Case Information
*1 UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------- X LINDA BENJAMIN,
Plaintiff, 09 Civ. 9722 -against OPINION THOMAS CARUSONA, CHRISTOPHER
BENNETT, LOLA COOPER MONTEMARANO,
and KEITH COOPER, as Trustees of GURNEY'S INN CORP. LIQUIDATING TRUST"", __ >"'., "'."~,,,"_~_,,~~,_,._.,, •• • H And LCM SPA & RESORT CONSULTANTS LLC; t ":,",~ ~\-(.;.-(~~-~"::~;.~;:z;. -.~ l' \ ,,')u ,. ""'.i. l i.:'~nf-': ;":~":':I"r ~; J..."'.j\.../'-':.~"' . .t~.:·l-'~ Defendants, ! \ :' .ECfRONICAUY j -and 1\0':' #: I i DAlE fTI~JJJ;i:l(}; .• GURNEY'S INN RESORT & SPA LTD.,
Nominal Defendant.
X A P PEA RAN C E S:
At iff
HARWOOD FEFFER LLP
488 Madison Avenue, 8th Floor New York, NY 10022
By: Joel C. Fef ,Esq.
Daniella Quitt, Esq.
Attorneys for De
Thomas Carusona ROBERT & ROBERT, PLLC
150 Broad Hollow Road
Melville, NY 11747
By: Clifford S. Robert, Esq.
*2 Attorneys for Defendant
Chri Bennett
EATON & VAN WINKLE LLP
3 Park Avenue
New York, NY 10016
By: Ted G. Semaya, Esq.
Joseph T. Johnson, Esq.
Attorneys for Defendants
Lola Cooper Montemarano, and Keith Cooper, as Trustees of Gurney's Inn Corp. Liquidating Trust, & Resort Consultants LLC and LCM RIVKIN RADLER, LLP
926 Rexcorp plaza
Uniondale, NY 11556
By: Evan Hayes Kr , Esq.
Michael P. Versichelli, Esq. Attorneys for Nominal Defendant 's Inn Resort &
FARRELL FRITZ, P.C. (LIS)
1320 Reckson Plaza
Uniondale, NY 11556
By: James M. Wicks, E
Charlotte A. Biblow, Esq.
in C. McRoberts, Esq. *3
Sweet, D.J.
Defendants Lola Cooper Montemarano and Keith Cooper, as Trustees of Gurney's Inn Corp. Liquidating Trust (the "Liquidating Trust") LCM Spa & Resort Consultants LLC ("LCM") (collectively, "Trust Defendants") have moved to dismiss the fi Amended Complaint (the "Complaint"), pursuant to Rule 12(b) (3) of the Federal
es of Civil Procedure, improper venue. Nominal Gurney's Inn Resort & De Ltd. ("Gurney's") has so moved to dismiss the Compl for improper venue, pursuant to Rule 12(b) (3), or to transfer the action to the Eastern District of New York, pursuant to 28 U.S.C.
§ 1404 (a) . Plaintiff Linda Benjamin ("Benjamin" or the a iff") has moved under Rule 65(a) a preliminary " injunction to bar all Defendants, including Directors Thomas Carusona ("Carusona") and Christopher Bennett ("Bennett"), from using any of Gurney's assets to pay legal fees or expenses in connection with this action or related actions, and to bar all Defendants from ing Class A shareholders who have failed to pay a spec assessment from voting a ass A Director at the annual meeting scheduled November 8, 2010. On November 1, 2010, the *4 Court entered an to Show Cause as to why it should not grant a preliminary injunction ng Defendants and Gurney's from taking any action to amend the Bylaws or Certificate of Incorporation of Gurney's.
Upon the findings and conclusions set forth below, the Trust Defendants' motion to smiss is granted as to Trust Defendants, and Gurney's motion to dismiss or trans is denied as to Gurney's, Carusona, and
Bennett. The motion to oin indemnity is denied, the motion to oin Defendants from prevent Class A
sharehol from voting is granted, and motion to bar amendment to the Bylaws and Certificate of Incorporation is granted.
The Parties
Benjamin is a Connecticut resident and the only Class A director of Gurney's. (Compl. , 8.)
Carusona and Bennett are the other two members of the board of directors of Gurney's. Both are residents of *5 New York. Id. " 9-10.)
