SUPREME COURT STATE OF NEW YORK COUNTY OF NASSAU. Defendants. Motion by the defendants Victor Barouh and Barouh Eaton Allen Corp.
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1 SCAN SHORT FORM ORDER SUPREME COURT STATE OF NEW YORK COUNTY OF NASSAU PRESENT: HON. IRA B. WARSHAWSKY, Justice. TRIAL/IAS PART 16 ANREA BAROUH and COURTNEY DINSKY - against - Plaintiffs INDEX NO. : /2004 MOTION DATE: 04/15/2005 MOTION SEQUENCE: 002 VICTOR BAROUH and BAROUH EATON ALLEN CORP. Defendants. The following papers read on this motion: Notice of Motion, Affirmation, Affidavit & Exhibits Anexed... Defendants' Memorandum of Law in Support & Exhibits Anexed... Plaintiffs' Memorandum of Law in Opposition... Reply Affirmation in Support of Defendants' Motion & Exhibits Anexed... Defendants' Reply Memorandum of Law in Furher Support... Motion by the defendants Victor Barouh and Barouh Eaton Allen Corp., for an order (1) pursuant to CPLR 3211(a)(I),( 7) dismissing the fifth, sixth and ninth causes of action; and (2) pursuant to CPLR 3024(b) strking paragraphs 56 through 91 of the amended verified complaint. The plaintiffs Andrea Barouh and Courey Dinskey, the daughter and granddaughter respectively, of codefendant Victor Barouh, commenced the within action
2 alleging in sum that Victor - as director, president and chief operating officer of codefendant Barouh Easton Allen Corp. BEA") - engaged in oppressive, fraudulent and ilegal conduct, and thereby breached his fiduciar duty to them as BEA shareholders (Cmplt ). More paricularly, the plaintiffs contend that over the past several years, Victor has engaged in misconduct by, inter alia: (1) improperly redeeming, altering, retiring and/or cancellng stock certificates belonging to the plaintiffs, including certificates owned by Courey Dinsky, a minor; (2) wasting corporate assets by undertaking failed - and to date - unsuccessful and/or misguided efforts to restore BEA' s profitabilty by expanding the company s product lines (Cmplt ); (3) excluding all but himself from involvement in the corporation s affairs and business activities; and (4) diverting and personally appropriating for himself, BEA' s assets by, among other things, embarking on varous "business schemes" (Cmplt. 65) - including schemes to sell golf novelty items and automotive supplies through a corporation known as O.S Eaton Corp., which is allegedly owned solely by Victor (Cmplt ). The amended verified complaint contains nine causes of action, including the fifth cause of action asserting violation of the Uniform Transfers to Minors Act with respect to certain stock issued to plaintiff Courey Dinsky (EPTL et., seq. The sixth cause of action alleges entitlement to an accounting and a " distrbution of the fair and reasonable value" of the plaintiffs' BEA shares (Cmplt ) while the ninth cause of action - styled as an "alternative cause of action" - sounds in common law dissolution (Cmplt ) (cf. Fedele v. Seybert, 250 AD2d ). Upon the instant notice, the defendants Victor Barouh and BEA now move for dismissal of the foregoing causes of action pursuant to CPLR 3211 (a)(i),(7), and for an order striking paragraphs 56 through 91 pursuant to CPLR The motion should be denied. It is settled that in order "(t)o succeed on a motion to dismiss pursuant to CPLR
3 3211(a)(l), the documentar evidence that forms the basis of the defense must utterly refuter ) plaintiffs factual allegations, conclusively establishing a defense as a matter of law Goshen v. Mutual Life Ins. Co. of N., 98 NY2d ; Leon v. Marinez, 84 NY2d 83 88). Furher, on a motion to dismiss pursuant to CPLR 3211(a)(7), the Cour must accept as tre, the facts "alleged in the complaint and submissions in opposition to the motion, and accord plaintiffs the benefit of every possible favorable inference, determining only "whether the facts as alleged fit within any cognizable legal theory Sokoloffv. Harrman Estates Development COl:., 96 NY2d see also Polonetsky v. Better Homes Depot, 97 NY2d 46 54; Leon v. Marinez, supra, at 87-88; Watts v. Champion Home Builders Co., 15 AD3d 850). Favorably construing the allegations advanced in accord with the above-cited priciples, the Cour concludes that the eighth cause of action sounding in common law dissolution states a claim upon which relief can be granted. The "Cour