Kavanaugh v. Kavanaugh

• Decision Date: 23 December 2021
• Docket Number: 703,CA 20-01024
• Citation: 200 A.D.3d 1568,161 N.Y.S.3d 558
• Parties: James KAVANAUGH, Helen Kavanaugh and Matthew G. Kavanaugh, Plaintiffs-Appellants-Respondents, v. Mary Ellen KAVANAUGH, Defendant-Respondent, Neil Kavanaugh, Also Known as Cornelius Kavanaugh, Martha Kavanaugh, Consumers Beverages, Inc., and Kavcon Development LLC, Defendants-Respondents-Appellants. (Appeal No. 1.)
• Court: New York Supreme Court — Appellate Division

200 A.D.3d 1568

161 N.Y.S.3d 558

James KAVANAUGH, Helen Kavanaugh and Matthew G. Kavanaugh, Plaintiffs-Appellants-Respondents,

v.Mary Ellen KAVANAUGH, Defendant-Respondent,Neil Kavanaugh, Also Known as Cornelius Kavanaugh, Martha Kavanaugh, Consumers Beverages, Inc., and Kavcon Development LLC, Defendants-Respondents-Appellants. (Appeal No. 1.)

703

CA 20-01024

Supreme Court, Appellate Division, Fourth Department, New York.

Entered: December 23, 2021

GROSS SHUMAN, P.C., BUFFALO (HUGH C. CARLIN OF COUNSEL), FOR PLAINTIFFS-APPELLANTS-RESPONDENTS.

ADAMS LECLAIR LLP, ROCHESTER (JEREMY M. SHER OF COUNSEL), FOR DEFENDANT-RESPONDENT-APPELLANT MARTHA KAVANAUGH.

CONNORS LLP, BUFFALO (VINCENT E. DOYLE, III, OF COUNSEL), FOR DEFENDANT-RESPONDENT-APPELLANT NEIL KAVANAUGH, ALSO KNOWN AS CORNELIUS KAVANAUGH.

GARVEY & GARVEY, BUFFALO (DENNIS J. GARVEY OF COUNSEL), FOR DEFENDANT-RESPONDENT.

BARCLAY DAMON LLP, BUFFALO (JAMES P. MILBRAND OF COUNSEL), FOR DEFENDANTS-RESPONDENTS-APPELLANTS CONSUMERS BEVERAGES, INC. AND KAVCON DEVELOPMENT LLC.

PRESENT: CENTRA, J.P., PERADOTTO, NEMOYER, AND DEJOSEPH, JJ.

MEMORANDUM AND ORDER

It is hereby ORDERED that said cross appeals by defendants Neil Kavanaugh, also known as Cornelius Kavanaugh, and Martha Kavanaugh are unanimously dismissed and the order is modified on the law by granting the motion insofar as made by plaintiffs James Kavanaugh and Helen Kavanaugh and granting judgment in their favor as follows:

It is ADJUDGED and DECLARED that the transfers of shares and ownership interests in defendants Consumers Beverages, Inc. and Kavcon Development LLC from defendants Martha Kavanaugh and Mary Ellen Kavanaugh to defendant Neil Kavanaugh, also known as Cornelius Kavanaugh, are null and void,

and as modified the order is affirmed without costs.

Memorandum: This appeal is part of an extended intra-family litigation concerning the ownership of two family companies, defendants Consumers Beverages, Inc. (CBI) and Kavcon Development LLC (Kavcon). CBI and Kavcon were founded decades ago by Lawrence Kavanaugh. Plaintiffs—James Kavanaugh, Helen Kavanaugh, and Matthew G. Kavanaugh—and defendants Neil Kavanaugh, also known as Cornelius Kavanaugh, Mary Ellen Kavanaugh, and Martha Kavanaugh are some of Lawrence's children. James, Helen, Matthew, Neil, Mary Ellen, and Martha are all current or former shareholders in CBI and current or former members of Kavcon. James, Helen, Matthew, Neil, Mary Ellen, and Martha are also all signatories to the separate agreements that govern the ownership structure of each company (CBI Agreement and Kavcon Agreement, respectively). In 2012 and 2013, Neil purchased Mary Ellen's and Martha's interests in CBI and Kavcon (CBI Purchases and Kavcon Purchases, respectively).

