Case Name: Abbey F. Goldstein, Appellant, v. Robert Bass et al., Respondents, et al., Defendants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 2016-04-21
Citations: 138 A.D.3d 556
Docket Number: 
Parties: Abbey F. Goldstein, Appellant, v Robert Bass et al., Respondents, et al., Defendants.
Judges: Concur— Sweeny, J.P., Renwick and Kapnick, JJ.
Reporter: Appellate Division Reports
Volume: 138
Pages: 556–559

Head Matter:
(April 21, 2016)
Abbey F. Goldstein, Appellant, v Robert Bass et al., Respondents, et al., Defendants.
[31 NYS3d 15]

Opinion:
Order, Supreme Court, New York County (Melvin L. Schweitzer, J.), entered October 21, 2014, which granted defendants' motions to dismiss the complaint, affirmed, without costs.
We note at the outset that plaintiff's argument, made for the first time on appeal, that he did in fact satisfy the demand requirement imposed by Business Corporation Law § 626 (c), will not be considered. Not only did plaintiff not raise this argument before the motion court, but, the argument expressly contradicts the complaint, which alleges that plaintiff never made a demand on the board, because it would have been futile.
Business Corporation Law § 626 (c) provides that in a shareholders' derivative suit, "the complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort" (see Marx v Akers, 88 NY2d 189, 193 [1996] [emphasis added]). In New York, to overcome a motion to dismiss for failure to plead demand futility, a plaintiff must have alleged "with particularity that (1) a majority of the directors are interested in the transaction, or (2) the directors failed to inform themselves to a degree reasonably necessary about the transaction, or (3) the directors failed to exercise their business judgment in approving the transaction" (Marx, 88 NY2d at 198).
Here, the gravamen of plaintiff's complaint is that many units in the subject cooperative corporation were sold at below market rates and that the managing agent was given a contract at an above market rate. However, the complaint does not allege that any member of the board was interested in the various challenged transactions, and the allegations that the directors failed to inform themselves fully about the transactions and merely rubber-stamped them are wholly conclusory. Although the complaint does list the various transactions that plaintiff claims were "rubber-stamped," there are no particularized allegations as to what the board members should have considered or investigated to properly inform themselves about the challenged transactions. The complaint also fails to allege facts, such as self-dealing, fraud or bad faith, that would establish that the sale of units at below-market prices could not have been the product of sound business judgment.
The motion court also properly considered the materials annexed to the complaint, including those that were damaging to plaintiff (see Rovello v Orofino Realty Co., 40 NY2d 633 [1976]).
We reject the request of defendants other than Michael Leifer, Astoria-Atlas LLC and Calix Realty Holdings LLC, made for the first time in their responding brief, for a "sua sponte" injunction prohibiting plaintiff from bringing any further actions against them without leave of court. This request is procedurally improper. Moreover, plaintiff prevailed in his books and records action (see Matter of Goldstein v Acropolis Gardens Realty Corp., 116 AD3d 776 [2d Dept 2014]), and the dismissal of this action is not on the merits.
Concur— Sweeny, J.P., Renwick and Kapnick, JJ.