Recine v. Recine

• Decision Date: 19 January 2022
• Docket Number: 2018–02492,Index No. 605495/17
• Citation: 201 A.D.3d 827,161 N.Y.S.3d 307
• Parties: John RECINE, etc., respondent, v. Luciano RECINE, et al., appellants, et al., defendants.
• Court: New York Supreme Court — Appellate Division

201 A.D.3d 827

161 N.Y.S.3d 307

John RECINE, etc., respondent,

v.Luciano RECINE, et al., appellants, et al., defendants.

2018–02492

Index No. 605495/17

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

Argued—October 4, 2021

January 19, 2022

Fiscella & Associates, P.C., Garden City, NY (James B. Fiscella of counsel), for appellants.

Farley & Kessler, P.C., Jericho, NY (Richard L. Farley, Susan R. Nudelman, and Zara Watkins of counsel), for respondent.

MARK C. DILLON, J.P., LINDA CHRISTOPHER, PAUL WOOTEN, JOSEPH A. ZAYAS, JJ.

DECISION & ORDER

In an action, inter alia, to recover damages for breach of fiduciary duty, the defendants Luciano Recine, Salimar Christina Recine, and Recine Properties, LLC, appeal from an order of the Supreme Court, Nassau County (Jerome C. Murphy, J.), entered December 28, 2017. The order, insofar as appealed from, granted that branch of the plaintiff's motion which was to preliminarily enjoin the defendants Luciano Recine and Salimar Christina Recine from disbursing, transferring, encumbering, or assigning the proceeds from the sale of certain real property in any manner other than based on the subject operating agreement's directive concerning distributions, and denied the motion of the defendants Luciano Recine and Salimar Christina Recine pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against them.

ORDERED that the appeal by the defendant Recine Properties, LLC, is dismissed, as it is not aggrieved by the portion of the order appealed from (see CPLR 5511 ; Mixon v. TBV, Inc., 76 A.D.3d 144, 156–157, 904 N.Y.S.2d 132 ); and it is further,

ORDERED that the order is modified, on the law, by deleting the provision thereof granting that branch of the plaintiff's motion which was to preliminarily enjoin the defendants Luciano Recine and Salimar Christina Recine from disbursing, transferring, encumbering, or assigning the proceeds from the sale of certain real property in any manner other than based on the subject operating agreement's directive concerning distributions, and substituting therefor a provision denying that branch of the plaintiff's motion; as so modified, the order is affirmed insofar as appealed from by the defendants Luciano Recine and Salimar Christina Recine, without costs or disbursements.

The plaintiff, John Recine, and his siblings, the defendants Luciano Recine and Salimar Christina Recine (hereinafter together the Recine defendants), are the managing members of the defendant Recine Properties, LLC (hereinafter the company), which is a limited liability company formed for the purpose of acquiring, holding, and disposing of certain real property in Rockaway Beach. The plaintiff commenced this action, individually and derivatively, against the Recine defendants and the company, among others, to recover damages for breach of fiduciary duty, misappropriation and conversion, and unjust enrichment, and for an accounting, injunctive relief, and removal of the Recine defendants, the managing members. The plaintiff alleged that the Recine defendants sold the property, the company's sole asset, without his knowledge or consent, thereafter intended to divert or diverted a portion of the proceeds for the benefit of their separate business interests, and refused his requests for information and documentation regarding the sale and the disposition of the proceeds.

The plaintiff moved, inter alia, to preliminarily enjoin the transfer and use of the sale proceeds. The Recine defendants moved pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against them. By order entered December 28, 2017, the Supreme Court, inter alia, (1) granted that branch of the plaintiff's motion which was to preliminarily enjoin the Recine defendants from disbursing, transferring, encumbering, or assigning the net proceeds of the sale of the property in a manner other than distribution of an equal share to each member, pursuant to the operating agreement; and (2) denied the Recine defendants’ motion pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against them. The Recine defendants appeal.

On a motion for a preliminary injunction, the movant has the burden of demonstrating that (1) the movant will likely succeed on the merits of the action, (2) the movant will suffer irreparable injury absent the issuance of a preliminary injunction, and (3) the balance of equities is in favor of the movant (see CPLR 6301 ; Berman v. TRG Waterfront Lender, LLC, 181 A.D.3d 783, 785, 122 N.Y.S.3d 317 ). Here, since monetary damages are an adequate remedy for the losses alleged, the plaintiff failed to demonstrate irreparable injury absent the granting of a preliminary injunction (see Berman v. TRG Waterfront Lender, LLC, 181 A.D.3d at 785, 122 N.Y.S.3d 317 ; Family–Friendly Media, Inc. v. Recorder Tel. Network, 74 A.D.3d 738, 740, 903 N.Y.S.2d 80 ). Moreover, contrary to the plaintiff's contention, the assets he seeks to restrain "are not specific funds which can be rightly regarded as ‘the subject of the action’ " ( Leo v. Levi, 304 A.D.2d 621, 623, 759 N.Y.S.2d 94, quoting CPLR 6301 ; see Credit Agricole Indosuez v. Rossiyskiy Kredit Bank, 94 N.Y.2d 541, 548, 708 N.Y.S.2d 26, 729 N.E.2d 683 ; Winter v. Brown, 49 A.D.3d 526, 529, 853 N.Y.S.2d 361 ).

However, contrary to the Recine defendants’ contention, the Supreme Court properly determined that the complaint was not subject to dismissal pursuant to CPLR 3211(a)(3) for lack of standing. Pursuant to Business Corporation Law § 626(c), which is applicable to members of New York limited liability companies (see Barone v. Sowers, 128 A.D.3d 484, 484, 10 N.Y.S.3d 22 ), a plaintiff shareholder must allege that he or she made efforts to secure initiation of the derivative action by managing members themselves or set forth the reasons for not making such effort (see Business Corporation Law § 626[c] ; Mason–Mahon v. Flint, 166 A.D.3d 754, 758, 87 N.Y.S.3d 556 ). "Demand is futile, and excused, when the directors are incapable of making an impartial decision as to whether to bring suit" ( Bansbach v. Zinn, 1 N.Y.3d 1, 9, 769 N.Y.S.2d 175, 801 N.E.2d 395 ). "The plaintiff may satisfy this standard by alleging with particularity (1) that a majority of the board of directors is interested in the challenged transaction; or (2) that the board of directors did not fully inform themselves about the challenged transaction to the extent reasonably appropriate under the circumstances; or (3) that the challenged transaction was so egregious on its face that it could not have been the product of sound business judgment of the directors" ( Mason–Mahon v. Flint, 166 A.D.3d at 758, 87 N.Y.S.3d 556 ; see Marx v. Akers, 88 N.Y.2d 189, 200–201, 644 N.Y.S.2d 121, 666 N.E.2d 1034 ). Here, the complaint alleges with particularity that the Recine defendants, who constituted a majority of the managing members, were interested in the challenged transaction, and a demand to initiate suit against themselves...