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Sardis v. Sardis

Supreme Court, Suffolk County

May 11, 2017

Lauren Sardis, Individually and as a Shareholder and on behalf of JLAJ HOLDING CORP. and as a Shareholder and on behalf of SCCC HOLDINGS CORPORATION, Plaintiff,
v.
Jeffrey Sardis and AETEA INFORMATION TECHNOLOGY, INC., Defendants, and SCCC HOLDINGS CORP., Nominal Defendants.

          MEYER, SUOZZI, ENGLISH & KLEIN, P.C. Attorneys for Plaintiff

          DIMASCIO & ASSOCIATES, LLP Attorneys for Plaintiff

          ABRAMS, FENSTERMAN, FENSTERMAN, EISMAN, FORMATO, FERRARA & WOLF, LLP Attorneys for Defendants

          Elizabeth H. Emerson, J.

         Upon the following papers read on this motion to reargue; Notice of Motion and supporting papers 102-142; Notice of Cross Motion and supporting papers; Answering Affidavits and supporting papers 149; Replying Affidavits and supporting papers 148; 151-153; Other 144; 147; 150; it is, ORDERED that the motion by the plaintiff (004) for reargument of so much of an order of this court dated September 7, 2016, as denied the branch of her motion which was for attorney's fees pursuant to Business Corporation Law § 626 (e) is granted; and it is further

         ORDERED that, upon reargument, the court adheres to its prior determination; and it is further

         ORDERED that the branch of the motion by the plaintiff (003) which is for attorney's fees pursuant to article XIX(E) of the stipulation of settlement in the Sardis' matrimonial action is denied.

         JLAJ Holding Corp. ("JLAJ) is a Delaware corporation owned by the plaintiff, Lauren Sardis (33%), and the defendant Jeffrey Sardis (67%). Jeffrey Sardis is JLAJ's controlling shareholder, as well as its president and sole director. JLAJ's only asset is its wholly owned subsidiary, AETEA Informational Technology, Inc. ("AETEA"). AETEA, which is also a Delaware corporation, is in the business of providing IT consulting services to Fortune 500 companies. Jeffrey Sardis is AETEA's president and sole director. SCCC Holdings Corporation ("SCCC") is another Delaware corporation owned by Lauren Sardis (40%) and Jeffrey Sardis (40%). [1] Jeffrey Sardis is SCCC's president and sole director. SCCC's only asset is a promissory note dated November 13, 2000, from AETEA in the principal amount of $4 million (the "SCCC Note"). AETEA currently owes SCCC approximately $16 million in principal and accrued interest on the note.

         The Sardis, who were married, divorced in 2009. On September 16, 2008, they entered into a stipulation of settlement in their matrimonial action (the "Stipulation of Settlement") and a stockholders agreement for JLAJ (the "Stockholders Agreement"). The Stockholders Agreement was incorporated by reference in the Stipulation of Settlement. Pursuant to the terms of the Stipulation of Settlement and Stockholders Agreement, Lauren was to be paid distributions in the amount of $300, 000 a year in lieu of maintenance, which she waived, and Jeffrey was to be paid a salary in the amount of $500, 000 a year. The Stockholders Agreement required Jeffrey to use commercially reasonable efforts to cause the sale, transfer, conveyance or other disposition of: "(i) all or substantially all of the assets of the Operating Entities, [2] (ii) all of the capital stock of AETEA and Allegiance, or (iii) all of the capital stock of JLAJ" (a "Liquidity Transaction"). If a Liquidity Transaction did not occur by September 16, 2012, Jeffery's salary was to be reduced every year until, by September 2014, it was zero.

         In April 2014, Jeffrey, as the sole director of AETEA, adopted a resolution to dissolve AETEA and to distribute its assets pursuant to a Plan of Liquidation and Dissolution (the "Plan"). The Plan allowed, but did not require, AETEA to pay Jeffrey compensation to implement the Plan. Jeffrey then filed a petition in the Delaware Chancery Court for the appointment of a receiver to oversee AETEA's winding up and liquidation, "including the negotiation and consummation of one or more sales of [its] property and assets." In his petition for the appointment of a receiver, Jeffrey made the following statement:

"Petitioner anticipates that one potential purchaser of AETEA's property and assets will be an entity owned by or affiliated with him. Given Petitioner's interest in such a potential transaction, as well as [Lauren] Sardi's history of litigation with Petitioner, appointing an independent receiver subject to the Court's oversight will ensure that the winding up and liquidation of AETEA is fair and equitable to all stakeholders."

         Lauren, who was not named as a party, intervened in the Delaware proceeding to oppose both the dissolution of AETEA and the appointment of a receiver. Lauren argued, inter alia, that Jeffrey's dissolution of AETEA and subsequent petition for the appointment of a receiver were part of a plan to sell AETEA's assets to himself, or to a company owned by or affiliated with him, in violation of article 3 of the Stockholders Agreement, which provides, in pertinent part, as follows:

"3.1 For purposes of this Agreement, an 'Approved Sale' means either the sale, transfer, conveyance or other disposition, in one or a series of related transactions of (i) all or substantially all of the assets of the Operating Entities, (ii) all of the capital stock of AETEA and Allegiance, or (iii) all of the capital stock of JLAJ, which in each case has been approved by both the Board of Directors and the Stockholder(s) holding a majority of the Shares..., including, for purposes of clarification a Liquidity Transaction (as defined herein).
"3.2 Notwithstanding anything to the contrary set forth in this Agreement, (i) a transaction with an Affiliate or Family Member of Jeffrey Sardis [3] shall not be an Approved Sale....In order for a transaction to be deemed an Approved Sale, the transaction must be an "arms-length" transaction....
"3.3In the event of an Approved Sale, each Stockholder [4] will: (i) consent to and vote for the Approved Sale; (ii) waive any dissenter's rights and other similar rights with regard to such Approved Sale...."

         On January 9, 2015, Lauren commenced this derivative action alleging, as she did in Delaware, that Jeffrey's dissolution of AETEA and petition for the appointment of a receiver were part of a plan to sell AETEA's assets to himself, or to a company owned by or affiliated with him, in violation of article 3 of the Stockholders Agreement. Lauren also alleged that the plan was designed to evade the provisions of the Stipulation of Settlement and Stockholders Agreement that required distributions to be paid to her in lieu of maintenance [5] and that required Jeffrey's salary to be reduced to zero. Lauren further alleged that the dissolution of AETEA and petition for the appointment of a receiver were events of default under the ...


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