COHEN v. Cole Realty Corp., Defendant. (2008)

Order, Supreme Court, New York County (Helen E. Freedman, J.), entered October 29, 2007, which denied plaintiffs' motion for a preliminary injunction against defendants Paul and Gail LeNoble transferring their shares of Cole Realty Corp. to defendants Clarett Group LLC or Daniel Hollander or any other person or entity ineligible to be a shareholder of a Subchapter S corporation, unanimously affirmed, with costs.

 As there are no restrictions on the disposition of shares in the subject close corporation's corporate documents, the LeNobles have the right to sell to Clarett or to whomever they wish (see Borden v. Guthrie, 23 A.D.2d 313, 319, 260 N.Y.S.2d 769 [1965], affd. 17 N.Y.2d 571, 268 N.Y.S.2d 330, 215 N.E.2d 511 [1966];  Leviton Mfg. Co. v. Blumberg, 242 A.D.2d 205, 207-208, 660 N.Y.S.2d 726 [1997] ).   That the sale will result in the corporation's loss of Subchapter S status, and will thus have an adverse financial impact on plaintiffs, does not warrant the injunctive relief they seek given no showing of fraud or other breach of fiduciary duty (see Zetlin v. Hanson Holdings, 48 N.Y.2d 684, 685, 421 N.Y.S.2d 877, 397 N.E.2d 387 [1979] ).   Plaintiffs also do not show irreparable harm (see Sterling Fifth Assoc. v. Carpentille Corp., 5 A.D.3d 328, 329, 774 N.Y.S.2d 140 [2004] [“[l]ost profits and tax benefits, however difficult to compute they may be, are clearly compensable with money damages”] ), and the equities do not balance in their favor.