Lola Cooper Montemarano and Keith Cooper are Nevada residents. They are being sued their capac as Trustees of the Liquidating Trust. The Liquidating Trust holds a purchase money consolidated mortgage on Gurney's property in the amount approximately $2.7 million, is allegedly the benefici owner of all 2,700,000 authori Class B shares, and all holds an rest in
approximately 61,250 unsold Class A shares. The address used by the quidating Trust is 290 Old Montauk Highway, Montauk, New York 11954. Id. ~~ 11-13.}
LCM is a Nevada limited-liability company managed by Lola Cooper Montemarano, and located at 1349 Galleria Drive, Suite 200, Henderson, Nevada 89014 8264. LCM has entered into a consulting with Gurney's pursuant to which it provides one consultant to Gurney's and for which it rece annual compensation, as well as free room and board during the summer and reasonable travel and other expenses. Id. ~ 14.}
Gurney's was formed on 1, 1981 and is located at 290 Old Montauk Highway, Montauk, New York 11954. Gurney's filed for Chapter 11 bankruptcy in 1994
was reorgani in 1999. Id. ~ 15.}
Prior Proceedings
amin filed her tial compla on November
23, 2009, all ing a violation of Section 720(b) of the New York Business Corporation Law ("BCL") and common law breach
fiduciary duty, and seeking a declaratory judgment, an injunction, reorganization of board of directors, an accounting and damages. The inal compla named the Liquidating Trust as a defendant, but the act against the Liquidating Trust was voluntarily dismissed without prejudice on February 8, 2010.
By Order to Show Cause, dated February 8, 2010, amin moved for unctive rel f seeking to prevent Carusona and Bennett from receiving any money from Gurney's *7 connection with this litigation and for or expenses to bar any amendment to the Bylaws or the Certificate of Incorporation. In an Opinion dated 1 21, 2010, the motion was denied because Benjamin to establish
of immediate irreparable harm.
4 Following a iminary conference on May 19, 2010, and entry of a case management an on May 26, 2010, Benjamin filed the fied Amended Complaint (the "Complaint") on August 25, 2010. In the Verified Amended Complaint, amin added Trust Defendants and alleged breach of f iary duty, waste, oppression, unjust
enrichment self-dealing. Subject matter jurisdiction of this action is based solely on diversity of citizenship.
(CompI. ~ 7.)
On September 24, 2010, Trust Defendants filed a motion to dismiss the Complaint, pursuant to Rule
12(b) (3), for improper venue, and Gurney's moved to dismiss the Complaint improper venue, pursuant to Rule
12(b) (3), or to transfer the action to the Eastern strict
New York, pursuant to 28 U.S.C. § 1404(a).
On the same date, Benj renewed her motion for a iminary injunction to bar Defendants from us
Gurney's assets to pay for the legal s or expenses incurred by any Defendants in this or ated actions, and to bar Defendants preventing Class A shareholders who
led to pay a special assessment from voting a Class A Director at the annual meeting scheduled for November 8, 2010.
By Order to Show Cause, dated November I, 2010, Benjamin sought a preliminary unction barring Defendants and Gurney's from taking any action to amend Bylaws or Certificate Incorporation Gurney's.
The motions to dismiss and/or transfer and for a iminary injunction were marked fully submit and heard on October 27, 2010, and Order to Show Cause was heard on November 4, 2010.
The Facts
The facts have been set forth in the declarations submitted by the ies and are not in dispute except as not below.
Gurney's, a popular resort , restaurant and I center, was founded in 1926 and incorporated as a timeshare cooperative corporation in 1981. In 1982, Gurney's began selling timeshare units. Gurney/s
Certificate of Incorporation, as amended, provides for a
6 capital structure consisting of 750 / 000 Class A shares and 2,700,000 Class B shares. Most the authorized Class A shares were issued to timeshare owners and all of the authorized ass B shares were issued to the holders of the purchase money mortgage, including the Liquidating Trust, which currently holds all Class B shares.
Gurney's filed for Chapter 11 bankruptcy in 1994 and was reorganized in 1999. (Compl. ~ 15.) The First Amended Plan of Reorganization ( "Reorganization Plan-) provided that:
(a) holders of Class A and Class B shares retained their erests unimpaired (section 3.2) i
(b) the institutional first mortgage was changed ipal, ten-year note, bearing interest at 10% per annum (section 4.2) i
(c) purchase money second mortgage, held by ly through the Liquidating the Montemarano/Cooper Trust, was reduced to a princ of $2,700,000, with repayment of principal and payment of interest restricted and possibly abated in the event Gurney's ing cash
7 , as defined in the Reorganization flow is insuffic an (section 4.3) i
(d) the quidating Trust also received "a future interest in 50% of 1 unsold shares and propriet leases, which future erest shall mature on the earlier of the date of the of property or December 31, 2032/1 (section 4.8) i and
(e) Article III, Sect 2 of Gurney's Bylaws was amended to permit the Class A shareholders to elect one *11 director and the Class B shareholders the right to appoint the remaining directors (sect 6.2(b)) i no other
amendment to the Bylaws was authori
Benjamin was elected to board of directors in May 2009 and currently serves as the elected by the
A shareholders. Carusona and Bennett serve as the ected by the Class B shareholders.
