Opinion
INDEX NO. 650913/2012
01-02-2020
JOERN MEISSNER, individually and derivatively on behalf of MANHATTAN REVIEW LLC, Plaintiff, v. TRACY YUN and MANHATTAN ENTERPRISE GROUP LLC, Defendants.
NYSCEF DOC. NO. 763 MOTION DATE __________ MOTION SEQ. NO. 016 & 017
DECISION + ORDER ON MOTIONS
MASLEY, J. : The following e-filed documents, listed by NYSCEF document number (Motion 016) 557, 558, 559, 560, 561, 562, 563, 564, 565, 566, 567, 568, 569, 570, 571, 572, 573, 574, 575, 576, 577, 578, 579, 580, 581, 582, 583, 584, 585, 586, 587, 588, 589, 590, 591, 592, 593, 594, 595, 596, 597, 598, 599, 600, 601, 602, 603, 604, 605, 606, 607, 608, 609, 610, 611, 711, 713, 716, 718, 719, 720, 721, 722, 723, 724, 725, 726, 727, 728, 729, 730, 731, 732, 733, 734, 735, 736, 737, 738, 739, 751, 752, 753 were read on this motion to/for SUMMARY JUDGMENT(AFTER JOINDER. The following e-filed documents, listed by NYSCEF document number (Motion 017) 612, 613, 614, 615, 616, 617, 618, 619, 620, 621, 622, 623, 624, 625, 626, 627, 628, 629, 630, 631, 632, 633, 634, 635, 636, 637, 638, 639, 640, 641, 642, 643, 644, 645, 646, 647, 648, 649, 650, 651, 652, 653, 654, 655, 656, 657, 658, 659, 660, 661, 662, 663, 664, 665, 666, 667, 668, 669, 670, 671, 672, 673, 674, 675, 676, 677, 678, 679, 680, 681, 682, 683, 684, 685, 686, 687, 688, 689, 690, 691, 692, 693, 694, 695, 696, 697, 698, 699, 700, 701, 702, 703, 704, 705, 706, 707, 708, 709, 712, 714, 717, 740, 741, 742, 743, 744, 745, 746, 747, 748, 749, 750, 760 were read on this motion to/for SUMMARY JUDGMENT(AFTER JOINDER.
In Motion Sequence Number (Motion) 016, individual defendant Tracy Yun (pro se) moves, pursuant to CPLR 3212, for summary judgment dismissing the remaining claims in plaintiff Joern Meissner's amended complaint (FAC), dated August 24, 2012 (NYSCEF Doc. No. [NYSCEF] 615, FAC), including breach of fiduciary duty (Count I) and defamation (Count VI). Yun further seeks permission to "renew" Motions 012 and 014, seeking fees and sanctions, both of which were previously denied without prejudice to a new motion after the action has been resolved. (NYSCEF 428, 12/21/17 Decision 012; NYSCEF 553, 8/10/18 Decision 014).
In Motion 017, plaintiff moves, pursuant to CPLR 3212, for partial summary judgment on the issue of liability against Yun for plaintiff's remaining denominated-direct breach of fiduciary duty claim surrounding her dissolution of Manhattan Review LLC (MR LLC), a Delaware Limited Liability Company (LLC), owned (at least initially) jointly by plaintiff and Yun (together, the parties) and her disposition of certain MR LLC assets.
The parties ask to consolidate their Motions and deem all papers submitted in connection with Motions 016 and 017 together. In the interest of brevity, the court will consider their submissions together given that the parties have collectively submitted nearly 200 exhibits and other papers in connection with their competing Motions for summary judgment.
As a preliminary matter, the court notes the similarity between Motion 17 and plaintiff's Motion 01, both for summary judgment on his fiduciary duty claim. Judge Oing denied the motion finding issues of fact. (NYSCEF 59, 2/26/14 decision, affirmed 126 AD3d 565 [1st Dept 2015]). Since that decision, this action has had a long and tortured history of delay, discovery disputes, personal and professional hostilities, and accusations of lack of candor with the court from both sides. (See generally e.g. Motions 006 - 015). With discovery finished and the note of issue filed, the court has all of the parties' documents before it, making reconsideration permissible.
