State of New York

Supreme Court, Appellate Division

Third Judicial Department

Decided and Entered: January 5, 2017 522224 

________________________________

STATE OF NEW YORK WORKERS'

COMPENSATION BOARD, as

Administrator of the

Workers' Compensation Law

and attendant regulations,

and as Successor in Interest

to THE HEALTH CARE PROVIDERS

SELF-INSURANCE TRUST,

RespondentAppellant,

v OPINION AND ORDER

PHYLLIS WANG et al.,

Respondents,

and

PROGRAM RISK MANAGEMENT, INC.,

et al.,

AppellantsRespondents,

et al.,

Defendants.

________________________________

Calendar Date: October 13, 2016

Before: Garry, J.P., Egan Jr., Rose, Devine and Mulvey, JJ.

__________

Miranda Sambursky Slone Sklarin Verveniotis LLP, Mineola

(Maurizio Savoiardo of counsel), for Program Risk Management,

Inc. and others, appellants-respondents.

Denlea & Carton LLP, White Plains (Peter N. Freiberg of

counsel), for Albert Johansmeyer and another, appellantsrespondents.
-2- 522224 

Phillips Lytle LLP, Buffalo (Craig R. Bucki of counsel),

for Todd Brason and others, appellants-respondents.

Corrigan, McCoy & Bush, PLLC, Rensselaer (Scott W. Bush of

counsel), for Joel Hodes, appellant-respondent.

Hinman Straub PC, Albany (Joseph M. Dougherty of counsel),

for respondent-appellant.

Dreyer Boyajian LLP, Albany (John J. Dowd of counsel), for

Phyllis Wang, respondent.

David R. Sheridan, Delmar, for Robert Callaghan and others,

respondents.

Cooper Erving & Savage LLP, Albany (Michael A. Kornstein of

counsel), for Nelson Carpentar and another, respondents.

Couch White, Albany (Joel M. Howard III of counsel), for

Thomas Gosdeck, respondent.

__________

Egan Jr., J.

Cross appeals from an order and an amended order of the

Supreme Court (McNamara, J.), entered March 3, 2015 and May 12,

2015 in Albany County, which, among other things, partially

granted certain defendants' motions to dismiss the complaint.

The Health Care Providers Self-Insurance Trust, a group

self-insured trust, was formed in 1992 to provide mandated

workers' compensation coverage to employees of the trust's

members (see Workers' Compensation Law § 50 [3-a]; 12 NYCRR 317.2

[i]; 317.3). The trust contracted with defendant Program Risk

Management, Inc. (hereinafter PRM) to serve as its program

administrator, which, in turn, employed defendants Thomas Arney,

Colleen Bardascini, John M. Conroy, Gail Farrell and Edward

Sorenson (hereinafter collectively referred to as the PRM

individual defendants). Additionally, the trust contracted with
-3- 522224 

defendant PRM Claims Services, Inc. (hereinafter PRMCS) to serve

as its claims administrator (see 12 NYCRR 317.2 [d]). Arney and

defendants Judy Balaban-Krause, Robert Callaghan, Nelson

Carpentar, Laura Donaldson, Ronald Field, Thomas Gosdeck, Joel

Hodes, Albert Johansmeyer1 and Michael Reda (hereinafter

collectively referred to as the trustee defendants), among

others, served as trustees.2

In 2009, plaintiff determined that the trust was insolvent

and assumed the administration thereof (see 12 NYCRR 317.20). 

Thereafter, plaintiff obtained a forensic audit, which allegedly 

revealed that the trust had an accumulated deficit of over $188

million. On July 8, 2011, plaintiff commenced this action, later

amended in January 2012, in its capacity as the governmental

entity charged with the administration of the Workers'

Compensation Law and attendant regulations, and as successor in

interest to the trust. Plaintiff alleged 32 causes of action

against certain defendants sounding in, among other things,

breach of contract, breach of good faith and fair dealing, breach

of fiduciary duty, fraud, fraud in the inducement, negligent

misrepresentation, gross negligence, alter ego liability and

indemnification.3 The complaint asserts that, as a result of

defendants' failures and wrongdoings, plaintiff has incurred

liability for, among other things, "certain [t]rust [m]embers'

assessments," "significant additional administrative expenses of

the [t]rust" and "the amount of the total deficit of the

1 Johansmeyer's name erroneously appears in the complaint

as "Bert Johansmeyer."

2 As plaintiff alleges claims against Hodes both in his

capacity as a trustee and as counsel to the trust, his capacity

is indicated when necessary. A similar distinction is made with

respect to Arney, who was sued both individually and in his

capacity as a trustee.

3 It is noted that the underlying facts and causes of

action set forth herein mirror those raised by employer members

of the trust in Accredited Aides Plus, Inc. v Program Risk Mgt.,

Inc. (___ AD3d ___ [decided herewith]).
-4- 522224 

[t]rust." 

