Matter of Brendan M. Schneck v Schneck

[*1] Matter of Brendan M. Schneck v Schneck 2010 NY Slip Op 51084(U) [27 Misc 3d 1237(A)] Decided on June 8, 2010 Supreme Court, Nassau County Bucaria, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on June 8, 2010
Supreme Court, Nassau County

In the Matter of the Application of Brendan M. Schneck individually and as 50% shareholder of R & J COMPONENTS CORP., B & T SCHNECK, INC., FEDERAL CONNECTORS, INC., S & S ELECTRONICS CORP., STANDARD RADIO ELECTRICAL PRODUCTS CORPORATION and SCHNECK PROPERTIES OF SC, LLC, Petitioners-, Plaintiffs, For the Judicial dissolution of R & J COMPONENTS CORP., B & T SCHNECK, INC., FEDERAL CONNECTORS, INC., S & S ELECTRONICS CORP., STANDARD RADIO & ELECTRICAL PRODUCTS CORPORATION, SCHNECK PROPERTIES OF SC, LLC,

against

Tyrel C. Schneck and NEW YORK STATE TAX COMMISSION, Respondents-, Defendants.



1347/07

Stephen A. Bucaria, J.

Motion for summary judgment pursuant to CPLR 3212 by the petitioner-plaintiff Brendan M. Schneck, individually and as a shareholder of R & J Components Corp., B & T Schneck, Inc., Federal Connectors, Inc., S & S Electronics Corp and Standard Radio & Electrical Products Corporation, Schneck Radio & Electrical Products Corp., [*2]and Schneck Properties of SC, LLC is denied.

Cross motion by the respondent Tyrel C. Schneck for an order: (1) dismissing the amended verified petition pursuant to CPLR 3212; (2) directing the petitioner Brendan M. Schneck to specifically perform stated obligations as allegedly required by the R & J Components Corp., shareholders' agreement; and (3) requiring Brendan M. Schneck to "immediately surrender" his shares in R & J Components Corp., in accord with the allegedly governing terms and prescribed pricing criteria set forth in the parties' shareholders' agreement is denied.

As more fully detailed in this Court's prior orders dated September 17, 2007 and December 2, 2008, the within hybrid action and BCL corporate dissolution proceeding, arises out of a contentiously litigated dispute between two brothers — the petitioner Brendan M. Schneck, and the respondent Tyrel C. Schneck — each of whom each owns 50% of the outstanding stock in several of the respondent corporations, including R & J Components Corp ["R & "J"].

R & J, an electronics components company, was founded some sixty years in 1950 ago by the parties' late father, Raymond Schneck, who passed away in 1990. Prior thereto, in December of 1986, Raymond, Tyrel and Brendan entered into a shareholders agreement with respect to R & J, pursuant to which Tyrel was appointed Vice President and Brendan Secretary (T. Schneck Aff., Exh., "1" [1986 "Shareholders' Agreement," ¶ 1.2).

After Raymond passed away, Tyrel assumed the position of Chief Operating Officer and currently serves as president of R & J, while Brendan headed R & J's sales department and also performed a variety of important functions — none of which, he contends, was any less valuable than the duties performed by Tyrel (Order of Bucaria, J., at 3 ["2007 Order at___"]; T. Schneck [Nov 2009] Aff., ¶¶ 6-14, 28; R & J by-Laws, ¶ 29).

According to Tyrel, the business has "grown exponentially" under his leadership and evolved into a highly profitable enterprise employing some forty individuals (T. Schneck [Nov 2009] Aff., ¶¶ 10-12, 28).

Paragraph 3.3 of the R & J shareholders' agreement contains a buy-out provision which provides, inter alia, "[i]n the event that any Shareholder voluntarily resigns his position or is discharged by the Corporation, the Corporation, or the other Shareholders, shall have options to purchase such Shareholders Shares * * *" . [*3]

Prior to Raymond's death in September of 1990 and thereafter, Tyrel has consistently received a higher annual salary than that paid to Brendan — although Tyrel advises that the profit distributions made between 1998 and 2006 (amounting to some $20.6 million), were dispensed equally (T. Schneck [Nov 2009] Aff., ¶¶ 20-21; Dep., 280).

