22 05 AVENUE REALTY CORP v. SYMON GARBER SG REAL ESTATE INVESTMENTS LLC 05 AVENUE REALTY CORP (2026)

The following e-filed documents, listed by NYSCEF as Documents (Motion Sequence #4) 20; 49—61 were read on this motion for an order dismissing the Intervenor Complaint pursuant to CPLR §§ 3211(a)(1), (3), (7) and CPLR § 3016(b), and awarding Plaintiffs attorneys' fees and costs for defending this action.

Upon the foregoing papers it is ordered that the motion by Plaintiffs is decided as follows:

On January 30, 2024, Plaintiffs commenced this action by filing a Summons and Complaint, and a Notice of Pendency against the property located at 22-05 43rd Avenue, Long Island City, New York, 11101, Block 00426, Lot 0005. Pursuant to a Short Form Order signed on January 5, 2026, this Court permitted SG Real Estate Investments, LLC (hereinafter, the "Intervenor LLC") to intervene in the instant action on behalf of 22-05 43rd Avenue Realty Corp. (hereinafter, "Avenue Realty") pursuant to CPLR §§ 1012 and 1013, finding that the proposed cause of action by the Intervenor LLC was "not palpably without merit." Plaintiffs now seek to dismiss the Complaint by Intervenor LLC pursuant to CPLR §§ 3211(a)(1), (3), (7) and CPLR § 3016(b). Intervenor LLC opposes.

Initially, Intervenor LLC claims that Plaintiffs' motion to dismiss should not be heard because it would be a "second bite at the apple," on the grounds that this Court previously found that the Intervening Complaint was "not palpably without merit." The Intervenor LLC put too much stake into this language from the Court. Allowing the LLC to file its intervening complaint does not preclude Plaintiffs from making a motion to dismiss that Complaint thereafter. Pursuant to CPLR § 1012, intervention is permitted as of right in an action involving the disposition of property if that person may be adversely affected by the judgment, and pursuant to CPLR § 1013, when the proposed intervenor's claim or defense and the main action have a common question of law or fact. CPLR §§ 1012 and 1013 present threshold minimums that an intervenor's complaint must meet to move forward. Neither statute prohibits a subsequent motion to dismiss nor guarantees success against it. (see Lengyel-Fushimi v Bellis, 242 AD3d 732 [2d Dept 2025]; 762 Park Place Realty, LLC v Lehrer, 161 AD3d 1135 [2d Dept 2018]). In permitting the Intervenor Complaint to proceed under Motion Sequence #3, the Court did not consider whether the Complaint had been plead with the requisite particularity or fulfilled the demand futility requirement of a derivative action. The Court considered only whether the proposed intervenor had an interest in the outcome of the judgment, whether proposed intervenor's complaint could bring any issues distinct from Defendant's claims, and whether such claims had any indicia of merit, not viability. Now, for the first time, the Court considers the arguments presented in Plaintiffs' motion to dismiss.

In turning to Plaintiffs' motion, the Court begins with Plaintiffs' argument that the Intervenor Complaint fails to sufficiently plead "demand futility." Pursuant to NY Bus. Corp. Law § 626(c) ("BCL"), the complaint in any shareholder's derivative action brought in the right of the corporation must "set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort." Such demand is futile, and excused because of futility when a complaint "alleges with particularity (1) that a majority of the board of directors is interested in the challenged transaction, which may be based on self-interest in the transaction or a loss of independence because a director with no direct interest in the transaction is controlled by a self-interested director, (2) that the board of directors did not fully inform themselves about the challenged transaction to the extent reasonably appropriate under the circumstances, or (3) that the challenged transaction was so egregious on its face that it could not have been the product of sound business judgment of the directors" (Taylor v Wynkoop, 132 AD3d 843, 844—45 [2d Dept 2015] (internal citations omitted)).

Here, in its Intervenor Complaint, SG Real Estate Investments, LLC on behalf of Avenue Realty, claims that "[n]o prior demand has been made on Elina to bring this claim, as it would be futile given Elina's exercise of control over 43rd Avenue Realty and her involvement in the alleged wrongdoing." Plaintiffs argue that this "single allegation" by Intervenor LLC is a conclusory allegation "entirely insufficient to plead demand futility."

