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Kaufman v. Cohen

Supreme Court of New York, Appellate Division, First Department

May 27, 2003, Decided ; May 27, 2003, Entered

2546

Case Summary

Procedural Posture

Plaintiff limited partners appealed from a judgment of the Supreme Court, New York County (New York), that dismissed as time-barred their claims against defendant former managing partner for fraud and breach of fiduciary duty and against defendant associates of the managing partner for aiding and abetting him, and seeking in addition to damages an equitable accounting, imposition of a constructive trust, and disgorgement of unjust enrichment.

Overview

The limited partnership owned a building that it planned to rehabilitate and develop. When it encountered financial difficulties, the managing partner told the limited partners that the situation was hopeless and that they should allow foreclosure to occur. Years later, they learned that the managing partner and his new associates had remained involved with the building and had ultimately taken ownership. The appellate court held that since the limited partners' claims of fraud and breach of fiduciary duty (adequately pled given the concealment that the managing partner's alleged actions necessarily entailed) were central to their causes of action, the six-year statute of limitations of N.Y. C.P.L.R. 213 governed their claims, and the delayed discovery rule further applied to delay the commencement of the running of the statute. The mere fact that the managing partner's daughter remained involved in managing the building after foreclosure was insufficient to put the limited partners on inquiry notice. The aiding and abetting claims against the associates were inadequately pled and, in any case, were time-barred.

Outcome

The court modified the judgment to reinstate the breach of fiduciary duty and fraud counts against the managing partner as well as the count seeking an equitable accounting.

LexisNexis® Headnotes

 

 

Business & Corporate Law > ... > Causes of Action & Remedies > Breach of Fiduciary Duty > General Overview

Business & Corporate Law > Limited Partnerships > Management Duties & Liabilities

Governments > Legislation > Statute of Limitations > Time Limitations

HN1 New York law does not provide any single limitations period for breach of fiduciary duty claims. Generally, the applicable statute of limitations for breach of fiduciary claims depends upon the substantive remedy sought. Where the relief sought is equitable in nature, the six-year limitations period of N.Y. C.P.L.R. 213(1) applies. On the other hand, where suits alleging a breach of fiduciary duty seek only money damages, courts view such actions as alleging injury to property, to which a three-year statute of limitations applies. N.Y. C.P.L.R. 214(4).

 

Business & Corporate Law > ... > Causes of Action & Remedies > Breach of Fiduciary Duty > General Overview

Governments > Legislation > Statute of Limitations > Time Limitations

Torts > Business Torts > Fraud & Misrepresentation > General Overview

HN2 Case law in New York clearly holds that a cause of action for breach of fiduciary duty based on allegations of actual fraud is subject to a six-year limitations period. An exception to this rule is that courts will not apply the fraud statute of limitations if the fraud allegation is only incidental to the claim asserted; otherwise, fraud would be used as a means to litigate stale claims. Thus, where an allegation of fraud is not essential to the cause of action pleaded except as an answer to an anticipated defense of the statute of limitations, courts look for the reality, and the essence of the action, and not its mere name.

 

Torts > Business Torts > Fraud & Misrepresentation > General Overview

Business & Corporate Law > ... > Causes of Action & Remedies > Breach of Fiduciary Duty > General Overview

Civil Procedure > ... > Pleadings > Heightened Pleading Requirements > General Overview

HN3 To state a cause of action for fraud, a plaintiff must allege a representation of material fact, the falsity of the representation, knowledge by the party making the representation that it was false when made, justifiable reliance by the plaintiff and resulting injury. Alternatively, instead of an affirmative misrepresentation, a fraud cause of action may be predicated on acts of concealment where the defendant had a duty to disclose material information. Thus, where a fiduciary relationship exists, the mere failure to disclose facts which one is required to disclose may constitute actual fraud, provided the fiduciary possesses the requisite intent to deceive.

 

Torts > Business Torts > Fraud & Misrepresentation > General Overview

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307 A.D.2d 113 ; 760 N.Y.S.2d 157 ; 2003 N.Y. App. Div. LEXIS 5918 

Gerald S. Kaufman et al., Appellants, v. Irwin B. Cohen et al., Respondents, et al., Defendants.

Prior History:  [1]  Appeal from a judgment of the Supreme Court (Shirley Werner Kornreich, J.), entered April 15, 2002 in New York County, dismissing the amended complaint.

Disposition: Judgment affirmed in part and modified in part.