Summary
holding that a cause of action for breach of fiduciary duties brought by Tennessee investors accrued in Tennessee even though the accounts were maintained in New York
Summary of this case from Hughes v. Lasalle Bank, N.A.Opinion
January 30, 1996
Appeal from the Supreme Court, New York County (Martin Evans, J.).
The IAS Court properly determined that the arbitral claims of respondents, Tennessee residents, for, inter alia, breach of contract, common law fraud, negligence, and breach of fiduciary duty, arising from investments made prior to May 4, 1990, were time-barred under the Tennessee Statute of Limitations applicable pursuant to New York's borrowing statute (CPLR 202). The Court of Appeals has recognized that "[u]nder the New York borrowing statute (CPLR 202), a securities fraud claim arising outside this state is subject to the limitations periods of the jurisdictions where the injury occurred — generally, the place where the investors resided and sustained the economic impact of the loss" — here, Tennessee ( Matter of Smith Barney, Harris Upham Co. v Luckie, 85 N.Y.2d 193, 207, cert denied sub nom. Manhard v Merrill Lynch, Pierce, Fenner Smith, ___ US ___, 116 S Ct 59; see also, Appel v Kidder, Peabody Co., 628 F. Supp. 153, 155-156).
Appellants argue, for the first time on appeal, that their arbitral claims accrued in New York and that their claims are not time-barred under New York law. By their failure to raise this claim in the IAS Court, respondents are deemed to have waived it ( Douglas Elliman-Gibbons Ives v Kellerman, 172 A.D.2d 307, lv denied 78 N.Y.2d 856). In any event, there is no merit to their argument that the economic harm occurred in New York merely because the accounts were maintained here.
The IAS Court also properly determined that the period of limitations for respondents' "churning claim", involving alleged personal gain by the securities dealer through excessive trading activity ( Newburger, Loeb Co. v Gross, 563 F.2d 1057, 1069, cert denied 434 U.S. 1035), ran from the date when respondents, as investors, were on notice, warranting inquiry, of the potential claim by receipt of trade confirmations or monthly statements detailing the allegedly excessive and unauthorized trading in their account, rather than from the date of the last trade ( Norniella v Kidder Peabody Co., 752 F. Supp. 624, 628, citing Appel v Kidder, Peabody Co., supra, at 158).
The claims for punitive damages and attorney's fees were also properly dismissed since punitive damages are unavailable in arbitration under New York law ( Garrity v Lyle Stuart, Inc., 40 N.Y.2d 354), and since attorney's fees may not be recovered in an arbitration under New York law unless they are expressly provided for in the arbitration agreement ( Matter of MKC Dev. Corp. v Weiss, 203 A.D.2d 573).
We have reviewed respondents' remaining claims and find them to be without merit.
Concur — Rosenberger, J.P., Wallach, Nardelli, Williams and Tom, JJ.