Rutigliano v. William Locantro, Robert Romanoff, Edm Elec. Contractors, Inc., Index No. 654118/2015

CourtUnited States State Supreme Court (New York)
Writing for the CourtBRANSTEN, J.
Citation2017 NY Slip Op 30446 (U)
Docket NumberIndex No. 654118/2015
Decision Date03 March 2017
PartiesJOSEPH RUTIGLIANO, Plaintiff, v. WILLIAM LOCANTRO, ROBERT ROMANOFF, EDM ELECTRICAL CONTRACTORS, INC., BRAVO SALES GROUP, INC., JOHN DOES 1 THROUGH 10, ABC CORPORATIONS 1 THROUGH 10 Defendants.

2017 NY Slip Op 30446(U)

JOSEPH RUTIGLIANO, Plaintiff,
v.
WILLIAM LOCANTRO, ROBERT ROMANOFF,
EDM ELECTRICAL CONTRACTORS, INC.,
BRAVO SALES GROUP, INC., JOHN DOES 1 THROUGH 10,
ABC CORPORATIONS 1 THROUGH 10 Defendants.

Index No. 654118/2015

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 3

RECEIVED: March 6, 2017
March 3, 2017


NYSCEF DOC. NO. 113

Motion Date: 7/19/2016
Motion Seq.
Nos. 001, 002

BRANSTEN, J.

This matter comes before the Court on Plaintiff-Petitioner's Petition for dissolution pursuant to Business Corporation Law § 1104-a (Motion Sequence 001), and Defendant-Respondents' motion to dismiss the Petition pursuant to CPLR §§ 404 and 3211 (Motion Sequence 002). Defendant-Respondents oppose the Petition for dissolution, and Plaintiff-Petitioner opposes the motion to dismiss. For the foregoing reasons, the Court denies Plaintiff-Petitioner's motion for dissolution. The Court grants, in part, Defendant-Respondents' motion to dismiss the Petition.

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I. Background

The instant Petition arises from a dispute between Plaintiff-Petitioner Joseph Rutigliano ("Rutigliano") and Defendant-Respondents William Locantro ("Locantro") and Robert Romanoff ("Romanoff") regarding ownership and control of Absolute Electrical Contracting of NY Inc., a unionized electrical contracting business ("Absolute" or the "Company"). Plaintiff-Petitioner Rutigliano alleges he holds one-third of all outstanding shares of Absolute, but has been effectively "frozen out" of Absolute through the "oppressive and illegal conduct" of his partners, Locantro and Romanoff. Petition ¶ 1. Rutigliano separately alleges Locantro and Romanoff improperly "diverted Company assets for their own benefit and robbed the Company of corporate opportunities." Id.

The Petition alleges that, in or about 2006, Rutigliano was approached by Locantro to join Absolute. Petition ¶ 10. At that time, Locantro was the sole owner and officer. Id. When Rutigliano first began working for Absolute, his initial compensation was "base salary plus commissions." Id. ¶ 12. Rutigliano began taking on more responsibilities at Absolute, eventually taking responsibility for "all of the day-to-day operations of the Company." Id. ¶ 13.

In mid-2011, Rutigliano and Locantro began negotiating the terms of a shareholder agreement pursuant to which each would own a 50% stake in Absolute. Petition ¶ 15. Soon after, Locantro advised Rutigliano he wanted a childhood friend, Robert Romanoff, to join Absolute as its new Chief Financial Officer and part-owner. Id. ¶ 16.

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On January 1, 2012, the parties signed an operating agreement governing the terms of operation and control of Absolute.1 See NYSCEF No. 56, Romanoff Affidavit Exhibit A (the "Operating Agreement"). The Operating Agreement sets forth that Plaintiff-Petitioner Rutigliano, Defendant-Respondent Locantro, and Defendant-Respondent Romanoff were each to possess a one-third ownership stake in Absolute. See Operating Agreement at 4, 28. Locantro and Rutigliano's initial contributions were valued at $250,000, while Romanoff provided no initial contribution for his ownership stake. See Operating Agreement at 28.

The Petition alleges disagreements between the shareholders arose almost immediately. Petition ¶ 28. For example, the Petition alleges Defendant-Respondent Romanoff quickly fell behind on paying Absolute's creditors, bounced payroll checks, and generally "could not properly manage the company's finances." Id. ¶¶ 28-30. The Petition alleges that, around the same time, Defendant-Respondents began denying Plaintiff-Petitioner access to Absolute's books and Records. Id. ¶ 30.

The Petition further alleges that, in September 2011, Defendant-Respondents Locantro and Romanoff formed EDM Electrical Contractors ("EDM") to bid on non-union contracting jobs for which Absolute was not eligible. Petition ¶ 26. To hide EDM's

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existence from Plaintiff-Petitioner, Defendant-Respondents formed EDM under the name of the individual Defendant-Respondents' children. Id. ¶ 26.

