Preview
FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022
NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NASSAU
xxxxxx xxxxxx a/k/a xxxxxxxxxx
xxxxxx, individually and derivatively on Index No.:
behalf of ROCKVILLE CORP.,
Plaintiff,
-against-
xxxxxxx xxxxx, individually and as the
executor of the Estate of xxxx xxxxx, and as
co-trustee of the disclaimer Trust under
Article “Fourth” of the Last Will and
Testament of xxxx xxxxx; MAKAN
DELRAHIM, as former co-trustee of the
disclaimer Trust under Article “Fourth” of the
Last Will and Testament of xxxx xxxxx; and
BAHARAK AMIRIAN as co-trustee of the
disclaimer Trust under the Last Will and
Testament of xxxx xxxxx,
Defendants,
-and-
ROCKVILLE CORP.
Nominal Defendant.
MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF’S MOTION
FOR A TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION
Counselors at Law
1425 RXR PLAZA
UNIONDALE, NEW YORK 11556-1425
——
(516) 663-6600
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TABLE OF CONTENTS
PAGE
TABLE OF AUTHORITIES .......................................................................................................... ii
PRELIMINARY STATEMENT .....................................................................................................1
STATEMENT OF FACTS ..............................................................................................................3
ARGUMENT ...................................................................................................................................3
POINT I Plaintiff’s Application for a Temporary Restraining Order
and Preliminary Injunction Should Be Granted In Its Entirety................................3
A. Plaintiff Is Likely to Succeed on The Merits of the Claims in
His Complaint ..............................................................................................5
i. Plaintiff Is Likely to Succeed on His First Cause of
Action for Breach of Fiduciary Duty .....................................................7
ii. Plaintiff Is Likely to Succeed on His Second Cause of
Action for Constructive Trust ................................................................9
iii. Plaintiff is Likely to Succeed on His Third Cause of
Action for Permanent Injunctive Relief ...............................................12
B. Plaintiff Will Suffer Irreparable Harm
in the Absence of an Injunction .................................................................13
C. The Balance of Equities Favors Plaintiff ...................................................15
CONCLUSION ..............................................................................................................................17
WORD COUNT CERTIFICATION .............................................................................................18
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TABLE OF AUTHORITIES
CASES PAGE
Autoone Insurance Company v. Manhattan Heights Medical P.C.,
24 Misc.3d 1229(A) (Sup. Ct. Queens Cnty. 2009).......................................................................13
Bank of America, N.A. v. PSW NYC LLC,
29 Misc.3d 1216(A), 10-11 (Sup. Ct. N.Y. Cnty. 2010) ...............................................................14
Barbour v. Knecht,
296 A.D.2d 218, 227 (1st Dep’t 2002) ............................................................................................8
Bass Bldg. Corp. v. Village of Pomona,
142 A.D.2d 657, 659 (2d Dep’t 1988) ...........................................................................................14
Borenstein v. Rochel Properties, Inc.,
176 A.D.2d 171 (1st Dep’t 1991) ....................................................................................................5
CanWest Global Commc‘ns Corp. v. Mirkaei Tikshoret Ltd.,
9 Misc.3d 845, 872 (Sup. Ct. N.Y. Cnty. 2005) ............................................................................15
Cedar Graphics, Inc. v. Long Island Power Authority,
35 A.D.3d 337, 338 (2d Dep’t 2006) ...........................................................................................3, 4
Davis v. Rondina,
741 F.Supp. 1115, 1125 (S.D.N.Y. 1990) .....................................................................................14
Delta Props. Inc. v. Fobare Enters. Inc.,
251 A.D.2d 960 (3d Dep’t 1988) .....................................................................................................5
Diaz v. Diaz,
130 A.D.3d 560, 561 (2d Dep’t 2015) .......................................................................................9, 11
EdCia Corp. v. McCormack,
44 A.D.3d 991, 993 (2d Dep’t 2007) ...............................................................................................4
Elow v. Svenningsen,
58 A.D.3d 674, 675 (2d Dep’t 2009) .............................................................................................12
Estate of Harold,
112 A.D.3d 929, 931 (2d Dep’t 2013) .............................................................................................9
Fedner v. Prescott,
101 A.D.2d 418, 422 (1st Dep’t 1984) ............................................................................................7
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Global Minerals and Metals Corp. v. Holme,
35 A.D.3d 93, 98 (1st Dep’t 2006) ..................................................................................................7
Glob. Switching, Inc. v. Kasper,
No. CV-06-0412 (CPS), 2006 WL 385315 at *4 (E.D.N.Y. Feb. 17, 2006) .................................14
Golden City Commercial Bank v. Hawk Props. Corp.,
236 A.D.2d 282, 283 (1st Dep’t 1997) ..........................................................................................13
Gramercy Co. v. Benenson,
223 A.D.2d 497 (1st Dep’t 1996) ..................................................................................................16
Henry v. Gustman,
2018 N.Y. Slip Op. 31914(U), *5 (Sup. Ct. Kings Cnty. 2018) ....................................................13
In Re Matter of Kemp & Beatley, Inc.,
64 N.Y.2d 63, 72-73 (1984) .............................................................................................................8
Int’l. Equity Investments v. Opportunity Equity Partners, Ltd.,
441 F.Supp.2d 552, 563 (S.D.N.Y. 2006) .....................................................................................14
Leiser v. System D Restaurant Holdings, Inc.,
32 Misc.3d 374, 377-78 (Sup. Ct. N.Y. Cty. Sept. 27, 2010) ..........................................................8
Lombard v. Station Square Inn Apartments Corp.,
94 A.D.3d 717 (2d Dep’t 2012) .....................................................................................................15
McLaughlin, Piven, Vogel, Inc. v. W. J. Nolan & Co., Inc.,
114 A.D.2d 165, 172-73 (2d Dep’t 1986) ........................................................................................5
Nastasi v. Nastasi,
26 A.D.3d 32, 37 (2d Dep’t 2005) ...................................................................................................9
Oracle Real Estate Holdings I LLC v. Adrian Holdings Co. I, LLC,
582 F. Supp.2d 616 (S.D.N.Y. 2008).............................................................................................14
Palmetto Partners, L.P. v. AJW Qualified Partners, LLC,
83 A.D.3d 804, 807 (2d Dep’t 2011) ...............................................................................................7
Pappas v. Corfian Enterprises, Ltd.,
22 Misc. 3d 1113(A), at *4 (Sup. Ct. Kings Cnty 2009),
aff'd, 76 A.D.3d 679 (1st Dep’t 2010) ...........................................................................................11
Poling Transp. Corp. v. A & P Tanker Corp.,
84 A.D.2d 796, 797 (2d Dep’t 1981) .............................................................................................13
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Props for Today, Inc. v. Kaplan,
163 A.D.2d 177, 178 (1st Dep’t 1990) ............................................................................................5
Quadrozzi v. Estate of Quadrozzi,
99 A.D.3d 688, 691 (2d Dep’t 2012) ...............................................................................................9
Ruiz v. Meloney,
26 A.D.3d 485, 486-87 (2d Dep’t 2006) ..........................................................................................5
Simonds v. Simonds,
45 N.Y.2d 233, 241 (1978) ..............................................................................................................9
South Amherst, Ltd. v. H. B. Singer LLC,
13 A.D.3d 515, 515 (2d Dep’t 2004) .............................................................................................13
Suchodolski Assocs., Inc. v. Cardell Fin. Corp.,
No. 03 CIV. 4148 (WHP), 2003 WL 22909149 at *4 (S.D.N.Y. Dec. 10, 2003) .........................15
Terrell v. Terrell,
279 A.D.2d 301, 303 (1st Dep’t 2001) ............................................................................................5
Vincent v. Seaman,
152 A.D.2d 841 (3d Dep’t 1989) ...................................................................................................14
Washington Deluxe Bus, Inc. v. Sharmash Bus Corp.,
47 A.D.3d 806 (2d Dep’t 2008) .....................................................................................................15
Wisdom Import Sales Co., L.L.C. v. Labatt Brewing Co. Ltd.,
339 F.3d 101, 108 (2d Cir. 2003)...................................................................................................15
W. T. Grant Co. v. Srogi,
52 N.Y.2d 496, 517 (1981) ..............................................................................................................3
Zwarycz v. Marnia Const., Inc.,
130 A.D.3d 922, 923 (2d Dep’t 2015) ...........................................................................................12
STATUTES AND OTHER AUTHORITIES
CPLR 6301.......................................................................................................................................4
CPLR 6313.......................................................................................................................................4
CPLR 6312(c) .................................................................................................................................4
Alexander 1996 Supp. Practice Commentaries, McKinney’s Cons. Laws of NY,
Book 78, CPLR C6312:5, (1997-93) ...............................................................................................4
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PRELIMINARY STATEMENT
This memorandum of law is respectfully submitted on behalf of plaintiff xxxxxx xxxxxx
a/k/a Nejatolla xxxxxx, individually and derivatively on behalf of Rockville Corp. (“Plaintiff” or
“xxxxxx”) in support of his order to show cause for temporary and preliminary injunctive relief
pursuant to Article 63 of the New York Civil Practice Law & Rules (“CPLR”), enjoining and
restraining defendants1, during the pendency of this action, from:
(i) transferring, pledging, encumbering, conveying, assigning, selling, altering,
marketing and/or listing for sale, modifying, destroying, hypothecating, financing
and/or otherwise disposing of the property located at 172 Sunrise Highway,
Rockville Centre, New York (Section: 38; Block: 317; Lots: 130, 359 and 369) to
which Rockville Corp. holds title and maintains a fee interest (the “Property”),
without the express written consent of Plaintiff; and
(ii) taking any steps and/or undertaking any actions in furtherance of transferring,
pledging, encumbering, conveying, assigning, selling, altering, marketing and/or
listing for sale, modifying, destroying, hypothecating, financing and/or otherwise
disposing of the Property without the express written consent of Plaintiff; and
(iii) granting such other and further relief as this Court deems just and proper.
