Petitioner Candace Carmel Barasch moves for partial summary judgment on her cause of action seeking an appraisal of the fair value of her shares in respondent Williams Real Estate Co. (Williams Oldco) and its six affiliates, respondents Williams Corporate Realty Services, Ltd., Williams International Realty Services, Ltd., Williams PM, Inc., Williams Management Realty Corp., Williams U.S.A. Realty Services, Inc., and Realty Programs Corporation (hereinafter, the Satellite Companies). Petitioner also moves for an order directing respondents to make an interim payment on the fair value of her shares, directing respondents to produce William Oldco's financial information on an ongoing basis, and awarding petitioner her costs and attorneys' fees.

Respondent Williams Oldco cross moves for summary judgment dismissing the petition against it.

Familiarity with the facts of this case, as set forth in various prior decisions and

orders is presumed.

The following facts are not in dispute. Prior to the transaction at issue in this proceeding, respondent Williams Oldco was a full-service commercial real estate company that conducted its business directly, through various wholly and partially owned subsidiaries, and through the six Satellite Companies. Petitioner Barasch owned a 10.33% interest in Williams Oldco, as well as a 10.33% interest in each of the six Satellite Companies. The remaining interests in Williams Oldco and each of the Satellite Companies were owned in the following percentages by five shareholders: Michael Cohen (50.54%), Andrew Roos (21.19%), Jerome Cohen (10.44%), Robert Freedman (6.5%), and Edwin Roos (1%).

In 2007, Williams Oldco began talking with potential investors and exploring the possibility of a sale. In March 2008, Williams Oldco entered into a non-binding letter of intent with FirstService Corporation (FirstService), a Canadian real estate brokerage firm, which wished to purchase 65% of Williams Oldco (see Wang Affirm., Exh. 9). Over the next several months, Williams Oldco and FirstService negotiated the precise nature and structure of the transaction. On September 15, 2008, an Amended and Restated Purchase Agreement (the Purchase Agreement) was executed by and among FirstService; its affiliate, FS Williams AcquisitionCo LLC; Williams Oldco; Williams Real Estate Management Co, LLC, a newly formed Delaware Limited Liability Company (Williams Holdco); and, individuals Michael Cohen, Andrew Roos, and Robert Freedman (id., Exh. 11).

As outlined in the Purchase Agreement, the structure of the proposed transaction required that Williams Oldco first undergo a multi-stage "Pre-Closing Corporate Reorganization" (id.). Specifically, the Purchase Agreement required that, prior to closing, Williams Oldco cause the formation of a new Delaware limited liability company, Williams Real Estate Operations Co. LLC (Williams Opco), with a total of 1000 membership units. Williams Oldco then was to contribute substantially all of the assets comprising its commercial real estate brokerage and management business, including two partially owned subsidiaries (the Partial Subsidiaries), to Williams Opco in exchange for all of these 1000 membership units. Williams Oldco then immediately was to contribute 999 (99.9%) of its Williams Opco membership units to the newly formed Williams Holdco, in exchange for 149.85 of Williams Holdco's membership units, constituting a 75% ownership interest in that entity. The remaining 50 membership units of Williams Holdco were to be issued, simultaneously, to the other owners of the Partial Subsidiaries, in exchange for their [*2]ownership interests in those entities.^[FN1] Williams Holdco then immediately would contribute these interests in the Partial Subsidiaries to Williams Opco, which thereby would acquire 100% of the membership interests in the Partial Subsidiaries.

Williams Oldco next was to acquire, by merger, all of the shares of the six affiliate Satellite Companies, which then would become wholly-owned subsidiaries of Williams Oldco. To effect this transaction, Williams Oldco was to form six new wholly-owned limited liability companies with which the Satellite Companies then would be merged. In exchange for their ownership interests in each of the Satellite Companies, the prior shareholders of the Satellite Companies each were to receive, pro rata, additional shares of Williams Oldco, the now parent company.^[FN2]

Upon the conclusion of this requisite pre-closing corporate reorganization, the Purchase Agreement called for FirstService to purchase 650 of William Opco's membership units from Williams Holdco, by which it would obtain a 65% ownership interest in Williams Opco. FirstService also was to purchase 100% of the shares of five of the six former Satellite Companies that had been merged and acquired by Williams Oldco. In addition, as part of the overall transaction, the parties contemplated that Williams Opco would enter into employment letters with most of the then executives of Williams Oldco. By their terms, these employment letters would supersede any employment agreements that these executives had with Williams Oldco, which then would be of no further effect (see e.g. Reichman Affirm., Exh. 35).

