Baron v Rocketboom, LLC

Baron v Rocketboom, LLC 2008 NY Slip Op 09656 [57 AD3d 269] December 9, 2008 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected through Wednesday, February 11, 2009

Fred Baron, Respondent,
v
Rocketboom, LLC, Respondent. Amanda Congdon, Nonparty Appellant.

—[*1] Hughes Hubbard & Reed LLP, New York (Russell W. Jacobs of counsel), for appellant.

Stephen Einstein & Associates, P.C., New York (Stephen Einstein of counsel), for Fred Baron, respondent.

Kenneth J. Glassman, New York, for Rocketboom, LLC, respondent.

Order, Supreme Court, New York County (Richard B. Lowe, III, J.), entered July 20, 2007, which denied the nonparty appellant's motion for leave to intervene as a party defendant and to add Andrew Baron as a necessary party, or in the alternative, to dismiss the action for failure to join a necessary party, unanimously affirmed, without costs.

Plaintiff seeks repayment on a loan. Appellant, who had a 49% membership interest in defendant, submitted a proposed intervenor's answer with a cross claim for declaratory relief, an accounting, and damages for breach of fiduciary duty and breach of contract. She alleged that the loan was improperly entered into between plaintiff and his son (Andrew Baron, who held a 51% interest in defendant) without her knowledge or consent. Appellant was properly barred from intervening in this matter (see CPLR 1012 [a]). To allow otherwise would override the restriction in Limited Liability Company Law § 610 that prohibits a member of a limited liability company from entering an action against the company except where the object is to enforce the member's right against the company. Here, appellant essentially argues that she fits within the section 610 exception insofar as she seeks to preserve the value of her equity interest in the company, which includes the company's assets. However, apart from a claimed individual right to an "equity interest" in the company, appellant has not demonstrated her individual right to any of the company's assets. Her alleged equity interest cannot be equated to a "right" to the company's assets, except upon dissolution of the company. Absent a derivative action on the company's behalf (see e.g. Tzolis v Wolff, 10 NY3d 100 [2008]), appellant is barred by section 610 from intervening in an effort to block enforcement of the company's obligation to repay the loan to the lender.

That branch of appellant's motion seeking joinder of the majority member as a necessary party to the action was properly denied absent evidence showing that the exception in section 610 [*2]would apply to him. Furthermore, appellant has not shown that complete relief cannot be afforded to plaintiff without his son's joinder as a party. Concur—Tom, J.P., Gonzalez, Nardelli, Moskowitz and Renwick, JJ. [See 2007 NY Slip Op 32202(U).]