Benjamin alleges that all of the board director meetings since the reorganization that were not
d by telephone were held at the offices Eaton & Van Winkle LLP, Gurney's former corporate counsel, in
8 Manhattan. (Compl. ~ 18.) According to Defendants, board of director meetings during this time, which were sometimes held as frequently as twice a month, were arly held at the Gurney's hotel or at another location in Long Island. . of Vincent J. McGill, dated Sept. 23, 2010 ( "McGill .") ~ 2.) Artic II, Section 1 of the Gurney's aws mandates that annual shareholders meetings place "in the Borough of Manhattan, ty of New York." However, according to Defendants, the annual *12 shareholder meetings were regul held in Long I and at the hotel. lowing Benjamin's ection to the board of directors in 2009, at least three but no more than
board meet have been held in Manhattan. (McGill Decl.
~ 5i Declaration Linda Benjamin, dated Oct. 13, 2010 ("Benjamin Decl.") ~ 3.)
Benjamin also alleges that David Clurman, an important potent witness who was draftsman of Gurney's Interval etary Lease, resides in Manhattan in Manhattan. and that Clurman's law office is 1 (Opp. 12.) [1]
On October 5, 2010, Benjamin served a upon Clurman to deposition testimony and serve documents, which Gurney's moved to on October 25, 2010. Oral argument on that motion is currently scheduled for November 17, 2010.
According to Defendants, much of the post bankruptcy conduct giving rise to Benjamin's claims, which involve the operation and management of Gurney's, the elections of Carusona and Bennett, and the restructuring and satisfaction of the Trust Mortgage, occurred in the Eastern District of New York, where Gurney's is located.
(McGill Decl. ~ 4-5.) Additionally, many key documents, *13 including the employment agreements and consulting
agreements, were negotiated and executed in Long Island.
(rd. ~ 8.) Likewise, performance of critical documents, such as the First Amended plan of Reorganization, the Interval Proprietary Lease, the Trust Mortgage and the Trust Agreement, occurred in Long Island. (Id.) The Gurney's bankruptcy action was venued in the Eastern District of New York. (rd. ~ 6.) In addition, all of Gurney's banking and financial transactions take place in Long Island. (rd. ~ 7.)
Although the Class B shareholders control the board of directors, timeshare owners, all of whom are Class A shareholders, are assessed maintenance and special assessments to cover all of Gurney's expenses.
10 At a board meeting held on January 21, 2010, the directors discussed proposed amendments to the Bylaws and Certificate of Incorporation and adopted a resolution authorizing a shareholders vote on the amendments at a special meeting. Carusona and Bennett, acting as the *14 appointed Class B directors, then set May 14, 2010 as the date for the annual shareholders meeting and proposed that the amendments be considered at that meeting. The May 14 meeting was cancelled by Carusona and Bennett before the meeting was convened.
By letter dated September 7, 2010, Paul Montemarano, Gurney's General Manager and CEO, informed the Class A shareholders that a special assessment of $552,123 would be imposed, based on a charge of $1.98 per share.
According to Benjamin, this assessment is intended to pay the legal fees of the Defendants. As of mid-October 2010, approximately 40% of Class A shareholders had paid the special assessment.
Carusona and Bennett, acting as the appointed Class B directors, set November 8, 2010, as the date of an annual shareholders meeting to take place in Montauk, Long Island. The new proxy materials sent to Class A
shareholders in connection with the November 8 shareholders meeting sets a record date of October 15 and includes the following language preventing sharehol who have not *15 paid the special assessment from vot "Only those Shareholders who l as of the commencement of the Annual Meeting on November 8 [1] 2010 [1] have paid maintenance fees and special assessments will be entit to vote at the annual meeting. II
The agenda for the shareholders meeting includes the election of a new ass A director l a proposed
amendment to the Certificate Incorporation and a
proposed amendment to aws. The Certificate of Incorporation is proposed to be amended by the addition of the following language:
The personal liability of the directors of the Corporation is eliminated to the fullest extent permitted by the provis paragraph (b) of Section 402 of Business Corporation Law l as the same may be amended and supplemented.
The Bylaws are proposed to be amended to change Article 1111 Sect I, to read as follows:
number of Directors constituting Board of Directors of the the ent ion shall be not less than nor more than seven (7) , as may be fixed from time to time by 12
resolution of the shareholders of the Board of Directors; provided the number of Directors const ing the *16 entire Board of Directors shall be three (3) until such a ution is adopted by the shareholders or the Board of Directors, and further provided that in no event shall the term of any incumbent rector be reduced by the adoption of such resolution.