The court also notes, as context, the staggering number of related actions with their numerous appeals in various state and federal courts during the nearly eight-year span since this action was commenced. (e.g. Manhattan Review LLC v Yun, 2017 WL 1330334, at *1 [SDNY Apr. 10, 2017], report and recommendation adopted 2017 WL 3034350 [SDNY July 17, 2017], appeal withdrawn 2017 WL 7668579 [2d Cir Dec. 4, 2017]; Manhattan Review LLC v Yun, 2017 WL 11455317, at *1 [SDNY Sept. 21, 2017], aff'd 919 F3d 149 [2d Cir 2019], subsequently aff'd 765 Fed Appx 574 [2d Cir 2019]; Manhattan Review, LLC v Yun, 2019 WL 1003385, *1 [Del Ch Mar. 1, 2019.
Background
Justice Oing, formerly presiding over this action, granted defendants' Motion 003 in 2015 and dismissed, pursuant to CPLR 3212, plaintiff's derivative claims, including the derivative portion of the breach of fiduciary duty claim plaintiff alleges in Count I, on the basis that he lacks standing/capacity to pursue those claims as he never annulled the Certificate of Cancellation (Certificate) dissolving MR LLC under Title 6, Section 18-805 of the Delaware LLC Act. (NYSCEF 100, Oing, J., 07/06/2015 Decision and Order [2015 Decision]). The 2015 Decision, affirmed by the First Department (Meissner v Yun, 150 AD3d 455, 455 [1st Dept 2017], appeal dismissed, 29 NY3d 1108 [2017]), sets forth many of the pertinent, undisputed facts and early procedural history and is incorporated into this decision. Thus, the court now only briefly recounts the background of this action as relevant to resolve Motions 016 and 017
It is undisputed that plaintiff and Yun co-founded MR LLC in March 2005 and that both parties were, at least at the outset, members and managers of MR LLC. The parties were romantically involved during much the time between MR LLC's formation and its dissolution in December 2011-January 2012. The dissolution was effectuated by Yun's obtaining the Certificate from the Delaware courts and it is also not disputed that Yun was a managing member at the time that MR LLC was dissolved. To date, plaintiff has not annulled the dissolution by revoking the Certificate in the Delaware Chancery Court. (See generally e.g. NYSCEF 559, 628, 728, 741 [the parties' affidavits]).
Despite the parties' countless exhibits and affidavits relating to Motions 016 and 017, there is no valid and enforceable operating agreement for MR LLC on this record. Instead, there are two "signed" versions of a purported operating agreement. First, a signed operating agreement, dated March 10, 2005 (Signed OA) (NYSCEF 729; see also NYSCEF 639 [unsigned draft operating agreement]), signed by only Yun, who asserts that she signed for herself and for plaintiff. (See NYSCEF 741, ¶¶ 5, 31 [Yun aff opp to Mot. 017]; NYSCEF 628, ¶ 28 [pl aff sup Mot. 017] [denying that he signed the 2005 Signed OA]). Second, a copy of the Signed OA with an appended amendment (Amended OA), dated May 20, 2017, giving Yun 100% ownership of MR LLC (NYSCEF 643), which was also signed by Yun, only (assertedly on behalf of herself and for plaintiff, at his request). (See NYSCEF 628, ¶¶ 28-29 [plaintiff denying that he signed the Amended OA and stating he does not know who signed his name on that document]; NYSCEF 741, ¶¶ 5, 45 [Yun asserting that she signed the Amended OA on plaintiff's behalf]). In addition to denying that he signed the Signed or Amended OA, plaintiff asserts that he has no recollection of ever signing an operating agreement of any kind for MR LLC and does not know if one exists. (NYSCEF 628, ¶¶ 23, 28).