Balaban-Krause, Callaghan, Donaldson and Field,

collectively, and Arney, Carpentar, Gosdeck,4 Hodes, Johansmeyer

and Reda, individually, moved to dismiss the complaint pursuant

to, among other provisions, CPLR 3211 (a) (5) (statute of

limitations) and CPLR 3211 (a) (7) (failure to state a cause of

action). PRM, PRMCS and the PRM individual defendants

(hereinafter collectively referred to as the PRM defendants)

moved to dismiss the complaint pursuant to, among other

provisions, CPLR 3211 (a) (1) (documentary evidence), CPLR 3211

(a) (3) (capacity to sue) and CPLR 3211 (a) (7). Plaintiff

opposed defendants' motions to dismiss and cross-moved for leave

to amend the complaint to include aiding and abetting breach of

fiduciary duty and fraud claims against certain defendants.

Supreme Court partially granted certain defendants' motions

by dismissing the breach of contract and breach of good faith and

fair dealing claims against Arney (as trustee), Balaban-Krause,

Callaghan, Hodes (as trustee), Johansmeyer and Reda, and limiting

the temporal scope of such claims as to the PRM defendants,

Donaldson and Field. The court also limited the temporal scope

of plaintiff's breach of fiduciary duty cause of action against

PRM, the PRM individual defendants and Carpentar, and dismissed

the same claims against Hodes (as counsel) and the remaining

trustee defendants. Similarly, the court limited the temporal

scope of plaintiff's claims for fraud and fraud in the inducement

and dismissed its negligent misrepresentation claim against the

PRM defendants. Although the court also limited the temporal

scope of the claims for negligence and gross negligence against

Carpentar, it dismissed such claims as to the remaining trustee

defendants, as well as the claim for gross negligence against

4 As a result of plaintiff's subsequent stipulation that

discontinued its causes of action for breach of contract, breach

of good faith and fair dealing, negligence and gross negligence

against Gosdeck, and in light of his failure to appeal with

respect to the surviving claims, the only claim at issue on

appeal in regard to this defendant is plaintiff's fourth cause of

action for breach of fiduciary duty.
-5- 522224 

Hodes (as counsel). 

As to plaintiff's cause of action for alter ego liability,

Supreme Court dismissed that portion of the complaint against

Arney and Conroy, but denied the motion as it pertained to PRM,

PRMCS, Bardascini, Farrell and Sorenson. Additionally, the court

dismissed the common-law indemnification claim against PRMCS, but

permitted such claim as alleged against PRM, the PRM individual

defendants, Johansmeyer and Reda. Finally, the court, among

other things, granted plaintiff leave to amend the complaint to

add causes of action for aiding and abetting breach of fiduciary

duty and fraud against certain defendants, including defendants

Todd Brason, Thomas Buckley, Kenrick Cort, Gwen Eichorn, Carmen

Flitt, John Fraher, Sanford Katz, Robert Kolb, Timothy McGorry,

Phyllis Raymond, Robin Richards, Gregory Schaefer, Jordan Shames,

David Slifkin, Suzanne Smith and Richard Swanson (hereinafter

collectively referred to as the Phillips Lytle trustee

defendants). Johansmeyer and Reda, collectively, the PRM

defendants and the Phillips Lytle trustee defendants appeal, and

plaintiff cross-appeals.5

5 Preliminarily, insofar as the PRM defendants failed to

address in their brief the denial of their motion to dismiss

plaintiff's twenty-ninth cause of action for an accounting and

thirtieth and thirty-first causes of action for contractual

indemnification, their appeal related thereto is deemed abandoned

(see Matter of Siennikov v Professional Grade Constr., Inc., 137

AD3d 1440, 1441 n 1 [2016]; Goodnow Flow Assn. Inc. v Graves, 135

AD3d 1228, 1229 n 1 [2016]). Similarly, although plaintiff

cross-appealed from the judgment dismissing its claims against

the PRM defendants, it has abandoned any contentions related to

its thirteenth cause of action for conversion by failing to

address it in its brief (see Towne v Kingsley, 121 AD3d 1381,

1382 n [2014]; Mills v Chauvin, 103 AD3d 1041, 1044 n 2 [2013]). 

Moreover, plaintiff withdrew its seventeenth and eighteenth

causes of action alleging that PRM and the PRM individual

defendants engaged in deceptive business practices in

contravention of General Business Law §§ 349 and 350.
-6- 522224 

As an initial matter, contrary to the claims of certain

defendants, we find that plaintiff has standing to maintain this

action as a successor in interest to the trust. Specifically,

plaintiff "stands in the shoes of the [t]rust" (New York State

Workers' Compensation Bd. v Marsh U.S.A., Inc., 126 AD3d 1085,

1087 [2015] [internal quotation marks and citation omitted]) and,

therefore, has standing to bring any claims that the trust may

bring against defendants (see State of N.Y. Workers' Compensation

Bd. v Madden, 119 AD3d 1022, 1024 [2014]; see also New York State

Workers' Compensation Bd. v Marsh U.S.A., Inc., 126 AD3d at 1087

n 5; New York State Workers' Compensation Bd. v SGRisk, LLC, 116

AD3d 1148, 1149-1150 [2014]).

