320 W. 111th St. Hous. Dev. Fund Co. v Taylor
Annotate this CaseDecided on April 23, 2009
Supreme Court, New York County
320 West 111th Street Housing Development Fund Company, Plaintiff,
against
Raynard Taylor, JEANETTE LOPEZ, MANUEL ARAUJO, EDMUND TAYLOR, LENNY LAVERGNE, and IMANI MANAGEMENT, INC., and ANGEL LAVERGNE, Defendants.
102258/2009
Debra A. James, J.
Plaintiff moves for a preliminary injunction seeking to enjoin defendants from, inter alia, "interfering or causing interference, directly or indirectly with plaintiff's right to conduct business" and "conducting business ... on behalf of the plaintiff" and to compel defendants to turn over all corporate plaintiff records, books and other documents to plaintiff.
Defendants cross move to disqualify the firm of Goldstein Hall PLLC from representing plaintiff on the ground of conflict of interest and to avoid the appearance of impropriety. Defendants also move to dismiss the action pursuant to CPLR § 3211(a)(3) and in the alternative for a declaration that defendants are the legally constituted Board of Directors.
The court must deny defendants' cross motion to disqualify the firm representing plaintiff. Kassis v Teacher's Insurance and Annuity Association, 93 NY2d 611, 617 (1999) sets forth the standard for interpreting lawyer disciplinary rules that "prohibit attorneys who have represented a former client in a matter from switching sides and [that] impute one attorney's personal conflicts of interest to his or her current firm." Kassis recognizes that there is a presumption that if one attorney is disqualified as a result of having acquired confidential information at a former firm, such information is imputed to the attorney's current firm, thus disqualifying the current firm from representing such former client. The Court of Appeals in Kassis ruled, however, that such presumption is not irrebuttable, noting the "'significant hardships' on the current client" and "abusive invocation for tactical advantages in a lawsuit" that such an irrebutable presumption would impose.
The court cannot determine on the papers submitted whether attorney Lisa Ornest acquired any confidential information at the defense firm in the course of prosecuting landlord tenant summary proceedings on behalf of plaintiff that is likely to be significant or material in the litigation. Under Kassis, it is the burden of plaintiff to prove such lack of significance and materiality as one approach to rebutting the presumption. Although Ms. Ornest, in her affidavit, states that she was neither told nor given possession of any information in regards to plaintiff's governance or the "internal affairs of the Board", which is at issue here, the court need not decide the issue whether any other information she obtained might be material or significant to the [*2]litigation at bar, in that plaintiff's counsel has rebutted the presumption by erecting a very solid "Chinese Wall" around Ms. Ornest, the disqualified attorney, which is sufficient to avoid firm disqualification. Plaintiff's counsel states, under penalty of perjury, that Ms. Ornest, who is of counsel to his law firm Goldstein Hall "has her own office that is physically isolated from the Goldstein Hall offices"; does not have access to the client files; and that the Goldstein Hall offices remain locked when the law firm's staff is out of the office." He avers further that Ms. Ornest played no part in the former client's contacting Goldstein Hall for representation and has never been consulted nor offered any input on the action at bar or any other matter regarding such client, the plaintiff herein. Finally, plaintiff's counsel states that Ms. Ornest is assigned to work on transactional matters for Goldstein Hall only, and Ms. Ornest states that is the limit of her work for Goldstein Hall. Such "quarantine" of Ms. Ornest from this action also constitutes an adequate safeguard against any appearance of impropriety. Cummin v Cummin, 264 AD2d 637, 639 (1st Dept 1999).
To obtain a preliminary injunction, a plaintiff is "required to establish (1) a likelihood of success on the merits . . .; (2) irreparable injury in the absence of the injunction; and (3) a balancing of the equities in his favor." Terrell v Terrell, 297 Ad2d 301, 303 (1st Dept 2001).
The nine causes of action stated in plaintiff's complaint seek similar injunctive relief and a declaratory judgment "voiding any contracts, either written or verbal, entered into by the defendants." Defendants' pre-joinder cross-motion to dismiss alleges that plaintiff lacks capacity to commence this action and seeks a declaratory judgment with respect to defendants claim to be the duly elected Board of Directors.
Both counsel miss the mark under the substantive and procedural law applicable to this case.
Plaintiff has failed to demonstrate a likelihood of success on the merits with respect to any of her claims for injunctive relief, as in and of themselves, they state no meritorious claim but refer only to remedies; nor is the action for judgment declaring void a contract resolvable on the motion at bar since plaintiff does not identify what contract it seeks to void.
On the other hand, defendants may not seek declaratory judgment relief by way of a cross motion to dismiss, particularly since they have yet to interpose an answer, let alone a counterclaim for affirmative relief. Nor have defendants demonstrated that plaintiff lacks capacity to maintain this action, as a matter of law.
Construing plaintiff's complaint most liberally, to the extent that plaintiff seeks an order that compels defendants to turn over the corporate books and records, such a claim sounds in mandamus. The proper form for this action is a special proceeding for a prerogative writ of mandamus to compel pursuant to Article 78 of the Civil Practice Laws & Rules. A corporation or other state-chartered organization is subject to Article 78 because it is beholden to the state for [its] franchise or charter or the exercise of [its] functions.' Weidenfeld v Keppler, 84 App Div 235 (1st Dept) affirmed 176 NY 562,... (1903).
