Opinion
2014-06-12
STILWELL VALUE PARTNERS, IV, L.P., etc., Plaintiff–Respondent, v. Diane B. CAVANAUGH, et al., Defendants–Appellants, Northeast Community Bancorp, Inc., Nominal Defendant–Appellant.
Kilpatrick Townsend & Stockton LLP, New York (Jonathan E. Polonsky of counsel), for appellants. Allegaert Berger & Vogel LLP, New York (Richard L. Crisona of counsel), for respondent.
Kilpatrick Townsend & Stockton LLP, New York (Jonathan E. Polonsky of counsel), for appellants. Allegaert Berger & Vogel LLP, New York (Richard L. Crisona of counsel), for respondent.
Order, Supreme Court, New York County (Charles E. Ramos, J.), entered on or about October 23, 2013, which, in a derivative action, denied defendants' motion to dismiss, unanimously affirmed, with costs.
Plaintiff sufficiently alleged with the requisite detail that defendant directors, who sit on the boards of both the defendant parent company, Northeast Community Bancorp, MHC, and its subsidiary, nominal defendant Northeast Community Bancorp, Inc., have a conflict of interest regarding plaintiff's proposed transaction, based on, inter alia, their dual loyalties and self-interest ( see generally Bansbach v. Zinn, 1 N.Y.3d 1, 11, 769 N.Y.S.2d 175, 801 N.E.2d 395 [2003];Marx v. Akers, 88 N.Y.2d 189, 200, 644 N.Y.S.2d 121, 666 N.E.2d 1034 [1996] ). Contrary to defendants' contention, self-interest is not limited to a direct financial interest. Affording the pleading the benefit of every favorable inference ( see Simkin v. Blank, 19 N.Y.3d 46, 52, 945 N.Y.S.2d 222, 968 N.E.2d 459 [2012] ), it also sufficiently alleges that the directors breached their fiduciary duties of loyalty and due care and failed to act in good faith by either failing to adequately consider or to undertake plaintiff's demand to add disinterested directors to Northeast's board or engage in a two step conversion of its structure ( see Auerbach v. Bennett, 47 N.Y.2d 619, 629–631, 419 N.Y.S.2d 920, 393 N.E.2d 994 [1979];534 E. 11th St. Hous. Dev. Fund Corp. v. Hendrick, 90 A.D.3d 541, 542, 935 N.Y.S.2d 23 [1st Dept.2011] ).
Plaintiff also sufficiently alleges that MHC, as Northeast's majority shareholder, breached its fiduciary duty to the minority ( see Alpert v. 28 Williams St. Corp., 63 N.Y.2d 557, 569, 483 N.Y.S.2d 667, 473 N.E.2d 19 [1984] ), and aided and abetted the directors' alleged breach by knowingly providing substantial assistance in refusing to act when under a duty to do so ( see Kaufman v. Cohen, 307 A.D.2d 113, 125–126, 760 N.Y.S.2d 157 [1st Dept.2003] ).
We have considered defendants' remaining contentions and find them unavailing. ACOSTA, J.P., DeGRASSE, RICHTER, MANZANET–DANIELS, FEINMAN, JJ., concur.