This application is necessary to put a halt to a series of ultra-vires and unauthorized actions
that various representatives of Plaintiff’s brother’s estate (and certain beneficiaries thereof) are
attempting to pursue on behalf of Rockville Corp. over the objection of Plaintiff – an 80% majority
shareholder and the only acting officer of the corporation since it was formed in 1996 – which are
having a deleterious impact on Rockville Corp’s business standing and diminishing the value of
the entity’s sole asset.
1
The following captioned defendants shall be hereinafter collectively referred to as the “Defendants”: xxxxxxx xxxxx,
individually and as the executor of the Estate of xxxx xxxxx, and as co-trustee of the disclaimer Trust under Article
“Fourth” of the Last Will and Testament of xxxx xxxxx, Makan Delrahim as former co-trustee of the disclaimer Trust
under Article “Fourth” of the Last Will and Testament of xxxx xxxxx, Baharak Amirain as co-trustee of the disclaimer
Trust under Article “Fourth” of the Last Will and Testament of xxxx xxxxx and nominal defendant Rockville Corp.
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Plaintiff is an 80% majority-controlling shareholder and the sole acting officer of Rockville
Corp, a single purpose entity that holds title to Property as its sole asset. Rockville Corp. was
formed in 1996 by Plaintiff and his brother, xxxx xxxxx (“xxxx”), to acquire the Property out of
which Plaintiff has been operating a Bargain Liquor Store (the “Store”) for twenty-five (25) plus
years. From inception (i.e. 1996) to the present, Rockville Corp. and the Store have been operated
and managed by Plaintiff, exclusively. Moreover, Rockville Corp’s initial acquisition of the
Property, along with its subsequent acquisitions of various adjoining lots, were funded with
Plaintiff’s personal capital; xxxx never contributed any personal funds to either Rockville Corp.
or the Store during his lifetime.
While there was never any dispute during xxxx’s lifetime (he died in 2008 leaving the
entirety of his estate, and the control thereof to his wife, defendant xxxxxxx xxxxx, the executor and
co-trustee of a disclaimer trust created under xxxx’s will) that Plaintiff maintained an 80%
shareholder interest in Rockville Centre and that xxxx’s interest was limited to a 20% minority
share, in recent months, xxxx’s estate representatives and beneficiaries have sought to turn a
twenty-five (25) year corporate business and ownership structure on its head by disclaiming
Plaintiff’s controlling stake in Rockville Corp. and the Property. Specifically, the Defendants,
who comprise of xxxx’s estate representatives and beneficiaries, are currently taking steps to
market and sell the Property under Plaintiff’s nose and over his express objection. Not only are
the Defendants refusing to acknowledge Plaintiff’s 80% shareholder interest in Rockville Corp.
(and the blocking rights he maintains with respect to any such sale), they are withholding such
information from the unsuspecting potential purchasers, many of whom have purportedly
expressed immediate interest in acquiring the Property.
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As such, Defendants are acting in breach of their fiduciary duties to Plaintiff and are
wrongfully pursuing a sale on behalf of Rockville Corp. without the requisite authority to bind the
corporation. Defendants must therefore be enjoined and restrained from proceeding in this
manner. An injunction is necessary to preserve the status quo. Absent such a restraint, Defendants
will proceed with the sale of the Property thereby disposing of Rockville Corp.’s sole asset without
the consent of its only officer, operator and controlling shareholder, resulting in irreparable harm
to Plaintiff. If the Property is sold, Rockville Corp. would cease as a business, which is a harm
that is not compensable by money damages.
By reason of the foregoing, and as stated in more detail below, Plaintiff’s order to show
cause for temporary and preliminary injunctive relief should be granted in its entirety.
STATEMENT OF FACTS
The material facts are stated in the accompanying Verified Complaint, dated May
, 2022 (the “Complaint”); the Emergency Affirmation of Daniel E. Shapiro, dated May
, 2022 (“Shapiro Affm.”); and the Affidavit of xxxxxx xxxxxx, sworn to on May , 2022
(“xxxxxx Aff.”) with the exhibits annexed thereto, to which this Court is respectfully referred.
ARGUMENT
I. Plaintiff’s Application for a Temporary Restraining Order and Preliminary
Injunction Should Be Granted In Its Entirety.
Plaintiff’s application for a temporary restraining order and preliminary injunction should
be granted in its entirety because: (i) he is likely to succeed on the merits of his underlying claims;
(ii) will be irreparably harmed absent an injunction; and (iii) the balance of the equities lies in his
favor. See W. T. Grant Co. v. Srogi, 52 N.Y.2d 496, 517 (1981); Cedar Graphics, Inc. v. Long
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Island Power Authority, 35 A.D.3d 337, 338 (2d Dep’t 2006); see also EdCia Corp. v.
McCormack, 44 A.D.3d 991, 993 (2d Dep’t 2007).
CPLR 6301 sets forth the grounds necessary for the issuance of a preliminary injunction
as follows:
A preliminary injunction may be granted in any action where it appears
that the defendant threatens or is about to do, or is doing or procuring or
suffering to be done, an act in violation of the plaintiff’s rights respecting
the subject of the action, and tending to render the judgment ineffectual,
or in any action where the plaintiff has demanded and would be entitled
to a judgment restraining the defendant from the commission or
continuance of an act, which, if committed or continued during the
pendency of the action, would produce injury to the plaintiff. . . .
CPLR 6301; see also CPLR 6313 (stating similar grounds for temporary restraining order).
Furthermore, CPLR 6312(c) provides that as long as the plaintiff demonstrates the elements
necessary for a preliminary injunction in its motion papers “the presentation by the defendant of
evidence sufficient to raise an issue of fact as to any of such elements shall not in itself be grounds
for denial of the motion.” CPLR 6312(c). Thus, “the existence of an issue of fact on a motion for
a preliminary injunction is not standing alone, a sufficient basis for denial of the motion.”
Alexander 1996 Supp. Practice Commentaries, McKinney’s Cons. Laws of NY, Book 78, CPLR
C6312:5 (1997-93).
Plaintiff more than satisfies his burden with respect to each of the elements that are required
for the issuance of a preliminary injunction. Accordingly, it is respectfully requested that
Plaintiff’s application for a temporary restraining order and preliminary injunction be granted in
its entirety.
