Grigsby v. Francabandiero

2017 NY Slip Op 5539, 152 A.D.3d 1195, 58 N.Y.S.3d 835

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: July 7, 2017
• Docket: 808 CA 17-00122
• Status: Published

Opinions

Appeal from an order of the Supreme Court, Erie County (Timothy J. Walker, A.J.), entered October 20, 2016. The order, among other things, granted the motion of defendant Joseph Francabandiero to dismiss the amended complaint against him and that part of the cross motion of defendant Robert McDonald seeking to dismiss the amended complaint against him.

It is hereby ordered that the order so appealed from is modified on the law by denying the cross motion in its entirety and reinstating the amended complaint against defendant Robert McDonald, and as modified the order is affirmed without costs.

Memorandum: Plaintiff commenced this action to enforce a judgment obtained against Hyperion Recovery, LLC (Hyperion) in an action under the Fair Debt Collection Practices Act in the United States District Court for the Northern District of Illinois, which judgment was thereafter domesticated in New York. In her complaint in the instant action plaintiff alleged that, at all relevant times, defendants were the owners and members of Hyperion and that, in an effort to keep Hyperion judgment-proof, they had undercapitalized Hyperion and failed to adhere to corporate/LLC formalities. Plaintiff further alleged that, near the time that the domesticated judgment was entered, defendants wound down the business of Hyperion in favor of a newly-created business that acquired the physical assets of Hyperion and assumed its operations without providing for payment of Hyperion’s outstanding liabilities, including the judgment debt owed to plaintiff.

Defendant Joseph Francabandiero moved to dismiss the complaint against him pursuant to CPLR 3211 (a) (1) and (7). In support of the motion, he submitted documents establishing that he had relinquished his interests as an owner, officer and member of Hyperion prior to May 2013, when the conduct complained of in the Federal District Court action occurred. In response, plaintiff amended her complaint to allege that “[a]t all times relevant. . . Francabandiero was an equitable owner of Hyperion.”

Francabandiero thereafter asked Supreme Court to treat his motion as if it were addressed to the amended complaint. The court implicitly granted that request and granted his motion to dismiss the amended complaint against him. We agree with the court that plaintiff’s bare allegation of equitable ownership was insufficient to salvage the amended complaint against Francabandiero. Plaintiff alleged no facts therein that, if proved, would establish that, after he divested himself of all interests in Hyperion, Francabandiero “ ‘dominated and controlled [the LLC] to such an extent that file] may be considered its equitable owner’ ” (Roohan v First Guar. Mtge., LLC, 97 AD3d 891, 891 [2012]). As the court concluded, “[t]he amended complaint contains mere bare-bones allegations and is completely devoid of any sufficiently particularized support, as required, for the assertion that” Francabandiero may be considered an equitable owner of Hyperion (Retropolis, Inc. v 14th St. Dev. LLC, 17 AD3d 209, 211 [2005]).

We reach a different conclusion, however, with respect to the cross motion of defendant Robert McDonald, who at all relevant times was the sole owner, officer and member of Hyperion. McDonald cross-moved to dismiss the amended complaint against him and for sanctions, and the court granted that part of the cross motion seeking dismissal of the amended complaint. Plaintiff sufficiently alleges in the amended complaint that McDonald, “through [his] domination of [Hyperion], abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against [her]” (Tap Holdings, LLC v Orix Fin. Corp., 109 AD3d 167, 174 [2013]). Plaintiff specifically alleged that McDonald took actions calculated to make Hyperion judgment-proof by undercapitalizing the LLC (see Rotella v Derner, 283 AD2d 1026, 1027 [2001], lv denied 96 NY2d 720 [2001]), and dissolving and thereafter diverting the assets of Hyperion to a new entity (see Baby Phat Holding Co., LLC v Kellwood Co., 123 AD3d 405, 407-408 [2014]), without reserving funds to satisfy the judgment debt (see Olivieri Constr. Corp. v WN Weaver St., LLC, 144 AD3d 765, 766-767 [2016]). We therefore conclude that, at this stage of the litigation, plaintiff sufficiently alleged that McDonald “engaged in acts amounting to an abuse or perversion of the LLC form to perpetrate a wrong or injustice against [her]” to survive his motion to dismiss the amended complaint (Grammas v Lockwood Assoc., LLC, 95 AD3d 1073, 1075 [2012]). We therefore modify the order accordingly.

All concur except Curran, J., who concurs in the result in the following memorandum.