Summary
In Darnet Realty, the Court held that the defendants--the managing agent, directors, officers, and sponsor of a cooperative apartment--were entitled to indemnification for reasonable attorneys' fees that the defendants spent in defending against a nonviable RICO claim brought against them (id. at 327-328, 670 N.Y.S.2d 97).
Summary of this case from Bd. of Managers of 28 Cliff St. Condo. v. Maguire,Opinion
March 31, 1998
Appeal from the Supreme Court, New York County (Barbara Kapnick, J.).
which, in an action by a residential cooperative against its former managing agent, directors, officers and sponsor for breach of contract and breach of fiduciary obligations in connection with a lease of retail stores and garage space entered into between the cooperative and its sponsor, insofar as appealed from, denied plaintiff's motion for leave to amend its complaint so as to add a cause of action against all defendants for violation of the Racketeer Influenced Corrupt Organization Act (RICO) statute ( 18 U.S.C. § 1962 [c]), without prejudice to renewal, and denied defendants' cross motion for indemnification of attorneys' fees and expenses incurred by the individual defendants in defending this action, without prejudice to renewal, unanimously modified, on the law and the facts, to deny plaintiff leave to renew or replead the RICO cause of action and to grant defendants' cross motion, and the matter is remanded for a determination of the individual defendants' reasonable attorneys' fees and expenses, and otherwise affirmed, without costs.
We agree with the IAS Court that plaintiff's proposed RICO claim is not sufficiently pleaded, in that it does not allege the content of any false statements in defendants' reports to plaintiff of their lease obligations, does not indicate the role played by each defendant in creating or sending the false reports, and indicates a fraud only on an unspecified out-of-State bank and unspecified out-of-State potential purchasers who are not parties to this action ( see, Mills v. Polar Molecular Corp., 12 F.3d 1170, 1176; Robbins MBW Corp. v. Ashkenazy, 228 A.D.2d 357, 359; Browning Ave. Realty Corp. v. Rubin, 207 A.D.2d 263, 266-267, lv denied 85 N.Y.2d 804). However, concerning the individual defendants' cross motion for pendente lite indemnification of their reasonable attorneys' fees and expenses pursuant to Business Corporation Law § 724 (c), genuine issues of fact and law are raised warranting such relief ( ibid.), defendants having previously succeeded in obtaining the dismissal of the fraud and certain breach of lease of claims, and having presently succeeded in opposing plaintiff's attempt to add a RICO claim ( see, Sierra Rutile v. Katz, 1997 US Dist LEXIS 11018, *7 [SD NY, July 31, 1997, Keenan, J.], citing Sequa Corp. v. Gelmin, 828 F. Supp. 203, 206). Accordingly, the matter is remanded to the IAS Court for a determination of the reasonable attorneys' fees and litigation expenses that should be advanced to the individual defendants, subject to repayment should defendants ultimately be found guilty of the wrongdoing alleged in the complaint ( see, supra).
Concur — Ellerin, J. p. 7 Wallach, Tom and Mazzarelli, JJ.