The sole actor rule can apply to a corporation that is controlled by "multiple people, so long as all of them were involved together in the fraud against the corporation." In re CBI Holding Co., Inc., 311 B.R. at 373; See In re CBI Holding Co., Inc, 529 F.3d at 453 n. 9 (finding that the sole actor rule does not apply because the managers were not the sole shareholders of the corporation, and there were no findings that the shareholders were complicit in the fraud); 546-552 W. 146th St. LLC v. Arfa, 863 N.Y.S. 2d 412, 414 (App.Div. 2008). If, however, a corporation has owners or managers who were innocent of the fraud and could have stopped the fraud if they had been aware of the it, the sole actor rule does not apply.In re CBI Holding Co., Inc., 311 B.R. at 373; In re CBI Holding Co., 529 F.3d at 453.

The adverse interest exception does not apply when the insiders who engaged in the fraud were the corporation's owners and decisionmakers. ( Wight v Bank-America Corp., 219 F3d 79; 546-552 W 146th St. LLC v Arfa, 54 AD3d 543; Morgado Family Partners, LP v Lipper, 6 Misc 3d 1014[A], 2004 NY Slip Op 51791[U], 19 AD3d 262; In re Mediators, Inc., 105 F3d 822; In re Parmalat Sec. Litig., 477 F Supp 2d 602; American Tissue, Inc. v Donaldson, Lufkin Jenrette Sec. Corp., 351 F Supp 2d 79; American Tissue, Inc. v Arthur Andersen, L.L.P., 275 F Supp 2d 398; First Nat'l. Bank of Cicero v Lewco Sec. Corp., 860 F2d 1407; In re Bennett Funding Group, Inc., 336 F3d 94; Ash v Georgia-Pacific Corp., 957 F2d 432.) III. The Court should decline the trustee's request to impose dramatic and improvident legal change through issues that the trustee did not preserve and that the Second Circuit Court of Appeals did not certify.

This Court affirmed the dismissal of the complaint on the ground that the LLCs lacked standing to sue (54 A.D.3d 543, 863 N.Y.S.2d 412 [2008],lv. dismissed in part, denied in part12 N.Y.3d 840, 881 N.Y.S.2d 13, 908 N.E.2d 921 [2009] ). In a subsequent appeal (70 A.D.3d 512, 894 N.Y.S.2d 427 [2009] ), we held that defendants-appellants were entitled to indemnification from the LLCs under the parties' operating agreements, regardless of the fact that claims for the same alleged wrongdoing were still pending in a parallel action brought by the investors.

The "adverse interest" exception is a method by which a plaintiff corporation can demonstrate that its agent's actions should not be imputed to it. The corporation must show that the agent's fraud was entirely self-interested and that the corporation did not benefit in any way ( see 546-552 W. 146th St. LLC v Arfa, 54 AD3d 543; Capital Wireless Corp. v Deloitte Touche, 216 AD2d 663, 666). If the agent was acting solely for his or her own benefit and to the detriment of the corporation, it cannot be said that the agent was acting in the scope of his or her employment ( see Center v Hampton Affiliates, 66 NY2D at 784).

Background A full recitation of the factual background can be found in 546-552 West 146thStreet LLC v Arfa ( 54 AD3d 543 [1st Dept], lv dismissed in part, denied 12 NY3d 840 [2008]), Roni LLC v Arfa ( 74 AD3d 442 [1st Dept], affirmed 74 AD3d 442 [2010]), and Arfa v Zamir (Arfa v Zamir, 75 AD3d 443 [1st Dept 2010]). This action is one of six related litigations before this Court.

New York cases seem to support this statement. See Farr v. Newman, 14 N.Y.2d 183, 190, 250 N.Y.S.2d 272, 199 N.E.2d 369 (1964) ("A conflict of interest does not avoid the imputation of knowledge. . . . `The mere fact that the agent's primary interests are not coincident with those of the principal does not prevent the latter from being affected by the knowledge of the agent if the agent is acting for the principal's interests.'") (quoting Restatement (Second) of Agency § 382 (1994)); Center, 66 N.Y.2d at 785, 497 N.Y.S.2d 898, 488 N.E.2d 828 ("[The adverse interest exception] cannot be invoked merely because he has a conflict of interest or because he is not acting primarily for his principal."); Henry v. Allen, 151 N.Y. 1, 9, 45 N.E. 355 (1896); 546-552 West 146th Street LLC v. Arfa, 54 A.D.3d 543, 863 N.Y.S.2d 412 (N.Y.App.Div. 2008) (holding that the exception is not triggered by allegations that the insiders received personal commissions that resulted in their employers' paying more to buy properties). However, other New York cases may be read to make intent more significant.

Plaintiff's allegations make it plausible that BCM knew this valuation was false because it was the manager of the assets it was valuing, and its "sole shareholder" was Graham, allowing me to "impute [his] knowledge . . . to the corporation." IMG Fragrance Brands, LLC v. Houbigant, Inc., 759 F. Supp. 2d 363, 380 (S.D.N.Y. 2010) (citing Mediators, Inc. v. Manney, 105 F.3d 822, 827 (2d Cir. 1997)); see also 546-552 W. 146th St. LLC v. Arfa, 863 N.Y.S.2d 412, 414 (App. Div. 1st Dep't 2008) ("[T]he alleged malefactors were the only members and managers of the LLCs at the time the agreements for the payment of the undisclosed commissions were entered into, and, therefore, their acts and knowledge are imputed to the LLCs." (citing Center v. Hampton Affiliates, 497 N.Y.S.2d 898 (1985)).

(Reply Memorandum in Further Support of Defendants' Motion to Dismiss ("Reply Mem.") at 12.) Essentially, the "sole shareholder" rule imputes the shareholder's knowledge of the wrongful conduct to the corporation, making the corporation a guilty party as well.Mediators, Inc. v. Manney, 105 F.3d 822, 827 (2d Cir. 1997);546-552 W. 146th St. LLC v. Arfa, 863 N.Y.S.2d 412, 415 (N.Y. App. Div. 2008). IMG and Dana argue that the controlling law is Florida law, which rejects Mediators.

(Reply Memorandum in Further Support of Defendants' Motion to Dismiss ("Reply Mem.") at 12.) Essentially, the "sole shareholder" rule imputes the shareholder's knowledge of the wrongful conduct to the corporation, making the corporation a guilty party as well.Mediators, Inc. v. Manney, 105 F.3d 822, 827 (2d Cir. 1997);546-552 W. 146th St. LLC v. Arfa, 863 N.Y.S.2d 412, 415 (N.Y. App. Div. 2008). IMG and Dana argue that the controlling law is Florida law, which rejects Mediators.

See, e.g.,Elder v. Greer (In re Sand Hill Capital Partners III, LLC), 2010 WL 4269622, 2, 2010 Bankr.LEXIS 3785, 6 (Bankr.N.D.Cal. Oct. 22, 2010); 546-552 W. 146th St. LLC v. Arfa, 54 A.D.3d 543, 863 N.Y.S.2d 412, 415 (1st Dep't 2008). Furthermore, imputation of officer acts to the corporation is simply an application of more general agency law.