Shiller v. Bensusan Rest. Corp.

Shiller v Bensusan Rest. Corp. 2024 NY Slip Op 33814(U) October 24, 2024 Supreme Court, New York Counrty Docket Number: Index No. 655943/2023 Judge: Melissa A. Crane Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.

[FILED: NEW YORK COUNTY CLERK 10/24/2024 04:41 P~ INDEX NO. 655943/2023 NYSCEF DOC. NO. 54 RECEIVED NYSCEF: 10/24/2024

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. MELISSA A. CRANE PART 60M Justice ----------------------------------------------------------------- ----------------X INDEX NO. 655943/2023 ROCHELLE SHILLER, DAVIDS. HARARI, ROCHELLE SHILLER, DAVIDS. HARARI, ROCHELLE SHILLER, 07/02/2024, MOTION DATE N/A Plaintiff, MOTION SEQ. NO. 001 002 - V -

BENSUSAN RESTAURANT CORP., DANNY BENSUSAN, STEVEN BENSUSAN, BLUE NOTE FESTIVALS LLC,BLUE NOTE INTERNATIONAL, INC.,BLUE NOTE MEDIA GROUP LLC,BLUE NOTE PRODUCTS LLC,BLUE NOTE ENTERTAINMENT GROUP LLC,BLUE NOTE DECISION + ORDER ON ENTERTAINMENT GROUP LLC (DELAWARE), BLUE MOTION NOTE TOURS LLC,HALF NOTE PRODUCTIONS LLC,131 WEST 3RD STREET INC.,57 GROVE CORP, DOE CORPORATIONS 1-10

Defendant. ------------------------------------------------------------------- --------------X

The following e-filed documents, listed by NYSCEF document number (Motion 001) 20, 21, 22, 23, 25, 30 were read on this motion to/for DISMISS

The following e-filed documents, listed by NYSCEF document number (Motion 002) 34, 35, 36, 37, 38, 39,40,41,42,43,50 were read on this motion to/for DISMISS

Upon the foregoing documents, it is

Motion 1 is moot have been withdrawn by stipulation [see EDOC 30]. The court grants

in part and denies in part motion 2 to dismiss for the reasons stated on the record of 10/24/2024.

Namely, the court sustains the first cause of action for breach of fiduciary duty against Steven,

Danny and Bensusan. If it is true as alleged that Shabtai was a shareholder of the original

corporation that evolved into a thriving business empire that he also had a share in as described

in the 2002 written agreement [EDOC 39], then the overarching company, Bensusan, and Danny

and Steven as officers and directors, would owe a fiduciary duty to Shabtai. Plaintiff

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successfully pled a breach of that duty by the allegations that Shabtai and his heirs were not paid

their share of the profits from the business enterprise. Breach of fiduciary duty is not duplicative

of the breach of contract cause of action, because: (1) defendants vociferously challenge the

existence of any agreement, but (2) if defendants are correct about the existence of an agreement,

this does not preclude Shabtai from having some sort of beneficial ownership given that he

allegedly put up the money that kicked off the business enterprise in 1981.

The court sustains the second cause of action for breach of contract for the reasons set

forth on the record, but grants that part of the motion seeking to dismiss the breach of contract

cause of action against Steven. It is undisputed that Steven never signed the 2002 Agreement.

The court denies that part of the motion to dismiss the third cause of action for a

constructive trust against ALL defendants. First, as defendants Steven, Danny and Bensusan

owed plaintiffs a fiduciary duty, they had a duty to hold Shabtai's share in trust and hand it over

to him. This they did not do. Hence, a cause of action for constructive trust lies against these

defendants.

As to the other defendant's, plaintiff alleges at paragraphs 75-79 of the complaint that

Danny, Steven and Bensusan created new entities and then diverted business from the entities in

which Shabtai had an alleged share to those new entities "as part of a scheme to deprive Shabtai

of his 50% ownership interest in the Blue Note business generally and his one-third interest in

International." [Compl. EDOC 26 at 79]. Diversion of profits to a new entity to avoid paying a

plaintiff allows for a constructive trust over those assets in the company to which those assets

were diverted (see Fellner v. Morimoto, 52 A.D.3d 352, 353 [1 st Dep't 2008] [on motion to

amend, court held "[r]egarding the cause of action for the imposition of a constructive trust,

plaintiff sufficiently alleges that certain profits and business opportunities rightfully belonging to

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Moridon and its members were improperly diverted to defendant and Morimoto, Inc., without

consideration, thereby unjustly enriching defendant and Morimoto, Inc., an entity in which

plaintiff has no interest"]; see also Lizard O's v Baha Lounge Corp, 214 AD3d 597, 599 [!81

Dep't 2023 ["diversion of plaintiffs money" provided support for claim for breach of fiduciary

duty and constructive trust"]; Kraus USA, Inc. v. Magarik, 2020 WL 2415670, at *10 n. 13

[SDNY May 12, 2020][denying motion to dismiss and stating "the remedy for a diversion of

corporate opportunity is a constructive trust"]).

The third cause of action for an accounting against Danny, Steven, Bensusan and the

Blue Note defendants is upheld as the court has upheld the cause of action for breach of fiduciary

duty. Defendant on the record did not challenge plaintiffs right to an accounting from 131 West

3rd Street Inc and 57 Grove Corp (fourth cause of action), because Shabtai had an ownership

interest in those entities.

However, the court dismissed the fifth cause of action for unjust enrichment as it

duplicates other causes of action, in particular the cause of action for a constructive trust.

The court also dismissed the sixth cause of action for fraudulent misrepresentation

against Danny and Steven. As explained on the record, plaintiff has failed to plead a

misrepresentation of present fact. All plaintiff describes is a broken promise. That is not fraud.

Accordingly, it is

ORDERED THAT the court dismisses the fifth, sixth and breach of contract claims

against Steven and otherwise denies the motion; and it is further

ORDERED THAT defendants have 45 days from the efiled date of this decision and

order to answer the amended complaint; and it is further

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!FILED: NEW YORK COUNTY CLERK 10/24/2024 04:41 PM! INDEX NO. 655943/2023 NYSCEF DOC. NO. 54 RECEIVED NYSCEF: 10/24/2024

ORDERED THAT the parties shall apprize the court, by email, as to the prospect for

mediation within ten days from thee-filed date of this decision and order.

202410~1B7~B0C28

10/24/2024 DATE MELISSA A. CRANE, J.S.C.

~ CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

GRANTED □ DENIED GRANTED IN PART □ OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

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