This action is brought by the State of New York Workers' Compensation Board ("WCB") in its capacity as the governmental entity charged with administration of the Workers' Compensation Law and as the successor in interest to eight group self-insured trusts ("GSITs"): the Healthcare Industry Trust of New York ("HITNY" or "the Trust"), the Wholesale and Retail Workers' Compensation Trust of New York, the Transportation Industry Workers' Compensation Trust, the Trade Industry Workers' Compensation Trust for Manufacturers, the Real Estate Management Trust of New York, the Public Entity Trust of New York, the New York State Cemeteries Trust, and the Elite Contractors Trust of New York.

The WCB moves for leave to file a second amended complaint ("Proposed Complaint") that adds 12 former trustees of HITNY ("HITNY Trustees") as defendants and alleges various new causes of action against them. Additionally, the WCB seeks to amend its ninth cause of action (conversion) to include one such additional defendant, the estate of Anthony Salerno. The motion is opposed principally by the HITNY Trustees.^[FN1]

BACKGROUND

This action was filed on December 9, 2009. On or about March 26, 2010, the WCB filed an amended verified complaint ("Complaint") as of right (CPLR 3025 [a]). On March 31, 2010, Compensation Risk Managers ("CRM") applied for an order from the New York State Litigation Coordinating Panel ("LCP") coordinating certain pending actions against CRM, including this case and the HITNY Action. The LCP (Freedman, J.) issued an Order to Show Cause on April 16, 2010 that stayed pre-trial proceedings in all of the cases that were the subject of the pending coordination application, including this one.

The LCP ultimately granted the request for coordination on February 23, 2011, and the coordinated cases were transferred to the undersigned as Coordinating Justice. On March 9, [*2]2011, this Court issued an order setting an initial coordinated conference and continuing the LCP's stay of proceedings pending said conference. On or about April 29, 2011, Majestic Capital Ltd. f/d/b/a CRM Holdings, Ltd. filed for federal bankruptcy protection, which had the effect of staying all proceedings against the debtor defendants, including CRM. The stays remained in effect until February 14, 2013.

In support of the instant motion, the WCB alleges that the HITNY Trustees breached contractual and fiduciary duties owed to the Trust. On that basis, the WCB seeks to add the HITNY Trustees as party defendants and assert causes of action against them sounding in breach of contract, breach of fiduciary duty and negligent misrepresentation. Additionally, the WCB seeks to name one such defendant in its ninth cause of action, which alleges conversion.

In opposing the motion, the employer-plaintiffs in the HITNY Action assert that the claims are untimely under the applicable statute of limitations and that the WCB is not the proper party to assert claims on behalf of the Trust and its members. The HITNY Trustees argue that the tort claims are barred by the statute of limitations and the proposed breach of contract claim fails to state a cause of action.

ANALYSIS

A motion for leave to amend a pleading should be freely granted, providing that there is no prejudice to the nonmoving party and the amendment is not plainly lacking in merit (CPLR 3025 [b]; Smith v Haggerty, 16 AD3d 967, 967-968 [3d Dept 2005]). In opposing the motion, the HITNY Trustees focus principally on the claimed lack of merit of the proposed amendments.

A.Breach of Fiduciary Duty

According to the Proposed Complaint, the Trustees are guilty of: failing to properly administer the Trust; disregarding the duty of due care and reasonable prudence owed to the Trust; entering into an improvident contract with CRM under questionable circumstances; failing to police CRM and its officers, employees and affiliates in the administration of the Trust; and failing to address mounting member deficits. As the Proposed Complaint does not plead essential allegations of actual fraud against the HITNY Trustees,^[FN2] the breach of fiduciary duty claim is subject to a three-year limitations period that accrued no later than October 22, 2007, when the WCB assumed administration of the trust (see State of NY Workers' Compensation Board v Madden (2013 NY Slip Op 50337 [U] [March 1, 2013]; New York State Workers' Compensation Bd. v Consolidated Risk Servs., Inc. (2013 NY Slip Op 51403 [U] [August 26, 2013] ["CRS"]). As the motion to amend was filed on March 14, 2013, the claims are prima facie untimely.

In an effort to save the claims, the WCB relies upon CPLR 204 (a), which provides that "where the commencement of an action has been stayed by a court or by statutory prohibition, the duration of the stay is not a part of the time within which the action must be commenced."

While the stays imposed by the LCP and and this Court precluded the WCB from filing the instant motion to amend the complaint to add the HITNY Trustees as parties to this action, there was no stay in effect that prohibited the commencement of a new action. Indeed, on July 8, 2011, following entry of the LCP's order staying all proceedings in the coordinated cases, the [*3]WCB commenced a new action in this Court against SGRisk, LLC and UHY, LLC, entities that served as professional advisors to the group self-insured trusts that are the subject of this action (see Index No. 4620-11 ["SGRisk"]). Under the circumstances, the WCB has failed to demonstrate that the orders issued by the LCP or this Court stayed or otherwise prevented "the commencement of an action" against the HITNY Trustees.