Discussion
"[T]he proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact." (Ayotte v Gervasio, 81 NY2d 1062, 1062 [1993] [internal quotation marks and citation omitted]). "Failure to make such showing requires denial of the motion, regardless of the sufficiency of the opposing papers." (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]). If the movant makes the requisite showing, the burden shifts to the opposing party to present evidentiary facts sufficient to raise triable issues of material fact. (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). The court is required to examine the evidence in the light most favorable to the opposing party. (Martin v Briggs, 235 AD2d 192, 196 [1st Dept 1997]), and summary judgment "should not be granted where there is any doubt as to the existence of a triable issue" of fact. (American Home Assur. Co. v Amerford Intl. Corp., 200 AD2d 472, 473 [1st Dept 1994]).
MR LLC is a cancelled Delaware limited liability company. Accordingly, the court applies the law of New York to procedural matters and Delaware law to substantive matters in addressing the breach of fiduciary duty claim. (Royal Park Investments SA/NV v Stanley, 165 AD3d 460, 461 [1st Dept 2018]).
1. Plaintiff's Breach of Fiduciary Duty Claim (Motions 016 and 017)
In Motion 017, plaintiff seeks partial summary judgment against Yun for his "direct" breach of fiduciary duty claim. While the court permitted plaintiff to pursue his directly-asserted claim for breach of contract in the early stages of this action, while dismissing the derivative portions of the complaint, the parties have now completed discovery and laid bare their proof. In Motion 016, Yun moves for summary judgment dismissing the fiduciary duty claim arguing that it is effectively an improper derivative claim, not direct.
The parties dispute, in large part, the membership interest that each held throughout the course of MR LLC's existence. (See e.g. NYSCEF 655-659 [tax forms for MR LLC]). Even assuming that plaintiff was 70% membership owner and Yun was 30% membership owner throughout the relevant periods of time, the absence of a valid operating agreement renders plaintiff's breach of fiduciary duty claim purely derivative and, therefore, plaintiff has failed to establish prima facie entitlement to judgment as a matter of law as to the issue of Yun's liability. Similarly, the lack of an operating agreement establishes Yun's prima facie entitlement to summary judgment dismissing plaintiff's breach of fiduciary duty claim as he lacks standing without having obtained an annulment of the Certificate in the Delaware courts.
This court has previously found, and the First Department affirmed, that plaintiff lacks capacity to pursue derivative claims on behalf of MR LLC. Under Delaware law, a plaintiff must nullify the Certificate of Cancellation under § 18-805 in an action in the Delaware Chancery Court in order to bring derivative claims on behalf of a dissolved LLC. (Otto v Otto, 110 AD3d 620, 620 [1st Dept 2013], citing Del. Code Ann. Tit. 6, § 18-805, Matthew v Laudamiel, 2012 WL 605589, *21-22, 2012 Del.Ch. LEXIS 38, *76 [Del Ch 2012]).
Here, plaintiff has not demonstrated that he nullified the Certificate and, therefore, he lacks standing to maintain any derivative claims on behalf of MR LLC. (See Meissner, 150 AD3d at 455). Further,
"[T]he dissolution and cancellation of [a Delaware LLC] does not transform derivative claims into direct claims held proportionately by the LLC's members . . . ; instead, after the filing of the certificate of cancellation, such claims must be brought in the name of the LLC by a trustee or receiver appointed under . . . § 18-805, or directly by the LLC or derivatively by its members after reviving the LLC by obtaining revocation of its certificate of cancellation."(Matthew, 2012 WL 605589, at *21). Additionally, § 18-805 is intended to protect a dissolved LLC's members and "addresses concerns regarding a multiplicity of suits" as "the undistributed claims of a cancelled LLC may not[] . . . be asserted directly by some of the LLC's former members." (Id.). Accordingly, plaintiff's noncompliance with the nullification provisions of the Delaware LLC Act are not excused by the dissolution of MR LLC.
