Opinion
Index No. 156938/2023 Motion Seq. No. 002
02-05-2024
WASYL ZINKEWITSCH, IZZY GJENASAJ, IURII VOVK, BOHDAN PRYJMAK, NICK SKIRKA, ROMAN STELMACH, NATALIA ZINKEWITSCH, Petitioner, v. STEPHEN ATAMANCHUK, BOHDAN SHASHKEWYCH, VALENTIN KOVALENKO, GEORGE PASTERNAK, EUGENE RAWCZAK, ANDREW HRYNIUK, STEVEN GBUR, STEVEN KOVALENKO, LUKASZ STANKOWSKI, TD BANK N.A., THE UKRAINIAN AMERICAN SOCCER ASSN. INC., Respondent.
Unpublished Opinion
MOTION DATE 09/21/2023
PRESENT: HON. NICHOLAS W. MOYNE Justice
DECISION + ORDER ON MOTION
NICHOLAS W. MOYNE, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 002) 44, 45, 46, 48, 49, 51,52, 53,54,55, 56, 57,58, 59,60,69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79,80, 81, 82,83,84,85, 86, 88,90,91, 92 were read on this motion to/for INJUNCTION/RESTRAINING ORDER.
Upon the foregoing documents, it is
This is a hybrid special proceeding and plenary action involving a dispute over control of the Ukrainian American Soccer Assn. Inc., ("UASA"), a non-profit New York corporation.
The special proceeding is brought under sections 618 and 706 of the Not-for-Profit Corporation Law ("NPCL"). The special proceeding seeks an order vacating and annulling the March 11, 2023 election of respondents/defendants S. Atamanchuk, V. Kovalenko, S. Kovalenko, B. Shashkewych, L. Stankowski, and S. Gbur (the "Respondents"), as directors and officers of the UASA. In the plenary action, plaintiffs seek a declaratory judgment and order declaring that they are the duly elected directors and officers of the UASA and that the attempts to remove them from office via a new election were unlawful and/or invalid. Plaintiffs also seek injunctive relief restraining the respondents from accessing UASA accounts and other property and from interfering with the plaintiffs access to UASA accounts and other properties. Additionally, petitioners W. Zinkewitsch("WZ") and N. Zinkewitsch assert a cause of action for defamation against Gbur,
TD Bank, the entity that manages the disputed accounts was also named as a defendant in this plenary action. Subsequently, the court granted TD Bank's motion to dismiss without opposition.
BACKGROUND
The UASA is a New York Not-for-Profit Corporation governed by its Bylaws (Petition at ¶¶ 25-26; WZ Aff. ¶¶ 19). Petitioners were elected to positions as directors and officers of the UASA at an annual meeting held on June 26, 2021. The Bylaws provide that Directors of the UASA hold 3-year terms, and that Officers hold one-year terms but remain in office until their successors "have been elected and qualified, or until his death, resignation, or removal." (WZ Aff. ¶¶ 22-24).
As noted above, this is a hybrid special proceeding and plenary action. For clarity and convenience, the term "Petitioners" will refer to both petitioners and plaintiffs, and "Respondents" will refer to both respondents and defendants.
At the June 26, 2021 election, a voting procedure was adopted and utilized pursuant to which the voting members voted for and elected officers and directors at the same time. This was in apparent violation of the bylaws which require that directors be elected first who would then elect the officers (Petition at ¶36). Petitioners allege that this variation from the bylaws was meaningless and/or trivial given that the voting members elected every director and officer. The Court offers no opinion as to whether this contention is correct as it would be irrelevant to the court's disposition of the motions and petition. What is important is the fact that neither the respondents nor anyone else raised objections to the form or results of the June 26, 2021 election at the meeting and no objections were recorded in the minutes. There were no legal proceedings of any kind instituted to challenge the June 26, 2021 election (WZ Aff. ¶ 31).