Finally, at the conclusion of the transaction, Williams Oldco was to contribute its entire 75% ownership interest in Williams Holdco to WREM Holdco LLC (Taxco), a new Delaware Limited Liability Company formed by Williams Oldco, Andrew Roos, and Robert Freedman. In exchange for this contribution, Williams Oldco was to become the sole Class A voting member of Taxco, while Andrew Roos and Robert Freedman were to become Class B non-voting members. The alleged purpose of this transaction was to enable Andrew Roos and Robert Freedman, then minority shareholders of Williams Oldco, to share equally with William Cohen, Williams Oldco's largest shareholder, in the division of any profits flowing from Williams Opco to Taxco through Williams Holdco.^[FN3] [*3]

Following the execution of the Purchase Agreement, a meeting of Williams Oldco's board of directors was held to obtain authorization and approval for all stages of the transaction. Specifically, according to the Notice of Meeting dated September 24, 2008, the stated purpose of the board meeting was, inter alia, to obtain "[t]he authorization and ratification of the proposed disposition of substantially all of the assets of [Williams Oldco]" pursuant to its Contribution Agreement with Williams Opco, its Contribution Agreement with Williams Holdco, its Contribution Agreement with Taxco, and the Purchase Agreement with FirstService (see Reichman Affirm., Exh. 22). The notice also stated that the board was to consider and act upon, inter alia, (1) calling a Special Meeting of the Shareholders of Williams Oldco to approve "the disposition of substantially all of the assets" of Williams Oldco, pursuant to those contribution agreements and the Purchase Agreement; and (2) authorizing "the Agreement and Plan of Merger" by and among Williams Oldco, the six Satellite Companies, and the six newly created limited liability companies (id.).

At the meeting, which was held on September 29, 2008, the board of directors voted to approve and authorize all stages of the transaction. That same day, the shareholders of Williams Oldco were sent Notice of a Special Meeting of Shareholders to be held on October 8, 2008. The shareholders of each of the Satellite Company also were sent Notice of a Special Meeting of Shareholders to be held that same date.

The Notice sent to the shareholders of Williams Oldco stated that the purpose of the Special Meeting was to obtain shareholder "authorization and ratification of the proposed disposition of substantially all of the assets of [Williams Oldco]," pursuant to the various contribution agreements and the Purchase Agreement (Reichman Affirm., Exh. 26). The Notice further stated that shareholder authorization also would be sought for the proposed Agreement and Plan of Merger involving Williams Oldco and the Satellite Companies (id.).The Notices sent to the shareholders of each of the Satellite Companies stated that the purpose of these Special Meetings was to obtain shareholder approval of the planned mergers, pursuant to which Williams Oldco would acquire ownership of the Satellite Companies (id., Exh. 23). Each of these six notices additionally stated that

the transactions contemplated by the proposed Merger Agreement would constitute a fundamental corporate change in the Company that, under the Business Corporation Law of the State of New York (the "BCL"), gives rise to a shareholder's right to dissent and to receive payment for his or her shares of common stock, no par value per share (the "Common Stock") of the Company. BCL § 623 sets forth the procedure to enforce a shareholder's right to receive payment for shares, a copy of which is attached hereto as Exhibit B

At the October 8, 2008 Special Meetings, a majority of each entity's six shareholders voted in favor of all stages of the proposed transaction. Petitioner, however, voted against the transaction and, by written notices dated October 8, 2008, advised Williams Oldco and each of the six Satellite Companies of her intent to exercise her statutory appraisal rights under BCL § 623, in the event that Williams Oldco proceeded with the transaction (id., Exh. 28). [*4]

The transaction closed on or about October 16, 2008. On October 23, 2008, petitioner tendered her original share certificate to Williams Oldco (id., Exh. 29).