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A. Plaintiff Is Likely to Succeed on The
Merits of the Claims in His Complaint
In demonstrating a “likelihood of success on the merits, a prima facie showing of a right to
relief is sufficient; actual proof of the case should be left to further court proceedings.”
McLaughlin, Piven, Vogel, Inc. v. W. J. Nolan & Co., Inc., 114 A.D.2d 165, 172-73 (2d Dep’t
1986); see also Ruiz v. Meloney, 26 A.D.3d 485, 486-87 (2d Dep’t 2006); Terrell v. Terrell, 279
A.D.2d 301, 303 (1st Dep’t 2001).
The party seeking an injunction does not bear the burden to show that success is certain;
the burden is to show merely that a “likelihood of success” exists. See Props for Today, Inc. v.
Kaplan, 163 A.D.2d 177, 178 (1st Dep’t 1990) (“plaintiff has not shown that its success is certain,
but it is in no way obliged to do so”); McLaughlin, Piven, Vogel, Inc. v. W.J. Nolan & Co., 114
A.D.2d 165, 173 (2d Dep’t 1986) (“actual proof of the case should be left to further court
proceedings”). A preliminary injunction may thus be granted where some facts are in dispute. See
Borenstein v. Rochel Properties, Inc., 176 A.D.2d 171 (1st Dep’t 1991); see also Delta Props. Inc.
v. Fobare Enters. Inc., 251 A.D.2d 960 (3d Dep’t 1988) (granting preliminary injunction
prohibiting resale of property pending resolution of action to enforce contract despite uncertainty
concerning whether plaintiff would prevail).
Plaintiff is likely to succeed on the merits of his claims against the Defendants who are
pursuing ultra-vires business transactions on behalf of Rockville Corp. and acting well-outside the
scope of their authority as minority shareholders in a corporation in which Plaintiff has maintained
a controlling 80% interest since it was first formed in 1996. Since 1996, Plaintiff has been the sole
and exclusive operator of Rockville Corp. and the Bargain Liquor Store business, which operates
out of the Property. In his capacity as the sole operator, and as Rockville Corp.’s de-facto sole
officer, Plaintiff is charged with overseeing every aspect of Rockville Corp.’s day-to-day and
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general business operations. Indeed, over the course of twenty-five (25) plus years, Plaintiff has
been the sole party responsible for paying, inter alia: (i) all of the property taxes assessed to
Rockville Corp. by the local municipalities; (ii) in excess of $1 million in mortgage payments
charged to Rockville Corp. on account of mortgages recorded against the Property, all of which
have been fully satisfied; and (iii) the professional fees incurred in connection with various
Rockville Corp. adjoining parcel acquisitions, property appraisals, business valuations and tax
certiorari applications. Much more, Plaintiff is the only party to have contributed his own personal
funds to the purchase of the Property and other Rockville Corp. business endeavors.
However, after a 25 year history of Plaintiff being recognized as the controlling
shareholder, during which time he has served as the businesses’ sole operator and manager,
Defendants are now seeking to exploit the fact that there exists no shareholders agreement or
corporate by-laws in an attempt to turn the ownership structure that Rockville Corp. has maintained
for a quarter-century, on its head. By way of a brief historical background, Plaintiff and his
brother, xxxx xxxxx (who before his death in 2008 was the other 20% shareholder), never reduced
their 80%-20% shareholder arrangement to a formal writing nor did they incorporate it into a
governing corporate documents/agreements during xxxx’s lifetime. Moreover, certificated shares
of stock were never prepared or issued by Rockville Corp to either Plaintiff or xxxx. That is
because the brothers (Plaintiff and xxxx) never felt compelled to formalize their 80%-20%
arrangement since, as between the two of them, it was well-understood and never gave rise to any
type of dispute during xxxx’s life. Even the initial corporate formation documents that were filed
with New York State (e.g. the Certificate of Incorporation) make no mention of who the intended
shareholders and officers were to be.
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In any event, Plaintiff and xxxx’s long-term understanding was as follows: for his 80%,
Plaintiff was to run and manage every aspect of Rockville Corp.’s business (as well as the
independent liquor store business that operated out of the Property) and would contribute his own
personal capital to the purchase of the Property; for xxxx’s 20%, his only responsibility was to
facilitate and procure a mortgage loan that was needed to fund the balance of the initial Property
purchase (over and above what Plaintiff personally contributed to the acquisition) and two
refinancings that were effectuated to help fund Plaintiff’s business.2 Whereas xxxx signed for
these mortgage loans as a representative of Rockville Corp., Plaintiff was the one charged with
generating business revenues that would be used to pay off said loans. As of June 2, 2021, all of
the mortgage loans were fully satisfied.
i. Plaintiff Is Likely to Succeed on His First Cause of Action for Breach of
Fiduciary Duty
The first cause of action in the Complaint sets forth a claim for breach of fiduciary duty.
“[T]he elements of a cause of action to recover damages for breach of fiduciary duty are
(1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages
directly caused by the defendant’s misconduct.” Palmetto Partners, L.P. v. AJW Qualified
Partners, LLC, 83 A.D.3d 804, 807 (2d Dep’t 2011). The relationship “between shareholders in a
close-corporation viz-a-viz each other, is akin to that between partners and imposes a high degree
of fidelity and good faith.” Fedner v. Prescott, 101 A.D.2d 418, 422 (1st Dep’t 1984); see also
Global Minerals and Metals Corp. v. Holme, 35 A.D.3d 93, 98 (1st Dep’t 2006).
To this end, a shareholder in a closely held corporation “owes a fiduciary duty to the other
shareholders not to co-opt or divert a valuable corporate opportunity she/[he] became aware of in
2
Parenthetically, it was also agreed by and between the brothers-partners, that xxxx would hold his 20% interest as
a nominee for their parents who were living in Iran at the time. The brothers’ understanding was that xxxx’s share
of the profits would be used to pay for living expenses that their parents incurred.
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her corporate shareholder capacity….and require[s] her/[him] to devote her undivided, unqualified
loyalty to the corporation and not to compete with it, place her/[his] private interests in conflict
with its interests, or personally profit at its expense.” Leiser v. System D Restaurant Holdings,
Inc., 32 Misc.3d 374, 377-78 (Sup. Ct. N.Y. Cty. Sept. 27, 2010).
Moreover, a controlling shareholder of a closely-held corporation owes a duty to other
shareholders not to engage in oppressive actions, which include, defeating a shareholders
reasonable expectations that ownership in the corporation would entitle to him/her a place in
corporate management. See In Re Matter of Kemp & Beatley, Inc., 64 N.Y.2d 63, 72-73 (1984).
As such, a plaintiff’s claim that he or she has been frozen out of management of a closely-held-
corporation asserts a cognizable claim for breach of fiduciary duty. See Barbour v. Knecht, 296
A.D.2d 218, 227 (1st Dep’t 2002).
For the past twenty-five (25) plus years, Plaintiff has maintained an 80% controlling
interest in Rockville Corp. and has been the only acting officer, manager and operator of the
business during that timeframe. However, in recent months, Defendants, who only maintain a
20% passive minority stake in the corporation, have started holding themselves out as majority
interest holders who maintain the right to bind the corporation and control its affairs, including the
sale of its sole asset. In marketing the Property for sale without Plaintiff’s consent (and over his
objection) and by fraudulently holding themselves out as controlling stakeholders in pursuit of a
sale of Rockville Corp.’s sole asset, Defendants have effectively frozen Plaintiff out of corporate
management in blatant breach of the fiduciary duties they owe to him and the corporation. Since
the formation of Rockville Corp. in 1996, Plaintiff has contributed substantial capital and sweat
equity to the business in reliance on a reasonable expectation that his 80% interest would afford
him rights as a controlling interest holder and decision-maker. Defendants’ oppressive actions are
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operating to defeat and thwart these reasonable expectations. As a consequence, Plaintiff has been
damaged by, among other things, the diminution in value of his 80% controlling interest in
Rockville Corp. since Defendants have wrongfully stripped of him of his managerial powers and
controlling interest.