Instead of challenging the results of the June 26, 2021 election, the respondents attempted to undo it approximately nine months later. On March 28, 2022, Respondents S. Atamanchuk, B. Shashkewych, and V. Kovalenko tried to call a special meeting to be held on April 8, 2022, the same date as a previously scheduled quarterly meeting, a meeting that the respondents had previously received notice of (WZ Aff. ¶ 40). Their notice for the special meeting did not indicate that the purpose of the special meeting was to undo the election or otherwise remove and replace any of the UASA directors and officers (WZ Aff. ¶ 41, 46). Petitioners rejected the special meeting as conflicting with the previously scheduled quarterly meeting, but allegedly invited respondents to address whatever concerns they had at the previously scheduled April 8th quarterly meeting. This offer was refused, and the respondents went ahead with their own special meeting on April 8, 2022. Petitioners maintain that the April 8, 2022 special meeting was not properly noticed under the bylaws, and is a nullity. The petitioners held their quarterly meeting on April 8, 2022 as planned and produced contemporaneous minutes. Respondents assert that they held a special meeting on April 8, 2022, but the record does not contain any minutes for that alleged special meeting. More than five weeks later, the respondents sent a letter, dated May 14, 2022, claiming that at the April 8, 2022 special meeting, they had voted to remove the petitioners as directors and officers of UASA and then voted to themselves in as replacements for those positions. The respondents notified two credit unions where the UASA maintained accounts that they were claiming to be the rightful officers and directors of UASA. The letter requested control of the accounts. The petitioners responded by notifying the credit union that the respondents had no authority to remove the petitioners as directors, no authority to hold new elections, and that legitimate control of the UASA accounts remained in the hands of the petitioners who were duly elected at the June 26, 2021 meeting.
Petitioners later attempted to penalize the respondents by calling a special meeting for June 24, 2022. The stated purpose of the special meeting was to address the purported unlawful takeover attempt of UASA by the respondents. At the special meeting, the voting members voted to suspend the respondents' memberships in UASA for six months. Eventually, the petitioners voted to permanently revoke the respondents' memberships in UASA. On January 21,2023, respondents, while their memberships were still suspended, sent notice of a special meeting to be held on January 21, 2023. Petitioners argue that the respondents had no right to call a special meeting because their memberships had been suspended, they were not directors of UASA, and they failed to provide proper notification of the special meeting to at least 13 USA members as require under the bylaws. There is no record of what, if anything, occurred at the respondents January 2023 special meeting. After their memberships in UASA were allegedly . terminated by the petitioners, respondents held yet another special meeting on March 11, 2023. At the March meeting, respondents claim to have elected new directors of UASA.
VACATING MARCH 11, 2023 ELECTION
Petitioners are seeking injunctive relief temporarily and preliminarily (1) vacating the March 11,2023 election; (ii) enjoining the respondents from asserting to any non-party that they are the lawful and rightful directors and officers of UASA; (3) enjoining respondents from controlling UASA accounts at TD Bank and other credit unions; (4) enjoining the respondents from interfering with the control and possession of UASA real property in Brooklyn and South Carolina; (5) ordering respondent TD Bank to restore control of the UASA account to the petitioners; and (6) affirming that the petitioners are the duly elected board of directors of the UASA. A preliminary injunction is appropriately granted under Article 63 of the CPLR when the movant demonstrates: (1) a likelihood of success on the merits; (2) irreparable injury absent an injunction; and (3) a balance of equities in favor of the movant (see Manhattan Real Estate Equities Group LLC v Pine Equity, NY, Inc., 16 A.D.3d 292 [T1 Dept 2005]).
In this case, the record is clear that the petitioners are the rightful, duly elected directors and officers of UASA. They were elected on June 26, 2021, and were never lawfully removed or -replaced. While the respondents may have had the ability to remove the petitioners, their attempts to do so fail because they did not follow the proper procedures under the Non-Profit Corporation Law (N-PCL) and the bylaws.
N-PCL 618 authorizes a court to consider the validity of a non-profit corporation election via a special proceeding (see Esformes v Brinn, 52 A.D.3d 459 [2d Dept 2008]). Proceedings brought under N-PCL 618 are the exclusive remedy for contesting the validity of an election of a non-profit corporate director and they are governed by a four-month statute of limitations period (In re Uranian Phalanstery 1st New York Gnostic Lyceum Temple, 155 A.D.2d 302 [Is' Dept 1989]). Both sides claim irregularities in elections held by the other side and both sides invoke the four-month statute of limitations in an attempt to defeat the other side's claims. At first glance, the series of conflicting meetings and special meeting, as well as the various conflicting elections, appears to be a tangled procedural mess. Untangling the mess and determining the rightful directors and officers of UASA requires the court to both interpret and harmonize the relevant provisions of the N-PCL and UASA bylaws and apply some basic equitable principles.
