Tartell v. Klein

Tartell v Klein

2025 NY Slip Op 31634(U)

May 5, 2025

Supreme Court, New York County

Docket Number: Index No. 653837/2024

Judge: Arthur F. Engoron

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.

[FILED: NEW YORK COUNTY CLERK 05/05/2025 04:55 P~ INDEX NO. 653837/2024

NYSCEF DOC. NO. 205 RECEIVED NYSCEF: 05/05/2025

SUPREME COURT OF THE STATE OF NEW YORK

NEW YORK COUNTY

PRESENT: HON. ARTHUR F. ENGORON PART 37

Justice

-----------------------------------------------------------X

INDEX NO. 653837/2024

PAUL TARTELL, BRIAN GRODMAN,

MOTION DATE 11/08/2024

Plaintiffs,

MOTION SEQ. NO. 006

- V -

MORTON KLEIN, RUBIN MARGULES, MICHAEL

ORBACH, BART BLATSTEIN, TYLER KORN, ZIONIST DECISION + ORDER ON

ORGANIZATION OF AMERICA, MOTION

Defendants.

----------------------------------------------------X

The following e-filed documents, listed by NYSCEF document number (Motion 006) 154, 155, 156, 157,

158,159,160,161,162,163,164,165,166,167,168,190,191,192,193,194,195,196,197,198,199,

200,201,202,203,204,

were read on this motion to DISMISS

Upon the foregoing documents, after oral argument on March 25, 2025, and for the reasons

stated hereinbelow, defendants' motion to dismiss is granted.

Background

This action poses the question of to what extent Courts should, or should not, oversee the

membership and monetary affairs of not-for-profit corporations.

The scourge of antisemitism is alive in modem day America. Plaintiffs' Verified Complaint

catalogues antisemitism's recent increase, especially since October 7, 2023, and responses

thereto. NYSCEF Doc. No. 156, ~~27-51.

Defendant Morton Klein ("Klein") has headed defendant Zionist Organization of America

("ZOA") for many years. Plaintiffs state that "The mission of the ZOA ... is essentially to

advocate for Israel and the Jewish people, and oppose anti-Semitism wherever it rears its ugly

head." NYSCEF Doc. No. 156 ~ 2.

When plaintiffs first became active in the ZOA, they strongly supported Klein. However,

Sadly, Plaintiffs have come to learn that Defendant Klein cares more about his

own personal stature, power, and financial gain than in seeing the ZOA fulfill its

mission. And they have come to learn that the Board Defendants have knowingly

enabled Klein to advance his own interests at the expense of the ZOA in order to

maintain political power within the ZOA.

653837/2024 TARTELL, PAUL ET AL vs. KLEIN, MORTON ET AL Page 1 of 4

Motion No. 006

[* 1] 1 of 4

[FILED: NEW YORK COUNTY CLERK 05/05/2025 04:55 P~ INDEX NO. 653837/2024

NYSCEF DOC. NO. 205 RECEIVED NYSCEF: 05/05/2025

Id. ,r 4. Furthermore,

Plaintiffs have also learned that the Board Defendants have directly and indirectly

aided and abetted Klein's misconduct and fraud by approving actions that benefit

Klein and hurt the ZOA and by taking steps to prevent other Board Members from

bringing Klein to heel. Such aiding and abetting has included, without limitation,

withholding information from the ZOA Board, failing to provide agendas in a

timely manner, and forbidding discussions among Board Members that do not

involve Defendant Klein. 1

Id. ,r 9.

Plaintiffs claim that after a glorious history, the ZOA has become a shell of its former self, "at

best, an irrelevancy, and, at worst, a joke." Id. ,r 66. They describe all the things that the ZOA

could be doing, but is not, to fight antisemitism, such as establishing outreaches to college

campuses, Washington, D.C., and Israel. They claim that Klein is overpaid, to the tune of

"millions of dollars," and underactive, except at self-aggrandizing. Id. ,r 68. They are incensed

that he has (allegedly) been abusing his credit card privileges and has been making a small

fortune by consulting for a ZOA board member, Henry Schwartz, "in direct violation of the

ZOA's Constitution and By-Laws." Id. In sum, "[t]he demise of the ZOA is due to the fact that

the ZOA National President, Morton Klein, is incapable of achieving the ZOA's mission and is

motivated by personal gain only." Id. ,i 74.

Plaintiffs have not taken Klein's alleged abuses lying down. In a July 17, 2024 letter to the

Board of Directors, plaintiffs and other board members demanded that the board: terminate

Klein as a ZOA employee; ostracize him; initiate action to recoup the salary paid to him while he

was consulting for Mr. Schwartz; engage independent counsel and an independent auditor to

investigate whether Klein committed any other improprieties; and report Klein's misconduct and

the results of the investigation to the New York State Attorney General. NYSCEF Doc. No. 191.

In no uncertain terms, defendants refused to comply with plaintiffs' demands.

On July 24, 2024, both sides convened and conducted dueling meetings, the validity of each of

which the other side hotly disputes. Similarly, both sides have commenced dueling "independent

investigations."

The Verified Complaint asserts the following causes of action, all derivatively on behalf of the

ZOA: (1) terminate Klein and bar him from any officer position; (2) recoup "misappropriated

funds" from Klein; (3) damages for Klein's alleged fraud; (4) damages for Klein's alleged breach

of fiduciary duty; (5) damages for the board member defendants' alleged breach of fiduciary

duty; (6) declare that plaintiff Tartell is a member of the Board and vice-chair of the ZOA (7)

enjoin defendants from hindering the independent investigation plaintiffs arranged; and (8) refer

defendants' alleged improprieties to the New York State Attorney General. NYSCEF Doc. No.