Dismissal may be warranted under CPLR 3211 (a) (5) where a

defendant establishes, prima facie, that a cause of action is

time-barred by the expiration of the applicable statute of

limitations (see Stewart v GDC Tower at Greystone, 138 AD3d 729,

729 [2016]; State of Narrow Fabric, Inc. v UNIFI, Inc., 126 AD3d

881, 882 [2015]; J.A. Lee Elec., Inc. v City of New York, 119

AD3d 652, 653 [2014]). "The burden then shifts to the plaintiff

to raise a question of fact as to whether the statute of

limitations has been tolled or was otherwise inapplicable, or

whether the action was actually commenced within the period

propounded by the defendant" (State of Narrow Fabric, Inc. v

UNIFI, Inc., 126 AD3d at 882 [internal quotation marks and

citation omitted]; see Picard v Fish, 139 AD3d 1331, 1332-1334

[2016]; Geotech Enters., Inc. v 181 Edgewater, LLC, 137 AD3d

1213, 1214 [2016]). 

Beginning with plaintiff's first cause of action for breach

of contract, as well as its second and third causes of action for

breach of good faith and fair dealing, we agree with Supreme

Court that such claims are time-barred by the applicable six-year

statute of limitations to the extent that the alleged breaches

occurred before July 8, 2005 (see CPLR 203 [a]; 213 [2]; see also

Town of Oyster Bay v Lizza Indus., Inc., 22 NY3d 1024, 1030

[2013]; Kosowsky v Willard Mtn., Inc., 90 AD3d 1127, 1131 [2011];

Liberman v Worden, 268 AD2d 337, 339 [2000]). Turning to

plaintiff's fourth and fifth causes of action for breach of

fiduciary duty, each is subject to a three-year statute of

limitations as "the remedy sought is purely monetary in nature
-7- 522224 

and it cannot be said that an allegation of fraud is essential to

[these] claim[s]" (Weight v Day, 134 AD3d 806, 808 [2015]; see

CPLR 214 [4]; see generally IDT Corp. v Morgan Stanley Dean

Witter & Co., 12 NY3d 132, 139 [2009]; compare New York State

Workers' Compensation Bd. v Consolidated Risk Servs., Inc., 125

AD3d 1250, 1253-1254 [2015]). Furthermore, the statute of

limitations for breach of fiduciary duty claims begins to run on

the date that the fiduciary's relationship with or administration

of a trust ceases (see Tydings v Greenfield, Stein & Senior, LLP,

11 NY3d 195, 201 [2008]; Matter of Therm, Inc., 132 AD3d 1137,

1138 [2015]; New York State Workers' Compensation Bd. v

Consolidated Risk Servs., Inc., 125 AD3d at 1253). 

Here, in support of their motion to dismiss, PRM and the

PRM individual defendants submitted written correspondence in

which plaintiff states that it assumed administration of the

trust effective October 13, 2009. Accordingly, Supreme Court

should have determined that plaintiff's fourth cause of action

was timely as the fiduciary relationship between PRM and the PRM

individual defendants and the trust, of which plaintiff is the

successor in interest, terminated – and, hence, the three-year

statute of limitations period commenced – on October 13, 2009

(see New York State Workers' Compensation Bd. v Consolidated Risk

Servs., Inc., 125 AD3d at 1253; Matter of De Sanchez, 107 AD3d

409, 410 [2013]; compare Matter of Barabash, 31 NY2d 76, 80-81

[1972]; Matter of Ruth Bronner & Zwi Levy Family Sprinkling

Trust, 112 AD3d 429, 429 [2013]).

As to the trustee defendants, Arney (as trustee), BalabanKrause, Callaghan, Gosdeck, Johansmeyer and Reda each submitted

affidavits, and Hodes (as trustee) submitted trust meeting

minutes, in support of their respective motions to dismiss – each

of which constituted prima facie proof that these defendants

ceased serving as trustees before plaintiff's claims accrued.6

6 Plaintiff does not take issue with the dismissal of its

claims for breach of fiduciary duty or the partial dismissal of

its claims for breach of contract and good faith and fair dealing

as alleged against Donaldson and Field, and, thus, has abandoned

any argument related to such claims (see Ruotolo v Fannie Mae,
-8- 522224 

Specifically, October 2004 was the latest that any of the

foregoing trustee defendants served as trustees, more than six

years prior to the commencement of this action, thus barring

plaintiff's causes of action for breach of contract, breach of

good faith and fair dealing, breach of fiduciary duty, negligence

and gross negligence as asserted against them (see CPLR 203 [a];

