Opinion
Index No. 654908/2022 Motion Seq. Nos. 001 002 003
05-10-2023
SAES REALTY GROUP LLC, SHKOIACH LLC Plaintiff, v. SARAH STERN KLAR, Defendant.
Unpublished Opinion
Motion Date 04/20/2023, 12/19/2022, 01/20/2023
DECISION + ORDER ON MOTION
HON. ANDREW BORROK, JUDGE
The following e-filed documents, listed by NYSCEF document number (Motion 001) 2 were read on this motion to/for DISSOLUTION.
The following e-filed documents, listed by NYSCEF document number (Motion 002) 17, 18, 19, 20, 21, 22, 26, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41 were read on this motion to/for JUDGMENT-DEFAULT.
The following e-filed documents, listed by NYSCEF document number (Motion 003) 44, 45, 46, 47, 48, 49, 50, 51,52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67 were read on this motion to/for DISMISS.
Upon the foregoing documents, the petition (Mtn. Seq. No. 1) to dissolve CISAM LLC (CISAM) and appoint a receiver must be granted and the motion to dismiss (Mtn. Seq. No. 3) must be denied. For the avoidance of doubt, the motion (Mtn. Seq. No. 2) for default judgment is denied as moot.
Reference is made to a related action captioned Sarah Stemklar, Individually And Derivatively On Behalf Of Nominal Defendant Stemklar Family Foundation, Inc. v Cindy Sternklar-Worenklein et al, Index No. 651270/2021 (the Prior Action). In the Prior Action, Sarah Stemklar sued Cindy Sternklar-Worenklein and Mark Stemklar seeking dissolution of CISAM and, among other things, a declaration that she was no longer a member of CISAM. When the defendants moved to dismiss, the Court denied the motion to the extent that the Court held that Sarah Stemklar was entitled to a declaration that she was no longer a member of CISAM as of December 31, 2021 (NYSCEF Doc. No. 7, at 1).
For clarity, and by way of background, Mark Stemklar and Cindy Stemklar-Worenklein desired to transfer their interests in CISAM for estate planning purposes. In 2018, they executed a First Amendment to the CIS AM Operating Agreement authorizing such assignments (NYSCEF Doc. No. 5). Sarah Stemklar was presented with the First Amendment but did not return an executed copy of it. More specifically, according to Mark Stemklar and Cindy Stemklar-Worenklein, Sarah Stemklar had indicated that she would sign it but did not in fact return it.
Subsequently, it came to Sarah Stemklar's attention that Mark Stemklar had purported to transfer his interest in CISAM to the Lila Stemklar and Jack Stemklar Trust FBO Mark Stemklar. She then decided that she no longer wanted to be a member of CISAM and only wanted to receive distributions in respect of her economic interest and otheiwise wanted to be paid out for the fair value of her membership interest in CIS AM.
To wit, by letter dated February 18, 2021 (the 2021 Letter; NYSCEF Doc. No. 6), from Sarah Stemklar to Cindy Stemklar-Worenklein, Sarah Stemklar wrote:
As Mark Stemklar has assigned his economic interest in CISAM, LLC ("CISAM") to the Lila Stemklar and Jock Stemklar Trust FBO Mark Stemklar ("Trust''), which is not a member of CISAM, you and I are the remaining members of CISAM. Accordingly, I am seeking your written consent, as the only member of CISAM other than myself, to consent to my withdrawal as a member of CIS AM as of December 31, 2021.
Article 9 of the Operating Agreement of CIS AM, LLC ("Operating Agreement") permits my withdrawal in accordance with the Limited Liability Company Law ("LLCL"). LLCL § 606, as in effect when CIS AM's articles of organization were filed in January 1996, permits my withdrawal upon the written consent of at least two-thirds in interest of its members other than the member proposing to withdraw. Within 10 business days from your receipt of this letter, please provide your consent by signing and returning the consent acknowledgement below.
In the event you do not consent to my withdrawal, LLCL § 606 provinces that I may withdraw without consent upon not less than six months' prior written notice to CISAM. Accordingly, I hereby notify CISAM that I will withdraw as a member of CIS AM as of the close of business on December 31, 2021.