It is undisputed that R & J's by-laws provide that officer salaries are to be fixed by the Board of Directors (T. Schneck [Nov 2009] Aff., ¶ 13 Exh., "2" [by-laws, ¶ 27). However, the parties' father, Raymond Schneck, never adhered to this by-law and unilaterally fixed officer salaries himself (T. Schneck [Nov 2009] Aff., ¶¶ 13-19). It is undisputed that the salary Raymond Tyrel paid to Tyrel was always more than that paid to Brendan (B. Schneck Dep., 20, 157-162). According to Tyrel, the differential was attributable to his executive position and increased managerial responsibilities with the companies (T. Schneck [Nov 2009] Aff., ¶¶ 15, 19, 23; B. Schneck Dep., 157-159; T. Schneck Dep., 315).

After Raymond passed away, Tyrel continued to exercise salary-setting authority, essentially using the proportionate formula established by his father, i.e., he regularly compensated himself (without consulting Brendan) at a higher annual rate than that applied to Brendan (T. Schneck Dep., 301-312; 315-317).

Tyrel claims that between 1998 and 2006, his total salary amounted to some $7 million, while Brendan was concededly paid the lesser sum of $5.5 million — a differential which he claims is "dwarf[ed]" by the much greater profit distribution amounts, which were always equally dispensed to the two brothers (T. Schneck [Nov 2009] Aff., ¶¶ 15, 19, 23; B. Schneck [March 2007] Aff.,¶ 32). Specifically, according to Tyrel, upon combining profit and salary over the years between 1998 and 2006, he received approximately $1.92 annually while Brendan received the sum of about $1.76 million annually (T. Schneck [Nov 2009]

Aff., ¶ 22).

Brendan asserts that Tyrel "always told him that * * * [they] were receiving the same, equal 50-50 share" (B. Schneck [March 2007] Aff.,¶¶ 20-21), while Tyrel contends that the salary disparity was never a secret as it was openly reflected on the companies' tax returns — to which Brendan had access in prior years (T. Schneck [Nov 2009] Aff., Exh., "3"; B. Schneck Dep., 138-140 see, Zanderzuk Aff., ¶¶ 3-6). Tyrel claims that he never promised Brendan that his salary would be equal to his own and there exists no corporate document or by-law which requires or even mentions, equality in officer compensation (B. Schneck Dep., 159, 162). [*4]

At some point in 2003, R & J adopted a written profit sharing plan which, among other things, contains an "Article VI" governing the payments of benefits (T. Schneck Aff., Exh., "5"). Article VI — generally entitled "Determination and Distribution of Benefits" — lists the various contingencies under which employee distributions could be made — including death, retirement, disability and termination (Plan, ¶¶ 6.1-6-4 at 27-29).

Section 6.4[a] of Article VI provides in part that, "[i]f a Participant's employment is terminated for any reason other than death, Total and Permanent Disability or retirement, then such Participant shall be entitled to such benefits as are provided hereinafter * * *" (Plan, at 29).

Brendan claims that his relationship with Tyrel began to deteriorate in 2005, when Tyrel allegedly became overbearing and "tyrannical" in his management of the business (B. Schneck [Sept. 2008] Aff., ¶¶ 8-9; B. Schneck [March 2007] Aff.,¶ 23). More particularly, Brendan claims that Tyrel adopted a dismissive, dictatorial management style; froze Brendan out from participating in the management of the companies; and barred access to the companies' books and records.

Moreover, upon consulting with R & J's accountants, Brendan claims to have discovered, among other things, that Tyrel had been taking "hundreds of thousands of dollars more each year" in salary than he was paying out to Brendan (B. Schneck Dep., 151-152 see, Zanderzuk Aff., ¶¶ 5-6). In fact, between 2000 and 2006, Tyrel paid himself over $1.124 million more in salary than was paid to Brendan (B. Schneck [March 21 2007] Aff., ¶ 32).

