SCAN

SHORT FORM ORDER

SUPREME COURT STATE OF NEW YORKCOUNTY OF NASSAU

PRESENT:HON. IRA B. WARSHAWSKY,

Justice.TRIAL/IAS PART 8

O. GENE CASAMASSIMA, a Shareholder ofWestbur Transport, Inc. of Georgia, WestburyTerminals, Inc. of Georgia, Westbury TransportInc. , and Westbury Terminals , Inc. , Suing in theRight of Westbury Transport, Inc. Of GeorgiaWestbury Terminals , Inc. of Georgia, WestburTransport, Inc. and Westbury Terminals , Inc.

Plaintiffs

-against -

INDEX NO. : 008626/2004MOTION DATE: 06/16/2010MOTION SEQUENCE: 002 and

003WESTBURY TRANSPORT, INC. OF GEORGIAWESTBURY TERMINALS , INC. OF GEORGIAWESTBURY TRANSPORT, INC. , WESTBURYTERMINALS , INC. , IGC MANAGEMENT, INC.

IGC TRANSPORTATION , INC. , IGC REALTY, INC.

CASE MANAGEMENT , INC. , ROSWELL REALTYBUSINESS TRUST , WESTBURY LOGISTICS , INC.,MATTHEW CASAMASSIMA LIVING TRUSTMATTHEW CASAMASSIMA and DANIEL DOYLE

Defendants.

The following papers were read on this matter:

Notice of Motion, Affidavit, Affrmation & Exhibits Annexed ........................................ 1Defendants ' Memorandum oflaw in Support of Motion for Summary Judgment............ 2Notice of Cross-Motion, Affrmation, Affdavit & Exhibits Annexed .............................. 3Plaintiffs ' Memorandum of Law in Opposition to Defendants ' Motion forSummary Judgment and in Support of Plaintiffs ' Motion for Summar ........................... 4Defendants ' reply Memorandum of Law in Further Support of Motion forSummary Judgment and in Opposition to Cross-Motion for Summar Judgment andfor Leave to File Amended Complaint ............................................................................... 5

PlaintiffO. Gene Casamassima s Affidavit in Reply to Defendant'Opposition to Plaintiffs Cross-Motion for Summar Judgment ..................................... 6

Plaintiffs ' Memorandum of Law in Reply to Defendants ' Opposition to

Plaintiffs ' Cross- Motion for Summar Judgment .............................................................. 7

PRELIMINARY STATEMENT

Defendants move for summary judgment pursuant to CPLR 9 3212. Plaintiffs cross-

move for summary judgment pursuant to CPLR 9 3212 , and for leave to serve an amended

complaint.

BACKGROUND

Plaintiff Gene and defendant Matthew Casamassima are brothers who inherited a

substantial trucking and trailer repair business from their father. They have been engaged in a

long-standing dispute, which culminated in this action which alleges mismanagement and

misappropriation of corporate funds by defendant Matthew. There are a number of corporations

involved in the operation of the respective businesses. Westbury Transport, Inc. and Westbur

Terminals , Inc. are commonly referred to as the "New York Corporations . They are operated

from two locations , Port Washington and Brentwood. Two companies , initially created to

service a prospective client are entitled Westbury Transport, Inc. of Georgia and Westbur

Terminals , Inc. of Georgia, known as the "Georgia Corporation . Additional defendants include

IGC Management, Inc., IGC Transportation, Inc. , IGC Realty, Inc. , Case Management, Inc.

Roswell Realty Business Trust, and Matthew Casamassima Revocable Living Trust, s./h./a.

Matthew Casamassima Living Trust.

Defendant reiterates the history of this matter, commencing with a 2002 action Westbury

Tramsport, Inc. of Georgia, et al. v. Casamassima, et aI Index No. 02-004888 , which was

dismissed without prejudice on May 11 , 2004 , only to be followed by this action, commenced in

2004. An interim action to remove Matthew as Trustee of a Family Trust was dismissed, with

affirmance by the Appellate Division.

