author: Ciparick, J. Smith, J. (dissenting).

text:
    [ 883 NE2d 996, 854 NYS2d 89]
    In the Matter of The American Committee for the Weizmann Institute of Science, Appellant, v Jennifer Dunn, Individually and as Executor of Doris Weingarten, Deceased, et al., Respondents.
    Argued January 8, 2008;
    decided February 14, 2008

      POINTS OF COUNSEL

      Orans, Elsen & Lupert LLP, New York City (Robert L. Plotz, Leslie A. Lupert and Nicholas G. Arons of counsel), for appellant.
    I. The charity made a sufficient showing to obtain SCPA 1404 discovery on its undue influence claim. (Matter of Abrial, 286 App Div 916; Matter of Callahan, 273 App Div 884; Matter

      of Greene, 240 AD2d 745; Matter of Walther, 6 NY2d 49; Matter of Arnold, 78 AD2d 753; Matter of Kaufmann, 20 AD2d 464; Matter of Saterlee, 281 App Div 251; Matter of Paneck, 237 AD2d 82; Matter of Itta, 225 AD2d 548; Matter of Loverme, 27 AD3d 747.) II. The American Committee for the Weizmann Institute of Science is entitled to SCPA 1404 discovery even under the reasonable probability of success standard. (Matter of Bacon, 169 Misc 2d 858; Matter of Walther, 6 NY2d 49; Matter of Paneck, 237 AD2d 82; Matter of Itta, 225 AD2d 548; Matter of Bobst, 165 Misc 2d 776; Matter of Loverme, 27 AD3d 747; Matter of Musso, 227 AD2d 404; Rollwagen v Rollwagen, 63 NY 504; Morrison-Knudsen Constr. Co. v Director, Office of Workers’ Compensation Programs, 461 US 624; Matter of Cregan, 275 NY 337.) III. The petition sufficiently alleged a contract to make a gift to the American Committee for Weizmann Institute of Science. (Hamlin v Stevens, 177 NY 39; Matter of Lubins, 250 AD2d 850; Matter of Camac, 2 Misc 3d 894; Mallad Constr. Corp. v County Fed. Sav. & Loan Assn., 32 NY2d 285; Matter of Urdang, 304 AD2d 586; Crabtree v Elizabeth Arden Sales Corp., 305 NY 48; Bruce Realty Co. of Fla. v Berger, 327 F Supp 507; Matter of Drogin, 144 Misc 2d 747; Matter of Field, 11 Misc 2d 427; Morris Cohon & Co. v Russell, 23 NY2d 569.)