Accordingly, Plaintiff has a likelihood of success on his first cause of action for breach of
fiduciary duty.
ii. Plaintiff is Likely to Succeed on His Second Cause of Action for
Constructive Trust
The second cause of action in the Complaint sets forth a claim for a constructive trust.
A constructive trust is a legal fiction imposed in equity where “the holder of legal title [to
property] may not in good conscience retain the beneficial interest.” Simonds v. Simonds, 45
N.Y.2d 233, 241 (1978). In such instances, “equity converts [the title owner] into a trustee.” Id.
The doctrine’s purpose is to “satisfy the demands of justice,” and its applicability is “limited only
by the inventiveness of men who find new ways to enrich themselves unjustly by grasping what
should not belong to them.” Id.; see Nastasi v. Nastasi, 26 A.D.3d 32, 37 (2d Dep’t 2005) (holding
that the constructive trust doctrine “is given broad scope to flex in response to all human
implications of the transaction, to remedy whatever knavery ingenious wrongdoers can invent, to
give expression to the conscience of equity, and to satisfy the demands of justice.”).
The elements of a constructive trust are (1) a fiduciary or confidential relationship; (2) an
express or implied promise; (3) a transfer in reliance on the promise; and (4) unjust enrichment.
See Diaz v. Diaz, 130 A.D.3d 560, 561 (2d Dep’t 2015). However, this standard is not rigidly
applied, and a constructive trust may be impressed even where not all of the elements are met. See
Estate of Harold, 112 A.D.3d 929, 931 (2d Dep’t 2013); Quadrozzi v. Estate of Quadrozzi, 99
A.D.3d 688, 691 (2d Dep’t 2012).
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Here, Plaintiff has established the requisite elements to succeed on a claim for a
constructive trust and for a declaration declaring that he is an 80% controlling-shareholder in
Rockville Corp.
First, Plaintiff and Defendants are co-shareholders in a closely-held-corporation and there
thus exists a fiduciary relationship as between them. See supra, POINT I(A)(i). Second, when
Rockville Corp. was first formed, it was formed based on a promise made by Plaintiff’s brother,
xxxx, that Plaintiff would be allocated an 80% controlling ownership interest and that he would
be the sole officer and shareholder charged with decision-making and managerial powers for the
corporation. Third, in reliance on this promise, Plaintiff agreed to contribute his personal funds to
Rockville Corp.’s acquisition of the Property, and to certain subsequent purchases of two adjoining
lots acquisition. Additionally, Plaintiff agreed to devote his full time to running the business and
maintaining the Property. In reliance on this understanding, Plaintiff agreed that Rockville Corp.
would take title to the Property, which purchase he helped fund out of his own pocket. Fourth, to
the extent Defendants are now taking the position that they, and not Plaintiff, are the majority
shareholders of Rockville Corp., they are being (and will continue to be) unjustly enriched. To
add, Defendants will be unjustly enriched to Plaintiff’s detriment if they move forward with the
unauthorized sale of the Property and then distribute the proceeds in a manner that deprives
Plaintiff of his right to an 80% share thereof.
As explained above, Defendants are ignoring and disclaiming an ownership structure that
Rockville Corp. has maintained for twenty-five (25) plus years by exploiting the fact that there
exists no formal shareholders agreement, nor are there any other governing corporate documents
that formally establish the corporate ownership of the entity. However, well-settled law does not
allow Defendants to wholly disregard the ownership agreement that Plaintiff and xxxx reached
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when they first formed Rockville Corp., much less the quarter-century of business practices that
followed.
The Second Department case of Diaz v. Diaz is illustrative of this point. 130 A.D.3d 560.
Diaz involved an ownership dispute between three sisters regarding a single family home in
Queens, New York. The property was titled in the name of the defendant sister and one plaintiff
sister (there were two plaintiff-sisters). Plaintiffs contended that it was well understood that the
property was jointly owned by all three sisters, co-equally, despite the fact that only two were on
the deed. At the time of the acquisition, the plaintiff sister who was omitted from the deed was
excluded because of her poor credit history but she nonetheless provided a co-equal one-third share
of the down payment for the mortgage. When the defendant sister refused to add the plaintiff sister
to the deed, the two plaintiff sisters commenced an action seeking, among other things, an
imposition of a constructive trust awarding a one-third interest to the plaintiff sister who was not
on the deed. The trial court ultimately awarded a one-third interest in the property to the sister
who was left off the deed based on her constructive trust claim. The Second Department affirmed,
noting that the plaintiff sister had given defendant $13,000, and had funded her one-third portion
of the monthly mortgage and maintenance payments in reliance on a promise that she would be
added to the deed at some later date.
Indeed, courts in New York have long recognized that “in the real world, particularly that
in which close corporations operate, clear evidence of share ownership is often not found in the
corporate books and records, for any number of reasons.” Pappas v. Corfian Enterprises, Ltd., 22
Misc. 3d 1113(A), at *4 (Sup. Ct. Kings Cnty 2009), aff'd, 76 A.D.3d 679 (1st Dep’t
2010). “‘[M]anagerial responsibilities’ or the exercise of executive functions may be as consistent
with status as an officer, or even an employee, as it is an indication of shareholder status.” Id.
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Along these same lines, it has been recognized that “[t[he mere fact that a corporation did
not issue any stock certificates does not preclude a finding that a particular individual has the rights
of a shareholder.” Zwarycz v. Marnia Const., Inc., 130 A.D.3d 922, 923 (2d Dep’t 2015) (holding
that credible testimony and other evidence regarding plaintiff’s contributions to, and involvement
with, two corporations, supported his claim that he was a 50% owner of each corporation).
Here, based on the facts and circumstances presented, Plaintiff is entitled to the imposition
of a constructive trust and an accompanying declaration that he is an 80% shareholder of Rockville
Corp. Accordingly, Plaintiff has a likelihood of success on his second cause of action for a
constructive trust.
iii. Plaintiff is Likely to Succeed on His Third Cause of Action for
Permanent Injunctive Relief
The third cause of action in the Complaint sets forth a claim for permanent injunctive relief.
To state a cause of action for permanent injunction, the pleading must allege the “violation
of a right presently occurring, or threatened and imminent…that the plaintiff has no adequate
remedy at law…that serious and irreparable injury will result if the injunction is not
granted…and….that the equities are balanced in the plaintiff’s favor.” Elow v. Svenningsen, 58
A.D.3d 674, 675 (2d Dep’t 2009).
Here, Plaintiff has alleged and can demonstrate that his rights are currently being violated
by the Defendants as they are pursuing a sale of the Property without the requisite authority to do
so, he has no adequate remedy at law, serious and irreparable harm will result if the injunction is
not granted (see infra, I(B), and that the equities are balanced in Plaintiff’s favor (see infra, I(C)).
By reason of the foregoing, and as detailed further in the irreparable harm and balance of
equities argument sections below, Plaintiff has a likelihood of success on his third cause of cause
of action for a permanent injunction.
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B. Plaintiff Will Suffer Irreparable Harm
in the Absence of an Injunction.
Plaintiff will suffer irreparable harm in the absence of a preliminary injunction because, if
Defendants are permitted to close on a sale of the Property, Plaintiff will forever lose Rockville
Corp.’s sole asset, upon which the entire business is premised, and will be forever stripped of the
ownership and managerial rights he bargained for when he funded the initial corporate acquisition
of the Property.
A party suffers irreparable harm when monetary damages are not as “complete,”
“practicable” or “efficient” as equitable relief in the form of a preliminary injunction. Poling
Transp. Corp. v. A & P Tanker Corp., 84 A.D.2d 796, 797 (2d Dep’t 1981); see also Henry v.
Gustman, 2018 N.Y. Slip Op. 31914(U), *5 (Sup. Ct. Kings Cnty. 2018), (citing Autoone
Insurance Company v. Manhattan Heights Medical P.C., 24 Misc.3d 1229(A) (Sup. Ct. Queens
Cnty. 2009)) (“In order to satisfy the second prong of irreparable harm it must be demonstrated
that monetary damages are insufficient”).
Plaintiff easily satisfies the irreparable harm requirement here based on settled New York
law all of which supports his application for a preliminary injunction.