213 [2]; 214 [4]).7 We also find that Carpentar established

through his affidavit that his service as trustee ceased when

plaintiff assumed administration of the trust, and, as such, the

cause of action against him for breach of fiduciary duty was

properly limited to only those claims that arose within three

years of commencement of the instant action (see CPLR 213 [2]).8

Accordingly, these trustee defendants shifted the burden to

plaintiff to raise a question of fact as to whether the statutes

of limitations should be tolled (see Assad v City of New York,

238 AD2d 456, 456-457 [1997], lv dismissed 91 NY2d 848 [1997];

Doyon v Bascom, 38 AD2d 645, 645-646 [1971]).9 

127 AD3d 1442, 1443 [2015], appeal dismissed 26 NY3d 983 [2015];

New York State Workers' Compensation Bd. v Marsh U.S.A., Inc.,

126 AD3d at 1087 n 4). Moreover, in regard to Gosdeck, only the

fourth cause of action for breach of fiduciary duty is at issue

on appeal as a result of plaintiff's stipulation.

7 Notably, plaintiff's complaint states that Arney resigned

from his duties as a trustee on or about July 1993.

8 Contrary to plaintiff's contention on appeal, Supreme

Court denied Carpentar's motion to dismiss its first cause of

action for breach of contract and third cause of action for

breach of good faith and fair dealing.

9 To the extent that plaintiff does not challenge Supreme

Court's sole finding that its breach of fiduciary duty claim

against Hodes (as counsel) was duplicative of its twenty-first

cause of action for professional negligence, it has abandoned any

appeal related thereto (see generally Matter of Kairis v Fischer,

138 AD3d 1360, 1360 n [2016]). Likewise, plaintiff has abandoned

any contentions regarding the court's dismissal of its sixteenth

cause of action for negligent misrepresentation and twenty-second
-9- 522224 

To the extent that plaintiff relies upon the doctrine of

equitable estoppel to toll the statutes of limitations, we reject

such effort. Equitable estoppel may be invoked to defeat a

statute of limitations defense so long as the plaintiff

establishes that it "was induced by fraud, misrepresentations or

deception to refrain from filing a timely action" (Zumpano v

Quinn, 6 NY3d 666, 674 [2006] [internal quotation marks and

citation omitted]), and "that it was diligent in commencing the

action 'within a reasonable time after the facts giving rise to

the estoppel have ceased to be operational'" (Marincovich v Dunes

Hotels & Casinos, Inc., 41 AD3d 1006, 1010 [2007], quoting

Simcuski v Saeli, 44 NY2d 442, 450 [1978]). However, "equitable

estoppel does not apply where the misrepresentation or act of

concealment underlying the estoppel claim is the same act which

forms the basis of the plaintiff's underlying substantive causes

of action" (Torrance Constr., Inc. v Jaques, 127 AD3d 1261, 1265

[2015] [internal quotation marks, brackets and citations

omitted]; see Kosowsky v Willard Mtn., Inc., 90 AD3d at 1130-

1131; Robare v Fortune Brands, Inc., 39 AD3d 1045, 1046 [2007],

lv denied 9 NY3d 810 [2007]). 

Here, plaintiff concedes that it was continuously aware of

the trust's significant underfunding since 2004, yet did not

commission a forensic analysis of the trust until 2010. 

Moreover, the misrepresentations that allegedly prevented

plaintiff from filing a timely action – specifically,

representations regarding the trust's solvency – are also the

basis for its underlying substantive claims (see Corsello v

Verizon N.Y., Inc., 18 NY3d 777, 789 [2012]; Beck v Christie's

Inc., 141 AD3d 442, 443-444 [2016]). As such, we reject

plaintiff's contention that defendants should be precluded from

relying upon a statute of limitations defense through employing

the "extraordinary remedy" of the doctrine of equitable estoppel

(Marincovich v Dunes Hotels & Casinos, Inc., 41 AD3d at 1010; see

cause of action for gross negligence against Hodes (as counsel)

by failing to advance it in its brief on appeal (see Salzer v

Benderson Dev. Co., LLC, 130 AD3d 1226, 1229 [2015]).
-10- 522224 

McCormick v Favreau, 82 AD3d 1537, 1540 [2011], lv denied 17 NY3d

712 [2011]).10 

As to the cross appeals, the PRM defendants contend that,

even adopting a liberal standard, Supreme Court should have

dismissed the entirety of plaintiff's causes of action for breach

of contract, breach of fiduciary duty, fraud, fraud in the

inducement, alter ego liability and common-law indemnification. 

Plaintiff alleged that the trust was an express and intended

beneficiary of the program administrator service agreements in

which PRM promised to, among other obligations, "monitor the

financial condition and activities of the [t]rust" and "manage

the activities of the third[-]party administrator" and "the loss

control consultant." Similarly, PRMCS contracted with the trust

to "[p]erform necessary and customary administrative and clerical

work in connection with each [c]laim," as well as "[p]ay [c]laims

and [a]llocated [e]xpenses." Plaintiff alleged that PRM and

PRMCS each breached their respective contractual obligations by,

among other things, "failing to provide adequate claims

administrative services, loss control and risk management

services." Based on the foregoing, and liberally construing the

facial sufficiency of the complaint (see 12 Baker Hill Rd., Inc.

v Miranti, 130 AD3d 1425, 1426 [2015]), we agree with Supreme

Court that plaintiff sufficiently pleaded a cause of action for

breach of contract against the PRM defendants as limited by a

six-year statute of limitations (see CPLR 213 [2]; Evans v

Deposit Cent. Sch. Dist., 139 AD3d 1172, 1174 [2016]; compare

Hyman v Schwartz, 127 AD3d 1281, 1283 [2015]). 

