GROSSBARTH v. NEW YORK STATE LAWYERS FUND FOR CLIENT PROTECTION (2024)

MEMORANDUM AND ORDER

Appeal from an order of the Supreme Court (Kimberly A. O'Connor, J.) entered February 6, 2023 in Albany County, which, among other things, granted defendant's motion to dismiss the complaint.

Plaintiff was admitted to the practice of law in this state in 1994.  In 2013, he pleaded guilty to two counts of grand larceny in the second degree and one count of forgery in the second degree, and was later disbarred (Matter of Grossbarth, 113 A.D.3d 14, 17, 975 N.Y.S.2d 116 [2d Dept. 2013]).  Pursuant to his plea agreement, plaintiff admitted to stealing over $1 million from various clients, and he was sentenced to a term of incarceration and ordered to pay restitution.  In 2021, plaintiff submitted an application to the Appellate Division, Second Department seeking to be reinstated to the practice of law, and he provided the requisite notice to defendant, a judicial agency created to safeguard the integrity of the legal profession by reimbursing losses caused by the dishonest conduct of New York attorneys.¹  Through a February 2021 letter, defendant opposed plaintiff's reinstatement, explaining that plaintiff had not fully repaid defendant for reimbursements it had made in connection with plaintiff's dishonest conduct.  Following receipt of that letter, plaintiff withdrew his application.  When plaintiff again sought reinstatement in May 2021, defendant opposed his application on the same grounds.

In May 2022, plaintiff commenced the instant action for declaratory judgment, seeking a declaration that he had made full and complete restitution to defendant and to preclude defendant from asserting otherwise and from opposing plaintiff's reinstatement on those grounds.  Defendant filed a pre-answer motion to dismiss the complaint, arguing that plaintiff was required to bring his claims through a CPLR article 78 proceeding and that his failure to commence the same within four months caused it to be time-barred.  Plaintiff opposed the motion and cross-moved for summary judgment.  Supreme Court found that, although actions seeking declaratory relief are generally subject to a six-year statute of limitations, plaintiff's claims could have been brought through a CPLR article 78 proceeding;  since claimant failed to bring the claims within the applicable four-month period, his claims were time-barred.  The court thus granted defendant's motion and dismissed the complaint, rendering plaintiff's cross-motion moot.  Plaintiff appeals.

“To dismiss a cause of action pursuant to CPLR 3211(a)(5) on the ground that it is barred by the applicable statute of limitations, a defendant bears the initial burden of demonstrating, prima facie, that the time within which to commence the action has expired.  If the defendant meets this burden, the burden then shifts to the plaintiff to raise a question of fact as to whether the statute of limitations has been tolled or was otherwise inapplicable, or whether the action was actually commenced within the period propounded by the defendant” (Krog Corp. v. Vanner Group, Inc., 158 A.D.3d 914, 915–916, 72 N.Y.S.3d 178 [3d Dept. 2019] [internal quotation marks, brackets and citations omitted];  see Sloane v. Power Auth. of the State of N.Y., 214 A.D.3d 1150, 1151, 185 N.Y.S.3d 395 [3d Dept. 2023], lv denied 40 N.Y.3d 902, 2023 WL 6066660 [2023]).  “Although declaratory judgment actions are typically governed by a six-year statute of limitations, if the underlying dispute could have been resolved through an action or proceeding for which a specific, shorter limitations period governs, then such shorter period must be applied” (Doyle v. Goodnow Flow Assn., Inc., 193 A.D.3d 1309, 1310, 147 N.Y.S.3d 728 [3d Dept. 2021] [internal quotation marks and citations omitted], lv denied 37 N.Y.3d 911, 2021 WL 4735328 [2021];  see CPLR 213[1];  accord Smith v. State of New York, 201 A.D.3d 1225, 1227, 162 N.Y.S.3d 499 [3d Dept. 2022]).  Where, as here, a governmental agency determination is challenged, we examine the substance of the declaratory action to identify the relationship underlying the claim and the relief sought and determine whether it could have been advanced through a CPLR article 78 proceeding;  if so, the applicable statute of limitations is four months (see Gress v. Brown, 20 N.Y.3d 957, 959, 958 N.Y.S.2d 675, 982 N.E.2d 595 [2012];  Spinney at Pond View, LLC v. Town Bd. of the Town of Schodack, 99 A.D.3d 1088, 1089, 953 N.Y.S.2d 314 [3d Dept. 2012]).

