Opinion
3280/06.
Decided September 18, 2006.
Parisi and Patti, LLP, Attorneys for Petitioners, White Plains, New York.
Sills Cummis Epstein Gross P.C., Attorneys for Respondents, New York, New York.
The following papers numbered 1 to 47 were read on respondents' motion to dismiss this CPLR Article 78 proceeding, which seeks, inter alia, a judgment declaring the individual petitioners herein the victors of an election held at the annual meeting of respondent United States Tennis Association Eastern, Inc. ("USTA/Eastern") on January 21, 2006 based on irregularities and illegalities petitioners assert occurred during the election, or, alternatively, a judgment annulling the election and ordering that a new election be held:
PAPERS NUMBERED
Amended Verified Petition/Exhibits A-I1-10 Notice of Motion 11 Affidavit of Dorris Herrick, Exhibits A-N12-21 Affidavit of Dale G. Caldwell 22 Affidavit of Barrie Markowitz 23 Memorandum of Law 24 Affidavit of Gerard E. Cuva in Opposition to Respondents' Motion, Exhibits 1-825-33 Affidavit of Lou Dimock in Opposition to Respondents' Motion 34 Affidavit of Charlotte Gordon in Opposition to Respondents' Motion 35 Affidavit of Marlene Beckenstein in Opposition to Respondents' Motion 36 Affidavit of Denise Jordan in Opposition to Respondents' Motion 37 Reply Affidavit of Doris Herrick, Exhibits O-S38-43 Reply Affidavit of Aaron Segal, Exhibits A-F44 Reply Memorandum of Law 45 Verified Answer 46 Verified Reply and Objection in Point of Law 47
Upon the foregoing papers, respondents' motion to dismiss is decided as follows.
FACTUAL AND PROCEDURAL BACKGROUND
This Article 78 proceeding arises out of the election for officers and members of the 2006/2007 Nominating Committee of USTA/Eastern, which occurred at the annual meeting of USTA/Eastern on January 21, 2006 (the "election"). USTA/Eastern is a not-for-profit corporation organized under the laws of New York State, the purposes of which are to represent the interests of the United States Tennis Association, Inc. ("USTA/National") in the geographic regions designated to USTA/Eastern in its bylaws ( i.e., New York, Connecticut [with the exception of Stamford] and New Jersey [with the exception of certain townships/boroughs]), by "promot[ing] the development of tennis as a means of healthful recreation and physical fitness," by "establish[ing] and maintain[ing] rules of fair play and high standards of sportsmanship" (USTA/Eastern Constitution at ¶ 3 A and B, Affidavit of Dorris Herrick ["Herrick Aff."], Ex. A), and by "[c]ooperating and working in conjunction with all recognized tennis programs in the colleges, schools and local municipalities located within the territorial jurisdiction of . . . [USTA/Eastern]" (USTA/Eastern Bylaws, Article IV, § 4, Herrick Aff., Ex. A).
USTA/Eastern elects officers and members of its Nominating Committee every two years at its annual meeting, which usually occurs in January. The officers/members are unpaid volunteers. USTA/Eastern's Nominating Committee interviews candidates and then recommends a slate of candidates (the "Committee Slate") that is then presented to the members. If there is an opposing slate, then a formal election is held. There have only been three elections since USTA/Eastern's formation in 1978 the most recent being the election in January 2006.
The eleven individual petitioners, Gerard E. Cuva, Kit Byron, Rob Schmitz, Alex Fernandez, Hemel Cosme, Daniel Burgess, Sylvester Almiron, Mike Gordon, Kathy Miller, Lorraine Rohlson and Steve Pekick (the "individual petitioners"), are members of the organizations that are members of USTA/Eastern (Affidavit of Gerard E. Cuva ["Cuva Aff."] at ¶¶ 6-7). The individual petitioners are also the candidates who were nominated to run as officers or members of the 2006-2007 Nominating Committee on the slate of candidates that were running in opposition to the Committee Slate (the "Alternate Slate"). According to petitioner Cuva, "[a]ll of Petitioners who were candidates in the January 2006 election were members of an organization listed in Respondent's Exhibit L and Delegates of their respective organizations and, as such, were entitled to vote at the Annual Meeting pursuant to Article IX Section 2 of USTA/Eastern Constitution" (Cuva Aff. at ¶ 10).
Petitioner Cuva was the candidate for President, petitioner Byron for Vice President, petitioner Fernandez for Secretary, petitioner Schmitz for Treasurer, and petitioners Burgess and Cosme for Members at Large.
Petitioners Almiron, Gordon, Miller, Rohlson and Peckick were nominated to be elected as the members of the 2006-2007 Nominating Committee.
Two of the candidates were actually running on both the Committee Slate and the Alternate Slate. Those two candidates are Alex Fernandez who ran as Secretary on the Alternate Slate and was elected as Treasurer on the Committee Slate, and Steve Pekich who ran on both the Committee Slate and the Alternate Slate as a candidate for membership to the 2006-2007 Nominating Committee. The final overlap between the two slates was that both had the same candidates for Regional Vice Presidents of the Northern, Long Island, Western, Metro and Southern Regions.
Petitioners Asian Americans of Rockland ("Asian Americans") and International Christian Fellowship ("Fellowship") are organizations that are alleged to have submitted applications for membership and filing fees to USTA/Eastern prior to the election but denied membership status and, accordingly, voting rights in the election.
Respondents Dale Caldwell, Sharman McCoach, Roberta Feldman, Brian Hainline, Ben Bucca, Elaine Viebranz, Loretta Van Raalte and Lex Kessler are the current officers and members of USTA/Eastern's 2006/2007 Nominating Committee who won the election on the Committee Slate by a vote of 6080 to 6000. Respondent Aaron Segal was the Chairman of the Membership Committee at the time of the election.
Respondent Caldwell was elected President, respondent McCoach, Vice-President, respondent Feldman, Secretary, respondent Fernandez, Treasurer, and respondents Hainline and Bucca, At-Large Members.
Respondents Viebranz, Van Raalte, Segal and Kessler were nominated as members of the 2006-2007 Nominating Committee.
Petitioners' Grounds for Setting Aside the Election
The crux of petitioners' argument is that respondents violated USTA/Eastern's bylaws and New York's Not-For-Profit Corporation Law ("N-PCL") when, among other things, certain organizations' membership applications were delayed, questioned and/or rejected shortly before the election causing the ballots submitted by these organizations not to be counted. It is undisputed that the right of an organization to vote in a USTA/Eastern election depends upon whether the organization's name appears on USTA/Eastern's Annual Membership Report (the "Membership Report"), which is prepared no later than December 31st of any given year (USTA/Eastern Bylaws, Article VI, § 6, Herrick Aff., Ex. A). Petitioners contend that had these organizations' applications been timely accepted, their names would have appeared on the Membership Report and their ballots would have been counted. Because it is petitioners' position that these organizations represented approximately 750 votes for the Alternate Slate, petitioners contend that had the organizations' votes been counted, the Alternate Slate would have won the election ( see Cuva Aff. at ¶ 13[e]; Amended Petition at ¶ 40).
Petitioners argue that the election should be set aside due to the following irregularities/illegalities having occurred:
(1) Petitioners contend that although demanded, the Alternate Slate was denied election inspectors in violation of N-PCL § 621 and in violation of past practices. Petitioners further allege that USTA/Eastern hired a non-member accountant to count ballots in the absence of representatives from the Alternate Slate.
(2) Petitioners contend that although duly demanded, the Alternate Slate was denied a recount of the ballots in violation of N-PCL § 621. Petitioners further allege that this was in violation of USTA/Eastern's past practices, which have permitted recounts.