of Appeals has recognized a common-law right to dissolution of a corporation by a minority shareholder where the officers or directors of the corporation are engaged in conduct which is violative of their fiduciar duty to shareholders Lewis v. Jones, 107 AD2d see Leibert v. Clapp, 13 NY2d 313 see also Matter of Kemp & Beatley. Inc., 64 NY2d 63, 69-70; Nelkin v. H. J. R. Realty COl:., 25 NY2d ; Krger v. Gerth, 22 AD2d , affd, 16 NY2d 802; In re Quail Aero Service. Inc AD2d 800, 802). Furer, it has been observed that the remedy, where properly asserted, is not eclipsed or precluded by the availabilty of a shareholder derivative action. Specifically, ( w ) here the damage claimed is primarily to the shareholder as a result of fiduciary breaches by corporate management, the shareholder may properly sustain a direct action against the corporate defendants " since "in such a situation, a direct action by a shareholder for judicial dissolution of the corporation may be a proper remedy to protect
4 " ( the shareholder s personal stake in the corporation Lewis v. Jones, supra, at 933 see also Leibert v. Clapp, supra, at 318). Although the proof required to establish common law dissolution is greater than is required to sustain a shareholder derivative action for waste (Matter of Kemp & Beatley. Inc., supra; Leibert v. Clapp, supra see, In re Quail Aero Service. Inc., supra, at 802; Shapiro v Rockvile Countr Club, 2 Misc2d 1002(A), 2004 WL (NOR), Slip Opn at 5 (Supreme Cour, Nassau County 2004)), the plaintiffs ' complaint details a litany of purorted defalcations, which include allegations that the defendant Barouh attempted to diminish, negate and/or appropriate the value of the plaintiffs' stock through fraudulent and improper issuance, cancellation or alteration of their respective stock certificates (Cmplt. ~~ 23-44). Upon liberally constring these and the additional allegations made by the plaintiffs, the Cour finds that they are sufficient "(a)t this CPLR 3211 motion stage Held v. Kaufman, 91 NY2d ), to defeat the defendants' motion pursuant to CPLR 3211 (a) (7) with respect to the eighth cause of action. Nor, in the Cour' s view have the defendants ' documentar submissions "utterly refute ( d)" the plaintiffs' factual allegations concerning the common law dissolution theory of recovery (CPLR 3211(a)(I); Goshen v. Mutual Life Ins. Co. of N., supra; New York Schools Ins. Reciprocal v. Gugliotti Associates. Inc., 305 AD2d 563). That branch of the motion which is to dismiss the sixth cause of action is similarly denied. The sixth cause of action effectively asserts entitlement to an appraisal and buy-out of the plaintiffs ' shares (Pltffs Mem. of Law at 14). Notably, the defendants' essentially concede (Defs' Reply Mem., at 14) that the foregoing relief may be appropriately granted in connection with - or as an alternative to - the remedy of common law dissolution (e. Leibert v. Clapp, supra, at 18). Accordingly, and since the Cour has already sustained at this junctue, the pleaded viability of the plaintiffs' common law dissolution
5 cause of action, dismissal of the sixth cause of action is unwaranted. Moreover, and in the exercise of its discretion QYegman v. Dairylea Co-op.. Inc. 50 AD2d 108, ) the Cour declines to strke paragraphs 56-through 91 of the plaintiffs ' complaint. In the Cour' s view, the objected to averments are not scandalous, unecessar, prejudicial or otherwise so inappropriate as to warant an award of relief pursuant to CPLR 3024(b) (e. Long Island Region Nat. Ass n for Advancement of Colored People v. Town of North Hempstead, 80 AD2d 826, 827; Matter of Stevens, 101 Misc.2d see 5 Weinstein-Korn-Miler. New York Civil Practice, ~~ ). Lastly, that branch of the defendats' motion which is to dismiss the fifth cause of action - asserted on behalf of Courey Dinsky pursuant Uniform Transfers to Minors Act - shall be deferred in light of on-going settlement discussions pending before the Cour at this time. The Cour has considered the defendants' remaining contentions and concludes that none establishes their entitlement to the relief sought on the motion. The foregoing constitutes the decision and order of the Cour. Dated: April 19, 2005 jb))ls. ENTERED APR NA.AU COUNTY G8 8l' $ OFI'CE
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