This inequality was contrary to Brendan's conception of how the profits would be distributed upon the passing of the parties' father. In sum, it was Brendan's understanding

that upon Raymond's death, he and Tyrel were to be "fifty-fifty down the line" — meaning that "at the end of the day" strict equality was required, irrespective of whether the earnings were denominated as profits or paid out in salary (B. Schneck Dep., 151-153).

In light of the acrimony between the two brothers — who then were not speaking — and allegedly order to promote settlement discussions, Brendan claims that he decided to stay away from the office, commencing in December, 2006 (B. Schneck [Sept 8] Aff., ¶¶ 8-10; B. Schneck Dep., 56-57, 61-62). Brendan testified that neither Tyrel nor anyone else told or directed him to leave the office in December of 2006 or took his employment responsibilities away (B. Schneck Dep., 33, 36, 47, 50-51, 56, but see B. Schneck [October 2008] Aff., ¶ 18). Although Brendan's salary was terminated at that point, and his name was apparently removed from the sale department personnel listed on the firm website, he never wrote to anyone at R & J to object about the termination since he [*5]believed it would be futile, and more fundamentally, because, "as a 50-percent owner of the company * * * [he] didn't feel * * * [he] needed to write to anyone" (B. Schneck Dep., 37-38; 41-43, 56, 62, 116, 129).

In May of 2005, the two brothers jointly investigated and thereafter agreed to purchase a warehouse in South Carolina, where portions of R & J's inventory were to be stored (B. Schneck Dep., 205-210). The investment so far has been a "smart" one in terms of the warehouse space acquired, the price paid and the favorable tenancy associated with the property (B. Schneck Dep., 205-210). The parties formed a limited liability company to acquire and hold the South Carolina property, and Brendan agreed to Tyrel's designation as managing member. Brendan could not recall why he agreed to permit Tyrel to assume the position of managing member — other than to state that "one of us had to be a managing member" (B. Schneck Dep., 213).

By verified petition and complaint dated January 2007, Brendan commenced the within, hybrid proceeding and action pursuant to, inter alia, BCL § 1104[a] for judicial dissolution of R & J. As subsequently amended, the petition also includes causes of action for an accounting and breach of fiduciary duty (A. Pet. ¶¶ 67-76).

Insofar as relevant, Brendan's first cause of action demands judicial dissolution of R & J pursuant to BCL § 1104[a], and alleges that he and Tyrel are deadlocked; that action by R & J's board of directors and/or its two shareholders cannot be obtained; and that he and Tyrel, as shareholders, are so divided that the best interests of R & J would be served by a judicial dissolution (A. Pet., §§ 37-38)(see, BCL § 1104).

Although the petition contains a factual averment to the effect that Tyrel froze Brendan out from participating in the business (Pet., ¶ 30), there is no claim grounded upon the provisions of BCL § 1104-a, which authorizes judicial dissolution upon proof, inter alia, that "[t]he directors or those in control of the corporation have been guilty of illegal, fraudulent or oppressive actions toward the complaining shareholders * * *." The original petition did not advance any claim for recovery of the previously withheld salary amounts. The respondents have answered, denied the material allegations of the complaint and interposed various affirmative defenses.

Thereafter, at some point prior to early 2008, another Schneck brother, Lance Schneck, lost his job, but then began a new career as a financial planner. Lance asked Brendan if he could assist him by turning over the funds in Brendan's pension/profit sharing plan to him (B. Schneck Dep., 224-227, 230, 238; B. Schneck [Oct. 2008] Reply Aff., ¶¶ 24-25). The parties' other siblings were apparently investing with Lance as well so as to assist him in reaching a stated investment quota (T. Schneck [Nov 17] Dep., [*6]148-149, 177; L. Schneck Dep., 127-129).

Brendan contends that he agreed to help Lance and told Lance to speak to Tyrel, which he did (B. Schneck Dep., 234-235). Subsequently, Tyrel allegedly told Lance that he too would help Lance by ensuring that Brendan's profit sharing funds were liquidated and transferred to Lance's company for investment (B. Schneck Reply Aff., ¶¶ 26-27; T. Schneck [Nov 17] Dep., 145-146, 154, 162).