Respondents thereafter failed to make a written offer to pay petitioner the fair value of her shares, failed to return petitioner's shares, and failed to advise petitioner what interests, if any, she had in any of the new entities. Petitioner then initiated the instant appraisal proceeding, which respondents thereafter moved to dismiss for failure to state a cause of action. By decision dated October 27, 2009, respondents' motion to dismiss the petition was denied, except to the extent of dismissing those claims that were asserted against the individual respondents and FirstService. However, petitioner's request for a summary determination on her petition also was denied, as the parties had yet to submit documentation regarding the actual transaction.

Discovery having been completed, petitioner now moves for partial summary judgment granting her an appraisal of the fair value of her shares in Williams Oldco and each of the six Satellite Companies. Respondents oppose petitioners' motion, arguing that none of the transactions at issue triggered petitioner's statutory appraisal rights under BCL § 623. Respondent Williams Oldco also cross moves for summary judgment dismissing the petition, as asserted against it.

Business Corporation Law § 909(a) provides, in pertinent part, that shareholder approval is required whenever a corporation attempts "[a] sale, lease, exchange or other disposition of all or substantially all the assets of a corporation, if not made in the usual or regular course of the business actually conducted by such corporation" (id.). BCL § 910 further provides that a shareholder who does not assent to a merger requiring shareholder approval, or who objects to any "sale, lease, exchange or other disposition of all or substantially all of the assets of a corporation which requires shareholder approval under section 909," has the right to receive payment of the fair value of his or her shares through an appraisal proceeding, as provided by BCL § 623 (id.). The purpose of the statute is to protect the interests of minority shareholders by preventing them "from being forced to sell at unfair values imposed by those dominating the corporation" (Matter of Cawley v SCM Corp., 72 NY2d 465, 471 [1988][cite omitted]), and by "prevent[ing] a corporation from disposing of a major portion of its property without obtaining prior" shareholder approval (Dukas v Davis Aircraft Prods. Co., 131 AD2d 720, 721 [2d Dept 1987]).

Petitioner contends that each of the William Oldco asset transfers, as well as the mergers of each of the six Satellite Companies, triggered her dissenters rights under Business Corporation Law (BCL) §§ 623 and 910, a fact that respondents, themselves, recognized in the notices that they sent to petitioner. Petitioner notes that these notices expressly characterized the proposed transaction as involving a "disposition of substantially all of the assets of [Williams Oldco]," and a merger of the Satellite Companies, each requiring shareholder approval (see Reichman Affirm., Exhs. 22 and 25).

Specifically, petitioner contends that her appraisal rights in Williams Oldco were triggered at three separate points in the course of this transaction: first, when Williams Oldco transferred substantially all of the assets needed to operate its commercial brokerage business to Williams Opco, in exchange for the membership units in that entity; second, when Williams Oldco transferred virtually all of its membership units in Williams Opco to Williams Holdco, in exchange for a majority of the membership units in Williams Holdco; and third, when Williams Oldco then transferred its entire interest in Williams Holdco to Taxco, in exchange for voting membership in Taxco. Petitioner additionally contends that her appraisal rights in each of the Satellite Companies were triggered when these companies were merged with Williams Oldco's new wholly-owned [*5]limited liability companies, and Williams Oldco then acquired all of the shares of these entities from petitioner and the other prior shareholders. Petitioner contends that, as a consequence of these asset transfers and mergers, petitioner's ownership interests and rights in each of these companies were fundamentally altered, if not totally extinguished.

Petitioner further contends that, as a result of these asset transfers and the purchase by FirstService, Williams Oldco no longer operates as a commercial real estate brokerage business. In support of her contention, petitioner points to the deposition testimony of several of respondents' executives that, post transaction, Williams Oldco has not engaged in any new business, and that the only ongoing activity engaged in by Williams Oldco is collecting receivables and paying on liabilities that pre-dated the transaction. Petitioner notes that, while Williams Oldco's former commercial real estate brokerage business may continue to operate, that business is now owned, operated, and controlled by Williams Opco, which, as a result of the transaction, is now majority owned and controlled by a subsidiary of FirstService, not of Williams Oldco.

