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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: May 12, 2020

Breach of Fiduciary Duty Claims Timely Even Though Alleged Breach Merely Renewed Earlier, Time-Barred Breaches

On May 7, 2020, the First Department issued a decision in Ganzi v. Ganzi, 2020 NY Slip Op. 02740, holding that breach of fiduciary claims were timely even though the alleged breach merely renewed earlier, time-barred breaches, explaining:

Breach of fiduciary duty is a tort claim that accrues when all the elements of the tort can be truthfully alleged in a complaint. Where there is one tortious act complained of, the cause of action accrues at the time that the wrongful act first injured the plaintiff; the continuous wrong doctrine tolls the running of the statute of limitations where there is a series of independent, distinct wrongs rather than a single wrong that has continuing effects.

Here, defendants argue that pursuant to a stipulation between the parties, the valid and enforceable 2007 and 2011 licenses merely papered or re-papered existing license agreements from 2004 and earlier, repeating identical terms, including the $6,000 annual fee, which would have continued regardless of whether the written licenses had been prepared, such that any damages sustained after 2006 were merely continuing consequential damages from preexisting breaches that occurred when each new Palm opened with established licensing terms and cannot be used to toll the statute of limitations.

However, the trial court properly found that plaintiffs timely asserted their claims of breach of fiduciary duty in connection with the $6,000 annual fee in the 2007 and 2011 licenses for the new Palms, even if defendants had earlier agreements to pay those restaurants the same fees prior to 2006. Unlike the facts in Madison Squ. Garden, L.P. v National Hockey League (2008 WL 4547518, 2008 US Dist LEXIS 80475 [SD NY 2008]), the 2007 and 2011 licenses, even if they stated the same terms, were not mere renewals of prior, written agreements. Rather, they were new and fully enforceable contracts entered into between JOMR and defendants’ wholly-owned restaurants within the limitations period, as they included a recital providing that “Licensor and Licensee have previously entered into a certain License Agreement and desire to enter into a new License Agreement under the terms and conditions as herein set forth,” as well as a merger clause providing that “this Agreement contains all of the terms and conditions agreed upon by the parties hereto and no promises or representations have been made other than as herein set shall be valid unless made in writing executed by an authorized officer of the Licensee or Licensor.” These are formal, complete agreements that have legal effect, and any associated breach of fiduciary duty occurred upon the execution of those agreements, regardless of identical breaches that occurred in connection with prior license agreements that were in place for unspecified terms and that were superseded by the new agreements. While defendants argue that the old licenses, including the $6,000 fee term, would have remained in place indefinitely even if the agreements had not been re-papered in 2007 and 2011, such that there was no injury in 2007 and 2011, the formalizing of the licenses in 2007 and 2011 was a new, overt act that constituted an injurious breach of fiduciary duty.

The claims based on license agreements with third parties are similarly not time-barred.

(Internal quotations and citations omitted).

It is not unusual for the statute of limitations to be an issue in complex commercial litigation. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding whether a claim is barred by the statute of limitations.

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