The starting point is the June 2021 election where the petitioners were elected by the UASA membership to positions as directors and officers at an annual membership meeting. The respondents now claim this election was invalid because, inter alia, members voted for officers and directors at the same time instead of first electing directors who would then elect the officers as required by the bylaws. There are multiple problems with the respondents raising this claim. First, the record clearly demonstrates that the respondents were present and freely participated in the June 2021 election without raising any objections to the procedures utilized. Second, there is no evidence that the technical deviation from the bylaws affected the results or caused any prejudice to the respondents given that the members elected both the officers and the directors. Third, and most significantly, neither the respondents nor any other member of UASA asserted any claims regarding the validity of the June 2021 election until at least April of 2023, twenty-two months after the June 2021 election was held.
Respondents filed an affidavit by S. Atamanchuk, sworn to on April 10, 2023. Mr. Atamanchuk alleged that the election violated the Bylaws because it (i) "failed to record eligibility for voting rights five days prior to the meeting;" (ii) the "President was the only vote that was cast by ballet (sic)... the other Officers were through a show of hands in violation of the bylaws," and (iii) after the election "appointed six members of the Board of Directors in violation of the Bylaws which requires that directors be elected by the Members." That affidavit was filed in connection with an earlier special proceeding that was subsequently withdrawn. Prior to that time, there is no indication in the record that any of the respondents objected to any of the procedures used to elect officers and directors at the June 2021 annual meeting.
Since the June 2021 election was valid, any attempts by the respondents to undo or supersede it must be done in conformance with the N-PCL and the UASA bylaws. The first attempt the respondents made was to call a special meeting for April 8, 2022. At that meeting, the respondents purported to hold a vote to remove the petitioners as directors and officers of UASA and elect themselves as replacement officers and directors. Respondents scheduled their meeting to conflict with the previously scheduled quarterly meeting and refused an offer to join the meeting agendas together. This by itself renders the April 8, 2022 special meeting suspect. But even if there was no conflict, the April 8, 2022 special meeting held by the respondents was invalid and a nullity due to lack of timely and proper notice and because the respondents lacked authority to call a special meeting for the purpose of removing duly elected officers and directors.
The April 8, 2022 special meeting was not properly noticed. First, pursuant to N-PCL §603(c), special meetings called by a sufficient number of members (ten percent or more) require a written demand to the specifying the date and month and "shall not be less than two nor more than three months from the date of such written demand." Here, the April 8, 2022 special meeting was called for and held a mere eleven days after the demand was sent to the secretary (see Petitioner's Exh. F, Demand for Special Meeting). Second, per section 4 of the bylaws and N-PCL § 603(c), once the Secretary receives the demand for a special meeting, the Secretary shall promptly give notice of such a meeting ... or if the Secretary fails to do so within five business days thereof, any member signing such demand may give such notice. Per section 5 of the Bylaws, written notice of the special meeting must be given not less than ten or more than five days before the date of the meeting. Here, the notice of the special meeting was sent only three days after the demand was sent to the Secretary, not five. Furthermore, the notice of the * special meeting was sent by the respondents less than ten days before the special meeting was held. Finally, the notice of the special meeting was completely vague as to the purpose of the meeting and certainly gave no notice that the purpose of the meeting was to elect new directors and officers. Therefore, the notice of the special meeting was defective. If proper notice is not given, the meeting is a nullity and any actions taken at that meeting are null and void (see Residents for Equit, and Affordable Permanent Shelter, Inc. v Lawrence, 236 A.D.2d 382 [2d Dept 1997] ["the purported annual meeting held on July 6, 1995, was invalid and therefore, the actions taken at the meeting, including the election of new members to the Board of Trustees, were nullities"]; see also Plumley v Oneida County, 57 A.D.2d 1062, 1062 [4th Dept 1977]).
