Ferolito v. Vultaggio

• Decision Date: 01 August 2012
• Docket Number: No. 600396/08.,600396/08.
• Citation: Ferolito v. Vultaggio, 2012 NY Slip Op 51523, 36 Misc.3d 1227, 959 N.Y.S.2d 88 (N.Y. Sup. Ct. 2012)
• Parties: John M. FEROLITO et al., Plaintiffs, v. Domenick J. VULTAGGIO et al., Defendants.
• Court: New York Supreme Court

36 Misc.3d 1227

959 N.Y.S.2d 88

2012 N.Y. Slip Op. 51523

John M. FEROLITO et al., Plaintiffs,

v.Domenick J. VULTAGGIO et al., Defendants.

No. 600396/08.

Supreme Court, New York County, New York.

Aug. 1, 2012.

Nicholas A. Gravante, Jr., Esq., Boies Schiller & Flexner LLP, New York City, for Plaintiffs.

Louis M. Solomon, Esq., Cadwalader Wickersham & Taft LLP, New York City, for Defendants.

MARTIN SHULMAN, J.

This action involves an ownership struggle between two competing groups-the Ferolito parties(“Ferolito”) and the Vultaggio parties(“Vultaggio”)—who own a beverage business, referred to here as the AriZona Entities (or “AriZona”), which manufactures and distributes the AriZona iced tea brand of beverages.The varied actions now pending include a Business Corporation Law (BCL)§ 1118 valuation proceeding to determine the fair value of John M. Ferolito's (“JMF”) shares in Beverage Marketing USA, Inc.(“ “BMU”).The brief underlying factual and procedural background has been detailed in this court's earlier Interim Decision, dated April 16, 2012.The defined terms used in the Interim Decision are incorporated here.

In Motion SequenceNo. 32, Ferolito moves for prospective equitable relief, viz., a permanent mandatory injunction purportedly to enforce this court's earlier decision, Ferolito v. Vultaggio,2010 WL 7373758(Sup Ct N.Y. Co2010)(“ESE Decision”¹), affd,85 A.D.3d 636, 925 N.Y.S.2d 506(1st Dept2011), or in the alternative, moves for partial summary judgment on Count III of the First Amended Complaint.Vultaggio opposes the motion.

In support of this motion, Ferolito reminds this court of bench rulings it sua sponte issued in 2009 prior to the ESE Decision which directed Vultaggio to allow JMF to participate in major corporate decision-making (see Exhibits 9 and 10 to Ferolito Motion).

However, it is important to appreciate the context in which the parties advanced their arguments about this management issue in extensive colloquy during varied in-court conferences early on in this litigation.At that time, there were no outcome-determinative decisions, but rather mediated pendente lite stipulations and sua sponte judicial directives.Specifically, the foregoing directives to resolve this impasse and other issues were based on this court's perceived practicalities to try to preserve the peace during this hotly litigated war between the parties.These rulings were not issued to dispose of varied motions for relief based on any developed record.

However, with Ferolito renewing its motion for injunctive relief, albeit prospectively, and/or alternatively seeking partial summary judgment again, this court must now search an up-to-date record using a more refined judicial lens to sustain or overrule any claimed right.In other words, this court's then pragmatic directives to Vultaggio to adhere to Section 3.1 of the Owners Agreement are wholly inapplicable and therefore Ferolito may not resort to the law of the case doctrine on this motion.

Thus, on this round of motion practice, Ferolito simply does not meet the requisite burden for demonstrating entitlement to this injunctive relief.The law is clear that a permanent injunction is a “drastic remedy”.SeeSybron Corp. v. Wetzel,46 N.Y.2d 197, 204, 413 N.Y.S.2d 127, 385 N.E.2d 1055(1978);Parry v. Murphy,79 A.D.3d 713, 715, 913 N.Y.S.2d 285(2d Dept2010).It is a drastic remedy “normally only granted after trial”(Moore v. Ruback's Grove Campers' Assn., Inc.,85 A.D.3d 1220, 1221, 924 N.Y.S.2d 197[3rd Dept2011] ).And it is a drastic remedy awarded to a moving party who has “ actually succeed[ed] on the merits of the case, rather than merely demonstrate[d] that success is likely in a future proceeding.”Weizmann Inst. of Science v. Neschis, 229 FSupp 2d 234, 258 (S.D.N.Y.2002)(emphasis added).Well settled is the notion that a movant must also satisfy an additional two prongs by showing that there would be (1) irreparable injury absent the granting of injunctive relief, and (2) a balancing of the equities in the movant's favor.

On the record now before this court, Ferolito has failed to satisfy the high threshold required to obtain such extraordinary relief.More to the point, Ferolito cannot show that its case has “actually succeeded” on the merits.And on a record rife with “issues of fact”, a claim for a permanent injunction cannot “be resolved on the basis of the papers submitted” and can “only [be] issued after a full trial”.Byrne Compressed Air Equip. Co., Inc. v. Sperdini,123 A.D.2d 368, 369, 506 N.Y.S.2d 593(2d Dept1986)(reversing permanent injunction and declining to issue preliminary injunction).²

Emphatically stated, in finding that no ESE had occurred, this court made no declarations regarding Ferolito's management rights.Contrarily, this court denied Ferolito summary judgment as to liability on Count III of the First Amended Complaint, implicitly finding the existence of material issues of fact as to Ferolito's alleged claim that Vultaggio contractually violated § 3.1 of the Owners' Agreement.

