Opinion
No. 2022-01905 Index No. 711713/21
07-24-2024
Tzu Yen Cheung, et al., appellants-respondents, v. Dolar Shop Restaurant Group, LLC, respondent-appellant.
Lanin Law P.C., New York, NY (Scott L. Lanin of counsel), for appellants-respondents. William G. Rospars, Jericho, NY, for respondent-appellant.
Lanin Law P.C., New York, NY (Scott L. Lanin of counsel), for appellants-respondents.
William G. Rospars, Jericho, NY, for respondent-appellant.
MARK C. DILLON, J.P., JOSEPH J. MALTESE, JANICE A. TAYLOR, CARL J. LANDICINO, JJ.
DECISION & ORDER
In an action, inter alia, to recover damages for breach of contract, the plaintiffs appeal, and the defendant cross-appeals, from an order of the Supreme Court, Queens County (Timothy J. Dufficy, J.), dated February 14, 2022. The order, insofar as appealed from, granted those branches of the defendant's motion which were pursuant to CPLR 3211(a) to dismiss the second through ninth causes of action. The order, insofar as cross-appealed from, denied that branch of the defendant's motion which was pursuant to CPLR 3211(a) to dismiss the first cause of action.
ORDERED that the order is modified, on the law, by deleting the provisions thereof granting those branches of the defendant's motion which were pursuant to CPLR 3211(a) to dismiss the second and seventh causes of action, and substituting therefor provisions denying those branches of the motion; as so modified, the order is affirmed insofar as appealed and cross-appealed from, with costs to the plaintiffs.
In 2014, the plaintiff Yu Zhang and nonparty Shanghai F-Dolarshop Catering Management Co., Ltd. (hereinafter Shanghai), entered into a "Cooperation Agreement" (hereinafter the agreement) to form the defendant, Dolar Shop Restaurant Group, LLC, among other things, for the purpose of operating a restaurant. The agreement distributed equity interest in the defendant 51% to Shanghai and 49% to Zhang and provided that both parties would be "involved in the operation and management" of the business. Further, dividends were to paid based on the respective equity ratio and Shanghai was to provide Zhang with a monthly "cash register statement," "business report," "operating profit expense breakdown," and "costs statement." In an amendment to the agreement dated November 30, 2018, Zhang divided her interest between herself and the plaintiff Tzu Yen Cheung.
In 2021, the plaintiffs commenced this action, asserting nine causes of action. They alleged, inter alia, that the defendant breached the agreement by failing to distribute profits and to provide business records to the plaintiffs, and by "unjustly freez[ing] [p]laintiffs out of the business." Thereafter, the defendant made a pre-answer motion to dismiss the complaint pursuant to CPLR 3211(a). In an order dated February 14, 2022, the Supreme Court denied that branch of the defendant's motion which was to dismiss the first cause of action, alleging breach of contract, and granted those branches of the motion which were to dismiss the second through ninth causes of action. The plaintiffs appeal and the defendant cross-appeals.
With respect to the third cause of action, alleging breach of fiduciary duty, the Supreme Court correctly determined that the plaintiffs failed to plead the existence of a fiduciary relationship with sufficient particularity (see CPLR 3016[b]; Saul v Cahan, 153 A.D.3d 947, 949). While members and managers of an LLC owe a fiduciary duty to the LLC, the reverse is not necessarily true (see McKinnon Doxsee Agency, Inc. v Gallina, 187 A.D.3d 733, 736). Similarly, with respect to the sixth cause of action, seeking an accounting, the plaintiffs failed to plead sufficient "facts demonstrating the existence of a special, confidential or fiduciary relationship" (Giambrone v Arnone, Lowth, Wilson, Leibowitz, Adirano & Greco, 197 A.D.3d 459, 462).
With respect to the fourth cause of action, alleging minority member oppression, as the defendant correctly argued in the alternative (see Parochial Bus Sys. v Board of Educ. of City of N.Y., 60 N.Y.2d 539, 545-546), that cause of action is duplicative of the breach of contract cause of action, since those causes of action are based on the same facts and seek essentially identical relief (see Guzman v Ramos, 191 A.D.3d 644, 648).
Moreover, the fifth and eighth causes of action are also duplicative of the breach of contract cause of action, and therefore were properly subject to dismissal (see id.; see also P.S. Fin., LLC v Eureka Woodworks, Inc., 214 A.D.3d 1, 30; KST2 Props., LLC v Pretee Constr. Co., Inc., 192 A.D.3d 785, 786).
The ninth cause of action is premised on the plaintiffs' speculation with respect to the defendant's past, present, and future actions in relation to certain federal loan proceeds, and therefore, as the defendant argued in the alternative (see Parochial Bus Sys. v Board of Educ. of City of N.Y., 60 N.Y.2d at 545-546), was properly subject to dismissal on that ground (cf. Matter of Edwards v Incorporated Vil. of Hempstead, 122 A.D.3d 627, 628).
However, to the extent that the existence of an enforceable contract against the defendant remains a matter of dispute, the Supreme Court erred in directing dismissal of the second cause of action, alleging unjust enrichment as an alternative theory of recovery to breach of contract (see F & R Goldfish Corp. v Furleiter, 210 A.D.3d 643, 646; see also Bedford-Carp Cosntr., Inc. v Brooklyn Union Gas Co., 219 A.D.3d 1293, 1295). Furthermore, to the extent that the plaintiffs pleaded that they had been improperly frozen out of their management rights in the operation of the underlying business, the seventh cause of action, seeking injunctive relief, was sufficiently stated to survive the defendant's motion to dismiss (see Elow Svenningsen, 58 A.D.3d 674, 675; cf. Hogue v Village of Dering Harbor, 199 A.D.3d 900, 903).
"The essential elements of a breach of contract cause of action are the existence of a contract, the plaintiff's performance pursuant to the contract, the defendant's breach of his or her contractual obligations, and damages resulting from the breach" (JM UC Group, LLC v Precious Care Mgt., LLC, 221 A.D.3d 877, 879 [internal quotation marks omitted]). As relevant here, the Limited Liability Company Law allows "members to enter into an operating agreement wherein the members can agree to certain terms, conduct, and provisions for operating the business" (Garcia v Garcia, 187 A.D.3d 859, 861, citing Limited Liability Company Law § 417; see LNYC Loft, LLC v Hudson Opportunity Fund I, LLC, 154 A.D.3d 109, 114).
Contrary to the defendant's contentions, the first cause of action sufficiently alleges the elements of a breach of contract cause of action necessary to survive a motion to dismiss pursuant to CPLR 3211(a)(7) (see JM UC Group, LLC v Precious Care Mgt., LLC, 221 A.D.3d at 879). In other words, under the circumstances, the defendant failed to unequivocally demonstrate that the agreement was not enforceable against the defendant. Notably, the Limited Liability Company Law provides that "every member is an agent of the limited liability company for the purpose of its business" (Limited Liability Company Law § 412[a]), and, in this case, the agreement was signed by all of the then-existing members.
The parties' remaining contentions are either without merit or not properly before this Court.
Accordingly, we modify the order so as to deny those branches of the defendant's motion which were pursuant to CPLR 3211(a) to dismiss the second and seventh causes of action.
DILLON, J.P., MALTESE, TAYLOR and LANDICINO, JJ., concur.