Stilwell Value Partners, IV L.P. v. Cavanaugh

Appellate Division of the Supreme Court of New York

Stilwell Value Partners, IV L.P. v. Cavanaugh

118 A.D.3d 518, 987 N.Y.S.2d 149

CourtAppellate Division of the Supreme Court of the State of New York

DecidedJune 12, 2014

StatusPublished

This text of 118 A.D.3d 518 (Stilwell Value Partners, IV L.P. v. Cavanaugh) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Stilwell Value Partners, IV L.P. v. Cavanaugh, 118 A.D.3d 518, 987 N.Y.S.2d 149 (N.Y. Ct. App. 2014).

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Opinion

Order, Supreme Court, New York County (Charles E. Ramos, J.), entered on or about October 23, 2013, which, in a derivative action, denied defendants’ motion to dismiss, unanimously affirmed, with costs.

Plaintiff sufficiently alleged with the requisite detail that defendant directors, who sit on the boards of both the defendant parent company, Northeast Community Bancorp, MHC, and its subsidiary, nominal defendant Northeast Community Bancorp, Inc., have a conflict of interest regarding plaintiff’s proposed transaction, based on, inter alia, their dual loyalties and self-interest (see generally Bansbach v Zinn, 1 NY3d 1, 11 [2003]; Marx v Akers, 88 NY2d 189, 200 [1996]). Contrary to defendants’ contention, self-interest is not limited to a direct financial interest. Affording the pleading the benefit of every favorable inference (see Simkin v Blank, 19 NY3d 46, 52 [2012]), it also sufficiently alleges that the directors breached their fiduciary duties of loyalty and due care and failed to act in good faith by either failing to adequately consider or to undertake plaintiffs demand to add disinterested directors to Northeast’s board or [519]*519engage in a two step conversion of its structure (see Auerbach v Bennett, 47 NY2d 619, 629-631 [1979]; 534 E. 11th St. Hous. Dev. Fund Corp. v Hendrick, 90 AD3d 541, 542 [1st Dept 2011]).

Plaintiff also sufficiently alleges that MHC, as Northeast’s majority shareholder, breached its fiduciary duty to the minority (see Alpert v 28 Williams St. Corp., 63 NY2d 557, 569 [1984]), and aided and abetted the directors’ alleged breach by knowingly providing substantial assistance in refusing to act when under a duty to do so (see Kaufman v Cohen, 307 AD2d 113, 125-126 [1st Dept 2003]).

We have considered defendants’ remaining contentions and find them unavailing.

Concur — Acosta, J.P, DeGrasse, Richter, Manzanet-Daniels and Feinman, JJ.

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Order, Supreme Court, New York County (Charles E. Ramos, J.), entered on or about October 23, 2013, which, in a derivative action, denied defendants’ motion to dismiss, unanimously affirmed, with costs.

Plaintiff sufficiently alleged with the requisite detail that defendant directors, who sit on the boards of both the defendant parent company, Northeast Community Bancorp, MHC, and its subsidiary, nominal defendant Northeast Community Bancorp, Inc., have a conflict of interest regarding plaintiff’s proposed transaction, based on, inter alia, their dual loyalties and self-interest (see generally Bansbach v Zinn, 1 NY3d 1, 11 [2003]; Marx v Akers, 88 NY2d 189, 200 [1996]). Contrary to defendants’ contention, self-interest is not limited to a direct financial interest. Affording the pleading the benefit of every favorable inference (see Simkin v Blank, 19 NY3d 46, 52 [2012]), it also sufficiently alleges that the directors breached their fiduciary duties of loyalty and due care and failed to act in good faith by either failing to adequately consider or to undertake plaintiffs demand to add disinterested directors to Northeast’s board or [519]*519engage in a two step conversion of its structure (see Auerbach v Bennett, 47 NY2d 619, 629-631 [1979]; 534 E. 11th St. Hous. Dev. Fund Corp. v Hendrick, 90 AD3d 541, 542 [1st Dept 2011]).

Plaintiff also sufficiently alleges that MHC, as Northeast’s majority shareholder, breached its fiduciary duty to the minority (see Alpert v 28 Williams St. Corp., 63 NY2d 557, 569 [1984]), and aided and abetted the directors’ alleged breach by knowingly providing substantial assistance in refusing to act when under a duty to do so (see Kaufman v Cohen, 307 AD2d 113, 125-126 [1st Dept 2003]).

We have considered defendants’ remaining contentions and find them unavailing.

Concur — Acosta, J.P, DeGrasse, Richter, Manzanet-Daniels and Feinman, JJ.

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Bluebook (online)

118 A.D.3d 518, 987 N.Y.S.2d 149, Counsel Stack Legal Research, https://law.counselstack.com/opinion/stilwell-value-partners-iv-lp-v-cavanaugh-nyappdiv-2014.

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