The WCB also seeks to invoke the relation-back doctrine. "As codified in New York's Civil Practice Law and Rules, what is commonly referred to as the relation back doctrine allows a claim asserted against a defendant in an amended filing to relate back to claims previously asserted against a codefendant for Statute of Limitations purposes where the two defendants are united in interest'" (Buran v Coupal, 87 NY2d 173, 177 [1995], citing CPLR 203 [b]). For the doctrine to apply: " (1) both claims [must arise] out of same conduct, transaction or occurrence, (2) the new party is united in interest' with the original defendant, and by reason of that relationship can be charged with such notice of the institution of the action that he will not be prejudiced in maintaining his defense on the merits and (3) the new party knew or should have known that, but for [a] . . . mistake by plaintiff as to the identity of the proper parties, the action would have been brought against h[er] as well'" (id. at 178 [citations and quoted sources omitted]; see Doe v HMO-CNY, 14 AD3d 102, 105 [4th Dept 2004]).

It is apparent that the interests of the HITNY Trustees are not united with those of CRM or any of the other defendants named in the Complaint. Unity in interest is demonstrated when "the respective interests of defendants in the subject matter are such that they stand or fall together and that judgment against one will similarly affect the other'" (Doe, 14 AD3d at 105 [quoted source omitted]; see Grossman v New York City Health & Hosps. Corp., 178 AD2d 323, 324 [1st Dept 1991]). Here, there is no claim of vicarious liability. Further, a judgment for or against the present parties would not necessarily affect the HITNY Trustees, and a judgment for or against the Trustees would not necessarily affect the present parties. Additionally, it is clear that the WCB knew or should have known of the identity of the HITNY Trustees and their relationship to this action.

Based on the foregoing, the Court concludes that the proposed breach of duty claim against the HITNY Trustees is time-barred and, therefore, patently lacking in merit.

B.Negligent Misrepresentation

Similar considerations compel the conclusion that the proposed claim of negligent misrepresentation is lacking in merit. Absent allegations of fraud, the claim is subject to a three year limitations period (Colon v Banco Popular N. Am., 59 AD3d 300, 301 [1st Dept 2009]), and any reliance by the Trust upon the alleged misrepresentations must have occurred no later than October 22, 2007, when the WCB assumed administration of the Trust.

C.Breach of Contract

As held in Madden and CRS, the proposed claim for breach of contract against the Trustees is subject to a six-year limitations period that accrued no later than the WCB's takeover of the Trust. As such, the claim is timely with respect to allegations of breach for the period from March 14, 2007 until October 22, 2007.

Apparently recognizing that a small portion of the WCB's proposed contract claim is timely, the Trustees argue that the WCB is improperly attempting to "dress up" its tort claims in order to take advantage of the more generous limitations period applicable to contract claims. [*4]The Court disagrees. The WCB has pleaded the existence of an enforceable contract (the HITNY Trust Agreement), breaches of the Trustees' obligations thereunder, performance on the part of the Trust and resulting damages from the Trustees' alleged breaches. The Trustees cite no authority holding that a trust may not proceed against a trustee under a contractual theory where a breach of fiduciary claim might also be available. And the Court is not persuaded that the pleading deficiencies relied upon by the Trustees leave the proposed cause of action palpably lacking in merit.

CONCLUSION

Accordingly,^[FN3] it is

ORDERED that plaintiff's motion to amend is granted in part to the limited extent indicated herein and denied in all other respects.

This constitutes the Decision and Order of the Court. This Decision and Order is being transmitted to plaintiff's counsel for filing and service. The signing of this Decision and Order shall not constitute entry or filing under CPLR Rule 2220, and counsel is not relieved from the applicable provisions of that Rule respecting filing, entry and Notice of Entry.

Dated: Albany, New York

October 1, 2013

RICHARD M. PLATKIN

A.J.S.C.

Papers Considered:

Notice of Motion, dated March 14, 2013;

Plaintiff WCB's Memorandum of Law, dated March 14, 2013;

Affirmation of Daniel E. Sarzynski, Esq., dated March 14, 2013, with attached exhibits A-E;

HITNY Trustees' Memorandum of Law, dated April 26, 2013;

Affirmation of Linda Clark, Esq,. dated April 26, 2013, with attached exhibit A;

HITNY Plaintiffs' Memorandum of Law, dated April 26, 2013;

Plaintiff WCB's Reply Memorandum of Law, dated May 23, 2013;

Reply Affirmation of Daniel E. Sarzynski, Esq, dated May 23, 2013;

Reply Affidavit of Michael Papa, Esq., sworn to May 23, 2013, with attached exhibits A-E;

Sur-Reply Affirmation of Abigail Van Deerlin, Esq., dated June 10, 2013, with attached exhibits A-E;

HITNY Trustees' Sur-Reply Memorandum of Law, dated June 21, 2013;

Plaintiff WCB's Memorandum of Law in Response to Sur-Reply, dated June 28, 2013; [*5]

Affirmation of Charles D. Case, Esq,. dated June 28, 2013.