Alksom Realty LLC v Baranik, Index No. 511287/2014, 06/09/15 (Demarest, J.)

Contract; breach; fiduciary duty; breach; fraudulent concealment; intentional misrepresentation; unjust enrichment; fraudulent inducement; accountant malpractice; negligence; gross negligence; CPLR §3211(a)(1); CPLR §214(6).

By: Yan Borodanski | Staff Writer

Plaintiff was the manager and part owner of Alkson Realty Company LLC (“Alkson”). Defendants were plaintiff’s accountants. Plaintiff entered into two agreements with defendants where he purchased shares of Southern State Realty (“SSR”), on or about March 20th 2010. The agreements included an arbitration clause that stipulated all disputes that may arise form the transaction shall be resolved through binding arbitration. Plaintiff claims that in 2014, SSR had been deemed inactive and administratively dissolved since 2005, invalidating his stock purchase. Plaintiff asked for his money back, and defendants refused. Plaintiff asserted causes of action for fraudulent concealment, intentional misrepresentation, unjust enrichment, breach of fiduciary duty, breach of contract, and fraudulent inducement for the purchase of SSR stock.

Moreover, Alkson contracted to sell an apartment to Artique Multinational LLC (“Artique”) in 2007, but only received a down payment for the property. Plaintiff claims defendant knowingly filed an incorrect tax return for Alkson that reflected receipt of the full purchase price for the apartment, when Alkson only received a down payment. Plaintiff also claims defendant waited past the tax return correction deadline to file an amended tax return, even though defendant knew two years before the deadline that the tax return was inaccurate. Plaintiff asserted accountant malpractice, negligence, and gross negligence for the Alkson tax return.

Defendants moved to dismiss the stock purchase claims based on the arbitration clause in both purchase agreements under CPLR §3211(a)(1). Plaintiffs argued the arbitration clause was invalid because both SSR stock purchase agreements were void. The court held arbitration agreements are separate from the rest of a contract and are valid even if other provisions in the contract were induced by fraud. The court found no evidence that the arbitration clause was induced by fraud, and granted defendants motion to dismiss the SSR stock purchase claims, along with directing plaintiff to submit the stock purchase cause of action to arbitration. Defendants also move to dismiss the accounting malpractice and negligence claims because the three-year statute of limitations has expired on accounting malpractice before plaintiff’s cause of action, under CPLR §214(6). The court held the statute of limitations on the accounting malpractice claim has not expired. The continuous treatment doctrine states that “the course of treatment which includes the wrongful acts or omissions has run continuously and is related to the same original condition or complaint, the limitations period does not begin to run until the end of the treatment”. Thus, the court found defendants continuously represented plaintiff in accordance with the continuous treatment doctrine, tolling the statute of limitations, and the court denied defendant’s motion to dismiss the accounting malpractice claims. The court also denied defendant’s motion to dismiss the negligence and gross negligence claims as duplicative of the accounting malpractice claims, as they “arose from the same factual allegations.” The also court denied defendant’s request for sanctions and attorney’s fees because plaintiff’s actions were not frivolous enough to warrant sanctions. Finally, the court ordered plaintiff to serve defendants with a demand for arbitration within twenty days of the court’s order.

 Alksom Realty LLC v Baranik, Index No. 511287/2014, 06/09/15 (Demarest, J.).

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