Goncalves v Iberian Concrete Co., Inc.

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Goncalves v Iberian Concrete Co., Inc. 2012 NY Slip Op 32939(U) December 6, 2012 Supreme Court, Suffolk County Docket Number: 26001-2011 Judge: Emily Pines Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] rq p 4 ( * SUPREME COURT- STATE OF NEW YORK COMMERCIAL DIVISION, 46, SUFFOLK COUNTY PART Original Motion Date: Motion Submit Date: Motion Sequence No.: I rrsent: 110N. EMILY PINES J . S. C. EILEEN GONCALVES, individually and derivatively as a shareholder of IBERIAN CONCRETE CO., INC., Petitioner - Plaintiff, -againstIBERIAN CONCRETE CO., INC., ALFRED J. HESS, GUY DASILVA, JOSE A. DASILVA, GARY DASILVA, DENNIS DASILVA, Respondents - Defendants, q / : /--%!4 . L 9 * y I- Y : i , ; L 08-14-2012 09-3 j-1012 00; MG Attorney for Petitioner - Plaintif! Bracken Margolin Besunder LLP By: Jeffrey Powell, Esq. 1050 Old Nichols Road, Suite 200 Islandia, New York 11748 Attorney for Respondents - Defendants Brian Egan, Esq. Egan & Golden, LLP 96 South Ocean Avenue Patchogue, New York 1 1772 Attorney for Defendant Star R e d m Marshall M. Stern, Esq. Marshall M. Stern, PC 17 Cardiff Court Huntington, New York 1 1746 and STAR READY - MIX, INC., Defendant I n this shareholder s derivative actioddissolution proceeding, defendant Star Ready-Mix, Inc. ( Star ) moves (Mot. Seq. # 003) for an order pursuant to CPLF: 3 103 granting a protective order striking the Notice for Discovery and Inspection dated January 16, 2012, served upon it by plaintiff and limiting discovery to information relevant to the fair value ofplaintiff s shares in Iberian Concrete Co., Inc. ( Iberian ). Plaintiff opposes the motion. * . [* 2] Fmtucil und Procedural Brickground Plaintiff Eileen Goncalves, individually and derivatively as a shareholder of Iberian, corninenced this action on August 17,20 1 1, against Iberian, Alfred J. Hess. Guy DaSilva, Jose A. DaSilva, Gary DaSilva, Dennis DaSilva, and Star. The Verified Petition/Coinplaint contains three causes of action. The first is a derivative action pursuant to BCL 626 for breach of contract against Star based upon Star s purported breach of a lease agreement for real property owned by Iberian. The second cause of action is for dissolution of Iberian pursuant to BCL 5 1104-a based upon alleged oppressive conduct by the individual defendants, Iberians officers and directors. The third cause of action is asserted against the individual defendants for breach of fiduciary duty, unjust enrichment, and self-dealing. On or about October 26,201 1, Iberian served an Election to Purchase Shares of Minority Shareholder Pursuant to Section 1 1 18 of the Business Corporation Law. On or about December 23, 201 1, counsel for all parties entered into #a Stipulation, which was So-Ordered by the Court, pursuant to which it was agreed, in relevant part: 1 , All claims pleaded in this hybrid proceeding are hereby stayed, pending the determination of the fair value of Petitioner s shares, subject to the discovery hereinafter provided for and further discovery demands as per the CPLR. 2. [Iberian] shall provide Petitioner s counsel with all financial records and tax I-cturns of [Iberian] for a period of five years prior to the valuation date, within ten days after counsel for Petitioner advises counsel for [Iberian], in writing, of all such financial records and tax returns he seeks to examine and copy. 3. Petitioner and the President of [Iberian] will submit to depositions on all matters reasonably related to the fair value of Petitioner s shares on the valuation date. at such dates and at such places as the attorneys for the parties shall deterrninc. 4. The parties shall exchange all real estate appraisals and valuation reports prepared by experts retained by the parties, and to produce such experts for depositions on such dates and at such places as the attorneys for the parties shall Page 2 of 5 [* 3] dctermine Pursuant to a further Stipulation dated January 10,2012, which references the Stipulation dated December 23,20 1 1, all counsel agreed that (1) plaintiffwould serve notices for a notice for discovery and inspection by February 10,2012, (2) defendants would respond to said notices by March 12, 2012, (3) examinations before trial of plaintiff and Iberian would be conducted on or before April 30, 20 12, and (4) real property appraisals would be exchanged by April 30, 2012. Plaintiff served a Notice for Discovery and Inspection dated January 16,20 12, upon Star seeking, among other things, minutes of Star s shareholder meetings, Star s shareholder resolutions, minutes