Katz v. Beil
| Decision Date | 14 September 2016 |
| Citation | 2016 N.Y. Slip Op. 05977,39 N.Y.S.3d 157,142 A.D.3d 957 |
| Parties | Stephen KATZ, et al., appellants, v. Barry J. BEIL, et al., respondents. |
| Court | New York Supreme Court — Appellate Division |
142 A.D.3d 957
39 N.Y.S.3d 157
2016 N.Y. Slip Op. 05977
Stephen KATZ, et al., appellants,
v.
Barry J. BEIL, et al., respondents.
Supreme Court, Appellate Division, Second Department, New York.
Sept. 14, 2016.
Certilman Balin Adler & Hyman, LLP, East Meadow, NY (John H. Gionis, Donna–Marie Korth, and Paul A. Pagano of counsel), for appellants.
Meister Seelig & Fein LLP, New York, NY (Mitchell Schuster and Kevin Fritz of counsel), for respondents Barry J. Beil and Stanley Pine.
Lewis Brisbois Bisgaard & Smith LLP, New York, NY (Mark K. Anesh and Philip J. Furia of counsel), for respondents Finkle Ross & Rost, LLP, and Finkle & Ross, LLP.
MARK C. DILLON, J.P., SHERI S. ROMAN, ROBERT J. MILLER, and HECTOR D. LaSALLE, JJ.
In an action, inter alia, to recover damages for breach of fiduciary duty, the plaintiffs appeal, as limited by their brief, from so much of a judgment of the Supreme Court, Nassau
County (Driscoll, J.), entered June 19, 2014, as, upon so much of an order of the same court entered January 11, 2013, as granted that branch of the motion of the defendants Finkle Ross & Rost, LLP, and Finkle & Ross, LLP, which was pursuant to CPLR 3211(a) to dismiss the cause of action alleging accounting malpractice, upon an order of the same court entered February 28, 2013, upon so much of an order of the same court entered November 4, 2013, as denied certain branches of their motion which were pursuant to CPLR 3025(b) for leave to amend the amended complaint, and upon so much of an order of the same court entered April 17, 2014, as granted that branch of the motion of the defendants Barry J. Beil and Stanley Pine which was for summary judgment dismissing the amended complaint insofar as asserted against them and granted the separate motion of the defendants Finkle Ross & Rost, LLP, and Finkle & Ross, LLP, for summary judgment dismissing the cause of action alleging aiding and abetting breach of fiduciary duty, is in favor of the defendants and against them dismissing the amended complaint.
ORDERED that the judgment is modified, on the law, by deleting the provision thereof dismissing the amended complaint insofar as asserted against the defendants Barry J. Beil and Stanley Pine; as so modified, the judgment is affirmed insofar as appealed from, with one bill of costs payable to the plaintiffs, that branch of the motion of the defendants Barry J. Beil and Stanley Pine which was for summary judgment dismissing the amended complaint insofar as asserted against them is denied, the amended complaint is reinstated insofar as asserted against the defendants Barry J. Beil and Stanley Pine, those branches of the plaintiffs' motion which were pursuant to CPLR 3025(b) for leave to amend the amended complaint (a) to assert shareholders' derivative causes of action on behalf of Hampton Hills Operating Corp. with respect to the first, third, fourth, fifth, sixth, seventh, eighth, and ninth proposed causes of action as set forth in the proposed second amended complaint, (b) to assert derivative causes of action on behalf of Hampton Hills Associates General Partnership with respect to the first, third, fourth, fifth, sixth, seventh, eighth, and ninth proposed causes of action as set forth in the proposed second amended complaint, (c) to assert a cause of action to recover damages for breach of a partnership agreement against the defendants Barry J. Beil and Stanley Pine, and (d) to assert a cause of action for certain declaratory and injunctive relief, are granted, and the orders entered November 4, 2013, and April 17, 2014, are modified accordingly.
The defendants Barry J. Beil and Stanley Pine (hereinafter
together the individual defendants) and the plaintiffs are partners in Hampton Hills Associates General Partnership (hereinafter the Partnership), which owns the Hampton Hills Golf & County Club. The defendants Finkle Ross & Rost, LLP, and Finkle & Ross, LLP (hereinafter together the Finkle defendants), are accounting firms that were allegedly retained to audit the books and records of the Partnership and at least one of its affiliates, the Hampton Hills Operating
Corp. (hereinafter the Operating Corp.).
