Lengyel-Fushimi v Bellis

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Lengyel-Fushimi v Bellis 2021 NY Slip Op 32498(U) November 29, 2021 Supreme Court, Kings County Docket Number: Index No. 512764/2021 Judge: Leon Ruchelsman Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*FILED: 1] KINGS COUNTY CLERK 11/29/2021 03:23 PM INDEX NO. 512764/2021 NYSCEF DOC. NO. 130 RECEIVED NYSCEF: 11/29/2021 SUPREME COURT OF THE $-TATE COUNT:Y' OF KINGS or : CIVIL TERM: NEW" YORK COMMERCIAL. 8 --- ---- ------ -----~------ - --~------ --x PETER LENGYEL-FUSH IMI.,. Plaiht:i.ffs, Deci·sion and order Index No. 512764/2021 ~ ~gain~t - ANTHONY BELLIS, ZACHARY KINNEY, and KINGS C()UNTY BREWERS November 29, 2021 COLLECTIVE, LLC,, oe·fendartts, ------·---·--------·----·-- .. - - - - · - · - - - - - - - - - - . ·-_::l{ PRESENT: HON. LEON RUCHELSMAN The de·fer:idants have moved puts"uant to CPLR §3-2:11 see.king to dismiss the :complaint of action. .on the· grounds it fail.s to all~ge a·ri-y cause The plaintiff hc;s opposed the motion. Moreover, the plaih.t,iff ha.s moved seeking. a more responsive answe-:r from the .defendants. In addition, intervl$n.9rs Gregor Rothfuss, Evangelos Pefanis, and" Jeffrey Lengyel '1.ave moved pursuant to ·cPLR §1012 seeking td _.interyehe. and arguments held. The motions. have been opposed respectiv:_ely Papers were submitted by the parties and after reviewing all the arguments this-· coiirt :now makes the fdllowihg determinatio n. As recorded in prior orders, in 2012 the plaintiff and defep.c;:larit Anthony Bellis fa.tined Kings Gounty .Brewers. Colleotive, LLC [hereinafter 'KCBC' J • Zac'1.ary Kinney j_oined at a. _later date ar1<i each of them cqntributed $33,000. An ·o-peratirn3 a'g-r:eement was executed -betwee·n the ··parti-e:s ori .January 15-,. 2014. Furthe-r., the_. owners attracted twenty-.four investors who became non-,-managing members of KCBC.~ The plai·ntift· -alleges that d.:l..sagreement s arose 1 of 9 -------- -------- ------······•- .,------- -------- -------- [*FILED: 2] KINGS COUNTY CLERK 11/29/2021 03:23 PM NYSCEF DOC. NO. 130 INDEX NO. 512764/2021 RECEIVED NYSCEF: 11/29/2021 between the managing members and the other managing members chci.hged the· operci.ting agreement in violation of the operating agreement itself. Further, the plaintiff was terminated as a manager and an officer of the Company and has been denied access to corporate books and records as well as entitlement to any income. The plaintiff instituted this lawsuit and ha;s asserted the defendants downgraded plaintiff's memb~rship share in violation of the operating agreement. The complaint alleges causes of aqtion for a dec.J,aratory judgement, breach of contrci.ct; breach of implied covenant of good faith and fair dealing, a violation of New York Limited Company Law §409 and breach of fidl.lciary duty. In an order dated July 15, 2021 the court . . . summarily noted that there were questions of fact regarding the activities of the defendants and that consequently the:wotion to dismiss was denied. This decision supplements that conclusion. Conclus-ions of Law It is well settled that upon a motion to dismiss the .court rnust determine, accepting the allegations of the complaint as true, whether the party can succeed upon arty reasonable view of thbse facts (Davids v. State, 159 AD3d 987, 74 NYS3d 288: [2d Dept., 2018 ]) . Further, all the <;1.liegation 9 in the complaint are. deemed true _a_nd all. reasonable inferences may be drawn in favor of the plaintiff (Dunleavy v. Hilton Hall Apartments Co., LLC.~ 14 2 of 9 [*FILED: 3] KINGS COUNTY CLERK 11/29/2021 03:23 PM INDEX NO. 512764/2021 NYSCEF DOC. NO. 130 RECEIVED NYSCEF: 11/29/2021 AD3d 4 7 9, 78 9 NYS2d 164 [ 2d Dept.·, 2005]) . Tt is- well settled that "a motion to dismiss the complaint in an action for a declaratory judgment 'presents for consideration only the issue of whether a cause of action for declaratory relief is set forth, not the question of whether the plaintiff is entitled to a favorable declaration'u (DiGiorgio v. 1109-1113 Manhattan Avenue Partners LLC, 102 AD3d 725, 958 NYS2d 417 [2d Dept., 2013]) • The basis for this cause of action is an allegation the defe·ndants breached the provisions of the Operating Agreement regarding the Class A shares of the plaintiff. Since the court has already determined that any change to the ,status of any member owning Class A shares required a Unanimous. vote, there are surely questions whether the plaintiff can succeed upon that Claim. Consequently, the motion seeking to dismiss the .first count is denied {see, Tilcon New York Inc .