BOOKHAMER v. KARTEN BERMAHA TEXTILES CO (2008)

Order, Supreme Court, New York County (Herman Cahn, J.), entered April 5, 2007, which, to the extent appealed from, denied plaintiffs' motion for partial summary judgment, unanimously affirmed, with costs.

The limited liability company was formed in 1995 and owned equally by plaintiffs' decedent, Julia Karten, and her late husband, Isidore Karten.   When Isidore died in 1999, he left his 50% interest to his son, defendant Harold Karten.   Harold took over management of the company at that time.   The widow Julia died in 2002, leaving her 50% interest in the residuary estate, to be shared equally by Harold and his two sisters (plaintiffs herein).   Plaintiffs, the executors of their mother's estate, brought this action to recover distributions allegedly wrongfully withheld by their brother.

There are triable issues of fact as to whether Harold Karten, now controlling two-thirds of the company, was entitled to collect excess distributions as compensation for carrying out the daily operations of the business, and whether such compensation was fair and reasonable (see Limited Liability Company Law § 401[b], § 411[b],[e] ).   There are also unresolved questions of fact as to whether Harold breached his fiduciary obligation to his mother (the non-managing 50% owner) during her lifetime, and to her estate since her passing, to operate the company in good faith and fairness, to avoid self-dealing, and to make full disclosure of all material facts (see Birnbaum v. Birnbaum, 73 N.Y.2d 461, 541 N.Y.S.2d 746, 539 N.E.2d 574 [1989] ).