Buechner v. Avery
836 N.Y.S.2d 443
N.Y. App. Div.
2007
Check Treatment

Jack Buechner et al., Appellants, v Allan R. Avery et al., Respondents.

Supreme Court, Appellate Division, First Department, New York

March 27, 2007

38 AD3d 443 | 836 NYS2d 443

Jack Buechner et al., Appellants, v Allan R. Avery et al., Respondents. [836 NYS2d 443]—

Judgment, Supreme Court, New York County (Helen E. Freedman, J.), entered April 19, 2006, dismissing the complaint, pursuant to an order of said court and Justice dated April 6, 2006, which granted defendants’ motions pursuant to CPLR 3211, unanimously affirmed, with costs.

This is an action by shareholders and the bankruptcy trustee seeking to recover for the alleged misappropriation by insiders and others of the corporation’s intellectual property, which had been collateral for a loan the corporation allegedly could not afford to repay and was obtained by the lender through strict foreclosure.

The motion court properly determined that the shareholder claims were derivative (see

). The reasonable reliance element for the fraud claims was lacking as belied by the knowledge, access to information and participation in the subject transactions by the corporations’ controlling shareholder (see
,
). The complaint conceded that defendant insiders’ conflict of interest was disclosed to the controlling shareholder; such disclosure provided them a “safe harbor” (see
, mod in other respects
). The claim for tortious interference with contract was not viable absent an enforceable contract (see
), since the letter of intent expressly provided that it was not binding except with respect to certain clauses not at issue (see
,
). The claim for tortious interference with prospective business relations based on the anticipated benefits from a proposed merger that did not take place was not viable because the letter of intent set forth several conditions precedent which plaintiffs failed to allege would have been satisfied “but for” defendants’ allegedly wrongful conduct (see
); notably, the bankruptcy filing, based on the decision of the controlling shareholder and the board of directors, intervened.

Moreover, the trustee was precluded from bringing the above tort claims by the doctrine of in pari delicto based upon the cooperation of the management of the bankrupt corporation with defendant third parties in committing the alleged wrongs (see

;
); the “narrow” exception to such rule (see
) was not implicated since it was not alleged that the wrongdoing corporate agent “totally abandoned” the corporation’s interests (see
). The trustee’s fraudulent conveyance claims were untimely (Bankruptcy Code [11 USC] § 546;
; cf.
, affd
), and, in any event, were waived by the trustee’s countersigning with “no objection” to the notice of strict foreclosure.

We have considered plaintiffs’ other contentions and find them unavailing. Concur—Tom, J.P., Williams, Buckley, Gonzalez and Sweeny, JJ.