On August 11, 2015, on an issue of first impression, the Appellate Division, First Department of the New York State Supreme Court unanimously overturned the New York County Supreme Court’s decision to dismiss a plaintiffs’ claim for replevin seeking to regain possession of their 50% interest in a number of New York Limited Liability Companies (the “LLCs”). Partner, Stanley A. Camhi and Associate, Natasha Shishov of Jaspan Schlesinger LLP, along with the Law Offices of Craig Avedisian P.C. as co-counsel, represented the plaintiffs in Herman et al. v. 36 Gramercy et al., Index No.: 652700/2012.
Plaintiffs were the former 50% owners of six prime apartment buildings located in Manhattan. In 2012, plaintiffs commenced an action against the purchaser of the LLCs, which owned the real properties, asserting a claim for replevin of the LLCs and for conspiracy to commit fraud with the fiduciaries that improperly transferred the properties and sold the LLCs to the detriment of the plaintiff.
The subsequent purchaser of the LLCs moved to dismiss the Complaint arguing that replevin does not apply to membership interests in an LLC and that the conspiracy claim was time barred. The Supreme Court granted the motion to dismiss. With respect to the replevin claim specifically, on an issue of first impression, the Supreme Court held that replevin does not lie because a membership interest in a limited liability company “is not specific property, an identifiable object or a piece of paper, capable of being identified and delivered in kind. In that way, it differs from a stock certificate, a bond or a note, which are defined as chattel, pursuant to the [New York General Construction Law].”
The Appellate Division however agreed with plaintiffs’ counsel and unanimously overturned the lower court’s order, holding that the statute of limitations against the underlying tortfeasor did not start to run until he repudiated his fiduciary position, making the conspiracy claims timely. With respect to the replevin claim, the Appellate Division held that “[t]he failure to include limited liability membership interest in the General Construction Law § 15 list of ‘chattel’ subject to replevin is not dispositive, given that the statutory list is by its terms not intended to be exclusive, and it predates by many years the 1994 enactment of the Limited Liability Company Law.” Thereby making new law concerning replevin in the State of New York.