Building Exterior Servs. Trust of N.Y. v A.W. Farrell & Son, Inc., Index No. 900983-2015, 3/16/2016, (Platkin, J.)

Breach of Contract, Statute of Limitations, Contract Interpretation, CPRL 3211; Fiduciary Duty

By: Aaron Jacob | Staff Writer

The New York State Roofing Contractors Compensation Trust (RCCT) was made up of former members, all of whom held varying roles in the roofing business. The RCCT created a group self-insurance trust (GSIT) and wrote policies for employees of the RCCT members for several years. The RCCT eventually reorganized and continued its operations through Plaintiff, a separate agency. Plaintiff is the agent of GSIT and responsible for its fiduciary duties.

Through Plaintiff, RCCT executed a Declaration of Trust, an Indemnity Agreement, and Bylaws, which collectively governed the operations of Plaintiff. Later, Plaintiff voluntarily ceased to write new policies, but continued to cover RCCT’s outstanding policies. Recently, the Worker’s Compensation Board, an agency controlling Plaintiff’s operations during all financial crises, alerted Plaintiff that its funds were low. The Worker’s Compensation Board then assessed RCCT’s former members for payments for such deficiency. However, several former members (“Defendants”) did not pay the amounts due. As a result, Plaintiff sued for a willful breach in the trust documents, on grounds that the bylaws of the trust agreement stipulate that members must make up any financial deficiencies of the trust. Defendants moved to dismiss under CPLR 3211 (a)(1), (a)(5), and (a)(7), on the basis that it was not a current member of the trust and, therefore, was not liable for the trust’s financial deficiency. Alternatively, Defendants argued that the statute of limitations for collecting the membership dues has passed.

The Court denied Defendant’s motion to dismiss, on the basis that Defendant could not absolve itself from its willful breach in the trust documents. First, the court held that defendant’s lack of membership did not absolve it from abiding by its fiduciary duties. Here, the Court relied on an affidavit from the Defendant’s CFO, which demonstrated that Defendant was represented through an agent upon signing the trust documents and, therefore, it could still be considered an active member with all corresponding fiduciary accountabilities. More so, Defendants had several employees that retained policies several years after the signing of the trust documents, demonstrating continued activity and involvement in RCCT. Thus, the court denied defendant’s motion to this point.

Second, the Court held that the current deficiency is attributed to the years when Defendant was a member, and therefore Defendant is obligated to pay. Here, the language of the bylaws was clear: the trust holds power over former employees. Accordingly, the former members are responsible for any deficit that had started during their membership, regardless of current membership status. Thus, the Court denied Defendant’s motion to this point as well.

Third, the Court found that the statute of limitations of colleting dues has not yet passed. Since the applicable statute only became active when Defendant first failed to pay the assessment, Plaintiff was not prohibited from bringing this cause of action.

Building Exterior Servs. Trust of N.Y. v A.W. Farrell & Son, Inc., Index No. 900983-2015, 3/16/2016, (Platkin, J.).

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