Personal-Touch Home Care, Inc. v Program Risk Mgt., Inc NY Slip Op 30611(U) March 1, 2011 Supreme Court, Nassau County Docket Number:

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1 Personal-Touch Home Care, Inc. v Program Risk Mgt., Inc NY Slip Op 30611(U) March 1, 2011 Supreme Court, Nassau County Docket Number: Judge: Timothy S. Driscoll Republished from New York State Unified Court System's E-Courts Service. Search E-Courts ( for any additional information on this case. This opinion is uncorrected and not selected for official publication.

2 [* 1] SUPREME COURT-STATE OF NEW YORK Present: SL.A HON. TIMOTHY S. DRISCOLL Justice Supreme Court l PERSONAL-TOUCH HOME CAR, INC., and COMMITY HOME CAR REFERR SERVICE, INC., Plaintifs, Inde1l No: against- TRIALIIS PART: NASSAU COUNTY PROGRA RISK MAAGEMENT, INC., PRM CLIAS SERVICES, INC., JOHN CONROY, DeCHATS, FUGLEIN & JOHNSON, LLP, and SGRisk, LLC, Defendants l The following papers having been read on this motion: Notice of Motion, Affirmation in Support and Exhibits... Memorandum of Law in Support... Affirmation in Opposition and E1lhibits... Memorandum of Law in Opposition... Defendant SKRsk' s Reply Memorandum of Law... Reply Memorandum of Law in Further Support... Correspondence dated December 30, 2010 and January 10, 14 and 25, Ths matter is before the Cour for decision on the motion fied by Defendant SGRisk LLC ("SGRisk") on October and submitted on Januar (motion sequence number 1). For the reasons set fort below, the Cour directs that ths motion shall be the subject of oral arguent on March 29, 2011 at 11 :00 a.m. At the oral arguent, counsel shall address the issue of why the decision issued by the Honorable Ira B. Warshawsky on December 22, 2010 in the related action of Health Acquisition Corp. d/b/a Allen Home Health Care Bestcare, Inc. and Aides at Home, Inc. v. Program Risk Management, Inc., PRM Claims Services, Inc., John Conroy, DeChants, Fuglein Johnson, LLP and SKRisk, LLC Nassau County Index Number 8714/10 is not dispositive of, and does not compel the granting of, the motion before the Cour.

3 [* 2] A. Relief Sought SGRisk moves for an Order, 1) pursuant to CPLR 3211(a)(I), (3), and (7), dismissing the Verified Complaint ("Complaint"); and 2) directing a change of venue. By letter dated December , counsel for SGRisk advised the Cour that it withdraws the portion of its motion for a change of venue, in light of a December 22, 2010 decision ("Related Decision ) by the Honorable Ira B. Warshawsky in the related matter of Health Acquisition Corp. d//a Allen Home Health Care Bestcare, Inc. and Aides at Home, Inc. v. Program Risk Management, Inc. PRM Claims Services, Inc., John Conroy, DeChants, Fuglein Johnson, LLP and SKRisk, LLC Nassau County Index Number 8714/10 ("Related Action Plaintiffs have submitted an "Affrmation in Opposition to Defendant DeChants, Fuglein & Johnson, LLP ("DFJ") and SGRisk, LLC' s Motions to Dismiss " and DFJ has submitted a Reply Memorandum of Law in Furer Support" of its motion to dismiss the Complaint. The Cour is not aware ofa separate motion filed by DFJ, and the Notice of Motion and Affirmation in Support of the motion only contan a request that the Cour grant SGRisk' s motion for an order dismissing the clais against it. Thus, while the Prior Decision would be relevant to a motion by DJF to dismiss the Complaint against it, such a motion does not appear to be before the Cour. Plaintiffs Personal-Touch Home Care, Inc. ("Personal Touch") and Community Home Care Referral Service, Inc. ("Community Home Care ) (collectively "Plaintiffs ) oppose the motion. B. The Paries' History The Complaint (Ex. A to Cumings Aff. in Supp.), filed on September 8, 2010, alleges that Plaintiffs Personal Touch and Communty Home Care Referral Service, Inc., also doing business as Helping Hands Attendant Service, are home health care agencies with offices in the State of New York. SGRisk is a company that is authorized to provide accounting and actuaial services to and for businesses in New York. Defendant Program Risk Management, Inc. PRM"), of which Defendant John Comoy ("Comoy ) was president, provided risk management services to and for businesses in New York, including self- insurance programs, retention programs and their members. Defendant DFJ was authorized to provide accounting and audit services to and for businesses in New York, including self-insurance trsts. The Complaint alleges, fuer, that in or about 1993, PRM and/or Comoy created Health

