Statutes of limitations limit the time within which a defendant can be held liable for any type of alleged wrongdoing. Plaintiffs who do not pursue their rights within the limitations period will find the courthouse doors closed to their claims. For this reason, whether the statute of limitations has run is an important issue to consider before commencing an action.
Important to this consideration is ascertaining when the claim sought to be asserted accrued. In cases involving a claim for breach of fiduciary duty – one of the claims asserted in Hammer v. Heller, 2024 N.Y. Slip Op 33658(U) (Sup. Ct., N.Y. County Oct. 15, 2024) (here) – accrual occurs as soon as “the claim becomes enforceable — when all elements of the tort can be truthfully alleged in a complaint.”[1] “Given that damage stemming from the misconduct is an essential element of a breach of fiduciary duty claim, the claim is not enforceable, and thus does not accrue until damages are sustained.”[2]
[Eds. Note: This Blog has written numerous articles addressing the statute of limitations for breach of fiduciary (e.g., here and here). This Blog has also written numerous articles about the accrual of claims, including claims for breach of fiduciary duty, e.g., here, here, and here.]
In cases involving a request for declaratory relief, also sought in Hammer, the claim accrues “when there is a bona fide, justiciable controversy between the parties.”[3] “A dispute matures into a justiciable controversy when a plaintiff receives direct, definitive notice that the defendant is repudiating his or her rights.”[4]
Hammer v. Heller
Hammer involved a dispute among three siblings[5] concerning their rights and interests in three family general partnerships.[6] The dispute before the motion court concerned the parties’ interests in Langfan.
At the time of Langfan’s formation, each sibling owned a 33% interest in the partnership. In or around February 2011, Dayna, without allegedly informing Robin, directed Langfan’s accountant, Seymour Kahan, to remove Robin as a partner of the partnership. Kahan allegedly followed Dayna’s instructions based on her representation that Robin consented to the change. Kahan consequently filed Langfan’s 2010 income tax return to indicate that only Dayna and Mark were owners of Langfan. Robin’s Schedule K-1 was, in turn, also amended to reflect her partnership interest being reduced from 33.333% to 0 %, while both Mark and Dayna’s shares increased to 50%. In the years that followed, Langfan’s tax returns continued to list only Mark and Dayna as owners of the partnership.
Plaintiffs alleged that defendant never informed Robin about her purported removal as a partner from Langfan, nor did defendant obtain Robin’s consent or otherwise document Robin’s removal as a partner. Instead, in 2022, Mark notified Robin, after his discussions with Dayna following the death of William, that he learned that Robin had been removed from the Langfan partnership. The next year, in the middle of 2023, Mark reviewed Langfan’s tax return history, discovered that Robin no longer appeared in those tax filings, and informed Robin of his findings. Dayna later confirmed to Robin that she had removed Robin from the Langfan partnership. According to Robin, Dayna represented in an email that she removed Robin from the Langfan partnership so that Dayna’s family could obtain a more advantageous health insurance plan. Plaintiffs characterized Dayna’s conduct as a fraud on Robin.
Defendant moved to dismiss two causes of action asserted by plaintiffs – declaratory judgment and breach of fiduciary duty – as being time-barred. Defendant contended that the declaratory judgment cause of action (concerning Robin’s removal as a partner) accrued in or around 2011 and, therefore, was barred under CPLR 213(1). Defendants also contended that the breach of fiduciary duty claim was barred because the claim accrued in or around 2011. Defendant maintained that the statute of limitations for the claim was three years. As discussed below, the motion court granted in part and denied in part the motion.
In New York, there is “no general period of limitation for a declaratory judgment action.”[7] “[T]o determine the appropriate limitations period for a declaratory judgment action, it is necessary to examine the substance of [the] action to identify the relationship out of which the claim arises and the relief sought.”[8] If the court finds the action can be resolved through a form of proceeding for which a specific limitation period is statutorily provided, then the statute of limitation for that proceeding will be applied.[9] If no other form of proceeding exists for resolving the claim, then the six-year limitations period in CPLR 213(1), the catch-all provision, applies.[10]
In Hammer, the parties did not dispute that plaintiffs’ declaratory relief claim was subject to a six-year statute of limitations period. Instead, the parties disputed when the claim accrued.