The action has been the subject of prior motion practice. The portions of the complaint

which remain open are as follows:

the Third and Fourth Causes of Action for diversion of corporate assets and

breach of fiduciar duty, have been dismissed, with respect to conduct occuring

prior to June 25, 2001 and June 25 , 1998 respectively;

the Sixth Cause of Action for breach of fiduciar duty on claimed diversion of

funds from the Georgia Corporations by payment of family members for "

show" jobs and paying personal expenses with corporate funds, was dismissed

except as to actions occurring after June 25 , 1998;

the Ninth and Eleventh Causes of Action alleged misappropriation of fuds from

the Georgia Companies for the benefit of companies in which Matthew held a

majority interest, is limited to such conduct after June 25 , 1998;

the Twelfth and Thirteenth Causes of Action allege that defendant Doyle assisted

in Matthew s wrongdoing.

The verified answer includes three counterclaims. The First and Second counterclaims

assert derivative claims on behalf of defendant and Westbury Transport of Georgia, Inc.

WTIG"), against counterclaim defendants O. Gene Casamassima, Bedding Showcase Inc.

BSI") and 1. Hadley Conn ("Conn ) for their misappropriation ofWTIG' s assets, and diversion

of those assets to Bedding Showcase. Counterclaim-plaintiffs seek a constructive trust over

assets wrongfully obtained by counterclaim-defendants.

Plaintiff takes a different view of the history of this intra-family conflict, contending that

the opening volley in the now long-standing dispute, was the firing by Matthew of Gene from

Westbury Transport in 2001 , despite the fact that each was a 50% owner ofthe company, and

negotiations were underway for the distribution of the assets of the conglomerate. This was

followed by an action commenced by Matthew, in which he obtained a temporar restraining

order against Gene s paricipation in any of the Westbur companies , leaving him without

income for himself or the employees he supervised at the Brentwood facility.

As par of their cross-motion, plaintiffs seek to amend the complaint by renaming

Roswell Realty Business Trust as a plaintiff; adding NuWest Logistics and Many Casamassima

as co-defendants; and add a cause of action for dissolution (not listed in the Notice of Cross-

Motion but listed in the Casamassima affidavit).

DISCUSSION

Defendants posit a series of reasons why their motion to dismiss should be granted:

plaintiff is seeking to recover for conduct in which he either paricipated or

acquiesced;

in a similar vein, defendants claim that plaintiff is barred from recovery

under the doctrine of unclean hands;

plaintiff is seeking to recover damages on behalf of entities other than

those on whose behalf he claims to act in this derivative action;

the majority of factual allegations underlying the complaint are

demonstrably false , and plaintiff has conceded his lack of evidence to

support most of the allegations.

When presented with a motion for summary judgment, the function of a cour is "not to

determine credibility or to engage in issue determination, but rather to determine the existence or

non-existence of material issues of fact." (Quinn v. Krumland, 179 A.D.2d 448 , 449 - 450 (1 sl

Dept. 1992)); See also (SJ Capelin Associates, Inc. v. Globe Mfg. Corp. 34 N. 2d 338 343

(1974)).

To grant summary judgment, it must clearly appear that no material and triable issue of

fact is presented. (Stilman v. Twentieth Century-Fox Corp. 3 N.Y.2d 395 404 (1957)). It is a

drastic remedy, the procedural equivalent of atrial , and wil not be granted if there is any doubt

as to the existence of a triable issue. (Moskowitz v. Garlock 23 AD.2d 94 (3d Dept. 1965));

(Crowley s Milk Co. v. Klein 24 A. 2d 920 (3d Dept. 1965)).

