The opinion
Matter of New York Coll. of Podiatric Med.
2024 NY Slip Op 34164(U)
November 26, 2024
Supreme Court, New York County
Docket Number: Index No. 157116/2024
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.
This opinion is uncorrected and not selected for official
publication.
INDEX NO. 157116/2024
NYSCEF DOC. NO. 39 RECEIVED NYSCEF: 11/26/2024
SUPREME COURT OF THE STATE OF NEW YORK
NEW YORK COUNTY
PRESENT: HON. PAUL A. GOETZ PART 47
Justice
---------------------------------------------------------------------------------X INDEX NO. 157116/2024
In the Matter of the Application of
MOTION DATE 08/05/2024
NEW YORK COLLEGE OF PODIATRIC MEDICINE
MOTION SEQ. NO. 001
For Approval to Transfer Substantially All Assets to
Touro University Pursuant to N.Y. Not-for-Profit DECISION + ORDER ON
Corporation Law Sections 510 and 511
MOTION
---------------------------------------------------------------------------------X
The following e-filed documents, listed by NYSCEF document number (Motion 001) 33, 35, 36, 37, 38
were read on this motion to/for MISC. SPECIAL PROCEEDINGS .
New York College of Podiatric Medicine (NYCPM) petitions for approval to transfer
substantially all its assets to Touro University (Touro) pursuant to Not-for-Profit Corporation
Law (NPC) §§ 510 and 511.
NYCPM operates campus facilities located at 53 E 124th Street, New York, NY 10035
(NYSCEF Doc No 8), and is a corporation providing instruction to students to qualify them for
the practice of podiatry, including academic programs leading to a doctoral degree in podiatric
medicine (NYSCEF Doc No 1 ¶¶ 4, 6). Touro is a 26 USC § 501(c)(3) Regents-chartered
educational institution that offers various professional degree-granting programs under its
university system umbrella (id. ¶¶ 7, 26). NYCPM seeks to the transfer substantially all of its
assets to Touro, resulting in NYCPM becoming an internal division of Touro and ceasing to be
an independently licensed and accredited institution (id.). To that end, the parties1 entered into a
1
“The parties” refers to NYCPM, Touro, and The Foot Clinics of New York (“Foot Clinic”), a clinical teaching
affiliate of the Corporation. As part of the transaction agreement, Foot Clinic will amend its governance structure
such that Touro will become its sole member upon the closing of the transaction.
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transaction agreement dated April 20, 2021 (NYSCEF Doc No 5) and amended on September
19, 2022 (NYSCEF Doc No 6) (the transaction agreement).
The assets to be transferred include (id. ¶ 8): (1) tangible personal property, including
furniture, fixtures, office equipment, PCs, laptops, lab equipment and passenger cars valued at
$946,700 (NYSCEF Doc No 16); (2) intellectual property; (3) real property consisting of the
campus facilities at 53 East 124th Street, valued at $42 million (NYSCEF Doc No 15); (4) leases
or facility licenses; (5) investments in marketable securities, good will, legacy; (6) all of the
membership interests of Podia Insurance Limited, a Cayman Islands insurance captive owned by
NYCPM; and (7) contracts, which collectively represent the educational operation being
transferred (NYSCEF Doc No 10). The transaction does not involve the payment of any
monetary consideration, however, Touro agrees to “assume and [] to pay, perform and discharge
the liabilities and obligations of NYCPM that arose from the operation of NYCPM, known or
unknown, prior to the Closing,” excluding those liabilities or obligations “arising from a breach,
default, or violation of any representation or warranty by NYCPM under the Transaction
Agreement; violations of laws by NYCPM; and certain labor, employment and benefit-related
actions or violations []which shall be retained by NYCPM for a period of five years post-
closing” (NYSCEF Doc No 1 ¶ 17; NYSCEF Doc No 37 ¶ 3).
“Ordinarily, courts are not involved in the oversight or approval of contracts [but the] law
is different in the case of not-for-profit entities [because they] do not have shareholders to whom
profits are distributed,” and therefore lack “market devices to ensure the efficacy of contracts and
regularity of operations (64th Assocs., L.L.C. v Manhattan Eye, Ear & Throat Hosp., 2 NY3d
585, 589-90 [2004]). NPC §§ 510 and 511 are therefore “designed to protect the members of a
not-for-profit corporation from unwise bargains and the wrongful use of the corporation’s
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property, and to assure both the public’s interest in the proper distribution of the corporations’
assets and the satisfaction of the officers’ and directors’ fiduciary obligation” (Rose Mary Bailly
et al, Practice Commentaries, McKinney’s Cons Laws of NY, Book 37, NPC § 510). These
statutes provide that a “disposition of all, or substantially all, the assets of a corporation may be
made upon such terms and conditions and for such consideration . . . as may be authorized” by a
majority vote of the board’s corporation (NPC § 510); and that the corporation must “present a
verified petition to the supreme court” setting forth, inter alia, a description of the assets to be
transferred, the consideration to be received, and the terms of the sale (NPC § 511).