      Hofheimer, Gartlir & Gross, LLP, New York City (David L. Birch of counsel), for respondents.
    I. The American Committee for Weizmann Institute of Science was not entitled to citation advising it of the application to probate the decedent’s will and therefore had no statutory right to take depositions pursuant to SCPA 1404 (4). (Matter of Brinkmann, 21 NY2d 804; Matter of Minasian, 149 AD2d 511; Matter of Abrial, 286 App Div 916; Matter of Eisenlohr, 153 Misc 130; Matter of Bray, 146 Misc 415; Wasmuth v Allen, 14 NY2d 391, 379 US 11; Schulman v People, 10 NY2d 249; Uberman v Lasner, 55 Misc 2d 1027.) II. The American Committee for Weizmann Institute of Science was required to demonstrate a substantial basis for contesting the decedent’s will and a reasonable probability of its success before the probate decree can be set aside. (Matter of Musso, 227 AD2d 404; Matter of Baldwin, 3 AD2d 635; Matter of Frutiger, 29 NY2d 143; Matter of Leslie, 175 App Div 108; Matter of Westberg, 254 App Div 320, 279 NY 316, 283 NY 589; Matter of Callahan, 273 App Div 884; Matter of Sandow, 25 Misc 2d 356, 13 AD2d 451, 912; Matter of Wang, 5 AD3d 785; Matter of Greene, 240 AD2d 745; Matter of Abrial, 286 App Div 916.) III. The courts below correctly determined that appellant had not met its burden to allege or demonstrate a substantial basis for and a reasonable probability of success to contest decedent’s will on the basis of undue influence. (Matter of Kindberg, 207 NY 220; Matter of Spinello, 291 AD2d 406; Matter of Clapper, 279 AD2d 730; Matter of Posner, 160 AD2d 943, 76 NY2d 710, 77 NY2d 940; Matter of Walther, 6 NY2d 49; Children’s Aid Socy. of City of N.Y. v Loveridge, 70 NY 387; Smith v Keller, 205 NY 39; Matter of Schillinger, 258 NY 186; Matter of Coniglio, 242 AD2d 901; Matter of Evanchuk, 145 AD2d 559.) IV. Appellant did not properly allege a contract to make a bequest nor did appellant demonstrate a substantial basis for contesting the will on this basis and a reasonable probability of its success. (Blackmon v Estate of Battcock, 78 NY2d 735, 79 NY2d 915; Morris Cohon & Co. v Russell, 23 NY2d 569; Rubin v Irving Trust Co., 305 NY 288; Oursler v Armstrong, 10 NY2d 385; Woodmere Academy v Steinberg, 41 NY2d 746; Lefkowitz v Lebensfeld, 51 NY2d 442; Rubenstein v Mueller, 19 NY2d 228; Edson v Parsons, 155 NY 555; Cobble Hill Nursing Home v Henry & Warren Corp., 74 NY2d 475; Matter of Weisman, 251 AD2d 112, 92 NY2d 920.)

      Andrew M. Cuomo, Attorney General, New York City (Richard Hearing, Barbara H. Underwood, Michelle Aronowitz and Carl Histefano of counsel), in his statutory capacity under EPTL article 8.
    I. A petition to reopen probate should not be dismissed without any opportunity for preliminary discovery unless the petition, liberally construed, fails to set forth any indicia of a possible ground for objection to probate. (Matter of Orlowski, 281 AD2d 422; Matter of Wharton, 114 Misc 2d 1017; Matter of Musso, 227 AD2d 404; Matter of Carney, 31 Misc 2d 676; Matter of Frutiger, 29 NY2d 143; Matter of Baldwin, 3 AD2d 635; Bazak Intl. Corp. v Mast Indus., 73 NY2d 113; CPC Intl. v McKesson Corp., 70 NY2d 268; Udoffv Zipf, 44 NY2d 117; Jered Contr. Corp. v New York City Tr. Auth., 22 NY2d 187.) II. The American Committee for Weizmann Institute of Science’s petition sets forth strong indicia of undue influence that easily satisfy the standard on a motion to dismiss. (Rollwagen v Rollwagen, 63 NY 504; Children’s Aid Socy. of City of N.Y. v Loveridge, 70 NY 387; Matter of Henderson, 80 NY2d 388; Matter of Walther, 6 NY2d 49; Matter of Itta, 225 AD2d 548; Matter of Bacon, 169 Misc 2d 858; Matter of Jackson, 134 Misc 750; Matter of Ferrara, 7 NY3d 244.) III. The lower courts’ approach would virtually guarantee that charities will be unable to obtain relief in cases where relatives exercise undue influence to override a decedent’s charitable intentions. (Matter of Ferrara, 7 NY3d 244; Woodmere Academy v Steinberg, 41 NY2d 746; Saint Joseph’s Hosp. v Bennett, 281 NY 115.) IV The First Department erroneously dismissed the American Committee for Weizmann Institute of Science’s contract claim for failure to satisfy the statute of frauds. (Marks v Cowdin, 226 NY 138; Henry L. Fox Co. v Kaufman Org., 74 NY2d 136; Rubin v Irving Trust Co., 305 NY 288.)
   OPINION OF THE COURT

Ciparick, J.