First, New York Courts routinely find irreparable harm where the plaintiff’s motion for a
preliminary injunction seeks to restrain the transfer or disposition of real property. See South
Amherst, Ltd. v. H. B. Singer LLC, 13 A.D.3d 515, 515 (2d Dep’t 2004
Preview
FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NASSAU xxxxxx xxxxxx a/k/a xxxxxxxxxx xxxxxx, individually and derivatively on Index No.: behalf of ROCKVILLE CORP., Plaintiff, -against- xxxxxxx xxxxx, individually and as the executor of the Estate of xxxx xxxxx, and as co-trustee of the disclaimer Trust under Article “Fourth” of the Last Will and Testament of xxxx xxxxx; MAKAN DELRAHIM, as former co-trustee of the disclaimer Trust under Article “Fourth” of the Last Will and Testament of xxxx xxxxx; and BAHARAK AMIRIAN as co-trustee of the disclaimer Trust under the Last Will and Testament of xxxx xxxxx, Defendants, -and- ROCKVILLE CORP. Nominal Defendant. MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF’S MOTION FOR A TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION Counselors at Law 1425 RXR PLAZA UNIONDALE, NEW YORK 11556-1425 —— (516) 663-6600 1 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 TABLE OF CONTENTS PAGE TABLE OF AUTHORITIES .......................................................................................................... ii PRELIMINARY STATEMENT .....................................................................................................1 STATEMENT OF FACTS ..............................................................................................................3 ARGUMENT ...................................................................................................................................3 POINT I Plaintiff’s Application for a Temporary Restraining Order and Preliminary Injunction Should Be Granted In Its Entirety................................3 A. Plaintiff Is Likely to Succeed on The Merits of the Claims in His Complaint ..............................................................................................5 i. Plaintiff Is Likely to Succeed on His First Cause of Action for Breach of Fiduciary Duty .....................................................7 ii. Plaintiff Is Likely to Succeed on His Second Cause of Action for Constructive Trust ................................................................9 iii. Plaintiff is Likely to Succeed on His Third Cause of Action for Permanent Injunctive Relief ...............................................12 B. Plaintiff Will Suffer Irreparable Harm in the Absence of an Injunction .................................................................13 C. The Balance of Equities Favors Plaintiff ...................................................15 CONCLUSION ..............................................................................................................................17 WORD COUNT CERTIFICATION .............................................................................................18 i 2 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 TABLE OF AUTHORITIES CASES PAGE Autoone Insurance Company v. Manhattan Heights Medical P.C., 24 Misc.3d 1229(A) (Sup. Ct. Queens Cnty. 2009).......................................................................13 Bank of America, N.A. v. PSW NYC LLC, 29 Misc.3d 1216(A), 10-11 (Sup. Ct. N.Y. Cnty. 2010) ...............................................................14 Barbour v. Knecht, 296 A.D.2d 218, 227 (1st Dep’t 2002) ............................................................................................8 Bass Bldg. Corp. v. Village of Pomona, 142 A.D.2d 657, 659 (2d Dep’t 1988) ...........................................................................................14 Borenstein v. Rochel Properties, Inc., 176 A.D.2d 171 (1st Dep’t 1991) ....................................................................................................5 CanWest Global Commc‘ns Corp. v. Mirkaei Tikshoret Ltd., 9 Misc.3d 845, 872 (Sup. Ct. N.Y. Cnty. 2005) ............................................................................15 Cedar Graphics, Inc. v. Long Island Power Authority, 35 A.D.3d 337, 338 (2d Dep’t 2006) ...........................................................................................3, 4 Davis v. Rondina, 741 F.Supp. 1115, 1125 (S.D.N.Y. 1990) .....................................................................................14 Delta Props. Inc. v. Fobare Enters. Inc., 251 A.D.2d 960 (3d Dep’t 1988) .....................................................................................................5 Diaz v. Diaz, 130 A.D.3d 560, 561 (2d Dep’t 2015) .......................................................................................9, 11 EdCia Corp. v. McCormack, 44 A.D.3d 991, 993 (2d Dep’t 2007) ...............................................................................................4 Elow v. Svenningsen, 58 A.D.3d 674, 675 (2d Dep’t 2009) .............................................................................................12 Estate of Harold, 112 A.D.3d 929, 931 (2d Dep’t 2013) .............................................................................................9 Fedner v. Prescott, 101 A.D.2d 418, 422 (1st Dep’t 1984) ............................................................................................7 ii 3 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 Global Minerals and Metals Corp. v. Holme, 35 A.D.3d 93, 98 (1st Dep’t 2006) ..................................................................................................7 Glob. Switching, Inc. v. Kasper, No. CV-06-0412 (CPS), 2006 WL 385315 at *4 (E.D.N.Y. Feb. 17, 2006) .................................14 Golden City Commercial Bank v. Hawk Props. Corp., 236 A.D.2d 282, 283 (1st Dep’t 1997) ..........................................................................................13 Gramercy Co. v. Benenson, 223 A.D.2d 497 (1st Dep’t 1996) ..................................................................................................16 Henry v. Gustman, 2018 N.Y. Slip Op. 31914(U), *5 (Sup. Ct. Kings Cnty. 2018) ....................................................13 In Re Matter of Kemp & Beatley, Inc., 64 N.Y.2d 63, 72-73 (1984) .............................................................................................................8 Int’l. Equity Investments v. Opportunity Equity Partners, Ltd., 441 F.Supp.2d 552, 563 (S.D.N.Y. 2006) .....................................................................................14 Leiser v. System D Restaurant Holdings, Inc., 32 Misc.3d 374, 377-78 (Sup. Ct. N.Y. Cty. Sept. 27, 2010) ..........................................................8 Lombard v. Station Square Inn Apartments Corp., 94 A.D.3d 717 (2d Dep’t 2012) .....................................................................................................15 McLaughlin, Piven, Vogel, Inc. v. W. J. Nolan & Co., Inc., 114 A.D.2d 165, 172-73 (2d Dep’t 1986) ........................................................................................5 Nastasi v. Nastasi, 26 A.D.3d 32, 37 (2d Dep’t 2005) ...................................................................................................9 Oracle Real Estate Holdings I LLC v. Adrian Holdings Co. I, LLC, 582 F. Supp.2d 616 (S.D.N.Y. 2008).............................................................................................14 Palmetto Partners, L.P. v. AJW Qualified Partners, LLC, 83 A.D.3d 804, 807 (2d Dep’t 2011) ...............................................................................................7 Pappas v. Corfian Enterprises, Ltd., 22 Misc. 3d 1113(A), at *4 (Sup. Ct. Kings Cnty 2009), aff'd, 76 A.D.3d 679 (1st Dep’t 2010) ...........................................................................................11 Poling Transp. Corp. v. A & P Tanker Corp., 84 A.D.2d 796, 797 (2d Dep’t 1981) .............................................................................................13 iii 4 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 Props for Today, Inc. v. Kaplan, 163 A.D.2d 177, 178 (1st Dep’t 1990) ............................................................................................5 Quadrozzi v. Estate of Quadrozzi, 99 A.D.3d 688, 691 (2d Dep’t 2012) ...............................................................................................9 Ruiz v. Meloney, 26 A.D.3d 485, 486-87 (2d Dep’t 2006) ..........................................................................................5 Simonds v. Simonds, 45 N.Y.2d 233, 241 (1978) ..............................................................................................................9 South Amherst, Ltd. v. H. B. Singer LLC, 13 A.D.3d 515, 515 (2d Dep’t 2004) .............................................................................................13 Suchodolski Assocs., Inc. v. Cardell Fin. Corp., No. 03 CIV. 4148 (WHP), 2003 WL 22909149 at *4 (S.D.N.Y. Dec. 10, 2003) .........................15 Terrell v. Terrell, 279 A.D.2d 301, 303 (1st Dep’t 2001) ............................................................................................5 Vincent v. Seaman, 152 A.D.2d 841 (3d Dep’t 1989) ...................................................................................................14 