Suspended Limitations: Lambos v. Karabinis Clarifies “Open Repudiation” Tolling for Shareholder Fiduciary Claims

1. Introduction

Lambos v. Karabinis (2025 NY Slip Op 03367) is a Third Department decision that reverses a trial-level dismissal of a shareholder-derivative and individual fiduciary action. Although the factual canvas concerns a coffee-import venture and alleged self-dealing loans, the precedential importance of the ruling lies in its treatment of statute-of-limitations defenses in fiduciary-duty cases.

The plaintiff, William K. Lambos, owned 33⅓ % of B.K. Associates International, Inc. (“BK”) and served as vice-president and director. The remaining 66⅔ % were held by brothers Anastasios and Paul Karabinis. After BK sold its assets for $1.5 million in 2019, Lambos demanded books and records, claimed he discovered previously undisclosed insider loans, and sued for breach of fiduciary duty and corporate waste. Supreme Court (Otsego County) dismissed on statute-of-limitations (CPLR 3211[a][5]) and failure-to-state-a-claim (CPLR 3211[a][7]) grounds.

The Appellate Division reversed, holding that:

• The “open repudiation” doctrine tolls the limitations period until the fiduciary relationship ends or the fiduciary clearly repudiates the obligation—even where plaintiff is a co-fiduciary or shareholder-director.
• Dismissal under CPLR 3211(a)(7) cannot rest on defendants’ affidavits or selective documents that merely contradict the complaint.

2. Summary of the Judgment

The Third Department unanimously:

• Reversed Supreme Court’s order dismissing the complaint.
• Denied defendants’ motion under CPLR 3211(a)(1), (5) and (7).
• Remitted for defendants to answer within 20 days.
• Awarded costs to plaintiff.

Key holdings:

1. Accrual of Fiduciary Claims. A cause of action for breach of fiduciary duty accrues only upon open repudiation or termination of the fiduciary relationship; no open repudiation occurred here, and the corporation has not dissolved.
2. Applicability to Co-Fiduciaries. A co-fiduciary (here, a shareholder-director) may rely on the rule; there is no due-diligence obligation akin to fraud discovery rules.
3. Pleadings Standard. Defendants’ testimony and annual statements did not constitute documentary evidence that “flatly contradicts” the complaint; therefore CPLR 3211(a)(7) dismissal was improper.

3. Detailed Analysis

3.1 Precedents Cited

• Matter of Baird, 58 AD3d 958 (3d Dept 2009) – Sets forth that fiduciary claims accrue on open repudiation or judicial accounting.
• Matter of George, 194 AD3d 1290 (3d Dept 2021) – Reaffirms the toll and emphasizes beneficiary’s entitlement to assume loyalty of fiduciary absent repudiation.
• Matter of Steinberg, 183 AD3d 1067 (3d Dept 2020) – Clarifies “open repudiation” must be clear and known to beneficiaries.
• Matter of Therm, Inc., 132 AD3d 1137 (3d Dept 2015) – Applies the rule in a corporate context; referenced for the proposition that no diligence duty exists.
• Matter of Twin Bay Village, Inc., 153 AD3d 998 (3d Dept 2017) – Relied on to rebut defendants’ “co-fiduciary” exception argument.
• IDT Corp. v. Morgan Stanley, 12 NY3d 132 (2009) – Discusses three- vs. six-year limitations periods for breach of fiduciary duty; here rendered irrelevant because accrual had not begun.
• Grossbarth v. NYS Lawyers’ Fund, 231 AD3d 1327 (3d Dept 2024) – Restates defendants’ burden on a 3211(a)(5) motion.
• Pierce v. Archer Daniels Midland, 221 AD3d 1382 (3d Dept 2023) – Standard for 3211(a)(7) motions.
• Lopes v. Bain, 82 AD3d 1553 (3d Dept 2011) & State Farm v. Main Bros., 101 AD3d 1575 (3d Dept 2012) – Limitations on “documentary evidence” dismissals.