Purportedly without consulting counsel, Brendan later personally contacted R & J's pension administrator, June Blumenthal, and allegedly informed her that he wanted to receive his full R & J profit sharing plan distribution (B. Schneck [Oct. 2008] Reply Aff., ¶¶ 27-28, 29; Blumenthal Aff., ¶¶ 2-4; B. Schneck Dep., 234-235).

In response to Brendan's inquiries, Blumenthal informed Brendan — who was a trustee of the profit sharing plan (B. Schneck Dep., 245) — that "distribution information would be given to him at the same time it would be given to all other terminated plan members" (Blumenthal Aff., ¶¶ 3-4). According to Blumenthal, in order to receive a profit sharing plan distribution, an employee must, inter alia, have terminated his or her employment with R & J, as defined by the terms of the plan (Blumenthal Aff.,¶ 3; Plan, ¶¶ 6.1-6.4 ).

In order to facilitate the plan payout, Blumenthal later sent Brendan certain forms to sign, which he executed and returned. Brendan checked boxes on the form by which he: (1)

requested a roll over of his entire vested account balance to Lance's plan; and (2) indicated that he did not want to continue his life insurance policy (T. Schneck Aff., Exh., "4"). In May of 2008, $497, 210.00 was distributed to Brendan, which sum was rolled over to the plan designated by his brother, Lance (Blumenthal Aff., ¶¶ 6-8; B. Schneck Dep., 227-228, 255; T. Schneck Dep., 227-228).

The materials which Brendan returned to Blumenthal also contained, among other things, an attachment entitled, " Information regarding Insurance policies Owned by the Retirement Plan." The first sentence of this form notice advises that "[w]hen a participant terminates his/her employment, the participant will be entitled to receive a lump sum distribution equal to the value of his/her vested account balance including the cash surrender value of the insurance policy" (T. Schneck Exh., "F").

Apparently, the insurance policy proceeds — some $200,000.00 were not invested with Lance — who testified that he was not "closing out" Brendan's account "just moving a portion over" (L. Schneck, Dep., 54). Lance discussed other investment options with [*7]Brendan, such as moving the entire pension amount over, but according to Lance, Brendan "did not want to do" that (L. Schneck Dep., 109).

In June of 2008, and based upon the theory that the profit sharing distribution was, in effect, a resignation, Tyrel sent Brendan a letter purporting to exercise his buy out rights pursuant to the above-referenced provision. Prior to the 2008 profit sharing request, Tyrel had never raised the claim that Brendan's conduct in absenting himself from the office constituted a voluntary resignation.

When Brendan rejected Tyrel's buy-out demand, Tyrel sent another letter in August of 2008 to Brendan, again demanding that he turn over his shares "in accordance with our shareholders' agreement" (Pet., OSC Exh., "C").

In prior motion practice Brendan argued — as he does now — that he never intended to resign; that his main purpose was to assist Lance; and that he only received a partial payout of his accrued benefits, since he never cashed out his insurance policy. According to Brendan, the distribution was no more than a simple transfer or shifting of funds — not evidence of any voluntary resignation within the meaning of the parties' shareholder agreement (B. Schneck Dep., 228, 249, 251-253).

By order to show cause dated September 3, 2008, Brendan previously moved for

provisional relief enjoining Tyrel from, inter alia, taking any action to compel him to sell his shares and/or attempting to sell or transfer any of his shares in R & J, which application the Court granted.

Brendan also sought additional relief, which this Court denied, compelling Tyrel and/or R & J to, inter alia, immediately reinstate his salary and benefits, retroactive to when they were terminated, with interest.

In its December 2008 order, this Court addressed the facts surrounding the alleged resignation theory interposed by Tyrel — a key issue in the dispute which has been once again raised in connection with the parties' currently noticed motions for summary judgment.

In denying Brendan's application for an immediate and retroactive recovery of the previously terminated salary amounts, this Court observed that Brendan was prematurely requesting — in effect — the ultimate "relief" by way of preliminary injunction (e.g., SHS Baisley, LLC v. Res Land, Inc., 18 AD3d 727, 728), and that additionally, "sharp factual issues and conflicting inferences with respect to the import and significance of the Brendan's conduct," i.e., his in voluntarily absenting himself without pay from the R & [*8]J's offices allegedly from as long ago as December of 2006; and (2) liquidating his R & J pension benefits (Schneck v. Schneck, 21 Misc 3d 1144A, [Sup. Ct., Nass. Co. 2008).