The plaintiffs commenced this action against the individual defendants and the Finkle defendants. The amended complaint asserted causes of action against the individual defendants for an accounting of the Partnership's books and records, and to recover damages for breach of fiduciary duty, self-dealing, usurpation of corporate opportunity, waste, and unjust enrichment. The amended complaint asserted causes of action against the Finkle defendants to recover damages for accounting malpractice and aiding and abetting breach of fiduciary duty.
Thereafter, the Finkle defendants moved pursuant to CPLR 3211(a) to dismiss the two causes of action asserted against them in the amended complaint. In an order entered January 11, 2013, the Supreme Court directed the dismissal of the cause of action alleging accounting malpractice, but declined to dismiss the cause of action alleging aiding and abetting breach of fiduciary duty.
The plaintiffs subsequently moved, inter alia, pursuant to CPLR 3025(b) for leave to amend the amended complaint to assert shareholders' derivative causes of action on behalf of the Operating Corp., derivative causes of action on behalf of the Partnership, and causes of action against the individual defendants to recover damages for breach of a partnership agreement and for certain declaratory and injunctive relief. In an order entered November 4, 2013, the Supreme Court denied those branches of the plaintiffs' motion.
The individual defendants thereafter moved, inter alia, for summary judgment dismissing the amended complaint insofar as asserted against them, and the Finkle defendants separately moved for summary judgment dismissing the remaining cause of action asserted against them, which alleged aiding and abetting breach of fiduciary duty. In an order entered April 17, 2014, the Supreme Court awarded the individual defendants summary judgment dismissing the amended complaint insofar as asserted against them and awarded the Finkle defendants summary judgment dismissing the cause of action alleging aiding and abetting breach of fiduciary duty. The court subsequently
entered a judgment, inter alia, in favor of the defendants and against the plaintiffs dismissing the amended complaint. The plaintiffs appeal from the judgment.
Contrary to the plaintiffs' contention, the Supreme Court, in the order entered January 11, 2013, properly directed the dismissal of the cause of action to recover damages for accounting malpractice asserted against the Finkle defendants. In considering a motion to dismiss pursuant to CPLR 3211(a)(7), a court is required to accept the facts as alleged in the complaint as true, accord the plaintiffs the benefit of every favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory (see Leon v. Martinez, 84 N.Y.2d 83, 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511 ). Applying that standard here, the amended complaint failed to adequately allege the existence of actual privity of contract between the plaintiffs and the Finkle defendants, or a relationship so close as to approach that of privity, sufficient to impose a professional duty upon the Finkle defendants for the benefit of the plaintiffs (see Credit Alliance Corp. v. Arthur Andersen & Co., 65 N.Y.2d 536, 551, 493 N.Y.S.2d 435, 483 N.E.2d 110 ; Signature Bank v. Holtz Rubenstein Reminick, LLP, 109 A.D.3d 465, 466–467, 970 N.Y.S.2d 281 ; Ideal Steel Supply Corp. v. Anza, 63 A.D.3d 884, 885, 882 N.Y.S.2d 190 ). Inasmuch as the amended complaint failed to adequately allege the existence of a duty
owed by the Finkle defendants to the plaintiffs, it failed to state a cause of action against the Finkle defendants for accounting malpractice.
The plaintiffs also contend that the Supreme Court, in the order entered November 4, 2013, should have granted those branches of their motion which were pursuant to CPLR 3025(b) for leave to amend the amended complaint to assert shareholders' derivative causes of action on behalf of the Operating Corp., derivative causes of action on behalf of the Partnership, and causes of action against the individual defendants to recover damages for breach of a partnership agreement and for certain declaratory and injunctive relief. CPLR 3025(b) provides that leave to amend a pleading “shall be freely given.” Accordingly, “leave should be given where the amendment is neither palpably insufficient nor patently devoid of merit, and the delay in seeking amendment does not prejudice or surprise the opposing party” (U.S. Bank, N.A. v. Primiano, 140 A.D.3d 857, 857, 32 N.Y.S.3d 643 ; see HSBC Bank v. Picarelli, 110 A.D.3d 1031, 1032, 974 N.Y.S.2d 90 ). “[T]he legal...
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