(3) Petitioners contend that in violation of Article VII, § 12 of the bylaws, which requires the Management Committee to rule on all applications for memberships, the Management Committee was not consulted and did not rule on all of the applications for membership that voted in the election. In particular, petitioners allege that during the December 2005 campaign, Aaron Segal, the Chairman of the Membership Committee, wrongfully instructed Doris Herrick, the Interim Executive Director of USTA/Eastern, to question and delay 17 member organizations that had submitted applications to become members of USTA/Eastern even though "[n]o memberships submitted in 2004 and most of 2005, under Aaron Segal's tenure as Membership Committee Chairman, were investigated or examined" (Cuva Aff. at ¶ 20). It is undisputed that the membership applications for these 17 organizations were sent to USTA/National by Dr. Slyvester Almiron, a supporter and candidate of the Alternate Slate. It is further alleged that Aaron Segal never called a meeting and unilaterally determined which applications should be accepted even though he had no authority to do so. Petitioner Cuva avers that these 17 organizations represented 425 votes for the Alternate Slate (Cuva Aff. at ¶¶ 26-27).
Petitioners allege that the 17 organizations and the eighteen "15 Love" organizations submitted ballots to the sectional office even though USTA/Eastern had not mailed ballots to these organizations but had mailed the ballots to the organizations listed on the Membership Report (Amended Petition at ¶¶ 32, 38; Herrick Aff. at ¶ 15).
(4) Petitioners allege that respondents further denied memberships to organizations affiliated with "15 Love," an Albany member organization of USTA/Eastern. The petition alleges that "[o]n November 29, 2005, Amber Ablan, Executive Director of 15-LOVE Albany filed applications and filing fees for each of the said eighteen organizations by mail pursuant to Article V Section 2 of the By-Laws" (Amended Petition at ¶ 31). Petitioner Cuva likewise avers that in November 2005, "15 Love" submitted eighteen new organization memberships for their Albany sites by properly mailing them to USTA/National's office (Cuva Aff. at ¶¶ 25, 29). Cuva contends that since petitioner Robert Schmitz is a prominent board member of "15 Love," respondents knew that the votes from these organizations would be in favor of the Alternate Slate (Cuva Aff. at ¶ 30). According to petitioners, these applications suspiciously disappeared and were never processed by respondents.
(5) Petitioners contend that the Alternate Slate was denied an opportunity to review the eligibility of 38 applications submitted by service organizations affiliated with New York Junior Tennis League ("NYJTL"). It is alleged that despite the fact that these 38 applications were similar in character to the applications of the organizations at issue in this proceeding, the applications were not questioned, were accepted for membership and the organizations were permitted to cast 950 votes in the election (presumably in favor of the Committee Slate) (Cuva Aff. at ¶ 41). The alleged similarities between those applications and the applications of the 17 organizations are that the applications were not completed separately insofar as they were all paid for out of NYJTL's corporate checking account, were all in the same handwriting, were all signed by the same person (Skip Hartman, President of NYJTL), were all identified with same return address, and were all mailed from the same post office (Cuva Aff. at ¶ 41).
(6) Petitioners allege that the Nominating Committee ordered Doris Herrick to use the USTA/Eastern's corporate funds to finance the mailing of campaign materials in favor of the Nominating Committee's Slate in derogation of past practices wherein each slate has financed their own campaign (Amended Petition at ¶¶ 33-34). Petitioners claim that although the individual respondents claim USTA/Eastern did not pay for their mailing, they have failed to produce proof that they paid for the mailing or reimbursed USTA/Eastern for the cost of the mailing (Cuva Aff. at ¶ 21).
Petitioners' first through third causes of action assert that respondents' decision to disregard the ballots submitted by the 17 organizations was an abuse of discretion, in violation of lawful procedures, and arbitrary and capricious. The fourth cause of action asserts that respondents' failure to process the applications from the eighteen "15 Love" organizations was arbitrary and capricious. The fifth cause of action alleges that the individual respondents' use of USTA/Eastern corporate funds to support the Committee Slate was a violation of lawful procedures. Finally, the sixth cause of action alleges that respondents' hiring of the accountant to count the ballots in the absence of the representatives of the Alternate Slate was a violation of lawful procedures. In addition to seeking an order directing respondents to count the ballots cast by the 17 organizations and declaring the individual petitioners the officers and members of the 2006/2007 Nominating Committee, petitioners also seek an order enjoining the individual respondents from holding themselves out as the officers of USTA/Eastern and from exercising the powers attendant to those positions ( e.g., hiring/firing, spending funds, appointing committees, etc.).
Respondents' Motion to Dismiss
Respondents move to dismiss the proceeding on the grounds that: (1) the individual petitioners lack standing to bring this proceeding pursuant to N-PCL because it is their organizations not the individual petitioners themselves that are the members of USTA/Eastern and the only ones entitled to vote in the election; (2) the organizational petitioners Asian Americans and Fellowship also lack standing since they were not listed as members of USTA/Eastern on the December 31, 2005 Membership Report and had no right to vote in the election; (3) contrary to petitioners' claims, three of the 17 organizations whose votes were allegedly not counted were actually counted since their names appeared on the Membership Report; (4) the documentary evidence establishes that as a matter of law, the remaining 14 organizations as well as the eighteen "15 Love" service organizations were not members of USTA/Eastern as of December 31, 2005, and, therefore, pursuant to USTA/Eastern's bylaws, none had the right to cast a vote in the election; and (5) USTA/Eastern's hiring the services of a certified public accountant, Alan B. Koblick, to collect and tabulate the ballots was done with the consent of petitioner Cuva, and petitioners have no right under N-PCL to require election inspectors or a recount.
According to respondents, unlike the allegations relating to the 17 organizations, petitioners have not alleged that any of the "15 Love" service organizations was a member of USTA/Eastern as of December 31, 2005 (Verified Answer at ¶ 69).
The Membership Applications from the 17 Organizations
In support of their motion to dismiss the proceeding, respondents' affiant, Dorris Herrick, the Interim Executive Director of USTA/Eastern during the time of the election, avers that three of the 17 organizations ( i.e., Christopher Morely Park, Apertate, Inc., and North Woodmere Park) were actually listed on the Membership Report as of December 31, 2005 and their votes were counted in favor of the Alternate Slate (Herrick Aff. at ¶ 41). With regard to the other 14 organizations, it is respondents' position that USTA/Eastern simply followed standard operating procedure which requires that whenever USTA/Eastern has a concern over a membership application, USTA/Eastern representatives are required to follow up with a questionnaire sent to the organization and, in some cases, a telephone interview, prior to making a decision on the application (Herrick Aff. at ¶ 13; Reply Affidavit of Aaron Segal ["Segal Reply Aff."] at ¶¶ 9-12). Because USTA/Eastern representatives were still conducting their investigation into these applications as of December 31, 2005, these organizations were properly omitted from the Membership Report.