Respondents argue that, petitioner is not entitled to an appraisal of her shares in any of these companies, because the statutory appraisal rights provided by BCL § 623 are triggered only when a transaction results in a disposition of "all or substantially all" of a company's assets, which, for purposes of appraisal rights, only occurs when a transfer of assets effectively results in the dissolution or liquidation of the transferor's business. Respondents argue that, here, far from liquidating or dissolving Williams Oldco's pre-transaction business, Williams Oldco, post-transaction, continues to operate, albeit now through new "subsidiaries," the exact same business, with the exact same assets, managed by the exact same officers, with the exact same employees, and for the exact same clients. Respondents argue that, as a practical matter, the various asset transfers had no effect on the ongoing business operations of Williams Oldco, as the only differences between the business before and after the transaction is that, post-transaction, (1) Williams Oldco is in a stronger position to compete in New York, due to the new capital and geographic reach provided by FirstService, and (2) the name on the company's office door had changed.

Respondents additionally argue that, New York law is clear that the mere movement of assets to a subsidiary, including only a partially owned subsidiary, is not sufficient to trigger a shareholder's appraisal rights (citing Matter of Resnick v Karmax Camp Corp., 149 AD2d 709 [2d Dept 1989]; Matter of Leventall (Socony-Vacuum Corp.), 241 AD 277 [1st Dept 1934]). Respondents contend that, here, at each stage of the transaction, Williams Oldco remained an ultimate owner of all of the original operating assets; therefore, petitioner's appraisal rights were never triggered. For example, respondents contend that, at the moment Williams Oldco transferred its operating assets to Williams Opco, it received all of Williams Opco's 1000 membership units in exchange, becoming the sole owner of Williams Opco. Thus, respondents contend, this "transfer was the equivalent of simply moving money from one pocket to another in the same pair of pants." ( Respondents -Reply Memorandum of Law, p.5). Similarly, when Williams Oldco then transferred 99.9% of its Williams Opco membership units to Williams Holdco, it received 75% of the membership units in Williams Holdco, becoming the majority member of that entity. Respondents argue that this transfer was merely "the equivalent of moving the money to yet another pocket in the same pair of pants." (Id, p.6). Finally, respondents note that when Williams Holdco then sold 65% of its membership units in Williams Opco to First Service, Williams Oldco still retained its ownership interest in the [*6]remaining 35% of Williams Opco's membership units that were held by Williams Holdco; thus, this transfer "did not even change the pocket in which the money was kept." (Id). Respondents argue that the subsequent transfer of its entire membership interest in Williams Holdco to Taxco also had no effect on William Oldco's ultimate ownership of these underlying assets, as Williams Oldco became the sole Class A voting member of Taxco, as a result of that exchange.

Respondents argue that the merger and acquisition of the Satellite Companies by Williams Oldco also did not trigger petitioner's appraisal rights, because the law expressly provides that the shareholders of a surviving corporation in a merger may not dissent (BCL § 910 [a][1]). Respondents note that at the time of the mergers, petitioner was a shareholder of Williams Oldco, the surviving corporation, as well as the Satellite Companies, the dissolving corporations. While respondents acknowledge that the BCL does not explicitly deny dissenter's rights to shareholders in these circumstances, they contend that the underlying rationale for the statute clearly prohibits appraisal rights in such a situation. Specifically, respondents argue that it makes no sense to afford petitioner appraisal rights for her shares in the dissolving corporations when, in all practical respects, petitioner would continue to "own" these entities through her status as a shareholder of the surviving corporation, even after receiving fair value for her extinguished ownership interests in the dissolving entities.

