McLaughlin v DeFalco
2012 NY Slip Op 31036(U)
April 11, 2012
Supreme Court, Nassau County
Docket Number: 21414/06
Judge: Stephen A. Bucaria
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[* 1]
SHORT FORM ORDER
SUPREME COURT - STATE OF NEW YORK
Present:
HON. STEPHEN A. BUCARI
Justice
TRALIIS, PART
NASSAU COUNTY
BRIN MCLAUGHLIN , THOMAS CRITELLI
and SECURCOM CONTRACTING , LTD.
INEX No. 21414/06
Plaintiffs
MOTION DATE: March 8 , 2012
Motion Sequence # 011 , 012
-against-
TONY DEFALCO , DOMINIC DEFALCO
DEF ALCO ASSOCIATES , LLC and
DEFALCO ELECTRC , LLC,
Defendants.
The following papers read on this motion:
Notice of Motion.......... ......... .................... X
Cross- Motion.................................. ........... X
Affirmation/Affidavit in Opposition......... XX
Affidavit in Furer Support...................... X
Reply Affirmation....
Memorandum of Law................................ X
Reply Memorandum of Law...................... X
Motion by defendants Tony DeFalco , Dominic DeFalco , DeFalco Associates , LLC
and DeF alco Electric , LLC for smmar judgment dismissing
&ranted in par
denied in par. Cross-motion by plaintiffs for sumar judgment as to their first, third
and fifth causes of action is denied. Plaintiffs ' motion to strike the answer is denied.
the complaint is
and
[* 2]
MCLAUGHLIN, et al v DEFALCO, et al
Index no. 21414/06
This is an action for breach of fiduciar duty against a minority shareholder in a close
corporation. Plaintiff Brian McLaughlin is the owner of a corporation known as The
Securecom Group, Ltd. , which was engaged in the business of installng
alar and security
systems.
In 2001 , McLaughlin and plaintiff Thomas Critell agreed to form a
corporation with
a similar name , Securecom Contracting, Ltd. , with defendant Tony DeFalco to engage in the
2003.
electrcal contracting business. McLaughlin , Critell , and DeFalco are each 1/3 shareholders
in Securecom Contracting, Ltd.
The paries entered into a shareholder agreement on May
According to the shareholder agreement , Tony DeFalco was to be employed
by
Securecom Contracting on a full time basis and receive compensation including benefits not
to exceed $100 000 per year. The agreement provided that if the directors (shareholders)
unanimously authorized an increase in DeFalco s compensation in excess of $100
000
McLaughlin and Critell were to share in the excess compensation on an equal basis.
On December 6 ,
2005 , Tony DeFalco created defendant DeFalco Electric, LLC
allegedly for the purose of competing with Securecom Contracting. The following day,
DeFalco sent plaintiffs written notice that he intended to withdraw from the business
effective December 31 2006. In the letter, DeFalco expressed hope that a " fair valuation
could be agreed upon for his equity interest and urged plaintiffs to have their lawyer contact
his attorney.
Plaintiffs then commenced the present action , naming also defendant Dominick
DeFalco , who was employed by Securecom Contracting as a foreman until he was terminated
on December 11 ,
2006. In the first cause
of action, plaintiffs allege that defendants
converted Securecom ' s New York City electrical license and used Securecom ' s credit card
and funds to purchase items for DeFalco Electric.
In the second cause of action, plaintiffs
seek recovery of Securecom Contracting s inventory, computer softare , and equipment
which were allegedly taen by defendants. In the third cause of action , plaintiffs allege that
defendant Tony DeFalco breached his fiduciar duty to plaintiffs by engaging in a business
in competition with Securecom Contracting. In the fourh cause of action
, plaintiffs seek a
permanent injunction enjoining defendants from soliciting Securecom Contracting
customers and disseminating false information about the company. In the fift cause
action , plaintiffs allege that defendant Tony DeFalco breached the provision in Securecom
Contracting s shareholder agreement requirig him to devote full time efforts to the
[* 3]
MCLAUGHLIN, et al v DEFALCO, et al
Index no. 21414/06
company. In the sixth cause of action , plaintiffs allege that defendants tortiously interfered
with Securecom Contracting s wireless phone contracts with Verizon by transferring eight
lines to DeFalco Electric. In the seventh cause of action , plaintiffs allege that defendants
interfered with Securecom s contract to perform electrical work at the Bellni-Neznick
Residence by representing that Securecom was unable to complete the work.
