C. Richard Stafford IRA v SC Capital GP, LLC

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C. Richard Stafford IRA v SC Capital GP, LLC 2017 NY Slip Op 31495(U) June 29, 2017 Supreme Court, New York County Docket Number: 656076/2016 Judge: David B. Cohen Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 07/13/2017 11:32 AM 1] NYSCEF DOC. NO. 43 INDEX NO. 656076/2016 RECEIVED NYSCEF: 07/13/2017 i SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. DAVID BENJAMIN COHEN - Justice PART 58 -------L--------------------------------------------------------------------------X I C. RICHARD STAFFORD IRA, C. RICHARD STAFFORD INDEX NO. 656076/2016 Plaintiff, MOTION DATE MOTION SEQ. NO. -v- 2/27/2017 002 SC CAPITAL GP, LLC, DECISION AND ORDER Defendant. -------,---------------------------------------------------------------------~~----X The following e-filed documents, listed by NYSCEF document number 21, 22, 23, 24, 25, 26, 27, 28, 29, 31, 32, 33, 34, 35, 36, 37,40,41,42 were read on this application to/for DISMISSAL Upon'.the foregoing documents, it is Decided that the defendant's motions seeking dismissal based upon documentary evidence and failure to state a cause of action are denied. In the Amended Complaint, C. Richard Stafford I IRA (the "Stafford IRA") and C. Richard Stafford (together with the Stafford IRA, "Plaintiffs") allege that SC Capital GP, LLP ("Defendant" or "Gerieral Partner") intentionally and needlessly delay~d the liquidation of SC Capital (P), LP (the; "Partnership") for over 27 months. The Partnership was formed for the principal purpose of achieving long-term capital appreciation by acquidng, holding and disposing of , investments, in a company called Penumbra, Inc. 1' ("Penumbra"). The Stafford IRA is a limited partner ih the Partnership and C. Richard Stafford is the owner and beneficiary of the Stafford IRA. Plaintiffs allege that defendant breached its contract and fiduciary duty to them by failing to liquidate in an "orderly and reasonable manner that Vfas in the best interest of all of the Partners," as set forth in the partnership agreement for the 'I Partn~rship. Plaintiffs allege that defendant wrongfully delayed the liquidation to maximize the I 656076/2016 STAFFORD, C. RICHARD vs. SC CAPITAL GP, LLC Motion No. 002 1 of 4 Page 1of4 [*FILED: NEW YORK COUNTY CLERK 07/13/2017 11:32 AM 2] NYSCEF DOC. NO. 43 INDEX NO. 656076/2016 RECEIVED NYSCEF: 07/13/2017 General Partner's 20% share of the profits on the net gain on the Partnership's shares in Penumbra. As sJch, the Amended Complainant details that the delay was taken in bad faith at the expense of ! the limited partners. The Amended Complaint alleges four causes of action; (1) breach of contract, ! (2) bieach of fiduciary duty, (3) accounti~g, (4) declar~tory relief. , When deciding a motion to dismiss pursuant to CPLR § 3211, the court should give the I i pleading a "liberal construction, accept the facts alleged in the complaint to be true and afford the I , plaintiff the benefit of every possible favorable inferen'ce" (Landon v Kroll Laboratory Specialists, Inc., ,22 NY3d 1, 5-6 [2013]; Faison v Lewis, 25 NY3d 220 [2015]). Defendant moved to dismiss based upon documentary evidence and failure to state a claim upon which relief can be granted. I : A motion to dismiss pursuant to CPLR § 321 l(a)(l), should not be granted unless the docu;\llentary evidence submitted is such that it resol':'es all factual issues as a matter of law and ' ' conclusively disposes of the claims set forth in the pleading (Art & Fashion Grp. Corp. v Cyclops Prod., Inc., 120 A.D.3d 436, 438 [1st Dept. 2014]). I I i Under CPLR § 321 l(a)(7), the court "accepts as true the facts as alleged in the complaint ' and ~ffidavits in opposition to the motion, accords :the plaintiff the benefit of every possible favo~able inference, and determines only whether the facts as alleged manifest any cognizable legalitheory" (Elmaliach v Bank of China Ltd., 110 ,A.D.3d 192, 199 (1st Dept 2013) (quoting I Sokoloff v Harriman Estates Dev. Corp., 96 N.Y.2d 409, 414 [2001])). I : As a threshold matter, many of defendant's arguments discuss the question of (a) C. Rich~rd Stafford's standing to sue personally; and (b) that C. Richard Stafford did not allege that he was the trustee and had authority to bring this action on behalf of the Stafford IRA. The . ' Ame~ded Complaint clearly alleged that C. Richard Stafford is the owner and