Najjar Group, LLC v West 56th Hotel LLC

Najjar Group, LLC v West 56th Hotel LLC 2013 NY Slip Op 07123 Decided on October 31, 2013 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on October 31, 2013
Mazzarelli, J.P., Renwick, DeGrasse, Feinman, Gische, JJ.
10925 111004/11

[*1]The Najjar Group, LLC, etc., Plaintiff-Appellant,

v

West 56th Hotel LLC, doing business as Chambers Hotel, et al., Defendants-Respondents.




Buckley Law Group, P.A., New York (Michael B. Buckley of
counsel), for appellant.
Levy Sonet & Siegel, LLP, New York (Steven G. Sonet of
counsel), for respondents.

Order, Supreme Court, New York County (Paul Wooten, J.), entered on or about June 25, 2012, which granted defendants' motion to dismiss the complaint, unanimously affirmed, with costs.

Plaintiff seeks to vindicate its personal rights under Article VII of the Operating Agreement of BDC 56, LLC, which specified that if any surplus revenue remained, those funds would be available for distribution pro rata to the members, including plaintiff, in accordance with their equity interests in the limited liability company. Plaintiff is therefore unable to bring a derivative action because the interests at issue are
personal to it, not corporate (belonging to BDC 56) (see Yudell v Gilbert, 99 AD3d 108, 114 [1st Dept 2012]).

Plaintiff also failed to allege that a pre-suit demand would have been futile. A shareholder may not institute a derivative action unless the complaint "set[s] forth with particularity," the shareholder's efforts to secure the initiation of that action by the board of directors, or sets forth sufficient and particular reasons for not making such efforts (see Business Corporation Law § 626[c]). A pre-suit demand is similarly required in a derivative action involving a limited liability company (see Segal v Cooper, 49 AD3d 467, 468 [1st Dept 2008]). Although plaintiff alleged that individual defendant Born controlled certain entities that owned and operated another hotel to which BDC 56 funds were allegedly diverted, and through these entities engaged in the alleged misconduct at issue, plaintiff failed to specify how the other individual defendants were involved. Thus, plaintiff failed to allege that the majority of the individuals controlling the managing member, defendant West 56th Hotel LLC, were interested in the challenged transaction. [*2]

We further observe that in addition to lacking standing to bring this derivative action, plaintiff's claims, including, inter alia, for breach of contract, breach of fiduciary duty and conversion, have been insufficiently pled.

THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: OCTOBER 31, 2013

CLERK