The Motion to Dismiss is Granted as to the Trust
Defendants and Denied as to the Remaining Defendants
I. The Rule 12 Standard Federal Rule of I Procedure 12(b) (3) provides that a defendant may move to dismiss a complaint on the grounds of improper venue. See Fed. R. Civ. P. 12(b) (3).
The standard for de ing a motion to dismiss under Rule 12 (b) (3) iss i mi to the standard under Rule 12(b) (2).
~~~~~~~~~~~~, 591 F. Supp. 2d 637, 648
(S.D.N.Y. 2008). "[T]he burden of showing that venue in the forum di ct is proper falls on the plaintiff." McKeown v. Port Auth. of N.Y. & N.J., U.S.E.P.A. ex 162 F. Supp. 2d 173, 183 (S.D.N.Y. 2001). However,
an evident , "'the plaintiff need only make a
showing of [venue]. f , f Gulf Ins. Co. v. ___________ , 417 F.3d 353, 355 (2d Cir. 2005) (quoting *17 CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 364-65 (2d Cir.1986)). "In a case involving multiple claims, the plaintiff must show that venue is proper for each claim asserted, but dismissal of an improperly venued claim is not warranted if it is factually related to a properly venued claim and the claims could be considered 'one cause of action with two grounds of relief.'" McKeown, 162 F.
Supp. 2d at 183 (citation omitted) .
II. Venue is Improper Under 28 U.S.C. § 1391(a) (2) When jurisdiction is founded solely upon diversity and all defendants do not reside in the same state, venue is proper in a district where a "substantial part of the events or omissions giving rise to the claim occurred." 28 U. S. C. § 1391 (a) (2). The determination of substantiality for venue purposes "is more a qualitative than a quantitative inquiry, determined by assessing the overall nature of the plaintiff's claims and the nature of the specific events or omissions in the forum, and not by simply adding up the number of contacts." Daniel v. Am.
Bd. of Emergency Med., 428 F.3d 408, 432-33 (2d Cir. 2005)
14 -----------------~-.--.--- .. - - . . . -.- *18 Defendants contend that Benjamin cannot demonstrate that a substantial part of the events or omissions giving rise to her claims occurred in the
Southern District of New York. All of the events giving rise to Benjamin's claims, which concern alleged breaches of fiduciary duty, oppression and waste, and challenges to the post-bankruptcy operation, management and control of Gurney's, occurred in the Eastern District of New York, where Gurney's is located.
According to Defendants, the only asserted nexus between Benjamin's claims and this district is the fact that three or four board of director meetings were held in Manhattan after Benjamin was elected to the board of directors in May 2009, at the offices of Gurney's former corporate counsel. Defendants have contended that these meetings are not material to the claims in this action, none of which are connected to the specific board meetings that took place in Manhattan. Benjamin argues that these meetings are "intrinsically material" to her claims, because this action is predicated on the conduct of the Class B directors, conduct that was planned and effectuated at these meetings. However, there is no evidence that anything that occurred or was decided at any board meeting *19 held in Manhattan gave rise to Benjamin/s claims. See l e.g' l Friedman v. Revenue Mgmt. of New York, Inc., 38 F.3d 668, 671 72 (2d Cir. 1994) (finding venue in the Southern District of New York improper where none of Defendant's contacts with the district gave to the claims be the Court) i ~N~a~t~'~l~~~~~~~C~o~._v~.~U~n~l~·v~e~r~c~o~l~-_H~i~l~l~e~l~~~~~ & Sons No. 03 CV 8618, 2004 WL 2546804, at *2 (S.D.N.Y. Nov. 10, 2004) (finding venue improper te insubstant 1 contacts with Southern District New York the events that rise to the claims occurred in a fferent district) .
Moreover, even if, as Benjamin argues, the planning and effectuating of Defendants' scheme occurred at such meetings, it appears that the meetings Manhattan represent only a fraction of the total board meetings that
taken place since reorganization, or even since Bennett and/or Carusona were elected. It appears from the
ies' submissions that approximately 21 board meetings were held in 2007 and 22 were held in 2008, and there is no indication that any of these meetings were held in this district. According to Defendants, board of director meetings, which were sometimes held as frequently as twice
16 *20 in a month, were regularly held at the Gurney's hotel or at another location in Long Island. (McGill Decl. ~ 2.)
Benjamin also cites Arti e II, Section 1, of Bylaws, which states that the annual shareholder meetings "shall be held in the Borough Manhattan, City of New York." (Opp. 9.) According to Defendants, however, the annual shareholder meetings been regularly held in Long Island at Gurney's, for more than ten years.2 Indeed, the shareholder meetings at which Benjamin, Carusona and Bennett were elected all occurred at Gurney's.
