The opinion
Goldman v Icaro Media Group, Inc.
2024 NY Slip Op 33610(U)
October 10, 2024
Supreme Court, New York County
Docket Number: Index No. 153193/2024
Judge: Paul A. Goetz
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
Op 30001(U), are republished from various New York
State and local government sources, including the New
York State Unified Court System's eCourts Service.
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publication.
INDEX NO. 153193/2024
NYSCEF DOC. NO. 42 RECEIVED NYSCEF: 10/10/2024
SUPREME COURT OF THE STATE OF NEW YORK
NEW YORK COUNTY
PRESENT: HON. PAUL A. GOETZ PART 47
Justice
---------------------------------------------------------------------------------X INDEX NO. 153193/2024
LLOYD GOLDMAN,
MOTION DATE 04/04/2024
Petitioner,
MOTION SEQ. NO. 001
-v-
ICARO MEDIA GROUP, INC.,PAUL FELLER DECISION + ORDER ON
MOTION
Respondents.
---------------------------------------------------------------------------------X
The following e-filed documents, listed by NYSCEF document number (Motion 001) 21, 23, 24, 25, 26,
27, 28, 29, 30, 31, 33, 34, 35, 36, 37, 38, 39, 40, 41
were read on this motion to/for ARTICLE 78 (BODY OR OFFICER) .
Upon the foregoing documents, it is
In this Article 78 proceeding, petitioner Lloyd Goldman, a shareholder in respondent
corporation, ICARO Media Group (“ICARO”) seeks an order compelling respondent to provide
him with requested books and records for his inspection. Petitioner argues that he is entitled to a
right of inspection through both statutory rights and New York common law. Respondents
oppose arguing that the court must apply Nevada law, since that is where ICARO was
incorporated, and thus the statutes petitioner cites are not applicable to ICARO. Respondents
further argue that even if New York law does apply the statutes cited by petitioner do not allow
him to inspect the records he seeks.
DISCUSSION
Internal Affairs Doctrine
Petitioner argues that pursuant to Business Corporation Law § 1315 (BCL), he is entitled
to receive certain records from ICARO. BCL § 1315(a) states:
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Any resident of this state who shall have been a shareholder of
record of a foreign corporation doing business in this state upon at
least five days' written demand may require such foreign corporation
to produce a record of its shareholders setting forth the names and
addresses of all shareholders, the number and class of shares held by
each and the dates when they respectively became the owners of
record thereof and shall have the right to examine in person or by
agent or attorney at the office of the foreign corporation in this state
or at the office of its transfer agent or registrar in this state or at such
other place in the county in this state in which the foreign
corporation is doing business as may be designated by the foreign
corporation, during the usual business hours, the record of
shareholders or an exact copy thereof certified as correct by the
corporate officer or agent responsible for keeping or producing such
record and to make extracts therefrom. Resident holders of voting
trust certificates representing shares of the foreign corporation shall
for the purpose of this section be regarded as shareholders. Any such
agent or authority shall be authorized in a writing that satisfies the
requirements of a writing under paragraph (b) of section 609
(proxies). A corporation requested to provide information pursuant
to this paragraph shall make available such information in the format
in which such information is maintained by the corporation and shall
not be required to provide such information in any other format. If a
request made pursuant to this paragragh1 includes a request to
furnish information regarding beneficial owners, the corporation
shall make available such information in its possession regarding
beneficial owners as is provided to the corporation by a registered
broker or dealer or a bank, association or other entity that exercises
fiduciary powers in connection with the forwarding of information
to such owners. The corporation shall not be required to obtain
information about beneficial owners not in its possession.
Respondents first argue that because ICARO is a corporation incorporated in Nevada,
New York law does not apply under the internal affairs doctrine. “With respect to matters arising
from the internal affairs of a corporation, as in this case, including the relationships between
directors and shareholders, [the Court of Appeals] has noted that the general approach is to apply
the law of the state of incorporation” (Eccles v Shamrock Capital Advisors, LLC, 2024 NY Slip
Op 02841 at *5 [Ct App May 23, 2024]). “[T]he doctrine serves the vital need for a single,
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constant, and equal law to avoid the fragmentation of continuing, interdependent internal
relationships” (id.).
