Sawyer v. 1120 Fifth Ave. Corp.

2026 NY Slip Op 30987(U)

• Court: New York Supreme Court, New York County
• Decided: March 17, 2026
• Docket: Index No. 154090/2021
• Status: Unpublished
• Author: Paul A. Goetz

Opinion

Sawyer v 1120 Fifth Ave. Corp. 2026 NY Slip Op 30987(U) March 17, 2026 Supreme Court, New York County Docket Number: Index No. 154090/2021 Judge: Paul A. Goetz 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.

file:///LRB-ALB-FS1/Vol1/ecourts/Process/covers/NYSUP.1540902021.NEW_YORK.001.LBLX036_TO.html[03/24/2026 3:45:44 PM] FILED: NEW YORK COUNTY CLERK 03/17/2026 04:41 PM INDEX NO. 154090/2021 NYSCEF DOC. NO. 441 RECEIVED NYSCEF: 03/17/2026

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. PAUL A. GOETZ PART 47 Justice ---------------------------------------------------------------------------------X INDEX NO. 154090/2021 ELIZABETH SAWYER, MOTION DATE 10/25/2023 Plaintiff, MOTION SEQ. NO. 002 -v- 1120 FIFTH AVENUE CORPORATION, BOARD OF DIRECTORS OF 1120 FIFTH AVENUE CORPORATION, JOHN BREGLIO, KATHRYN BREGMAN, DAVID DECISION + ORDER ON CLOSSEY, ELLEN CONRAD, MICHAEL FELDBERG, LINDA GELFOND, STEPHEN GREENBERG, WILLIAM MOTION HAINES, MARY MORGAN, ROBERT ERNSTOFF

Defendants. ---------------------------------------------------------------------------------X

The following e-filed documents, listed by NYSCEF document number (Motion 002) 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 80, 81, 82, 83, 86, 112, 113, 114, 138, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 150, 151, 152, 153, 154, 155, 156, 157, 158, 159, 160, 161, 162 were read on this motion to/for JUDGMENT - SUMMARY .

In this action between a shareholder-tenant and a Coop Board, defendants 1120 Fifth

Avenue Corporation (the “Coop”), the Board of Directors of the Coop (the “Board”), and John

Breglio, Kathryn Bregman, David Clossey, Ellen Conrad, Michael Feldberg, Linda Gelfond,

Stephen Greenberg, William Haines, Mary Morgan, and Robert Ernstoff (collectively, the

Individual Defendants) move pursuant to CPLR § 3212 for partial-summary judgment seeking to

dismiss plaintiff’s seventh cause of action, brought as a derivative cause of action for breach of

fiduciary duty.

BACKGROUND

The Coop owns the cooperative apartment building located at 1120 Fifth Avenue, New

York, New York 10128 (NYSCEF Doc No 161 ¶ 1). In 1995, plaintiff’s husband, Clifford Press

(“Press”), and plaintiff became the proprietary lessees of Apartment 2A (the “Apartment”) and

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purchased 340 shares of stock in the Coop (id. at ¶ 2), pursuant to a proprietary lease agreement

with the Coop, dated February 13, 1995 (id. at ¶ 3). On October 17, 2003, Press assigned and

transferred his interest in the Apartment to his wife, plaintiff, who then became the sole

proprietary lessee of the Apartment (id. at ¶ 4). In connection with the Assignment, plaintiff was

issued a Stock Certificate evidencing plaintiff’s sole ownership of the 340 shares in the Coop (id.

at ¶ 7).

In the complaint, plaintiff alleges that the Board, of which the Individual Defendants all

sit on, or have sat on, have run the Co-op in a way to promote their own self-interests rather than

in the best interests of the Co-op and its shareholders (NYSCEF Doc 53 ¶ 15). Plaintiff alleges

that the Board awarded an elevator contract to a company owned by the cousin of the president

of the board John Breglio (id. at ¶ 24). Plaintiff further alleges that the Board engaged in

expensive litigation which resulted in increased insurance costs.

