Court Opinion

ID: 5758366
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:10:16.345515+00
Date Added: 2024-06-11T08:41:28.773139
License: Public Domain

Mazzarelli, J.P. (dissenting in part).
A detailed discussion of the background of this litigation, including the substance of the complaint, is set forth in our decision in People v Grasso (42 AD3d 126 [2007], Iv granted 2007 NY Slip Op 81807[U] [1st Dept 2007], appeal by New York Stock Exchange withdrawn 9 NY3d 998 [2007] [Grasso II]), the second of what are now five decisions of this Court arising out of the action. Therefore, the facts recited here are confined to those relevant to the disposition of the appeal. Involved in this appeal are plaintiff Attorney General’s motion for summary judgment on liability on his third and sixth causes of action; the motions by cross claim defendants John Reed and the New York Stock Exchange (NYSE) to dismiss five cross claims asserted against them by defendant Richard A. Grasso; Grasso’s motion for summary judgment dismissing as against him the second and third causes of action; and defendant Kenneth G. Langone’s motion for summary judgment dismissing as against him the seventh cause of action. The Attorney General’s allegations, in his third and sixth causes of action, are that Grasso breached his duties to the NYSE by designing and implementing a compensation process that failed to disclose to the NYSE’s Board of Directors material information about aspects of his variable compensation (third cause of action), and by negotiating two interest free loans (sixth cause of action). The largest component of Grasso’s compensation as CEO of the Exchange was his Supplemental Executive Retirement Plan (SERF). His participation in another program, the Supplemental Executive Savings Plan (SESP), is also relevant to the third and sixth causes of action. The Attorney General’s seventh cause of action alleges that Langone breached his fiduciary duty to the NYSE in his role as Chair of its Compensation Committee.
The NYSE’s SERF a nonqualified defined benefit retirement plan, was established in 1984. In 1990, Grasso became entitled to a contractual retirement benefit that was calculated using *215the same formula as the NYSE’s SERP1 with certain modifications. Grasso’s SERF benefits were due to be paid to him upon his retirement from the Exchange. However, in negotiating his 1995 employment agreement, Grasso requested an advance from the NYSE in an amount equal to his accrued SERF benefit at the time, $6,571,397. He agreed to offset this amount from his SERF distribution upon retirement, but did not agree to pay interest on the advance. Grasso’s 1995 employment agreement, including the $6.57 million advance, was approved by both the NYSE’s Compensation Committee and its Board of Directors.
Grasso participated in SESP pursuant to his 1990, 1995, and 1999 employment agreements. SESP permitted eligible executives to deposit, and defer paying income tax on, portions of their compensation until after the termination of their employment. By its terms, SESP prohibited distributions prior to the termination of a participant’s employment. Grasso elected to receive his SESP distribution in a lump sum, on the January 1 following the termination of his employment with the NYSE. Throughout his participation in SESE Grasso received quarterly statements reflecting the value of his participation as well as the allocations he chose for the investment of his funds. As part of his 1999 employment agreement, Grasso negotiated to have $29.9 million (an amount equal to his then accumulated SERF benefit) deposited into his SESP account. As in 1995, he agreed to repay this amount from his ultimate SERF distribution, but he did not pay any interest on the advance. Again, the terms of the 1999 employment agreement were reviewed by both the Compensation Committee and the full Board of Directors.
The NYSE’s Compensation Committee met each February to recommend fixed and variable compensation awards for all of its senior executives. The process, from 1997 to 2003, was as follows. Frank Ashen, the NYSE’s head of human resources, would collect compensation data from a number of comparable companies. Ashen would then prepare an analysis of each NYSE executive’s performance for the year. He would compare the collected data against 65 quantitative measurements to reach a score for each executive. That score comprised 65% of the individual’s compensation. The Chair of the Compensation Committee retained discretion to determine the remaining 35% of compensation figures, which he would recommend to the Board. After the Chair made his recommendations, Ashen met individu*216ally with each of the members of the Compensation Committee to present and discuss the Chair’s salary proposals. On the first Thursday of each February, the Compensation Committee met to discuss and vote on each of the executive’s compensation. Later that same day, the full Board of Directors would meet and vote on the same proposals. Grasso did not attend any of the meetings where his compensation was addressed.
The value of Grasso’s SERF and SESP was not discussed at the yearly February meetings. However, the executives’ annual Incentive Compensation Plan (ICP) awards were evaluated and approved on a yearly basis. The ICP awards had a sizeable impact upon the value of executives’ SERF benefits. In May 1999, Grasso’s SERF was valued at approximately $36 million. Between 1999 and 2002, Grasso’s SERF tripled in value to more than $110 million. The NYSE’s total pre-tax profit for 2002 was approximately $56.8 million, about half of Grasso’s accumulated SERF for that same year.
The NYSE’s Department of Human Resources was aware of the growth of SERF benefits and the potential negative impact of this program on the NYSE’s financial future. Thus, in 1998, Bernard Marcus, then Chair of the Compensation Committee, proposed disclosing yearly SERF costs to the Board. However, deposition testimony from Board members reveals that Kenneth Langone, Marcus’s successor, did not make any type of annual SERF or SESP disclosure.
By the summer of 2002, Grasso sought to extend his contract and accelerate payment of some of his SERF and SESP benefits. The Compensation Committee held a special meeting. It was at this meeting that some Committee members first learned of the size of Grasso’s SERF that would be due upon his retirement. The Committee decided that a third party should be retained to review Grasso’s compensation. Langone hired Vedder, Price, Kaufman & Kammholz, a consulting firm, for this purpose. Vedder, Price requested the materials provided to the Compensation Committee for its February 2003 meeting.
Grasso then made a proposal to cap his final pay at $12 million, extend his contract to 2006, and move $56 million of his accrued SERF benefit into his SESP The Compensation Committee considered this proposal but made no determination on the matter. Then, in January 2003, Grasso, revising his proposal, requested the immediate payment of approximately $140 million in deferred compensation. At its February 2003 meeting, the Compensation Committee did not vote to approve Grasso’s *217proposal, but referred it for further study of the financial implications for the NYSE.
On August 27, 2003 Grasso executed his fourth employment agreement with the NYSE. That agreement had a new provision, section 3.3 (b), which provided: “in lieu of participation in . . . the SESf] the Exchange [NYSE] shall pay to the Executive [Mr. Grasso] ... a payment equal to the sum of the amounts credited . . . under the SESE” The 2003 employment agreement also required Grasso to subtract the approximately $6.6 million advanced to him in 1995, and the $29.9 million deposited in his SESE in 1999, from his final SERE benefit award. On the day the 2003 agreement was executed, the NYSE issued a press release revealing that $139.5 million would be immediately payable to Grasso. The press release did not reveal that $48 million was also due to be paid Grasso upon his retirement. In September 2003, the Chair of the Securities and Exchange Commission (SEC) contacted the NYSE and requested information about Grasso’s compensation. In response to increasing internal and external pressure, Grasso agreed to forgo future benefit payments. Then, at a September 17, 2003 teleconference Board meeting, Grasso read the following prepared written statement: “[T]he best alternative, it seems to me, is that I should submit my resignation at the next Board meeting if you wish me to do so, for the benefit of the Exchange, and to help preserve what we have tried to build over the last 35 years.” Outside of Grasso’s hearing, the Board voted in favor of his resignation. Grasso was advised of the vote, and he resigned.