of meeting of Star s board of directors, Star s bylaws, stock transfer ledger, general ledger, cash receipts journal, all communications between Star and Iberian, inventory information, check register, invoices, bills, financial statements, and payroll reports. By letter dated January 19, 20 12, counsel for Star rejected the Notice for Discovery and Inspection on the grounds that it violated the Stipulation dated December 23, 201 1, and was overly broad. On or about May 23, 2012, counsel for the parties entered into another Stipulation and Order, which provides, in relevant part: 2. Undersigned counsel concur that discovery as to wrongful acts and conduct for the purpose of justifying dissolution has been obviated by Iberian s exercise of its Election to Purchase Shares of Minority Shareholder pursuant to BCL 4 1 1 18. The scope of discovery shall include and extend to all matters that are reasonably related to the assets and/or liabilities of Iberian or valuation of the Plaintiffs Iberian stock. * * * 6 . Additional discovery reasonably related to the assets and/or liabilities and/or the valuation of Iberian may be conducted pursuant to the CPLR and Rules of court. Discussion Page 3 of 5 [* 4] 4s recently set forth by the Appellate Division, Second Department in Cozinty of Sztjfolk Long Is. Powey Azith. (- AD2d -, 2012 NY Slip Op 08087 [2d Dept 11 30E]): CPLR 3 10 l(a) provides that [tlhere shall be full disclosure ofall matter material and necessary in the prosecution or defense of an action, regardless ofthe burden ofproof. Nevertheless, unlimited disclosure is not mandated, and the rules provide that the court may issue a protective order denying, limiting, conditioning or regulating the use of any disclosure device to prevent unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice to any person or the courts (CPLR 3103[a]; see Accent Collections, Inc. v Capelli Enters., Inc., 84 AD3d 1283; Spohn-Konen v Toiwi of Brookhaven, 74 AD3d 1049; Palerrno Masor7 C onstr. v Aavk Holding Corp., 300 AD2d 460, 461). Generally, the supervision of disclosure is left to the broad discretion of the trial court, which must balance the parties competing interests (Accent Collections, Inc. v. Cappelli Enters. Inc., 84 AD3d at 1283; see Koopev v Kooper, 74 AD3d 6 , 17; Palerrno Mason Constr. v Aark Holding Covp., 300 AD2d at 461). Here, the parties charted their own course with regard to discovery by entering into the various stipulations. They specifically agreed that all claims in this action/proceeding, including the derivative claim for breach of contract against Star, are stayed pending the determination of the fair value of Plaintiffs shares of Iberian. It was also agreed that at this stage the scope of discovery is limited to matters that are reasonably related to the assets and/or liabilities of Iberian and/or the valuation of Iberian. The Court finds that the scope of the Notice for Discovery and Inspection dated January 16, 20 12, served by the plaintiff seeks information that is beyond the scope of the limited discovery agreed to by the parties in that the information sought is not reasonably related to the assets and/or liabilities and/or valuation of Iberian. While the plaintiff is certainly entitled to discovery from Star regarding the amount of rent paid by or due from Star to Iberian during the relevant time period, the Court disagrees that the collectability from Star of any rent it may owe Iberian is not reasonably related to the assets and/or liabilities and/or valuation of Iberian. Rent owed by Star to Iberian is simply a receivable of Iberian, whether collectable fi-orn Star or not. Plaintiff is also clearly entitled to discovery regarding the terms of any Page 4 of 5 [* 5] lease or other agreement(s) between Star and Iberian concerning the payment of rent by Star to Iberian. However, contrary to plaintiffs contention, Star s financial statements are not relevant to a determination of the fair amount of rent, if any, thar; Iberian should have been charging Star. Finally, in light of the stipulations between the parties limiting the scope of discovery, the allegations of self-dealing, breach of fiduciary duties and/or conflict of interest are not relevant at this time. Accordingly, I t 1s ORDERED that Star s motion for a protective order striking the Notice for Discovery and Inspection dated January 16, 2012, served upon it by plaintiff is granted. This constitutes the DECZSION and ORDER of the Court. * . e Dated: December 6,2012 Riverhead, New York J. S. C. [ ]FINAL [ x ] NON FINAL Page 5 of 5

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