NEW YORK STATE WORKERS' COMPENSATION BOARD, as Administrator of the Workers' Compensation Law and Attendant Regulations and as Successor in Interest to the Community Residence Insurance Savings Plan, Appellant-Respondent,
PROGRAM RISK MANAGEMENT, INC., et al., Respondents-Appellants, and BOARD OF TRUSTEES OF THE COMMUNITY RESIDENCE INSURANCE SAVINGS PLAN et al., Respondents, et al., Defendants.
Calendar Date: February 22, 2017
Baase Pfalzgraf Cunningham, LLC, Buffalo (Daniel E. Sarzynski
of counsel), for appellant-respondent.
Miranda Sambursky Slone Sklarin Verveniotis, LLP, Mineola
(Maurizi Savoiardo of counsel), for Program Risk Management,
Inc. and others, respondents-appellants.
Schoeneck & King, PLLC, Albany (Stuart Klein of counsel),
for Thomas Gosdeck, respondent-appellant.
Peabody, LLP, Albany (Kimberly K. Harding of counsel), for
Board of Trustees of the Community Residence Insurance
Savings Plan and others, respondents.
Before: Egan Jr., J.P., Lynch, Rose, Clark and Mulvey, JJ.
MEMORANDUM AND ORDER
appeal from an order of the Supreme Court (Platkin, J.),
entered October 5, 2015 in Albany County, which, among other
things, partially granted certain defendants' motions to
dismiss the complaint.
Community Residence Insurance Savings Plan, a group
self-insured trust, was formed in 1995 to provide
workers' compensation to the employees of the members of
the trust (see Workers' Compensation Law §
50 [3-a]; 12 NYCRR 317.2 [i]; 317.3). Defendants Janice
Johnson, Antonia Lasicki, Thomas McKeown, John Lessard, Ann
Hardiman, Vincent Sirangelo, Phillip Saperia, Steven
Greenfield, Peter Pierri, Fred Apers, Peter Campanelli and
Diana Antos-Arens (hereinafter collectively referred to as
the trustee defendants), among others, each served as
individual trustees. Shortly after the trust was formed, it
contracted with defendant Program Risk Management, Inc.
(hereinafter PRM) to administer the trust (see 12
NYCRR 317.2 [g]) and, in 2001, the trust contracted with
defendant PRM Claims Services, Inc. (hereinafter PRMCS) to
administer its claims (see 12 NYCRR 317.2 [d]).
Defendants Thomas Arney, John M. Conroy, Edward A. Sorensen
and Mark J. Crawford (hereinafter collectively referred to as
the PRM individual defendants) are former or current officers
of PRM and PRMCS and/or served in various corporate
capacities. Defendant Thomas Gosdeck served as counsel to the
trust and as qualifying officer to PRMCS.
2004, plaintiff began advising the trust that it was
underfunded and required the execution of a number of consent
agreements intended to preserve it. In 2010, plaintiff deemed
the trust to be underfunded with a regulatory deficit of more
than $7, 900, 000, and, when efforts to reduce this deficit
failed, the trustees voted to stop providing workers'
compensation. After advising the trustees that the trust had
"demonstrated an inability to properly administer its
liabilities, " plaintiff assumed the administration of
the trust, effective August 2011. A subsequent forensic audit
determinated that, as of December 31, 2010, the trust was
underfunded by more than $60, 715, 450.
2013, plaintiff commenced this action in both its capacity as
the governmental agency charged with administering the
state's workers' compensation program and as the
trust's successor in interest. As relevant on this
appeal, plaintiff seeks to recover damages for breach of
contract against PRM, PRMCS and the PRM individual defendants
(hereinafter collectively referred to as the PRM defendants)
and the trustee defendants (first cause of action); breach of
the duty of good faith and fair dealing against the PRM
defendants and the trustee defendants (second cause of
action); breach of fiduciary duty against PRM and the PRM
individual defendants, the trustee defendants and Gosdeck
(fourth, fifth and sixth causes of action); fraud against the
PRM defendants (seventh cause of action); unjust enrichment
against Gosdeck (ninth cause of action); negligent
misrepresentation against the PRM defendants and Gosdeck
(tenth cause of action); legal malpractice against Gosdeck
(eleventh cause of action); contractual indemnification
against the PRM defendants (sixteenth cause of action); and
common-law indemnification against all defendants (eighteenth
cause of action). Plaintiff also seeks a judgment declaring
the PRM defendants to be alter egos (thirteenth cause of
action) and an accounting from PRM and PRMCS (fifteenth cause
of action). As relevant herein, the PRM defendants, the
trustee defendants and Gosdeck each moved to dismiss the
complaint against them.
