Matter of Ruham

Matter of Ruham 2024 NY Slip Op 31863(U) May 14, 2024 Supreme Court, New York County Docket Number: Index No. 656166/2023 Judge: Andrew Borrok 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 05/14/2024 02:11 P~ INDEX NO. 656166/2023 NYSCEF DOC. NO. 60 RECEIVED NYSCEF: 05/14/2024

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 53 ----------------------------------------------------------------------------------- X

IN THE MATTER OF THE PETITION FOR DISSOLUTION INDEX NO. 656166/2023 PURSUANT TO NY LLC LAW

Plaintiff, MOTION DATE 12/08/2023

- V - MOTION SEQ. NO. 001 GAD RUHAM, DECISION+ ORDER ON Defendant. MOTION

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HON. ANDREW BORROK:

The following e-filed documents, listed by NYSCEF document number (Motion 001) 2, 15, 16, 17, 18, 19,20,21,22,23,24,25, 26,27, 28,29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39,40,41,42,43,44,45, 46,47,48,49,50,51,52,53,54,55,56,57,58,59 were read on this motion to/for DISSOLUTION

Upon the foregoing documents and for the reasons set forth on the record (tr. 5.14.24), the

motion (Mtn. Seq. No. 001) is granted solely to the extent that Gad Ruham (Respondent) shall

make the books and records of the company available to Daniel Hoday (Petitioner), and the

cross-motion to dismiss is denied. The allegations may support a derivative action but not one

for dissolution (In re 1545 Ocean Ave., LLC, 72 AD3d 121, 132 [2d Dept 2010]).

The facts in this case between Petitioner and Respondent are relatively straightforward. This

case involves Hoham 932 Grand Street LLC (the LLC), a New York limited liability company,

which has two fifty-percent members, the Respondent and the Petitioner. There are others. In

fact - there are apparently eight other cases involving the Petitioner and the Respondent.

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As relevant, in this lawsuit, the parties agree that LLC was formed by the filing of articles of

organization on November 21, 2000 (the Articles; NYSCEF Doc. No. 21).

Significantly, the Articles provide only that "[t]he limited liability company is to be managed by

1 or more members" (id., ,i 6). The Articles do not address which member would manage it, and

the LLC has no operating agreement. The LLC has only one asset, a property located at 942

Grand Street in Brooklyn, New York (the Property; NYSCEF Doc. No. 1, ,i,i 7-8), which

premises are rented out to a tenant (id., ,i,i 10-13).

The Petitioner commenced the instant action with the filing of a Verified Petition for Judicial

Dissolution on December 8, 2023 (the Petition; NYSCEF Doc. No. 1) seeking (i) dissolution of

the LLC pursuant to Limited Liability Company Law § 702, (ii) the appointment of a receiver,

and (iii) the production of books and records.

Dissolution, the remedy sought here, is a drastic remedy (In re 1545 Ocean Ave., LLC, 72 AD3d

121, 131 [2d Dept 2010]). In a petition seeking dissolution pursuant to Limited Liability

Company Law § 702, the petitioning member must establish, in the context of the terms of the

operating agreement or articles of incorporation, that (i) the management of the entity is unable

or unwilling to reasonably permit or promote the stated purpose of the entity to be realized or

achieved or (ii) that continuing the entity is financially unfeasible (id.). Based on In re 1545

Ocean Ave, the Court is constrained to hold that the Petition does not sufficiently allege either

ground such that dissolution is not appropriate.

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In fact, at bottom, the Petition alleges that the relationship between the parties has broken down,

resulting in numerous lawsuits that implicate various other corporate entities the parties jointly

own. With respect to the LLC, the parties' breakdown revolves around an alleged freeze out of

the Petitioner and disagreement as to a business decision made by the Respondent, i.e.,

Respondent's reduction of rent, to which the Petitioner explicitly objected (id., ,i 18). The

Petition specifically alleges that the Respondent (i) has moved funds from the LLC's accounts to

his own personal accounts, (ii) intercepted Property rental payments due the LLC and caused

these payments to be routed to his own personal bank accounts, and (iii) removed the books and

records of the LLC and has refused to produce them to the Petitioner. The Petition asserts that in

light of this malfeasance continuing the LLC is financially unfeasible because, among other

things, unpaid real estate taxes may lead to the foreclosure of the Property, the LLC' s sole asset

(id., ,i 14-22, 24, 31-32, 37).

Since the souring of the parties' relationship, the Respondent commenced a lawsuit on the LLC' s

behalf to recover back rent from the LLC' s tenant (id., ,i 27) and asserts that the action settled in

exchange for a $170,000 payment to the LLC (see NYSCEF Doc. Nos. 56; 50, ,i 13).

As discussed above, the Articles do not require majority vote to effectuate the purpose of the

LLC. They expressly provide otherwise. As such, there is no risk of deadlock (In re 1545

Ocean Ave., LLC, 72 AD3d 121, 129 [2d Dept 2010]). As discussed above, nor does the Petition

set forth another statutory basis for dissolution - the dispute at present between the members is

not inimicable to achieving the purpose of the LLC and there is no threatened foreclosure or

other financial malady that threatens the viability of the LLC or its purpose (In re 1545 Ocean

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Ave., LLC, 72 AD3d 121, 122 [2d Dept 2010]; cf Advanced 23, LLC v Chambers House

Partners, LLC, 2017 NY Slip Op 32663[U] [Sup Ct, NY County 2017]; Matter ofVashovsky v

Zablocki, 2023 NY Slip Op 30768[U] [Sup Ct, Kings County 2023]; In re 47th Rd. LLC, 54

Misc 3d 1217(A) [NY Sup 2017]). Thus, to the extent the Petition seeks dissolution, an

injunction, and a receiver in support of such dissolution, it must be denied and dismissed without

prejudice.

However, the facts of this case may present a cause of action sounding in breach of fiduciary

duty of care and loyalty which may potentially be asserted in a derivative action based on the

allegations that Respondent has failed to provide access to the books and records of the LLC,

entry into transactions not in the best interests of the LLC and/or against the express interests of

Petitioner, a 50% owner of the LLC, and alleged misappropriation of assets. Nothing in this

Decision and Order should be read to prevent the viability of the assertion of such claim (id., at

132).

Limited Liability Company Law Section 1102 provides that each member of a New York limited

liability company may, subject to reasonable standards set forth in an operating agreement,

inspect and copy at his or her own expense, for any purpose reasonably related to the member's

interest as a member, any financial statements maintained by the limited liability company for

the three most recent fiscal years and other information regarding the affairs of the limited

liability company as is just and reasonable (NY Limit Liab Co § 1102). As discussed above, the

LLC has no operating agreement to establish standards for the review of books and records

beyond the statutory requirements. The Respondent does not dispute that he has not provided

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access to these books and records. Nothing in the record establishes that either the Petitioner or

the Respondent is the manager, and the Respondent can not cherry-pick that which he shares

with his 50% partner. Thus, the Petition is granted solely to the extent that the Respondent must

make the books and records available to the Petitioner.

The Court has considered the parties remaining contentions and finds them unavailing.

Accordingly, it is hereby

ORDERED that the motion is granted solely to the extent that the Respondent shall make the

books and records of the LLC available to the Petitioner but is otherwise dismissed without

prejudice; and it is further

ORDERED that the cross-motion is otherwise denied.

5/14/2024 DATE ANDREW BORROK, 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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