According to Ms. Herrick, on December 20, 2005, she was notified that USTA/National had received the 17 membership applications at issue in this case, that USTA/National would be processing three of them but that the remaining 14 would be forwarded to USTA/Eastern for processing since they seemed a "little suspicious." Ms. Herrick further avers that she "was aware of accusations of irregularities in past elections with respect to last minute membership applications that were intended to stuff the ballot box' and thereby influence the outcome of an election" (Herrick at ¶ 21). These 14 applications were delivered to Ms. Herrick on the evening of December 20, 2005. According to Ms. Herrick, the applications were deemed suspicious because they all had the same handwriting, included money orders that had been purchased from the same post office on the same day (December 16, 2005), and all were mailed at or about the same time. Ms. Herrick avers that she was unaware of the sympathies of these 14 organizations to the slates of candidates, and that she was committed to remaining neutral and ensuring a fair election. Ms. Herrick contends that she requested guidance from Aaron Segal, the Chairman of USTA/Eastern's Membership Committee, regarding the proper handling of the 14 membership applications. He advised her that the appropriate procedure was to learn more about the applicant's tennis activity by having them respond to a questionnaire. On December 27, 2005, Ms. Herrick sent the questionnaires to the 14 organizations, requesting that each one respond by January 10, 2006. According to Ms. Herrick, 11 of the 14 organizations returned their questionnaires. Based on the questionnaire responses and the follow-up telephone calls, three of the organizations (the Russian Convent Tennis Club, West Haverstraw Tennis Association, and Malate Tennis Association) were denied membership because they either failed to return their questionnaire or because they did not engage in any tennis activity ( see Letters dated February 9, 2006, Herrick Aff., Ex. K). It is unknown whether or not any of the other 11 organizations was ever granted membership status subsequent to the election.
Based on the Herrick Affidavit and the exhibits annexed thereto, the irregularities found in the questionnaire responses included: (1) the organizations Asian Americans of Rockland and the Rockland Centennial Lions Club list the same director Ted de Guzman and list the same address and telephone number; (2) the applications of International Christian Fellowship, Ladies Circle Tennis Club and the West Nyack Medical Center Sports list the same contact person, Marilou Ibalio, and state that they have no members, staff and tennis programs; (3) the phone number listed in the West Nyack Medical Center Sports' response is the same phone number listed by the Russian Convent Tennis Club; (4) the questionnaires returned by Talila Club, Filam Methodists of Rockland, Jeanal Sports Center, and Asian Americans of Rockland were all faxed from either Nyack Hospital or Nyack Admit Services; and (5) two questionnaires (Rockland Centennial Lions Club and Joe Rizal Lodge Tennis Club) were faxed back at the same time with the incorrect date running across the top of the page of April 18, 2004.
LEGAL DISCUSSION
The Propriety of this Proceeding Being Brought Pursuant to CPLR Article 78 Rather Than N-PCL § 618
Petitioners instituted this proceeding pursuant to CPLR Article 78 on the grounds that the determinations made with respect to (1) the denial of membership status to the 17 organizations and the eighteen "15 Love" organizations, (2) the use of USTA/Eastern funds to support a mailing for the Nominating Committee Slate, and (3) the hiring of the accounting firm to count the ballots in the absence of representatives of the Alternate Slate and the denial of a recount, were in violation of lawful procedures, arbitrary, capricious and an abuse of discretion. However, in opposition to respondents' motion to dismiss, petitioners have requested that pursuant to CPLR 103(c), this Court treat the proceeding as having been brought pursuant to N-PCL § 618 rather than CPLR Article 78. Even respondents concede that this defect is not fatal and may be cured by this Court's deeming the proceeding to have been brought pursuant to the appropriate statute.
The Court notes that this is not the first time a proceeding seeking relief pursuant to N-PCL § 618 (or its counterpart in the Business Corporation Law "BCL") has been brought pursuant to the provisions of CPLR Article 78. Courts have had differing views as to the propriety of using this procedural mechanism to review an election pursuant to N-PCL § 618 ( compare Matter of R. Hoe Co., 309 NY 719, affg 285 AD 927, affg 14 Misc 2d 500; Matter of Workmen's Benefit Fund of U.S. v. Michel, 265 AD 176, lv denied 265 AD 991, with Matter of Ohrbach v. Kirkeby, 3 AD2d 269; Matter of Burke v. Wiswall, 193 Misc 14). The Appellate Division, Second Department has held that "a proceeding pursuant to Business Corporation Law § 619 [the BCL's statutory counterpart to N-PCL § 618] is the exclusive method available to a shareholder to test the validity of an election. . . ." ( Chiulli v. Reiter, 130 AD2d 617, 618).
Based on the foregoing, the Court agrees with both petitioners and respondents and believes that this action is more properly brought pursuant to N-PCL § 618. That statute provides:
"[u]pon the petition of any member aggrieved by an election and upon notice to the persons declared elected thereat, the corporation and such other persons as the court may direct, the supreme court at a special term held within the judicial district where the office of the corporation is located shall forthwith hear the proofs and allegations of the parities, and confirm the election, order a new election, or take such other action as justice may require" (N-PCL § 618).
Accordingly, pursuant to the authority of CPLR 103 (c), this Court deems this action to have been brought in the appropriate form pursuant to the proper statute ( Matter of Malatestinic v. Board of Educ. of City of New York, 132 AD2d 661).
Petitioners' Standing to Institute this Proceeding
In support of their motion to dismiss this proceeding, respondents argue that because petitioners were not members of USTA/Eastern as of December 31, 2005 or otherwise entitled to vote in the election, they lack standing to bring this proceeding. Petitioners oppose respondents' standing argument by alleging that the individual petitioners were the delegates entitled to vote on behalf of their respective organizations, all of which were listed as members of USTA/Eastern on the Membership Report of December 31, 2005. Alternatively, petitioners request that should this Court find that petitioners lack standing, the organizations represented by the individual petitioners should be granted leave to intervene as petitioners in this action pursuant to CPLR 1013. Petitioners, however, make no arguments in opposition to the motion to dismiss with respect to petitioners Asian Americans and Fellowship.
Pursuant to N-PCL § 618's terms, any shareholder or member of a corporation aggrieved by an election may institute a proceeding to review the election, and the meaning of the term "member aggrieved" should not be strictly construed ( Matter of R. Hoe Co., 14 Misc 2d at 504). Based on the standard for standing set forth in the statute, courts have held that a person having a right to vote is a person aggrieved and entitled to institute a proceeding pursuant to N-PCL § 618 ( see Wyatt v. Armstrong, 186 Misc 216, 223 ; Matter of Green Bus Lines, Inc., 166 Misc 800, 802). Similarly, a member of a benefit society nominated as a candidate for office has been found to have standing as a party aggrieved within the meaning of the statute ( Matter of Workmen's Benefit Fund of U.S., 265 AD at 178). However, courts have denied standing to petitioners who were not stockholders at the time of the election, holding that they "cannot be aggrieved by an election in which. . . . [they] had . . . [no] right to participate" ( Matter of Scheel, 134 AD 442, 443; see also Matter of Hammond Light Power Co., 131 Misc 747).
Accordingly, because respondents have not rebutted petitioners' assertion that the individual petitioners had the right to vote in the election as the delegates of the member organizations, and given their status as the candidates defeated by the Committee Slate, the Court finds that the individual petitioners have standing to institute this N-PCL § 618 proceeding. However, the organizational petitioners have not established themselves to be members aggrieved by the election since they were not listed as members on the Membership Report as of December 31, 2005 and, therefore, were not entitled to vote in the election. Accordingly, the Court finds that petitioners Asian Americans and Fellowship are without standing to institute this proceeding and are hereby dismissed as petitioners to this proceeding.