In the eighth cause of action, plaintiffs allege that defendants interfered with Securecom
contract with Park South Tenant' s Corp. In the ninth cause of action , plaintiffs allege that
defendants interfered with Securecom s contract with Michael and Maria Mum at 300 East
4th Street in Manatt. In the tenth cause of action , plaintiffs allege that defendants have
tortiously interfered with other unspecified contracts of Securecom. In the eleventh cause
of action, plaintiffs seek a permanent injunction against unspecified tortious interference with
Securecom s contracts. In the twelft cause of action , plaintiffs allege that defendant Tony
DeFalco falsely represented that he was a loyal employee and would devote his full time and
energy to Securecom. The thirteenth cause of action is redundant of the eighth cause of
action. The foureenth cause of action is redundant of the ninth cause of action.
assert a counterclaim for judicial dissolution of
Securecom Contracting. Defendants also seek a declaratory judgment that certin actions
taken by plaintiffs at a special meeting of shareholders held on Januar 31 , 2007 are void and
of no effect.
In defendants ' answer, they
Defendants are moving for sumary judgment dismissing the complaint. Plaintiffs
cross move for summar judgment with respect to their first, third , and fift causes of action.
Alternatively, plaintiffs ' move to strike the answer for failure of defendants to provide
discovery. On a motion for sumar judgment , it is the proponent' s burden to make a prima
facie showing of entitlement to judgment as a matter of law , tendering sufficient evidence
JMD Holding Cot:. v. Congress
Financial Corp. 4 NY3d 373 384 (2005)). Failure to make such a prima facie showing
requires denial of the motion , regardless of the sufficiency of the opposing papers(Id).
However, if this showing is made , the burden shifts to the par opposing the sumar
judgment motion to produce evidentiar proof in admissible form sufficient to establish the
to demonstrate the absence of any material issues of fact
existence of material issues of fact which require a trial
(Alvarez v. Prospect Hospital
NY2d 320 , 324 (1986)).
It was not a breach of the duty of loyalty for Tony DeFalco to form a company in
preparation for competing with Securecom prior to leaving Securecom s employ. Since
~~~~~
[* 4]
MCLAUGHLIN, et al v DEFALCO, et al
Index no. 21414/06
there was no covenant not-to-compete in the shareholder agreement, DeFalco was free to
engage in a competing business after December 31, 2006. However, defendants were not
free to tortiously interfere with Securecom s existing contracts.
The cour concludes that there are contested material factual issues with respect to
whether defendants began to compete with Securecom prior to December 31 , 2006 , whether
defendants wrongfully misappropriated any of Securecom s funds or other propert, and
whether defendants tortiously interfered with Securecom contracts. Accordingly,
defendants ' motion for sumar
denied as to plaintiffs ' first , second , third , fift
sixth , seventh , eighth , and ninth causes of action.
judgment is
However, the cour concludes that plaintiffs have an adequate remedy at law and that
plaintiffs ' claim for misrepresentation relates to their claim for breach of contract. As noted
certain of plaintiffs ' claims for tortious interference are redundant. Accordingly, defendants
motion for summar judgment dismissing the
&ranted as to plaintiffs four
tenth , eleventh , twelft , thirteenth , and foureenth causes of action.
complaint is
Plaintiffs ' cross-motion for
sumar judgment as to the first, third and fifth causes
denied . Plaintiffs
denied . The deposition of
Tony DeFalco , ifnot previously conducted , shall take place in the courhouse at 9:30 am on
April 24 , 2012 and shall continue day to day until completed. The deposition of Dominic
DeFalco, if not previously conducted, shall tae place immediately after the deposition of
of action is
' motion to strike the answer is
Tony DeFalco and shall continue day to day until completed. These depositions may not be
adjoured without the prior written approval of the cour.
So ordered.
Dated AP R
11 2012
ENTERED
AP 13 2012
cou
7FICE
