Notice of Motion (Seq. 006) 1Affirmation in Opposition (Seq. 006) 2Affirmation in Reply (Seq. 006) 3Order to Show Cause (Seq. 007) 4Affirmation in Opposition (Seq. 007) 5 Upon the foregoing papers, the motion of the defendants, Sherif Eltahawy, Aba Noub, Ltd, d/b/a/ Joseph Pharmacy and Ava Mina, LLC, seeking an Order dismissing plaintiff’s second, third, fourth, fifth and sixth causes of action for failure to state a claim for accounting (Seq. #006); and the application of the plaintiff, Shahira Eltahawy, by Order to Show Cause, seeking an Order striking the defendant’s answer for failure to provide responses to plaintiff’s document demands, or, alternatively, compelling defendants to provide same, (Seq. # 007); are determined as set forth below.In this action, plaintiff’s Verified Complaint asserts six causes of action against defendants, asserting claims for fraud, breach of fiduciary obligations, and accounting, regarding all monies paid to defendant concerning the parties’ equal and jointly held interest in a pharmacy business located in Manhattan, New York, and the ownership of real property located at 61-48 Madison Street, Ridgewood New York, as well as the partition of a single family residence located at 12 Bridle Path Drive, Old Westbury, New York, in which the parties are tenants in common.Defendant contends that plaintiff’s second, third, fourth, fifth and sixth causes of action for an accounting fail to state a cause of action as there exists no fiduciary relationship between plaintiff, and the defendant corporate entities, Aba Noub, Ltd, d/b/a/ Joseph Pharmacy and Ava Mina, LLC.In opposition, plaintiff contends the second, third, fourth, fifth and sixth causes of action seek causes of action for accounting against the defendant, Sherif Eltahawy, in his individual capacity only.In reviewing a motion pursuant to CPLR 3211(a)(7) to dismiss a complaint for failure to state a cause of action, the facts as alleged in the complaint must be accepted as true, the plaintiff is accorded the benefit of every possible favorable inference, and the court’s function is to determine only whether the facts as alleged fit within any cognizable legal theory (see Leon v. Martinez, 84 N.Y.2d 83, 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511; Morone v. Morone, 50 N.Y.2d 481, 484, 429 N.Y.S.2d 592, 413 N.E.2d 1154; Rochdale Vil. v. Zimmerman, 2 A.D.3d 827, 769 N.Y.S.2d 386). “[T]he criterion is whether the proponent of the pleading has a cause of action, not whether he [or she] has stated one” (Guggenheimer v. Ginzburg, 43 N.Y.2d 268, 275, 401 N.Y.S.2d 182, 372 N.E.2d 17). Lupski v. County of Nassau, 32 A.D.3D 997, 822 N.Y.S.2d 112 [2d Dept. 2006]. In addition, “[a] court is, of course, permitted to consider evidentiary material…in support of a motion to dismiss pursuant to CPLR 3211(a)(7)” and “the criterion then becomes ‘whether the proponent of the pleading has a cause of action, not whether he has stated one’” See, Nasca v. Sgro, 130 A.D.3d 588, 13 N.Y.S.3d 188 [2d Dept. 2015], citing Sokol v. Leader, 74 A.D.3d 1180, 904 N.Y.S.2d 153.). “Indeed, a motion to dismiss pursuant to CPLR 3211 (a) (7) must be denied unless it has been shown that a material fact as claimed by the pleader to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it” Id. [citations omitted].Upon this Court’s review of the parties’ submissions, and contrary to plaintiff’s assertions, the allegations regarding claims of accounting include the individual defendant, Sherif Eltahawy (hereinafter “Sherif”) and defendants, Aba Noub, Ltd., d/b/a/ Joseph Pharmacy (hereinafter “Joseph Pharmacy”) and Ava Mina, LLC.“The right to an accounting is premised upon the existence of a confidential or fiduciary relationship and a breach of the duty imposed by that relationship respecting property in which the party seeking the accounting has an interest” (Center for Rehabilitation & Nursing at Birchwood, LLC v. S & L Birchwood, LLC, 92 A.D.3d 711, 713, 939 N.Y.S.2d 78 [internal quotation marks omitted]). Lake Overlook Partners, LLC v. Sosa, 163 A.D.3d 945, 83 N.Y.S.3d 83 [2d Dept. 2018].While causes of action seeking a corporate accounting may be sought by a shareholder only in a derivative action brought in the right of the corporation, pursuant to subdivision (b) of section 720 Business Corporation Law, (see, Romanoff v. Superior Career Institute, Inc., 69 A.D.2d 856, 415 N.Y.S.2d 457 [2d Dept. 1979]), shareholders in a close corporation owe fiduciary duties to one another, wherein such a fiduciary relationship supports a claim for an accounting. See, Unitel Telecard Distribution Corp. v. Nunez, 90 A.D.3d 568, 936 N.Y.S.2d 17 [1st Dept. 2011] (citations omitted); see also, Brunetti v. Musallam, 11 A.D.3d 280 [1st Dept. 2004].Applied herein, the verified complaint contains allegations that Sherif and plaintiff are each fifty (50 percent) shareholders of defendant, Joseph Pharmacy, that these defendants breached their fiduciary duty to plaintiff by failing to provide an accounting based upon this fiduciary relationship, and, that plaintiff has been damaged individually based upon these breaches. In as much as plaintiff’s causes of action regard a closely held corporation and seek to vindicate her personal rights as an individual and not as a shareholder of the