It is undisputed that the requirements of NY Bus. Corp. Law § 626 are applicable to the Intervenor LLC's Complaint. In opposition to Plaintiffs' motion, Intervenor LLC argues that New York courts consistently find that a demand is excused where the alleged wrongdoer controls or compromises the majority of the corporation's directors. Pursuant to the 2017 Marital Settlement Agreement (hereinafter, "MSA"), Elina Garber received a 51% ownership interest in Avenue Realty, with Defendant Symon Garber's corporation, SG Real Estate Investments LLC, retaining its 49% interest in the subject corporation. Plaintiff Elina Garber therefore holds majority control of the corporation. However, this fact alone is not enough to excuse the BCL demand requirement. The purpose of the demand requirement, and the limited exception to it, are intended to achieve a "balance between preserving the discretion of directors to manage a corporation without undue influence through the demand requirement and permitting shareholders to bring claims on behalf of the corporation when it is evident that directors will wrongfully refuse to bring such claims, through the demand futility exception" (Marx v Akers 88 NY2d 189, 194 [1996]). Simply asserting that alleged conduct is a breach of a director's duty, and that that individual or group controls the decision making for the organization, is not enough to excuse the demand requirement. Such an exception risks swallowing the rule whole. Rather, there must be some allegation that the majority acted in pursuit of their own self-interest in a manner distinct and different from the interest of the corporation when engaged in the alleged wrongdoing (Marx v Akers, 88 NY2d at 202).

Indeed, in the cases cited by the Intervenor LLC in its opposition to the motion for dismissal, New York courts found demand futility sufficiently plead when a complaint alleged, with sufficient particularity, how those directors involved in the alleged misconduct did so for some self-interest or benefit, or because of a loss of independence to another self-interested director (Recine v Recine, 201 AD3d 827 [2d Dept 2022] (where two out of three shareholders sold a property without the permission of the third, and then failed to remit any profit from the sale to the third shareholder); Hu v. Ziming Shen, 57 AD3d 616 [2d Dept. 2008] (where the complaint, although not plead initially as a shareholder's derivative action, alleged with particularity that the majority shareholders were "directly interested in, and personally benefitting from, the alleged acts of malfeasance and nonfeasance at issue").

Here, the Intervenor Complaint alleges that it was a breach of Elina Garber's fiduciary duty to "intentionally and improperly interfere[ ] with the sale of the Long Island City Property by improperly filing a Notice of Pendency on the Long Island City Property." Elina Garber, as a 51% shareholder of Avenue Realty, does constitute a managing majority exerting control over the corporation. However, the Intervenor Complaint does not indicate to what end or what benefit Plaintiff Elina Garber stood to derive from such conduct. Accordingly, the Intervenor Complaint fails to meet a critical component of the precedent for demonstrating demand futility. Consequently, without having made a demand for initiation of the action, and without an adequate pleading of demand futility, the Intervenor Complaint fails to meet its obligation pursuant to NY Bus. Corp. Law § 626(c). Plaintiffs' motion is granted and the Intervenor Complaint is dismissed (see Berejka v Huntington Med. Group, P.C., 235 AD3d 821 [2d Dept 2025]).

In reaching a decision to dismiss the Intervenor Complaint, the Court need not reach the remaining branch of Plaintiffs' argument, that pursuant to CPLR 3211(a)(1) and (a)(7), the Intervenor Complaint failed to plead the elements of a breach of fiduciary duty with the requisite particularity.

Finally, the Court will examine the branch of Plaintiffs' motion seeking to enforce the terms of the MSA as the "non-defaulting party" and recover reasonable attorney's fees. Pursuant to Section 12.2 of the MSA, the parties agreed, in relevant part, to the following:

[T]he defaulting party shall fully indemnify and reimburse the other party for all reasonable expenses and costs, including but not limited to attorney's fees incurred in enforcing this Agreement . . . . [T]he parties have agreed that the only function of the Court in connection with the reimbursement to the non-defaulting party shall be to determine (1) whether the other party breached the Agreement; (2) the reasonableness of the attorney's fees incurred as a result of the breach.

Intervenor LLC argues that "SG Investments' derivative claim is asserted on behalf of Avenue Realty [is] for breach of fiduciary duty--it has nothing to do with enforcing the terms of the MSA between Elina and Simon." Plaintiffs' motion solely concerns the Intervenor Complaint, which has been dismissed. To date, there has been no ultimate resolution on Plaintiffs' remaining claim against Defendant for breach of contract under the MSA, and the issue of whether Elina Garber or Symon Garber have breached the MSA is not presently before the Court. Consequently, Plaintiffs' request for attorney's fees is premature and the branch of Plaintiffs' motion seeking reimbursement of attorney's fees is denied with leave to represent when the issue becomes ripe.

DATED: October 7, 2026

ROBERT I. CALORAS, J.S.C.

Robert I. Caloras, J.