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Access Point Medical, LLC, et al., Plaintiffs-Appellants v. Edward R. Mandell

April 2, 2013

ACCESS POINT MEDICAL, LLC, ET AL., PLAINTIFFS-APPELLANTS,
v.
EDWARD R. MANDELL, ET AL., DEFENDANTS-RESPONDENTS.



Plaintiff appeals from an order of the Supreme Court, New York County (Judith J. Gische, J.), entered August 2, 2011, which, to the extent appealed from as limited by the briefs, granted defendants' motion to dismiss as time-barred the claims for breach of fiduciary duty and aiding and abetting breach of fiduciary duty.

The opinion of the court was delivered by: Saxe, J.

Access Point Med., LLC v Mandell

Decided on April 2, 2013

Appellate Division, First Department

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Richard T. Andrias,J.P. David B. Saxe Karla Moskowitz Helen E. Freedman Sheila Abdus-Salaam, JJ.

SAXE, J.

Plaintiffs Access Point Medical LLC and its wholly owned subsidiary, Access Point Medical, Inc., were formed by nonparty Bill Kidd, with the assistance of defendant attorney Edward R. Mandell to engage in the business of manufacturing and selling durable home medical equipment such as wheelchairs, canes, walkers, and oxygen tanks. Kidd was plaintiffs' largest shareholder and served as chairman of the board. In this action, plaintiffs essentially allege that defendants, acting as their attorneys, actively misled them and failed to disclose critical information because, while representing them, defendants simultaneously represented Kidd when Kidd's interests were adverse to theirs.

Plaintiffs commenced this action on February 17, 2010, alleging causes of action for legal malpractice, breach of contract, and breach of fiduciary duty, and seeking damages including compensatory damages and the "disgorgement" of the $658,117.28 they paid to defendants in legal fees. In support of these causes of action, the complaint alleges a number of events. First, that Mandell and his law firm, defendant Troutman Sanders, LLP, prepared the private placement memoranda when Kidd decided to sell plaintiffs' securities to outside investors in order to recoup his investment, and errors in those memoranda exposed plaintiffs to legal liability. Second, that defendants improperly represented both Kidd and plaintiffs in the drafting and negotiating of a management services agreement between them, despite, and without disclosing, the existence of a conflict between their interests.

Plaintiffs further allege that defendants negotiated a line of credit for them from Wells Fargo, while failing to address Kidd's causing or contributing to their deteriorating financial condition and the certainty of their default on the line of credit, rendering them liable for extra penalties and fees and, ultimately, causing the cancellation of the line of credit. In addition, plaintiffs claim that defendants failed to properly inform them of warning letters sent by the Food and Drug Administration regarding allegedly defective products being sold by them, resulting in loss of business and damage to their business reputation.

Defendants' motion to dismiss the complaint pursuant to CPLR 3211(a)(1) and (7) was granted. The motion court observed that the claims for malpractice and breach of fiduciary duty were barred by the three-year statute of limitations (CPLR 214), because all the complained-of conduct occurred in 2005 or 2006. As to the language added in plaintiffs' amended complaint, that "[u]pon information and belief, Troutman's and Mandell's representation of APM continued through March 2007," the motion court found that it was conclusively disproved by the last entry on defendants' final invoice to plaintiffs, which reflects a telephone call on February 14, 2007, more than three years before this action was commenced.

Plaintiffs do not challenge the motion court's determination that their legal malpractice action was barred by the three-year statute of limitations, since the cause of action accrued in 2005 or 2006, this action was commenced on February 17, 2010, and the continuous representation doctrine was not shown to be applicable. However, they challenge the ruling that their breach of fiduciary duty claims are also barred by the three-year limitations period.

Plaintiffs' argument against treating the fiduciary duty claims as time-barred has changed over time. They acknowledged before the motion court that the three-year limitations period applied to the breach of fiduciary duty claims, but insisted that under the continuous representation doctrine the fiduciary duty claims did not start to run until some time after March 2007. Now plaintiffs now take the position ...


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