Herencia v. Centercut Restaurant Corp.

92 A.D.3d 485, 938 N.Y.2d 286

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: February 9, 2012
• Status: Published

Opinion

Since the terms of the shareholders’ agreement were not met, the exercise of redemption rights by defendants was ineffectual (see Cho v 401-403 57th St. Realty Corp., 300 AD2d 174 [2002]; Tornick v Dinex Furniture Indus., 148 AD2d 602 [1989]; see also Stephenson v Drever, 16 Cal 4th 1167, 947 F2d 1301 [1997]; compare Gallagher v Lambert, 74 NY2d 562, 567 [1989]; Ingle v Glamore Motor Sales, 73 NY2d 183, 189 [1989]).

Under the terms of the agreement, defendants’ termination of plaintiff’s employment did not divest plaintiff of his status as a minority shareholder. Defendants, majority shareholders who managed the corporation, therefore owed him a fiduciary duty (see Centro Empresarial Cempresa S.A. v América Móvil, S.A.B. de C.V., 17 NY3d 269, 278 [2011]). In addition, the sale of his stock to defendants presented a valid reason for plaintiff to inspect financial records relating to the value of his individual holdings (see Matter of Waldman v Eldorado Towers, 25 AD2d 836, 837 [1966], affd 19 NY2d 843 [1967]), particularly since the method of valuation agreed upon in the repurchase agreement was not used (see Matter of Glassman v Louis Shiffman, Inc., 56 AD2d 824, 824-825 [1977], appeal dismissed 42 NY2d 910 [1977]).

The fraud claim both lacks the necessary particularity and fails to allege the breach of a duty independent of the agreement (CPLR 3016 [b]; Empire 33rd LLC v Forward Assn. Inc., 87 AD3d 447, 448-449 [2011]). Concur — Tom, J.E, Sweeny, Acosta, Renwick and Román, JJ.