Fakiris v. Gusmar Enters. LLC, et al., Index No. 14652/14, 11/21/2016 (Ritholtz, J.)

Summary Judgment; Fiduciary Duty; Judicial Dissolution; Temporary Receivership

By: James Clarke | Staff Writer

Plaintiff Marina Fakiris (“Marina”), her brother Defendant Kostas Fakiris (“Kostas”), and their late father Peter Fakiris (“Peter”) formed Defendant Gusmar Enterprises, LLC (“Gusmar”), a real estate company. Marina and Kostas served as the managing members while Defendant Neubauer (“Neubauer”) served as Gusmar’s comptroller. Importantly, Neubauer retained the power to cast the deciding vote during any disagreement concerning the management of Gusmar. After Peter’s death, Marina initiated lawsuits against her mother regarding Peter’s estate. Kostas sided with his mother during these suits, therefore the relationship between Marina and Kostas began to deteriorate. First, Kostas and Marina disagreed on whether to litigate against their insurance company over a five hundred-thousand-dollar policy, which Kostas ultimately pursued despite Marina’s objections. After the insurance company settled, Marina refused to provide her consent to have the settlement funds released from escrow. Second, Marina refused to refinance two of Gusmar’s mortgages, causing Gusmar’s default. Finally, after Neubauer resigned from Gusmar, Marina became uncooperative in appointing her replacement, leaving them without a deciding vote.

As a result of the countless disagreements, Marina subsequently filed suit against Kostas and Neubauer seeking: (1) to exercise her right to an accounting of Gusmar, (2) to remove Kostas as managing member, and (3) to impose liability on both Kostas and Neubauer under theories of breach of fiduciary duty, gross negligence, and unjust enrichment. Marina claimed that Kostas was improperly managing Gusmar’s finances, and that Neubauer had conflicts of interest preventing her from casting her deciding vote as required. In response, Kostas asserted counterclaims against Marina, and moved for judicial dissolution of Gusmar on the basis that the management of the company had become so dysfunctional that it was no longer practicable to operate the business.

Marina then cross-moved for the appointment of a temporary receiver to wind up Gusmar’s affairs, and moved for summary judgment on her claims.

The Court granted Kostas’ motion for judicial dissolution and Marina’s motion for the appointment of a temporary receiver. A court may order dissolution of an LLC whenever it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement. Here, the Court held that Kostas established prima facie that the management of Gusmar had become so dysfunctional that it was no longer reasonably practicable to operate the business. The appointment of a temporary receiver to wind up an LLC’s affairs is warranted upon cause shown. The Court held that, due to the level of the parties’ managerial dysfunction, the appointment of a temporary receiver to wind up Gusmar’s affairs was a necessity.

The Court denied Marina’s motion for summary judgment, finding that issues of fact required disposition by trial.

Fakiris v. Gusmar Enters. LLC, et al., Index No. 14652/14, 11/21/2016 (Ritholtz, J.).

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