Notably, the ESE decision clearly highlighted JMF's inconsistent posturing:

Ferolito cannot aver that he has had but nominal involvement in the operations of the AriZona entities since before the Owner's Agreement was entered into, and expect this court to rule as a matter of law that he was damaged because Vultaggio prevented him from participating in management decisions.

As further gleaned from the then underlying record and noted in the ESE Decision: Count III of the First Amended Complaint sought monetary damages and injunctive relief due to Vultaggio's alleged breaches of the corporate governance provisions of the Owners' Agreement; indisputably, JMF, in a sworn affidavit, then averred to substantially reducing his role in the management of the AriZona entities and maintaining that financially lucrative passive role even after executing the Owner's Agreement; and implicit from that same record was a lack of sufficient evidence to persuade the court to either award any interim injunctive relief let alone summary judgment grounded on Ferolito's claimed irreparable harm due to Vultaggio making unilateral corporate decisions in operating the profitable AriZona entities.

Now, on this more developed record, this court can also consider various judicial admissions made as part of the record in a related action in Supreme Court, Nassau County, which evidently undermines Ferolito's perceived harm.Illustratively, JMF duly acknowledged the existence of the “One Captain Agreement”, an oral agreement in which JMF left the running of AriZona to Vultaggio: “I left Don Vultaggio and I let him do his thing because I did it for the first 20–some odd years.I let him be king.”( SeeJMF EBT Trat 61:6–9 as Volume I, Exhibit 17 to Solomon Opp. Aff.).And during the trial in the Nassau County action, Richard M. Adonailo, to whom Ferolito had entrusted full power of attorney, testified that he was aware of the Captain Agreement” between the parties, that it was reached prior to the Owners' Agreement, and that it continued to be an Agreement between the parties after the Owners' Agreement was signed.SeeTrial Trat 2510:19–25, through 2511:1–3 as Volume I, Exhibit 1 to Solomon Opp. Aff.³

Based on the foregoing, JMF and Ferolito simply fail to demonstrate that they suffered, and will continue to suffer, irreparable harm unless they are granted a permanent mandatory injunction to prospectively weigh in on all material AriZona matters during the pendency of the valuation proceeding triggered by BMU's right of election pursuant to BCL § 1118.Consequently, Ferolito did not show then, and has not shown now, that “he was damaged because Vultaggio prevented him from participating in management decisions.”

Moreover, except for conclusory assertions here, without more, JMF and Ferolito have not only failed to demonstrate that their claimed injuries from perceived long-standing marginalization are irreparable, viz., for which they cannot be fully compensated by money damages at law ( see306 Rutledge, LLC v. City of New York,90 A.D.3d 1026, 1028, 935 N.Y.S.2d 619[2d Dept2011];see also, Sperry Intl. Trade, Inc. v. Government of Israel,670 F.2d 8, 12[2d Cir1982] ), but JMF has also made no showing at this juncture that being “out of the loop” will adversely affect the valuation of his BMU shares.Contrarily, JMF and Ferolito have steadfastly maintained that their collective interests in BMU/AriZona are worth billions of dollars and intend to prove same at trial in the valuation proceeding.

Ferolito has also not demonstrated the second prong, that of balancing the equities in his favor, without which his application must be denied.CPLR § 6301;Aetna Ins. Co. v. Capasso,75 N.Y.2d 860, 552 N.Y.S.2d 918, 552 N.E.2d 166(1990);Nobu Next Door, LLC v. Fine Arts Hous., Inc.,4 N.Y.3d 839, 800 N.Y.S.2d 48, 833 N.E.2d 191(2005).“In balancing the equities, the court should consider various factors, including ... whether plaintiff has unclean hands.”United for Peace & Justice v. Bloomberg,5 Misc.3d 845, 849–850, 783 N.Y.S.2d 255, N.Y. Slip Op 24389 (Sup Ct N.Y. Co2004)(“[P]laintiff's delay in coming to court, and its decision to renege on its [earlier] commitment, demonstrate that it lacks the clean hands that are a prerequisite for the grant of equitable relief-regardless of any alleged or even actual wrong attributable to defendants”).“He who comes to equity must come with clean hands” and unclean hands may bar injunctive relief concerning enforcement of a shareholders' agreement.Amarant v. D'Antonio,197 A.D.2d 432, 434, 602 N.Y.S.2d 837(1st Dept1993).Illustrative of JMF's unclean hands was JMF's calculated violation of the transfer covenants contained in the Owners' Agreement which this court found “border[ed] on the unconscionable.”SeeFerolito v. Vultaggio,2009 N.Y. Misc. LEXIS 5806[*7](Sup Ct N.Y. Co2009), affd,78 A.D.3d 529, ...