Beattie Padovano wins $8.5 million summary judgment for oppressed members of real estate holding companies

On February 20, 2025, Beattie Padovano’s litigators obtained summary judgment for $8,512,632 on behalf of members of various real estate holding companies who contended that the majority controlling members essentially wasted holding company assets in order to protect the majority members’ own interests in their own closely-held operating company. Summary Judgment was awarded by the Hon. Jerome C. Murphy, J.S.C., of the Supreme Court of the State of New York, County of Nassau, Commercial Division.

Case Background

The Firm’s clients, the plaintiffs, collectively own a 40% minority interest in each of two real estate holding companies while the defendants own the remaining 60% majority.  This case involved classic self-dealing by the defendants, who are controlling majority members of two real estate holding companies, to advance and safeguard their own interests in the operating company.

In 2018, an operating company owned and controlled exclusively by the defendants (the Firm’s clients having no stake in the operating company) borrowed millions of dollars. To secure that loan, the defendants voted their majority interest in the two real estate holding companies to cause the companies to guarantee the operating company’s massive debt. Though several other companies and individuals —including some of the defendants — were also guarantors of the operating company’s debt, the majority owners in essence used holding company assets to pay down operating company debt and thus safeguard their own interests in the operating company at the expense of the holding companies (and, derivatively, the plaintiff minority owners).

Summary Judgment Decision And Order

The State Supreme Court granted summary judgment on derivative claims brought on behalf of the real estate holding companies for $8,512,632.  Other causes of action, including breach of fiduciary duty, for waste, for an equitable accounting, and for other claims related to corporate mismanagement, are scheduled for trial later this year, defendants’ efforts to dismiss them notwithstanding, which efforts were successfully defeated.

The matter is being litigated by Martin R. Kafafian, Matthew Ross, and Jim Pilinci.