[972 N.Y.S.2d 843]
Shapiro, Croland, Reiser, Apfel & Di Iorio, LLP and the Law Offices of G. Oliver Koppell & Associates, for plaintiff.
Johnson Gallagher Magliery LLC, for defendants.
SHIRLEY WERNER KORNREICH, J.
Motion Sequence Numbers 020 and 021 are consolidated for disposition.
Plaintiff Luba Mosionzhnik moves for partial summary judgment on the second and twelfth causes of action in the Amended Complaint (the AC) pursuant to CPLR 3212. Seq. No. 020. Defendants Ezra Chowaiki, David E.R. Dangoor, Todd [972 N.Y.S.2d 844] Hutcheson, and Chowaiki & Co. Fine Art Ltd. (collectively, with defendant Chowaiki Mosionzhnik Gallery Ltd., the Gallery)  move for partial summary judgment on the Gallery's first and third counterclaims and on the second and seventh though eleventh causes of action in the AC. Seq. No. 021. The motions are granted in part and denied in part for reasons that follow.
On July 20, 2009, Mosionzhnik commenced this action against defendants alleging substantial wrongdoing in connection with an art gallery in which she was a shareholder and employee. Mosionzhnik's operative pleading, the AC, was filed on May 14, 2010. The AC contains thirteen causes of action: (1) oppressive conduct towards a minority shareholder; (2) a declaratory judgment regarding to Mosionzhnik's equity interests in the defendant companies; (3) R.I.C.O. claims; (4) defamation; (5) fraud; (6) an accounting; (7) breach of contract (the Shareholders Agreement); (8) breach of contract (the Employment Agreement); (9) breach of fiduciary duty; (10) breach of the covenant of good faith and fair dealing; (11) tortious interference with current and prospective business advantages; (12) conversion; and (13) unjust enrichment. On July 7, 2010, defendants filed their Answer, in which the Gallery asserts five counterclaims: (1) breach of contract; (2) fraud; (3) breach of fiduciary duty; (4) conversion; and (5) unjust enrichment. After extensive discovery, the instant partial summary judgment motions were filed on January 28, 2013.
The Gallery was formed on January 14, 2005, when the parties executed a Shareholders' Agreement for Chowaiki Mosionzhnik Gallery Ltd. (the Shareholders' Agreement) and virtually identical Employment Agreements for Mosionzhnik (the Employment Agreement) and Chowaiki. The Shareholders' Agreement states that the Gallery's three shareholders are Mosionzhnik and Chowaiki, who were each issued 250 shares, and Dangoor, who was issued 500 shares. All three are named Directors. Chowaiki is designated the President, and Mosionzhnik is designated the Vice-President and Secretary. They each were paid an annual base salary of $120,000. Dangoor, who was not an employee of the Gallery, received 50% percent of the shares because he provided seed capital to the Gallery. Defendant Hutcheson now is an employee of the Gallery.
The Shareholders' Agreement provides that upon the termination of Mosionzhnik's (or any employee who owned stock, such as Chowaiki) employment, Mosionzhnik would have to sell her shares to the Gallery. Section 4.2 provides that " the price shall be the fair market value of the shares of stock to be sold determined by the accountants servicing the [Gallery] using generally accepted accounting principles, consistently applied."
On July 23, 2008, Mosionzhnik was summoned to a meeting by Chowaiki and Dangoor at which Mosionzhnik was accused of myriad improprieties in connection with her employment with the Gallery and fired for cause. In a letter dated October 20, 2008, the Gallery notified Mosionzhnik that it had valued her shares at $170,000. The Gallery had retained an accounting firm, Holtz Rubenstein Reminick (Holtz), which issued a report (the Holtz Report) that valued Mosionzhnik's [972 N.Y.S.2d 845] shares as of July 23, 2008. The Gallery further notified Mosionzhnik that she would not receive any money for the shares because the amount she stole from the Gallery exceeded the value of her shares. This action followed.