These cases collectively frame a coherent, defendant-unfavorable tolling doctrine. The panel uses them not only to sustain Lambos’ standing but also to amplify that “open repudiation” is a high bar unmet by mere internal disagreement or incomplete disclosures.

3.2 Legal Reasoning

1. Burden Allocation. On a CPLR 3211(a)(5) motion, defendants must prima facie establish the time bar. They failed because:
• They admitted, at oral argument, that fiduciary duties “still exist.”
• No documentary evidence of repudiation, dissolution, or judicial accounting was tendered.
2. Definition of “Open Repudiation.” The court parses precedent to require a repudiation that is:
   • Unequivocal;
   • Communicated to the beneficiary;
   • Capable of alerting the beneficiary that reliance on the fiduciary is no longer reasonable.
   Nothing in the record—including the asset sale—met that definition.
3. Co-Fiduciary Argument Rejected. Defendants contended that a shareholder-director cannot rely on tolling because he could have discovered the wrongdoing. Citing Twin Bay, the panel holds the doctrine applies regardless of the beneficiary’s status, absent explicit legislative or precedential direction otherwise.
4. 3211(a)(7) Analysis. Applying liberal pleading standards, the court found the complaint adequately alleged:
   • Self-dealing loans at preferential rates;
   • Concealment of those transactions;
   • Resulting corporate waste and personal benefit to defendants.
   The conflicting deposition snippets and tax returns do not “flatly contradict” these allegations and are not “documentary evidence” within CPLR 3211(a)(1).

3.3 Impact on Future Litigation

a) Extension of Exposure Window. Corporate officers, directors, trustees, and partners should recognize that fiduciary-duty claims may remain viable indefinitely unless they:

• Formally resign and settle accounts;
• Secure dissolution or judicial accounting; or
• Transmit a clear, written repudiation of their fiduciary obligations.

b) Derivative Litigation Strategy. Plaintiffs can circumvent stale-claim arguments by emphasizing ongoing fiduciary relationships. Defense counsel must now consider proactive steps to end or clarify relationships if finality is desired.

c) Record-Inspection Battles. The decision will likely embolden minority shareholders to file article 78 proceedings to obtain books and records and then commence derivative suits without fear of limitations defenses.

d) Distinction from Fraud Limitations. By decoupling the fiduciary-toll from fraud’s discovery-accrual framework, the court shields plaintiffs from due-diligence attacks, influencing pleading practice across trust, partnership, and LLC disputes.

4. Complex Concepts Simplified

• Open Repudiation: A fiduciary’s unmistakable statement or action that he will no longer honor fiduciary duties, communicated to the beneficiary.
• Fiduciary Duty: A legal obligation of loyalty and care owed by certain persons (directors, partners, trustees) toward the entity or beneficiaries they serve.
• CPLR 3211(a)(5): New York rule allowing dismissal when a claim is time-barred.
• CPLR 3211(a)(7): Rule allowing dismissal for failure to state a legally cognizable claim.
• Derivative Action: Lawsuit brought by a shareholder on behalf of the corporation to redress harm to the corporation.
• Article 78 Proceeding: Special New York procedure to compel a corporate or governmental body to perform a statutory duty (e.g., allowing inspection of corporate records).
• Documentary Evidence for CPLR 3211(a)(1): Only unambiguous documents like contracts, deeds, or official records; affidavits and deposition transcripts generally do not qualify.

5. Conclusion

Lambos v. Karabinis fortifies the “open repudiation” tolling doctrine by applying it—even to an insider plaintiff—and by rejecting a due-diligence overlay. The decision signals that fiduciary relationships are presumed continuous until explicitly ended, rendering statute-of-limitations defenses precarious in ongoing corporate settings. Additionally, it underscores the judiciary’s reluctance to end disputes at the pleading stage where documentary certainty is lacking. Practitioners on both sides should reassess the management of fiduciary relationships, record disclosure, and litigation timing in light of this expansive view of fiduciary tolling.