Standard of Review in an N-PCL § 618 Proceeding
The law is well settled that in reviewing an election pursuant to N-PCL § 618, the court sits as a court of equity and "should not interfere in the internal affairs of a corporation. . . . unless a clear showing is made to warrant such action'" ( Nyitray v. New York Athletic Club of City of New York, Inc., 195 AD2d 291, quoting Matter of Scipioni v. Young Women's Christian Assn. of Rochester and Monroe County, 105 AD2d 1113; Matter of F.I.G.H.T., Inc., 79 Misc 2d 655, 659). This follows the view that "[t]he conduct of private corporate affairs should be interfered with as little as possible" ( Matter of Ohrbach, 3 AD2d at 273). Thus, courts hold that election procedures of corporations are not to be disturbed in the absence of a showing of fraud or wrongdoing in the election ( Matter of Parisi v. New York County Medical Socy., 177 AD2d 369, 370). The "[q]uestion for determination . . . is whether or not this election was conducted legally, fairly and in good faith" ( Burke, 193 Misc at 17).
Despite the deferential treatment courts afford to the internal operations of corporations (including their elections), courts will nevertheless "direct a new election where the election under review is so clouded with doubt or tainted with questionable circumstances that the standards of fair dealing require the court to order a new, clear and adequate expression'" ( Matter of Faraldo v. Standardbred Owners Assn., Inc., 63 AD2d 1010, 1011, quoting Matter of F.I.G.H.T., Inc., 79 Misc 2d at 659). The test is not whether the outcome is in fact changed by the irregularity but whether the outcome could have been affected ( Jackson v. First Dist. Dental Socy., 240 AD2d 265, 266; see also Matter of Faraldo, 63 AD2d at 1011 [petition is not insufficient on its face for failure to establish that petitioner would have won the seat but for the claimed irregularities]).
In support of their application to dismiss this proceeding, respondents contend that the election "was conducted in a manner that was, in all respects, fair, proper and in accordance with Eastern/USTA's By-Laws and agreed upon procedures" (Herrick Aff. at ¶ 3). In opposition, petitioners argue that (1) respondents rely on documents that do not qualify as the type of documentary evidence permitted to be used to support a motion to dismiss pursuant to CPLR 3211(a)(1) ( e.g., correspondence, affidavits, the USTA/Eastern Membership Report as of December 31, 2005, membership applications), and (2) the documents relied on by respondents do not definitively dispose of petitioners' claims and instead raise questions of fact requiring a hearing in this proceeding (Petitioners' Memorandum of Law at 6).
To begin with, while captioned a motion to dismiss, the application is more appropriately viewed as a motion for summary judgment. First, the standard this Court is required to apply to determine whether a hearing should be ordered pursuant to N-PCL § 618 is identical to the standard that would apply to a motion for summary judgment i.e., "a hearing is required only where issues of fact material to the determination are raised" ( Nyitray, 195 AD2d at 291; see also Matter of East Rockaway Trade Assn., Inc., 285 AD2d 551; Matter of Unexcelled, Inc. v. Unexcelled, Inc., 28 AD2d 44; Teperman v. Atcos Baths, Inc., 7 AD2d 854; Fort Hamilton Dev. Corp. v. Bay Ridge Towers, Inc., 190 Misc 2d 335). As explained by the Appellate Division, Second Department:
"[i]f this proceeding . . . [is to] be considered one pursuant to section 25 of the General Corporation Law [the predecessor to N-PCL § 619], the Special Term . . . had the power to determine it on its merits on the return day of the application, without a hearing, if the papers raised no triable issue of fact" ( Teperman, 7 AD2d at 855).
Second, petitioners and respondents have treated this motion to dismiss as a motion for summary judgment since they have submitted not only documentary evidence but also affidavits indicating that they have lay bare their proof and have charted a course for summary judgment ( see New York State Higher Educ. Serv. Corp. v. Barry, 267 AD2d 567; Gregware v. Key Bank of New York, 218 AD2d 859, lv denied 87 NY2d 803 ; O'Dette v. Guzzardi, 204 AD2d 291). For both of these reasons, the Court will determine whether petitioners have raised material issues of fact over whether this election was conducted legally, fairly and in good faith.
The Maintenance of the Membership Report by USTA/National Does Not Violate the Bylaws
As petitioners point out, respondents have admitted that the responsibility for maintaining the Membership Report lies with USTA/National, and USTA/Eastern is only provided an electronic version that cannot be altered ( see Affidavit of Barry Markowitz ["Markowitz Aff."] at ¶ 2; Herrick Aff. at ¶ 12; Affidavit of Dale G. Caldwell ["Caldwell Aff."] at ¶ 3). Petitioners contend that this practice violates USTA/Eastern's bylaws (Article VI, § 6), which requires that USTA/Eastern maintain the Membership Report.
As an initial matter, whether or not USTA/National's maintenance of the Membership Report violates the bylaws has no relevance to the main issue involved in this proceeding namely, whether respondents improperly delayed or denied memberships to organizations to influence the outcome of the election. Petitioners have not alleged that USTA/National was responsible for the organizations' names being omitted from the Membership Report rather petitioners lay the entire blame on USTA/Eastern and its representatives. In any event, the Court finds no violation occurred as a result of this practice. Article VI, § 6 of USTA/Eastern's bylaws provides:
"All membership information shall be prepared and consolidated in a report to be known as the USTA/Eastern Annual Membership Report.' Such information shall be forwarded to the Secretary who shall review the Report and shall add thereto the voting strength of each member as defined in the above Article. This Report shall be prepared not later than December 31st of each year and shall be kept on permanent file in the Secretary's records and shall the basis for voting for all Association meetings until the next annual Membership Report is filed, provided the USTA approves or certifies the same as of December 31st" (USTA/Eastern Bylaws, Article VI, § 6, Herrick Aff., Ex. A).
Thus, the bylaws expressly provide for USTA/National's approval or certification of the Membership Report and USTA/National's forwarding of the report to the USTA/Eastern Secretary so that he/she may include the voting strength of each member in the Report. Indeed, the only other requirement of the USTA/Eastern Secretary is that he/she maintains a copy of the Report in his/her permanent file. Petitioners have not alleged that the Secretary failed to do the tasks required by the bylaw. As such, the practice of USTA/National's preparation and maintenance of the Membership Report does not violate the express terms of the above-referenced bylaw and petitioners' contentions to the contrary are without merit.
Petitioners' Claims Regarding The Improper Use of Corporate Funds For The Committee Slate's Mailing Are Insufficient As a Matter of Law
In the Amended Petition, petitioners allege in a conclusory fashion that "[u]pon information and belief, during the course of the campaign USTA/EASTERN INC. expended USTA/EASTERN corporate funds in support of the Nominating Committee Slate against the Alternate Slate" (Amended Petition at ¶ 33). To further buttress their claim, petitioner Cuva avers "[u]pon information and belief, the Nominating Committee ordered the acting Executive Director Doris Herrick to use USTA/Eastern resources to put a mailer out extolling the virtues of the Nominating Committee's Slate, versus the Alternate Slate" (Cuva Aff. at ¶ 21). Petitioners contend that such conduct was a violation of lawful procedures, but they do not provide any support for the proposition that such an unlawful expenditure, in and of itself, would support this Court's invalidation of the election pursuant to N-PCL § 618.
In support of their motion to dismiss this proceeding, respondents have provided the Affidavit of Doris Herrick wherein she avers that she was the person at USTA/Eastern who "signed the checks from October 2005 until just after the election in February 2006. To the best of my knowledge, no corporate funds were spent for or against any of the slates or candidates" (Herrick Aff. at ¶ 44). In her Reply Affidavit, Ms. Herrick also denies petitioner Cuva's assertion that the Nominating Committee ordered her to use USTA/Eastern's funds to send out a mailer extolling the virtues of the Committee Slate (Herrick Reply Aff. at ¶ 6).