Pursuant to LLCL § 509,1 request that CISAM continue to give me any distribution to which I am entitled under the Operating Agreement and, within a reasonable time after my withdrawal, the fair value of my membership interest in CIS AM as of my withdrawal date based on my one-third interest in the company(NYSCEF Doc. No. 6 [emphasis added]).
During discoveiy in the Prior Action, Sarah Stemklar alleges that she learned for the first time that Mark Stemklar and Cindy Sternklar-Worenklein had in fact both assigned their interests to other entities and that notwithstanding (x) the First Amendment which she was given and (y) her 2021 Letter which acknowledged that Mark Stemklar had done exactly that which the First Amendment contemplated - i.e., transferred his interest - this was a big shock to her. And, in fact, she only discontinued her membership in CISAM based on the false understanding that Cindy Sternklar-Worenklein was in fact still a member of CISAM.
Given the foregoing, on August 10, 2022, when Sarah Stemklar moved to amend her complaint in the Prior Action, the Court indicated that unless an election was made to continue the business of CISAM pursuant to the Operating Agreement, CISAM was likely dissolved (NYSCEF Doc. No. 35, at 3-4). Significantly, it is undisputed that Sarah Stemklar did not either together with Mark Stemklar and Cindy Sternklar-Worenklein or on her own execute in writing an election to continue the business of CIS AM as required by Sections 12 and 13.2 of the Operating Agreement and, to date, Sarah Stemklar has not executed a document purporting to rescind her resignation.
Given that Section 12 of the Operating Agreement (NYSCEF Doc. No. 4) requires an election to be made continuing the business of CIS AM within 90 days of the occurrence of an event of dissolution, and that such 90 days have passed, CISAM is in dissolution - i.e., (i) if Mark Stemklar and Cindy Sternklar-Worenklein are no longer members of CISAM, then CISAM is without members, no election to continue the business of CISAM has occurred within the relevant time period by anyone eligible to do so including Sarah Stemklar and (ii) if Mark Stemklar and Cindy Sternklar-Worenklein are members of CISAM, then Mark Stemklar and Cindy Sternklar-Worenklein have indicated their desire as the only members of CISAM to dissolve CISAM. Stated differently, the Petition must be granted because either (i) Mark Stemklar and Cindy Sternklar-Worenklein are members of CISAM and they have decided to dissolve CISAM which they are permitted to do, or (ii) CISAM has no members and there has neither been a rescission of the 2021 Letter nor an election to continue the business of CISAM by Sarah Stemklar (either on her own or with her siblings) - both of which would be necessary to comply with the CISAM Operating Agreement and for Sarah Stemklar to properly oppose this motion. As no issues of fact exist, the Petition must be granted.
For completeness, it does not matter that Sarah Stemklar understood the transfer of Mark Stemklar's interest to be to the Lila Stemklar and Jock Stemklar Trust FBO Mark Stemklar and that it may have been to Shkoiach LLC. Nor does it matter that Cindy Stemklar-Worenklein may have transferred her interest to SAES Realty Group LLC. What matters is that Sarah Stemklar understood that her siblings were contemplating transfers and that when she "learned" that Mark Stemklar had purported to transfer his interest in CISAM, she sought to withdraw and be paid out the fair value of her membership interest. Thus, it can not be said that an actionable fraud here occurred given that her siblings are dissolving CISAM pursuant to this Petition and that as a result she will in fact be paid out as she desired and CIS AM will in fact be dissolved as she had previously moved this Court to do.
It is hereby ORDERED that the petition (Mtn. Seq. No. 1) is granted; and it is further
ORDERED that the parties are each directed to each submit the names and resumes of two proposed receivers to Part 53 (SFC-Part53@nycourts.gov) by June 8, 2023; and it is further
ORDERED that parties are directed to appear for a status conference on July 13, 2023 at 9:30am; and it is further
ORDERED that the motion (Mtn. Seq. No. 2) for default judgment and the motion (Mtn. Seq. No. 3) to dismiss are denied.