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Decided on March 20, 2006
Supreme Court, New York County
Soterios (Steve) Tzolis and Vicky Tzolis, individually and in the right
and on behalf of Pennington Property Co. and Pennington Property Co.
LLC, Plaintiffs,

against

Herbert Wolff, 316 Pennington LLC, Jay Podolsky, Stuart Podolsky, Sol
Orbuch, Rita Cwern, Irving Goldofsky, Sam Goldofsky, Solomon
Freedman, Parkway LLC, Pennington Leasing Corp., and Toby
Birnbaum, Defendants.







108353/05
Herman Cahn, J.
This is an action by two minority members of a limited liability company, Pennington Property Co. LLC, the former owner of a building located at 316 West 95th Street on the Upper West Side of Manhattan.
Plaintiffs bring this action on their own behalf, and derivatively on behalf of the limited liability company, and on behalf of Pennington Property Co., the general partnership that previously owned the building, to redress claimed breaches of fiduciary duty by their fellow partners/members.
The alleged breaches consist of the leasing of the LLC's property in 1994, and its subsequent sale in 2005, at prices that plaintiffs allege are far below fair market value. Plaintiffs also contend that the sale of the LLC's sole asset required the unanimous consent of the members, which was not obtained.
Defendant 316 Pennington LLC moves to dismiss the First Amended Complaint as against it, CPLR 3211(a)(1), (3) and (7), and to cancel the notice of pendency filed against its property, CPLR 6514.
Defendants Jay and Stuart Podolsky cross-move for the same relief, also arguing that plaintiffs' claims are barred by documentary evidence, that plaintiffs lack capacity to sue, and that the complaint fails to state a cause of action for aiding and abetting a breach of fiduciary duty.
Defendant Herbert Wolff cross-moves to dismiss as against him, CPLR 3211(a)(1), (3), (5) and (7), on the grounds of documentary evidence, lack of capacity, expiration of the statute of limitations with respect to the fifth cause of action, and failure to state a claim. [*2]
Defendant Solomon Freedman cross-moves for summary judgment dismissing the claims asserted against him, CPLR 3212.[FN1]
Finally, plaintiffs cross-move for leave to file a second amended complaint, CPLR 3025(b).


FACTUAL ALLEGATIONS
In May of 1977, several individuals formed a general partnership called Pennington Property Co. to purchase a building located at 316 West 95th Street in Manhattan, known as the Hotel Pennington, which has seven floors and approximately 184 single-room-occupancy units (the Property). Originally, there were nine partners with the following ownership interests:
Plaintiff Steve Tzolis 10%
Plaintiff Vicky Tzolis 15%
Defendant Irving Goldofsky 10%
Defendant Sam Goldofsky 10% Defendant Herbert Wolff 10%
Margot Wolff 25%
Rita Cwern 10%
Erna Berlin 5%
Bennet Cutler 5%
100%
Subsequently, defendants Toby Birnbaum and Mark Cwern acquired Rita Cwern's 10% interest. Defendant Herbert Wolff acquired Erna Berlin's and Bennet Cutler's 5% interests, and controls the shares owned by Margot Wolff, now deceased.
On October 1, 1980, the partnership leased the Property to non-party 316 West 95th Street Hotel Corp. for a 21-year term, expiring on September 30, 2001 (the First Lease).
Plaintiffs allege that, on November 1, 1994, seven years before the First Lease was to expire, the partnership secretly granted a new lease of the Property to defendant Pennington Leasing Corp. for a 30-year term, commencing on October 1, 2001 (the Second Lease). Plaintiffs allege that the shareholders of Pennington Leasing Corp. were all friends and family of certain of their partners, and that the lease rent was well below market value. Plaintiffs claim that they were not informed of the Second Lease until late in 2001, and that it was never approved or authorized by them.
On or about September 25, 1995, Pennington Property Co. LLC (Pennington LLC) filed Articles of Organization, converting the partnership to a limited liability company. The membership interests remained the same. The Articles of Organization provide that Pennington LLC is to be managed by one or more members. Plaintiffs allege, on information and belief, that defendant Herbert Wolff acted as the de facto manager of the company. No operating agreement was ever executed.
On or about May 1, 1997, Pennington Property Co. transferred the Property to Pennington LLC; the deed was recorded on May 30, 1997. [*3]
In 2003, defendant Parkway LLC, a company owned and controlled by defendants Jay and Stuart Podolsky, acquired Pennington Leasing Corp., lessee under the Second Lease.
On March 28, 2005, defendant Solomon Freedman, purportedly as a "Managing Member" on behalf of Pennington LLC, executed a contract to sell the Property to defendant 316 Pennington LLC, another company owned and controlled by the Podolskys. The sales price was $1.9 million. Plaintiffs allege that Freedman had no authority to act for Pennington LLC. It is noted that Freedman does not appear to be a member of Pennington LLC.
On April 26, 2005, approximately a month later, Freedman wrote a letter to each member of the LLC advising them of the sale and requesting and recommending that each sign an "Approval, Consent and Authorization" form enclosed with the letter. This document provided that, by signing, the member approved the sale of the Property for $1.9 million. Each signing member also consented to the buyer paying Freedman and Wolff a $100,000 fee "for negotiating the sale" of the Property, along with two other buildings, and authorized Freedman or Wolff to execute the deed on behalf of Pennington LLC. Defendants Wolff, Birnbaum and Cwern, together representing 55% of the members of Pennington LLC, signed the consent form.
Plaintiffs allege, upon information and belief, that Toby Birnbaum received approximately $50,000 of the $100,000 paid to Freedman and Wolff.
The First Amended Complaint contains six causes of action. The first and second seek declaratory judgments that the sale of the Property to 316 Pennington is void and that the Second Lease was unauthorized and also void, CPLR 3001. Plaintiffs allege that Freedman did not have the authority to sign the documents on behalf of Pennington LLC and that the sale was without the required consent or vote of the members because, as interested parties, Wolff and Birnbaum could not sign the consent forms. Plaintiffs further allege that the sale price was for substantially less than market value, and thus unlawful and unconscionable. In the second cause of action, plaintiffs allege that Parkway LLC's acquisition of Pennington Leasing Corp. (the holder of the Second Lease) constituted an assignment of the Second Lease, which required the landlord's prior written consent, and that consent was not obtained.
The remaining four causes of action assert claims for breach of fiduciary duty against the various defendants. Plaintiffs, both individually and on behalf of Pennington Property Co. and/or Pennington LLC, seek at least $10,000,000 in compensatory damages and an additional $1,000,000 in punitive damages.
The third cause of action, asserted against Wolff and Freedman, alleges that Wolf, as manager of Pennington LLC, and Freedman, as its attorney and authorized agent, owed a fiduciary duty to the company and to plaintiffs. Wolff and Freedman are alleged to have breached those duties by selling the Property for a small fraction of its value, and by receiving improper payments or benefits at the expense of the company or other members. The fourth cause of action, asserted against defendants 316 Pennington LLC, the Podolskys and Birnbaum, is for aiding and abetting the aforesaid claimed breach of fiduciary duty.
In the fifth cause of action, Wolff and the Goldofskys are sued based on their status as partners of Pennington Property Co. By entering into the Second Lease in 1994 with a company controlled by their family and friends at well below market value, these defendants allegedly engaged in self

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