We reject plaintiff's assertion that defendant's exemption from the Freedom of Information Law (see Public Officers Law § 86[3];  Matter of Fowler v. New York State Bd. of Law Examiners, 298 A.D.2d 682, 684, 748 N.Y.S.2d 423 [3d Dept. 2002]) categorically excludes it from being subject to the provisions of CPLR article 78.  Simply put, such an exemption is absent from CPLR article 78, and the judiciary branch of state government and its agencies have long been subject to proceedings brought pursuant to that article (see CPLR 7801 et seq.;  see e.g. Matter of Feng Li v. Knight, 201 A.D.3d 1048, 1049–1051, 159 N.Y.S.3d 588 [3d Dept. 2022], lv denied 38 N.Y.3d 907, 2022 WL 1573600 [2022];  Matter of Pappas v. Lawyers’ Fund for Client Protection, 60 A.D.3d 1195, 1195–1197, 875 N.Y.S.2d 608 [3d Dept. 2009], lv denied 12 N.Y.3d 713, 2009 WL 1620419 [2009];  Matter of Plater v. O'Sullivan, 294 A.D.2d 719, 719, 741 N.Y.S.2d 749 [3d Dept. 2002], lv denied 98 N.Y.2d 611, 749 N.Y.S.2d 3, 778 N.E.2d 554 [2002]).  Defendant is a judicial agency charged with safeguarding the integrity of the legal profession by reimbursing clients for losses caused by the dishonest conduct of New York attorneys;  whether claims are approved or denied is a matter left to the discretion of defendant's board of trustees, which is also empowered to seek recovery from the attorneys whose conduct led to the approved awards (see Judiciary Law § 468–b [2], [4]).  Between 2012 and 2017, defendant approved numerous reimbursements to plaintiff's former clients.  The parties agree that plaintiff has made significant payments toward repaying defendant for the approved awards;  plaintiff believes such payments are in full satisfaction of his obligation, while defendant asserts that arrears remain.  Through the complaint, plaintiff challenges specific reimbursement awards, and he seeks a declaration preventing defendant from asserting the existence of arrears and from opposing plaintiff's reinstatement to the practice of law on those grounds.  As these claims distill to challenges to defendant's administrative determinations about reimbursement awards, they could have been raised in a CPLR article 78 proceeding and, thus, are subject to the shorter statute of limitations (see CPLR 217[1];  Doyle v. Goodnow Flow Assn., Inc., 193 A.D.3d at 1311–1312, 147 N.Y.S.3d 728;  Spinney at Pond View, LLC v. Town Bd. of the Town of Schodack, 99 A.D.3d at 1089, 953 N.Y.S.2d 314;  Matter of Saferstein v. Lawyers’ Fund for Client Protection, 30 A.D.3d 653, 655, 815 N.Y.S.2d 787 [3d Dept. 2006], lv dismissed & denied 7 N.Y.3d 887, 826 N.Y.S.2d 179, 859 N.E.2d 918 [2006]).

