ERKMAN INTERNATIONAL CO LTD v. PEPSICO INC (2026)

DECISION & ORDER

In an action, inter alia, to recover damages for aiding and abetting breach of fiduciary duty and aiding and abetting fraud, the plaintiff appeals from an order of the Supreme Court, Westchester County (Linda S. Jamieson, J.), dated September 17, 2024.  The order granted the motion of the defendant PepsiCo, Inc., pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against it.

ORDERED that the order is affirmed, with costs.

The plaintiff, Erkman International, Co., Ltd., individually and derivatively on behalf of Ektam Kibris, Ltd. (hereinafter Ektam), commenced this action against the defendants Mehmet Melih Sipahioglu and Gungor Sipahioglu (hereinafter together the Sipahioglu defendants) and the defendant PepsiCo, Inc. (hereinafter PepsiCo), inter alia, to recover damages for fraud and breach of fiduciary duty against the Sipahioglu defendants and for aiding and abetting a breach of fiduciary duty and aiding and abetting fraud against PepsiCo.  The plaintiff alleged, among other things, that it and the Sipahioglu defendants were shareholders of Ektam and that the Sipahioglu defendants designed and carried out a fraudulent invoicing scheme that was facilitated by PepsiCo.  The plaintiff alleged that, beginning in 2002, PepsiCo entered into a noncompete agreement with a company that was surreptitiously owned and operated by the Sipahioglu defendants, that the Sipahioglu defendants fraudulently inflated invoices that were issued by PepsiCo to Ektam through the Sipahioglu defendants' intermediary company, and that the Sipahioglu defendants retained the excess profits unbeknownst to the minority shareholders of Ektam.  The plaintiff also alleged, inter alia, that, in 2011, upon its discovery of the invoicing scheme, it informed PepsiCo of the fraudulent scheme and that PepsiCo's refusal to cease invoicing through the Sipahioglu defendants' company aided and abetted in the Sipahioglu defendants' fraud and breach of fiduciary duty.

Thereafter, PepsiCo moved pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against it.  The plaintiff opposed.  In an order dated September 17, 2024, the Supreme Court granted the motion.  The plaintiff appeals.

On a motion to dismiss pursuant to CPLR 3211(a)(7), the pleading must be afforded a liberal construction and the court must accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory (see Klostermeier v. City of Port Jervis, 200 AD3d 866, 867).

Here, contrary to the plaintiff's contention, the Supreme Court properly granted that branch of PepsiCo's motion which was to dismiss the cause of action alleging aiding and abetting a breach of fiduciary duty asserted against it.  To assert a cause of action for aiding and abetting a breach of fiduciary duty, the plaintiff must allege, with particularity, knowledge of the alleged tortious conduct by the aider and abettor and substantial assistance by the aider and abettor in the achievement of the tortious conduct (see Weinstein v. CohnReznick, LLP, 144 AD3d 1140, 1140).  The elements must be pleaded with particularity pursuant to CPLR 3016(b).  Substantial assistance requires an affirmative act on the defendant's part;  mere inaction can constitute substantial assistance only if the defendant owes a fiduciary duty directly to the plaintiff (see Plymouth Capital, LLC v. Montage Fin. Group, Inc., 230 AD3d 1361, 1364;  Baron v. Galasso, 83 AD3d 626, 629).  Here, the plaintiff failed to sufficiently allege facts to show that PepsiCo provided substantial assistance to the Sipahioglu defendants with respect to their alleged breach of fiduciary duty to the plaintiff (see Plymouth Capital, LLC v. Montage Fin. Group, Inc., 230 AD3d at 1364).

Likewise, the Supreme Court also properly granted that branch of PepsiCo's motion which was to dismiss the cause of action alleging aiding and abetting fraud asserted against it.  To plead a cause of action to recover damages for aiding and abetting fraud, the complaint must allege the existence of an underlying fraud, knowledge of the fraud by the aider and abettor, and substantial assistance by the aider and abettor in the achievement of the fraud (see Weinstein v. CohnReznick, LLP, 144 AD3d at 1141).  Substantial assistance requires an affirmative act on the defendant's part (see Markowits v. Friedman, 144 AD3d 993, 996).  Conclusory allegations that the aider and abettor had actual knowledge of fraud, together with allegations that would be sufficient to state a claim against the principal participants in the fraud, are insufficient, without more, to establish substantial assistance (see Matter of Woodson, 136 AD3d 691, 693).  Here, the facts as alleged in the complaint are insufficient to show that PepsiCo substantially assisted the Sipahioglu defendants in the achievement of the alleged fraud (see id.).

The parties' remaining contentions either need not be reached in light of our determination or are without merit.

DUFFY, J.P., CHRISTOPHER, LANDICINO and QUIRK, JJ., concur.