corporation, (see, Albany-Plattsburgh United Corp. v. Bell, 307 A.D.2d 416, 419, 763 N.Y.S.2d 119 [3d Dept.2003]; (DeMarco v. Clove Estates, Inc., 250 A.D.2d 724, 725, 672 N.Y.S.2d 784 [2d Dept.1998]), the verified complaint adequately pleads a cause of action for accounting.Regarding the defendant limited liability company, the verified complaint contains allegations that Sherif and plaintiff are fifty (50 percent) partners/members of Ava Mina LLC and that defendant Sherif agreed to manage and operate the company and provide an accounting. The allegations also set forth that Sherif and Ava Mina LLC were exclusively in control of the books for the company. As long as members of a limited liability company are not acting in a managerial capacity they do not have fiduciary duties to one another unless such fiduciary duties are set forth in the operating agreement. (see, 51 AM. Jur.2d Limited Liabilities Companies §11).Upon review of the allegations in a light most favorable to the plaintiff, and absent evidence of any operating agreement containing language to the contrary, the plaintiff adequately alleges facts of an agreement by the parties that Sherif would manage and operate the company, which is sufficient to plead a claim for accounting based upon the breach of a fiduciary duty owed by Sherif to plaintiff. See, Cottone v. Selective Surfaces, Inc., 68 A.D.3d 1038, 892 N.Y.S.2d 466 [2d Dept. 2009] (member of LLC stated individual claim for accounting based upon allegations demonstrating existence of fiduciary duty).Accordingly, defendants’ motion to dismiss plaintiff’s second, third, fourth, fifth and sixth causes of action for accounting is denied.This Court now turns to plaintiff’s motion, by Order to Show Cause, to strike the defendant’s answer for failure to provide responses to plaintiff’s document demands, or, alternatively, compelling defendants to provide responses and documents to these demands. By decision and Order of this Court, dated September 14, 2018, defendants were directed to review previously provided documentation set forth on a flash drive and respond to plaintiff’s demands as outlined in its reply papers to its motion within thirty days of the date of the order. This Order also provided that any records requested in plaintiff’s document demands that are kept in the ordinary course of business shall be viewed pursuant to CPLR §3122 within forty-five days of the date of the order.Plaintiff contends, that defendants failed to provide discovery in contravention of this Court’s Order dated September 14, 2018, wherein responses were received later than thirty days and remain incomplete based upon objections, inter alia, that proof of a claim of accounting is required prior to access of financial records such as bank statements and canceled checks.In opposition, defendants, contend that the instant motion is improper because the plaintiff failed to supply a copy of the flash drive it provided to the Court with its motion papers to the defendants, rendering it impossible to oppose the instant motion. Defendants also contend that its motion to dismiss (Seq. #006) was filed prior to the date discovery was due and stayed all discovery pursuant to CPLR §3214(b). Lastly, defendants assert that contrary to the direction of the Court’s September 14, 2018 order, plaintiff has failed to notify defendants of a time to review documents held in the ordinary course of business, demanding same be delivered instead.In as much as it is undisputed that defendants have provided responses to plaintiff’s demands as directed by this Court’s September 14, 2018 order, and same are deemed timely given the filing of the motion to dismiss on October 15, 2018 staying discovery pursuant to CPLR §3214(b), the relief sought by plaintiff to strike the defendants’ answer for failure to provide and lateness is moot. However, plaintiff’s application which seeks, alternatively, to compel documents pursuant to CPLR 3124 is appropriate based upon this Court’s findings in motion Seq. #006, supra, regarding plaintiff’s adequate pleadings of a cause of action for accounting.In as much as plaintiff’s demand for document production with regard to the corporate defendant is premised upon a proper purpose and good faith, the requirements of Business Corporation Law apply to plaintiff’s discovery demands. See, Business Corporation Law S§624, Matter of Niggli v. Richlin Machinery, Inc., 257 A.D.2d 623, 684 N.Y.S.2d 254 (2d Dept. 1999); Matter of Peterborough Corp. v. Karl Ehmer, Inc., 215 A.D.2d 663, 664, 628 N.Y.S.2d 134 (2d Dept.1995). Likewise, in the absence of any operating agreement, the default requirements set forth in Limited Liability Company Law apply herein. (See, Limited Liability Company Law §1102).Accordingly, plaintiff’s application by Order to Show Cause is granted to the extent that defendants are directed to provide responses to plaintiff’s outstanding document demands, in accordance with the statutory provisions of Business Corporations Law §624 and Limited Liability Company Law §1102, within forty-five (45) days of the date of this Order. Failure to follow this Court’s directive will result in defendants’ answer being stricken.This constitutes the decision and Order of this Court. Any relief not expressly granted herein is denied.January 18, 2019
