In this case, we are asked whether a three- or six-year statute of limitations applies to causes of action for negligence and breach of fiduciary duty by a school district against a former member of the school board. We hold that the six-year limitations period in CPLR 213(7) is applicable and, therefore, this action was timely commenced.
In September 2002, an accounting firm hired by plaintiff XXX School District discovered irregularities in the district’s financial records. An audit revealed that Mr. GM, the assistant superintendent for business, had stolen $223,000 from district accounts. The XXX School District Board of Education (the Board) was notified of Mr. GM’s misconduct and it decided to allow Mr. GM to repay the misappropriated funds along with attorney’s fees and accounting costs and retire. The Board, however, did not notify law enforcement authorities or state officials about Mr. GM’s criminal activities, nor did it publicly disclose her illegal conduct.
Unfortunately, the theft by Mr. GM turned out to be just one component of a long-running conspiracy to loot the school district’s coffers. After Mr. GM left her post, information about additional missing funds surfaced and eventually a criminal investigation was undertaken by the Nassau County District Attorney’s Office. In June 2004, Mr. GM was arrested for grand larceny in the first degree for stealing more than $1 million from the school district. The investigation also implicated the school district’s superintendent (Mr. TX) and an account clerk (Ms. D, who was Mr. GM’s niece), and they too were arrested for grand larceny. An extensive forensic audit by the State Comptroller determined that, from 1998 through 2004, approximately $11 million had been misappropriated: Mr. GM had stolen over $4.6 million; Mr. TX had taken more than $2.4 million; and Ms. D had received about $300,000. In total, various sums had been funneled to more than two dozen people.
In addition to the criminal prosecutions that emerged from these investigations, the school district initiated a lawsuit against former and current members of the Board for their allegedly lax management during the years the funds disappeared and their attempt to keep these illegal activities under wraps. Defendant Mrs. QX was a member of the Board for approximately one year, beginning in 2000. Her departure from the Board occurred before Mr. GM’s criminal activities came to light. There are no allegations that Mrs. QX knew about the ongoing illegal scheme, benefitted from the theft of the school district’s funds or received any portion of the stolen monies. Mrs. QX also did not participate in the Board’s decision not to reveal Mr. GM’s initial thievery. Mrs. QX was, however, a member of the Board during a time period that funds were being stolen by school district employees.
Mrs. QX moved to dismiss the complaint against her, arguing that the causes of action were time-barred because the school district’s claims were subject to the three-year statute of limitations in CPLR 214(4) and the complaint was filed more than three years after she ceased being a school board member.
Causes of action that seek monetary damages for injury to property are generally subject to a three-year statute of limitations extends the limitations period to six years for an action by or on behalf of a corporation against a present or former officer to recover damages for waste or for an injury to property or for an accounting in conjunction therewith. If the specific language of CPLR 213(7) encompasses a particular claim, it supplants the general three-year rule of CPLR 214 (4). The issue here then distills to whether a school district is a corporation within the meaning of CPLR 213(7), thereby providing a six-year statute of limitations for covered claims. We hold that it is.
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