HERENCIA v. Ahmet Erkaya, Defendant. (2012)

Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), entered July 12, 2011, which, to the extent appealed from, denied defendants Centercut Restaurant Corp., Samuel M. Janetta, and Robert Lombardi's (defendants) motion to dismiss the claims for an accounting, access to corporate books and records, breach of fiduciary duty, and fraud, unanimously modified, on the law, to grant the motion as to the fraud claim, and otherwise affirmed, with costs to be paid by defendants-appellants.

Since the terms of the shareholders' agreement were not met, the exercise of redemption rights by defendants was ineffectual (see Cho v. 401–403 57th St. Realty Corp., 300 A.D.2d 174 [2002]; Tornick v. Dinex Furniture Indus., 148 A.D.2d 602 [1989]; see also Stephenson v. Drever, 947 P.2d 1301 [Cal 1997]; compare Gallagher v. Lambert, 74 N.Y.2d 562, 567 [1989]; Ingle v. Glamore Motor Sales, 73 N.Y.2d 183, 189 [1989] ).

Under the terms of the agreement, defendants' termination of plaintiff's employment did not divest plaintiff of his status as a minority shareholder. Defendants, majority shareholders who managed the corporation, therefore owed him a fiduciary duty (see Centro Empresarial Cempresa S.A. v. America Movil, S.A.B. de C.V., 17 NY3d 269, 278 [2011] ). In addition, the sale of his stock to defendants presented a valid reason for plaintiff to inspect financial records relating to the value of his individual holdings (see Matter of Waldman v. Eldorado Towers, 25 A.D.2d 836, 837 [1966], affd 19 N.Y.2d 843 [1967] ), particularly since the method of valuation agreed upon in the repurchase agreement was not used (see Matter of Glassman v. Louis Shiffman, Inc., 56 A.D.2d 824, 824–25 [1977], appeal dismissed 42 N.Y.2d 910 [1977] ).

The fraud claim both lacks the necessary particularity and fails to allege the breach of a duty independent of the agreement (CPLR 3016[b]; Empire 33rd LLC v. Forward Assn. Inc., 87 AD3d 447, 448–49 [2011] ).