It should be noted that the respondents lacked the authority to even remove directors of the UASA even if the special meeting for that purpose had been properly noticed. The respondents lacked the authority to remove directors under the Bylaws. Section 6 of the Bylaws dictates the method of removal of a Director, stating "Any director may be removed at any time for cause by a vote of Directors then in office at a regular meeting or special meeting of the Board called for that purpose," The respondents failed to comply with this Bylaw for three reasons. First, the respondents were not "Directors then in office." Second, at the time, there had been no allegations that any director violated a duty to the UASA that amounted to cause for removal. Third, the special meeting was not called for the purpose of removal of directors..
Since any actions by the respondents at the April 8, 2022 special meeting were null and void, it follows that any subsequent actions taken by the respondents which relied upon their alleged election as officers and directors of UASA are also void. Therefore, the respondents' position that they held another special meeting and election on March 11, 2023, is without merit. The so-called March 11,2023 special meeting was completely unauthorized and a legal fiction. At that time, the respondent's memberships were suspended and had not been reinstated. Even if they were members, there is no indication in the record that any notice of the March 11, 2023 special meeting was given to the petitioners, let alone proper notice under the bylaws and the N-PCL. In fact, the respondents held several meetings after the initial April 8, 2022 special meeting and there are no minutes or records concerning any of them. Presumably, these meetings were attempts to cure the deficiencies of the April 8, 2022 special meeting. These attempts failed.
The petitioners are entitled to preliminary injunctive relief. "The party seeking a preliminary injunction must demonstrate a probability of success on the merits, danger of irreparable injury in the absence of an injunction and a balance of equities in its favor" (Nobu Next Door, LLC v Fine Arts Hous., Inc., 4 N.Y.3d 839, 840 [2005]). As set forth above, the petitioners have shown a likelihood of success on the merits. In fact, the petitioners have demonstrated that they are the duly elected board of UASA and that the purported special meetings, at which the respondents contend the petitioners were removed as the board, are nullities. Furthermore, petitioners have shown irreparable injury in that without access to bank accounts they are unable to pay the bills for the UASA and the renovation of the Brooklyn property is delayed. Additionally, "an opportunity for defendants to shift the balance of power and assume management and control of the corporation, may properly be viewed as irreparable injury" (Louis Foodservice Corp, v Konstantinos Vouyiouklis, 2002 NY Slip Op 50448(U), 10 [Sup Ct Kings County Aug. 26, 2002]). Finally, the balance of equities favors the petitioners. Petitioners have demonstrated that they are the directors of the UASA. The respondents are not the legitimate directors of the UASA. Therefore, the respondents do not have a legitimate claim to control of the organization and are not harmed by allowing the petitioners to continue in their elected positions and having control of the UASA's assets. Accordingly, the petitioners are entitled to the injunctive relief they seek.
For the reasons set forth herein above, it is hereby
ORDERED, ADJUDGED AND DECREED that the April 8, 2022, and March 11,2023 special meetings are null, void, and without legal effect; and it is further
ORDERED, ADJUDGED AND DECREED that petitioners Wasyl Zinkewitsch, Izzy Gjenasaj, Iurii Vovk, Bohdan Pryjmak, Dr. Nick Skirka, and Roman Stelmach are the duly elected board of the Ukrainian American Soccer Assn. Inc.; and it is further
ORDERED that pending resolution of this matter, the respondents are enjoined from asserting to any non-party that they are the current directors and/or officers of the Ukrainian American Soccer Assn. Inc.; and it is further
ORDERED that pending resolution of this matter, the respondents are enjoined from controlling, accessing, directing, or authorizing payments from any Ukrainian American Soccer Assn. Inc. depository and checking accounts including, but not limited to those accounts at TD Bank, N.A., Self Reliance NY Federal Credit Union, and the Ukrainian National Federal Credit Union; and it is further
ORDERED that pending resolution of this matter, the respondents are enjoined from interfering with Petitioners' control, administration, and management of UASA's books and records, personal, intellectual, and real property including but not limited to the UASA's real property located at 663 Manhattan Avenue, Brooklyn, NY; and it is further
ORDERED that the balance of the action, including but not limited to Wasyl and Natalia Zinkewitsch's causes of action for libel, slander and defamation against Steven Gbur, and respondents' counter-claims for an accounting and breach of fiduciary duty are severed and continued; and it is further
ORDERED that the parties appear on March 21, 2024, at 2:00PM in Part 41, room 327 of the courthouse located at 80 Centre Street, New York, New York for a conference in this matter.
This constitutes the decision and order of the court.