O'Hara v. Corporate Audit Co., Inc.

• Decision Date: 10 May 1990
• Citation: 555 N.Y.S.2d 82,161 A.D.2d 309
• Parties: Barney O'HARA, Plaintiff-Respondent, v. CORPORATE AUDIT COMPANY, INC., Defendant, Robert Pfeffer et al., Defendants-Appellants.
• Court: New York Supreme Court — Appellate Division

Page 82

555 N.Y.S.2d 82

161 A.D.2d 309

Barney O'HARA, Plaintiff-Respondent, v.CORPORATE AUDIT COMPANY, INC., DefendantRobert Pfeffer et al., Defendants-Appellants.

Supreme Court, Appellate Division First Department.

May 10, 1990.

L.B. Hoffman, Elmsford, for plaintiff-respondent.

G.D. Fischer, New York City, for defendants-appellants.

Before MURPHY, P.J., and SULLIVAN, MILONAS, ROSENBERGER and ASCH, JJ.

MEMORANDUM DECISION.

Order, Supreme Court, New York County (Irma Vidal Santaella, J.), entered November 1, 1989, which, inter alia, granted plaintiff's motion for a preliminary injunction removing defendant Pfeffer as president, manager and director of defendant Corporate Audit, unanimously reversed to the extent appealed from, on the law and on the facts, with costs and disbursements, and the motion denied.

In this stockholder's derivative action, plaintiff, a 50% shareholder, alleges waste, mismanagement and self-dealing on the part of Pfeffer, also a 50% shareholder, who, since the corporation's formation ten years ago, has been its president and sole operating officer, and ran its day-to-day operations.Plaintiff admittedly has not devoted one day of effort to the corporation's business--obtaining rebates for its clients who advertised in magazines that failed to achieve their published circulation upon which the advertising rate was based--during the ten years of its existence.With plaintiff's knowledge and consent, Pfeffer was paid a salary and received rent for the corporation's use of premises leased or owned by him or his wholly-owned corporation, Matthew Stewart, Inc.At no time did plaintiff voice any complaints about the rental or compensation arrangements until shortly before the commencement of this suit, when Pfeffer canceled all corporate credit cards, including his and plaintiff's.This decision, which allegedly infuriated plaintiff, was, according to Pfeffer, necessitated by plaintiff's abusive use of the credit cards.Shortly thereafter, plaintiff commenced this action in 1987.No injunctive relief was sought at that time.After two years of litigation and after the case had lain dormant for seven months, plaintiff, without any stated emergency or showing of irreparable harm, moved for, inter alia, the removal, pendente lite, of Pfeffer as an officer and director of the corporation.Prior to the court's decision on the motion, the parties stipulated that the corporation would continue to pay rent to Matthew Stewart,...