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Breach of Fiduciary Duty: Time Bars, Tolling and the Continuing Wrong Doctrine

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  • Posted on: Mar 29 2021

Although New York law does not provide for a single statute of limitations for breach of fiduciary duty or unjust enrichment claims, courts typically determine the applicable limitations period — three years under CPLR § 214 (4) or six years under CPLR § 213(1) — by analyzing the substantive remedy that the plaintiff seeks. IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 139 (2009). Thus, for example, “[w]here the remedy sought is purely monetary in nature, courts construe the suit as alleging ‘injury to property’ within the meaning of CPLR § 214.” IDT, 12 N.Y.3d at 139; see also Ingrami v. Rovner, 45 A.D.3d 806, 808 (2d Dept. 2007) (applying three-year statute of limitations to unjust enrichment claim because plaintiff sought monetary, as opposed to equitable, relief). 

A claim for breach of fiduciary duty accrues as soon as “the claim becomes enforceable — when all elements of the tort can be truthfully alleged in a complaint.” IDT, 12 N.Y.3d at 140. “Given that damage stemming from the misconduct is an essential element of a breach of fiduciary duty claim, the claim is not enforceable, and thus does not accrue until damages are sustained.” Grika v. McGraw, 55 Misc. 3d 1207(a) (Sup. Ct., N.Y. County 2016), aff’d sub nom., L.A. Grika on behalf of McGraw, 161 A.D.3d 450 (1st Dept. 2018]) see also IDT, 12 N.Y.3d at 140 (“date of damages is measured from when the plaintiff first suffered loss”).

As with many rules, there is an exception – the continuing wrong doctrine. Under the doctrine, the statute of limitations is tolled “where there is a series of independent, distinct wrongs rather than a single wrong that has continuing effects.” Ganzi v. Ganzi, 183 A.D. 3d 433 (1st Dept. May 7, 2020) (holding that, under continuous wrong doctrine, new contracts executed during limitations period gave rise to timely fiduciary duty claims based on same terms as an earlier contract executed prior to limitations period); see also Henry v. Bank of Am., 147 A.D.3d 599, 600 (1st Dept. 2017). 

When a defendant seeks dismissal under CPLR § 3211(a)(5) on statute of limitations grounds, he or she bears “the initial burden of establishing, prima facie, that the time in which to sue has expired.” Benn v. Benn, 82 A.D.3d 548, 548 (1st Dept. 2011) (internal quotation marks and citation omitted). “To meet its burden, the defendant must establish, inter alia, when the plaintiff’s cause of action accrued.” Lebedev v. Blavatnik, 144 A.D.3d 24, 28 (1st Dept. 2016) (internal quotation marks and citation omitted). If the defendant meets that burden, “then the burden shifts to the plaintiff to aver evidentiary facts establishing that the cause of action was timely or to raise a question of fact as to whether the cause of action was timely.” Lake v. New York Hosp. Med. Ctr. of Queens, 119 A.D.3d 843, 844 (2d Dept. 2014) (internal quotation marks and citation omitted).

In today’s article, we examine VA Mgt., LP v. Estate of Valvani, 2021 N.Y. Slip Op. 01878 (1st Dept. Mar. 25, 2021) (here), a case in which the court addressed the foregoing statutes and principles.

VA Management, LP v. Estate of Valvani


VA Management involved, inter alia, an alleged breach of fiduciary duty in connection with the management of a portfolio of pharmaceutical company securities.

According to the Complaint, plaintiff VA Management, LP (“VA”) hired Sanjay Valvani (“Valvani”) in 2007 to manage its portfolio of pharmaceutical company securities. Between 2007 and 2011, Valvani allegedly obtained confidential information from the Food and Drug Administration about the status of drug applications and used that information to buy and sell pharmaceutical company shares for a substantial gain. VA claimed to be unaware of Valvani’s alleged insider trading. Valvani allegedly received over $100 million in compensation during his time with VA. 

In June 2016, Valvani was arrested on federal criminal insider trading charges. The Securities and Exchange Commission (“SEC”) simultaneously brought a civil enforcement action against him. Following Valvani’s death, the U.S. Attorney’s Office and SEC dropped their actions against him. VA settled related claims with the SEC in May 2018.

On June 14, 2019, VA and Valvani’s estate (“Defendant”) executed a tolling agreement that tolled the statute of limitations for any claims between the parties until July 31, 2019. The agreement was amended on July 30, 2019, tolling all time limitations for any claims between the parties until August 7, 2019.

On August 7, 2019, VA filed suit against Defendant, asserting claims for breach of fiduciary duty and unjust enrichment. Defendant moved to dismiss, arguing that VA’s claims were untimely and should be dismissed under the doctrine of in part delicto because, according to Defendant, Valvani’s misconduct was attributable to VA. Defendant also argued that VA’s unjust enrichment claim was duplicative.