Plaintiff next contends that the statute of limitations has not run on his claims.  A petitioner must commence a CPLR article 78 proceeding within four months of receiving notice of a final and binding determination (see Matter of Girard v. Annucci, 216 A.D.3d 1387, 1388, 188 N.Y.S.3d 283 [3d Dept. 2023];  Doyle v. Goodnow Flow Assn., Inc., 193 A.D.3d at 1311, 147 N.Y.S.3d 728).  An administrative determination becomes final and binding when the agency has “reached a definitive position on the issue that inflicts actual, concrete injury” and administrative remedies have been exhausted (Walton v. New York State Dept. of Correctional Servs., 8 N.Y.3d 186, 194–195, 831 N.Y.S.2d 749, 863 N.E.2d 1001 [2007];  see Matter of Krakauer v. New York State Educ. Dept., 174 A.D.3d 1090, 1091, 107 N.Y.S.3d 467 [3d Dept. 2019]).  In support of its motion to dismiss, defendant proffered several letters sent by the parties.  In our view, defendant's February 2021 letter opposing plaintiff's reinstatement provided notice of a final and binding determination, as it provided the sum of every reimbursement, the sums received from plaintiff and the calculation that resulted in the arrears, and it noted the absence of any action by plaintiff since October 2014.  Although the letter was addressed to the Appellate Division, Second Department, plaintiff's counsel was copied and acknowledged receipt of such through a March 3, 2021 letter.  Consequently, the claim accrued on that date and plaintiff's failure to commence the instant action until May 24, 2022 constitutes a prima facie showing that the complaint was not commenced until long after the expiration of the four-month statute of limitations and, thus, is time-barred (see Matter of Coney Is. Preparatory Pub. Charter Sch. v. New York State Educ. Dept., 224 A.D.3d 1203, 1206–1207, 207 N.Y.S.3d 182 [3d Dept. 2024];  Matter of Park Beach Assisted Living, LLC v. Zucker, 189 A.D.3d 1756, 1758, 137 N.Y.S.3d 209 [3d Dept. 2020];  see also Matter of School Adm'rs Assn. of N.Y. State v. New York State Dept. of Civ. Serv., 124 A.D.3d 1174, 1177–1178, 3 N.Y.S.3d 150 [3d Dept. 2015], lv denied 26 N.Y.3d 904, 2015 WL 5255098 [2015]).

In opposition, plaintiff does not claim any tolling period;  rather, he asserts that he never received the individual award letter pertaining to one specific reimbursement award and, as such, that his claim has yet to accrue.  We disagree, as notices of determination are not required to follow any particular format (see e.g. Matter of Park Beach Assisted Living, LLC v. Zucker, 189 A.D.3d at 1758, 137 N.Y.S.3d 209;  Matter of School Adm'rs Assn. of N.Y. State v. New York State Dept. of Civ. Serv., 124 A.D.3d at 1177–1178, 3 N.Y.S.3d 150), and defendant's February 2021 letter provided plaintiff with notice of a final and binding determination that aggrieved him.²  Plaintiff's failure to commence the instant action within the requisite four-month period rendered his claim time-barred and, as such, Supreme Court properly dismissed the complaint.

Plaintiff's assertion that defendant should be equitably estopped from claiming the statute of limitations defense is unpreserved, as plaintiff raises it for the first time on appeal (see Picinich v. New York Cent. Mut. Fire Ins. Co., 216 A.D.3d 1232, 1233, 188 N.Y.S.3d 768 [3d Dept. 2023]) and, in any case, such contention lacks merit (see Matter of Saferstein v. Lawyer's Fund for Client Protection, 298 A.D.2d 726, 727–728, 748 N.Y.S.2d 438 [3d Dept. 2002], lv denied 99 N.Y.2d 505, 755 N.Y.S.2d 711, 785 N.E.2d 733 [2003]).  Plaintiff's remaining arguments, to the extent not expressly addressed herein, have either been rendered academic or have been examined and found to lack merit.

ORDERED that the order is affirmed, without costs.

FOOTNOTES

1.   Defendant – the Lawyers’ Fund for Client Protection of the State of New York – is incorrectly named in the caption.

2.   Were we to find that the February 2021 letter was insufficient to provide notice to plaintiff, we note that defendant's March 2021 and April 2021 letters to plaintiff's counsel reiterated the earlier information and addressed plaintiff's substantive complaints about the specified award.  As each of those letters would also serve as notice of a final and binding determination, the instant May 2022 action would still be barred by the applicable four-month statute of limitations (see Matter of Developmental Disabilities Inst., Inc. v. New York State Off. for People with Dev. Disabilities, 200 A.D.3d 1273, 1274, 160 N.Y.S.3d 395 [3d Dept. 2021]).

Clark, J.

Egan Jr., J.P., Aarons, Reynolds Fitzgerald and Fisher, JJ., concur.