Washington Deluxe Bus, Inc. v. Sharmash Bus Corp., 47 A.D.3d 806 (2d Dep’t 2008) .....................................................................................................15 Wisdom Import Sales Co., L.L.C. v. Labatt Brewing Co. Ltd., 339 F.3d 101, 108 (2d Cir. 2003)...................................................................................................15 W. T. Grant Co. v. Srogi, 52 N.Y.2d 496, 517 (1981) ..............................................................................................................3 Zwarycz v. Marnia Const., Inc., 130 A.D.3d 922, 923 (2d Dep’t 2015) ...........................................................................................12 STATUTES AND OTHER AUTHORITIES CPLR 6301.......................................................................................................................................4 CPLR 6313.......................................................................................................................................4 CPLR 6312(c) .................................................................................................................................4 Alexander 1996 Supp. Practice Commentaries, McKinney’s Cons. Laws of NY, Book 78, CPLR C6312:5, (1997-93) ...............................................................................................4 iv 5 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 PRELIMINARY STATEMENT This memorandum of law is respectfully submitted on behalf of plaintiff xxxxxx xxxxxx a/k/a Nejatolla xxxxxx, individually and derivatively on behalf of Rockville Corp. (“Plaintiff” or “xxxxxx”) in support of his order to show cause for temporary and preliminary injunctive relief pursuant to Article 63 of the New York Civil Practice Law & Rules (“CPLR”), enjoining and restraining defendants1, during the pendency of this action, from: (i) transferring, pledging, encumbering, conveying, assigning, selling, altering, marketing and/or listing for sale, modifying, destroying, hypothecating, financing and/or otherwise disposing of the property located at 172 Sunrise Highway, Rockville Centre, New York (Section: 38; Block: 317; Lots: 130, 359 and 369) to which Rockville Corp. holds title and maintains a fee interest (the “Property”), without the express written consent of Plaintiff; and (ii) taking any steps and/or undertaking any actions in furtherance of transferring, pledging, encumbering, conveying, assigning, selling, altering, marketing and/or listing for sale, modifying, destroying, hypothecating, financing and/or otherwise disposing of the Property without the express written consent of Plaintiff; and (iii) granting such other and further relief as this Court deems just and proper. This application is necessary to put a halt to a series of ultra-vires and unauthorized actions that various representatives of Plaintiff’s brother’s estate (and certain beneficiaries thereof) are attempting to pursue on behalf of Rockville Corp. over the objection of Plaintiff – an 80% majority shareholder and the only acting officer of the corporation since it was formed in 1996 – which are having a deleterious impact on Rockville Corp’s business standing and diminishing the value of the entity’s sole asset. 1 The following captioned defendants shall be hereinafter collectively referred to as the “Defendants”: xxxxxxx xxxxx, individually and as the executor of the Estate of xxxx xxxxx, and as co-trustee of the disclaimer Trust under Article “Fourth” of the Last Will and Testament of xxxx xxxxx, Makan Delrahim as former co-trustee of the disclaimer Trust under Article “Fourth” of the Last Will and Testament of xxxx xxxxx, Baharak Amirain as co-trustee of the disclaimer Trust under Article “Fourth” of the Last Will and Testament of xxxx xxxxx and nominal defendant Rockville Corp. 1 6 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 Plaintiff is an 80% majority-controlling shareholder and the sole acting officer of Rockville Corp, a single purpose entity that holds title to Property as its sole asset. Rockville Corp. was formed in 1996 by Plaintiff and his brother, xxxx xxxxx (“xxxx”), to acquire the Property out of which Plaintiff has been operating a Bargain Liquor Store (the “Store”) for twenty-five (25) plus years. From inception (i.e. 1996) to the present, Rockville Corp. and the Store have been operated and managed by Plaintiff, exclusively. Moreover, Rockville Corp’s initial acquisition of the Property, along with its subsequent acquisitions of various adjoining lots, were funded with Plaintiff’s personal capital; xxxx never contributed any personal funds to either Rockville Corp. or the Store during his lifetime. While there was never any dispute during xxxx’s lifetime (he died in 2008 leaving the entirety of his estate, and the control thereof to his wife, defendant xxxxxxx xxxxx, the executor and co-trustee of a disclaimer trust created under xxxx’s will) that Plaintiff maintained an 80% shareholder interest in Rockville Centre and that xxxx’s interest was limited to a 20% minority share, in recent months, xxxx’s estate representatives and beneficiaries have sought to turn a twenty-five (25) year corporate business and ownership structure on its head by disclaiming Plaintiff’s controlling stake in Rockville Corp. and the Property. Specifically, the Defendants, who comprise of xxxx’s estate representatives and beneficiaries, are currently taking steps to market and sell the Property under Plaintiff’s nose and over his express objection. Not only are the Defendants refusing to acknowledge Plaintiff’s 80% shareholder interest in Rockville Corp. (and the blocking rights he maintains with respect to any such sale), they are withholding such information from the unsuspecting potential purchasers, many of whom have purportedly expressed immediate interest in acquiring the Property. 2 7 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 As such, Defendants are acting in breach of their fiduciary duties to Plaintiff and are wrongfully pursuing a sale on behalf of Rockville Corp. without the requisite authority to bind the corporation. Defendants must therefore be enjoined and restrained from proceeding in this manner. An injunction is necessary to preserve the status quo. Absent such a restraint, Defendants will proceed with the sale of the Property thereby disposing of Rockville Corp.’s sole asset without the consent of its only officer, operator and controlling shareholder, resulting in irreparable harm to Plaintiff. If the Property is sold, Rockville Corp. would cease as a business, which is a harm that is not compensable by money damages. By reason of the foregoing, and as stated in more detail below, Plaintiff’s order to show cause for temporary and preliminary injunctive relief should be granted in its entirety. STATEMENT OF FACTS The material facts are stated in the accompanying Verified Complaint, dated May , 2022 (the “Complaint”); the Emergency Affirmation of Daniel E. Shapiro, dated May , 2022 (“Shapiro Affm.”); and the Affidavit of xxxxxx xxxxxx, sworn to on May , 2022 (“xxxxxx Aff.”) with the exhibits annexed thereto, to which this Court is respectfully referred. ARGUMENT I. Plaintiff’s Application for a Temporary Restraining Order and Preliminary Injunction Should Be Granted In Its Entirety. Plaintiff’s application for a temporary restraining order and preliminary injunction should be granted in its entirety because: (i) he is likely to succeed on the merits of his underlying claims; (ii) will be irreparably harmed absent an injunction; and (iii) the balance of the equities lies in his favor. See W. T. Grant Co. v. Srogi, 52 N.Y.2d 496, 517 (1981); Cedar Graphics, Inc. v. Long 3 8 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 Island Power Authority, 35 A.D.3d 337, 338 (2d Dep’t 2006); see also EdCia Corp. v. McCormack, 44 A.D.3d 991, 993 (2d Dep’t 2007). CPLR 6301 sets forth the grounds necessary for the issuance of a preliminary injunction as follows: A preliminary injunction may be granted in any action where it appears that the defendant threatens or is about to do, or is doing or procuring or suffering to be done, an act in violation of the plaintiff’s rights respecting the subject of the action, and tending to render the judgment ineffectual, or in any action where the plaintiff has demanded and would be entitled to a judgment restraining the defendant from the commission or continuance of an act, which, if committed or continued during the pendency of the action, would produce injury to the plaintiff. . . . CPLR 6301; see also CPLR 6313 (stating similar grounds for temporary restraining order). Furthermore, CPLR 6312(c) provides that as long as the plaintiff demonstrates the elements necessary for a preliminary injunction in its motion papers “the presentation by the defendant of evidence sufficient to raise an issue of fact as to any of such elements shall not in itself be grounds for denial of the motion.” CPLR 6312(c). Thus, “the existence of an issue of fact on a motion for a preliminary injunction is not standing alone, a sufficient basis for denial of the motion.” Alexander 1996 Supp. Practice Commentaries, McKinney’s Cons. Laws of NY, Book 78, CPLR C6312:5 (1997-93). Plaintiff more than satisfies his burden with respect to each of the elements that are required for the issuance of a preliminary injunction. Accordingly, it is respectfully requested that Plaintiff’s application for a temporary restraining order and preliminary injunction be granted in its entirety. 