The final nexus between the claims and s dis ct alleged by Benj is that David Clurman, an fted Gurney's Interval attorney who allegedly
Proprietary Lease, res in Manhattan and that Clurman's law office is located Manhattan. (Opp. 12.) Defendants contend Benjamin has no facts to support her claim that Clurman is among the most important individuals in this action, and the fact that he is not named anywhere in the Complaint supports this contention. Even if Clurman is a material witness this case, his res in this Defendants also argue that the Bylaws were amended in 1991 to change the location of annual shareholder meetings from Manhattan to Suffolk County. Plaintiffs dispute the validity of this amendment.
---------~,,"--~ - - " " ' - - - - - - " ' ' ' ' ' ' ' ' ' ' ' ' requirement of district does not satisfy the substant § 1391 (a) (2) .
AccordinglYI although three or four board meetings occurred in this district Bylaws might call I for shareholders meetings to occur here l and one witness resides here there is no such conduct or l contacts with this district se to the claims in this action. Regardless I even if edl the alleged nexus between the conduct and this district does not rise to the level of being "substanti under § 1391 (a) (2) . /I Gurney/s
III. Carusona l Waived t Venue Benjamin argues that l irrespective of the merit of their venue argument I Defendants waived the defense by moving to dismiss original complaint and failing to object to venue at time.
A de who wishes to raise the defense of improper venue "must do so in its first defensive move I it a Rule 12 motion or an answer. II Hartling v. woodloch Pines Inc' l No. 97 Civ. 2587 [1] 1998 WL 575138 [1] at *1 l
18
(S.D.N.Y. Sept. 8, 1998). "[T]he omission of a Rule 12 's motion to dismiss results in waiver motion from a the defense unless the defense was not avai at the time of the motion." . Ins. Co. v. Scottsdale Ins. Co., 874 F. Supp. 601, 604 (S.D.N.Y. 1995); see Fed.
R. Civ. P. 12(h) (1) ("A party waives any defense listed in Rule 12(b) (2)-(5) by . failing to either (i) make it by motion under s rule; or (ii) include it in a responsive . ") . pleading .
In original complaint, Benjamin named Carusona, Bennett, and the Liquidating Trust as Defendants.
On February 8, 2010, the Liquidating Trust moved to dismiss pursuant to Rule 12(b) (2) and (5), but did not raise any objection to venue. On the same day, Benjamin filed a , pursuant to Rule 41(a) (1), notice of voluntary dismi dismiss the complaint the Liquidating Trust.
Benjamin argues that the Liquidating Trust's February 8 motion to di ss constitutes its "first
defens move" and that, because it fail to object to venue at the time, the quidating Trust therefore *23 waived the right to object to venue at s stage. See _M_e_d_.____ ~~~~~~. __v__ .~C~R~~~~~~~~~, No. 08 Civ. 8556, 2010 WL 1487994, at *9-*10 (S.D.N.Y. Apr. 13, 2010). The Liquidating Trust is no longer a party and neither the trustees of the Liquidating Trust, Lisa Cooper Montemarano and Keith Cooper, nor LCM were formally parties at the time of the initial motions to dismiss. Nonetheless, Benjamin contends that those parties "implicitly acquiesced to the [Liquidating] Trust's waiver" because the Liquidating Trust was under the control of the trustees and LCM is under the control of Lola Cooper Montemarano. (See Opp. 7 n.3.) However, venue is "a privilege personal to each defendant." Agricultural Ins. Co. Inc. v. Ace Hardware Corp., No. 98 Civ. 8708, 2000 WL 1568313, at *1 (S.D.N.Y. Oct. 20, 2000) (quoting 1 Moore, Federal Practice ~ 0.146(6), at 1911 (2d ed. 1964)) i Concession Consultants, Inc. v. Mirisch, 355 F.2d 369, 371 n.1 (2d Cir. 1966). Accordingly, waiver by the Liquidating Trust does not result in waiver of any objections to venue by the trustees or LCM. Neither the trustees nor LCM participated in any pre-trial proceedings prior to their filing the instant motion. They were first brought into the action when they were named in the
Verified Amended Complaint, after which their first
defensive move was to file this motion to dismiss.
20 On the other hand, on June 25, 2010, Carusona and Bennett filed their motion to dismiss, pursuant to Rule 12(b) (6), and did not raise any objection to venue.
Gurney's joined in the motion and similarly I to object to venue. Since this motion constitut "first defensive move" by Carusona, Bennett and 's, their objections to venue have been waived. See Del Med. , 2010 WL 1487994, at *9; Tribune Co. v.