Plaintiffs objected to the CBI Purchases and the Kavcon Purchases, and they thereafter commenced this action. Only the first and second causes of action are at issue in this appeal. The first cause of action, which was asserted only by James and Helen, alleged that the CBI Purchases violated certain transfer restrictions in the CBI Agreement, and it therefore sought a declaration that the CBI Purchases were null and void. The second cause of action, which was likewise asserted only by James and Helen, alleged that the Kavcon Purchases violated certain transfer restrictions in the Kavcon Agreement, and it therefore sought a declaration that the Kavcon Purchases were null and void. Notably, both the first and second causes of action were asserted only against Neil, Martha, and Mary Ellen as individuals, not against CBI and Kavcon as corporations; indeed, the complaint does not allege any wrongdoing by CBI and Kavcon as corporations. CBI and Kavcon are thus properly treated only as nominal defendants in this action, i.e., parties whose presence in the litigation is necessary only to bind them to the eventual judgment and to ensure full relief between the real parties in interest (see e.g. Harris v. Harris , 193 A.D.3d 457, 457-458, 148 N.Y.S.3d 1 [1st Dept. 2021] ; Berger v. Friedman , 151 A.D.3d 678, 678-679, 54 N.Y.S.3d 671 [2d Dept. 2017] ; see generally Acosta v. Saakvitne , 355 F. Supp. 3d 908, 916-919 [D. Haw. 2019] ; Allen v. Park Natl. Bank & Trust of Chicago , 1998 WL 299477, *3 [ND Ill, May 29, 1998, No. C 2198] ).

Neil answered the complaint, asserting—as relevant here—affirmative defenses of waiver and estoppel premised on plaintiffs’ failure to object to 73 intra-family transactions involving CBI shares between 1986 and 2002 (Prior Transactions), each of which allegedly failed to comply with the transfer restrictions in the CBI Agreement. Plaintiffs’ failure to object to the Prior Transactions constituted, in Neil's view, an implicit prospective waiver of the transfer restrictions in both the CBI Agreement and the Kavcon Agreement such that plaintiffs should be barred by principles of waiver and estoppel from challenging both the CBI Purchases and the Kavcon Purchases.

Following discovery, plaintiffs moved for partial summary judgment on the first and second causes of action. In opposition, Neil argued that summary judgment in plaintiffs’ favor was precluded by triable issues of fact with respect to the estoppel and waiver affirmative defenses, but he did not formally cross-move for summary judgment dismissing the first and second causes of action against him. Despite the absence of any cause of action against them, CBI and Kavcon opposed plaintiffs’ motion and cross-moved for summary judgment dismissing the complaint as purportedly against them. For their part, Martha and Mary Ellen both conceded liability and advocated in plaintiffs’ favor, although neither sister filed a formal motion or cross motion on her own behalf.

Supreme Court determined, as a matter of law, that the CBI Purchases violated the transfer restrictions of the CBI Agreement and that the Kavcon Purchases violated the transfer restrictions of the Kavcon Agreement. Nevertheless, the court denied both plaintiffs’ motion and the cross motion by CBI and Kavcon solely on the ground that triable issues of fact existed as to the affirmative defenses of waiver and estoppel. Plaintiffs now appeal, and defendants—with the exception of Mary Ellen—now cross-appeal.

