Commercial Division Blog

Posted: January 14, 2022 / Written by: Jeffrey M. Eilender, Samuel L. Butt, Christopher R. Dyess, Joshua Wurtzel, Hillary S. Zilz / Category Commercial

First Department Affirms Granting of Motion to Dismiss

In a Decision dated December 7, 2021 Fenway Polar Representative, LLC v. Americold Realty Trust, 2021 N.Y. Slip. Op. 06797, the First Department affirmed an Order of Justice Jennifer Schecter dismissing a complaint concerning alleged interference with the sale of a privately held company.  The Court explained:

This action arises from the alleged interference with the sale of a privately held company. Plaintiff sues solely as an attorney-in-fact for the former shareholders of the company. Plaintiff has no standing to sue because it suffered no separate injury. The injury was derivative as it was based solely on the diminution of the value of the company, which was shared equally by all shareholders (see Tooley v Donaldson, Lufkin & Jenrette, Inc. , 845A2d 1031, 1038 [Del 2004]).

Moreover, because the alleged interference was with the landlords of the company, and not with the auction bidders for the company or anyone else with whom the stockholders had a potential relationship, the claim for interference with potential economic relations was properly dismissed (see Carvel Corp. v Noonan, 3 NY3d 182, 192 [2004]).

While plaintiff's claim that it sold the stock for a fraudulently depressed price does satisfy the out-of-pocket loss rule (see Bernstein v Kelso & Co., 231 AD2d 314, 322 [1st Dept1997]), the fraud claim was properly dismissed for lack of standing.

The attorneys at Schlam Stone & Dolan frequently litigate disputes concerning privately held companies .  Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such companies.