We reach a similar conclusion with respect to the PRM

defendants' contention that the forensic report constituted

documentary evidence that conclusively established that PRM and

10 With respect to the eighth, eleventh, nineteenth and

twentieth causes of action, plaintiff does not address Supreme

Court's calculation of the applicable statute of limitations and,

as generously interpreted, only argues that it should have been

permitted to utilize the doctrine of equitable estoppel. For the

reasons stated supra, we similarly reject plaintiff's contention

as it relates to these causes of action. 
-11- 522224 

PRMCS "performed their contractual services." Notably, the

forensic report states that the independent review concluded that

PRM "failed to provide a satisfactory level of claims processing

service on behalf of the [trust]" and that PRMCS under-reserved

claims "thereby contributing to the member deficit." As such,

without deciding whether the forensic report constitutes

documentary evidence (see generally Eisner v Cusumano Constr.,

Inc., 132 AD3d 940, 941-942 [2015]), we find that it failed to

conclusively refute plaintiff's breach of contract claims (see

511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144,

152-153 [2002]; Raach v SLSJET Mgt. Corp., 134 AD3d 792, 794

[2015]; see also CPLR 3211 [a] [1]).

Turning to the PRM defendants' cross appeal with respect to

plaintiff's timely claims for breach of fiduciary duty, we agree

with Supreme Court that, for pleading purposes, plaintiff

adequately set forth allegations, apart from the terms of the

underlying administration agreements, that created a relationship

of higher trust than what would arise from the administration

agreements alone (see EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d

11, 19 [2005]; Matter of Lorie DeHimer Irrevocable Trust, 122

AD3d 1352, 1352-1353 [2014]; compare NYAHSA Servs., Inc., SelfIns. Trust v Recco Home Care Servs., Inc., 141 AD3d 792, 794-795

[2016]). Plaintiff alleged that PRM and the PRM individual

defendants "influenced and controlled the [t]rust and possessed

superior access to [t]rust information" and "creat[ed] a

relationship of trust and confidence between" itself and the

trust. Specifically, plaintiff alleged that PRM and the PRM

individual defendants went so far as to participate and control

trust board meetings, contract with third parties on behalf of

the trust, decide trust investments and appoint trustees. 

Additionally, plaintiff alleged that PRM and the PRM individual

defendants "agreed to exercise good faith and undivided loyalty

to the [t]rust" to, among other things, "develop[] underwriting

criteria," and that the breach of their duty resulted in monetary

damages (see generally New York State Workers' Compensation Bd. v

SGRisk, LLC, 116 AD3d at 1152-1153; ARB Upstate Communications

LLC v R.J. Reuter, L.L.C., 93 AD3d 929, 930-931 [2012]). 

Similarly, we discern no error in Supreme Court permitting

the timely portions of plaintiff's eighth and eleventh causes of
-12- 522224 

action based in fraud to proceed against the PRM defendants (see

generally ACA Fin. Guar. Corp. v Goldman, Sachs & Co., 25 NY3d

1043, 1044 [2015]; 84 Lbr. Co., L.P. v Barringer, 110 AD3d 1224,

1226 [2013]). However, we agree with plaintiff that the court

should not have dismissed its sixteenth cause of action for

negligent misrepresentation against the PRM defendants.11

Plaintiff alleged, among other things, that in order to induce

the trust to enter into and continue the program and claims

administrator services contracts, the PRM defendants

misrepresented and omitted material facts known to be false that

were related to the trust's financial solvency, compliance with

the Workers' Compensation Law and accompanying regulations and

the PRM defendants' capacity – all of which plaintiff relied upon

to its financial detriment. Accordingly, we find that

plaintiff's allegations based in fraud "are not redundant but,

rather, sufficiently allege duties that are independent from [the

PRM defendants'] alleged failure to perform the terms of the

contracts" (NYAHSA Servs., Inc., Self-Ins. Trust v Recco Home

Care Servs., Inc., 141 AD3d at 798; see TIAA Global Invs., LLC v

One Astoria Sq. LLC, 127 AD3d 75, 87 [2015]; Gizzi v Hall, 300

AD2d 879, 880 [2002]; compare Carpenter v Plattsburgh Wholesale

Homes, Inc., 83 AD3d 1175, 1176 [2011]). 

