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Ronald Yatter, Appellant, v. William Morris Agency, Inc., Respondent

New York Supreme Court, Appellate Division1998-12-29
256 A.D.2d 260682 N.Y.S.2d 198

Summary

Holding. The appellate court reversed the trial court's dismissal order, reinstating the first and second causes of action for breach of contract and breach of fiduciary duty. The court found the allegations sufficient to withstand dismissal under the civil procedure rules and determined that neither claim was barred by the statute of limitations as a matter of law.

Ronald Yatter appealed after the trial court dismissed the first two counts of his amended complaint against the William Morris Agency. Yatter alleged breach of contract based on a shareholders' agreement and breach of fiduciary duty, claiming the agency undervalued his shares for repurchase. The appellate court found that Yatter's allegations were detailed enough to proceed past the motion-to-dismiss stage, rejecting the agency's arguments that the contract language imposed no obligation on the defendant and that only a derivative claim—rather than an individual claim—could be brought for the alleged undervaluation.

The court also addressed whether the claims were barred by the statute of limitations. For the breach of contract claim, which carries a six-year window, the court determined that the claim accrued when the transaction closed and therefore was timely. For the breach of fiduciary duty claim, subject to a three-year period when only money damages are sought, the court found a factual dispute about when Yatter knew or should have known of the breach, preventing dismissal on statute-of-limitations grounds at the motion stage.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether allegations of breach of a shareholders' agreement state a claim adequate to survive motion to dismiss
  • Whether an individual shareholder may assert a personal cause of action for breach of fiduciary duty based on alleged intentional undervaluation of shares
  • Whether breach of contract and fiduciary duty claims are time-barred under applicable statutes of limitation

Procedural posture

Appellant Yatter appealed from a trial court order granting defendant's motion to dismiss the first and second causes of action of his amended complaint.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

—Order, Supreme Court, New York County (Charles Ramos, J.), entered June 30, 1997, which granted defendant’s motion to dismiss the amended complaint to the extent of dismissing the first and second causes of action, unanimously reversed, on the law, with costs, and the first and second causes of action reinstated.

As to plaintiffs first cause of action for breach of contract, we find that plaintiffs allegations are sufficient to withstand defendant’s motion to dismiss pursuant to CPLR 3211 (a) (1) and (7). The nature of the breach, at least with respect to the shareholders’ agreement, was adequately pleaded, given the allegations in the complaint together with plaintiffs affidavit and the contract itself, which was attached to the pleadings (see, e.g., Merrill Lynch, Pierce, Fenner & Smith v Chipetine, 221 AD2d 284, 287; see also, Jaffe v Paramount Communications, 222 AD2d 17, 22-23). As to the documentary evidence defense, in our view, the IAS Court erred in concluding at this stage of the litigation that the contested provisions of the shareholders’ agreement cannot be read to impose any obligation on defendant to disapprove the accountants’ valuation of a departing employee’s stock under any circumstances.

As to both the breach of contract claim and the second cause of action, for breach of fiduciary duty, we find that plaintiff possessed an individual cause of action with respect to the alleged intentional undervaluation of his shares for purposes of their repurchase by defendant (as opposed to an actual decrease in the stock’s value), contrary to the IAS Court’s conclusion that only a derivative cause of action would lie for such claim.

We further find that, as to plaintiffs second cause of action, for breach of fiduciary duty, facts relating to this claim are particularly within defendant’s knowledge, and, just as the IAS Court declined to dismiss plaintiffs fraud claim as insufficiently pleaded under CPLR 3016 (b) for this reason, it should have declined to dismiss the fiduciary claim on the same ground.

In light of our conclusion that the IAS Court erred in dismissing the two causes of action, we turn to the issue of whether they are barred by the Statute of Limitations. With respect to the breach of contract claim, which must be brought within six years of accrual (CPLR 213 [2]), we agree with plaintiffs contention that this cause of action accrued on the date of the closing of the transaction that gives rise to this litigation (see, Rachmani Corp. v 9 E. 96th St. Apt. Corp., 211 AD2d 262), and that therefore this cause of action is not time-barred. A breach of fiduciary duty claim falls under either a three-year or six-year limitation period, depending on the nature of the relief sought (Loengard v Santa Fe Indus., 70 NY2d 262, 266; Ghandour v Shearson Lehman Bros., 213 AD2d 304, 306, lv denied 86 NY2d 710). Because plaintiffs breach of fiduciary duty claim seeks only money damages, the applicable limitations period is three years. While defendant does not appear to contest plaintiffs argument that a discovery accrual rule applies to this claim, defendant does maintain that it is time-barred because plaintiff had reason to know of the alleged breach as early as 1989, six years before the action was brought. However, because we conclude that there is a question of fact as to plaintiffs knowledge in this regard, the cause of action for breach of fiduciary duty cannot be dismissed at this juncture on this ground. Concur — Milonas, J. P., Rosenberger, Ellerin and Andrias, JJ.