Martha is not aggrieved by the order from which she purports to cross-appeal because that order neither granted relief against her nor denied any motion for affirmative relief on her own behalf (see CPLR 5511 ; Fabrizi v. 1095 Ave. of the Ams., L.L.C. , 22 N.Y.3d 658, 664 n. 4, 985 N.Y.S.2d 416, 8 N.E.3d 791 [2014] ; MacKay v. Paliotta , 196 A.D.3d 552, 553, 151 N.Y.S.3d 671 [2d Dept. 2021] ; see generally CPLR 2211, 2215 ; Free in Christ Pentecostal Church v. Julian , 64 A.D.3d 1153, 1154, 881 N.Y.S.2d 773 [4th Dept. 2009] ). Martha's support for plaintiffs’ efforts to void the CBI Purchases and the Kavcon Purchases does not make her an "aggrieved" party in a technical sense; "aggrievement is about relief, not reasoning" ( Mixon v. TBV, Inc. , 76 A.D.3d 144, 154, 904 N.Y.S.2d 132 [2d Dept. 2010] ), and the fact that Martha "may be disappointed or even have been deprived of a financial benefit by the adjudication[s] does not, without more, make [her] a party ‘aggrieved’ " within the meaning of CPLR 5511 ( Matter of DeLong , 89 A.D.2d 368, 370, 455 N.Y.S.2d 896 [4th Dept. 1982], lv denied 58 N.Y.2d 606, 460 N.Y.S.2d 1025, 447 N.E.2d 85 [1983] ; see Matter of Tariq S. v. Ashlee B. , 177 A.D.3d 1385, 1386, 110 N.Y.S.3d 611 [4th Dept. 2019] ). Rather, to qualify as a party aggrieved under CPLR 5511, "[i]t must be shown that [such] party had some legal right or interest in the subject of the determination which was adversely affected thereby" ( DeLong , 89 A.D.2d at 370, 455 N.Y.S.2d 896 ). Martha's cross appeal must therefore be dismissed (see Fabrizi , 22 N.Y.3d at 664, 985 N.Y.S.2d 416, 8 N.E.3d 791 ; MacKay , 196 A.D.3d at 553, 151 N.Y.S.3d 671 ).

We likewise dismiss Neil's cross appeal. Neil did not formally cross-move for affirmative relief on his own behalf, the court did not grant relief against him, and he is not individually aggrieved by the denial of CBI's and Kavcon's cross motion because that "portion of the order ... affected [at most] only the [purported] rights of the corporation[s], and not [Neil's] individual rights" ( LaRose v. Cricchio , 134 A.D.3d 680, 681, 20 N.Y.S.3d 169 [2d Dept. 2015] ; see Berrechid v. Shahin , 60 A.D.3d 884, 884, 874 N.Y.S.2d 918 [2d Dept. 2009] ; Broadway Equities v. Metropolitan Elec. Mfg. Co. , 306 A.D.2d 426, 427, 763 N.Y.S.2d 830 [2d Dept. 2003] ). Neil's belated attempt, following oral argument of the motions, to orally "join in" CBI's and Kavcon's cross motion was ineffective in light of his failure to "formally" join that cross motion in compliance with CPLR 2215 ( Matter of Arkadian S. [Crystal S.] , 130 A.D.3d 1457, 1458, 13 N.Y.S.3d 746 [4th Dept. 2015], lv dismissed 26 N.Y.3d 995, 19 N.Y.S.3d 216, 41 N.E.3d 73 [2015] ; see Free in Christ Pentecostal Church , 64 A.D.3d at 1154, 881 N.Y.S.2d 773 ; but see Voorhees v. Babcock & Wilcox Corp. , 150 A.D.2d 677, 678, 541 N.Y.S.2d 550 [2d Dept. 1989] ). To the extent that Neil's oral attempt to "join in" CBI's and Kavcon's cross motion could be construed as an independent application for summary judgment dismissing the first and second causes of action as against himself , and to the further extent that the order on appeal could be read to deny such an application, we note only that the denial of an oral application made on the return date is not appealable as of right under CPLR 5701 (a) (2) because such an application is not a proper cross motion made on notice under CPLR 2215 (see Free in Christ Pentecostal Church , 64 A.D.3d at 1154, 881 N.Y.S.2d 773 ).

With respect to the cross appeal by CBI and Kavcon, we reject their contention that the court erred in denying their cross motion, although our reasoning differs from the motion court's. It is well established that a party lacks standing to seek...