In the absence of a valid operating agreement, plaintiff's claim is wholly derivative, no matter how it is denominated in the FAC. Under Tooley v Donaldson, Lukin & Jenrette, Inc. (845 A2d 1031 [Del. 2004]), "[t]he inquiry 'must turn solely on the following questions: (1) who suffered the alleged harm (the corporation or the suing stockholders, individually); and (2) who would receive the benefit of any recovery or other remedy (the corporation or the stockholders, individually)?'" (Reith v Lichtenstein, 2019 WL 2714065, at *10 [Del Ch June 28, 2019], quoting Tooley, 845 A2d at 1033). The court looks to the nature of the wrong and to whom or to what entity the relief would be awarded. (Id. at *10). A direct claim is that in which the plaintiff "demonstrate[s] that the duty breached was owed to the [member] and that he or she can prevail without showing an injury to the [company]." (Id. [internal quotation marks and citation omitted]).
Plaintiff asserts that he was "directly" harmed by Yun's breaches of fiduciary duty surrounding her dissolution of MR LLC without his consent in that she: misappropriated $150,000 from an MR LLC's bank account; assigned two MR LLC trademarks to her own competing business, Manhattan Elite Prep (MEP); took MR LLC reviews and certain online presences (e.g., a Facebook page, etc.) and reframed them as pertaining to MEP; engaged MR LLC's employees, contractors (e.g, teachers), and non-employees (e.g., students) for MEP by representing that MR LLC had rebranded itself as MEP; misappropriated MR LLC's business telephone numbers for MEP; misappropriated and sold MR LLC test preparation materials (e.g., test preparation books) for MEP; and misappropriated the content of an MR LLC marketing brochure for MEP's use. (See NYSCEF 628, ¶¶ 66-73 [pl's aff supp Motion 017]).
Each of those alleged breaches of fiduciary duty (self-dealing, diversion of business opportunities from MR LLC to MEP, and misappropriation of MR LLC's assets) constitute injuries sustained directly by MR LLC, not plaintiff. Any relief for the harm plaintiff asserts in support of Motion 017 would necessarily be awarded to MR LLC, first, then redistributed as appropriate under Delaware law (e.g., to its creditors, if any, and/or to its members in proportion to their percentage of interest in the LLC) as it applies to a dissolved LLC winding down its affairs in the absence of an operating agreement providing alternative procedures.
In an attempt to characterize his fiduciary duty claim as direct in nature, plaintiff argues, among other things, that Yun was a minority-interest holder who harmed plaintiff's managerial and voting authority, as well as plaintiff's economic interest, under the MR LLC operating agreement. Plaintiff's reliance on the Signed OA is misguided as the document is undisputedly signed by Yun, only, and is not valid and enforceable. (See NYSCEF 643 at 12 [signed by Yun alone]). Plaintiff does not assert that the parties entered any informal agreement regarding dissolution-related procedures for MR LLC.
Absent an enforceable operating agreement for MR LLC (either formal or informal), plaintiff has failed to establish a harm he sustained that is distinct from those which may flow indirectly to him through some harm that MR LLC may have incurred. Yun raised the defense of plaintiff's lack of standing to commence this action at the inception and in her amended answer and plaintiff's failure to obtain an annulment of the Certificate in the Delaware courts plainly precludes plaintiff from having the standing/capacity to pursue this breach of fiduciary duty claim, requiring denial of plaintiff's motion for partial summary judgment and granting Yun's motion to dismiss as to plaintiff's fiduciary duty claim, in opposition to which plaintiff does not raise a triable issue of fact.