Court dismissed plaintiff's causes of action for breach
of fiduciary duty against PRM, the PRM individual defendants
and the trustee defendants as duplicative of the breach of
contract causes of action. The court also dismissed
plaintiff's cause of action for a declaratory judgment
regarding the alter ego liability of PRM and PRMCS, but
allowed the claim as against the PRM individual defendants.
The court denied the motions to dismiss the first cause of
action alleging breach of contract against the PRM defendants
and the trustee defendants and the ninth cause of action
alleging unjust enrichment against Gosdeck, but subjected
both causes of action to a six-year statute of limitations.
Similarly, the court denied Gosdeck's motion to dismiss
the cause of action for legal malpractice. Finally, the court
dismissed plaintiff's claim for common-law
indemnification against PRMCS and Gosdeck, but denied the
motions by the trustee defendants and PRM to dismiss this
claim against them. Plaintiff appeals and the PRM defendants,
the trustee defendants and Gosdeck cross-appeal.
the pendency of this appeal, this Court decided State of
N.Y. Workers' Compensation Bd. v Wang (147 A.D.3d
104 ). We find, and the parties confirmed at oral
argument, that certain rulings in Wang are
applicable to a number of issues presented on this appeal.
Accordingly, we hold that Supreme Court properly determined
that the doctrine of equitable estoppel did not toll the
statute of limitations governing plaintiff's first cause
of action for breach of contract (see State of N.Y.
Workers' Compensation Bd. v Wang, 147 A.D.3d at
112-113). Further, we find that the court should not have
dismissed plaintiff's fourth cause of action for breach
of fiduciary duty against PRM and the PRM individual
defendants and the fifth cause of action for breach of
fiduciary duty against the trustee defendants as redundant of
the breach of contract cause of action (see State of N.Y.
Workers' Compensation Bd. v Wang, 147 A.D.3d at 115)
. Supreme Court properly denied the
motion to dismiss plaintiff's thirteenth cause of action
against Conroy and Arney, both of whom served as officers to
PRM and PRMCS, but should have dismissed the claim as against
Sorensen and Crawford (see State of N.Y. Workers'
Compensation Bd. v Wang, 147 A.D.3d at 116). Also
pursuant to Wang, we find that Supreme Court
properly permitted the common-law indemnification cause of
action, as alleged in its governmental capacity, to continue
against PRM, but should not have dismissed this cause of
action against PRMCS (see State of N.Y. Workers'
Compensation Bd. v Wang, 147 A.D.3d at 118; compare
New York State Workers' Compensation Bd. v Fuller &
LaFiura, CPAs, P.C., 146 A.D.3d 1110, 1112-1113 ).
Contrary to the argument raised by the PRM defendants,
plaintiff's authority to assert claims in its
governmental capacity may be inferred from its statutory and
regulatory authority to administer insolvent group
self-insured trusts (see State of N.Y. Workers'
Compensation Bd. v Wang, 147 A.D.3d at 118;
Accredited Aides Plus, Inc. v Program Risk Mgt.,
Inc., 147 A.D.3d 122, 136-137 ; State of N.Y.
Workers' Compensation Bd. v Madden, 119 A.D.3d 1022,
to the remaining issues on appeal, the PRM defendants contend
that plaintiff's breach of contract claims must be
dismissed because the alleged breaches were controlled by the
consent agreements, which, among other things, established
and mandated certain premium and discount formulas. On this
motion, we "afford the complaint a liberal construction,
accept the facts alleged in the pleading as true, confer on
the nonmoving party the benefit of every possible inference
and determine whether the facts as alleged fit within any
cognizable legal theory" (NYAHSA Servs., Inc.,
Self-Ins. Trust v Recco Home Care Servs., Inc., 141
A.D.3d 792, 794  [internal quotation marks, brackets
and citation omitted]). This standard, though liberal,
"will not save allegations that consist of bare legal
conclusions or factual claims that are flatly contradicted by
documentary evidence or are inherently incredible"
(Jenkins v Jenkins, 145 A.D.3d 1231, 1234 
[internal quotation marks and citation omitted]).
Accordingly, a cause of action ...