beneficiary of Stafford IRA. The Stafford IRA is a self-directed account. Several Courts that have heard 656076/2016 STAFFORD, C. RICHARD vs. SC CAPITAL GP, LLC Motion No. 002 2 of 4 Page 2 of4 [*FILED: NEW YORK COUNTY CLERK 07/13/2017 11:32 AM 3] NYSCEF DOC. NO. 43 INDEX NO. 656076/2016 RECEIVED NYSCEF: 07/13/2017 simil~r arguments have ruled that under the circumstances, to not permit the beneficiary of a self- directed account to maintain the suit "would substitute form over function and substantially J J prejudice" (FBO David Sweet IRA v Taylor, 4 F Supp 3d 1282, 1285 [MD Ala 2014]; see also Dee;,_ v Baron, 2016 WL 8230425 [D Utah Apr. 14, 2616]; Lawrence v Am. IRA, LLC, 2014 WL 1172S723 [ND Ga Nov. 26, 2014]; Vannest v Sage, Rutty & Co., Inc., 960 F Supp 651 [WDNY I March 31, 1997]; Goldin v. Tag Virgin Islands, Inc., 2014 WL 2094125 (NY Sup NY Cty 2014). i Further, in opposition to this motion, plaintiff submitted the affidavit of C. Richard Stafford which states "My IRA is held at Merrill Lynch, Pierce, Fenner & Smith, (the "Custodian"), ! 1 I,'. which serves as the custodian for the account. The Custodian has executed a written Instrument of Delegation delegating to me any right that the Custodian has or might have, in its capacity as 1 custo dian for my IRA, to bring or participate in the bringing of the claims asserted in this litigation." Taking these facts as true, C. Richard Stafford had authority to bring this action on behalf of the Stafford IRA. i i The motion to dismiss for breach of contract is denied. Plaintiffs allege that the time taken i by defendant to liquidate the Partnership was unreasonable and in direct violation of the ,, ' partnership agreement. Defendant argues that there was no requirement to immediately liquidate, however, even if true, as that is a defense, it is not sufficient to dismiss for failure to state a claim or documentary evidence. Further, the partnership agreement required the liquidation to be performed in a reasonable time frame. Giving all possible inferences, the motion to dismiss for brea~h of contract is dismissed as the question as to Jrhether 27 months was a reasonable amount of time to liquidate is a question of fact and not subjebt to dismissal at this juncture. , The motions to dismiss the third and fourth causes of action for accounting and declaratory : .' I relief are denied. A claim for an equitable accounting lies where there is a "confidential or fiduciary 656076/2016 STAFFORD, C. RICHARD vs. SC CAPITAL GP, LLC Motion No. 002 3 of 4 Page 3 of 4 [*FILED: NEW YORK COUNTY CLERK 07/13/2017 11:32 AM 4] NYSCEF DOC. NO. 43 INDEX NO. 656076/2016 RECEIVED NYSCEF: 07/13/2017 relationship and a breach of the duty imposed by that relationship respecting property in which the party'. seeking an accounting has an interest" (Ctr. for Rehab. & Nursing at Birchwood, LLC v S&L Birchwood, LLC, 92 A.D.3d 711, 713 [1st Dept 2012]). As the Amended Complaint properly I alleged that defendant owes a fiduciary duty to Stafford IRA, the motion to dismiss is denied. l ' Defendant alleges that the action.for declaratory judgment must be dismissed as plaintiffs faile~ to allege facts showing intentional or criminal wrongdoing, gross negligence, or a disloyal act by defendant. However, the Amended Complaint properly alleges multiple examples of bad ,, faith taken by defendant. Therefore, the motion to dismiss for declaratory relief is denied. i' • The motion to dismiss the second cause of action for breach of fiduciary duty is also denied. A cidim for aiding and abetting a breach of fiduciary duty "requires: (1) a breach by a fiduciary of 1 oblig ations to another, (2) that the defendant knowingly induced or participated in the breach, and I . I I ' (3) that plaintiff suffered damage as a result of the b'reach" (Kaufman v Cohen, 307 AD2d 113, ., •I 125 [1st Dept 2003]; Wechsler v Bowman, 285 NY 284 [1941]). As alleged in the Amended ' Complaint and discussed above, plaintiffs properly alleged the three required factors for breach of fiduciary duty. Accordingly, it is therefore ORDERED, that defendant's motion to dismiss is denied. This constitutes the decision and order of the Court. 6/29/2017 DATE CHECK ONE: CASE DISPOSED GRANTED APPLICATION: SETTLE ORDER CHECK IF APPROPRIATE: DO NOT POST 1 656076/2016 STAFFORD, C. RICHARD vs. SC CAPITAL GP, LLC Motion No. 002 4 of 4 Page 4 of 4

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