However, “[a]ccess to stockholder lists is a recognized exception to the internal affairs
doctrine as a matter of corporate law and conflicts of law, and it should take a substantial threat
of conflict adversely affecting interstate commerce before a court invalidates a state's assertion of
this traditional authority” (Sadler v NCR Corp., 928 F2d 48, 55 [2d Cir 1991]). In affirming BCL
§ 1315’s constitutionality the Second Circuit ruled that “Section 1315 creates no discrimination
against interstate commerce [because] it is adequately justified by the legitimate local interest in
protecting local shareholders (id. at 55-56). Further, “[t]he use of a state's courts to reach a
corporation doing business within the state for the purpose of availing oneself of a state statutory
remedy or pursuing a common-law tort action does not implicate impermissible regulation”
(Airtran New York, LLC v Midwest Air Group, Inc., 46 AD3d 208, 215 [1st Dept 2007]). “As [a]
New York resident shareholder[] in respondent foreign corporation[], petitioner[] [is] entitled to
inspect the corporation[’s] shareholder lists for the avowed purpose of soliciting sales of stock
from other shareholders” (Madison Liquidity Inv'rs 103 LLC v H. Augustus Carey, 291 AD2d
362, 362 [1st Dept 2002]). Therefore, petitioner may rely on New York law for the limited
purpose of enforcing BCL § 1315.
BCL § 1315
Petitioner argues that notwithstanding BCL § 1315’s text only allowing for access to a
record of shareholder information, that he is entitled to inspect the wider array of records
enumerated in BCL § 624. BCL § 624 provides in relevant part that:
(a) Each corporation shall keep correct and complete books and
records of account and shall keep minutes of the proceedings of its
shareholders, board and executive committee, if any, and shall keep
at the office of the corporation in this state or at the office of its
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transfer agent or registrar in this state, a record containing the names
and addresses of all shareholders, the number and class of shares
held by each and the dates when they respectively became the
owners of record thereof.
…
(b) Any person who shall have been a shareholder of record of a
corporation upon at least five days' written demand shall have the
right to examine in person or by agent or attorney, during usual
business hours, its minutes of the proceedings of its shareholders
and record of shareholders and to make extracts therefrom for any
purpose reasonably related to such person's interest as a shareholder.
…
(e) Upon the written request of any shareholder, the corporation
shall give or mail to such shareholder an annual balance sheet and
profit and loss statement for the preceding fiscal year, and, if any
interim balance sheet or profit and loss statement has been
distributed to its shareholders or otherwise made available to the
public, the most recent such interim balance sheet or profit and loss
statement. The corporation shall be allowed a reasonable time to
prepare such annual balance sheet and profit and loss statement.
Thus, under BCL § 624, a shareholder has a right to inspect a wider range of records than
the records that a shareholder is entitled to inspect from a foreign corporation under BCL § 1315.
Here, petitioner seeks the following documents from ICARO:
a. ICARO’s governing documents, including certificates of
incorporation, bylaws and shareholder agreements.
b. A record of all of ICARO’s shareholders containing the names
and addresses of all shareholders, the number and class of shares
held by each and the date upon which they became shareholders
of record.
c. All audited financial statements for ICARO from 2015 to the
present.
d. Annual and quarterly financial statements for ICARO from 2015
to the present.
e. Profit and loss statement for ICARO from 2015 to the present.
f. General ledgers for ICARO from 2015 to the present.
g. Documents concerning ICARO’s accounts receivable and
accounts payable from 2015 to the present.