The Petition further alleges that by late 2013, Absolute was significantly behind in repaying expenses which Rutigliano had incurred on Absolute's behalf. Petition ¶ 38. Then on November 2, 2013, Rutigliano was allegedly replaced as president of Absolute without prior notice. Id. ¶ 39. On November 12, 2013, Rutigliano met with Locantro to discuss his concerns regarding Absolute. Id. ¶ 41. Locantro allegedly told Plaintiff-Petitioner he "would pay the $250,000 owed to [Rutigliano] and that the Company would begin paying back all monies owed." Id.

On or about February 1, 2015, Defendant-Respondent Locantro called a meeting of the three shareholders for February 12, 2015. Petition ¶ 56. At that meeting, Defendant-Respondents Locantro and Romanoff allegedly "proceeded to vote to remove Rutigliano as 'managing member', officer, and 'member' of the Company. Id. ¶ 59. Locantro and Romanoff also "voted to suspend all compensation and other benefits owed to Petitioner." Id. By email dated March 6, 2015, Romanoff advised Rutigliano his "duties and responsibilities as president, officer, and managing member have been totally removed." Id. ¶ 61. Defendant-Respondents subsequently "denied Petitioner access to his office and mailed his personal effects to his home." Id.

At a shareholder meeting held on July 24, 2015, Locantro and Romanoff approved an immediate "capital call" which would require each of the three shareholders, including Plaintiff-Petitioner, to make a capital contribution of $102,550 within four days—by July

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28, 2015. Petition ¶ 65. An additional shareholder meeting was held on October 9, 2015 for the purposes of issuing a second capital call. Id. ¶ 68. According to the Petition, Defendant-Respondents issued the capital calls in an improper attempt to dilute Plaintiff-Petitioner's interest in the company to nothing. Id. ¶ 69.

On December 9, 2015, Plaintiff-Petitioner filed the instant Petition seeking judicial dissolution of Absolute pursuant to Business Corporation Law § 1104-a (Count One). The Petition alleges nine additional causes of action against Defendant-Respondents, including "appointment of a receiver pursuant to Business Corporation Law § 1113" (Count Two); an accounting of Absolute and EDM (Count Three); breach of fiduciary duty (Count Four); breach of contract (Count Five); breach of the duty of good faith and fair dealing (Count Six); Conversion (Count Seven); unjust enrichment (Count Eight); tortious interference with Contract and economic advantage (Count Nine); and promissory estoppel (Count Ten).

II. Standards of Review

A respondent in a special proceeding "may raise an objection in point of law by setting it forth in his answer or by a motion to dismiss the petition, made upon notice within the time allowed for answer." C.P.L.R. § 404. The purpose of this provision "is to permit a motion to be made on all grounds available in an action under CPLR § 3211." Bernstein Family Ltd. P'ship v. Sovereign Partners, L.P., 66 A.D.3d 1, 5 (1st Dep't 2009); see also Langella v. Front Door Associates, Inc., 34 Misc. 3d 1212(A) at *1 (Sup. Ct. Suffolk Cty.

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2012) (holding a motion to dismiss pursuant to CPLR § 404 "should not involve a contest on the merits of the targeted claims, but instead, should be limited to the assertion of one or more of defenses in bar of the type contemplated by CPLR 3211(a)").

In considering a motion to dismiss for failure to state a claim under CPLR § 3211(a)(7), the court must "accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory." Leon v. Martinez, 84 N.Y.2d 83, 87-88 (1994). While factual allegations contained in a complaint are accorded a favorable inference, bare legal conclusions and inherently incredible facts are not entitled to preferential consideration. Sud v. Sud, 211 A.D.2d 423, 424 (1st Dep't 1995). The motion will be denied if the factual allegations contained within "the pleadings' four corners . . . manifest any cause of action cognizable at law." 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 151-52 (2002).

Where a motion to dismiss is based on documentary evidence under CPLR § 3211(a)(1), the claim will be dismissed "only where the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law." Goshen v. Mut. Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326 (2002); see also Leon v. Martinez, 84 N.Y.2d 83, 87-88 (1994). Thus, courts will not grant dismissal based on documentary evidence where that evidence consists of contractual provisions which are ambiguous as applied, or which are subject to multiple "reasonable" interpretations.

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Whitebox Concentrated Convertible Arbitrage Partners, L.P. v. Superior Well Servs., Inc., 20 N.Y.3d 59, 64 (2012).

III. Discussion

Defendants move to dismiss the Petition in its entirety pursuant to CPLR § 3211 and § 404 on numerous grounds, including lack of standing, failure to state a claim and documentary evidence. The Court will address each argument separately below.

A. Dissolution of Absolute Pursuant to BCL § 1104-a

Defendant-Respondents argue the Petition's claim for judicial dissolution of Absolute (Count One) should be dismissed pursuant to CPLR §§ 3211(a)(1) and (7) for lack of standing and for failure to state a claim.

1. Standing

Defendant-Respondents first argue Plaintiff-Petitioner lacks standing to petition for dissolution because he does not meet the threshold ownership requirements set forth by BCL § 1104-a. Def. Mov. Br. at 9-11. Specifically, Defendant-Respondents argue Plaintiff-Petitioner's initial one-third stake in Absolute was "reduced to zero" due to failure to pay the July and October capital calls. Def. Mov. Br. at 9. In support, Defendant-Respondents rely on the provision of the Operating...

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