4 9 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 A. Plaintiff Is Likely to Succeed on The Merits of the Claims in His Complaint In demonstrating a “likelihood of success on the merits, a prima facie showing of a right to relief is sufficient; actual proof of the case should be left to further court proceedings.” McLaughlin, Piven, Vogel, Inc. v. W. J. Nolan & Co., Inc., 114 A.D.2d 165, 172-73 (2d Dep’t 1986); see also Ruiz v. Meloney, 26 A.D.3d 485, 486-87 (2d Dep’t 2006); Terrell v. Terrell, 279 A.D.2d 301, 303 (1st Dep’t 2001). The party seeking an injunction does not bear the burden to show that success is certain; the burden is to show merely that a “likelihood of success” exists. See Props for Today, Inc. v. Kaplan, 163 A.D.2d 177, 178 (1st Dep’t 1990) (“plaintiff has not shown that its success is certain, but it is in no way obliged to do so”); McLaughlin, Piven, Vogel, Inc. v. W.J. Nolan & Co., 114 A.D.2d 165, 173 (2d Dep’t 1986) (“actual proof of the case should be left to further court proceedings”). A preliminary injunction may thus be granted where some facts are in dispute. See Borenstein v. Rochel Properties, Inc., 176 A.D.2d 171 (1st Dep’t 1991); see also Delta Props. Inc. v. Fobare Enters. Inc., 251 A.D.2d 960 (3d Dep’t 1988) (granting preliminary injunction prohibiting resale of property pending resolution of action to enforce contract despite uncertainty concerning whether plaintiff would prevail). Plaintiff is likely to succeed on the merits of his claims against the Defendants who are pursuing ultra-vires business transactions on behalf of Rockville Corp. and acting well-outside the scope of their authority as minority shareholders in a corporation in which Plaintiff has maintained a controlling 80% interest since it was first formed in 1996. Since 1996, Plaintiff has been the sole and exclusive operator of Rockville Corp. and the Bargain Liquor Store business, which operates out of the Property. In his capacity as the sole operator, and as Rockville Corp.’s de-facto sole officer, Plaintiff is charged with overseeing every aspect of Rockville Corp.’s day-to-day and 5 10 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 general business operations. Indeed, over the course of twenty-five (25) plus years, Plaintiff has been the sole party responsible for paying, inter alia: (i) all of the property taxes assessed to Rockville Corp. by the local municipalities; (ii) in excess of $1 million in mortgage payments charged to Rockville Corp. on account of mortgages recorded against the Property, all of which have been fully satisfied; and (iii) the professional fees incurred in connection with various Rockville Corp. adjoining parcel acquisitions, property appraisals, business valuations and tax certiorari applications. Much more, Plaintiff is the only party to have contributed his own personal funds to the purchase of the Property and other Rockville Corp. business endeavors. However, after a 25 year history of Plaintiff being recognized as the controlling shareholder, during which time he has served as the businesses’ sole operator and manager, Defendants are now seeking to exploit the fact that there exists no shareholders agreement or corporate by-laws in an attempt to turn the ownership structure that Rockville Corp. has maintained for a quarter-century, on its head. By way of a brief historical background, Plaintiff and his brother, xxxx xxxxx (who before his death in 2008 was the other 20% shareholder), never reduced their 80%-20% shareholder arrangement to a formal writing nor did they incorporate it into a governing corporate documents/agreements during xxxx’s lifetime. Moreover, certificated shares of stock were never prepared or issued by Rockville Corp to either Plaintiff or xxxx. That is because the brothers (Plaintiff and xxxx) never felt compelled to formalize their 80%-20% arrangement since, as between the two of them, it was well-understood and never gave rise to any type of dispute during xxxx’s life. Even the initial corporate formation documents that were filed with New York State (e.g. the Certificate of Incorporation) make no mention of who the intended shareholders and officers were to be. 6 11 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 In any event, Plaintiff and xxxx’s long-term understanding was as follows: for his 80%, Plaintiff was to run and manage every aspect of Rockville Corp.’s business (as well as the independent liquor store business that operated out of the Property) and would contribute his own personal capital to the purchase of the Property; for xxxx’s 20%, his only responsibility was to facilitate and procure a mortgage loan that was needed to fund the balance of the initial Property purchase (over and above what Plaintiff personally contributed to the acquisition) and two refinancings that were effectuated to help fund Plaintiff’s business.2 Whereas xxxx signed for these mortgage loans as a representative of Rockville Corp., Plaintiff was the one charged with generating business revenues that would be used to pay off said loans. As of June 2, 2021, all of the mortgage loans were fully satisfied. i. Plaintiff Is Likely to Succeed on His First Cause of Action for Breach of Fiduciary Duty The first cause of action in the Complaint sets forth a claim for breach of fiduciary duty. “[T]he elements of a cause of action to recover damages for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant’s misconduct.” Palmetto Partners, L.P. v. AJW Qualified Partners, LLC, 83 A.D.3d 804, 807 (2d Dep’t 2011). The relationship “between shareholders in a close-corporation viz-a-viz each other, is akin to that between partners and imposes a high degree of fidelity and good faith.” Fedner v. Prescott, 101 A.D.2d 418, 422 (1st Dep’t 1984); see also Global Minerals and Metals Corp. v. Holme, 35 A.D.3d 93, 98 (1st Dep’t 2006). To this end, a shareholder in a closely held corporation “owes a fiduciary duty to the other shareholders not to co-opt or divert a valuable corporate opportunity she/[he] became aware of in 2 Parenthetically, it was also agreed by and between the brothers-partners, that xxxx would hold his 20% interest as a nominee for their parents who were living in Iran at the time. The brothers’ understanding was that xxxx’s share of the profits would be used to pay for living expenses that their parents incurred. 7 12 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 her corporate shareholder capacity….and require[s] her/[him] to devote her undivided, unqualified loyalty to the corporation and not to compete with it, place her/[his] private interests in conflict with its interests, or personally profit at its expense.” Leiser v. System D Restaurant Holdings, Inc., 32 Misc.3d 374, 377-78 (Sup. Ct. N.Y. Cty. Sept. 27, 2010). Moreover, a controlling shareholder of a closely-held corporation owes a duty to other shareholders not to engage in oppressive actions, which include, defeating a shareholders reasonable expectations that ownership in the corporation would entitle to him/her a place in corporate management. See In Re Matter of Kemp & Beatley, Inc., 64 N.Y.2d 63, 72-73 (1984). As such, a plaintiff’s claim that he or she has been frozen out of management of a closely-held- corporation asserts a cognizable claim for breach of fiduciary duty. See Barbour v. Knecht, 296 A.D.2d 218, 227 (1st Dep’t 2002). For the past twenty-five (25) plus years, Plaintiff has maintained an 80% controlling interest in Rockville Corp. and has been the only acting officer, manager and operator of the business during that timeframe. However, in recent months, Defendants, who only maintain a 20% passive minority stake in the corporation, have started holding themselves out as majority interest holders who maintain the right to bind the corporation and control its affairs, including the sale of its sole asset. In marketing the Property for sale without Plaintiff’s consent (and over his objection) and by fraudulently holding themselves out as controlling stakeholders in pursuit of a sale of Rockville Corp.’s sole asset, Defendants have effectively frozen Plaintiff out of corporate management in blatant breach of the fiduciary duties they owe to him and the corporation. Since the formation of Rockville Corp. in 1996, Plaintiff has contributed substantial capital and sweat equity to the business in reliance on a reasonable expectation that his 80% interest would afford him rights as a controlling interest holder and decision-maker. Defendants’ oppressive actions are 8 13 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 operating to defeat and thwart these reasonable expectations. As a consequence, Plaintiff has been damaged by, among other things, the diminution in value of his 80% controlling interest in Rockville Corp. since Defendants have wrongfully stripped of him of his managerial powers and controlling interest. Accordingly, Plaintiff has a likelihood of success on his first cause of action for breach of fiduciary duty. ii. Plaintiff is Likely to Succeed on His Second Cause of Action for Constructive Trust The