A transaction does not require shareholder approval, and thus will not trigger a shareholder's right to an appraisal, where it does not result in a liquidation, in whole or in part, of a company's business (see Dukas v Davis Aircraft Prods. Co., 131 AD2d at 721).The test applied by the courts to determine whether a sale or exchange of assets is within the purview of Business Corporation Law § 909(a) is not the dollar amount of the assets involved in the transfer. Rather, the test is whether the sale or exchange was made in the regular course of the business actually conducted by the corporation in furtherance of the objects of its existence, or something outside of its normal and regular course of business. (Kingston v Breslin, 56 AD3d 430, 431 [2d Dept 2008][internal citations omitted]). Thus, our courts have held that, regardless of the ultimate size of a transaction, where a company retains property and/or assets sufficient to continue the operation of some part of its business, it is not a sale, exchange, or disposition of "all or substantially all" of a company's assets requiring shareholder approval under BCL § 909 (Matter of Resnick v Karmax Camp Corp., 149 AD2d at 710 [where respondent corporation retained ownership of the corporate land and buildings, transfer of the company's camping operations and buses to two wholly owned subsidiaries formed by respondent did not result in a liquidation, in whole or in part, of the camp business operated by the respondent, and thus did not require shareholder approval]; Dukas, 131 AD2d at 721 [where corporation continued to engage in the same business as it had prior to the transaction, exchange of buildings and "transfer of [company's] operations from one building to another" was not a liquidation, in whole or in part, of the company's business, and did not require shareholder approval]).

Respondents do not contend that this transaction was made in the usual or regular course of the business. Nor have respondents argued that this transaction never required shareholder approval. Additionally, unlike the situations described in Resnick and Dukas, there is no indication, here, that Williams Oldco retained any property or assets with which it could have continued to operate as a commercial real estate business following the transaction. Rather, the evidence shows that essentially all of the property and assets required for the continued operation of Williams Oldco's [*7]commercial real estate business were transferred to Williams Opco and/or FirstService. For example, according to the Contribution Agreement between Williams Oldco and Williams Opco, the transferred property and assets included all fixed assets, leased or owned by Williams Oldco, including furniture, fixtures, equipment, leasehold improvements and automobiles; all transferable brokerage, management, agency and similar contracts, agreements and arrangements; the lease of its principal place of business, and all personal property leases; all transferable licenses, permits, and memberships; all goodwill; all marketable securities and bank deposits; all prepaid expenses; all interests in certain subsidiaries, including the Partial Subsidiaries; all rights to the Williams name and all goodwill appurtenant thereto; and all transferable employment contracts, agreements, and similar arrangements (see Reichman Affirm., Exh. 31). In addition, several former Williams Oldco executives have testified that none of the assets that were necessary to the ongoing operations of the business were excluded from the transaction (see id., Exh. 11: Barrett Deposition, p 113), and that, following the transaction, Williams Oldco had not engaged in any new business, other than collecting receivables and making payments on its pre-2008 accounts and liabilities (see id., Exh. 6: Siegel Deposition, pp 6-9; Exh. 9: Cohen Deposition, pp 44-46).

While, it may be true that the commercial real estate business that Williams Oldco transferred to Williams Opco continued to operate with essentially the same assets and the same personnel, it is also clear that these assets and personnel were no longer owned and or controlled by Williams Oldco, but by Williams Opco, which, in turn, is now majority owned and controlled by FirstService. While the executives who run its day-to-day business may be the same, the record reflects that these executives also are now employed by Williams Opco, now known by the name Colliers International NY LLC, and ultimately answer to a board controlled by Colliers/FirstService in Seattle. Thus, as a result of the transaction at issue, Williams Oldco has changed from a full-service commercial real estate company that conducted its business directly, and through various subsidiaries and affiliates, to a company that, at best, holds an indirect minority interest in Williams Opco, by way of Taxco's interest in Williams Holdco.

Because I find that this transaction, which was not made in the usual or regular course of the business, effectively constituted a transfer of "substantially all of the assets" of Williams Oldco requiring shareholder approval, petitioner's motion for partial summary judgment on her cause of action seeking an appraisal of the fair value of her shares in Williams Oldco is granted.