The evidence wil be considered in a light most favorable to the opposing par. (Weil

Garfield, 21 AD .2d 156 (3d Dept. 1964)). The proof submitted in opposition wil be accepted as

true and all reasonable inferences drawn in favor of the opposing par. (Tortorello v. Carlin, 260

AD.2d 201 206 (PI Dept. 2003)). On a motion to dismiss, the court must" , accept the facts as

alleged in the complaint as true , accord plaintiffs the benefit of every possible favorable

inference , and determine only whether the facts as alleged fit within any cognizable legal

theory

' "

(Braddock v. Braddock 2009 WL 23307 (N. AD. 1 sl Dept. 2009)), (citing Leon

Martinez 84 N.Y.2d 83 , 87 88 (1994)). But this rule wil not be applied where the opposition

is evasive or indirect. The opposing party is obligated to come forward and bare his proof, by

affidavit of an individual with personal knowledge, or with an attorney s affirmation to which

appended material in admissible form, and the failure to do so may lead the Cour to believe that

there is no triable issue of fact. (Zuckerman v. City of New York, 49 N.Y.2d 557 , 562 (1980)).

While it may appear to be a difference without distinction, the doctrine of unclean hands

may not be used as a defense to a derivative cause of action, the theory being that the action is

brought on behalf ofthe company, and the unclean hands of the individual shareholder who

brings the action is irrelevant. (Grammas v. Charla, 45 AD.2d 7569 (2d Dept. 1974)). Actual

acquiescence, paricipation in, acquiescence in, or ratification of an act constituting a wrong

against the corporation, however, precludes the shareholder from maintaining an action attacking

such acts on the grounds of equitable estoppel. (Diamond v. Diamond, 307 N.Y. 263 , 266

(1954)); (Pinnacle Consultants, Ltd. v. Leucadia Nat. Corp. 261 AD.2d 164 (PI Dept. 1999)).

Defendants ' first argument is that during the course of discovery, it became apparent that

plaintiff could not identify the amount of funds , if any, diverted from any of the four Westbur

corporations, leaving open the possibility that funds were diverted from another entity. This is

why plaintiff is seeking to amend the complaint to name Roswell Realty Business Trust as a

necessar plaintiff, instead of solely a defendant. The question, at this juncture , is whether

viewing the complaint in its most favorable light, and considering the documentar and

testimonial evidence adduced to date , plaintiff can show that there has been a diversion of fuds

from any of the four corporations on behalf of whom Gene purports to act. If not, the claims

against them must be dismissed.

In support of the request for leave to amend the complaint to include Roswell as a

plaintiff, Gene contends that in 1999-2000 alone , $464 987.26 was diverted from Roswell to IGC

Realty, in which Gene has no interest. Plaintiff further contends that Matthew diverted two major

accounts from the Westbury Georgia companies , initially to IGC Transport, Inc. , and then to

NuWest Logistics , 99% of which is owned by Matthew s son Many, whom plaintiff seeks to

add as a defendant, and the remaining 1 % is owned by Matthew. Defendant opposes the

application to amend the complaint on the grounds that the proposed amended complaint fails to

include derivative claims on behalf of Roswell; that plaintiff had unduly delayed in making

application for leave to amend; and, any such claims on behalf of Roswell are bared by the

statute of limitations.

Provosed Amended Comvlaint

Plaintiffs motion to amend the complaint to include Roswell Realty Business Trust as a

plaintiff so as to seek derivative relief on its behalf is denied. The proposed amended complaint

Exh. "T" to the Cross-motion, neither names Roswell as a plaintiff, nor includes any allegations

that defendant Matthew Casamassima improperly diverted any funds from that entity. Whle

leave to amend, it is often stated, should be freely given, this is not so where the proposed

amended complaint fails to state a cause of action or is plainly lacking in merit. Hynes v. Start

Elevator, Inc., 2 A. 3d 178 , 181 (PI Dept. 2003).