DISCUSSION

Defendants argue that the seventh cause of action, a derivative cause of action for breach

of fiduciary duty, as against the Board and Individual Defendants must be dismissed because the

plaintiff did not comply with the statutory requirement that prior to the filing of a complaint, she

must have made a demand on the Board to take action, or set forth in the complaint why a

demand would be futile. Plaintiff argues that this motion is premature as discovery is still

ongoing. They also argue that even if the court was to find that the motion was not premature,

that the derivative action has been properly pled and that the investigation undertaken by the

Special Litigation Committee was inadequate.

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Inadequacy of Pleading

As an initial matter, defendants’ argument that plaintiff’ complaint does not set forth why

a demand would be futile will be analyzed under CPLR § 3211(a)(7), rather than under CPLR §

3212 since by arguing that the complaint is deficient, defendants posit that plaintiff has failed to

state a cause of action on which the relief sought can be granted (see Bansbach v Zinn, 1 NY3d 1

[2003] [analyzing whether plaintiff’s allegations sufficiently stated that demand upon board

would be futile, under a CPLR § 3211(a)(7) standard]).

When reviewing a “motion to dismiss for failure to state a cause of action pursuant to

CPLR 3211(a)(7), [courts] must accept the facts as alleged in the complaint as true, accord the

plaintiff the benefit of every reasonable inference, and determine only whether the facts, as

alleged fit within any cognizable legal theory” (Bangladesh Bank v Rizal Commercial Banking

Corp., 226 AD3d 60, 85-86 [1st Dept 2024] [internal quotations omitted]). “In making

this determination, [a court is] not authorized to assess the merits of the complaint or any of its

factual allegations” (id. at 86 [internal quotations omitted]). “Dismissal of the complaint is

warranted if the plaintiff fails to assert facts in support of an element of the claim, or if the

factual allegations and inferences to be drawn from them do not allow for an enforceable right of

recovery” (Connaughton v Chipotle Mexican Grill, Inc., 29 NY3d 137, 142

[2017]). Furthermore, “[i]n opposition to a CPLR 3211 motion, a plaintiff may submit an

affidavit in order to remedy defects in the complaint, and the allegations contained therein, like

the allegations contained in the complaint, are deemed to be true for the purposes of the motion”

(Robinson v Jamaica Hosp. Med. Ctr., 240 AD3d 534, 536 [2d Dept 2025]).

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Derivative Claim

Business Corporation Law § 626 provides the statutory authority to bring a derivative

action (Caprer v Nussbaum, 36 AD3d 176, 186 [2d Dept 2006]). Therefore, “the capacity of

shareholders in a cooperative apartment building to bring a derivative action is without question

since cooperatives are organized as corporations under the Business Corporation Law” (id. at

187). Business Corporation Law § 626 (BCL § 626) states:

(a) An action may be brought in the right of a domestic or foreign corporation to procure a judgment in its favor, by a holder of shares or of voting trust certificates of the corporation or of a beneficial interest in such shares or certificates. … (c) In any such action, the complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort.

The requirement that a demand on the board to take action is grounded in the “basic

principles of corporate control—that the management of the corporation is entrusted to its board

of directors, who have primary responsibility for acting in the name of the corporation and who

are often in a position to correct alleged abuses without resort to the courts” (Bansbach v Zinn, 1

NY3d 1, 8-9 [2003]). “The demand requirement thus relieves courts of unduly intruding into

matters of corporate governance by first allowing the directors themselves to address the alleged

abuses” (id. at 9). “The requirement also provides boards with reasonable protection from

harassment on matters clearly within their discretion, and it discourages ‘strike suits’

commenced by shareholders for personal rather than corporate benefit” (id.).

However, a shareholder is excused of making a demand to the board “when the directors

are incapable of making an impartial decision as to whether to bring suit” (id.). The three

circumstances where a demand is excused are:

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1. Demand is excused because of futility when a complaint alleges with particularity that a majority of the board of directors is interested in the challenged transaction. Director interest may either be self-interest in the transaction at issue or a loss of independence because a director with no direct interest in a transaction is “controlled” by a self-interested director. 2. Demand is excused because of futility when a complaint alleges with particularity that the board of directors did not fully inform themselves about the challenged transaction to the extent reasonably appropriate under the circumstances. The “long- standing rule” is that a director “does not exempt himself from liability by failing to do more than passively rubber-stamp the decisions of the active managers” 3. Demand is excused because of futility when a complaint alleges with particularity that the challenged transaction was so egregious on its face that it could not have been the product of sound business judgment of the directors (Marx v Akers, 88 NY2d 189, 200 [1996] [internal quotation marks and citations removed]).