Moreover, for the reasons stated supra, we find that the

PRM defendants were "in a special position of confidence and

trust with the [trust] such that reliance on the negligent

misrepresentation is justified" (Greenberg, Trager & Herbst, LLP

v HSBC Bank USA, 17 NY3d 565, 578 [2011] [internal quotation

marks and citation omitted]; compare Zelber v Lewoc, 6 AD3d 1043,

1044-1045 [2004]). Therefore, Supreme Court should not have

dismissed plaintiff's claim for negligent misrepresentation;

rather, consistent with the temporal limitation imposed upon

plaintiff's fraud claims, the sixteenth cause of action survives

11 Inasmuch as plaintiff only challenges Supreme Court's

dismissal of its sixteenth cause of action for negligent

misrepresentation against the PRM defendants, it abandons any

challenge to the court's dismissal of that portion of its claim

against Hodes (as counsel) (see Salzer v Benderson Dev. Co., LLC,

130 AD3d at 1229).
-13- 522224 

as to those claims that accrued within six years of filing of the

instant action. 

As to alter ego liability, plaintiff alleged that PRM,

PRMCS and the PRM individual defendants "are each the alter ego

of the other as they perform similar functions, share profits and

are both managed by Conroy." As Supreme Court's order and

amended order, as well as the parties' briefs, focus solely on

the liability of the PRM individual defendants, we need not reach

the issue as to whether plaintiff sufficiently requested a

declaratory judgment of alter ego liability against PRM and

PRMCS. Upon review of the pleadings, plaintiff asserts that

Conroy is the president of both PRM and PRMCS, and that Arney,

his predecessor, held the same positions. Plaintiff further

alleges that Bardascini, Farrell and Sorenson were owners of PRM

during unspecified periods of time. While plaintiff's

allegations that Arney and Conroy each served concurrently as

president of both PRM and PRMCS are sufficient (see ARB Upstate

Communications LLC v R.J. Reuter, L.L.C., 93 AD3d at 931), the

conclusory statements regarding Bardascini, Farrell and Sorenson

do not permit piercing the corporate veil and imposing individual

liability (see NYAHSA Servs., Inc., Self-Ins. Trust v People Care

Inc., 141 AD3d 785, 790 [2016]; Weis v Selected Meat Packers, 91

AD2d 1085, 1086 [1983]; see also CPLR 3013, 3016 [b]; see

generally Matter of Morris v New York State Dept. of Taxation &

Fin., 82 NY2d 135, 140-142 [1993]). 

As to the thirty-second cause of action, plaintiff

challenges the dismissal of its common-law indemnification claim

against PRMCS; the PRM defendants contend that Supreme Court

should have dismissed the claims against PRM and the PRM

individual defendants because the Workers' Compensation Law does

not create a common duty for service providers to maintain the

solvency of a trust. Additionally, Johansmeyer and Reda contend

that the court should have dismissed the only surviving claim

against them because the complaint fails to identify specific

wrongdoings attributable to them. A plaintiff is entitled to

common-law indemnification upon "a showing that the plaintiff and

the defendant owed a duty to third parties, and that the

plaintiff discharged the duty which, as between the plaintiff and

the defendant, should have been discharged by the defendant"
-14- 522224 

(Murray Bresky Consultants, Ltd v New York Compensation Manager's

Inc., 106 AD3d 1255, 1258 [2013] [internal quotation marks,

brackets and citation omitted]; see McDermott v City of New York,

50 NY2d 211, 216-217 [1980]). "Such an implied obligation may

arise from contractual relations or from the status of the

parties as a matter of law, or it may be imposed by statute"

(State of N.Y. Workers' Compensation Bd. v Madden, 119 AD3d at

1024 [internal quotation marks and citations omitted]). 

Here, plaintiff, by virtue of the Workers' Compensation Law

and its enabling regulations (see Workers' Compensation Law § 50-

a; 12 NYCRR 317.9, 317.20), and PRM and PRMCS, by virtue of their

agreements with the trust, owed a common duty to the covered

employer members to ensure that the trust maintained adequate

reserves to cover employee claims. Similarly, plaintiff, by

virtue of its statutory and regulatory role, and Johansmeyer and

Reda, by virtue of the trust bylaws, owed a common duty to the

covered employer members to ensure that the trust maintained

adequate reserves such that its assets would cover its

liabilities (see New York State Workers' Compensation Bd. v

Consolidated Risk Servs., Inc., 125 AD3d at 1258-1259; State of

N.Y. Workers' Compensation Bd. v Madden, 119 AD3d at 1025; Murray

Bresky Consultants, Ltd v New York Compensation Manager's Inc.,

106 AD3d at 1258-1259; compare Germantown Cent. School Dist. v

Clark, Clark, Millis & Gilson, 294 AD2d 93, 98-99 [2002], affd

100 NY2d 202 [2003]). Plaintiff further alleged that "through no

fault of its own," breaches by Johansmeyer, Reda, PRM and PRMCS

contributed to the trust's insolvency and, thus, they should "in

the interests of justice" cover the costs that plaintiff incurred

in carrying out its obligations. 