Mosionzhnik has admitted to committing the most egregious of the alleged improper acts. She secretly opened a Swiss bank account which she used to divert approximately $500,000 related to the Gallery's art sales  and used over $13 million of art consigned by the Gallery's clients as collateral for loans without the clients' knowledge or consent. Rather than deny or present evidence to refute these allegations, at her deposition, Mosionzhnik testified that her actions were not improper and noted that " plenty of advisors take a kickback That's not ethical but it happens because it's the art world." With respect to illegally using client art as collateral, her defense is that Chowaiki also did so and told her that such a thing was accepted practice in the industry (despite the AC waxing poetic about Mosionzhnik being " an internationally acclaimed and renowned" art dealer, while Chowaiki supposedly was merely an " unsuccessful screenwriter" and ice cream salesman with " no formal education or expertise in art." ). As discussed infra, these actions warrant summary judgment on liability. However, as discussed infra, Mosionzhnik's bad acts  do not destroy her right to receive the proper value of her shares pursuant to the terms of the Shareholders' Agreement. Consequently, the central dispute on these motions is whether the Holtz Report complied with section 4.2 of the Shareholders' Agreement. Mosionzhnik's main objection to the Holtz Report is that it did not account for the Gallery's interest in litigation it is funding in Europe (referred to by the parties and hereinafter as Project Gamma).
In December 2004, shortly before the formation of the Gallery, Mosionzhnik and Chowaiki decided to invest in a pending judicial proceeding in Switzerland and Greece. The litigation concerned the estate of a deceased Greek billionaire and his wife, who had amassed a valuable art collection that included works by Picasso and Monet. The works disappeared shortly before the wife died (her husband predeceased her by six years) and were supposedly sold in the 1980s to a Panamanian trading company for a fraction of their value. Mosionzhnik and Chowaiki agreed to fund one of the estate's purported heiresses in her attempt to recover the artwork. If successful, Mosionzhnik and Chowaiki contracted for the right to purchase the artwork at a substantial discount, which the Gallery would then be able to sell for a multi-million dollar profit. To this end, on December 21, 2004, Chowaiki created defendant Zelco Ltd. (Zelco) to enter into said agreement with the heiress. Mosionzhnik never had a direct equity interest in Zelco. Zelco was never operated as an independent company, [972 N.Y.S.2d 846] its finances were completely commingled with the Gallery's, and the Gallery directly funded Project Gamma. Thus, Mosionzhnik's and Chowaiki's interest in Project Gamma is no more than their equity interest in the Gallery.
Summary Judgment Motions
It is well established that summary judgment may be granted only when it is clear that no triable issue of fact exists. Alvarez v. Prospect Hosp.,68 N.Y.2d 320, 325, 508 N.Y.S.2d 923, 501 N.E.2d 572 (1986). The burden is upon the moving party to make a prima facie showing of entitlement to summary judgment as a matter of law. Zuckerman v. City of New York, 49 N.Y.2d 557, 562, 427 N.Y.S.2d 595, 404 N.E.2d 718 (1980); Friends of Animals, Inc. v. Associated Fur Mfrs., Inc., 46 N.Y.2d 1065, 1067, 416 N.Y.S.2d 790, 390 N.E.2d 298 (1979). A failure to make such a prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers. Ayotte v. Gervasio, 81 N.Y.2d 1062, 1063, 601 N.Y.S.2d 463, 619 N.E.2d 400 (1993). If a prima facie showing has been made, the burden shifts to the opposing party to produce evidentiary proof sufficient to establish the existence of material issues of fact. Alvarez, 68 N.Y.2d at 324, 508 N.Y.S.2d 923, 501 N.E.2d 572; Zuckerman, 49 N.Y.2d at 562, 427 N.Y.S.2d 595, 404 N.E.2d 718. The papers submitted in support of and in opposition to a summary judgment motion are examined in the light most favorable to the party opposing the motion. Martin v. Briggs, 235 A.D.2d 192, 196, 663 N.Y.S.2d 184 (1st Dept. 1997). Mere conclusions, unsubstantiated allegations, or expressions of hope are insufficient to defeat a summary judgment motion. Zuckerman, 49 ...