second cause of action in the Complaint sets forth a claim for a constructive trust. A constructive trust is a legal fiction imposed in equity where “the holder of legal title [to property] may not in good conscience retain the beneficial interest.” Simonds v. Simonds, 45 N.Y.2d 233, 241 (1978). In such instances, “equity converts [the title owner] into a trustee.” Id. The doctrine’s purpose is to “satisfy the demands of justice,” and its applicability is “limited only by the inventiveness of men who find new ways to enrich themselves unjustly by grasping what should not belong to them.” Id.; see Nastasi v. Nastasi, 26 A.D.3d 32, 37 (2d Dep’t 2005) (holding that the constructive trust doctrine “is given broad scope to flex in response to all human implications of the transaction, to remedy whatever knavery ingenious wrongdoers can invent, to give expression to the conscience of equity, and to satisfy the demands of justice.”). The elements of a constructive trust are (1) a fiduciary or confidential relationship; (2) an express or implied promise; (3) a transfer in reliance on the promise; and (4) unjust enrichment. See Diaz v. Diaz, 130 A.D.3d 560, 561 (2d Dep’t 2015). However, this standard is not rigidly applied, and a constructive trust may be impressed even where not all of the elements are met. See Estate of Harold, 112 A.D.3d 929, 931 (2d Dep’t 2013); Quadrozzi v. Estate of Quadrozzi, 99 A.D.3d 688, 691 (2d Dep’t 2012). 9 14 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 Here, Plaintiff has established the requisite elements to succeed on a claim for a constructive trust and for a declaration declaring that he is an 80% controlling-shareholder in Rockville Corp. First, Plaintiff and Defendants are co-shareholders in a closely-held-corporation and there thus exists a fiduciary relationship as between them. See supra, POINT I(A)(i). Second, when Rockville Corp. was first formed, it was formed based on a promise made by Plaintiff’s brother, xxxx, that Plaintiff would be allocated an 80% controlling ownership interest and that he would be the sole officer and shareholder charged with decision-making and managerial powers for the corporation. Third, in reliance on this promise, Plaintiff agreed to contribute his personal funds to Rockville Corp.’s acquisition of the Property, and to certain subsequent purchases of two adjoining lots acquisition. Additionally, Plaintiff agreed to devote his full time to running the business and maintaining the Property. In reliance on this understanding, Plaintiff agreed that Rockville Corp. would take title to the Property, which purchase he helped fund out of his own pocket. Fourth, to the extent Defendants are now taking the position that they, and not Plaintiff, are the majority shareholders of Rockville Corp., they are being (and will continue to be) unjustly enriched. To add, Defendants will be unjustly enriched to Plaintiff’s detriment if they move forward with the unauthorized sale of the Property and then distribute the proceeds in a manner that deprives Plaintiff of his right to an 80% share thereof. As explained above, Defendants are ignoring and disclaiming an ownership structure that Rockville Corp. has maintained for twenty-five (25) plus years by exploiting the fact that there exists no formal shareholders agreement, nor are there any other governing corporate documents that formally establish the corporate ownership of the entity. However, well-settled law does not allow Defendants to wholly disregard the ownership agreement that Plaintiff and xxxx reached 10 15 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 when they first formed Rockville Corp., much less the quarter-century of business practices that followed. The Second Department case of Diaz v. Diaz is illustrative of this point. 130 A.D.3d 560. Diaz involved an ownership dispute between three sisters regarding a single family home in Queens, New York. The property was titled in the name of the defendant sister and one plaintiff sister (there were two plaintiff-sisters). Plaintiffs contended that it was well understood that the property was jointly owned by all three sisters, co-equally, despite the fact that only two were on the deed. At the time of the acquisition, the plaintiff sister who was omitted from the deed was excluded because of her poor credit history but she nonetheless provided a co-equal one-third share of the down payment for the mortgage. When the defendant sister refused to add the plaintiff sister to the deed, the two plaintiff sisters commenced an action seeking, among other things, an imposition of a constructive trust awarding a one-third interest to the plaintiff sister who was not on the deed. The trial court ultimately awarded a one-third interest in the property to the sister who was left off the deed based on her constructive trust claim. The Second Department affirmed, noting that the plaintiff sister had given defendant $13,000, and had funded her one-third portion of the monthly mortgage and maintenance payments in reliance on a promise that she would be added to the deed at some later date. Indeed, courts in New York have long recognized that “in the real world, particularly that in which close corporations operate, clear evidence of share ownership is often not found in the corporate books and records, for any number of reasons.” Pappas v. Corfian Enterprises, Ltd., 22 Misc. 3d 1113(A), at *4 (Sup. Ct. Kings Cnty 2009), aff'd, 76 A.D.3d 679 (1st Dep’t 2010). “‘[M]anagerial responsibilities’ or the exercise of executive functions may be as consistent with status as an officer, or even an employee, as it is an indication of shareholder status.” Id. 11 16 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 Along these same lines, it has been recognized that “[t[he mere fact that a corporation did not issue any stock certificates does not preclude a finding that a particular individual has the rights of a shareholder.” Zwarycz v. Marnia Const., Inc., 130 A.D.3d 922, 923 (2d Dep’t 2015) (holding that credible testimony and other evidence regarding plaintiff’s contributions to, and involvement with, two corporations, supported his claim that he was a 50% owner of each corporation). Here, based on the facts and circumstances presented, Plaintiff is entitled to the imposition of a constructive trust and an accompanying declaration that he is an 80% shareholder of Rockville Corp. Accordingly, Plaintiff has a likelihood of success on his second cause of action for a constructive trust. iii. Plaintiff is Likely to Succeed on His Third Cause of Action for Permanent Injunctive Relief The third cause of action in the Complaint sets forth a claim for permanent injunctive relief. To state a cause of action for permanent injunction, the pleading must allege the “violation of a right presently occurring, or threatened and imminent…that the plaintiff has no adequate remedy at law…that serious and irreparable injury will result if the injunction is not granted…and….that the equities are balanced in the plaintiff’s favor.” Elow v. Svenningsen, 58 A.D.3d 674, 675 (2d Dep’t 2009). Here, Plaintiff has alleged and can demonstrate that his rights are currently being violated by the Defendants as they are pursuing a sale of the Property without the requisite authority to do so, he has no adequate remedy at law, serious and irreparable harm will result if the injunction is not granted (see infra, I(B), and that the equities are balanced in Plaintiff’s favor (see infra, I(C)). By reason of the foregoing, and as detailed further in the irreparable harm and balance of equities argument sections below, Plaintiff has a likelihood of success on his third cause of cause of action for a permanent injunction. 12 17 of 22 FILED: NASSAU COUNTY CLERK 06/02/2022 01:08 PM INDEX NO. 607197/2022 NYSCEF DOC. NO. 9 RECEIVED NYSCEF: 06/02/2022 B. Plaintiff Will Suffer Irreparable Harm in the Absence of an Injunction. Plaintiff will suffer irreparable harm in the absence of a preliminary injunction because, if Defendants are permitted to close on a sale of the Property, Plaintiff will forever lose Rockville Corp.’s sole asset, upon which the entire business is premised, and will be forever stripped of the ownership and managerial rights he bargained for when he funded the initial corporate acquisition of the Property. A party suffers irreparable harm when monetary damages are not as “complete,” “practicable” or “efficient” as equitable relief in the form of a preliminary injunction. Poling Transp. Corp. v. A & P Tanker Corp., 84 A.D.2d 796, 797 (2d Dep’t 1981); see also Henry v. Gustman, 2018 N.Y. Slip Op. 31914(U), *5 (Sup. Ct. Kings Cnty. 2018), (citing Autoone Insurance Company v. Manhattan Heights Medical P.C., 24 Misc.3d 1229(A) (Sup. Ct. Queens Cnty. 2009)) (“In order to satisfy the second prong of irreparable harm it must be demonstrated that monetary damages are insufficient”). Plaintiff easily satisfies the irreparable harm requirement here based on settled New York law all of which supports his application for a preliminary injunction. First, New York Courts routinely find irreparable harm where the plaintiff’s motion for a preliminary injunction seeks to restrain the transfer or disposition of real property. See South Amherst, Ltd. v. H. B. Singer LLC, 13 A.D.3d 515, 515 (2d Dep’t 2004