-~"--~ Purcigliotti, No. 93 CIV. 7222, 1996 WL 457290, at *1 (S.D.N.Y. Aug. 14, 1996). Moreover, Carusona, Bennett and Gurney's implicitly waived the venue objection by
actively participating in pre proceedings, including making motions, defending t Benjamin's February 8 motion for a preliminary injunction, entering into a confidentiality stipulation was "So Ordered,"
negotiating a scheduling , and participating in discovery. See Ferraro Foods Inc. v. IZZET INCEKARA, No. 01 CIV. 2682, 2001 WL 940562, at *3 (S.D.N.Y. Aug. 20, *25 2001) ("The improper venue may also be waived by actions that are implication when a party
inconsistent with ting cases) . • II )
Trust Defendants' motion to dismiss for venue is granted, but the motion to dismiss is denied as to Carusona, Bennett and Gurney's due to their waiver of any objection venue. See Rains v. Cascade Indus., Inc., 258 F. Supp. 974, 976-77 (S.D.N.Y. 1966) (severing action one defendant, in the "interest of justice," so as to venue proper against remaining defendants) .
The Motion to Transfer is Denied
Gurney's also s in the alternative that the case be transferred to Eastern District of New York, pursuant to 28 U.S.C. § 1404(a), which states: "For the convenience of parties and witnesses, In the interest of justice, a dist ct court may transfer any civil action to any other district or division where it might have been brought." Unlike a motion under Rule 12(b) (3), which is *26 based on a forum's impropriety, a motion under § 1404(a) turns on cons of convenience. Waiver of
objection to improper venue does not preclude transfer pursuant to § 1404(a). Instead, "'motions trans lie within the broad discretion of the courts and are
determined upon notions of convenience and on a case-by-case basis.'" Linzer v. EMI Blackwood Music Inc.,
22 904 F. Supp. 207, 216 (S.D.N.Y. 1995) (quoting In re Cuyahoga Equip. Corp., 980 F.2d 110, 117 (2d Cir. 1992))
When deciding a motion to transfer, the court must first determine whether the action "might have been brought" in the transferee court. Here, the parties do not dispute that the case might have been brought in the Eastern District of New York.
Second, the court must determine whether, considering the "convenience of parties and witnesses" and the "interest of justice," a transfer is appropriate.
Wilshire Credit Corp. v. Barrett Capital Mgmt. Corp., 976 F. Supp. 174, 180 (W.D.N.Y. 1997). To make this
determination, courts in the Southern District of New York consider the following factors: (1) the convenience of witnesses; (2) the location of relevant documents and relative ease of access to sources of proof; (3) the convenience of the parties; (4) the locus of the operative facts; (5) the availability of process to compel attendance of unwilling witnesses; (6) the relative means of the parties; (7) the forum's familiarity with governing law; (8) the weight accorded to a plaintiff's choice of forum; and (9) trial efficiency and the interests of justice. See
23 __________En i$ l t \ ( - - - - - - - - - - - - - - - - - - - - - ---- Capitol Records, Inc. v. MP3tunes, LLC, No. 07 Civ. 9931, 2008 WL 4450259, at *5 (S.D.N.Y. Sept. 29, 2008) (citing American Eagle Outfitters, Inc. v. Tala Bros. Corp., 457 F.
Supp. 2d 474, 477 (S.D.N.Y. 2006)).
Several of the relevant factors have little or no applicability when the requested transfer is from the Southern District to the Eastern District, including the convenience of witnesses, parties, and sources of proof, familiarity with the governing law, the availability of process to compel attendance of unwilling witnesses, and the parties' financial circumstances. See, e.g., Legrand v. City of New York, No. 09 Civ. 9670, 2010 WL 742584, at *28 *4 (S.D.N.Y. Mar. 3, 2010) ("The proximity of the two districts renders several of the factors relatively
insignificant in this inquiry. Thus, witnesses could be compelled to attend court proceedings in either district and the parties' financial circumstances would not
interfere with them participating in proceedings in either district. Finally, both federal courts are familiar with the governing law and could address the case
efficiently."); O'Hopp v. ContiFinancial Corp., 88 F. Supp.
2d 31, 36 (E.D.N.Y. 2000) ("Because of the close proximity between the Southern and Eastern District courthouses, it
--------------~---------- --- cannot be said that one venue is significantly more
convenient than the other for the parties, their witnesses, or with respect to access to sources of proof.").
The only remaining factors to consider are the weight accorded to a plaintiff's choice of forum, the locus of the operative facts, and trial efficiency and the interests of justice.
"Courts in this circuit are loath to disturb a plaintiff's choice of forum absent a showing that the *29 balance of convenience and justice weighs heavily in favor of transfer." It's a 10, Inc. v. PH Beauty Labs, Inc., No.
10 Civ. 972, 2010 WL 2402848, at *2 (S.D.N.Y. June 14, 2010) (citing cases) . Gurney's contends that no weight should be given to Benjamin's choice of forum because she is a resident of Connecticut, not New York. "However, even if a plaintiff is not a resident of its chosen forum, the choice will be respected as long as the balance of factors does not warrant a transfer." Id. Benjamin's choice of forum therefore weighs in favor of retaining jurisdiction.