Thereafter, the Attorney General brought this action on behalf of the Feople of the State of New York for what he alleges was Grasso’s excessive compensation. The complaint contains eight causes of action, six against Grasso, one against Kenneth Langone, as Chair of the NYSE’s Compensation Committee, and one against the NYSE itself. In his answer, Grasso asserts five cross claims against the NYSE for breach of two of his employment agreements, disparagement, and defamation.2 In our first decision in this matter, we denied a CFLR 3211 (a) (7) motion by the NYSE and Reed to dismiss Grasso’s fifth cross claim for defamation (21 AD3d 851 [2005]). In Grasso II, we dismissed the Attorney General’s first, fourth, fifth, and sixth causes of action (see 42 AD3d at 144).
*218The order on appeal was issued on October 19, 2006, before Grasso II was issued on May 8, 2007. As relevant, it (1) granted the Attorney General summary judgment as to liability on the third and sixth causes of action; (2) denied Grasso summary judgment dismissing as against him the second and third causes of action; (3) denied Langone summary judgment dismissing as against him the seventh cause of action; (4) granted motions by the NYSE and Reed to dismiss all five of Grasso’s cross claims; and (5) directed an accounting to determine: (a) how much interest was owed on the loans received by Grasso in violation of N-PCL 716, and (b) how much of the SESP was deferred income actually earned, and how much, if any, contingent SESP had been actually earned or vested prior to Grasso’s departure.
In the third cause of action, the Attorney General alleges that Grasso violated the fiduciary duties he owed to the NYSE under N-PCL 717,3 720 (a) (1) (A) and (B),4 and 720 (b), by withholding information about critical aspects of his variable compensation, including his SERF} from the Compensation Committee and the Board of Directors. In the order appealed, the motion court granted the Attorney General summary judgment on this claim, finding that Grasso breached his duties to the NYSE by failing to alert the Board to his SERF balances, and by thwarting the Board’s efforts to become informed about the growth of their value. The court further found that the Board never amended the SESP to do away with its prohibition against pretermination distributions.
While the deposition testimony of numerous Board members indicates that they were not aware of the exact value or growth of Grasso’s SERF over time, it is unclear that Grasso is solely *219responsible for this group having been uninformed. All of the Board members were financially sophisticated businesspeople. They reviewed and approved the SERF program, which was included and explained in each of Grasso’s 1995, 1999, and 2003 employment agreements. Those agreements set forth the formula by which Grasso’s SERF was calculated and the fact that IGF awards were a component of Grasso’s SERE In fact, in February and April 2001 and February 2002, the Board classified certain bonuses in a manner that excluded them from SERF eligibility. The Board also ratified the amended 1999 employment agreement so that only 85% of Grasso’s future IGF awards would be SERP-eligible. As Grasso’s compensation grew and his SERF accumulated, no member of the Board undertook an independent examination into whether the awarded compensation was excessive, or whether accumulating SERF benefits would have deleterious implications for the Exchange. Given that the Board members arguably failed to educate themselves, it cannot be concluded, as a matter of law, on this record, that Grasso is solely responsible for his compensation, or that he failed to exercise his duty of reasonable care and loyalty to the NYSE. The reasonableness of Grasso’s actions and whether they comported with his fiduciary duties are fact-sensitive issues that require full exploration before the trier of fact (cf. Insurance Co. of N. Am. v Manufacturers Hanover Trust Co., 106 AD2d 285 [1984], Accordingly, the court erred in granting the Attorney General partial summary judgment on liability on the third cause of action, and I agree with the majority in vacating the accounting the court directed in that regard.
While I agree with the majority that there is an issue of fact regarding the Board’s knowledge as to the value of Grasso’s SERI) I disagree with its conclusion that the SESP payments were proper as a matter of law. It is unquestionable that the Board had the authority to amend SESP at any time. However, whether through a formal document amending SESP or some less formal act, the Board must have actually intended to amend it. The United States Supreme Court has made clear that once it is determined that an employee benefit plan may be amended, the inquiry shifts to who is authorized to amend it, and whether those persons “actually” did so (Curtiss-Wright Corp. v Schoonejongen, 514 US 73, 85 [1995]). That inquiry is “factintensive.” (Id.)
The majority misstates my position. Evidence of intent to amend a benefits plan does not always require that a “formal” *220amendment be prepared. However, there is affirmative evidence in this record that the Board did not intend to amend SESP so as to permit distribution to Grasso, when, on August 7, 2003, it approved the proposed SESP payout to Grasso. Accordingly, on this record, the issue cannot be determined as a matter of law for purposes of summary judgment. Indeed, the record reveals that when the Compensation Committee met to consider Grasso’s compensation proposal in February and July 2003, the Committee was not informed that any SESP distribution would contravene SESP Furthermore, there is no evidence that the Committee addressed the need to amend SESP Moreover, by resorting to a formal amendment on at least three previous occasions when the Board saw fit to amend SESP the Board arguably established a course of conduct that undermines Grasso’s argument that the payment to him constituted an amendment to SESP The majority fails to address any of these facts, which raise a triable question as to whether the Board, in authorizing the payment, knew that the payment contravened the terms of SESP such that it needed to be amended. Certainly, if it was not aware of that fact, then the payment cannot be considered an amendment to SESP
Finally, the parol evidence rule is not, as the majority states, applicable here since the foregoing facts could lead a trier of fact to reasonably infer that the terms of SESP were disregarded as a result of mutual mistake (see Marine Midland Bank-S. v Thurlow, 53 NY2d 381, 387 [1981]). Similarly, just as extrinsic evidence may be considered to establish that a writing purporting to be a contract is no contract at all, parol evidence should be permissible here to establish that the 2003 employment agreement was not intended by either party to it to constitute an amendment to SESP (see Polygram Holding, Inc. v Cafaro, 42 AD3d 339 [2007]).
In the sixth cause of action, the Attorney General alleged that Grasso received payments in 1995 and 1999 that constituted loans from the NYSE, in violation of N-PCL 716. That section provides:
“No loans . . . shall be made by a corporation to its directors or officers ... A loan made in violation of this section shall be a violation of the duty to the corporation of the directors or officers authorizing it or participating in it, but the obligation of the borrower with respect to the loan shall not be affected thereby.”
*221The motion court granted the Attorney General summary judgment on liability on this claim, and also ordered an accounting of interest due on the sums advanced to Grasso. However, in Grasso II (again, issued after the order on appeal), this Court dismissed the sixth cause of action, finding it decisive that N-PCL 716 “does not itself authorize the Attorney General or anyone else to bring suit for a violation of its terms” (42 AD3d at 133). We noted that N-PCL 720 (b) authorizes the Attorney General to sue for the relief provided in N-PCL 719 (a), and that the latter section provides for the joint and several liability to the corporation of directors who vote for or concur in “ ‘[t]he making of any loan contrary to section 716’ ” (id., quoting N-PCL 719 [a] [5]). Under N-PCL 719 (e),5 however, an officer or director is afforded a good faith defense to the acceptance of a loan.
We found the sixth cause of action deficient because it alleged a right to recover against Grasso “without regard to whether, ‘in the circumstances,’ he discharged the duties imposed on him by N-PCL 717” (42 AD3d at 133). We also held that the Attorney General’s pleading did not assert that Grasso “knew of [the] unlawfulness” of either the 1995 or 1999 advances, which would have been actionable under N-PCL 720 (a) (2) (id. at 134).
Because the sixth cause of action was not explicitly authorized by the N-PCL, we found its assertion inconsistent with specific “policy judgments” made by the Legislature, and therefore dismissed it (id. at 128). This disposition renders moot those portions of the order on appeal that (1) granted the Attorney General partial summary judgment on liability on that same claim, and (2) ordered Em accounting to calculate interest. Accordingly, I concur with the dismissal of the appeal from those portions of the order (Matter of Standley v New York State Div. of Parole, 40 AD3d 1344 [2007]).
