PALEJA v. Pradeep Malhotra et al., Defendants. (2024)

Order, Supreme Court, New York County (Dakota D. Ramseur, J.), entered August 22, 2022, which denied defendants KP N.Y. Operations LLC and Gary Mulchandani's motions to dismiss the complaint, unanimously modified, on the law, Mulchandani's motion to dismiss granted, and otherwise affirmed, without costs.

This appeal concerns plaintiff's alleged purchase of a 10% share in defendant KP N.Y. Operations LLC's restaurant.  KP N.Y. Operations LLC moved to dismiss the claims against it on the ground that plaintiff's alleged purchase did not comply with the terms of its operating agreement.  However, the documentary evidence submitted by plaintiff shows that defendant Anika Malhotra signed the original share certificates that were given to plaintiff on behalf of the restaurant, as well as the operating agreement at issue.  Further, plaintiff alleges that Anika identified herself as “President KPNY Operations LLC.” Plaintiff also alleges that KPNY Operations LLC made dividend payments to him for a time, stopped those dividend payments based on an alleged financial dispute with defendant Pradeep, and acknowledged plaintiff's ownership of the shares in letters dated December 9, 2019 and January 10, 2020.  Plaintiff has thus sufficiently alleged that Anika Malhotra had apparent authority to execute the sale and that he was entitled to rely on that apparent authority (see Indosuez Intl. Fin. B.V. v. National Reserve Bank, 279 A.D.2d 408, 409, 720 N.Y.S.2d 102 [1st Dept. 2001]).  Accordingly, the motions to dismiss were properly denied at this stage of the proceedings.

Defendants contend that Paleja's unjust enrichment claim fails “because there is a valid and enforceable operating agreement governing the subject matter of [the] claim[s]” (see D'Artagnan, LLC v. Sprinklr Inc., 192 A.D.3d 475, 477, 144 N.Y.S.3d 177 [1st Dept. 2021]).  However, in the event Paleja's agreement to purchase stock is deemed unenforceable, one or more of the defendants may have been unjustly enriched.  At this stage in the proceedings, Paleja is entitled to plead in the alternative (see Cohn v. Lionel Corp., 21 N.Y.2d 559, 563, 289 N.Y.S.2d 404, 236 N.E.2d 634 [1968]).

The motion court improperly denied Mulchandani's motion to dismiss.  A claim “seeking to hold corporate officials personally responsible for the corporation's breach of contract is governed by an enhanced pleading standard” (Joan Hansen & Co. v. Everlast World's Boxing Headquarters Corp., 296 A.D.2d 103, 109, 744 N.Y.S.2d 384 [1st Dept. 2002]).  Here, the claims against individual defendant Gary Mulchandani, which are simply that he stopped payment of Paleja's profit-sharing checks, were not sufficiently pleaded to hold Mulchandani individually liable.