Shapiro Arato Bach Prevails in Motion to Dismiss Raising Novel Statute of Limitations Issue

On March 25, 2019, Shapiro Arato Bach LLP obtained a favorable ruling on a novel statute of limitations issue on behalf of its client Cash Money Records, Inc.  Plaintiff Aspire Music Group, LLC commenced this action in 2017 contending that it was a party to a written agreement requiring Cash Money and others to pay Aspire a share of profits earned from certain recordings by the recording artist Drake.  In 2018, Cash Money asserted counterclaims against Aspire and two new, third parties for aiding and abetting fraud and breach of fiduciary duty in connection with obtaining the very agreement under which Aspire sued.   Aspire and the new parties each moved to dismiss Cash Money’s counterclaims on the grounds that they were time-barred under New York law.

Shapiro Arato Bach opposed the motions and argued that all of Cash Money’s counterclaims were timely under CPLR 203(d).  Under that statute, a defendant’s counterclaims will be deemed timely, even if they would have been time-barred as standalone claims, if they relate to the plaintiff’s claims.  In that setting, the counterclaim plaintiff can recover damages “to the extent of the demand in the complaint.”  Aspire and the third parties contended that Cash Money could not rely on section 203(d) because Cash Money had not asserted its counterclaims in its initial answer to Aspire’s complaint but had waited and asserted them only in response to Aspire’s amended complaint.  Relying on Court of Appeals precedent,  Aspire separately argued that Cash Money’s counterclaims were not related.  The third parties also contended that Cash Money could not rely upon section 203(d) as against them, because they had not asserted affirmative claims in the case.  Cash Money opposed the motions, contending that section 203(d)’s savings provision applied to the counterclaims in its answer to Aspire’s amended complaint.  Cash Money also argued that the Court of Appeals precedent did not apply to Cash Money’s counterclaims.  Cash Money further contended that section 203(d) applied to its claims against the third parties, even if the third parties had asserted no affirmative claims for relief against Cash Money, since Cash Money’s claims were properly considered counterclaims under the CPLR, and, on its face, section 203(d) applies to all counterclaims.

After two rounds of oral argument, as well as supplemental briefing on the statute of limitations issues, New York Supreme Court Justice Barry R. Ostrager denied the motions to dismiss and held that Cash Money’s counterclaims were timely asserted against both Aspire and the third parties. The Court found that Cash Money’s “reading of the pertinent case law is correct” and held that (1) the filing “of an amended complaint [hits] the reset button and [the] amended complaint enables defendants to assert new defenses and counterclaims”; (2) “Counterclaims that are based upon negotiations leading up to the execution of a contract may arise from the same transaction or series of transactions that form the basis of plaintiff’s breach of contract claim”; and (3) section 203(d) applied to the counterclaims asserted against the third parties even though they were not plaintiffs in the action.

Cynthia S. Arato and Philip W. Young authored the briefs and argued the motions. The Court’s decision denying the motions to dismiss is available here.