As noted, “[a]n action for declaratory relief accrues when there is a bona fide, justiciable controversy between the parties.”[11] “A dispute matures into a justiciable controversy when a plaintiff receives direct, definitive notice that the defendant is repudiating his or her rights.”[12]
The motion court found that the claim accrued in 2022, not in 2011. The motion court explained that although the alleged removal of Robin from the Langfan partnership occurred in or around February 2011, it was not until 2022 that she had “direct, definitive notice” of Defendant’s purported repudiation of her partnership rights.[13]
The motion court also found that plaintiff had “sufficiently established … that, although [defendant’s] actions occurred in 2011, a justifiable controversy only crystalized in 2022 when [defendant] informed Mark that Robin was not a partner of Langfan.”[14] Therefore, said the motion court, plaintiff’s “declaratory judgment [claim] appear[ed] to be within CPRL 213(l)’s six-year limitations period.”[15]
However, the motion court dismissed the breach of fiduciary duty cause of action, holding that the claim accrued in 2011.[16]
In New York, a cause of action for breach of fiduciary duty is subject to a three-year statute of limitations when “the remedy sought is purely monetary in nature.”[17] When a fiduciary duty claim is primarily “based on allegations of actual fraud,” the six-year/two-year from discovery limitations period set forth in CPLR 213(8) applies.[18] However, where the fraud allegations are only incidental to the fiduciary duty claim, courts will not apply the fraud statute of limitations.[19]
In Hammer, plaintiffs alleged that defendant breached her fiduciary duties by unilaterally removing Robin as a partner from Langfan and, in turn, causing Langfan to file federal income tax returns that listed only Mark and defendant as co-owners of the partnership.[20] Plaintiffs sought monetary damages for the alleged breach “in an amount not less than 33% of the total valuation of Langfan.”[21] “Given these allegations,” concluded the motion court, “the statute of limitations on plaintiffs’ [breach of fiduciary duty cause of action] plainly began to run in 2011 and expired in 2014, i.e., well before th[e] action was filed in 2023.”[22]
The motion court rejected plaintiffs’ argument that their breach of fiduciary duty claim was based on defendant’s alleged fraud, which Robin claimed not to have discovered until 2022, thereby bringing the breach of fiduciary duty claim within the two-year discovery rule in CPLR 213(8).[23] In doing so, the motion court found the allegations to be “bald and conclusory characterizations,” which “plaintiffs [did] not explain in any detail how, if at all, [defendant’s] conduct was fraudulent.”[24] “[A]t any rate,” said the motion court, “plaintiffs’ conclusory assertions fail[ed] to establish that [defendant’s] purported fraudulent conduct was anything more than incidental to the primary conduct underlying their fiduciary duty claim: [defendant’s] alleged unwarranted removal of Robin from the Langfan partnership.”[25] Accordingly, the motion court dismissed the breach of fiduciary duty claim as time-barred.[26]
[1] IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 140 (2009).
[2] Grika v. McGraw, 55 Misc. 3d 1207(a) (Sup. Ct., N.Y. County 2016), aff’d sub nom., L.A. Grika on behalf of McGraw, 161 A.D.3d 450 (1st Dept. 2018); see also IDT, 12 N.Y.3d at 140 (“date of damages is measured from when the plaintiff first suffered loss”).
[3] Trump Vill. Section 4, Inc. v. Young, 217 A.D.3d 711, 714 (2d Dept. 2023).
[4] Zwarycz v. Marnia Constr., Inc., 102 A.D.3d 774, 776 (2d Dept. 2013).
[5] The siblings are: plaintiffs Robin Langfan Hammer (“Robin”) and Mark Langfan (“Mark”) and defendant Dayna Langfan Heller (“Dayna”).
[6] The first partnership is Abnet Realty Company (“Abnet”), a commercial real estate business founded by William K. Langfan (“William”), the siblings’ father. Abnet is governed by a First Amended General Partnership Agreement, dated February 10, 2004. Its two general partners are currently RMD Associates (“RMD”), Abnet’s Managing Partner, and Mark, as Trustee of non-party William K. Langfan Revocable Trust. The second partnership is RMD, which is an oral partnership owned in equal thirds by plaintiffs and defendant. RMD was formed in 1990 to perpetually hold a 50% general partnership interest in Abnet. The third partnership is Langfan Company (“Langfan”), an oral partnership formed in 1990 for the purpose of paying salaries and administering healthcare benefits for nonfamily and family employees managing Abnet’s various real properties, as well as paying for incidental office-related expenses.
[7] Vigilant Ins. Co. of Am. v. Housing Auth. of City of El Paso, Tex., 87 N.Y.2d 36, 40·41 (1995) (internal quotation marks and citations omitted);
[8] Rosenthal v. City of N.Y., 283 A.D.2d 156, 157-158 (1st Dept. 2001) (internal quotation marks and citation omitted); see also Gress v. Brown, 20 N.Y.3d 957, 959 (2012).
[9] See Solnick v. Whalen, 49 N.Y.2d 224, 229-30 (1980).
[10] Id. at 230; see also Saratoga Cnty. Chamber of Com. v. Pataki, 100 N.Y.2d 801, 815 (2003).
[11] Trump Vill., 217 A.D.3d at 714.
[12] Zwarycz, 102 A.D.3d at 776.
[13] Slip Op. at *5.
[14] Id.
[15] Id.
[16] Id. at *6.
[17] IDT, 12 N.Y.3d at 139; Romanoff v. Romanoff, 148 A.D.3d 614, 616 (1st Dept. 2017).
[18] Wimbledon Fin. Master Fund, Ltd v. Hallac, 192 A.D.3d 617, 618 (1st Dept. 2021).
[19] Romanoff, 148 A.D.3d at 616.
[20] Slip Op. at *6.
[21] Id.
[22] Id.
[23] Id.
[24] Id. (citing CPLR 3016(b)).
[25] Id.
[26] Id.