This appeal requires us to determine the standard applicable to a petition to vacate a probate decree brought by a nonparty to an initial probate proceeding and based upon “newly-discovered evidence,” which allegedly demonstrates that a probated will was procured through the exercise of undue influence upon a testator. We are also asked to consider whether correspondence between decedent, Doris Dunn Weingarten, and petitioner, a charitable organization engaged in fundraising for scientific research, constitutes a contract to bequeath the sale proceeds of decedent’s cooperative apartment to petitioner that is sufficient to satisfy the statute of frauds applicable to testamentary bequests (EPTL 13-2.1).

We conclude, as to the second issue, that the correspondence presented here fails to satisfy the EPTL requirements because it does not indisputably demonstrate decedent’s intent to renounce her right to freely execute a subsequent will during her lifetime. As to the primary issue here, we hold that a party seeking to vacate a probate decree based upon the alleged exercise of undue influence must establish a substantial basis for its challenge to the probated will and a reasonable probability of success on the merits of its claim. Because petitioner failed to substantiate its undue influence claim with competent evidence of decedent’s longstanding, specific testamentary intent to benefit the charity in her will, we conclude, as a matter of law, that the Surrogate’s Court did not abuse its discretion in refusing to vacate its probate decree.

I.

Decedent died on January 16, 2004. Five days before her death, she executed a will that named her brother, Irving Dunn, executor and left her duplex cooperative apartment to her niece Jennifer Dunn, Irving’s daughter. The co-op, which is located on Manhattan’s Riverside Drive, was valued at approximately $1 million at the time. The January 11 will also left decedent’s personal effects to Irving Dunn and her residuary estate to two of her nephews and two of her nieces, in equal shares.

On January 26, Irving Dunn filed a petition with Surrogate’s Court, seeking probate of the January 11 will. On February 9, the Surrogate granted that petition on the basis of a January 12 affidavit submitted by Edward S. Schlesinger, an attorney who supervised and witnessed decedent’s execution of the will, and another witness, Sarah J. Schlesinger. In that affidavit both witnesses swore that the decedent “was under no duress or restraint [ ] and was in all respects competent to make a Will” when she executed the January 11 will.

Petitioner, a New York not-for-profit corporation engaged in the solicitation of philanthropic donations on behalf of the Weizmann Institute of Science, a center for scientific research and graduate study located in Israel, did not receive—nor was it entitled to—notice of either the January 26 probate petition or the February 9 decree. On October 5—nearly eight months later—petitioner filed a verified petition, signed by its executive vice-president, Martin Kraar, seeking vacatur of the February 9 decree pursuant to CPLR 5015, return of the co-op (or its proceeds) pursuant to SCPA 2105 and the opportunity to obtain discovery regarding decedent’s execution of the January 11 will pursuant to SCPA 1404 (4). Petitioner alleged it was entitled to that relief because it had “newly-discovered evidence” that the January 11 will was executed due to Irving and/or Jennifer Dunn’s exercise of undue influence over decedent and because it had a contract with decedent under which she was obligated to leave it the co-op’s sale proceeds.

In its verified petition, petitioner alleged that decedent had “long intended to make a sizeable donation to Weizmann.” In support of this claim, petitioner alleged that, in 1981, decedent and her husband, Aaron Weingarten, “executed reciprocal wills leaving their respective residuary estates to Weizmann should one predecease the other.” Decedent’s husband died in 1992. The verified petition claims that, after his death, decedent “decided to change the residuary bequest to [petitioner] to a bequest of the proceeds of the sale of her duplex apartment.” Neither the 1981 will nor any subsequent will were annexed to the petition. But petitioner did annex two 1994 letters that, it contended, constituted a “binding contract” to leave it the coop’s sale proceeds.

