Case Summary: Lawrence A. Davis v. Cornerstone Telephone Company, LLC, et al. — Appellate Division, 3rd Dept., April 30, 2009

Factual and Procedural Background

During the first half of 2001, plaintiff Lawrence A. Davis alleges that he paid a total of $100,000 to defendants Daniel J. Yamin Jr. and Donald J. Walsh in exchange for their promise that he would be a part owner of Combined Solutions, Inc., a telecommunications consulting corporation they were forming. Plaintiff alleges he never received shares in Combined Solutions or in CSTC, LLC (formed by Combined Solutions in June 2001), and that Yamin and Walsh later used CSTC, LLC to compete with plaintiff's telecommunications business. A January 2002 newspaper article reported that plaintiff stated he "didn't loan them money to compete against me." Plaintiff did not commence this action until August 2007.

Plaintiff filed an amended complaint consisting of 155 pages, 389 paragraphs and 21 exhibits, asserting multiple causes of action seeking damages. Defendants moved to dismiss pursuant to CPLR 3211(a)(5) and (7), arguing that the claims were barred by applicable statutes of limitations (citing CPLR 213, 214) and failed to state causes of action. Plaintiff cross-moved for leave to further amend his complaint. Supreme Court (Platkin, J.) granted defendants' motion to dismiss the amended complaint and denied plaintiff's cross-motion. Plaintiff appealed; the Appellate Division issued the opinion summarized here.

Legal Issues Presented

Whether plaintiff's contract-based and quasi-contract claims (including breach of contract, breach of the covenant of good faith and quasi contract) are barred by the applicable statutes of limitations.
Whether plaintiff's unjust enrichment claim is time-barred, and if portions of that claim remain timely based on later nonmonetary contributions alleged by plaintiff.
Whether the amended complaint states causes of action for the remaining numbered causes of action alleged by plaintiff.
Whether Supreme Court abused its discretion in denying plaintiff leave to further amend the complaint under CPLR 3014.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
EBC I, Inc. v Goldman, Sachs Co., 5 NY3d 11, 19	Standard for deciding a motion under CPLR 3211: pleadings must be liberally construed, allegations taken as true, and plaintiff afforded every possible inference.	The court applied this standard in evaluating defendants' CPLR 3211 motions but nonetheless proceeded to dismiss or limit certain claims after applying the standard to the amended complaint.
Westbank Contr., Inc. v Rondout Val. Cent. School Dist., 46 AD3d 1187, 1188	Referenced in conjunction with the CPLR 3211 pleading standard.	Cited to support the application of the liberal-construction rule on a CPLR 3211 motion.
Ground to Air Catering v Dobbs Intl. Servs., 285 AD2d 931, 933	Authority for reading facts and documents together to determine if a contractual claim can be plausibly alleged.	Used to conclude that, together with an undated letter, plaintiff plausibly alleged a claim that defendants agreed to grant him a 6% ownership interest for each $50,000 payment.
G.H. Dorety Constr. v Joseph Francese, Inc., 252 AD2d 656, 656-657	Similar authority for interpreting alleged unwritten agreements and pleadings supporting contract claims.	Used to support the court's view that the complaint and the referenced letter could be read to allege a specific ownership promise.
County of Niagara v Town of Royalton, 48 AD3d 1072, 1072	Authority applying a six-year statute of limitations to certain contract-related claims.	Cited to support the dismissal of breach of contract and related claims as barred by the six-year limitations period.
Liberman v Worden, 268 AD2d 337, 339	Authority supporting timeliness analysis for contract claims.	Used in concluding that plaintiff's contract-based claims were time-barred.
Klein v Conte, 212 AD2d 363, 363	Authority supporting that certain contract/quasi-contract claims are subject to a six-year limitations period.	Cited in support of dismissing the breach-related causes of action as untimely.
Clifford R. Gray, Inc. v LeChase Constr. Servs., LLC, 31 AD3d 983, 988	Statement of the unjust enrichment principle: it is inequitable for a defendant to retain a benefit without compensating the plaintiff.	Applied to analyze plaintiff's fourth cause of action for unjust enrichment and its potential viability.
Elliott v Qwest Communications Corp., 25 AD3d 897, 898	Authority that an unjust enrichment claim is subject to a six-year statute of limitations.	Applied to determine that plaintiff's unjust enrichment claim is time-barred only as to benefits conferred more than six years prior to suit; later contributions may be timely.
Sanford v Colgate Univ., 36 AD3d 1060, 1062	Authority concerning denial of leave to amend and compliance with pleading rules (CPLR 3014).	Cited as support for Supreme Court's denial of plaintiff's cross-motion to further amend because the proposed amendment would not cure defects or comply with CPLR 3014.
Moon v Clear Channel Communications, 307 AD2d 628, 630	Authority regarding the court's discretion to deny leave to amend pleadings.	Relied upon in upholding the denial of leave to file the proposed second amended complaint.
Lawrence v Talbot, 62 AD2d 1012, 1012	Cited by way of contrast in the court's discussion of amendment standards.	Referenced (with "cf.") in relation to the court's analysis of whether the proposed amended complaint should be allowed.
19 Misc 3d 1142(A), 2008 NY Slip Op 51141(U) (Supreme Court, Platkin, J.)	The Supreme Court's comprehensive written decision below explaining its reasons for dismissal and denial of leave to amend.	The Appellate Division concurred with the reasons set forth in that decision for dismissing particular causes of action and denying leave to amend, and cited it as the basis for affirming in part.