The Attorney General’s second cause of action seeks judgment setting aside all unlawful payments made by the NYSE to Grasso and directing that Grasso return such payments to the NYSE. The claim is brought pursuant to N-PCL 720 (a) (2) and (b); as noted above, the latter provision explicitly authorizes the Attorney General to seek such relief. The third cause of action, which alleges that Grasso breached his fiduciary duty to the *222NYSE, relies on N-PCL 720 (a) (1), which the Attorney General was also explicitly authorized to bring under N-PCL 720 (b). Grasso never questioned the Attorney General’s authority to bring these causes of action; however, he now posits that such authority has been extinguished. Specifically, Grasso argues that when, on March 7, 2006,6 the NYSE was merged into Archipelago Holdings, Inc. to create NYSE, LLC, a for-profit company, the authority conferred on the Attorney General by N-PCL 720 ceased to exist.
On its face, this argument is meritless. First, NYSE LLC has two subsidiaries. One is NYSE Market, Inc., a Delaware corporation, and the other is NYSE Regulation, Inc., a New York not-for-profit corporation that constitutes the regulatory arm of NYSE LLC. Unquestionably, even were one to accept Grasso’s theory, the Attorney General continues to have authority to enforce the N-PCL as it concerns NYSE Regulation, Inc. Moreover, the Attorney General clearly indicated to this Court, in his brief in Grasso II (at page 25), and to Supreme Court at oral argument of the motion that resulted in that appeal,7 that he intends to ask the court, should he prevail in securing a judgment against Grasso, to order that any sums recovered be returned to NYSE Regulation, Inc. This also gives lie to Grasso’s argument that since the merger the Attorney General has been pursuing a derivative claim that is strictly for the benefit of a for-profit corporation.
The majority’s bare statement that the entity to which the Attorney General intends to direct any recovered monies is irrelevant, because “the right of recovery under these three causes of action belongs to the Exchange’s successor, NYSE LLC,” is no more than an ipse dixit and does nothing to advance its argument. Certainly, it has not been established that NYSE Regulation, Inc. is some arcane entity that bears no functional relation to the premerger NYSE such that it would be absurd for the Attorney General to have determined that it is the proper beneficiary of any judgment. To the contrary, NYSE Regulation, Inc. is identified in NYSE Group, Inc.’s SEC registration statement as being singularly responsible for moni*223toring member organizations and overseeing their compliance with federal securities laws. These were some of the core functions of the premerger NYSE that was led by Grasso. Accordingly, NYSE Regulation is not a simple “affiliate” of NYSE Group, Inc., as the majority inaccurately describes it. Indeed, by pursuing his claims on behalf of NYSE Regulation, Inc. the Attorney General is merely attempting to “follow the money.”
That the court may direct which entity any judgment will benefit, including NYSE Regulation, Inc., has been acknowledged by the NYSE itself. On November 2, 2005, prior to the merger but after Grasso had argued to the motion court on his pre-answer motion to dismiss that the merger plan would provide that any judgment be paid to the for-profit arm of NYSE LLC, an attorney for the NYSE was quoted as saying: “Mr. Grasso’s lawyers appear to be mistaken on the facts. It’s the Attorney General’s lawsuit and if he is successful it will be up to him to propose a remedy and for the court to order it.” (Reuters, Grasso Says no Public Benefit in Payout Return, Nov. 3, 2005).8
Indeed, the SEC registration statement that was filed in connection with the merger by NYSE Group, LLC, the Delaware for-profit entity that owns NYSE LLC, is not inconsistent with that position. There, in describing this action, NYSE Group, LLC stated: “If the New York Attorney General prevails on all of his claims, the court will order Mr. Grasso to return to the NYSE portions of his compensation and benefits determined to be unreasonable and declare that the alleged obligation of the NYSE to make further payments is void” (emphasis supplied). The term “NYSE” is specifically stated in the registration statement to refer to “after the completion of the merger, New York Stock Exchange LLC, a New York limited liability company, and its subsidiaries, NYSE Market, Inc., a Delaware corporation, and NYSE Regulation, Inc., a New York not-for-profit corporation” (emphasis supplied). Neither the NYSE attorney’s comment nor the registration statement is dispositive of whether any judgment will ultimately become an asset of NYSE Regulation, Inc. However, they are each far more probative than what the majority relies on—Grasso’s personal interpretation of premerger filings concerning how NYSE LLC intended to allocate assets to its not-for-profit arm. Accordingly, on this record, it is *224clear that the interests of a not-for-profit corporation continue to be at stake.
Even if there were no surviving not-for-profit element of the new entity, we would still reject Grasso’s argument as meritless. The N-PCL expressly anticipates and provides for what happens to litigation pending against a not-for-profit corporation when it is merged into a for-profit entity. Pursuant to N-PCL 908 (i) (A), when a merger or consolidation of a not-for-profit and a garden variety business corporation has been effected, the resulting entity “shall be subject to the business corporation law and the effect of such merger or consolidation shall be the same as in the case of the merger or consolidation of domestic corporations under section 906 (Effect of merger or consolidation) of the business corporation law.” Business Corporation Law § 906 (b) (3), in turn, provides that when a merger has been effected:
“The surviving or consolidated corporation shall assume and be liable for all the liabilities, obligations and penalties of each of the constituent entities. No liability or obligation due or to become due, claim or demand for any cause existing against any such constituent entity, or any shareholder, member, officer or director thereof, shall be released or impaired by such merger or consolidation. No action or proceeding, whether civil or criminal, then pending by or against any such constituent entity, or any shareholder, member, officer or director thereof, shall abate or be discontinued by such merger or consolidation, but may be enforced, prosecuted, settled or compromised as if such merger or consolidation had not occurred, or such surviving or consolidated corporation may be substituted in such action or special proceeding in place of any constituent entity” (emphasis supplied).
Thus, the change in status of a not-for-profit corporation into a for-profit corporation has no effect whatsoever upon causes of action that were pending against the not-for-profit at the time of the merger. Moreover, nothing in the N-PCL even suggests that the Attorney General loses his authority to prosecute suits initiated by him against the premerger not-for-profit. Business Corporation Law § 906 (b) (3) would not be “rewritten],” as the majority incorrectly suggests, by permitting the Attorney General to have monies returned to NYSE Regulation. To the *225contrary, it would effectuate the Legislature’s intent, reflected in N-PCL 908 (i) (A), of ensuring the survival of claims benefit-ting not-for-profit corporations, notwithstanding that those corporations may have been swallowed up by for-profit entities.
Grasso attempts to evade the consequences of N-PCL 908 (i) (A) by analogizing to this Court’s decision in Rubinstein v Catacosinos (91 AD2d 445 [1983], affd 60 NY2d 890 [1983]). In that case, one business corporation acquired 92% of the shares of another business corporation, and the shareholders of the acquired corporation were forced to sell their shares for cash. We construed Business Corporation Law § 906 (b) (3) to permit “the continuation of [a shareholder’s derivative] claim on behalf of the corporation but not to preserve standing of a now non-stockholder to enforce that claim on behalf of the corporation against that corporation’s will” (91 AD2d at 447). However, Rubinstein is inapposite. First, the Attorney General’s claims are not derivative in nature. N-PCL 720 (b), on which this Court placed great reliance in Grasso II, was clearly structured by the Legislature to differentiate between derivative actions against not-for-profit corporations and actions brought by the Attorney General:
“An action may be brought for the relief provided in this section and in paragraph (a) of section 719 (Liabilities of directors in certain cases) by the attorney general, by the corporation, or, in the right of the corporation, by any of the following:
“(1) A director or officer of the corporation.
“(2) A receiver, trustee in bankruptcy, or judgment creditor thereof.
“(3) Under section 623 (Members’ derivative action brought in the right of the corporation to procure a judgment in its favor), by one or more of the members thereof.