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h. A list of ICARO’s top ten customers and the revenue attributable
to each from 2015 to the present.
i. All federal and state tax returns for ICARO from 2015 to the
present.
j. Documents concerning the value of ICARO’s assets, including
the description and location of ICARO’s assets and bank
accounts
Petitioner argues that he is entitled to inspect these documents because BCL § 1315 gives
New York shareholders the same rights of inspection to foreign corporations as BCL § 625 gives
to shareholders of New York corporations. He relies on the ruling in Airtran where the court
stated, “Section 1315 … was intended to give New York holders of shares in foreign
corporations the same right of inspection as under Business Corporation Law § 624 for those
holding shares in New York corporations” (Airtran, 46 AD3d at 213). However, read in context
this statement cannot be understood to be granting shareholders of foreign corporations the right
to broader range of documents from BCL § 624. In Airtran, the plaintiff was seeking the
shareholder information enumerated in BCL § 1315 and the court was analyzing the standard for
the term “doing business” within the context of BCL § 1315 (id.). The First Department
determined that courts should liberally construe the term “doing business” within BCL § 1315 in
favor of the shareholder to give them access to shareholder information because “Section 1315
… was intended to give New York holders of shares in foreign corporations the same right of
inspection as under Business Corporation Law § 624 for those holding shares in New York
corporations” and thus (id.).
The First Department was not implying, as petitioner suggests, that BCL § 1315 grants
shareholders access to the additional documents enumerated in BCL § 624. Indeed, if this was
the intent of the legislature they would have included the language in BCL § 624 within BCL §
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1315. Therefore, because ICARO is a foreign corporation, petitioner is only entitled to the
shareholder information listed in BCL § 1315.
Petitioner also argues that because BCL § 103(a) states “This chapter applies to every
domestic corporation and to every foreign corporation which is authorized or does business in
this state” that BCL § 624 applies directly to both domestic and foreign corporations alike. This
argument is unavailing since under BCL § 102, the legislature includes distinct definitions for
“corporation” and “foreign corporation” stating:
(4) “Corporation” or “domestic corporation” means a corporation
for profit formed under this chapter, or existing on its effective date2
and theretofore formed under any other general statute or by any
special act of this state for a purpose or purposes for which a
corporation may be formed under this chapter, other than a
corporation which may be formed under the cooperative
corporations law.
…
(7) “Foreign corporation” means a corporation for profit formed
under laws other than the statutes of this state, which has as its
purpose or among its purposes a purpose for which a corporation
may be formed under this chapter, other than a corporation which,
if it were to be formed currently under the laws of this state, could
not be formed under this chapter. “Authorized”, when used with
respect to a foreign corporation, means having authority under
article 13 (Foreign corporations) to do business in this state.
Indeed, if the legislature intended all references to “corporation” to refer to both domestic
and foreign corporations then the inclusion of much of Article 13 of the BCL, which delineates
specific provisions for foreign corporations, including BCL § 1315 would be duplicative.
Accordingly, petitioner is limited to inspection of the rights enumerated in BCL § 1315.
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Common Law Right
While petitioner claims that he also has a common law right to inspect corporate records,
he does not cite any case law granting these rights to a shareholder of a foreign corporation.
While he does cite Crane Co. v Anaconda Co, where the Court of Appeals contemplates a
common law right to inspect records in reference to a Montana corporation, the court ultimately
granted access to the shareholder information based on BCL § 1315 and not on any common law
right (Crane Co. v Anaconda Co., 39 NY2d 14 [1976]). “The operative language of section 1315
of the Business Corporation Law applies to foreign corporations … In view of our disposition on
the statutory basis it is unnecessary to reach the common-law ground” (id. at 17 n.2).
Considering that in Sadler the Second Circuit recognized that access to shareholder lists is a
limited exception to the “internal affairs doctrine as a matter of corporate law and conflicts of
law”, petitioner will not be granted wider access to ICARO’s records.
Accordingly it is,
ORDERED that the petition is granted, only to the extent that respondent shall provide, if
not already provided pursuant to the May 23, 2024 interim order (NYSCEF Doc No 33), the
shareholder information enumerated in BCL § 1315; and it is further
ORDERED that the petition is otherwise denied.
10/10/2024
DATE PAUL A. GOETZ, J.S.C.
CHECK ONE: X CASE DISPOSED NON-FINAL DISPOSITION
GRANTED DENIED X GRANTED IN PART OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE
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