Summary
explaining that under New York law, defendant-corporation owed no fiduciary duty to shareholder-plaintiff and plaintiff must have no adequate remedy at law
Summary of this case from Honig v. Cardis Enters. Int'l N.V., Cardis Enters. (U.S.A.) Int'l, Inc.Opinion
2011-12-27
UNITEL TELECARD DISTRIBUTION CORP., et al., Plaintiffs–Appellants, v. Henry NUNEZ, Defendant–Respondent.
Hodgson Russ LLP, New York (Jacquelyn R. Trussell and Daniel S. Steinberg of counsel), for appellants. Allen M. Schwartz, New York, for respondent.
Hodgson Russ LLP, New York (Jacquelyn R. Trussell and Daniel S. Steinberg of counsel), for appellants. Allen M. Schwartz, New York, for respondent.
GONZALEZ, P.J., TOM, CATTERSON, RICHTER, ROMÁN, JJ.
Order, Supreme Court, New York County (O. Peter Sherwood, J.), entered October 13, 2010, which, insofar as appealed from, denied plaintiffs' motion to dismiss the counterclaim for an equitable accounting, unanimously affirmed, with costs.
The complaint alleges that the individual plaintiffs and defendant were equal shareholders, employees, officers, and directors of the corporate plaintiff, a closely held corporation. After defendant left the corporation, plaintiffs commenced an action seeking a declaration that he had relinquished all rights, authority, and interest of any type or kind in the corporation, and for damages arising from his alleged breach of fiduciary duty, unjust enrichment, and conversion. Defendant counterclaimed for an equitable accounting of his 25% share of a federal excise tax refund to the corporation.
While the corporation does not owe fiduciary duties to defendant ( see Hyman v. New York Stock Exch., Inc., 46 A.D.3d 335, 337, 848 N.Y.S.2d 51 [2007] ), defendant and the individual plaintiffs, as shareholders in a close corporation, owe fiduciary duties to one another ( see Brunetti v. Musallam, 11 A.D.3d 280, 783 N.Y.S.2d 347 [2004] ). That fiduciary relationship supports defendant's claim for an accounting ( see Adam v. Cutner & Rathkopf, 238 A.D.2d 234, 242, 656 N.Y.S.2d 753 [1997] ).
To be entitled to an equitable accounting, a claimant must demonstrate that he or she has no adequate remedy at law ( Kastle v. Steibel, 120 A.D.2d 868, 869, 502 N.Y.S.2d 538 [1986] ). The unsigned and undated “Points of the Contract” memorandum that is the alleged basis for defendant's claim to 25% of the federal excise tax refund is insufficient to establish the existence of an enforceable agreement as to the distribution of the refund. Thus, defendant has established that he has no adequate remedy at law.
Finally, defendant has sufficiently set out that he demanded an accounting and that plaintiffs refused the demand ( see Kaufman v. Cohen, 307 A.D.2d 113, 123–124, 760 N.Y.S.2d 157 [2003]; McMahan & Co. v. Bass, 250 A.D.2d 460, 463, 673 N.Y.S.2d 19 [1998], lv. dismissed in part, denied in part 92 N.Y.2d 1013, 684 N.Y.S.2d 484, 707 N.E.2d 439 [1998] ).
We have reviewed plaintiffs' remaining contentions and find them unavailing.