Court's Reasoning and Analysis

The Appellate Division began by reiterating the CPLR 3211 standard: pleadings are to be liberally construed, allegations taken as true, and plaintiff afforded every possible inference. Applying that standard to the lengthy amended complaint, the court limited its discussion to plaintiff's second and fourth causes of action because those were the only ones warranting extended analysis under the standard.

Regarding the second cause of action (an unwritten contract): the court concluded that, when read together with an undated letter from defendant Yamin offering plaintiff a 6% ownership interest, the complaint could plausibly be read to allege that defendants agreed to grant plaintiff 6% ownership for each $50,000 payment. Thus, treated liberally, the complaint could assert a breach-of-contract theory of that form. However, the court then applied the relevant statutes of limitations and authority holding that contract- and quasi-contract-based claims are subject to a six-year limitations period. Because plaintiff did not bring the breach-of-contract claim (and related covenant of good faith and quasi-contract claims) until more than six years after the alleged payments and breaches, those claims were time-barred and properly dismissed.

Regarding the fourth cause of action (unjust enrichment): the court recognized that unjust enrichment is governed by the same six-year limitations period. The court held that the unjust enrichment claim is time-barred only to the extent it seeks recovery for benefits conferred more than six years before the commencement of the action. The court relied on plaintiff's opposing affidavit alleging that he provided nonmonetary benefits to defendants after August 2001, and concluded that any unjust enrichment claim seeking the value of those post-August 2001 nonmonetary contributions was not time-barred. Thus the court reversed Supreme Court's dismissal of the fourth cause of action to that extent.

The Appellate Division further stated that Supreme Court correctly dismissed several other numbered causes of action as time-barred (causes 1, 5, 12, 18, 19, 21 and 22) and correctly dismissed additional causes (6, 8–11, 13–17, 20 and 23–27) for failure to state a cause of action. Regarding plaintiff's cross-motion for leave to file a second amended complaint, the court agreed with Supreme Court that the proposed pleading (196 pages, 488 paragraphs and 25 exhibits) would not cure the defects of the pending complaint and would not comply with CPLR 3014; therefore, Supreme Court did not abuse its discretion in denying leave to amend, consistent with cited authority on amendment standards.

Holding and Implications

Holding: The Appellate Division modified and affirmed the amended order of Supreme Court as follows:

The portion of Supreme Court's order dismissing plaintiff's fourth cause of action (unjust enrichment) is reversed to the extent that the unjust enrichment claim seeks recovery for nonmonetary benefits allegedly provided after August 2001; defendants' motion to dismiss is denied as to that portion. In all other respects, the amended order is affirmed.

Implications

Direct effect on the parties: Plaintiff's breach-of-contract, related covenant and quasi-contract claims (second, third and seventh causes) were held time-barred and dismissed. Several other causes were either dismissed as time-barred or for failure to state a claim, as enumerated by the court. Plaintiff retains a timely unjust enrichment claim only to the extent it seeks recovery for nonmonetary benefits allegedly provided after August 2001.
Plaintiff's request for leave to file a second amended complaint was denied; the court found the proposed amendment would not remedy the pleadings' defects and would not comply with CPLR 3014.
The opinion resolves the particular statutory‑limitations and pleading issues in this case but does not purport to establish a new legal principle or broader precedent beyond application of existing authority to the facts presented.

Ordered as: modified on the law without costs; reversed in part (as to the fourth cause of action) and otherwise affirmed.

Show full summary ...

LAWRENCE A. DAVIS, Also Known as LARRY DAVIS, Indi v. dually and as Shareholder of COMBINED SOLUTIONS, INC., and as a Member of CORNERSTONE TELEPHONE COMPANY, LLC, Appellant,

Rose, J.P.