4 [* 3] Care Providers Self-Insurance Trust ("HCPSIT" or "Trust"), a group self-insurance trst. Personal Touch joined HCPSIT as a retention program provider in or about 2000 and remained a member until June 30, 2009 when the Workers Compensation Board ("Board") revoked HCPSIT's authorization (" Revocation ). Communty Home Care joined HCPSIT as a retention program provider in or about 1994, and was a member from 1997 until the Revocation. In his Affrmation in Support, counsel for SKRsk afrms as follows: Plaintiffs allege, in the Instat Action, that they paricipated in retention programs offered by the Trust, and that PRM, the Trust's admnistrator, and other Defendants engaged in improper conduct that caused Plaintiffs to suffer damages. Counsel provides documentation on which SGRisk relies in support of its motion to dismiss, including 1) a forensic analysis of the Trust prepared by an accounting firm retained by the Board, 2) the agreement that Plaintiffs entered into to paricipate in the retention plan, 3) copies of engagement letters between SGRisk and the Trust' s adminstrator, 4) relevant cases from the Southern Distrct of New York, and the Supreme Cours of Erie and New York Counties, 5) SGRisk' s loss reserve analyses for the Trust from 2001, and 2009, and 6) SGRisk' s premium rate analysis for the Trut as of November Counsel submits that the complaints in the Related Action and the action sub judice Instat Action ) assert "virtally identical factual allegations" (Cumings Aff. at 8). In support, counsel provides a comparson of the two complaits (Ex. C to Cumings Af.) which confs that the two complaints contain many of the same allegations. Counsel afrms that the defendants' motions to dismiss in the Related Action were the subject of oral arguent before the Honorable Ira B. Warshawsky on September 8, Following the submission of the motion, counsel for SGRisk advised the Cour of the Prior Decision and submitted that the Prior Decision was dispositive of the motions pending before the Cour. Counsel for Plaintiffs advised the Cour of its disagreement with the Prior Decision, and submitted that the Complaint sufficiently states causes of action as to the moving Defendants making dismissal inappropriate. The Cour has reviewed the Prior Decision which addressed the motions by defendants SGRisk and DFJ to dismiss the complaint in the Related Action.

5 [* 4] In the Related Decision, Justice Warshawsky outlined the allegations as follows: In sum and substace, the plaintiffs' claims as to (DFJ) are predicated on allegations tht these defendants were hired, inter alia for the "benefit of the plaitiffs" and the Trust (Cmplt. 310, 328). According to the complaint the defendants held themselves out as possessing expertise with respect to inter alia the auditing, accounting, management and administration of group self-insured trusts, including the import of applicable regulatory law (e. Cmplt. 309, 327). Despite these representations, the plaintiffs contend that the defendants thereafer negligently failed to perform their respective administrative accounting and auditing/actuaral duties by, inter alia underestimating and misrepresenting the Trust' s claims reserves and projected liabilties, and/or by otherwse negligently failing to ascertin, disclose and properly document the tre natue of the Trust's "fmancial condition, liabilities assets and exposures (Cmplt., (;) see also 74-84; 98, ; ; 240). Moreover, the defendants knew or should have known that the individual group Trut members would rely on their respective reports for the puroses of, among other thigs, assessing the risks of Trust membership and/or whether they should either join the Trust or retain their memberships in the futue (Cmplt ; ; ). The complait fuer alleges that by virte of the foregoing misconduct, the plaintiffs have sufered undescribed damages and will continue to incur undue excessive and umeasonable costs, liabilties, fees and damages" (Cmplt ; ; 341). Related Decision at p. 4 Judge Warshawsky also discussed the documentation provided by defendants, including a May 1993 engagement letter, actuarial reports and evaluations, and report cover/retention letters addressed to the Trust which included a letter defining the scope and natue of the services to be rendered (Prior Decision at pp. 5-6). Judge Warshawsky noted that it was 'udisputed'' that neither DFJ nor SGRisk entered into any contractu arangement directly with the plaintiffs, but rather contracted with either RPM and/or the non-par group Trust. (Id. at p. 6). Judge Warshawsky agreed with SGRisk and DFJ that the complaint did not set fort facts establishig a relationship with the plaitiffs constituting the " fuctional equivalent of privity, and, therefore, no duty existed to the plaitiffs, including any duty based on a thd-par beneficiar theory (Id. In reaching this determination, Judge Warshawsky outlined the relevant legal principles regarding the limited circumstances under which it is appropriate to extend

6 [* 5] liabilty to thrd paries, citing, inter alia, Prudential Ins. Co. of America v. Dewey Ballantine, Bushby, Palmer Wood 80 N. 2d 377 (1992) and Security Pacifc Business Credit, Inc. Peat Marwick Main Co. 79 N. 2d 695 (1992). Judge Warshawsky concluded as follows: With these conclusions in mid, and guded by the "cautious" and circumspect approach adopted by the Cour of Appeals, the Cour agrees that the plaintiffs allegations establish - at most - that they were incidenta or collaterally situated beneficiares, whose relationship with the movants did not amount to the fuctional equivalent of privity (citations omitted). Contrar to the plaintiffs' contentions, there are no pleaded claims interposed against the movants based on an "aiding and abetting" theory, aiding and abetting the breach ofprm' s alleged fiduciar duty to the Trust or its commission of fraud (citation to Plaitiffs' brief). Rather, the complaint contains only two causes of action involving the moving defendants, both of which assert clais grounded solely on negligent misrepresentation and professional negligence (citations to relevant provisions in complaint). Even if an unstated, aiding and abetting claim could somehow be discerned from the complaint, it is settled that plaintiff "may not merely rely on conclusory and sparse allegations" in pleading a cause of action based on an aiding and abetting theory of recovery" (citations omitted). The Cour is of the view that the Prior Decision appears to warant dismissal of the Instat Action against DFJ and SGRisk. The Cour directs counsel for Plaintiffs, SGRisk and DFJ to appear for oral arguent before the Cour on March at 11 :00 a.m. to address ths issue. ENTER DATED: Mineola, NY March TIMOTHY S. DRISC MAR p:ed NA.; AU COUtI 1'( COUNTY CLERK' S OFFICE