On August 4, 2014, Justice Sherwood of the New York County Commercial Division issued a decision in Blumenstyk v. Singer, 2014 NY Slip Op. 32124(U), illustrating the analysis used to determine the statute of limitations applicable to claims of breach of fiduciary duty and fraud.
In Blumenstyk, the plaintiffs brought twenty-four causes action against the defendants. Ultimately, most were dismissed. This post looks at the question of the statute of limitations applicable to the plaintiffs’ breach of fiduciary duty and fraud claims. The court reviewed the analysis used to determine the statute of limitations applicable to such claims:
New York applies different statutes of limitations for claims alleging breach of fiduciary duty, depending on the remedy sought. For equitable relief, the six-year limitations period in CPLR 213(1) applies. However, when the plaintiff seeks only money damages, courts interpret the claims as alleging injury to property and subject to the three year limitations period set forth in CPLR 214(4). Claims for breach of fiduciary duty accrue, and the statute of limitations begins to run, as of the date of the alleged breach, not when it was discovered. Generally, the three year statute of limitations to recover damages for injury to property (see CPLR 214) accrues when the injury occurs, irrespective of when the damage was actually discovered.
The statute of limitations may be tolled while a relationship of trust and confidence exists between the parties. In such cases, the statutory period does not begin to run until the fiduciary relationship is repudiated or otherwise ended.
. . .
CPLR 213(8) provides that, as to claims of fraud, there is either a six year statute of limitations running from the time the cause of action accrued, or a two year period from the time the plaintiff discovered the fraud, or could with reasonable diligence have discovered it. However, courts will not apply the fraud Statute of Limitations if the fraud allegation is only incidental to the claim asserted; otherwise, fraud would be used as a means to litigate stale claims. Thus, where an allegation of fraud is not essential to the cause of action pleaded except as an answer to
an anticipated defense of Statute of Limitations, courts look for the reality, and the essence of the action and not its mere name.
(Internal quotations and citations omitted) (emphasis added).