Contrary to Johansmeyer's and Reda's contentions, dismissal

of the other claims against them does not affect the viability of

plaintiff's common-law indemnification claim, and plaintiff is

not required to "specify the amount of damages attributable to

each trustee defendant's time as trustee, only that it specify

that it paid a common obligation that the trustee defendants

ought to have paid" (Murray Bresky Consultants, Ltd v New York

Compensation Manager's Inc., 106 AD3d at 1259). Accordingly,

viewing the complaint liberally and accepting its allegations as

true (see Mandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 178
-15- 522224 

[2011]), Supreme Court did not err in permitting plaintiff's

claim for common-law indemnification, as alleged in its

governmental capacity, against Johansmeyer, Reda and PRM to

proceed (see State of N.Y. Workers' Compensation Bd. v Madden,

119 AD3d at 1025; see generally City of New York v Lead Indus.

Assn., 222 AD2d 119, 125 [1996]). However, the court also should

have permitted plaintiff's claim for common-law indemnification,

as alleged in its governmental capacity, to proceed against PRMCS

as the agreement between PRMCS and the trust similarly

established such a duty. As to Arney and Conroy, this claim

should be allowed to proceed at this early stage in the

litigation for the reasons previously stated.

Finally, as to plaintiff's cross motion for leave to file a

second amended complaint, we cannot say that Supreme Court abused

its discretion in granting plaintiff leave to amend its complaint

against certain defendants; however, we modify those claims that

have been affected by our earlier determinations.12 Leave to

amend a pleading "should be freely granted in the absence of

prejudice or surprise resulting from the delay except in

situations where the proposed amendment is wholly devoid of

merit" (Edwards & Zuck, P.C. v Cappelli Enters., Inc., 124 AD3d

181, 183 [2014] [internal quotation marks and citations omitted];

accord Loch Sheldrake Beach & Tennis Inc. v Akulich, 141 AD3d

809, 811 [2016], lv dismissed ___ NY3d ___ [Dec. 22, 2016]; see

CPLR 3025 [b]). 

To prevail on a claim for aiding and abetting a breach of

fiduciary duty, the cause of action must allege "(1) a breach by

a fiduciary of obligations to another, (2) that the defendant

12 Although plaintiff specifically stated in its notice of

appeal that it was appealing from, among other things, that

portion of the amended order partially denying its cross motion

for leave to amend, it failed to address in its brief Supreme

Court's denial of the proposed claims against Arney, BalabanKrause, Callaghan, Gosdeck, Hodes, Johansmeyer and Reda. As

such, any arguments with respect thereto are deemed abandoned

(see Wiggins v Kopko, 94 AD3d 1268, 1269 n 1 [2012]; Hoffman v

Cannone, 206 AD2d 740, 740 n [1994]). 
-16- 522224 

knowingly induced or participated in the breach, and (3) that the

plaintiff suffered damage as a result of the breach" (Kaufman v

Cohen, 307 AD2d 113, 125 [2003]; see Torrance Constr., Inc. v

Jaques, 127 AD3d 1261, 1264 [2015]). "A defendant knowingly

participates in the breach of fiduciary duty when he or she

provides substantial assistance to the fiduciary, which occurs

when a defendant affirmatively assists, helps conceal or fails to

act when required to do so, thereby enabling the breach to occur"

(Schroeder v Pinterest Inc., 133 AD3d 12, 25 [2015] [internal

quotation marks and citation omitted]; see Monaghan v Ford Motor

Co., 71 AD3d 848, 850 [2010]). 

Plaintiff's proposed aiding and abetting a breach of

fiduciary duty claim against PRMCS states that PRMCS "knowingly

induced and participated in" breaches of fiduciary duties by

certain trustee defendants, PRM and the PRM individual

defendants, among others, as owed to the trust, which resulted in

monetary damages. Although we have already determined that a

breach of fiduciary duty has been adequately stated against PRM

and certain of the PRM individual defendants, we find that

Supreme Court properly determined that plaintiff's proposed claim

is insufficient as plaintiff only alleges conclusory statements

as to how PRMCS provided substantial assistance (see McBride v

KPMG Intl., 135 AD3d 576, 578-579 [2016]; see generally Roni LLC

v Arfa, 15 NY3d 826, 827 [2010]; compare Smallberg v Raich Ende

Malter & Co., LLP, 140 AD3d 942, 944 [2016]). That said, we

agree that plaintiff sufficiently alleged that the remaining

defendants who are trustees had a fiduciary duty to plaintiff,

that PRM and the PRM individual defendants knew of this duty and

participated with those trustees in administrative conduct

designed to breach that fiduciary duty and that plaintiff

sustained damages as a result. However, we limit this cause of

action as to only those defendants, i.e., Brason, Carpentar,

Cort, James Dwyer, Eichorn, Fraher, Karl Hagan, James Mahoney,

McGorry, Schaefer, Schwartz, Shames, Smith, Swanson, Tooker,

Robert Vein, Wang and Hazle Woodley, for whom a breach of

fiduciary duty claim is not time-barred, and as to the remaining

PRM individual defendants, Arney and Conroy.