Here, respondents have provided prima facie proof that USTA/Eastern's corporate resources were not expended in connection with the Committee Slate's mailer. Thus, Ms. Herrick, who has the requisite personal knowledge as the person responsible for signing USTA/Eastern checks during the period in question, has categorically denied such an expenditure having been made ( see Landa v. Herman, 2005 NY Slip Op 51787 [U] [2005]). Petitioners' assertions that "upon information and belief" they believe corporate funds to have been improperly used, with no evidentiary support whatsoever, are insufficient to raise a triable issue of fact in this regard ( see Wood v. Nourse, 124 AD2d 1020, 1021; see also CK Realty Co. v. ISFC Fabrics Corp., 66 AD2d 697) [conclusory allegations as to a "belief" that there had been an improper transfer of corporate funds were patently insufficient]). Accordingly, petitioners' claims regarding the improper use of corporate funds in connection with the election are insufficient as a matter of law and cannot support this Court's annulment of the election.
Finally, even if petitioners had created an issue of fact over whether USTA/Eastern used corporate funds in connection with the Committee Slate's mailing, the Court would nevertheless have to dismiss this proceeding since this allegation, in and of itself, would be insufficient to justify the Court's ordering that the election be invalidated and there are no allegations in the petition that this expenditure of corporate funds somehow influenced the election result. The Denial of Petitioners' Request to Have Members of the Alternate Slate at the Vote Was Not in Violation of Lawful Procedures
Although petitioners would arguably have a derivative action (providing they provide evidentiary support for their assertions) if indeed USTA/Eastern expended corporate funds on behalf of the Committee Slate's mailing ( see Lawyers' Adv. Co. v. Consolidated Ry. Lighting Refrig. Co., 187 NY 395 [1907]; Cullom v. Simmonds, 285 AD 1051 [1955]), this action cannot be converted to a derivative action since petitioners have not alleged the prerequisites necessary to establish their standing to institute such an action ( see N-PCL § 623[a]; CPLR 3211[a][3]; Barr v. Wackman, 36 NY2d 371, 377 [1975]; Tomczak v. Trepel, 283 AD2d 229 [2001], lv dismissed in part and denied in part 96 NY2d 930 [2001]).
In their sixth cause of action, petitioners contend that respondents' "hiring an non-member [ sic] accountant to count the ballots in the absence of representatives of the Alternate Slate was a violation of lawful procedures" (Amended Petition at ¶ 54). This cause of action is further amplified in petitioner Cuva's Affidavit wherein he states that "[a]lthough demanded, the Alternate Slate was denied election inspectors in violation of Section 621 of the Not for Profit Corporation Law. (See Cuva and Herrick e-mail Exhibits 1 2) and in violation of past practices. (See Dimock Affidavit Exhibit 3)" (Cuva Aff. at ¶ 13[a]). One of the e-mails referenced in petitioner Cuva's Affidavit is an e-mail from petitioner Cuva to Doria Herrick wherein he advises her of his agreement with Bob Byrne (USTA/Eastern's general counsel) that each side will have two observers present at the counting of the votes. It is uncontested that petitioner Cuva's request to have representatives of the Alternate Slate at the election was ultimately denied and, instead, USTA/Eastern hired the services of an accountant to tally the ballots, with Doris Herrick present at the vote count as the neutral observer.
The other e-mail referenced in petitioner Cuva's Affidavit is the e-mail from Doris Herrick to Dale Caldwell and petitioner Cuva wherein she admits that petitioner Cuva would be more comfortable with members of the Alternate Slate present but that as an alternative, he and respondent Caldwell suggested she be present at the vote count as the neutral observer. She also conveyed her understanding that the identities of the organizations casting the ballots were to be kept secret so that the organizations did not feel intimidated by either slate.
The only other evidence petitioners provide is the Affidavit of Lou Dimock, USTA/Eastern's President from 1992-1993 and 2002-2003, and a member of USTA/Eastern management from 1988 to 2005, to show that there is a past precedent for permitting representatives from each slate to be present at the vote count. Thus, Mr. Dimock attests that during the 2002 contested election, the procedure they followed for the election was that each slate had a right to be represented at the vote. USTA/Eastern also hired a retired Supreme Court Judge to be an impartial observer. Mr. Dimock states that when the opposing slate chose not to send someone to the election, they requested a recount, which was granted and the election outcome was confirmed.
The Court finds that petitioners' claim that respondents' violated N-PCL § 621 by failing to permit representatives from the Alternate Slate present at the vote fails as a matter of law. First, the applicable provision is N-PCL § 610 not N-PCL § 621. Second, by its terms, N-PCL § 610 does not afford petitioners the right to select members of the Alternate Slate to be present at the vote count as election inspectors. Finally, even if petitioner Cuva's request that representatives of the Alternate Slate be present at the vote could be viewed as a demand for an election inspector pursuant to N-PCL § 610, that demand was met through USTA/Eastern's hiring of the accountant to count the ballots cast.
N-PCL § 621 involves the rights of members to inspect a not-for-profit's books and records.
N-PCL § 610 provides, in pertinent part:
"[i]f the by-laws require inspectors at any meeting of members, such requirement is waived unless compliance therewith is requested by a member present in person or by proxy and entitled to vote at such meeting. Unless otherwise provided in the by-laws, the board, in advance of any meeting of members, may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at the meeting of members may, and on the request of any member entitled to vote thereat shall, appoint one or more inspectors" (N-PCL § 610[a]).
Because N-PCL § 610 does not give provide members with the right to appoint representatives from their slate of candidates as election inspectors, petitioners' sixth cause of action must be dismissed and there is no basis to annul the election based on the absence of members of the Alternate Slate at the vote.
Petitioners Have Failed to Create a Question of Fact with Respect to Respondents' Processing of Applications from the Eighteen "15 Love" Service organizations
In their Amended Petition, petitioners allege that membership applications from eighteen "15 Love" service organizations that had been submitted to USTA/National mysteriously disappeared. Petitioners suggest that the disappearance occurred because respondents knew that these organizations would be sympathetic to the Alternate Slate since petitioner Schmitz is a prominent board member of "15 Love."
In support of their motion to dismiss, respondents provide evidence that USTA/National did not receive any applications from these "15 Love" affiliated organizations. In the Affidavit of the USTA/National representative responsible for receiving such applications, Barrie Markowitz, the Senior Director — Membership of USTA/National, Mr. Markowitz attests that USTA/National "did not receive applications from any of the 15-Love' service organizations . . . or from 15-Love.' As such, none of these entities were members of USTA/Eastern as of December 31, 2005, and therefore, none were listed in the Report as of December 31, 2005" (Markowitz Aff. at ¶ 7).
In opposition to the motion, petitioners have not provided copies of these applications, and the only evidence petitioners provide in support of their contention that these applications were mailed is petitioner Cuva's statement in his Affidavit that they were properly mailed to USTA/National's office in November 2005 (Cuva Aff. at ¶¶ 25, 29). Petitioner Cuva does not set forth the basis for his knowledge, and it is conceded that petitioner Cuva did not mail the applications since the Amended Petition identifies Amber Ablan as the person from "15 Love" Albany who allegedly mailed the applications (Amended Petition at ¶ 32).
Petitioner Cuva's Affidavit carries no probative value since he has provided no basis for his personal knowledge ( see Hansel'n Gretel Brand, Inc. v. Allstates Food Corp., 86 AD2d 858, 859). Moreover, in order to establish a rebuttable presumption that an item mailed was actually received by the addressee, petitioners would have had to provide proof of mailing, which can be established "either by offering the testimony of the person who actually mailed the letter or by showing that it was the regular office practice to mail such a letter" ( Mount Vernon Fire Ins. Co. v. East Side Renaissance Assoc., 893 F Supp 242, 245; see also Matter of Phoenix Ins. Co v. Tasch, 306 AD2d 288). Here, petitioners have neither proffered an Affidavit from the person responsible for the mailing nor from a person from "15 Love" responsible for such mailings to attest that it was the regular practice of "15 Love" to mail such applications. Accordingly, petitioners have failed to rebut respondents' prima facie showing that USTA/National never received any applications from the "15 Love" service organizations in November 2005. There is no basis for this Court to find that respondents disposed of these applications in order to fix the election in favor of the Committee Slate.
