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Delphi Healthcare PLLC v. Petrella Phillips LLP
Citation: 2018 NY Slip Op 1012Docket: 1345 CA 16-02320
Court: Appellate Division of the Supreme Court of the State of New York; February 8, 2018; New York; State Appellate Court
Original Court Document: View Document
In **Delphi Healthcare PLLC v. Petrella Phillips LLP**, the Appellate Division of the Supreme Court of New York addressed an appeal regarding a motion to dismiss certain causes of action in a malpractice case. Plaintiffs, including Delphi Healthcare and related entities, alleged that defendants, their accountants, failed to ensure compliance with the Federal Fair Labor Standards Act (FLSA) and New York Labor Law, resulting in a class action lawsuit against the plaintiffs. The plaintiffs sought damages for attorney fees related to the defense and settlement of this lawsuit, as well as damages for loss of business and reputation. The court modified a prior order by granting the defendants' motion to dismiss parts of the complaint, specifically regarding the requests for damages for attorney fees, which were deemed requests for indemnification and thus barred by the FLSA. The court reinforced that there is no right to contribution or indemnity for employers found liable under the FLSA, aligning with established legal precedent. The order was affirmed as modified, with costs not awarded. The court concluded that the complaint should not be dismissed entirely despite the defendants' arguments, as the plaintiffs' claims for damages related to loss of business, reputation, and contract payments are permissible under the Fair Labor Standards Act (FLSA). Such damages are rooted in the business relationship between the parties and do not compensate for FLSA-related liabilities from the underlying class action. The defendants additionally argued for the dismissal of the second through fourth causes of action—negligence, breach of contract, and breach of fiduciary duty—claiming they are duplicative of the first cause of action for accounting malpractice. The court agreed regarding negligence and breach of fiduciary duty, stating that these claims are indeed duplicative since they share the same factual basis and seek similar damages as the accounting malpractice claim. The court referenced relevant case law to support this position, noting that merely alleging concealment of malpractice does not create a separate cause of action. Conversely, the court found that the breach of contract claim is distinct because it alleges that the defendants failed to perform contracted services, which differs from the accounting malpractice claim that addresses failure to meet professional standards in the performance of those services. Thus, the breach of contract cause of action was not considered duplicative.