To the extent plaintiff seeks to add Many Casamassima and NuWest as defendants, the

motion is also denied. Plaintiff alleges that defendant Matthew Casamassima improperly

diverted two major clients, Macy s/Associated and Bed, Bath and Beyond, from Westbur to

ICC, and thereafter to NuWest, states a cause of action. These transactions , however, took place

in 1999 and 2000. By bringing this claim for the first time in 2010, it is bared by even the

longest potential statute of limitations , six years.

Roswell , on whose behalf plaintiff ostensibly seeks to act, is a Pennsylvania Trust, the

sole asset of which is a building in Pittsburgh. It is a resident of Pennsylvania. The action

complained of occurred either in Pennsylvania, from where money was allegedly diverted, or

Florida, where it is claimed to have been invested. In either event, CPLR 9202 requires the

application of the statute of limitations of Pennsylvania, where the damage was sustained, or

New York, whichever is shorter.

The substantive law of New York, to the extent that it contains a "relation back" doctrine

is of no benefit to plaintiff. There is no basis upon which to apply New York law to a transaction

which took place outside of New York and had its major impact in Pennsylvania. Even if New

York' s more liberal "relation back" doctrine were applicable , it would not grant relief to plaintiff

in this action since Roswell cannot be said to be "united in interest" with other defendants against

whom the action was timely commenced. (Buran v. Coupal 87 N.Y.2d 173 (1995)).

Third and Fourth Causes of Action

Plaintiff contends that between 1994 and 2001 Matthew diverted $60 000 per month from

the Georgia Corporations to cover operating expenses on a parcel of real estate in Florida, owned

by IGC Realty, Inc. , in which Matthew had a 99% interest, with their father owning the other 1 %.

The remaining claim is from June 25 , 1998 forward.

Ifplaintiffs allegation of$60 000 per month from June 25 through 2001 is fully credited

the total amount is approximately $2. 16 milion. Aside from the fact that he has not, despite

years of discovery, been able to establish what, if any, fuds were diverted from the Georgia

corporations to IGC , or state whether the payments came, in fact, from another entity, Roswell.

It seems clear that he was a full paricipant in the operation of the Georgia companies , and

acquiesced in the transfers, if they occured. More significantly, Matthew has injected far more

money from the sale of the Florida building into the Georgia companies than Gene claims was

misappropriated. Neither he nor the Georgia companies have sustained economic damage as a

consequence of the alleged diversions.

The Fourh Cause of Action is based upon the same unsubstantiated claims of $60 000

per month diversions , and alleges a breach of fiduciar duty. Putting aside the claims of

complicity in the challenged conduct, at the conclusion of discovery, plaintiff canot substatiate

his claims , and has, in fact, benefitted from the contributions from the sale ofIGC's propert as

opposed to suffering a detriment.

The motion to dismiss the Third and Fourh Causes of Action is granted.

The Sixth Cause of Action

In this Cause of Action plaintiff asserts diversion of funds by placing family members on

the payroll for "no-show" jobs, thereby reducing his distribution from these companies. The

details of these claimed misappropriations were set forth in plaintiff s response to Interrogatory

No. 10 , and are set forth verbatim at pp. 40 - 42 of Defendants ' Memorandum of Law.

The ariculated claims in Response to Interrogatory 10 relate to payments for moving

expenses for family members , travel expenses to England for Matthew s son, and for Mattew

and his wife to visit him there , payment of travel expenses for Matthew s son to Bahama, and

payment of wedding expense for Matthew s daughter. During the course of his deposition, it

became obvious that all of these allegations were rooted in speculation on the par of Gene, that

if checks were issued for payment of moving expenses, he was the signator on at least one of

them, that there were substantiated contradictions as to the source of fuds, such as Mattew

son s travel to England on behalf of his employer, Bear Stears, and the use of frequent fler

miles as opposed to corporate checks for travel by Matthew and his wife. It is also of

consequence that Gene fully acknowledged using corporate fuds for his daughter s wedding,

precisely the conduct about which he claims Matthew is guilty.

