State Supreme Court Dismisses Counterclaims Against Corporation’s Co-owner

By Lewis Tesser, Partner, and Timothy Nolen, Associate, of Tesser, Ryan & Rochman, LLP

A recent New York County Supreme Court decision provides an example of a critical issue in business litigation: identifying the correct party to sue. The litigation involved issues of business law, civil procedure, contract law and corporate law.

The case, Matter of Evans v. Perl, 2011 N.Y. Misc. LEXIS 3367, Index No. 112210-2010 (Sup. Ct. N.Y. County, July 8, 2011), concerned counterclaims filed against the guardian of a one-half owner of a corporation by the other one-half owner. The parties were engaged in extensive litigation concerning winding down the business. The counterclaims alleged that the one-half owner was responsible for indemnifing the other owner pursuant to the corporation’s operating agreement and was responsible for payment for services rendered to the corporation. Justice Gische, however, dismissed the counterclaims, noting that the company’s operating agreement might bind the company to indemnify the defendant, but did not require the owners to personally indemnify anyone. Additionally, the defendant’s services were provided to the company, not its co-owner. Accordingly, the Court dismissed the counterclaims against the co-owner since they should have been filed against the corporation.

Evans’ procedural posture is interesting—even though the two owners of the corporation were engaged in litigation against one another concerning the business, the counterclaims were deficient because the defendant did not name the business itself as a party.

Tesser, Ryan & Rochman’s attorneys have years of experience handling a range of disputes between business partners, shareholders and corporations. We can help ensure that litigants identify the correct party in all proceedings.