In a March 28, 2011 decision by Justice Kornreich, the Court denied defendant’s motion to dismiss a breach of contract complaint. The action arose out of a recapitalization agreement between defendant Empire Resorts (“Empire”), and two of its preferred shareholders, plaintiffs Bryanston Group, Inc. and Stanley Tollman. Plaintiffs claimed that Empire breached the recapitalization agreement and sought a preliminary injunction requiring the company to set aside funds sufficient to redeem their preferred shares and pay accrued dividends. Empire moved to dismiss.
According to plaintiffs, Empire used certain funds for purposes other than retirement of plaintiffs’ preferred stock, including payment of operating expenses in excess of $1 million and settling a contested claim with a former CEO. According to the Court, if such use of those funds constituted payment of "dividend" or the making of a "distribution," then plaintiffs correctly alleged that Empire breached Section 1.9 the Recapitalization Agreement. Accepting the allegations of the complaint as true, the Court denied the motion to dismiss.
Bryanston Group, Inc. v. Empire Resorts, Inc., Sup Ct, New York County, March 28, 2011, Kornreich, J, Index No. 650881/10.