ULL 2009 v. ROYAL CAR PARK LLC (2020)

Plaintiff claims that distributions from the defendant LLCs were required to be paid in one-third shares to her children, defendants Richard Ull and Jennifer Ull, and to the Jeffrey Ull 2009 Management Trust (Trust), of which her third child, defendant Jeffrey Ull, was the beneficiary, and that instead, Richard and Jennifer, who manage the LLCs, diverted distributions from the Trust in order to pay Jeffrey directly or to pay other individuals on his behalf.

The court properly granted summary judgment dismissing the claim of breach of fiduciary duty against defendants Richard and Jennifer.  They established prima facie entitlement to summary judgment by submitting evidence that distributions paid to the Trust were comparable to those paid to Richard and Jennifer, that certain nonequal distributions were made to account for repayment of loans made by Jennifer and the Trust, and that other characterizations of income or funds were based on their accountant's advice and tax concerns.  They also averred that Jeffrey did not receive any payments, directly or through other individuals.  The business judgment rule “bars judicial inquiry into actions of corporate directors taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes” (Auerbach v. Bennett, 47 N.Y.2d 619, 629, 419 N.Y.S.2d 920, 393 N.E.2d 994 [1979] ).  In seeking to rebut defendants' prima facie case, and to overcome the business judgment rule, plaintiff cited certain discrepancies in the financial documents, but those, without more, did not raise any triable issue whether Richard or Jennifer acted in bad faith and/or diverted funds from the Trust to Jeffrey directly or to others on his behalf.

In light of the foregoing, the claim against Jeffrey for aiding and abetting breach of fiduciary duty also was properly dismissed (Kaufman v. Cohen, 307 A.D.2d 113, 125, 760 N.Y.S.2d 157 [1st Dept. 2003] ), as was the claim of conversion against all defendants (Lemle v. Lemle, 92 A.D.3d 494, 497, 939 N.Y.S.2d 15 [1st Dept. 2012];  see Thyroff v. Nationwide Mut. Ins. Co., 8 N.Y.3d 283, 288–289, 832 N.Y.S.2d 873, 864 N.E.2d 1272 [2007] ).

The court also properly dismissed the accounting cause of action against Jeffrey.  There is no evidence that Jeffrey, who did not manage the LLCs, has any fiduciary relationship to plaintiff (Saunders v. AOL Time Warner, Inc., 18 A.D.3d 216, 217, 794 N.Y.S.2d 342 [1st Dept. 2005];  see Unitel Telecard Distrib. Corp. v. Nunez, 90 A.D.3d 568, 569, 936 N.Y.S.2d 17 [1st Dept. 2011] ).  Regarding Richard and Jennifer, they owe the Trust fiduciary obligations and consequently, the Trust has a right to an accounting.  The trustee need not show that she does not have an adequate remedy at law (see Mullin v. WL Ross & Co. LLC, 173 A.D.3d 520, 105 N.Y.S.3d 382 [1st Dept. 2019]

Finally, the court properly concluded that there was no basis to deny summary judgment on the ground that discovery was not complete (CPLR 3212[f];  Frierson v. Concourse Plaza Assoc., 189 A.D.2d 609, 610, 592 N.Y.S.2d 309 [1st Dept. 1993] ).  Her vague allegations that her children colluded in order to pay Jeffrey directly rather than pay the Trust, of which she is the trustee, do not support a request for disclosure pursuant to CPLR 3212(f) (Citibank, N.A. v. Furlong, 81 A.D.2d 803, 804, 439 N.Y.S.2d 130 [1st Dept. 1981];  see Fulton v. Allstate Ins. Co., 14 A.D.3d 380, 381, 788 N.Y.S.2d 349 [1st Dept. 2005] ).

We have considered plaintiff's remaining arguments and find them unavailing.