“(4) If the certificate of incorporation or the by-laws so provide, by any holder of a subvention certificate or any other contributor to the corporation of cash or property of the value of $1,000 or more.”
Had the Legislature meant that claims brought by the Attorney General are derivative in nature, then it would have drafted the statute so that the Attorney General would have been included as one of the persons specifically enumerated as entitled to *226bring actions “in the right of the corporation.” As this Court stated in Grasso II, the Legislature is “ ‘presumed to have investigated the subject, and to have acted with reason, not from caprice’ ” (42 AD3d at 139, quoting Farrington v Pinckney, 1 NY2d 74, 88 [1956]). Not surprisingly, the majority fails to explain why it believes this presumption does not apply to N-PCL 720 (b).
The majority unreasonably dismisses the fact that the statute differentiates between claims brought by the Attorney General and those brought “in the right of the corporation.” The statute recognizes that the Attorney General brings his claims in his capacity as the State’s chief law enforcement officer, not merely as a surrogate for the corporation. This is not an irrelevant distinction, as the majority says. To the contrary, the distinction makes all the difference. The Attorney General is not merely standing in the NYSE’s shoes. The statute is written to authorize the Attorney General to bring a unique claim that is expressly distinct from that of a shareholder, officer or director suing derivatively on behalf of the corporation. Furthermore, N-PCL 908 (i) (A) preserves that claim notwithstanding the precise event that occurred here, i.e., the merger of the not-for-profit into a for-profit entity. That merger does not extinguish the claim, nor the Attorney General’s standing or authority to bring it. Accordingly, my analysis of Business Corporation Law § 906 (b) (3) is sound and would have required no different result in Rubinstein. Unlike the case of a shareholder’s derivative claim, which can be prosecuted by a variety of other persons if the shareholder loses capacity, only the Attorney General can maintain the claim carved out by N-PCL 720 (b) exclusively for him.
Moreover, there is no evidence that the Legislature intended that a claim brought by the Attorney General pursuant to N-PCL 720 (b) would be extinguished because of a merger into a for-profit corporation. To construe the statute in that manner would be contrary to the clear language of N-PCL 908 (i) (A), and would lead to the absurd result of the Attorney General’s capacity being dependent on the not-for-profit maintaining that status throughout the litigation. This would diminish his ability to execute his mission and would encourage changes in status simply to evade his reach. Indeed, it would wrest control of prosecutions against not-for-profit corporations from the Attorney General and deliver that control squarely into the hands of those accused of wrongdoing.
*227Even if one were to agree that the Attorney General’s claims are “in the right of the corporation” (despite that the relevant statute states otherwise), Rubinstein is a poor analogy to this case. Rubinstein is distinguishable because there the plaintiff was an ordinary shareholder in the corporation on whose behalf he sued. As the Court of Appeals stated in Tenney v Rosenthal (6 NY2d 204, 211 [1959]), ‘‘[t]he shareholder is under no fiduciary duty to the corporation prior to the institution of the action. When he sues derivatively, he does so as a volunteer insofar as his fellow shareholders are concerned; he is authorized to proceed only because of his proprietary interest in the corporation.” Indeed, Tenney is a much more instructive precedent. There, the plaintiff was a director who brought a derivative action. While the action was pending, he failed to gain reelection to the board. Defendants moved to dismiss the action, arguing that the plaintiff lost his capacity when he lost his seat on the board. The Court of Appeals rejected this argument. In contrast to the shareholder’s derivative action, the Court stated, the director’s
“right to sue is based on the public policy declared by the Legislature upon enactment of the statute. We may assume that the right to bring suit has been granted in order to facilitate and improve the director’s performance of the ‘stewardship obligation’ which he owes to the corporation and its stockholders and to protect him from possible liability for failure to proceed against those responsible for improper management of the corporate affairs” (id.).
Here, too, the Attorney General’s right to sue reflected the Legislature’s public policy determination that it is in the public interest for the Attorney General to police not-for-profit corporations. Borrowing the analogy proposed by the Court in Tenney, that the nature of a corporate director is akin to a guardian ad litem, the majority suggests that the NYSE is “of age and no longer needs the guardian’s protection.” However, as stated above, that theory is in contravention of what the Legislature determined when it provided that all causes of action commenced against a not-for-profit corporation continue despite its merger into a for-profit corporation, regardless of who initiated them. In the absence of a legislative pronouncement to the contrary, the Attorney General’s standing and capacity continue, just as a guardian ad litem’s fiduciary duties continue notwith*228standing that he may have become “a stranger to his ward” (Tenney, 6 NY2d at 211-212).
To adopt Grasso’s creative reasoning would mean that the Attorney General always loses the claim he is expressly authorized to bring by N-PCL 720 (b) when a merger into a for-profit occurs, notwithstanding that the statute states that the merger ought to be treated as if it never happened.9 It would open the door to a feeding frenzy for con men and swindlers to raid assets of not-for-profit corporations they control and then evade prosecution and responsibility by merging with a for-profit corporation. Certainly this Court cannot countenance such a legal sleight-of-hand. The majority counters that the Attorney General could preserve his capacity to continue prosecuting an action where the merger is a sham. To establish that, however, the Attorney General would most likely have to prove the ultimate merits of his case just to establish his capacity to sue. This would turn the doctrine of justiciability on its head because, “[w]hether a person seeking relief is a proper party to request an adjudication is an aspect of justiciability which must be considered at the outset of any litigation” (Matter of Dairylea Coop. v Walkley, 38 NY2d 6, 9 [1975]).
Another analogy to this case that is similar to the one presented by Tenney is where the corporation dissolves during the pendency of the action. In that event, “the shareholder’s interest does not abruptly end. At a minimum, the stockholder possesses a substantial interest in the distribution of corporate assets” (Independent Inv. Protective League v Time, Inc., 50 NY2d 259, 264 [1980]).
Here, the Attorney General continues to possess a “substantial interest” in seeing this enforcement action through to its conclusion. This case is not merely about recouping an excessive amount of compensation. While that is the immediate remedy sought, the Attorney General’s complaint makes clear that the *229gravamen of this action is to restore the integrity of an institution to which the perception of integrity is of the utmost importance to the investing public. Indeed, the complaint contains specific allegations of potentially unethical activities that go beyond the sheer amount of Grasso’s pay. For example, it asserts that Grasso intimated to Compensation Committee members that if they took positions favorable to him, he would seek to assist them and their companies in connection with their dealings with the NYSE. (Complaint 1ÍH 25-31.) The complaint also alleges that Grasso discussed his pay proposal with NYSE specialists and other “floor Directors” whom the NYSE regulated, and who in fact were being investigated by the NYSE at the time of the conversation (Complaint 1Í141). Now that such allegations have been made, the people of this state have the right to have them heard so that they may know whether the NYSE is deserving of the confidence they place in it. The effect that the Attorney General’s sudden loss of capacity would have on these allegations is not addressed by the majority.
By stating that Business Corporation Law § 906 (b) (3) allows for the Attorney General to lose his capacity to sue in these circumstances, the majority is contradicting this Court’s own pronouncements in this very litigation. We held in Grasso II that authority to sue not expressly vested in the Attorney General by statute may not be granted by judicial fiat:
“Because of the Legislature’s plenary authority over its choice of goals and the methods to effectuate them, ‘a private right of action should not be judicially sanctioned if it is incompatible with the enforcement mechanism chosen by the Legislature or with some other aspect of the over-all statutory scheme . . . ‘[wjhere the Legislature has not been completely silent but has instead made express provision for civil remedy . . . the courts should ordinarily not attempt to fashion a different remedy’ ” (42 AD3d at 136-137, quoting Sheehy v Big Flats Community Day, 73 NY2d 629, 634-635, 636 [1989]).
Here, the Legislature stated that all causes of action initiated against a not-for-profit are to continue unabated. Neither Grasso nor the majority offers any controlling authority, other than the readily distinguishable Rubinstein, for the proposition that under these circumstances the Attorney General should *230lose his capacity to continue prosecuting such claims. Accordingly, to extinguish the Attorney General’s capacity to sue would be by the same judicial fiat upon which this Court frowned in Grasso II.
People v Ingersoll (58 NY 1 [1874]), People v Lowe (117 NY 175 [1889]) and People of State of N.Y. by Abrams v Seneci (817 F2d 1015 [1987]), on which the majority relies, do not change my analysis. None of those cases involved a statute, such as N-PCL 720, that specifically authorizes the Attorney General to seek recovery of monies belonging to a private corporation. Indeed, this fact was noted in both Ingersoll and Lowe, which predate the enactment of the N-PCL by, respectively, 95 and 80 years.10 In the former case, the Court stated:
“[I]n the absence of any fraud or collusion on the part of the governing body of the county in the perpetration of the wrong and commission of the fraud, or any inability or disinclination of the proper officers of the county to prosecute, if the money was the property of the county, property belonging to its treasury, and the robbery and wrong was against the county, whether the money was held upon any particular trust, or was applicable to the general purposes of the county, or was incapable of use for county purposes, except by legislative permission, there would be no necessity or occasion for the intervention of the people or their attorney-general, as there might be if the authorities of the county— the trustees in fact—had been participants in the fraudulent abstraction of the moneys, or accessories to the frauds by refusing to prosecute” (58 NY at 19-20 [emphasis added]).11
In Lowe, the Court, after concluding that the Attorney General had no general authority to seek vindication of strictly private rights, turned to a lengthy inquiry into whether “there *231are any statutes which require a modification of these views” (117 NY at 192). The majority states that Ingersoll and Lowe are persuasive because there is no statute that expressly states that the Attorney General maintains his capacity to sue despite the merger of a not-for-profit corporation into a for-profit. However, there is no need for such a statute here because N-PCL 720 (b) and 908 (i) (A) already provide that the Attorney General’s claims against a not-for-profit (and, by necessity, his capacity to bring them) survive the merger. There is nothing to suggest that the Legislature meant otherwise.
The “constitutional question” that the majority seeks to avoid by reading N-PCL 908 (i) (A) to strip the Attorney General of his ability to maintain his claims is fictitious. The case it relies on, Raines v Byrd (521 US 811 [1997]), addresses the requirement of article III of the United States Constitution that for a plaintiff to have standing (as discussed below, a concept distinct from “capacity” or “authority” to sue) there must be a “case or controversy.” However, the “case or controversy” doctrine “has no analogue in the State Constitution” (Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 772 [1991]). Accordingly, there is no constitutional concern whatsoever.
Even if the Federal Constitution were determinative of standing in this case, there would nonetheless be no constitutional question. The majority flatly misconstrues footnote 3 in Raines (521 US at 820). The footnote stands only for the proposition that Congress may never confer standing on a plaintiff who would not otherwise have constitutional standing (id., citing Gladstone, Realtors v Village of Bellwood, 441 US 91, 100 [1979]), i.e., a plaintiff who has not “suffered a distinct and palpable injury to himself that is likely to be redressed if the requested relief is granted” (Gladstone at 100 [internal quotation marks and citation omitted]). Indeed, the majority neglects to report that the footnote explicitly acknowledges that Congress may confer standing where the plaintiff has suffered the requisite injury even if he would otherwise lack “prudential” standing because he is not the person best suited to assert a particular claim.
The only type of standing Grasso can possibly claim the Attorney General lacks at this juncture is “prudential” standing. This is because Grasso has never argued here that the Legislature acted unconstitutionally when it enacted N-PCL 720 because the people of this state do not always suffer an “injury” when officers or directors of a not-for-profit corporation waste *232corporate assets. Indeed, if that were his position, he would presumably have moved at the outset to dismiss all of the causes of action against him, even those that the statute explicitly grants to the Attorney General, relying on his theory that there is no quasi-public interest at issue in this case. If the initial grant of standing to the Attorney General were constitutional, then, even if he lacked “prudential standing,” the Legislature’s decision to permit the Attorney General’s standing to survive a merger with a for-profit entity would unquestionably pass muster under the United States Constitution.
It is significant that Grasso has never attacked the Attorney General’s standing, as opposed to his capacity or authority, to bring his claims, as such a failure constitutes a waiver of that defense. Capacity to sue is “conceptually distinct” from standing to sue (Silver v Pataki, 96 NY2d 532, 537 [2001]). While Grasso has nominally framed his argument as involving standing, the argument in fact involves capacity. This Court has held that because the two defenses are distinct, they must both be separately preserved pursuant to CPLR 3211 (e) (Security Pac. Natl. Bank v Evans, 31 AD3d 278, 279, 280-281 [2006], appeal dismissed 8 NY3d 837 [2007]). Because Grasso has never, other than nominally, invoked standing, as opposed to capacity, as a defense, he has waived it.
The majority’s argument that to recognize the Attorney General’s standing would violate the separation of powers doctrine is particularly ironic. To the contrary, the three branches of government are in perfect harmony here. The Legislature, by enacting N-PCL 720 and 908 (i) (A), granted the executive branch, in the person of the Attorney General, authority to seek judicial relief under the very circumstances that exist here. The result favored by the majority, in which the judicial branch would refuse to hear claims expressly granted by the Legislature to the executive, would trample on the concept of separation of powers.
Finally, there is no rationality to the new argument, found only in the majority’s writing and in none of the parties’ briefs, that an endeavor so important as seeking to ensure the integrity of the NYSE constitutes an improper use of public funds. Likewise, the argument that the continued prosecution of the Attorney General’s claims runs contrary to the prohibition of article VII, § 8 (1) of the New York Constitution, also made solely by the majority, is without basis in fact, statute or precedent. That clause generally prohibits the State from subsidizing *233the activities of private corporations and is in no way implicated in this controversy. Indeed, the NYSE was a private corporation before it merged with Archipelago Holdings, Inc., albeit a not-for-profit. This Court in Grasso II did not find any constitutional impediments to allowing the Attorney General to prosecute those claims he was authorized to bring pursuant to N-PCL 720, nor should it now.12
Of course, the Attorney General need not offer any justification for why he maintains his capacity to sue despite the merger. Nor need he explain why his expenditure of public funds in pursuit of his claims is proper. As discussed at the outset, Grasso’s argument about capacity to sue and the majority’s theory about the appropriateness of state subsidization of a private matter both rest on the fallacy that the merger resulted in the extinguishment of any not-for-profit that the Attorney General was empowered to police. That is simply not the case. Again, the new entity includes a not-for-profit. Accordingly, the Attorney General’s capacity to seek disgorgement by Grasso of his compensation to that not-for-profit is expressly authorized by N-PCL 720.
Grasso’s first and third cross claims allege that the NYSE breached section 6.2 of his 2003 and 1999 employment agreements by failing to award him termination benefits. Grasso contends that he was terminated involuntarily, without cause, and that section 6.2 of his employment agreements entitles him to a termination award. The language of section 6.2 is identical in Grasso’s 1999 and 2003 employment agreements. It provides:
