Regardless of the merits of a plaintiff’s claim, she will be unable to have her day in court if she fails to file suit before the statute of limitations expires.  This principle is especially important to breach of fiduciary duty claims, because the statute of limitations governing such claims is elusive and highly dependent on the precise nature of the claims alleged. 

In Matter of Hersh, 198 A.D.3d 766 (2d Dep’t 2021), the Appellate Division, Second Department, addressed the timeliness of a breach of fiduciary duty claim asserted in a family dispute pitting mother against son in connection with the administration of his father’s estate.  This case also addresses fiduciary duty claims that arise from some underlying fraudulent act—here, the son’s alleged forging of the father’s signature on a document that transferred significant assets to the son.  Where fiduciary duty claims arise from such fraudulent acts, plaintiffs must be highly vigilant about performing due diligence if there appear to be any red flags.

George Hersh (“George”) died in 2007.  Esther Hersh (“Esther”), George’s widow and the executor of his estate, commenced a proceeding to discover certain assets purportedly belonging to George’s estate.  George and his son, Mark, had operated a family real-estate businesses, and Esther sought both the return of property belonging to George’s estate as well as ownership shares in certain entities owned by George and Mark (the “Real Estate Companies”) on the ground that Mark had defrauded George’s estate. 

Central to Esther’s case were allegations concerning a 2004 lawsuit commenced by Esther’s brother, Rafael Fintsi, against both George and Mark for the dissolution of certain of the Real Estate Companies.  Fintsi, George, and Mark had resolved that lawsuit through a stipulation dated April 28, 2004 (the “Fintsi Stipulation”) where Fintsi transferred certain ownership shares in the Real Estate Companies to George and Mark.  As Esther alleged, Mark executed the Fintsi Stipulation by forging George’s name.  In so doing, Mark allegedly breached his fiduciary duty to George (and, by extension, George’s estate).  

In her discovery proceeding, Esther interposed a breach of fiduciary duty claim premised on Mark’s forging of George’s name on the Fintsi Stipulation—an act that enabled Mark to transfer ownership interests in the Real Estate Companies from Fintsi to himself.  Again, the Finsti Stipulation was dated April 28, 2004, but Esther did not commence her discovery proceeding until more than six years later on November 18, 2010.  Unfortunately for Esther, her time to allege that Mark had breached his fiduciary duty to George had already expired when she commenced the discovery proceeding.  Accordingly, the Appellate Division held that her claim was time-barred.

The statute of limitations governing breach of fiduciary duty claims is not clear-cut and requires nuanced analysis.  The court examines the remedy the plaintiff seeks:  if it is monetary damages, then the limitations period is generally three years; if equitable relief, then six years.  Additionally, the court must determine if the plaintiff’s breach of fiduciary duty claims are based on allegations of fraud, a separate inquiry the court undertakes regardless of the relief sought.  If so, then the plaintiff can take advantage of the six-year statute of limitations and two-year discovery rule that governs fraud claims.  As the court in Matter of Hersh explained:

New York law does not provide a single statute of limitations for breach of fiduciary duty claims. Generally, the choice of the applicable limitations period depends on the substantive remedy that the plaintiff seeks. Where the relief sought is equitable in nature, the statute of limitations is six years, and where the relief sought is purely monetary, the statute of limitations is generally three years. In addition, regardless of the relief sought, where an allegation of fraud is essential to a breach of fiduciary duty claim, courts have applied a six-year statute of limitations under CPLR 213(8).

Id. at 769. 

Applying these principles to the facts, the court in Matter of Hersh held that Esther’s breach of fiduciary claim was untimely.  That claim was based upon the Fintsi Stipulation: by allegedly forging George’s name and effectuating the transfer of interests in the Real Estate Companies from Fintsi to himself, Mark breached his fiduciary duty to George.  But the Fintsi Stipulation was dated more than six years before Esther filed suit, so even if the six-year fraud-based statute of limitations applied, her claim had expired.

Moreover, Esther failed to file suit within two years of the date that she could have discovered Mark’s alleged fraud in forging George’s name on the Finsti Stipulation.  Because Esther’s breach of fiduciary duty claim was based on her allegations that Mark defrauded George, she conceivably could have benefitted from the two-year discovery rule applicable to fraud causes of action.  As the court explained:  “Pursuant to CPLR 213(8) and 203(g), an action sounding in fraud must be commenced within six years of the commission of the fraud, or within two years after the fraud was or should have been discovered through the exercise of reasonable diligence.”  Id. at 769. 

Here, there were numerous circumstances that should have alerted Esther to Mark’s alleged forging of George’s name on the Fintsi Stipulation: 

The evidence demonstrated that Mark frequently discussed the Fintsi litigation with George and the petitioner [i.e., Esther] in 2003 and 2004, including its resolution as memorialized in the Fintsi stipulation; that George was personally served with the petition in the Fintsi litigation and signed a retainer agreement for counsel; that the Fintsi stipulation permitted Fintsi to rent a room at the property owned by 229 West [one of the Real Estate Companies] for the nominal rate of $1 per year through September 2006, which sum George was in charge of collecting; and that the petitioner recalled discussing resolving the Fintsi litigation with both George and Mark in 2003 and 2004.

Id. at 770.  Accordingly, “the petitioner [i.e., Esther] and George were aware, or should have been aware, of Mark’s alleged forgery on the Fintsi stipulation in 2004, such that the two-year limitations period from discovery with reasonable diligence had expired before the petition was filed on November 18, 2010.” 

It is entirely possible that in the context of the Hershes’ family-owned real-estate business, neither Esther nor George wanted to litigate with their son Mark over his alleged forging of George’s signature on the Fintsi Stipulation.  A desire to preserve family harmony and prevent unnecessary roadblocks to the smooth functioning of a family-run business is entirely understandable.  As this case demonstrates, however, the trade-off in such situations may very well be the abandonment of an otherwise timely cause of action.