Derfner Management, Inc., Plaintiff–Respondent, v. Lenhill Realty Corp, et al., Defendants–Appellants. (2011)

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Order, Supreme Court, New York County (Charles E. Ramos, J.), entered February 22, 2011, which, insofar as appealed from as limited by the briefs, denied defendants' motion to enjoin plaintiff from destroying certain records that predate the commencement of this action by seven years, and granted plaintiff's cross motion for a protective order against disclosing records that predate that seven-year period, unanimously modified, on the law, to grant defendants' motion and deny plaintiff's motion with respect to the books and records of the corporate defendants and the family corporations in which the individual defendants have an interest, and otherwise affirmed, without costs.

On appeal, defendants argue that the motion court abused its discretion in limiting discovery to a seven year period measured from the allegations in the complaint.   Defendants contend that the statute of limitations was an inappropriate tool to limit discovery because of plaintiff's status as a fiduciary, with a duty to account.   Defendants also argue that the pre–2004 records are a part of, and shed light on, the self-dealing carried out by plaintiff within the statutory period and thus, are relevant to this action.   However, defendants failed to establish that they could not, with reasonable diligence, have discovered plaintiff's alleged fraud earlier (see Lucas–Plaza Hous. Dev. Corp. v Corey, 23 AD3d 217 [2005];  see also Endervelt v. Slade, 214 A.D.2d 456, 457 [1995] ).   However, to the extent defendants seek their own corporate books and records, their request should be granted with no time limitation imposed.   The corporate defendants clearly have a right to their own books and records.   The individual defendants, as shareholders of the defendant corporations and other family corporations, have a qualified right to examine the books and records of those corporations (see Business Corporation Law § 624 [“for any purpose reasonably related to (their) interest as [ ] shareholder[s]”] ).  That right “is to be liberally construed” (Matter of Bohrer v. International Banknote Co., 150 A.D.2d 196 [1989] ).   Moreover, those individual defendants who are directors or officers of the corporations have “an absolute, unqualified right ․ to inspect their corporate books and records” (Matter of Cohen v. Cocoline Prods., 309 N.Y. 119, 123 [1955] ).

THIS CONSTITUTES THE DECISION AND ORDER

OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

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CLERK