Although the events giving rise to Benjamin's claims occurred primarily in the Eastern District, the occurrence of three or four board meetings in Manhattan and the possibility that the Bylaws call for annual meetings to take place Manhattan provide some nexus with Manhattan, even if insubstantial. Ultimately, this weighs in favor of transfer to the Eastern District.
burden is on moving party to "make a 'clear-cut showing' that trans is in the best interests of the litigation." Smart v. Goord, 21 F. Supp. 2d 309, *30 315 (S.D.N.Y. 1998) (citing cases). Here, however,
Gurney's has neglected to address this issue. This Court is familiar with the complex s of this action and has issued a substantive decision connection with Benjamin's initial motion a preliminary injunction. Ultimately, given that most factors in the transfer analysis are neutral and in light of Benjamin's selection this forum and this Court's familiarity with and involvement in this case, the interests of justice are best served by retaining j sdiction.
Gurney's motion to trans is therefore denied. ------------------------------_.',
Benjamin's Motion to Enjoin Gurney's
from Indemnifying Defendants Is Denied The Prel unction Standard
1. A party seeking a liminary injunction must show: "(1) the likelihood of irreparable injury in the *31 absence of such an injunct , and (2) either (a) s or (b) sufficiently
likelihood of success on the serious questions going to the s to make them a fair ground for litigation plus a hardships tipping
idedly toward the party request the preliminary reI f." __________________________ ~~, 571 F.3d 238, 242 (2d Cir. 2009) (quoting
sso Inc., 201 F.3d 168, 173 (2d Cir. 2000)). Because irreparable harm "is ' single most important prerequisite for the issuance of a preliminary injunct ,'" the "'moving party must first demonstrate requirements that such injury is likely before the for issuance of an injunction will be considered.'" ____ ~L- ________________ ~~ ______________ , 175 F.3d 227, 233 34 (2d Cir. 1999) (citations omitted) To establish irreparable harm, the injury must "neither remote, nor speculative, but actual and imminent./I Shapiro v. Cadman Towers Inc., 51 F.3d 328, 332 (2d r. 1995). In
addition, the injury "must be one requiring a remedy of more than mere money damages./I Church of Christ v.
of New York, 617 F. Supp. 2d 201, 215 (S.D.N.Y. 2008) (quoting Tucker Anthony Realty Corp. v. Schlesinger, 888 F.2d 969, 975 (2d Cir. 1989)).
II. Neither Irreparable Harm nor Likelihood of Success on the ts Have Not Been Established For the reasons set forth in greater detail the April 21, 2010 Opinion denying Benjamin's request a preliminary injunction, amin still cannot show
irreparable harm or a I lihood of success on the ts, because Carusona and Bennett are entitled to defense and potential indemnif ion under the Bylaws and the BCL. ly, Article VII of the aws contains
Specifi the following language:
Nothing contained in this sion shall limit any right of indemnification to which any director or any officer may be entitled to by contract or under any law now or hereinafter enacted.
28 Also, as explained in the April 21, 2010 Opinion:
Under BCL § 723(c), a company may advance defense costs to a sued director upon the posting of an undertaking. In the event of a finding against a director bad faith or *33 dishonesty, however, no indemnification may be had and any advanced expenses must be repaid to the company. BCL §§ 721, 725(a). Carusona and Bennett have provided the undertaking required under BCL §§ 723 (c) and 725 (a) for advancement of de costs, namely, that they will repay Gurney's if it is they are not ultimately proven entitled to indemnif ion.
Benjamin v. Carusona, No. 09 C 9722, 2010 WL 1645047, at *5 (S.D.N.Y. April 22, 2010).
Benjamin has not demonstrated a likelihood harm from Gurney's advancing Carusona and Bennett's
fees in this action or in any related actions.
The Liquidating Trust has a contractual to indemnification arising out of the Trust Mortgage. See Trust Mortgage at ~ 12.) Benjamin has offered no evidence to indicate a likelihood or harm or of success on the s to enjoin indemnificat merits in her ef the Liquidating Trust.
29
amin argues, in essence, that the most recent
spec assessment was improper because it was not approved *34 by ass A shareholders, pursuant to Paragraph 3(e) the Proprietary Lease, and that the Class A ",-"","u,-s' use of Gurney's shareholders have not approved assets, including funds obta through the most recent
ial assessment, for legal fees and expenses incurred in s or related actions. As Court noted in the April 21, 2010 Opinion, "the Class A shareholders under Paragraph 3(e) of the Lease are granted control of the services which they are liable." However, upon argument, the
ies appeared to that the scope of the "services" covered by Paragraph 3(e) is an issue to be decided at a later date, as it has not been presented for resolut by this Court.
