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Tico, Inc. v. Borrok

NEW YORK SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT


December 11, 2008

TICO, INC., ET AL., PLAINTIFFS-APPELLANTS,
v.
CHARLES R. BORROK, ET AL., DEFENDANTS-RESPONDENTS.

Judgment, Supreme Court, New York County (Richard B. Lowe III, J.), entered July 27, 2007, insofar as appealed from as limited by the briefs, dismissing the complaint as against defendants-respondents with prejudice pursuant to an order, same court and Justice, entered June 14, 2007, which, in a derivative action by limited partners of respondent 425 Park Avenue Company alleging breach of fiduciary duty and related business torts, granted respondents' motion to dismiss the complaint, unanimously modified, on the law, to the extent of deleting the provision that the dismissal is with prejudice, and otherwise affirmed, without costs.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Friedman, J.P., McGuire, Acosta, DeGrasse, Freedman, JJ.

No. 650235/06

Although the court properly determined that plaintiffs lacked standing on the basis that they did not make a formal demand on all of the general partners and failed to demonstrate that such a demand would have been futile, dismissal of the complaint with prejudice was improper. A dismissal premised on lack of standing is not a dismissal on the merits for res judicata purposes (see Alco Gravure, Inc. v Knapp Found., 64 NY2d 458, 465 [1985]; Pullman Group v Prudential Ins. Co. of Am., 297 AD2d 578 [2002], lv dismissed 99 NY2d 610 [2003]). If given effect, however, the provision of the judgment that the dismissal was "with prejudice" would bar plaintiffs from thereafter filing an amended complaint even if they would have standing at that time. For this reason alone the provision should be deleted from the judgment. Thus, we need not address the question of whether, having concluded that plaintiffs lacked standing to bring this action and thus that dismissal was necessary, Supreme Court properly went on to determine the issue of whether dismissal should be with prejudice.

THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

20081211

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