“Involuntary Termination by the Exchange without Cause or Termination by the Executive for Good Reason. If the Executive is involuntarily terminated by the Exchange without Cause in accordance with Section 5 (c) above or the Executive terminates his employment for Good Reason in accordance with Section 5 (d) above, [benefits flow].”
Section 5 (c) and (d) of the 1999 and 2003 employment agreements are consistent in the requirement of “written notice” of termination.
Here, Grasso read a prepared statement at a Board meeting offering to “submit [his] resignation ... if [the Board] wish[ed *234him] to do so.” At the same meeting, the Board voted in favor of Grasso resigning, and he agreed to do so. He now contends that because the Board asked him to submit his resignation, he was effectively involuntarily terminated without cause, triggering section 6.2.
The law is settled that an individual who resigns, even in the face of inevitable termination, has not been terminated (Nocera v New York City Fire Commr., 921 F Supp 192, 201 [SD NY 1996]; Matter of Biegel v Board of Educ. of Ellenville Cent. School Dist., 211 AD2d 969, 970 [1995]). On this record, there is no evidence that the Board was contemplating terminating Grasso. Thus, Grasso’s resignation was voluntary.
In any event, even if we were to conclude that Grasso was terminated, his claim for benefits would be precluded by General Obligations Law § 15-301 (4), which states:
“If a written agreement or other written instrument contains a provision for termination or discharge on written notice by one or either party, the requirement that such notice be in writing cannot be waived except by a writing signed by the party against whom enforcement of the waiver is sought or by his agent.”
As the parties agree that no written notice of resignation or termination was issued by Grasso or the NYSE, Grasso’s first and third cross claims for termination benefits were properly dismissed (see Jaffe v Paramount Communications, 222 AD2d 17 [1996] [where employment agreement requires written notice of termination, alleged oral notice is insufficient to effect contractual termination]).
After Grasso resigned, John Reed became the Interim Chairman and CEO of the NYSE. Reed retained Daniel Webb, Esq. and his law firm, Winston & Strawn, to represent the NYSE in an inquiry by the SEC related to Grasso’s compensation. The firm conducted a three-month investigation, which included extensive document review, interviews of more than 60 directors and employees of the NYSE, and obtaining analyses by experts in compensation. In December 2003, Winston & Strawn provided Reed with a copy of a written report (the Webb report) summarizing the information obtained in its investigation.
Subsequently, Reed made a remark that was quoted in the December 21, 2003 New York Times. His statement reads: “If you read this report [referring to the Webb report] and if you were trained in the law, you would say that there is information *235in that report that would support a potential legal action” (McGeehan and Thomas, Next for the Big Board, To Sue or Not to Sue?, New York Times, Dec. 21, 2003, sec 3, at 31). On January 8, 2004, the NYSE also issued a press release that Reed had informed the SEC and the New York Attorney General that the NYSE Board “had reviewed and discussed the [Webb] report, concluding that ‘serious damage has been inflicted on the Exchange by unreasonable compensation of the previous Chairman and CEO, and by failure of governance and fiduciary responsibility that led to the compensation excesses as well as other injuries.’ ” In his fifth cross claim, Grasso contended that these statements constituted actionable defamation by the NYSE and Reed. By order entered March 25, 2005, the motion court granted the NYSE’s and Reed’s CPLR 3211 (a) (7) motion to dismiss. However, on appeal, this Court reversed and reinstated the defamation claim (21 AD3d 851 [2005], supra). Our order held that a factual issue was presented as to whether “the ordinary and average reader was likely to have understood the [challenged] statements in a defamatory sense” (id. at 852 [internal quotation marks omitted]). Given that the statements concerned allegations that Grasso’s compensation was excessive, we also concluded that “whether the defamatory implications (if any) of the statements were of and concerning Grasso is also a question for the trier of fact” (id. [internal quotation marks omitted]). Our order concluded that “[w]hether Grasso (who concedes that he is a public figure) will be able to sustain his burden of proving actual malice at trial cannot be determined at this prediscovery stage of the litigation” (id. at 853, citing, inter alia, Arts4All, Ltd. v Hancock, 5 AD3d 106, 109 [2004]).
Subsequent to substantial discovery, including the contents of the Webb report, the NYSE and Reed moved for summary judgment on the same cross claim. In the order appealed, the motion court granted the motion, finding Grasso’s submissions insufficient to substantiate the required element of his claim that the challenged statements were made with actual malice. I agree.
A public figure13 may not recover damages for defamation unless he or she establishes that an offending false statement was made with “actual malice,” defined as either actual “knowledge that [the offending statement] was false or with reckless disregard of whether it was false or not” (see New York Times Co. v *236Sullivan, 376 US 254, 279-280 [1964]; Freeman v Johnston, 84 NY2d 52, 56 [1994], cert denied 513 US 1016 [1994]; Prozeralik v Capital Cities Communications, 82 NY2d 466, 474 [1993]). It is the plaintiffs burden to show actual malice (see Mahoney v Adirondack Publ. Co., 71 NY2d 31, 39 [1987]), including proving, with clear and convincing evidence, the falsity of factual assertions, or the declarant’s entertaining serious doubt as to their truth (Freeman, 84 NY2d 56; Prozeralik, 82 NY2d at 473).
Here, Grasso contends that Reed’s statements were a distortion of the Webb report. However, a review of the report, which was before the motion court on this motion and is in the record on appeal, reveals the same criticisms of Grasso as related in Reed’s statements. Further, the conclusions of the Webb report were also consistent with the opinions of the independent executive compensation consultants hired to analyze Grasso’s compensation.
Thus, there is no evidence that Reed’s statements were false. Further, there was no evidence, let alone, clear and convincing evidence, that Reed entertained any doubt about the truth of the findings in the Webb report (see Present v Avon Prods., 253 AD2d 183, 188 [1999], Iv dismissed 93 NY2d 1032 [1999]). While Grasso may have disagreed with many of that report’s conclusions, he presented nothing in opposition to the motion that calls its veracity into question. Accordingly, I agree with the majority’s conclusion that Grasso’s fifth cross claim for defamation was properly dismissed.
Grasso’s second and fourth cross claims assert that the alleged defamatory statements also constituted disparagement by the NYSE in breach of section 8.9 of the 2003 and 1999 employment agreements. That section provides:
“During the Employment Term . . . and thereafter, the Exchange by formal announcement or by statements of an officer thereof shall not with willful intent damage the reputation of, or vindictively disparage, the Executive, provided that the foregoing shall not apply to (i) actions or statements taken or made by the Exchange in good faith, . . . (iii) as the Exchange in good faith deems necessary to rebut any untrue or misleading public statements made about the Exchange, and (iv) statements made in good faith by the Exchange to rebut untrue or misleading statements made about the Exchange” (§ 8.9 [b] [emphasis supplied]).
*237Grasso contends that through Reed’s statements, the NYSE violated section 8.9 of his employment agreements. However, as noted with respect to the defamation claim, Reed was entitled to rely and comment on the findings set forth in the Webb report. Because there is no evidence that Reed acted “vindictively” or with “willful intent” to damage Grasso’s reputation by relating the contents of the report, Grasso’s contractual disparagement claims were properly dismissed.
Saxe and Buckley, JJ., concur with McGuire, J.; Mazzarelli, J.P., dissents in part in a separate opinion.
Order, Supreme Court, New York County, entered October 19, 2006, modified, on the law, to deny the Attorney General summary judgment on liability as to the third cause of action, grant Grasso’s motion to dismiss the second and third causes of action, and grant Langone’s motion to dismiss the seventh cause of action, and otherwise affirmed, without costs. The Clerk is directed to enter judgment accordingly. Appeal from that part of said order which granted plaintiff summary judgment on the sixth cause of action against Grasso dismissed, as moot, without costs.