Next, plaintiff's proposed aiding and abetting a breach of

fiduciary duty claim against the Phillips Lytle trustee
-17- 522224 

defendants is based upon the theory that PRM and the PRM

individual defendants had a fiduciary duty to plaintiff, that

these defendants knew of this duty and nonetheless participated

with PRM and the PRM individual defendants in conduct designed to

breach that fiduciary duty and that plaintiff sustained damages

as a result. As we have previously determined that PRM and the

PRM individual defendants' breach of fiduciary duty claim is

subject to a three-year statute of limitations (compare Cusimano

v Schnurr, 137 AD3d 527, 530 [2016]), claims asserted against

Buckley, Flitt, Katz, Kolb, Raymond, Richards and Slifkin are

time-barred based upon the submission of their unchallenged

affidavits. However, as to the remaining Phillips Lytle trustee

defendants, we discern no error in Supreme Court's decision to

grant that branch of plaintiff's motion (compare Markowits v

Friedman, 144 AD3d 993, 996 [2016]).

Turning to plaintiff's proposed claims for aiding and

abetting fraud, the cause of action must state in detail "the

existence of an underlying fraud, knowledge of the fraud by the

aider and abettor, and substantial assistance by the aider and

abettor in the achievement of the fraud" (Nabatkhorian v

Nabatkhorian, 127 AD3d 1043, 1043 [2015]; see Weinberg v

Mendelow, 113 AD3d 485, 487-488 [2014]; see also CPLR 3016 [b]). 

Affording the pleadings a liberal construction and accepting the

facts alleged as true (see Nabatkhorian v Nabatkhorian, 127 AD3d

at 1044), plaintiff's proposed claim adequately states a cause of

action against PRM and Arney and Conroy, in their individual

capacities, for aiding and abetting fraud. Specifically, the

proposed claim alleges that, among other things, these defendants

knew that PRMCS fraudulently and purposefully withheld

information or provided incorrect information in regards to the

financial condition of the trust and its compliance with

governing law, and that these defendants provided substantial

assistance by taking administrative actions to assist or conceal

such fraudulent activity (see Goldson v Walker, 65 AD3d 1084,

1084-1085 [2009]; Houbigant, Inc. v Deloitte & Touche, 303 AD2d

92, 100 [2003]). Similarly, plaintiff's proposed claim

adequately states a cause of action against PRMCS and Arney and

Conroy, in their capacities as owners or officers of PRMCS, for

aiding and abetting fraud as it alleges that these defendants

knew of fraudulent acts by PRM, among others, and provided
-18- 522224 

substantial assistance by permitting "inherent conflicts of

interest" and through its "control over the claims administration

process" (compare Goel v Ramachandran, 111 AD3d 783, 792-793

[2013]).

In regard to the Phillips Lytle trustee defendants, to the

extent that the cause of action for aiding and abetting fraud is

based on allegations of fraudulent conduct by Buckley, Cort and

Katz, the six-year statute of limitations serves as a bar because

plaintiff commenced this action more than six years from when

these defendants ceased serving as trustees (see CPLR 213 [8];

NYAHSA Servs., Inc., Self-Ins. Trust v Recco Home Care Servs.,

Inc., 141 AD3d at 798). However, as to the remaining Phillips

Lytle trustee defendants, we agree that the proposed claim

adequately set forth that these defendants had actual knowledge

of the fraudulent acts of PRM, among others, and that they

provided substantial assistance to the commission of the fraud

through their actions as trustees (see Goldson v Walker, 65 AD3d

at 1085; compare Winkler v Battery Trading, Inc., 89 AD3d 1016,

1017-1018 [2011]). The parties' remaining contentions, to the

extent not specifically addressed, have been examined and found

to be lacking in merit.

Garry, J.P., Rose, Devine and Mulvey, JJ., concur.

ORDERED that the order and amended order are modified, on

the law, without costs, by reversing so much thereof as (1)

granted a motion by defendants Program Risk Management, Inc., PRM

Claims Services, Inc., Thomas Arney, Colleen Bardascini, John M.

Conroy, Gail Farrell and Edward Sorenson to dismiss (a) the

sixteenth cause of action against them, (b) the twenty-fifth

cause of action against defendants Thomas Arney and John M.

Conroy, and (c) the thirty-second cause of action against

defendants PRM Claims Services, Inc., Thomas Arney and John M.

Conroy (in their individual capacities), and (2) granted

plaintiff's motion for leave to amend its complaint to assert

proposed causes of action for aiding and abetting breach of

fiduciary duty and fraud against certain defendants; said motions

denied and plaintiff's causes of action are correspondingly
-19- 522224 

limited to the extent set forth in this Court's decision; and, as

so modified, affirmed.

ENTER:

Robert D. Mayberger

Clerk of the Court