Respondents' Failure to Accord Membership Status to the 17 Organizations
Petitioners' main issue with the election revolves around respondents' failure to count the ballots submitted by 17 organizations constituting 425 votes for the Alternate Slate. It is uncontested that the membership applications were received on December 20, 2005, 11 days prior to the last date on which membership eligibility and consequently voting eligibility can be determined. To begin with, because petitioners have not rebutted respondents' representation that the votes of three of the organizations were counted in favor of the Alternate Slate as their names appeared on the December 31, 2005 Membership Report, the Court finds the number of organizations at issue to be 14.
To show that respondents' actions in investigating and delaying the granting of membership status to these applications violated lawful procedures, petitioners rely on a number of arguments. First, petitioners contend that respondents violated USTA/Eastern's bylaws by failing to have the Management Committee rule on the 14 organizations' applications for membership. Second, petitioners argue that respondents failed to follow past practices (and/or current operating procedure) when they delayed and questioned these membership applications. Third, petitioners contend that respondents gave different treatment to 38 other membership applications received that were identical in character to the 14 applications, yet those applications were processed without any investigation. Petitioners contend that these 38 organizations represented 950 votes. Finally, petitioners rely on the Affidavit of petitioner Cuva wherein he avers that "[d]uring the campaign in December 2005, Doris Herrick . . . informed me that Eastern Membership Chairman, Aaron Segal . . . had instructed her to question and delay 17 member organizations that had submitted applications to join the USTA, even though the section had questioned no new memberships at any time in the past two years" (Cuva Aff. at ¶ 22).
In support their first argument, petitioners rely on the affidavits submitted by respondents which admit that the membership determinations were made by Aaron Segal with the assistance of the Executive Directors during this time frame i.e., first Denise Jordan and later Doris Herrick. Petitioners also submit the Affidavit of Charlotte Gordon. Ms. Gordon, who was a member of the Membership Committee of USTA/Eastern from January 2004 to December 2005, avers that during her tenure on the Membership Committee, she was "never asked to approve, to reject, to make inquiries about, to investigate or to consider any membership organization's application to the USTA/Eastern Section" (Affidavit of Charlotte Gordon at ¶ 3).
To support their second argument, while petitioners admit that during the 2002 election, USTA/Eastern employed the investigative techniques used by Ms. Herrick in connection with the 14 applications, petitioners nevertheless contend that in 2004-2005, USTA/Eastern decided to change its operating procedure in favor of a new one which was to accept, without investigation, all applications received for membership ( i.e., that Mr. Segal made clear in a June 2005 Management Committee Meeting that this procedure was being discarded for a new liberal membership procedure which was to encourage memberships by letting almost anyone become a member). In support of this assertion, petitioners submit the Affidavit of Marlene Beckenstein, the Vice President of the Long Island Region who claims to have attended the "June 5, 2005" Management Committee Meeting of USTA/Eastern to discuss USTA/Eastern's constitution and bylaws. Ms. Beckenstein avers that "[o]ne of the points discussed by Aaron Segal was the ease that people have to become member organizations. At this point, Jerry Cuva raised his hand and asked Does this mean that if Steve Cobb and I signed up together, we could become a member organization?' Aaron Segal then responded with a yes' and said it by saying that more member organizations means more money for the USTA" (Affidavit of Marlene Beckenstein at ¶ 3).
Respondents assert that there was no Management Committee meeting on June 5, 2005, and the meeting closest in time to this date was the meeting held on May 24, 2005.
Petitioners also rely on the petitioner Cuva's Affidavit wherein he avers that it was at that June 2005 Management Committee meeting that management addressed what constitutes a valid organizational membership. Accordingly, it was in this context that Mr. Cuva avers that Aaron Segal stated "that any two people can join USTA Eastern as a member organization. . . ." (Cuva Aff. at ¶ 20). Mr. Cuva further avers that "[n]o memberships submitted in 2004 and most of 2005, under Aaron Segal's tenure as Membership Chairman, were investigated or examined" (Cuva Aff at ¶ 20).
Finally, petitioners submit the Affidavit of Denise Jordan, the Executive Director of USTA/Eastern in June 2005. In her Affidavit, Ms. Jordan confirms that after the 2002 contested election, USTA/Eastern "imposed a very stringent policy that included a questionnaire, and a thorough investigation of any new candidate for membership" (Affidavit of Denise Jordan at ¶ 7). Ms. Jordan then contends that this policy was changed based on Aaron Segal's statement at a June 2005 Management Committee Meeting that they were disposing of their multi-layer review process in favor of accepting all membership applications without review.
With regard to their third argument, the only evidentiary support provided is petitioner Cuva's assertion in his Affidavit that these 38 applications shared the same characteristics as the 14 applications at issue ( e.g., that they were all sent from the same NYTL address, paid for from the same corporate checking account, and were in the same handwriting), yet the 38 applications were processed without being sent questionnaires, were approved for membership, and were entitled to vote in the election. No detail is provided as to when these applications were received or when they were approved for membership.
To begin with, petitioners' allegations that Ms. Herrick and Mr. Segal violated Article VII, § 12 of USTA/Eastern's bylaws by failing to have the Management Committee rule on the applications for membership is specious. Article VII, § 13 of the bylaws specifically empowers USTA/Eastern's President to employ (with the consent and approval of the Management Committee) an Executive Director, and the bylaws also empower the Executive Director to be the chief administrative officer of USTA/Eastern. In such capacity, the Executive Director is to "assist the officers in carrying out their duties and do such other tasks as may be assigned by the President" (Bylaws, Article VII, § 13). Based on the additional evidence set forth below, it is evident that it has been USTA/Eastern's practice, at least since 2002, to delegate the Management Committee's obligations with respect to membership determinations to the Executive Director and Membership Committee Chair, in accordance with the authority to do so as set forth in the foregoing bylaws.
To prove that it has been USTA/Eastern's practice since at least 2002 to have the Executive Director and Membership Committee's Chairs investigate and render determinations on membership applications, respondents submit a letter from Charlotte and Mike Gordon, the former Co-Chairs of the Membership Committee. The letter annexes a list of approximately 160 organizations that had been investigated during the 2002 election. The Gordons explain that they sent questionnaires to these organizations and that more than 90% never replied. They also describe how they would follow up with phone calls when the returned questionnaires provided insufficient information. Finally, the Gordons explain that USTA/National does nothing to validate the membership applications and that the agreement between USTA/National and USTA/Eastern is that USTA/National would not process an application until USTA/Eastern "approves it as long as that is accomplished within 30 days of . . . [USTA/Eastern] receiving it" (Segal Reply Aff., Ex.C at 2). Doris Herrick similarly avers that as "[a]s Interim Executive director, I continued the practice of my predecessor, Denise Jordan, in sending out questionnaires to organizational applicants, and in reviewing them to determine membership eligibility" (Reply Affidavit of Doris Herrick ["Herrick Reply Aff."] at ¶ 20).