Thus, corporations are quasi-governmental bodies that can be compelled in an article 78 proceeding to fulfill not only obligations imposed upon them by state or municipal statutes but also those imposed by their internal rules.' Gray v Canisius College of Buffalo, 76 AD2d 30, 33 (4th Dept 1980)"
Mandamus is available, for example, to compel corporate management...to comply with
[*3]the corporation's by-laws regarding corporate governance
(Auer v Dressel, 1984, 306 NY 427, convening of special meeting upon demand of
majority of shareholders meeting).
McKinney's Practice Commentaries, CPLR 7802:1, p 493.
Mandamus is certainly available to plaintiff as the means to compel outgoing
officers to deliver books to the incoming officers of the corporation. In the Matter of Lenc v
Zicha, 223 AD 158, affirmed 250 NY 541 (1929).
Defendants contend that the plaintiff was incorporated under the Business Corporation Law as a low income housing cooperative corporation pursuant to Article XI of the State's Private Housing Finance Law (§ 570 et seq). Business Corporation Law § 619 provides that upon petition by an aggrieved shareholder, the court may direct a hearing with respect to proofs and allegations and "confirm an election, order a new election or take other action as justice may require." Construing the defendants' supporting papers most liberally, they likewise appear to seek mandamus with respect to compelling plaintiff to abide by the by-laws that set forth the corporate governance requirements for plaintiff.
Each party makes various claims with respect to the propriety of an election that took place on January 21, 2009, and the propriety of a notice for a special meeting on February 24, 2009 for yet another election or for a recall election of a new Board of Directors.
Plaintiff submits no copy of the By-Laws with its papers and defendants append an incomplete copy of such By-Laws to their papers. Therefore, the papers before the court are woefully inadequate to determine, for example, that assuming Michelle Olave, was, in fact, ineligible to vote because she was more than two months in arrears in payments under the Proprietary Lease, as defendants allege, that the wrongful inclusion of her vote in those cast would have changed the result of the election on January 21, 2009. In Re Workmen's Benefit Fund, 265 AD 176 (1st Dept 1942). Nor is the affirmation of Iliana T. Santiago, which was not taken under oath before a notary public, sufficient to rebut defendants' contention that the January 9, 2009 meeting notice of the January 30, 2009 meeting was delivered to the shareholders prior to the January 11, 2009 notice of the January 21, 2009 meeting that plaintiff claims was legitimate. See Application of Vallone, 92 AD2d 799 (1st Dept 1983), which holds that generally the failure to give notice in accord with the corporate by-laws requires a new election of directors even without showing that the results of the election would, or might have been different.
When a civil judicial proceeding is instituted in the wrong form, as both parties have embarked upon here, the court is to convert such proceeding into the proper form, rather than to grant dismissal, and to make whatever order is necessary for the proper prosecution. CPLR 103c; In the Matter of First National City Bank v City of New York, 36 NY2d 87 (1975). Therefore, the court in this action converts the plenary action for declaratory judgment to a special proceeding for a writ of mandamus pursuant to the CPLR Article 78 to compel the outgoing officers and outgoing agents of the corporation to turn over and deliver forthwith the corporate books and records to plaintiff, and to compel plaintiff to abide by the By-Laws in governing the body of tenant-shareholders.
The parties raise issues of fact that must be resolved upon a hearing of the proofs and allegations of the parties. CPLR 409. [*4]
The corporate books and records must be deposited forthwith into the court pending a determination pursuant to Business Corporation Law § 619 and further action of the court. Pending such further action, the parties shall access such books and records on two days notice (by telephone or telefacsimile) with the court via its IAS Part 59 Clerk.
Accordingly, it is hereby
ORDERED that the cross motion to disqualify counsel for plaintiff is DENIED; and it is further
ORDERED that the cross motion of defendants for a judgment declaring defendants Taylor, Lopez, Araujo, Taylor and Lavergne as the legally constituted Board of Directors is DENIED, and it is further;
ORDERED that the motion of plaintiff for injunctive and declaratory relief is DENIED, except that pending further action of this court, defendants and any agent that is custodian of the corporate books and records must deposit such records with the Clerk of IAS Part 59 forthwith; and it is further
ORDERED that (1) defendants are directed to serve on plaintiff's counsel and file with Supreme Court, New York County, Clerk of Part 50 R a copy of this Order with notice of entry and (2) that the parties are directed to attend a hearing pursuant to Business Corporation Law § 619 to report on whether and when proper notice of the meeting to elect the Board of Directors was made, whether a quorum was achieved at such meeting and whether the purported directors of plaintiff corporation received a majority of the legal votes before a Special Referee at a time, place and date to be set by the Clerk of Part 50R, who will to notify the parties of the time, place and date of such hearing; and it is further
ORDERED that the Special Referee is to hear and report pursuant to CPLR 4311, and the reference is to be conducted and the report filed pursuant to CPLR 4320.
This is the decision and order of the court.
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