. As the parties all call this contractual benefit program Grasso’s SERR it will be referred to in the same manner here.

. Grasso’s defamation claim is also asserted against cross claim defendant John Reed, who succeeded him as Chair and CEO of the NYSE.

. As relevant, N-PCL 717 (a) provides that “[directors and officers shall discharge the duties of their respective positions in good faith and with that degree of diligence, care and skill which ordinarily prudent men would exercise under similar circumstances in like positions.” N-PCL 717 (b) provides that “[i]n discharging their duties, directors and officers, when acting in good faith, may rely on information, opinions, reports or statements . . . prepared or presented” by various individuals, including fellow officers and directors and other agents of the corporation.

. N-PCL 720 (a) (1) (A) and (B) authorize an action against an officer or director of a not-for-profit corporation to compel an accounting for alleged misconduct concerning “(A) The neglect of, or failure to perform, or other violation of his duties in the management and disposition of corporate assets committed to his charge,” and “(B) The acquisition by himself, transfer to others, loss or waste of corporate assets due to any neglect of, or failure to perform, or other violation of his duties.” N-PCL 720 (b) also authorizes the Attorney General, among others, to bring such an action against the offending officer or director.

. N-PCL 719 (e) provides that, “[a] director or officer shall not be liable under this section if, in the circumstances, he discharged his duty to the corporation under section 717 (Duty of directors and officers).”

