Parallel organization divorce procedures in the very same or various courts declaring overlapping or duplicative claims prevail.
When it takes place, judges need to frequently figure out whether to deal with one so the other might continue in the very first circumstances under the “another action pending” ground for termination in CPLR 3211 (a) (4 ), whether to combine or sign up with the 2 claims in a single case under CPLR 602, or whether to just permit the 2 cases to continue simultaneously.
Parallel organization and matrimonial divorce procedures? Not so typical. However that is precisely what took place in Malick v 302 East 105th St. LLC (2023 NY Slip Op 34417( U) [Sup Ct, NY County Dec. 12, 2023])
In Malick, Ibrahim, an owner of 2 property owning minimal liability business, sued his spouse and co-owner, Pramilla, in New York City County Supreme Court, submitting a ten-count grievance declaring a range of tort and statutory reasons for action developing from disputes over their property services, consisting of a single claim for judicial dissolution of the 2 LLCs.
However Pramilla beat Ibrahim to the punch.
Simply days prior, Pramilla submitted her own suit versus Ibrahim in New York City County Supreme Court for dissolution of their marital relationship. In the divorce case, Pramilla obviously looked for “fair circulation” of her ownership stakes in the husband-and-wife owned LLCs.
This was the setup for 2 branches of the very same court having possibly overlapping jurisdiction over the concern of what to do with 2 marital owned LLCs, their equity interests, and their hidden property properties, upon the breakdown of Ibrahim and Pramilla’s marital relationship.
As we have actually composed formerly, insofar as the New york city corporation and LLC judicial dissolution statutes offer place in the “Supreme Court,” and the Matrimonial Department (where marital dissolution cases are venued) is a branch of the Supreme Court, it promises that New york city’s divorce courts might work out jurisdiction, in an appropriate case, to judicially liquify a New york city entity co-owned by 2 separating New york city domiciled partners.
Malick attended to a more narrow concern: should an industrial court dismiss under CPLR 3211 (a) (4) a judicial dissolution case in favor of a previously-filed matrimonial case where the business case likewise consists of organization tort declares derivatively on behalf of an entity ( i.e., breach of fiduciary task, waste, conversion, and gross neglect), and those claims appear to possibly go beyond the jurisdiction of matrimonial courts?
Case law translating CPLR 3211 (a) (4) materials contending guidelines of choice.
On the one hand, “jurisdiction must continue” in the court “where all rights can be correctly figured out in a single action” ( Matter of Estate of Ryan, 212 AD3d 902 [3d Dept 2023], lv dismissed 39 NY3d 1095 [2023]).
On the other hand, total overlap of celebrations and claims is not needed to dismiss one case in favor of the other. All that is needed is “considerable identity of the celebrations, the 2 actions are adequately comparable, and the relief looked for is significantly the very same” in both cases ( Ashwood v Uber U.S.A., LLC, 219 AD3d 1289 [2d Dept 2023]).
Under this concept, “[i] t is not required that the exact legal theories provided in the very first action likewise exist in the 2nd action” ( JPMorgan Chase Bank, N.A. v Luxama, 172 AD3d 1341 [2d Dept 2019]), so long as both matches “aris[e] out of the very same topic or series of supposed wrongs” ( JFK Household Ltd. Collaboration v Millbrae Nat. Gas Dev. Fund 2005, L.P., 169 AD3d 775 [2d Dept 2019]).
Where these conditions are satisfied, courts normally follow the “first-in-time guideline, implying that the court which has actually initially taken jurisdiction is the one in which the matter must be figured out” ( Seneca Specialized Ins. Co. v T.B.D. Capital, LLC, 143 AD3d 971 [2d Dept 2016]).
To use these guidelines of law, the Malick Court was not composing on a blank slate.
In Raik v Clindent Devs., LLC (282 AD2d 513 [2d Dept 2001]), the Court thought about basically the very same problem: whether to dismiss a later-filed business dissolution case in favor of an earlier-filed matrimonial divorce case.
In Raik, the appeals court ruled that the lower court “correctly figured out” that it would be “duplicative and detrimental” to allow a judicial dissolution suit to continue simultaneously with a marital dissolution case, dismissing the previous in favor of the latter. “The complainant’s claims with regard to his supposed interests in the … household services,” the Court held, “will be figured out as part of the fair circulation” in the divorce suit.
However the Raik Court left the door available to extra lawsuits, must the matrimonial lawsuits show insufficient to solve all concerns. “To the degree that it might later on be figured out that any of the complainant’s supposed organization interests are beyond the reach of [the marital divorce action], as a matter of discretion in the interest of justice, the termination of [the corporate dissolution proceeding] lacks bias to recommencement of that action after last resolution of the fair circulation concerns.”
Carefully tracking the language of Raik, New York City County Supreme Court Justice Verna L. Saunders ruled in Malick:
[T] his court grants that branch of the cross-motion looking for termination of the action pursuant to CPLR 3211 (a) (4 ). Resolution of the concerns raised in this dissolution action would be duplicative and detrimental provided the pending divorce action in this court insofar as complainant’s supposed interest in the homes owned by offenders 302 LLC and 304 LLC would go through fair circulation in the matrimonial action (citations left out).
Like Raik, the Court dismissed the LLC dissolution case without bias and with leave to refile:
To the degree it is later figured out that any of the complainant’s supposed organization interests are exempt to the matrimonial action, this court, in its discretion and in the interest of justice grants stated termination without bias to recommencement of this action after last resolution of the fair circulation concerns. (citation left out).
Last But Not Least, the Court turned down Ibrahim’s argument that his filing of organization tort declares versus his partner was factor, in and of itself, to reject termination:
Although complainant has actually asserted tort claims in this action that he keeps total up to ‘interspousal tort claims’ different from the concerns prosecuted in the divorce action, this court nonetheless discovers that the claims raised here are significantly linked with the decision of ownership of the homes and the celebrations’ particular interests in the LLCs, a questions that is within the province of the divorce action.
The result of Malick is that a modest however growing body of case law empowers matrimonial divorce litigants to effectively move for without-prejudice termination of an antagonistic partner’s parallel organization divorce suit to allow the divorce court to solve, in the very first circumstances, linked concerns of organization and marital home ownership and fair circulation constant with the matrimonial court’s broad jurisdiction over the marital estate.