The claims also allege purchases of private cars for Matthew s son and daughter with

corporate funds. It is quite clear, however, that the Range Rover for Matthew s daughter was

purchased with a personal loan that Matthew, paid back over 60 months. The GMC for his son

was leased, and at least one of the lease payment checks was signed by Gene, making him an

accessory to the misuse of corporate funds, ifthere were some. Not insignificantly, Gene

daughter was also the beneficiary of a vehicle acquired with funds from Westbur Transport, Inc.

of Georgia, as apparently, according to Gene , were many other family members.

Similarly, Gene was unable to substantiate his claim that construction on Matthew

home in Ashroken was paid for with corporate fuds. With respect to the payment of personal

credit card charges for Matthew, Gene acknowledges that he too had personal credit card charges

paid for by the companies , thereby acquiescing in the conduct about which he complains.

He is not entitled to equitable relief because he is equitably estopped from doing so. The

motion to dismiss the Sixth Cause of Action is granted.

Ninth and Eleventh Causes of Action

The Ninth Cause of Action alleges diversion of fuds from the Georgia companes

into IGC Management, IGC Transportation, IGC Realty, Case Management, Roswell Realty,

Westbur Logistics and the Matthew Casamassima Living Trust. The Eleventh similarly alleges

diversion of funds from the Westbury companies into companies of which Matthew was the sole

owner, creating fictitious debts.

The essence of the claimed wrongdoing is the diversion of fuds, and, as defendants point

out, the creation of fictitious debts of the Georgia companies does not follow a rational thought

process. If defendant companies improperly received funds from the Georgia companies, it is

they who are indebted to the Georgia companies, not the other way around, as plaintiff contends.

Aside from equitable estoppel as a general bar to the recovery of equitable relief by

plaintiff, the underlying allegations , as set out in Answer 11 to Interrogatories, are

unsubstantiated. The contents of the interrogatory responses are at pp. 60 61 of defendants

memorandum of law, as follows:

the previously discussed payment of $60 000 per month to IGC;

a $1.9 million loan from the senior Casamassimas to Matthew, which was

deposited in one of Matthew s companies , then "fueled" into Georgia

companies , creating a debt to Matthew s companies;

Matthew withdrew $6 000 per month from the Georgia companies

between 1998 and 2002 , and has not repaid it;

Matthew took for himself $500 000 in escrow with respect to Roswell'

building in Pittsburgh, the source of which fuds were the Georgia

compames;

Matthew improperly took proceeds of an insurance payment on the

Pittsburgh property for himself, when it should have gone to its rightful

owners , the Georgia companes;

Matthew has diverted at least two accounts from Westbur Georgia to

companies owned by him or his son.

Again, putting aside the issue of equitable estoppel, the allegations are all either factually

unsupported, or fail to represent a claim on behalf of the plaintiff corporations. The issue of the

claimed diversion of $60 000 per month to IGC has previously been dealt with and put to rest.

There is no refutation of response that the $6 000 per month payment to Matthew was nothing

more than regular compensation as established by their father, Emmanuel , the founder of the

corporations. Gene was aware of these payments and, in fact, signed some of the checks.

As established in his deposition, the claimed $500 000 in escrow fuds relating to the

Roswell building had nothing to do with the corporations on whose behalf Gene brings the

action. Aside from the fact that he was unsure that Matthew took $500 000 for himself, the

reality is that the escrow amount was $1 000 000 , which both brothers contributed either from

mortgages on their personal homes, or accumulated savings.

The claimed entitlement to insurance proceeds relating to the Roswell propert in

Pittsburgh is belied by documentary evidence from the closing, providing that in return for a

payment of$327 000 , Gene waived his claim to the insurance proceeds.

Defendants claim that the final allegation, the diversion of customers from the Georgia

companies to entities owned solely by Matthew, or Matthew and his son, is bared by the

doctrine of unclean hands. The customers in question are Macy slFederated and Bed, Bath and

Beyond. They are presently serviced by companies in which Gene has no interest, Nu West

Logistics and IGC Transportation.