. The merger became final just eight days before the motion court rendered the decision on Grasso’s pre-answer motion to dismiss in Grasso II.

. See record on appeal, Grasso II (at 365-366), of which we take judicial notice (see Matter of Allen v Strough, 301 AD2d 11, 18-19 [2002]). The majority’s point that “the Attorney General has never sought to amend the complaint to reflect this intention” is not persuasive, as the Attorney General can seek leave to amend from Supreme Court at any time (CPLR 3025 [b]).

. A printout of the Internet article was included in the supplemental record on appeal for Grasso II.

. The majority’s statement that its position would not necessarily result in the loss of all claims because the law is unsettled as to whether the Attorney General might be able to continue a hypothetical claim for injunctive relief pursuant to his parens patriae authority, despite the merger, does nothing to advance the discussion. The issue on this appeal is whether the claims that are expressly authorized by N-PCL 720 (b), and do not rely on the Attorney General’s parens patriae authority, survive merger with a for-profit. Moreover, given the majority’s expressed disdain for the Attorney General’s parens patriae authority to proceed against Grasso in any respect, we hardly believe that the majority would have given any consideration to such a claim if it had been pleaded.

. The Seneci court did not discuss, as did Ingersoll and Lowe, whether the outcome would have been different in that case if the Attorney General’s claims had been specifically authorized by statute. Presumably, however, had there, like here, been a statute in that case authorizing the Attorney General to bring the claims, the claims would have been sustained.

. As stated by the Ingersoll dissent, “[i]t seems to be conceded, in all the discussions upon the subject before and within the court, that if the attorney-general had been specially authorized by act of the legislature to bring this action, such authority would be valid and sufficient to sustain the action” (58 NY at 44).

. As conceded by the majority, this constitutional argument was not raised on the prior appeal. It should also be emphasized, however, that it was also not raised on this appeal by the parties and is found only in the majority’s writing.

. Grasso does not dispute that, for purposes of evaluating his defamation claim, he is a public figure.