Similarly, and upon reviewing Tyrel's earlier, 2007 motion for summary judgment, which was made when discovery had "yet to progress beyond the preliminary stages", this Court held that "factual issues exist with respect to the Brendan's claims that an actionable deadlock exists, and/or that dissolution would be beneficial to the shareholders within the meaning of BCL§ 1104[a]" (Schneck v. Schneck, ___Misc 3d___, 2007 WL 2988394, citing to, Giordano v. Stark, 229 AD2d 493, 494).

Discovery is now essentially complete (cf., North Fork Preserve, Inc. v. Kaplan, 68 AD3d 732, 733), and Brendan moves for summary judgment dismissing Tyrel's resignation counterclaim and for judgment on the amended petition-complaint "in its entirety."

Tyrel opposes the application and cross moves for summary judgment dismissing the amended verified petition. Tyrel contends, inter alia, that the evidence now establishes as a matter of law that Brendan resigned from his position and that his resignation thereby triggered R & J's right to acquire Brendan's shares in R & J Components Corp.

Tyrel additionally claims that there is no evidence supporting a dissolution claim pursuant to BCL 1104[a], since R & J is — and continues to be — a highly profitable commercial enterprise; and there is absent the sort of intractable or internally destructive dissension which would create "an irreconcilable barrier to the continued functioning and prosperity of the corporation" (In re Dream Weaver Realty, Inc., 70 AD3d 941, quoting from, Matter of Kaufmann, 225 AD2d 775).

Notably, and at this juncture, the only outstanding claims are Brendan's dissolution claims as to R & J and another Schneck entity, Standard Radio and Electrical Products Corp (first and firth causes of action, respectively), and the sixth and seventh causes of action, sounding in breach of fiduciary duty and accounting (see, T. Schneck, Main Brief at 1, fn 3).

On a motion for summary 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 to demonstrate the absence of any material issues of fact (JMD Holding Corp. 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 party opposing the [*9]summary judgment motion to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial (Alvarez v. Prospect Hospital, 68 NY2d 320, 324 [1986]).

Those branches of the parties' motions which are for summary judgment with respect to defendant Tyrel's counterclaim based upon a purported resignation by Brendan are denied.

Tyrel's cross motion seeking summary judgment with respect to Brendan's fourth cause of action sounding in dissolution as to R & J, and Brendan's related breach of fiduciary duty and accounting causes of action, is also denied. That branch of Tyrel's cross motion which is to dismiss Brendan's dissolution claim under BCL § 1104 as against R & J should be denied (A. Pet 1st cause of action). Brendan's related claims for judgment on that dissolution cause of action are also denied.

Preliminarily, this Court has already held upon a similar evidentiary predicate, that the record presented factual issues with respect to whether, inter alia, Brendan's conduct established a "voluntary resignation" within the meaning of the parties' shareholders' agreement. On the papers submitted, the Court perceives no reason to depart from its prior

holding in this respect.

While the R & J profit sharing plan authorizes a distribution upon, inter alia, a covered employee's retirement and/or termination (Plan,¶¶ 6.3, 6.4), the fact that Brendan requested the distribution does not necessarily establish that he had previously resigned — or that the request itself must be viewed as a voluntary resignation within the meaning of the parties' substantively distinct and separate shareholder's agreement (cf., Doniger v. Rye Psychiatric Hosp. Center, Inc., 122 AD2d 873, 876-877)(Agreement at 8, ¶¶ 3.3).

Despite Brendan's departure in December of 2006, there are no contemporaneously generated documents or internal corporate records which demonstrate that R & J had ever formally designated, considered or classified Brendan as a terminated employee — or an employee who had voluntarily resigned (T. Schneck Dep., 227-228).