The motion court granted Defendant’s motion to dismiss (here).

First, the motion court held that the three-year statute of limitations applied to VA’s breach of fiduciary duty and unjust enrichment claims because “the remedies sought by VA, including disgorgement of all compensation paid to Valvani from when his breach of fiduciary duty began, [were] purely monetary.” The motion court explained that the “use of the term ‘disgorgement’ instead of other equally applicable terms such as repayment, recoupment, refund, or reimbursement,” was of no moment and “should not be permitted to distort the nature of the claim so as to expand the applicable limitations period from three years to six.” Quoting Access Point Med., LLC v. Mandell, 106 A.D.3d 40, 44 (1st Dept. 2013). See also IDT, 12 N.Y.3d at 139-40. “As a practical matter,” concluded the motion, ‘disgorgement’ of Valvani’s compensation is a claim for monetary damages, not a request for equitable relief. Therefore, the three-year limitations period in CPLR § 214 (4) applies to VA’s breach of fiduciary duty and unjust enrichment claims.”

Second, the motion court held that under the tolling agreement, the three-year limitations period had run and therefore VA’s claims were time-barred. The motion court explained that although Valvani’s “‘period of disloyalty’ lasted until 2016, the conduct on which its [breach of fiduciary duty] claim [was] based — Valvani’s insider trading — took place in 2011.” This was so, said the motion court, even though Valvani continued to receive compensation through 2016. “The fact that VA may have suffered further damages from Valvani’s insider trading in later years, in the form of continued compensation and costs of governmental and internal investigations, [were] the ‘continuing effects of earlier conduct alleged to have been wrongful.’” Quoting Carey v. Trustees of Columbia Univ., 113 N.Y.S. 3d 32, 34 (1st Dept. 2019); see also B. Brages Assoc. v. West 21st LLC, 2014 WL 2116093, at *6 (Sup. Ct., N.Y. County 2014) (“[T]he statute of limitations begins to run at the first sign of damage, even when the damage gets progressively worse”). These damages, concluded the motion court, did not “constitute a separate wrongful act extending the accrual date for VA’s claim.” Citing Murphy v. Morlitz, 751 F. App’x 28, 30 (2d Cir. 2018); New York Yacht Club v. Lehodey, 171 A.D.3d 487, 487 (1st Dept. 2019). 

The motion court also reasoned that “the payment of salary in future years [was] a continuing effect of [Valvani’s] earlier unlawful conduct, not an independent breach.”

First Department’s Decision

On appeal, the First Department affirmed.

The Court held that VA’s claims were for monetary relief, not equitable relief. Slip Op. at *1. Like the motion court, the First Department rejected the notion that seeking “disgorgement” was something other than the repayment of monies improperly taken. Id. As such, seeking the “disgorgement” of Valvani’s compensation did not convert VA’s claim to one for equitable relief “to which the six-year statute of limitations would apply.” Id. (citations omitted).

The Court also held that the motion court “correctly concluded that the breach of fiduciary claim accrued in 2011 at the latest, when Valvani completed the insider trading scheme, which resulted in large profits to the portfolio and thus, to plaintiff, and which in turn increased Valvani’s performance-based compensation.” Id. The Court found that the “three-year statute of limitations had run by June 2019, when the parties executed a tolling agreement.” Thus, concluded the Court, the motion court “properly dismissed plaintiff’s breach of fiduciary duty claim,” which it filed on August 7, 2019. Id. 

The Court further held that the motion court “correctly deemed the fiduciary tolling doctrine,” to be “inapplicable because [the doctrine] does not apply to claims that are solely at law like this one.” Id. (citing Stern v. Barney, 129 A.D.3d 619 (1st Dept. 2015); see also IDT, 12 N.Y.3d at 139; Cusimano v. Schnurr, 137 A.D.3d 527, 530 (1st Dept. 2016).

Finally, the Court held that VA’s breach of fiduciary duty claim did not “sound in fraud to warrant application of the six-year statute of limitations (CPLR 213[8]).” Id. “In particular,” said the Court, “the complaint fail[ed] to allege that [VA] justifiably relied on any misrepresentation from Valvani, including his certifications of compliance with plaintiff’s policies prohibiting insider trading.” Id. (citing IDT, 12 N.Y.3d at 140).


VA Management shows that courts will not elevate form over substance when considering whether a breach of fiduciary duty claim is subject to the three-year statute of limitations or the six-year statute of limitations. The decision also highlights how the continuing wrong doctrine applies. As noted, it does not apply to a single wrong that has continuing effects; it applies only to a series of independent, distinct wrongs.

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