Other than citing to a bylaw suggesting that it is the responsibility of the Management Committee to rule on membership applications, petitioners have provided no evidence to show that having the Executive Director and Membership Committee Chair rule on the applications has not been the standard operating procedure with regard to membership determinations since at least 2002. Petitioners have further failed to rebut that this practice is expressly permitted by the authority vested in the Executive Director to perform USTA/Eastern's officers' duties. Finally, the minutes of the May 24, 2005 Management Committee meeting evidence that this practice was accepted by the members of the Management Committee. Those minutes show that the Management Committee heard Aaron Segal describe "USTA/Eastern's multi-layered review process, which is established to validate every organizational member applicant. There is review by Maureen Fanelli, Aaron and Denise before forwarding of the applications to National" (Segal Reply Aff., Ex. E at 2).
With regard to petitioners' second argument, petitioners' evidence that USTA/Eastern, and more particularly, Aaron Segal, changed its procedure in 2004-2005 away from investigating applications to a blind approval process is belied by the documentary evidence submitted by respondents.
First, petitioners' interpretation of Aaron Segal's remark at the May 2005 Management Committee Meeting does not support petitioners' position that USTA/Eastern shifted away from its standard operating procedure of investigating applications because the minutes irrefutably reflect just the opposite to be the case i.e., that they were continuing their multi-layered review process to validate every organizational applicant:
"[t]opics covered: Membership categories or distinctions, Voting Rights and proportionality . . . Election of Officers procedures clearly spelled out. . . . The second area, membership categories for both organizational and individual, the group spoke about whether the Section had the ability to define these categories for the USTA and therefore no changes were suggested. The third and "hot button" item, namely voting rights, the consensus was to leave the existing definitions. To change because of concern of "vote buying" is essentially" chasing one's tail." Aaron described the USTA/Easterns' multi-layered review process, which was established to validate every organizational member applicant. There is review by Maureen Fanelli, Aaron and Denise before forwarding of the applications to National" (Segal Reply Aff., Ex. E at 2).
In light of the above minutes, Mr. Segal's statement that two people could sign up for organizational membership cannot be construed as meaning that USTA/Eastern was moving to a blind approval process since he also made clear that the legitimacy of the organizations submitting their membership applications would still be verified through their standard multi-layer review process. Finally, and perhaps most importantly, respondents have annexed numerous membership applications (other than the 14 at issue in this proceeding) with accompanying questionnaires that were investigated during the 2004-2005 time frame, thereby conclusively demonstrating that indeed there had been no change in procedure when it came to the investigation of membership applications ( see Segal Aff., Ex. D).
Petitioners' allegations of bad faith in respondents' processing of the 14 applications are also based on their conclusory assertion that 38 organizations' applications (as set forth at ¶ 41 of the Cuva Aff.) submitted to respondents shared the same "suspicious" characteristics as the 14 organizations yet the 38 organizations were granted membership status and their votes were counted in the election. As evidenced by the documentation provided by respondents that has not been rebutted by petitioners, this conclusory assertion is without basis in fact. The evidence demonstrates that eight of the 38 organizations (Charles Pasarell NJTL, IS302/NJTL; IS 29/NJTL; P.S. 122 NJTL; M.S. 167 NJTL; Harry Truman High School; Stadium Tennis Center and Beach Channel NJTL) were not listed on the Membership Report as of December 31, 2005 and, therefore, these organizations were not entitled to vote in the election. Moreover, with regard to the 30 remaining applications, respondents have provided documentary proof that 28 of these 30 applications were either renewal applications or first time applications occurring at least one year (if not earlier) prior to the election at issue in this proceeding. The first time registrations for these membership applications occurred at various times from 1983 to December 2004. Thus, only two applications were submitted in December 2005, Cannasie NJTL and Soundview NJTL ( see Herrick Aff., Ex. L). Respondents have also submitted proof that 17 of these 28 applications, which were submitted for renewal in November 2004, had actually originally been rejected for membership during the 2002 contested election. Thus, during the 2002 election, when USTA/Eastern received these 17 applications, the applications were not approved in time for the organizations to vote in the 2002 election and, instead, like the procedure employed in this election, USTA/Eastern began its investigation into the legitimacy of the membership applications ( see Segal Reply Aff., Exs.C and F). Finally, respondents have provided proof that 21 of these applications were renewed in November 2004 ( see Segal Reply Aff., Ex. F) at a time when there was no reason to suspect that the applications were being submitted to influence the outcome of an election ( i.e., 10 months after the uncontested election of 2004).
As gleaned from a comparison of the organizations listed in paragraph 41 of Cuva's Affidavit and the corporations listed in Exhibits C and F to the Segal Reply Affidavit, the following 17 organizations had submitted renewal applications in November 2004 and had originally been denied membership status during the 2002 election (Bayswater NJTL YTC, Whitestone NJTL YTC, Floral Park NJTL YTC, Morningside NJTL YTC, Forest Hills NJTL YTC, East Elmhurst NJTL YTC, Kensington NJTL YTC, Flushing NJTL YTC, Gravesend NJTL YTC, Bushwick NJTL YTC, Two Bridges/Rutgers NJTL YTC, Crotona Park NJTL YTC, Vitas Gerulaitis NJTL YTC, Linden Park NJTL YTC, Park Slope NJTL YTC, Dutch Kills NJTL YTC, Murphy NYTL YTC.).
With regard to petitioner Cuva's assertion that Doris Herrick admitted that Aaron Segal had instructed her to "question and delay 17 member organizations that had submitted applications to join the USTA, even though USTA/Eastern had not questioned any membership applications in 2004 or 2005," this assertion is belied by the documentary evidence presented. To begin with, as set forth in more detail above, there is no basis for a finding that Aaron Segal and Doris Herrick changed USTA/Eastern's membership approval procedure to a blind approval process during the 2004-2005 time frame given the minutes of the May 24, 2005 membership meeting as well as the numerous membership applications submitted during this time frame that were investigated through the use of questionnaires ( see Segal Reply Aff., Ex. D). Furthermore, there is no basis for this Court to find that the approval process with regard to these applications was purposefully delayed to defeat the members' right to vote given (1) the fact that this same procedure was employed during the 2002 election where the approval of numerous membership applications was not made in time for the organizations to vote in the 2002 election, (2) the fact that USTA/Eastern had 30 days from the date it received an application to approve it before USTA/National would process it, and (3) the fact that there are applications from the 2004-2005 time frame that are annexed as exhibits to the Segal Reply Affidavit that have similar timing in terms of when the applications were submitted to USTA/National as compared to when the responses to the questionnaires were due.
The Court also notes that in her affidavit, Doris Herrick denies having ever made such a comment to petitioner Cuva (Herrick Reply Aff. at ¶ 7).
Many of the questionnaires do not have the blank for when the questionnaire response is due filled in. For the ones that do have the blank filled in, the timing of the receipt of the applications in this case (12/20/05) as compared to when the questionnaire responses were due (1/10/06) comports with the timing found in these other applications. For example, notes on the application for Gotham Tennis Emporium state that the questionnaire was sent on 9/15/04 and the responses to the questionnaire were due on 9/30/04 (Segal Reply Aff, Ex. D). Similarly, the application for FX Tennis Sports LLC was received by fax on 2/8/05 and the responses to the questionnaire were due on 2/28/05 (Segal Reply Aff., Ex. D). Another application from Immaculata Academy, which was likely mailed to USTA/National on or about 11/10/04 ( i.e., the date of the application check) was required to respond to the questionnaire no later than 12/30/04 (Segal Reply Aff., Ex. D).
