United States District Court, Eastern District of New York
DORSEY R. GARDNER and JOHN FRANCIS O’BRIEN, as trustees of the DORSEY R. GARDNER 2002 TRUST Plaintiffs,
THE MAJOR AUTOMOTIVE COMPANIES, INC., BRUCE BENDELL, HAROLD BENDELL, ERIC L. KELTZ, STEVEN HORNSTOCK, JEFFREY M. WEINER, ALAN PEARSON, and DAVID EDELSTEIN, Defendants.
For the Plaintiffs LARRY L. VARN, ESQ. MARK B. ROSEN, ESQ. Pierce Atwood LLP
For Defendant Eric L. Keltz ROBERT F. BRODEGAARD, ESQ. Brodegaard & Associates LLC
MEMORANDUM AND ORDER
FREDERIC BLOCK Senior United States District Judge
In 2011, Bruce Bendell, the majority shareholder the Major Automotive Companies, Inc. (“Major”), voted in favor of a 1-for-3, 000, 000 reverse stock split that made him Major’s sole shareholder. Major’s minority shareholders were offered forty cents per share.
Plaintiffs, the trustees of one of the former minority shareholders, claim that the offer price was unfairly low. They assert claims for breach of fiduciary duty against Bruce Bendell, two of Major’s officers (Harold Bendell and Eric L. Keltz), and four members of its board of directors (Steven Hornstock, Jeffrey M. Weiner, Alan Pearson and David Edelstein). Jurisdiction is premised on diversity, and Nevada substantive law governs.
In prior memoranda and orders, the Court held that plaintiffs stated viable claims against Bruce Bendell, Harold Bendell and the four director defendants. See Gardner v. Major Auto. Cos., 2012 WL 3614353 (E.D.N.Y. Aug. 21, 2012), reh’g denied, 2013 WL 3244822 (E.D.N.Y. June 29, 2013) (Bruce Bendell); Gardner v. Major Auto. Cos., 2014 WL 4660850 (E.D.N.Y. Sept. 18, 2014) (Harold Bendell and director defendants). In lieu of moving to dismiss for failure to state a claim, the last defendant-Keltz-has moved for summary judgment. For the following reasons, his motion is denied.
Keltz was Major’s general counsel and corporate secretary. Apart from his formal titles, the parties sharply dispute Keltz’s role in the challenged transaction. Accordingly, the Court must view the facts regarding Keltz’s role “in the light most favorable to the non-moving party and drawing all reasonable inferences and resolving all ambiguities in its favor.” Gould v. Winstar Commc’ns, Inc., 692 F.3d 148, 157-58 (2d Cir. 2012). Viewing the record accordingly, the Court is constrained to deny summary judgment.
Keltz testified at his deposition that he was part of the collective decision-making that lead to the transaction. See Keltz Dep. 167 (“I am sure Bruce, Harold, the board, our outside counsel, myself, probably our accountants, probably all had conversations about it at various points in time.”). More specifically, he testified that his was the “primary point person” working with Empire Valuation Consultants (“Empire”), the entity retained to assess Major’s value and the resultant share price to offer its minority shareholders. Many of his tasks in that regard can fairly be described as information gathering:
[Empire] had general questions about the corporate structure, some of the specifics of our ownership of a variety of assets. They wanted documentation of things like leases or any other kind of documentation of business relationships that they felt had bearing on the valuation, I suppose.
And I guess the other thing that I provided was my interpretation or opinion of the current risk regarding legal affairs of the company as well.
Id. at 193-94.
In one important particular, however, Keltz’s role was arguably more substantive. The key components of plaintiff’s claim is that Empire evaluated Major based on outdated financial information. Empire asked for updated data, but “[m]anagement stated that none of this information was available at the Valuation Date.” Letter from Empire to Bruce Bendell and Keltz (Apr. 15, 2010) 16. Keltz’s deposition testimony raises at least a ...