During the first half of 2001, plaintiff allegedly gave a total of $100,000 to defendants Daniel J. Yamin Jr. and Donald J. Walsh in exchange for their promise that he would be a part owner of Combined Solutions, Inc., the telecommunications consulting corporation that they were forming. Plaintiff never received any shares of stock in Combined Solutions or a second company, CSTC, LLC, which Combined Solutions formed in June 2001 and which Yamin and Walsh later used to compete with plaintiff's own telecommunications business. Despite this and a newspaper article in January 2002 reporting that plaintiff had stated that he "didn't loan them money to compete against me," he did not commence this action to recoup his investment until August 2007. In a lengthy amended complaint comprising 155 pages, 389 paragraphs and 21 exhibits, plaintiff seeks to recover damages under many legal theories. Defendants moved pursuant to CPLR 3211 (a) (5) and (7) to dismiss the complaint on the grounds that its claims are barred by the applicable statutes of limitations ( see CPLR 213, [2], [3]; 214 [4]) and fail to state a cause of action. Plaintiff cross-moved for leave to again amend his complaint. Supreme Court granted defendants' motion and denied plaintiff's cross motion, prompting this appeal.

When a court considers a motion under CPLR 3211, it "must afford the pleadings a liberal construction, take the allegations of the complaint as true and provide plaintiff the benefit of every possible inference" ( EBC I, Inc. v Goldman, Sachs Co., 5 NY3d 11, 19; see Westbank Contr., Inc. v Rondout Val. Cent. School Dist., 46 AD3d 1187, 1188). However, even after applying these principles to plaintiff's prolix complaint, we find that only his arguments regarding his second and fourth causes of action warrant discussion.

In his second cause of action, plaintiff alleges that he, Yamin and Walsh entered into an unwritten contract by which they agreed to grant him a "proportionate" share of Combined Solutions in exchange for his contribution of $100,000. Affording plaintiff the benefit of every possible inference, we agree that the complaint, when considered together with an undated letter from Yamin asking that plaintiff accept a 6% ownership of the company's stock, can be read to allege a claim that Yamin and Walsh agreed to grant plaintiff 6% ownership for each of his two payments of $50,000 ( see Ground to Air Catering v Dobbs Intl. Servs., 285 AD2d 931, 933; G.H. Dorety Constr. v Joseph Francese, Inc., 252 AD2d 656, 656-657). Nonetheless, this breach of contract claim, the related third cause of action for breach of the covenant of good faith and the seventh cause of action for quasi contract are all untimely because plaintiff did not assert them until more than six years after the money was paid and defendants breached their obligations by failing to grant him part ownership or otherwise compensate him ( see e.g. County of Niagara v Town of Royalton, 48 AD3d 1072, 1072; Liberman v Worden, 268 AD2d 337, 339; Klein v Conte, 212 AD2d 363, 363).

We reach a different conclusion with regard to plaintiff's fourth cause of action for unjust enrichment. This claim alleges that plaintiff gave defendants $100,000 and valuable personal services, and that it would be inequitable for them to retain those benefits without compensating him ( see Clifford R. Gray, Inc. v LeChase Constr. Servs., LLC, 31 AD3d 983, 988). While the six-year statute of limitations also applies to this claim ( see Elliott v Qwest Communications Corp., 25 AD3d 897, 898), it is time-barred only to the extent that plaintiff provided things of value more than six years before he commenced this action. Since plaintiff alleges in an opposing affidavit that he provided nonmonetary benefits to defendants after August 2001, his claim for the value of those contributions is not time-barred.

For the reasons set forth by Supreme Court in its comprehensive written decision ( 19 Misc 3d 1142[A], 2008 NY Slip Op 51141[U]), we concur that plaintiff's further causes of action numbered 1, 5, 12, 18, 19, 21 and 22 were properly dismissed as time-barred. The court also properly dismissed causes of action numbered 6, 8-11, 13-17, 20 and 23-27 for their failure to state a cause of action. Finally, inasmuch as plaintiff's proposed second amended complaint comprising 196 pages, 488 paragraphs and 25 exhibits would not remedy the defects of the first or comply with CPLR 3014, Supreme Court did not abuse its discretion in denying plaintiff's cross motion to amend his complaint ( see Sanford v Colgate Univ., 36 AD3d 1060, 1062; Moon v Clear Channel Communications, 307 AD2d 628, 630; cf. Lawrence v Talbot, 62 AD2d 1012, 1012).

Ordered that the amended order is modified, on the law, without costs, by reversing so much thereof as granted defendants' motion to dismiss the fourth cause of action; motion denied to that extent; and, as so modified, affirmed.

[ See 19 Misc 3d 1142(A), 2008 NY Slip Op 511410(U).]

DAVIS v. CORNERSTONE TELEPHONE CO