Nor is there any written document which preceded the distribution request by which Brendan expressly and affirmatively advised R & J that he was actually resigning from his position. Significantly, Brendan claims that never intended to resign and construed the request as a mere transfer of funds, whose purpose was to assist his brother Lance. [*10]

While R & J did cut off Brendan's salary after he left in December of 2006, it is unclear precisely what significance and import should be attributed to this occurrence, i.e., whether — in this closely held, family-owned entity — the salary termination can be viewed as some evidence that Brendan had resigned, or whether instead, the cessation of salary was reflective of the fact that, for that specific period of time, Brendan was no longer regularly reporting for work. The latter inference is buttressed by the fact that, inter alia, Tyrel never raised the resignation theory until after Brendan's commencement of the present lawsuit in 2008, and then only after Brendan requested the disputed pension distribution.

It is settled that to obtain judicial dissolution pursuant to Business Corporation Law 1104(1), the petitioner must establish, inter alia, that internal dissension has resulted in a management deadlock and/or that by virtue of that dissension, dissolution would be beneficial to the shareholders (Matter of Fazio Realty Corp., 10 AD3d 363; Matter of Parveen, 259 AD2d 389 see, BCL § 1104[a][1],[3]).

Notably, "[t]he standard for dissolution is not who is at fault for a deadlock, but whether a deadlock exists" as evidenced by significant dissension resulting in " an irreconcilable barrier to the continued functioning and prosperity of the corporation' " (In re

Dream Weaver Realty, Inc., supra , 70 AD3d 941, quoting from, Matter of Kaufmann, supra , 225 AD2d 775 see generally, In re Radom & Neidorff, Inc., 307 NY 1, 7 [1954]; Matter of Goodman v Lovett, 200 AD2d 670; see also, In re Kagan and Hazelkorn, ___Misc 3d___, 2005 WL 856007 [Supreme Court, Nassau County 2005]; Wagner v. Dombrowsky, supra ___Misc 3d___, 2004 WL 3250104 [Supreme Court, Nassau County 2004] ). However, "[d]issolution is not to be denied merely because the dissension has not yet had an appreciable impact on the corporation's profitability" (Patti v. Fusco, supra see, Neville v. Martin, 29 AD3d 444, 445; Matter of T.J. Ronan Paint Corp., 98 AD2d 413, 421-422; Patti v. Fusco, ____Misc 3d___, 2005 WL 3372976 [Supreme Court, Nassau County 2005] Business Corporation Law § 1111[b][3]).

On the other hand, the mere existence of dissension among the corporation's principals will not alone suffice, and "[i]rreconcilable differences even among an evenly divided board of directors do not in all cases mandate dissolution" (Wagner v. Dombrowsky, supra ; Wollman v. Littman, 35 AD2d 935; In re Kagan and Hazelkorn, supra , at 5). Nor may "the acrimonious tenor of the lawsuit * * * be cited to bootstrap the arguments made or justify the relief sought" (Application of Glamorise Foundations, Inc., 228 AD2d 187, 189 see, In re Radom & Neidorff, Inc., supra , 307 NY at 6-7; In re Fazio Realty Corp., supra ; In re Kagan and Hazelkorn, supra cf., Nelkin v. H. J. R. Realty Corp., 25 NY2d 543, 550 [1969]). [*11]

"There is no absolute right to dissolution" (In re Radom & Neidorff, Inc., supra , 307 NY at 6-7), and whether "the extraordinary step of judicial dissolution" is warranted rests within the discretion of the court (Application of Glamorise Foundations, Inc., supra , 228 AD2d 187, 189; Wagner v. Dombrowsky, supra see, In re Parveen, supra , 259 AD2d 389).

The court concludes that Brendan has not established prima facie that the parties' dispute as to salary has created "an irreconcilable barrier to the continued functioning and prosperity" of R & J (In re Kagan and Hazelkorn, supra ). However, Tyrel has not established prima facie that internal dissension over the salary issue does not render it beneficial to the shareholders to dissolve the R & J corporation. (See, In re Fazio Realty Corp., supra ; Matter of Kaufmann, supra , 225 AD2d 775 see also, In re Radom & Neidorff, Inc., supra ).