Defendants Are Enjoined from Requiring Payment of the Special Assessment as a Condition Precedent to Voting
Benjamin moved for an injunction "directing defendants to allow 1 Class A shareholders who are otherwise current ir obligations to Gurney's, to vote for the Class A director irrespective of whether they have paid the special assessment." (Benjamin Mot. 2.)
*35 Defendants argue that the requirement that Class A shareholders be current in their dues, including paying the special assessment, to be eligible to vote at the annual shareholders meeting has a rational business
purpose: "Gurney's needs capital for its operations and management reasonably believes that Gurney's is more likely to collect the assessment if shareholders must pay the assessment to vote." (Opp. 12.) Defendants contend that this is all that is required for the decision to be
protected by the business judgment rule. (Id. 13 (citing Estate of Detwiler v. Offenbacher, 728 F. Supp. 103, 156 (S.D.N.Y. 1989)).) According to Defendants, with the exception of one special shareholders meeting in March 2009, this requirement "always has been and continues to be (Id. ) Gurney's policy."
However, BCL § 612(a) provides that "[e]very shareholder of record shall be entitled at every meeting of shareholders to one vote for every share standing in his name on the record of shareholders, unless otherwise provided in the certificate of incorporation." Nothing in the Certificate of Incorporation conditions Class A
shareholders' right to vote on their being current on all *36 maintenance charges and special assessments. As such, Defendants' proposed limitations on Class A shareholders Aini v. Garau, 244 A.D.2d 442, 442 are ffective.
(N.Y. App. Div. 1997) (holding that "limitations on the right to vote" not set forth the certificate of
incorporation are ineffective) i Madison v. Striggles, 228 A.D.2d 170, 170 (N.Y. App. Div. 1996) (depriving a right to vote "can be accomplished only
shareholder of through a provision in the certificate of incorporation").
For reasons, Defendants' attempt to exclude from the vote at the upcoming annual shareholder meet any Class A shareholders who have not paid the special assessment is an impermissible limitation on the
shareholders' right to vote. Accordingly, because Benjamin
demonstrated a likelihood of success on the merits, her is granted. motion to enjo
Defendants Are Enjoined from Amending the
Certificate of Incorporation and Bylaws
As an initial matter, it appears that board of directors never properly authorized the presentation of the proposed amendments at the annual shareholder meeting
32 *37 fendants cite a board to be held on November 8, 2010. which the directors
meeting held on January 21, 2010, discussed similar proposed amendments to be considered at the originally scheduled May 14, 2010 shareholders meeting.
However, second resolution adopted at the board's January meet only authorizes a shareholders vote at a special meeting, as opposed to an annual meeting, and then only for meeting scheduled May 14, 2010. The November 8 meeting cannot be ewed as an adjournment of the May 14 meeting, because original meeting was never convened, and Article II, Section 4, of the Bylaws only allows ournment "at meet ing . " Furthermore, s issued entirely new proxy materials the
De November 8 meeting, and set a record date of October 15, indicating that the May 14 meeting was cancelled. As a
t, the resolution zing consideration of the proposed amendments at May 14 meeting does not apply to the November 8 meeting.
Even if consideration of the amendments had been properly authorized, amendment of the Bylaws is only permitted "subsequent to cancellation all Class B stock," pursuant to Article XII of aws and Article Fourth (b) of the Certificate of Amendment of the
Certificate of Incorporation. Any amendment to the Bylaws or the Certificate of Incorporation that would render these provisions meaningless is improper.
Article Eighth of the Certificate of Incorporation provides that ~[t]he Certificate of
Incorporation may be amended by the affirmative vote of the holders of two thirds of the shares of the
Corporation issued and outstanding." Benjamin contends, and the Court agrees, that this provision must be read to apply only to the Class A shareholders. If this provision were read to allow all shareholders, including the Class B shareholders, to amend the Certificate of Incorporation, the Class A shareholders would be effectively
disenfranchised and their property interests impermissibly compromised. Accordingly, the Certificate of Incorporation may only be amended by a two-thirds vote of the Class A shares.
However, because consideration of the proposed amendments at the November 8 annual shareholders meeting was not properly authorized by the board of directors, the motion to enjoin amendment is granted.
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... __ .. _--_.
Conclusion
The motion of Trust Defendants to dismiss the action for improper venue is granted as to the Trust Defendants, and Gurney's motion to dismiss or transfer is denied as to Gurney's, Carusona, and Bennett. The motion to enjoin indemnity is denied, the motion to enjoin
Defendants from preventing Class A shareholders from voting is granted, and motion to bar amendment to the Bylaws and Certificate of Incorporation is granted.
It is so ordered.
New York, NY ,--
November ~ ,
U.S.D.J.
35