• v. Town of Poughkeepsie, 87 AD3d 114 8, 930 NYS2d 34 [2d Dept., 2011]). It is further well settled that to succeed upon a ·claim of breach of contract the plaintiff must establish the existence of a contract, the plaintiff's performanc::e, t11e defendant's breach and resulting damages (Harris v. Seward Park Housing Corp., 79 AD3d 425, 913 NYS2d 161 [1 st D~pt., 2010]}. Further, as explained .in G.1.anelli v. RE/MAX -of New York, i44 AD3.d 861, 41 NY$3d 27.3 [2d Dept .. , 2016]; "a b_readh of co11tract cause o-f actiori 3 3 of 9 [*FILED: 4] KINGS COUNTY CLERK 11/29/2021 03:23 PM NYSCEF DOC. NO. 130 INDEX NO. 512764/2021 RECEIVED NYSCEF: 11/29/2021 fails as a matter of law in the absence of any showing that a specific provision of the cohtraCt was breached" (id). As noted, the court has already determined that Article 10.l of the operating agreement which states that the agreement "shall not be modified or amended in any respect except by a written instrument executed by all 0£ the Memb~rs~ (id) was potentially breached when the defendants reduced the plaintiff's Class A shares to Glass D shares without a uhanimous vote of approval. Therefore, the:r:-e are surely questions whether a breach of contract occurred and consequently the motion seeking to dismiss the breach o.f contract claim is denied. Turning to the cause of action for a breach of implied cove·nant of good faith and fair dealing, it is well settled that cause o.f action is premised upon parties to a contract exercising good faith while performing the terms of an agreement Valkenburgh Nooger & (Vari Neville v. Hayden Publishing Co., 30 NY2d 34, 330 NYS2d 329 [1972J). However, New York does not recognize a separate cause of action based upon such implied covenant of good faith and fair dealing when it is merely duplicative of breach of contract claims (see, Impax Laboratories, Inc., v. Turing Pharmaceuticals AG, 2017 WL 4357893 [S.D.N.Y. 2017]}. Since the claim based upon. a breach of the covenant of good faith and fair dealing is du~licative of th~ br~ach 6£ cbnttact clai~ the motion seeking to dismiss that cause •Of acti:on is granted. 4 4 of 9 [*FILED: 5] KINGS COUNTY CLERK 11/29/2021 03:23 PM NYSCEF DOC. NO. 130 INDEX NO. 512764/2021 RECEIVED NYSCEF: 11/29/2021 Next, concerning the fourth and fifth causes of action alleging a breach of fiduciary duty, it is well settled that when .·. . a claim for breach of a fiduciary duty is merely duplicative of a breach of contract claim where they are based on the same facts and seek the same damage then the breach of fiduciary claim cannot stand (Pacella v. Town of Newburgh Volunteer Ambulance Corps. Inc., 164 AD3d 809,, 83 NYS3d 24 6 [ 2d Dept., 2018]) . In this case the causes of action alleging any breach of a fiduciary duty is identical to the breach of contract claim, namely that the defendants failed to honor the terms of the operating agreement entered into between the parties and downgraded his Class A shares without authority. Consequently, the motion seeking to dismiss the fourth and fifth causes of action is granted. Thus, the causes of action for declaratory judgement and breach of contract remain. The remainder of the complaint is dismissed. Turning to the motion to intervene, according to the proposed complaint of the intervenors, Rothfuss is a Class B member and Pefanis and Lengyel are Class C members. The proposed complaint a1leges that the Class A members transferred t.o themselves treasury shares comprising 42.3% of the company's valu.e thereby diluting the valu.e of .all other shareholders. Sec.and, the proposed corrtplairtt. alleges the deferidartts awarded themselves distributions without aipproval of the memnership. 5 5 of 9 [*FILED: 6] KINGS COUNTY CLERK 11/29/2021 03:23 PM INDEX NO. 512764/2021 NYSCEF DOC. NO. 130 RECEIVED NYSCEF: 11/29/2021 Lastly, the: proposed complaint raises the facts of the present lawsuit and the plaintiffis allegations the defendants are attempting to dilute his ownership stake as well. Thus, the proposed amendment contains direct claims against the defendants for breach of contract, breach of fiduciary duty and declaratory judgement and a violation of LLCL §409 and derivative claims on behalf of the corporation for breach of duty, corporate waste, breach of contract and declaratory judgement. It is well settled that pursuant to CPLR §1012'(a) {2) a party may intervene as a matter Of right "when the representation of the person I s interest by the parties is or may be inadequate: and the person is or may be bound by the judgment'' (id) . The Court of Appeals has explained the right of intervention as available only where the judgement will bind the potential intervenor ''by its res j udicate effect" (Vantage Petroleum v. Board of Assessment Review of the Town of Babylon, 61 NY2d 695, 472 NYS2d 603 [1984]). That definition was further r'efined to cases where the potential intervenor is irt "privity" with the parties to the lawsuit (Green v. Sante Fe Industries Ihc., 70 NY2d 244, 519 NYS2d 793 [19'87]). Thus, a party demonstrating a possible legitimate ownership interest in property may intervene iri a real tax property l.ien case. (NYCTL i9.99.