Plaintiff's argument that the claim is direct, relying on James Talcott, Inc. v Wilson Hosiery Co. (32 AD2d 524, 525 [1st Dept 1969]), Pimpinello v Swift & Co. (253 NY 159, 162 [1930]), and related cases for the premise that Yun is bound by the terms of the Signed OA because she signed that document, regardless of whether plaintiff ever signed an operating agreement for MR LLC, do not yield an alternative result. Those cases are distinguishable from this action in that they largely deal with circumstances under which a party sought to void a signed instrument on the basis that the party did not read or comprehend the otherwise enforceable agreement. (See e.g. Pimpinello, 253 NY at 162). Those cases do not contemplate situations in which, as here, only one party signed a contract and the record is bereft of an executed or enforceable agreement.
Plaintiff's further arguments that his fiduciary duty claim is direct, not derivative, are likewise unsupported by the law on which he relies. The cases on which plaintiff relies on involve, variously, corporate agreements and stockholders' voting rights and/or liquidation and distribution rights under formal, executed agreements, and, in one instance, an oral agreement regarding an executive's compensation. For instance, plaintiff's reliance on Gentile v Rossette (906 A2d 91, 102-103 [Del 2006]), in which the plaintiff's allegations of a stock-dilution injury that diminished his shareholder voting rights and caused him economic loss were adequate to survive a motion to dismiss as a mixed derivative-direct claim in a shareholder's derivative action, is misplaced. There is nothing in this record that demonstrates that plaintiff was deprived of some contractual right with regard to the operations of MR LLC that would constitute a direct injury sustained by him distinct from the injuries that would flow to him derivatively through MR LLC.
Thus, having granted Yun's motion as to plaintiff's breach of fiduciary duty claim, the court does not address her additional arguments relating to that claim in this decision. Additionally, the court has considered plaintiff's remaining arguments both in support of Motion 017 and in opposition to Motion 016 and, to the extent that they are properly before the court, finds that they do not demand a different result.
2. Plaintiff's Defamation Claim (Motion 016)
Yun has failed to establish prima facie entitlement to dismissal of plaintiff's defamation claim requiring denial of that portion of Motion 016.
The allegedly defamatory statements at issue are contained in Yun's December 18, 2011 (2011 Email) and January 9, 2012 (2012 Email) emails. In the 2011 Email (NYSCEF 730), sent by Yun to Professor Sonke Albers and at least two other individuals at plaintiff's place of employment, a European university, Yun states that plaintiff had recently "fraudulent[ly]" transferred $210 thousand from MR LLC's bank account, that she/MR LLC "will file a civil lawsuit . . . and email all [plaintiff's] associates and contacts in [his professional] industry until he returns the entire money [sic]," which will "negatively affect your institution's reputation and recruiting situation." (Id.). She further expresses doubt in the 2011 Email that plaintiff, "a person of such unethical conduct[,] can be the right person on your team as a professor." (Id.). Yun also stated that plaintiff "evaded significant income taxes anywhere [sic] . . . by maintaining a bank account . . . offshore." (Id.).
In the 2012 Email, filed only in redacted form such that the recipient's name has been removed, Yun wrote to one of plaintiff's colleagues and stated that plaintiff had returned most, but not all, of the funds removed from MR LLC's bank account and beseeched the colleague to ask plaintiff to return MR LLC's web-domain and server controls as well as the outstanding MR LLC funds. (NYSCEF 731). Further, she wrote that plaintiff "has a long track record of violating internet domain registration laws and anti cyber-privacy [sic] laws since 1999," including cybersquatting restrictions, "avoiding taxes in Europe," and threatened to commence various legal actions against plaintiff if his MR LLC-related actions were not corrected. (Id.).
Any and all future filings will conform with the current Part 48 Rules and Procedures and include an unredacted copy filed under temporary seal on NYSCEF for the court to access or else will not be considered.
Yun contends that the defamation claims founded on theft of MR LLC funds, tax evasion, and illicit internet-based activity should be dismissed as plaintiff cannot demonstrate that the statements at issue are untrue. Yun has failed, however, to meet her burden to establish entitlement to judgment as a matter of law by eliminating all triable issues of fact as to the veracity of the alleged defamatory statements.
