20 A.D.3d 469
PROCEDURAL POSTURE: Appellant seller of his interest in a limited liability company (LLC) sued respondent buyer of the interest, seeking to recover damages for breach of fiduciary duty and fraud. The Supreme Court, Nassau County (New York), granted the buyer's motion for summary judgment dismissing the complaint and denied the seller's cross-motion to compel discovery. The seller appealed.
OVERVIEW: The parties were members of the LLC, which owned an auto dealership. The buyer was the managing member of the LLC and purchased the seller's interest for $ 3,750,000, plus $ 1,350,000 payable under a consulting contract. Two days later, the buyer sold the dealership for $ 16 million. The seller alleged that the buyer misrepresented the value of the dealership as being between $ 5 and $ 6 million and failed to disclose that the non-party purchaser had made a firm offer to buy it for $ 16 million before the buyer acquired the seller's interest.
The appellate court ruled that, as the managing member of the LLC and as a co-member with the seller, the buyer owed the seller a fiduciary duty to fully disclose all material facts.
Also, since the buyer had a fiduciary relationship with the seller, the disclaimers in the contract did not relieve the buyer of the obligation of full disclosure. The alacrity with which the dealership was sold was sufficient to establish that facts essential to justify opposition may have existed but could not have then been stated. The motion for summary judgment was premature.
OUTCOME: The judgment was reversed, the motion was denied as premature, the cross-motion was granted, the complaint was reinstated, and the order was vacated.
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