Applications pursuant to NPC §§ 510 and 511 often involve the sale of assets between
two distinct entities, where the seller is a not-for-profit corporation and the buyer is a for-profit
corporation (see, e.g., Dore v Wormley, 690 F Supp 2d 176, 181 [SDNY 2010]; Matter of
Prospect Hgts. Hous. Dev. Fund Corp., 38 AD3d 781 [2nd Dept 2007]; Rose Ocko Found., Inc. v
Lebovits, 259 AD2d 685 [2nd Dept 1999]). The nature of the instant proposed transfer is atypical
in that, by way of the transaction agreement, the parties intend that NYCPM become a part of
Touro’s school system, named the “New York College of Podiatric Medicine of Touro
University” (NYSCEF Doc No 1 ¶ 7). Additionally, as previously noted Touro is itself a USC §
501(c)(3) Regents-chartered educational institution (id. ¶ 6). Therefore, while “judicial scrutiny
[is appropriate to] protect [NYCPM] against board actions that might be adverse to the entity’s
well-being” (64th Assocs., L.L.C., 2 NY3d at 591), the proposed transfer under review here does
not raise the usual concerns that a not-for-profit corporation is proposing an imprudent transfer
of assets.
Pursuant to NPC § 510(a)(1), NYCPM submitted resolutions, unanimously adopted by its
board, recommending the proposed transfer of assets (NYSCEF Doc Nos 23-26 [NYCPM’s
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board’s approval of the first transaction agreement at a meeting held on September 24, 2021;
NYCPM’s board’s approval of the amended transaction agreement at a meeting held on October
21, 2022; NYCPM’s board’s confirmation of its approval at a meeting held on February 24,
2023; and Foot Clinic’s board’s confirmation of its approval at a meeting held on February 24,
2023]). Additionally, NYCPM obtained the Attorney General’s approval of NYCPM’s proposed
order (NYSCEF Doc No 37, p. 5).
NPC § 511(d) requires that the court be satisfied that the “consideration and the terms of
the transaction are fair and reasonable” and that the “purposes of the corporation . . . will be
promoted.” In support of its petition, NYCPM avers that, in line with the national trend for
podiatric schools, it has seen decreased enrollment in recent years, and this decrease, “combined
with the challenges NYCPM faces as an independent school[,] means that it has a limited pool of
tuition and revenue from which to cover all of its operational expenses (NYSCEF Doc No 1 ¶
24). While NYCPM has some significant assets, it states that the Foot Clinic’s “operations run at
a substantial deficit” (id. ¶ 20), and that NYCPM has “had to draw on funds from its reserves to
cover cash flow shortfalls in its operational accounts” (id. ¶ 25; see also NYSCEF Doc No 18
[NYCPM’s audited financial statement for the fiscal year ending on June 30, 2023]). Notably,
“NYCPM is the last stand-alone podiatric school in the country,” as “each of the other accredited
independent podiatric schools have become part of multi-discipline educational institutions,
giving those schools access to greater resources, allowing them to streamline their administrative
operations, modernize their operations, and increase opportunities for cross-collaboration across
professional schools” (id. ¶ 23). In transferring substantially all of its assets to Touro, NYCPM
seeks to similarly benefit from joining a larger institution, which will allow it “to reduce its
administrative overhead, thereby allowing the school to direct more of its resources towards
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accomplishing its educational mission” (id.). It identifies Touro as a school with “a history of
successfully bringing various professional degree-granting programs under its university system
umbrella” (id. ¶ 26) and which is “committed to providing the financial, operational, and human
resources services necessary to strengthen the podiatric school, cover its operational costs, and
bring the school back to its stature as the preeminent podiatric school in the nation” (id. ¶ 25).
Based on the foregoing, NYCPM has demonstrated its compliance with NPC § 510, and
that the proposed transaction is fair and reasonable and will promote NYCPM’s purposes
pursuant to NPC § 511. Accordingly, it is
ORDERED that NYCPM’s application for approval for the transfer of substantially all of
its assets to Touro as set forth in the transaction agreement (NYSCEF Doc No 5) and amendment
thereto (NYSCEF Doc No 6) is granted; and it is further
ORDERED that the transferred assets are to be used to create an internal division of
Touro University to be called the New York College of Podiatric Medicine of Touro University
("Podiatric College"); and it is further
ORDERED that the restricted assets transferred from the NYCPM to Touro shall
continue to be used by Touro in accordance with the same original restricted purposes; and it is
further
ORDERED that the Attorney General shall be served with a copy of the signed court
order and shall receive notice that the transaction has been completed upon closing, or that the
transaction has been abandoned, or that it is still pending 90 days from the date of this order; and
it is further
ORDERED that a copy of the final closing statement for the transaction shall be provided
to the Attorney General within 30 days of the closing date; and it is further
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ORDERED that there shall be no change to the parties, or the terms of the transaction
agreement as amended without further court approval.
11/26/2024
DATE PAUL A. GOETZ, J.S.C.
CHECK ONE: X CASE DISPOSED NON-FINAL DISPOSITION
X GRANTED DENIED GRANTED IN PART OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE
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