Panos v. Universal Forest Products Inc.
- Kenneth Karas
- 7:18-cv-02066
- U.S. District Court · Southern District of New York
- 17
Panos v. Universal Forest Products Inc.: Judge Karas partly dismissed and partly allowed Panos’s fraud-assistance claims based on when his investments were made.
Spyros Panos’s aiding-and-abetting-fraud claims against Universal Forest Products, Inc. and Shawnlee Construction, LLC. Claims tied to investments before March 7, 2012 were dismissed with prejudice; claims tied to investments on or after that date survived.
What happened
In Panos v. Universal Forest Products Inc., Spyros Panos alleged that Universal Forest Products, Inc. and Shawnlee Construction, LLC helped conceal a kickback scheme involving housing-project financing, causing him to lose his investments. The defendants asked the court to dismiss his claim as filed too late.
The court ruled that the claims accrued when Panos made his investments, not when he later discovered the alleged wrongdoing. Because Panos filed the case on March 7, 2018, claims involving investments made before March 7, 2012 were too late. Claims involving investments made on or after March 7, 2012 could proceed.
Judge Kenneth M. Karas granted the defendants’ motion in part for the earlier investments and denied it in part for the later investments. The court dismissed the earlier-investment claims with prejudice and allowed the later-investment claims to survive.
The detailed version
- Panos v. Universal Forest Products Inc. · No. 7:18-cv-02066
- Kenneth Karas
- Jan. 27, 2020
Background
Spyros Panos sued Universal Forest Products, Inc. and Shawnlee Construction, LLC, alleging that they aided and abetted fraud. The claim concerned Panos’s investments in projects involving the Vineyard Property, the Highland Square Property, and the Wappinger Property. According to the Second Amended Complaint, Panos invested a total of at least $1,240,000 and lost the value of his membership interests after the projects failed.
Panos alleged that defendants participated in an approximately $865,000 kickback arrangement involving inflated bills for labor and materials and housing-project financing insured by the U.S. Department of Housing and Urban Development. He also alleged that statements and omissions led him to invest in the projects. The opinion states that federal authorities later indicted or prosecuted individuals involved in the alleged scheme, and that Panos learned of the wrongdoing after a 2016 government press release.
Motion and Legal Standard
The defendants moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not adequately state a legal claim. For this motion, the court accepted the complaint’s factual allegations as true and drew reasonable inferences in Panos’s favor.
The defendants argued that Panos’s claim was barred by New York’s statute of limitations for fraud. Under the rule described by the court, a fraud claim must be filed within the longer of six years after the claim accrued or two years after the plaintiff discovered, or reasonably could have discovered, the fraud.
Accrual of the Claims
The court characterized Panos’s claim as one for fraudulent inducement—an allegation that misleading statements caused him to make an investment. The court held that these claims accrued when Panos made the investments, rather than when he entered into the agreements to purchase membership interests. Drawing reasonable inferences for Panos, the court treated December 2012 as the date of his final investment.
The court also rejected the argument that the investments formed a continuing violation. The alleged misrepresentations occurred during a discrete earlier period, and Panos alleged continuing financial effects rather than new wrongful acts during the limitations period. The court therefore treated each investment date as relevant to whether the related claim was timely.
Ruling
The court concluded that claims involving investments made before March 7, 2012—six years before Panos filed his original complaint—were time-barred. Because Panos had counsel and had already amended his complaint, the court dismissed those claims with prejudice.
The court ruled that claims involving investments made on or after March 7, 2012 survived the motion to dismiss. Its final disposition was to grant the defendants’ motion with respect to investments made before March 7, 2012 and deny the motion with respect to investments made on or after that date. The Clerk was directed to terminate the pending motion, and the court scheduled a status conference.
Read the full 17-page opinion on CourtListener, the free public archive maintained by the Free Law Project.