-l Trust v. Chalom, 47 Ab3d 779, 8.51 NYS2d. 211 [2d Dept. r 2008]). potential intervenor has ho interest in 6 of 9 However, where the either the teai property [*FILED: 7] KINGS COUNTY CLERK 11/29/2021 03:23 PM INDEX NO. 512764/2021 NYSCEF DOC. NO. 130 RECEIVED NYSCEF: 11/29/2021 or the outcome of the litigation then the motion seeking intervention should be tjenied (Citibank N.A. v. Plagakis, 8 AD3d 604, 77 9 NYS2d 57 6 [2d Dept., 2004] ) . The core claim of the intervenors, namely that the defendants have taken acts. which harmed the company, are sufficiently connected to the lawsuit which concerns allegations the defendants sought to improperly adjust ownership interests; The defendants' primary ground for opposing the motion is the fact it is barred by LLC Law §60-9 and §610, LLC Law §610 states that "a member of a limited liability company is not a proper party to proceedings by or against a limited liability company, except where the object is to enforce a member's right against or liability to the limited liability company'' (id). Notwithstanding, members of a limited liability company may initiate derivative suits on the LLC's behalf (Tzolis v. Wolff, 10 NY3d 100, 855 NYS3d 6 [2008]). Further, individual members may sue a corporation "to enforce a member's right against or liability to the limited liability company" {LLC Law §610.). The defendant's arguments that there are "no remaining or exi,sting "claims"" in this case, or that "thE! case is now resolved'' and there "is nothing to decide" (see, Affirmation in Opposition, page 6) fails to appreciate th_e le.gitimi::lte claims :the plaintiff and the interve:hors have raised. Of course, further discovery w:i..11 sharpen the issues,. however, viable ca:uses of acti_on have 7 7 of 9 [*FILED: 8] KINGS COUNTY CLERK 11/29/2021 03:23 PM NYSCEF DOC. NO. 130 INDEX NO. 512764/2021 RECEIVED NYSCEF: 11/29/2021 been presented, they have survived a motion to dismiss and they remain outstanding. The claims of the intervenors are sufficiently related to the plaintiff's claims and therefore the motion seeking intervention is granted. Turning to the plaintiff's motion :seeking to dismiss counterclaims, the defendant's answer contained two counterclaims. The first alleges the plaintiff failed to sign certain documents and seeks a declaratory ruling ordering the plaintiff to sign these documents. The counterclaim does not explain the nature of these documents and thus they cannot support a claim for any sort Of relief. The failure to include the nature of these documents renders the entire counterclaim vague and insufficient. In any event, the court already ruled that the plaintiff is not required to execute any loan documents sought J::iy the defendants and to the extent the counterclaim references those documents the court has already ruled oh this issue. In any event, the motion seeking to dismiss this counterclaim is granted; The second counterclairn does not assert any concrete wrong allegedly committed by the plaintiff. It asserts in conclusory fashion that the plaintiff is ".required to meet his obligations" (see, Counter.claims, ':I[ i2} and. ''the· sole purpose of t:his act:Lon is tiaras sing .and .3'.nnoying the Defendants with me.r it less anci vexatious claims sole1y £.or its own benefit, harming: the 8 8 of 9 [*FILED: 9] KINGS COUNTY CLERK 11/29/2021 03:23 PM INDEX NO. 512764/2021 NYSCEF DOC. NO. 130 RECEIVED NYSCEF: 11/29/2021 Defendants in an amount to be proven at trial, fees" (see, Counterclaims, <J[ 16) . including legal However, those allegations do not assert any causes of action, they are merely conclusory statements that have no substantive legal basis. Thus, this counterclaim also fails to state any cause C>f action and consequently i t is likewise dismissed. Thus, the motion seeking to dismiss the counterclaims is granted. At this juncture the motion seeking a clearer complaint is denied without prejudice. The parties will engage in discovery and the exchange of such discovery should narrow the precise defenses and supplemental submissions should clear any ambiguity at this time. The plaintiff may move again at a later date if the confusion still persists. So ordered. ENTER: DATED: November 29, 2021 Brooklyn N.Y. Hon. Leon Ruchelsman JSC .9 9 of 9

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