“To justify failure to make a demand, it is not sufficient to name a majority of the

directors as defendants with conclusory allegations of wrongdoing or control by wrongdoers”

(Glatzer v Grossman, 47 AD3d 676, 677 [2d Dept 2008]). “Instead, to adequately plead self-

interest, the complaint must set forth facts alleging that the directors receive[d] a direct financial

benefit from the transaction” or that they were controlled by a director who did have a direct

benefit (Walsh v Wwebnet, Inc., 116 AD3d 845, 847 [2d Dept 2014]).

Here, plaintiff’s complaint, as supplemented by her affirmation, alleges that the Board

awarded an elevator modernization contract to a company owned by then Board president, John

Breglio’s cousin (NYSECF Doc No 140 ¶¶ 16-18). Plaintiff further alleges that she made

multiple requests to the Board to inspect records and documents relating to among other things,

the elevator contract, Directors and Officers insurance, board membership tenure, annual

meetings, directors elections, as well as communications with her mortgage lender about fees

plaintiff allegedly owed to the Co-op (id. at ¶ 7). Plaintiff alleges that these requests were

consistently denied, forcing her to file an article 78 proceeding (id. at ¶¶ 35-36). Plaintiff further

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alleges that the relationship between her and the Board had deteriorated to such a degree that at

an annual shareholder’s meeting, Breglio gave a speech disparaging plaintiff and her family, and

encouraging the Board to take action against her (id. at ¶¶ 43-44). Plaintiff alleges that several

sitting Board members applauded at the end of the speech, leading plaintiff to conclude that any

request to the Board to take action would be futile (id. at ¶ 44-45).

Considering that courts must accept the allegations in the complaint, as supplemented by

plaintiff affirmations, as true on a CPLR 3211(a)(7) motion, plaintiff has sufficiently alleged that

any attempt to have the board initiate a shareholder action on her behalf would be futile (see

Bansbach v Zinn, 258 AD2d 710, 712 [3d Dept 1999] ([“Director interest’, in turn, ‘may either

be self-interest in the transaction at issue or a loss of independence because a director with no

direct interest in a transaction is ‘controlled’ by a self-interested director’”] [quoting Marx v

Akers, 88 NY2d 189, 200-201 [1996]). Accordingly, the derivative action will not be dismissed.

Special Litigation Committee Investigation

Defendants also argue that because the Board appointed a Special Litigation Committee,

that conducted an investigation and found plaintiff’s derivative claim meritless, that the

derivative claim must be dismissed (see Lichtenberg v Zinn, 260 AD2d 741 [3d Dept 1999]).

Sincer the findings of a Special Litigation Committee are subject to the protections of the

business judgment rule, courts reviewing the committee’s actions are limited to an “inquiry into

their disinterested independence, or the adequacy and appropriateness of the committee's

investigative procedures and methodologies” (Rosen v Bernard, 108 AD2d 906, 907 [2d Dept

1985]). Plaintiff argues that this portion of the motion is premature as it was brought while there

was still significant discovery outstanding. As of this date discovery is nearly complete (see

NYSCEF Doc No 439). Therefore, the claim will not be dismissed at this juncture, and

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defendants will be granted leave to renew their arguments made here on a post note of issue

summary judgment motion.

Accordingly, it is

ORDERED that the motion is denied, without prejudice to bringing a summary judgment

motion following the filing of the note of issue.

3/17/2026 DATE PAUL A. GOETZ, J.S.C. CHECK ONE: CASE DISPOSED X NON-FINAL DISPOSITION

□ GRANTED X DENIED GRANTED IN PART OTHER

APPLICATION: SETTLE ORDER SUBMIT ORDER

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

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