The Court has concluded that the doctrine of unclean hands does not bar the individual

shareholder from bringing a derivative action on behalf of the corporations. It is uncontradicted

that these moves occurred after the brothers agreed to go their separate ways, operating

separately, and Gene transferred the Georgia companies ' trailer rental and repair customers to

Bedding Showcase , Inc. ("BSI") in which only he had an interest. Having lost the benefit ofthe

income from these customers into the Georgia companies, Matthew responded by moving

business over which he had control. There is no doubt but that the plaintiff companies operated

two distinct businesses , the trucking and storage out of the Port Washington location, and the

trailer rental and repair business in Brentwood. The former was the domain of Mattew, and the

latter that of Gene. It was only rational that they would segregate the income from the two

branches of the business according to their historical relationships. This transfer of customers by

both individuals after the 2002 agreement to go their separate ways, is nothing more than mutual

acquiescence and condonation of the plan to operate separately, each for their own benefit.

The motion to dismiss the Eleventh Cause of Action, seeking equitable relief, is granted.

The claims are bared under the doctrine of equitable estoppel.

Twelfih and Thirteenth Causes of Action

These claims are directed at Daniel Doyle in his individual capacity. Since the

action was commenced Gene has conceded that he never was other than an employee of the

Georgia companies. Allegations that he aided and abetted Matthew in his improper activities

now ring hollow, since the claims against Matthew have all been dismissed. The Thirteenth

Cause of Action alleges a breach of fiduciar duty.

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The Thirteenth Cause of Action is premised on Doyle s obligations as a director and

officer of the Georgia companies, which he concededly never was.

The Twelfth and Thirteenth Causes of Action against Daniel Doyle are dismissed.

Defendants ' Counterclaims

Three in number, they claim that plaintiff diverted the trailer rental and repair business of

Westbury Georgia s customers to Bedding Showcase (BSI), which is solely owned by plaintiff.

The First Counterclaim seeks the imposition of a constructive trust over all funds wrongfully

obtained in this regard.

The Second Counterclaim alleges that Hedley Conn is the Chief Financial Officer ofBSI

and that he paricipated in the wrongful deposit of checks payable to Westbury Georgia into the

account of BSI. This cause of action is for monetar damages , and does not seek equitable relief.

The Third Counterclaim also alleges a claim for equitable relief in the form of a

constructive trust of assets used for payments of salaries to family members for no-show

positions , thereby damaging the Westbury Georgia companies.

The First and Third Counterclaims are dismissed. Matthew and Gene each paricipated in

the reassignment of customers, and made corporate benefits available to family members, and

each are equitably estopped from complaining about this conduct on behalf of the corporation.

The Second Counterclaim, however, is not barred for the same reason. Defendant counter-

claimant alleges that by opening accounts with similar names to Westbury Georgia companies

plaintiffs were able to deposit checks which were payable to and intended for Westbur Georgia

companIes.

After eight years of this family feud, and the time and effort required by the Cour to

referee the disputes , all that remains is a counterclaim that plaintiff improperly obtained and

deposited checks intended for the Georgia companies into accounts to which only he had access.

The Court has not ascertained the amount of this claim from the record.

The application to add a cause of action for dissolution is denied. Where have we been

for eight years? If plaintiff or defendant wishes to move for the dissolution of one or more of

these diverse entities, they are obviously free to do so. If either side should so move, then the

Court would consider consolidating what remains of the instant action with the action for

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dissolution. (See Grammas v. Charla 45 AD.2d 756).

This matter wil appear on the Court' s calendar on October 14 2010 , at 9:30 AM. , for a

Certification Conference and to select a trial date.

This constitutes the Decision and Order of the Court.

Dated: September 13 2010

ENTEREDSEP 14 2010

NASSAU COUNTYCOUNTY CLERK'S OFFICE

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