clark, Millis & Gilson, 294 AD2d 93, 98 n 2 [2002], affd 100 NY2d 202 [2003]). Such an implied obligation “may arise from contractual relations or from the status of the parties as a matter of law, or it may be imposed by statute” (Sea Ins. Co. v U.S. Fire Ins. Co., 71 AD2d 51, 53-54 [1979], lv denied 49 NY2d 702 [1980] [internal quotation marks and citation omitted]). Here, plaintiff contends that it is entitled to indemnification based upon its status as successor in interest to the trust and, alternatively, as the governmental entity statutorily charged with enforcement of the
We agree with Supreme Court that plaintiff is not entitled to indemnification based upon its role as successor in interest to the trust. As the successor, plaintiff stands in the shoes of the trust, but, like an assignee, does not obtain any greater rights than those originally possessed; aсcordingly, plaintiff is only entitled to indemnification on this basis if the trust would have had such a claim (compare Matter of Quail Aero Serv., 300 AD2d 800, 802 n [2002]). Here, the complaint does not allege that the trust and defendants had common duties to third parties that were discharged by the trust, but should have been discharged by defendants (compare State of New York v Stewart’s Ice Cream Co., 64 NY2d 83, 88 [1984]; Murray Bresky Consultants, Ltd v New York Cоmpensation Manager’s Inc., 106 AD3d at 1258-1259). Instead, the gravamen of the claim is that defendants breached contractual and fiduciary duties that were owed, not to third parties, but to the trust—and, by extension, to plaintiff (see Germantown Cent. School Dist. v Clark, Clark, Millis & Gilson, 294 AD2d at 99; see also Bunker v Bunker, 80 AD2d 817, 817-818 [1981]). Thus, plaintiff’s claims against defendants arising from its role as successor in interest are direct, and do not sound in common-law indemnification.
We likewise agree, in part, with Supreme Court’s dismissal of plaintiff’s alternative claim for indemnification arising from its role as the governmental agency charged with administration of the
Turning to the cross appeals, the trustee defendants challenge Supreme Court’s failure to dismiss the breach of contract claim against them in its entirety. The court dismissed this claim as time-barred insofar as it addressed alleged breaches that occurred before May 2, 2005, but permitted сlaims arising thereafter to continue. The trustee defendants argue that, as the complaint does not allege any specific breaches of contract occurring on or after May 2, 2005, no such claims exist. However, the complaint does allege that, on unspecified dates, the trustee defendants breached obligations, among other things, to perform duties under the trust agreement, oversee trust operations, hold regular meetings, and inform board members of the trust’s financial status, that they failed to take prompt, adequate actions to address the deficit, and that these and other acts and omissions contributed tо the underfunding of the trust. Liberally construed, these allegations assert that the breaches continued from the time the trust was formed until July 31, 2006, when plaintiff assumed its administration, and were ongoing throughout each trustee defendant’s term of service. Accordingly, the breach of contract cause of action is timely to the extent thаt it addresses breaches occurring after May 2, 2005, i.e., within the six-year statutory limitations period (see
Next, trustee defendants Cathy Madden and Linda Villano contend that the breach of contract claim against them is time-barred in that the complaint allegеdly concedes that their tenure as trustees ended in 1998. The complaint alleges that Madden acted as secretary/treasurer of the board of trustees from May 1997 through June 1998, and that Villano acted as chairperson of the board from May 1997 through 1998. However, this establishes only the dates during which these defendants actеd as officers; it does not reveal that they did not continue to serve as trustees after 1998. Notably, the FOIL documents submitted by Muskin indicate that they served from July 1997 to an “unknown” date. Accordingly, Supreme Court properly refused to dismiss the breach of contract claim against Madden and Villano as untimely at this juncture (see generаlly Delaware County v Leatherstocking Healthcare, LLC, 110 AD3d 1211, 1212-1213 [2013]).2
Next, Glaser—the trust’s former counsel—contends that the unjust enrichment claim against him should have been dismissed in its entirety. The challenged cause of action seeks the return of legal fees paid to Glaser by the trust, alleging, among other things, that Glaser had an attorney-client relationship with HWG and its principal before he was rеtained to represent the trust, that Glaser did not disclose this prior representation to
Supreme Court did not err in partially denying Berenson’s motion to dismiss the fraud claim against it. In addition to the fraud claim and the previously-discussed common-law indemnification claim, plaintiff asserted claims against Berenson for breach of contract, breach of fiduciary duty, and aiding and abetting breaches of fiduciary duty by the trustees. Supreme Court found that these claims were subject to the three-year statute of limitations applicable to malpractice claims (see
Next, Belgraier contends that Supreme Court erred in failing to dismiss the portion of the breach of contract claim against her that sought to recover fees paid for her professional aсcounting services. As with the other professional defendants, the court dismissed plaintiff’s claims against Belgraier as time-barred to the extent that, by alleging that she had failed to render competent accounting services, they essentially constituted malpractice claims. However, the court permitted the brеach of contract claim to proceed insofar as it alleged that she had failed to perform accounting duties for which she was paid, and was paid with trust funds for services that were not performed or were rendered to others. We agree with the court that this aspect of the complaint sufficiently states a claim for breach of contract by alleging that the trust was an intended third-party beneficiary of a contract between Belgraier and HWG, by which Belgraier was to provide services for the benefit of the trust and its members, and that—knowing that her services were intended for the trust’s benefit—Belgraier breached the contract (see Saratoga Schenectady Gastroenterology Assoc., P.C. v Bette & Cring, LLC, 83 AD3d 1256, 1257-1258 [2011]; compare IMS Engrs.-Architects, P.C. v State of New York, 51 AD3d 1355, 1357 [2008], lv denied 11 NY3d 706 [2008]). This aspect of the cause of action is not, as Belgraier contends, a disguised professional malpractice claim and, as it alleges that Belgraier was paid for her services through 2006, is not time-barred (see
Finally, we reject Belgraier’s contention that the breach of cоntract claim against her should have been dismissed based on documentary evidence (see
Lahtinen, J.P., McCarthy, Lynch and Clark, JJ., concur.
Ordered that the order is modified, on the law, without costs, by reversing so much thereof as granted (1) the motion of defendants Linda Villano, Cathy Madden, Phyllis Ettinger, Patricia Huber, Elizabeth Rosenberg, Sam Harte, Timothy Ferguson and Lynn Edmonds to dismiss the common-law indemnification claim asserted against them and (2) the motion of defendant Daniel Muskin to dismiss the common-law indemnification claim against him; said motions denied to the extent asserted by plaintiff in its governmental capacity as the entity charged with the administration of the
GARRY, J.