Benjamin v. Carusona
2:11-cv-06120
| E.D.N.Y | Nov 5, 2010Background
- Benjamin sues Gurney's Inn Corp. and related trustees and consultants in SDNY for fiduciary breach, oppression, waste, and related relief; matter centers on post-bankruptcy governance of Gurney's and control by Class B trustees over Class A shareholders.
- Class A director Linda Benjamin is Connecticut resident and sole Class A director; Class B directors are Carusona and Bennett from New York; the Liquidating Trust holds all Class B shares and a secured mortgage on Gurney's.
- Gurney's reorganization in 1999 left Class A and B shares with preserved interests; provisions amended to enable Class A to elect one director and Class B to appoint the rest.
- Defendants seek dismissal for improper venue under Rule 12(b)(3) or transfer under 28 U.S.C. § 1404(a); Benjamin seeks preliminary injunction to bar use of assets for fees and to bar certain voting actions by non-paying Class A shareholders.
- Various motions were argued with questions about venue, indemnification costs, and authority to amend the Bylaws/Certificate of Incorporation; the court’s rulings addressed both venue and the requested injunctions.
- Court denies transfer, grants some injunction-related relief (voting rights for certain Class A shareholders), and grants injunction to bar amendments to governing documents; Trust Defendants’ venue dismissal is granted while others are denied or retained against transfer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether venue is improper under §1391(a)(2) for a diverse, multi-defendant action | Benjamin argues substantial events occurred in SDNY | Defendants contend events occurred in EDNY | Venue improper for Trust Defendants; transfer denied for those defendants |
| Whether Trust Defendants waived venue objections | Waiver cannot bind absent defendants | Waiver occurred due to early motions | Trust Defendants’ venue challenge granted; waiver applies to others, who remain |
| Whether case should be transferred to EDNY under §1404(a) | Benjamin argues EDNY is proper and closer to facts | Gurney's seeks transfer for convenience | Transfer denied; court retains in SDNY |
| Whether preliminary injunction barring indemnification or asset use should be granted | Benjamin seeks to enjoin indemnity and asset use for fees | Indemnification and advance costs allowed under BCL with undertakings | Indemnity injunction denied; asset-use injunction partially granted against voting limitations |
| Whether amendments to Bylaws and Certificate of Incorporation may be enjoined | Amendments threaten Class A rights | Amendments within director authority | Enjoin amendment process; amendments barred due to improper authorization and scope |
Key Cases Cited
- Daniel v. American Bd. of Emergency Med., 428 F.3d 408 (2d Cir. 2005) (venue and related considerations relied upon in determining substantial connections)
- Shapiro v. Cadman Towers Inc., 51 F.3d 328 (2d Cir. 1995) (irreparable harm standard for injunctions emphasized)
- In re Cuyahoga Equipment Corp., 980 F.2d 110 (2d Cir. 1992) (multidefendant venue and transfer considerations in complex actions)
- Hartling v. Woodloch Pines Inc., No. 97 Civ. 2587, 1998 WL 575138 (S.D.N.Y. 1998) (waiver rules for Rule 12(b)(3) venue defenses discussed)
- Mckeown v. Port Authority of N.Y. & N.J., 162 F. Supp. 2d 173 (S.D.N.Y. 2001) (plaintiff bears burden to show proper venue; related rule)