SHERMAN LLC v. ZAMPELLA (2023)

Order, Supreme Court, New York County (Andrew Borrok, J.), entered on or about May 13, 2022, which, to the extent appealed from as limited by the briefs, denied defendants’ motion to dismiss the complaint pursuant to CPLR 3211(a)(1), (a)(3), and (a)(7), except as against Aniello Zampella personally, unanimously affirmed, with costs.

Plaintiff pleaded facts sufficient to raise triable issues that he owned a stake in defendant Cottonwood Vending LLC and that the Operating Agreement's membership requirements were waived, giving Sherman standing to proceed with his derivative claims.  Taking the complaint's allegations as true, Sherman agreed to work as chief technology officer at Cottonwood solely on the condition that he receive a percentage ownership interest in Cottonwood, to which Cottonwood agreed.  Once in that position, Sherman performed substantial work for Cottonwood.  Among other things, he secured a critical BitLicense from New York State and developed software for use in Cottonwood's kiosks that saved Cottonwood significant licensing fees.  In addition, the WhatsApp messages and defendant Aniello Zampella's emails to counsel indicate that well into Sherman's employment, both Zampella and Sherman believed that Sherman owned approximately a 10% stake in Cottonwood.  These facts suggest that Sherman prejudicially changed his position in reliance on his reasonable belief in his ownership stake (BWA Corp. v. Alltrans Exp U.S.A., Inc., 112 A.D.2d 850, 853, 493 N.Y.S.2d 1 [1st Dept. 1985]) and suggests a course of conduct that waived any noncompliance with the Operating Agreement's membership terms (see McGuire v. McGuire, 197 A.D.3d 897, 900–901, 153 N.Y.S.3d 280 [4th Dept. 2021];  Howard v. Pooler, 184 A.D.3d 1160, 1163–1164, 126 N.Y.S.3d 824 [4th Dept. 2020]).

Defendants’ arguments seeking dismissal of Sherman's unjust enrichment claims brought individually are raised for the first time in their reply papers, and will not be considered (Simon v. FrancInvest, S.A., 192 A.D.3d 565, 569, 146 N.Y.S.3d 9 [1st Dept. 2021]).

Finally, although the doctrine of law of the case applies to the motion court's findings of fact, the doctrine applies only to the extent that those findings address the sufficiency of the pleadings and may not be used to limit discovery or to establish facts on summary judgment or at trial (Friedman v. Connecticut Gen. Life Ins. Co., 30 A.D.3d 349, 818 N.Y.S.2d 201 [1st Dept. 2006], affd as mod 9 N.Y.3d 105, 846 N.Y.S.2d 64, 877 N.E.2d 281 [2007];  see also Korff v. Corbett, 155 A.D.3d 405, 410, 65 N.Y.S.3d 498 [1st Dept. 2017]).

We have considered the remaining arguments and find them unavailing.