Petitioner also is entitled to partial summary judgment on her claim for an appraisal of her shares in each of the Satellite Companies. Although it is true that shareholders of a surviving corporation in a merger are not entitled to dissent and seek an appraisal (BCL §910 [a] [1] [A] [ii]), as respondents have acknowledged, petitioner also was a shareholder, holding separate membership interests, in each of the dissolving Satellite Companies. The Notices sent to the shareholders of the Satellite Companies clearly recognized these separate interests when they advised each of the shareholders of their appraisal rights, in the event that they elected not to accept additional shares in Williams Oldco upon the merger and extinguishment of their shares in the Satellite Companies. Respondents have cited no authority to support their contention that the shareholders of a corporation that is merged into another, and then dissolved, lose their right to an appraisal merely because they also happen to own separate shares in the surviving company.

The remainder of petitioner's motion, which seeks an order directing respondents to make [*8]an interim payment of $1,138,000 toward the fair value of her shares, directing respondents to produce William Oldco's financial information on an ongoing basis, and awarding petitioner her costs and attorneys' fees for, among other things, respondents' failure to offer an advance any payment on the fair value of her shares or to commence a special appraisal proceeding after receiving her notices of dissent, is granted to the extent of awarding petitioner partial summary judgment on her claim for costs and attorneys' fees.

BCL § 623 (h) (7) provides that, generally, each party to an appraisal proceeding shall bear its own costs and expenses, including the fees and expenses of its counsel and of any experts employed by it. However, this section further provides that

[t]he court may, in its discretion, apportion and assess all or any part of the costs, expenses and fees incurred by any or all of the dissenting shareholders who are parties to the proceeding against the corporation if the court finds any of the following: (A) that the fair value of the shares as determined materially exceeds the amount which the corporation offered to pay; (B) that no offer or required advance payment was made by the corporation; (C) that the corporation failed to institute the special proceeding within the period specified therefor; or (D) that the action of the corporation in complying with its obligations as provided in this section was arbitrary, vexatious or otherwise not in good faith. In making any determination as provided in clause (A), the court may consider the dollar amount or the percentage, or both, by which the fair value of the shares as determined exceeds the corporate offer

Respondents argue that petitioner's motion for costs and attorneys' fees should be denied because BCL 623 (h) expressly acknowledges that corporations have a right to dispute a shareholder's assertion that they are entitled to appraisal rights. In any event, respondents argue that it would be premature to award attorneys' fees based on the difference between the fair value of petitioner's shares and the value identified by the corporation, as no such determination has yet been made.

While a corporation does have the right to dispute a shareholder's assertion that they are entitled to appraisal rights, BCL § 623 (h) also provides that, if the corporation fails to make an offer of the fair value of the shares within the applicable period, it "shall, within twenty days after the expiration of [the applicable period]..., institute a special proceeding in the supreme court in the judicial district in which the office of the corporation is located to determine the rights of dissenting shareholders and to fix the fair value of their shares" (BCL § 623 [[h][1] ). Here, it is undisputed that respondents did not make any offer for petitioner's shares, and did not commence a special proceeding, for the purpose of determining petitioner's rights, within the applicable period. Accordingly, I find that petitioner is entitled to recover her costs in commencing this proceeding and, to the extent that the fair value of her shares is found to materially exceed the prior valuation set by respondents, to an award of attorneys' fees, the amounts of each to be determined in the course of the appraisal hearing. However, petitioner's motion for an order directing an interim payment of the fair value of her shares is denied, given that no approximate value of the shares has yet been determined.

Accordingly, it is hereby [*9]

ORDERED that petitioner's motion is granted to the extent of awarding partial summary judgment on her first and third causes of action for (1) an appraisal of the fair value of her shares in respondent Williams Real Estate Co. and its six affiliates, respondents Williams Corporate Realty Services, Ltd., Williams International Realty Services, Ltd., Williams PM, Inc., Williams Management Realty Corp., Williams U.S.A. Realty Services, Inc., and Realty Programs Corporation, and (2) costs and attorneys' fees, in amounts to be determined in the course of the appraisal hearing; and it is further

ORDERED that the remainder of petitioner's motion for partial summary judgment is denied; and it is further

ORDERED that respondent Williams Real Estate Co.'s cross motion for summary judgment to dismiss the petition is denied.

DATED: November 3, 2011

ENTER:

_______________________

J.S.C.