Yun has also failed to establish entitlement to summary judgment on the basis that plaintiff cannot demonstrate damages resulting from the statements. "A defamation plaintiff must plead special damages unless the defamation falls into any one of four per se categories," including "statements charging the plaintiff with a serious crime" and "statements that tend to injure the plaintiff in her trade, business or profession." (Nolan v State, 158 AD3d 186, 195 [1st Dept 2018] [internal quotation marks and citations omitted]). Here, these are precisely the two categories of defamation per se that plaintiff alleges. No special damages need be demonstrated for a defamation per se claim to survive a motion for summary judgment. (See id.). "The baseline for any discussion about what constitutes defamatory material is that it tends to expose a person to hatred, contempt or aversion, or to induce an evil or unsavory opinion of [that person] in the minds of a substantial number of the community, even though it may impute no moral turpitude to [that person]." (Id. [internal quotation marks and citation omitted]).
Here, summary judgment must be denied as the allegedly defamatory statements published by Yun to plaintiff's colleagues at his university fall within the ambit of defamation per se exceptions as the allegedly defamatory statements would potentially expose a person to aversion or induce an unsavory opinion of that person in his community and charged plaintiff with serious crimes (tax evasion, fraudulent business practices, violation of internet-regulation laws). They further impute, ostensibly and if found to have been falsely made after trial, moral turpitude to plaintiff as an unethical individual. While truth is a complete defense to a defamation claim, Yun has not established that her statements were indisputably and substantially true and, therefore, her motion is denied as to plaintiff's defamation claim, regardless of any proof or lack of proof of pecuniary damages. 3. Yun's Requests to "Renew" Motions 012 and 014 for Fees and Sanctions (Motion 016)
Yun's requests to renew Motions 012 and 014, both of which sought penalties against plaintiff and his attorney and were denied without prejudice, are not briefed or supported in her papers submitted with Motion 016 and, accordingly, the application to "renew" those motions is denied. Further, while the court denied those motions without prejudice to a new motion after resolution of this action (e.g. NYSCEF 428 [denying Motion 012 without prejudice]), this decision and order does not dispose of this action in its entirety. In any event, if Yun deems those motions to be appropriate after this action has been fully resolved, she may file a single new motion that comports with the Part Rules, Commercial Division Rules, and the Uniform Rules for New York Courts regarding the matters contemplated in Motions 012 and 014 within 30 days of the court's entry of its decision/order disposing of this action (e.g., a decision after trial or an order otherwise concluding this action).
Accordingly, it is
ORDERED that Motion 016 is granted in part, and plaintiff Joern Meissner's first cause of action for breach of fiduciary duty is dismissed; and it is further
ORDERED that Motion 016 is otherwise denied and the prongs of Motion 016 that seek to "renew" previously-denied Motions 012 and 014 are denied without prejudice to a new motion to be made, if at all, within 30 days of the court's entry of a decision/order resolving this action in its entirety; and it is further
ORDERED that Motion 017 is denied; and it is further
ORDERED that the parties shall familiarize with the current Part 48 Rules and Procedures and comport with those Rules immediately and throughout the remainder of this action; and it is further
ORDERED that motions in limine, if any, shall be filed within 30 days of entry of this decision and order on NYSCEF by the court or else they are waived; and it is further
ORDERED that the parties shall appear for a pretrial conference at which a date will be selected for trial on the issue of liability for plaintiff's defamation claim and any remaining counterclaims asserted by Yun on February 7, 2020, at 3:30 PM. Motion Seq. No. 016: 1/2/2020
DATE
/s/ _________
ANDREA MASLEY, J.S.C. Motion Seq. No. 017: 1/2/2020
DATE
/s/ _________
ANDREA MASLEY, J.S.C.