Given the foregoing evidence, the Court finds that respondents have satisfied their prima facie burden of showing that their treatment of the 14 applications received on December 20, 2005 was in accordance with respondents' standard operating procedures and USTA/Eastern's bylaws. In opposition, petitioners have merely provided conclusory assertions with no evidentiary support. Thus, the Court finds that respondents acted in accordance with USTA/Eastern's bylaws and past practices when it came to investigating membership applications i.e., that respondents' actions continued the procedures implemented by the Gordons in 2002, which was to investigate applications that raised concerns by sending out questionnaires and following up with telephone interviews to the extent the answers to the questions were incomplete. Accordingly, there is no basis for finding that respondents acted in bad faith in an attempt to thwart petitioners' quest for election as USTA/Eastern's officers and members of the Nominating Committee ( see Matter of Burke v. Wiswall, 193 Misc 14 [court refused to set aside election based on acceptance of proxies in favor of successful candidate and rejection of duplicate proxies in favor of unsuccessful candidate since committee conducting election acted honestly and in good faith in determining which proxies to accept]).
Petitioners' Right to a Recount
Petitioners rely on N-PCL § 621 as giving them the right to a recount since it grants any person who has been a member for at least six months the right to examine, on five days prior notice, the minutes of the proceedings of the corporation's members. Petitioners contend that the ballots submitted in connection with the election qualify as such minutes of proceedings of USTA/Eastern's members and are subject to inspection (and, in this case, a recount) pursuant to N-PCL § 621's terms. Petitioners contend that petitioner Cuva has already demanded the inspection based on the Memorandum he provided to USTA/Eastern requesting "an immediate recount of all ballots submitted during the 2006 USTA/Eastern election" by an independent auditing firm to "insure an unbiased count" (Cuva Aff., Ex. 4). By letter dated February 7, 2006, Doris Herrick responded by stating that petitioner Cuva's request for a recount was being denied because there is no provision in USTA/Eastern's bylaws for a recount. In addition to their argument that they are legally entitled to a recount pursuant to N-PCL § 621, petitioners also rely on USTA/Eastern's grant of a recount during the 2002 election as providing a basis for a recount here ( see Affidavit of Lou Dimock ¶ 3).
In opposition to petitioners' application, respondents argue that there was no basis for petitioner Cuva's request for a recount "since the votes were certified by an independent accounting firm . . . which, as the courts have held, is prima facie proof of the facts stated and of the vote certified by them'" (Reply Memorandum of Law at 12, quoting Nyiatray, 195 AD2d at 291). Respondents further argue that N-PCL § 621 does not afford petitioners a right to inspect the ballots in the context of a N-PCL § 618 proceeding since by its terms, it is limited to "books and records of accounts and minutes, and member lists" (Reply Memorandum of Law at 12). Finally, respondents argue that even if N-PCL § 621 permitted a recount, "the individual petitioners have not shown that they satisfied the conditions precedent necessary to invoke the section in the first instance. Thus, the individual petitioners have not shown that they were members of USTA/Eastern entitled to make such a request, or that they submitted the requisite affidavit. More to the point: Mr. Cuva requested a re-count; he did not make a request to inspect the ballots" (Reply Memorandum of Law at 12-13).
Here, as respondents point out and as petitioners concede, "[t]here is no provision in the USTA/Eastern Bylaws for a recount or review of election" (Amended Petition at ¶ 43). Petitioners' argument that USTA/Eastern's denial of petitioner Cuva's request for a recount was a violation of past practices is misplaced. Thus, this Court cannot find that it was a violation of USTA/Eastern's past practices not to permit a recount simply because USTA/Eastern permitted a recount in one election in which different procedures were employed.
As explained in the Affidavit of Lou Dimock, in the 2002 election, the slates had agreed that a representative from each slate would be entitled to attend the vote count. One slate sent a representative but the other slate's representative chose not to attend. USTA/Eastern hired a retired Supreme Court Judge to be an impartial observer and the Secretary of USTA/Eastern tallied the votes. When the other slate requested a recount, it was granted by the winning slate and the losing slate sent a lawyer to recount the votes. Upon recount, the election was confirmed. By contrast, here, an accounting firm was hired to count the ballots. Neither slate had a representative at the vote despite petitioner Cuva's requests that the Alternate Slate be permitted such representation. Finally, it was agreed that Dorris Herrick would be present as the neutral observer.
Petitioners are nevertheless correct in their other argument that respondents' failure to permit a recount violates N-PCL § 621. The issue of whether election ballots constitute corporate records subject to the right of inspection was recently addressed by the Appellate Division, First Department in Matter of Schapira v. Grunberg, 30 AD3d 345, affg 2005 NY Slip Op 52277 [U] [2005]). In that case, petitioners sought a determination by the court that the board of Whitehall Tenant's Corp. consisted of the persons elected by all of the shareholders other than the sponsor shareholder. The vote count in that election was certified by an election inspector in accordance with the provisions of BCL § 610 (the BCL's counterpart to N-PCL § 610). Despite the use of the election inspector, respondents who were shareholders and members of the Board asserted a counterclaim which sought the inspection of the election records pursuant to BCL § 624(b) (the BCL's counterpart to N-PCL § 621). The lower court held that these records were subject to inspection pursuant to BCL § 624, and that BCL § 624(d) provided respondents with the procedural vehicle to compel their disclosure by the court. Nevertheless, the court denied respondents' request pending a hearing to determine whether their demand was being made in good faith and for a proper purpose as required by BCL § 624 (c). The Appellate Division modified that part of the lower court's order finding that:
"the court should have granted the second counterclaim of respondent Board of Directors. . . . to the extent it sought an inspection of the election records, which constitute corporate records, and as such are subject, under the bylaws, to inspection by the directors of the Board . . . Although corporate counsel announced at the election that the voting would proceed by secret ballot, this is not provided for in the bylaws and did not negate the provisions in the bylaws for the inspection of corporate records" ( Matter of Schapira, 30 AD3d at 346).
Thus, it was found that respondents, as board members, had an absolute right to inspect the election ballots pursuant to the corporation's bylaws regardless of their good faith in seeking such inspection.
The Court finds that petitioners' request to compel the inspection of the ballots for the purpose of conducting a recount falls within the right of inspection of corporate records afforded to members pursuant to N-PCL § 621 ( Matter of Schapira, 2005 NY Slip Op 52277 at 6; cf. Matter of Mayer v. National Arts Club, 223 AD2d 440, lv denied 88 NY2d 802). There is no reason to believe that petitioners are not acting in good faith in seeking this inspection. Furthermore, petitioners' offer to have the ballots inspected by an independent accountant selected by them will ensure that the members' interests in keeping their votes confidential will not be disturbed. Accordingly, respondents are directed to provide petitioners' agent with access to the ballots at a time to be mutually agreed upon between the parties, but in no event later than 30 days from the date of entry of this Decision, Order and Judgment.
CONCLUSION
Based on the foregoing, the Court finds that petitioners are entitled to inspect the ballots in order to engage in a recount based on the provisions of N-PCL § 621. However, with regard to the remaining claims found in petitioners' petition, which seek an order from the Court either pronouncing the individual petitioners the victors of the election, or alternatively, directing that a new election be held, the Court finds that respondents have sustained their prima facie burden of showing that there were no illegalities and/or irregularities occurring during the election and that petitioners' petition should be dismissed as a matter of law. Petitioners have failed to provide evidence sufficient to raise a question of fact that any of the procedures and actions taken by respondents were not in accordance with USTA/Eastern's Constitution, bylaws, rules and regulations and New York's N-PCL.
Based on the foregoing, it is ordered and adjudged that the petition is dismissed.
The foregoing constitutes the Decision, Order and Judgment of the Court.