The amended petition contains allegations to the effect that, inter alia, the parties and/or shareholders are so divided that the votes required for action by the board of directors cannot be obtained (Pet.,¶¶ 38, 44, 57). Since the parties have not adduced evidence establishing that R & J's board has actually met during the relevant time period, i.e., from

approximately 2005 onward — it is not clear whether R & J has been unable to transact corporate business because of the alleged deadlock (In re Parveen, supra , 259 AD2d 389, 391see also, Nelkin v. H. J. R. Realty Corp., supra , 25 NY2d at 550; In re Kagan and Hazelkorn, supra , 2005 WL 856007 at 4).

The documents Brendan has attached to his papers memorialize a series of Board meetings which were concluded in 1993, many years prior to 2005 — the point at which, according to Brendan, Tyrel's behavior allegedly became overtly and unacceptably dictatorial, overbearing and oppressive towards him.

The record establishes that historically, and during the period relevant here, R & J did not conduct its affairs or resolve managerial issues by conducting Board of Directors' meetings — a conclusion buttressed by Brendan's own deposition testimony, in which he stated that R & J did not conduct Board meetings, and that he himself had never attempted to notice any Board or shareholder meetings (B. Schneck Dep., 222-223; T. Schneck Dep. 279-280)(In re Parveen, supra ; In re Kagan and Hazelkorn, supra , 2005 WL 856007 at 4-5).

The fact that Tyrel had been receiving higher salary amounts does not of itself constitute "a ground for dissolving the corporation" (In re Radom & Neidorff, Inc., supra , at 6).However, there appear to have been no board meetings conducted with [*12]respect to the issue of officer compensation. Thus, the parties' internal discord with respect to this issue, may materially impact the continued functioning and prosperity of the corporation.

Nevertheless, Brendan has not established prima facie that he is entitled to judgment as to his claims with respect to the seventh cause of action sounding in breach of fiduciary duty, which is largely based on the disparity in salary payments and/or the claim that the salary Tyrel set for himself was improper, excessive and/or fraudulent (Pet., ¶¶ 72-76; B. Schneck Brief, at 4-6). Brendan claims that Tyrel told him everything would be shared equally (B. Schneck [March 2007] Aff.,¶¶ 20-21); that as a fifty percent owner of the business, he was entitled, on that basis alone, to absolute equality in all respects, including salary; and that Raymond Schneck always stressed fair dealings and allegedly intended a "fifty-fifty"-type equality (B. Schneck Reply Aff., ¶¶ 18, 20; B. Schneck Dep., 18-20, 151-152; 181). However, neither the shareholders' agreement nor any other R & J corporate document makes reference to — much less requires — absolute equality in employment compensation, (B. Schneck Dep., 159, 162).

Thus, there is a factual issue as to whether Tyrel's practice in this respect , i.e., unilaterally prescribing officer salaries, as opposed to setting compensation through Board

action, constitutes a breach of his fiduciary duty to Brendan. Directors and shareholders "must adhere to fiduciary standards of conduct" by acting "in good faith when undertaking any corporate action" (e.g., Alpert v. 28 Williams Street Corp., 63 NY2d 557, 568-569 [1984]; Waldman v. 853 St. Nicholas Realty Corp., 64 AD3d 585, 587; PDK Labs, Inc. v. Krape, 277 AD2d 212, 213). Since Brendan was allegedly excluded from management of the corporation, there is a triable issue as to the underlying merits of his claim that the compensation differentials paid over the years were excessive or based upon Tyrel's self-dealing.

Upon the conflicting evidence presented here, the parties' cross motions for summary judgment with respect to Brendan's fiduciary duty cause of action and the sixth cause of action for an accounting must be denied (North Fork Preserve, Inc. v. Kaplan, 68 AD3d 732, 734).

Accordingly, it is,

ORDERED that the motion for summary judgment pursuant to CPLR 3212 by the petitioner-plaintiff Brendan M. Schneck, et., al, is denied, and it is further,

ORDERED that the cross motion for, inter alia, summary judgment pursuant to CPLR 3212 by the respondent Tyrel C. Schneck dismissing the first, fourth, sixth and [*13]seventh causes of action of the amended verified petition is denied.

The foregoing constitutes the decision and order of the Court.

DatedJ.S.C.