156.

1

One wonders how Klein and the ZOA police this last prohibition, or whether they rely on an "honor system."

653837/2024 TARTELL, PAUL ET AL vs. KLEIN, MORTON ET AL Page 2 of 4

Motion No. 006

[* 2] 2 of 4

[FILED: NEW YORK COUNTY CLERK 05/05/2025 04:55 P~ INDEX NO. 653837/2024

NYSCEF DOC. NO. 205 RECEIVED NYSCEF: 05/05/2025

Defendants, not lying down either, now move to dismiss this action on several grounds: (1)

plaintiffs' membership status (or lack thereof) deprives them of standing; (2) plaintiffs have

failed to satisfy the "demand requirement" for a derivative action; (3) plaintiffs have failed to

identify any valid reason to remove Klein; (4) plaintiffs have failed to identify any "related party

transactions"; (5) the complaint fails to plead fraud and breach of fiduciary duty with

particularity; (6) defendants have not aided and abetted any breach of fiduciary duty; (7) as board

members of a not-for-profit, defendants are entitled to qualified immunity; and (8) the eighth

cause of action is not cognizable. 2

Discussion

"In the posture of defendants' CPLR 3211 motion to dismiss, our task is to determine whether

plaintiffs' pleadings state a cause of action. The motion must be denied if from the pleadings'

four comers factual allegations are discerned which taken together manifest any cause of action

cognizable at law. In furtherance of this task, we liberally construe the complaint, and accept as

true the facts alleged in the complaint and any submissions in opposition to the dismissal motion.

We also accord plaintiffs the benefit of every possible favorable inference." 511 W. 232nd

Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 151-52 (2002).

Here, precisely resolving the standing issue would require a "deep dive" into the ZOA's

constitution and by-laws; the dueling membership meetings of July 27, 2024; the roster of

ZOA' s different categories of membership, and the hotly contested issue of whether standing can

be terminated by events subsequent to the commencement of a derivative action. Case authority

appears to be divided. This Court agrees with plaintiffs that, as a matter of fairness, common

sense and public policy, standing cannot be defeated by ejecting from membership plaintiffs that

originally had standing.

This Court agrees with plaintiffs that they satisfied the demand requirement and that any further

demands or delay would be futile; the board was never going to accede to plaintiffs' demands.

Plaintiffs' pleading just barely satisfies the requirement to plead fraud and breach of fiduciary

duty with particularity.

But plaintiffs fall short in two respects, one specific, one general. Plaintiffs most particular

grievance, which runs throughout their complaint, is Klein's alleged consulting work, which

plaintiffs claim is "in direct violation of the ZOA's Constitution and By-Laws." For all of their

reliance on this claim, plaintiffs are rather reticent in stating exactly where the Constitution or

By-Laws prohibit this sort of arrangement. To the extent that said documents prohibit the ZOA

president from having "outside employment" or being "employed" by a board member, this

Court does not consider consulting work to be "employment." Presumably, any such provision

is designed to ensure that the president can devote sufficient time and energy to the job of being

president, which would not be the case if the president had full-time outside employment. This

failing leaves gaping holes in plaintiffs' case.

More generally, the board of directors of a non-profit corporation can pretty much do what they

want (call it "The Board Judgment Rule"). The board can keep an (allegedly) ineffectual

2

Or, in this Court's view, recognizable.

653837/2024 TARTELL, PAUL ET AL vs. KLEIN, MORTON ET AL Page 3 of 4

Motion No. 006

[* 3] 3 of 4

[FILED: NEW YORK COUNTY CLERK 05/05/2025 04:55 P~ INDEX NO. 653837/2024

NYSCEF DOC. NO. 205 RECEIVED NYSCEF: 05/05/2025

president. The board can (allegedly) overpay him or her. The board can let the president

(allegedly) run the corporation into the ground. The board can allow liberal use of the

corporation's credit cards. 3

This Court sympathizes with plaintiffs' frustration. But the correct course would be to support,

join, and nurture, perhaps even lead, any of the estimable organizations fighting the good fight

that plaintiffs list in their complaint: the American Jewish Committee, the Anti-Defamation

League, Hillel International, the Louis D. Brandeis Center for Human Rights Under Law, the

Jewish Federations of North America, and/or the American Israel Public Affairs Committee.

Bitter and costly internecine warfare is not the answer to antisemitism. Neither is judicial

intervention in the internal affairs of a do-good organization. The Klein faction clearly controls

the ZOA. A court should not put its hand on the scale to change the balance of power.

Conclusion

Thus, defendants' motion to dismiss is granted, and the Clerk is hereby directed to enter

judgment dismissing this action. _..,Tlar ;;

5/5/2025

DATE ARTHUR F. ENGORON, J.S.C.

CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

APPLICATION:

CHECK IF APPROPRIATE:

GRANTED

SETTLE ORDER

□ DENIED

INCLUDES TRANSFER/REASSIGN

8 GRANTED IN PART

SUBMIT ORDER

FIDUCIARY APPOINTMENT

□ OTHER

□ REFERENCE

3

The complaint does not allege that Klein has had his hands in the ZOA's cookie jar.

653837/2024 TARTELL, PAUL ET AL vs. KLEIN, MORTON ET AL Page 4 of 4

Motion No. 006

4 of 4

[* 4]