In the first letter, dated September 12, 1994, Richard Brill, whom petitioner claims was then acting as decedent’s attorney, wrote:

“I am drawing a will for my client, Doris Weingarten, of New York City. In the will she is making a very substantial bequest to the Weizmann Institute, contingent upon [it] agreeing to four conditions . . . (a) to establish a fund, to be called, in perpetuity, The Doris and Aaron Weingarten Fund (b) to place in the fund the entire sum paid to the Institute by the executor of the will, to constitute the principal of the fund (c) to invest the principal in interest-bearing investments, and (d) to expend annually the entire interest earned for scientific research.”

Four days later, petitioner’s then executive vice-president, Bernard Samers, responded, “acknowledging] that [petitioner] will agree to the four conditions set forth in your letter.”

Petitioner alleged that decedent repeatedly “reconfirmed” the purported 1994 contract “up to several months before her death.” It claimed that on September 19, 1994, Judy Feig, its then director of planned giving, wrote to decedent to express petitioner’s gratitude for decedent’s generosity and to invite her to a “Gala Celebration,” tickets to which ordinarily cost $1,000 each, at petitioner’s expense. In addition, petitioner asserted that in September 1996, decedent called Ms. Feig’s successor, Steven Meyers, to confirm that the “very substantial bequest” mentioned in Mr. Brill’s 1994 letter referred to her co-op’s sale proceeds. During that call, petitioner also alleges that decedent requested two free tickets to the 1996 Gala Celebration. In response to that request, petitioner claims that one of its employees, Tina Begleiter, met with decedent on October 2, 1996 at the co-op. After decedent purportedly reconfirmed her agreement to bequeath the co-op’s sale proceeds to petitioner, Ms. Begleiter allegedly gave decedent the free Gala tickets that she previously requested.

According to petitioner, Ms. Begleiter regularly met with decedent until her passing. During their conversations, petitioner alleges that decedent repeatedly reaffirmed that petitioner would receive the co-op sale proceeds upon her death. Indeed, petitioner claims that in February 2000, decedent called Ms. Begleiter to inform her that a realtor had appraised the co-op at $1.4 million. Based on decedent’s representations, petitioner asserted that for many years it included the co-op’s proceeds in its list of “known expectancies,” which are used for purposes of financial and strategic planning. In addition, petitioner claims that, in consideration of decedent’s anticipated bequest, it designated decedent a member of its Honor Society, which entitled her to a special pin and to attend a special event as well as special mailings and invitations to Weizmann Institute events.

At various times, over the course of their more-than 20-year relationship, petitioner alleges that decedent discussed with certain of its officials the possibility of “amending” the purported 1994 contract to transfer title to her co-op to petitioner while retaining a life estate for herself. Petitioner further claimed that a February 4, 1998 letter from decedent reconfirmed the 1994 contract to bequeath the co-op and discussed the life-estate option.

Turning to its allegations of undue influence, petitioner asserted that its longstanding reliance upon the 1994 contract was dashed in January 2004, when following a December 2003 diagnosis of terminal gall bladder cancer, decedent moved to Irving Dunn’s apartment to receive hospice care during what would be her final illness. Petitioner claimed that when she executed the January 11 will, decedent “was in a severely weakened condition” and that Irving and/or Jennifer Dunn exerted undue influence over her. To support this allegation, petitioner alleged that “[t]he January 11, 2004 Will is an unexplained departure from [decedent’s] previously expressed testamentary plan and repeatedly stated intention, over a period of more than 20 years, that she would make a substantial provision for Petitioner in her Will.” Alternatively, petitioner claimed that it was entitled to the proceeds of the sale of the co-op based upon the “binding” 1994 contract. On November 22, 2004, respondents moved to dismiss the verified petition pursuant to CPLR 3211 (a) (7).

In opposition to respondents’ motion to dismiss, petitioner submitted an affidavit of its counsel, which attached an unexecuted copy of decedent’s 1981 will and a purported copy of decedent’s handwritten February 4, 1998 letter to Ms. Begleiter. The affidavit explained that although petitioner was never given an original copy of the 1981 will, decedent “told [petitioner] that she had executed this Will.” In the February 4, 1998 letter, decedent stated, as relevant here:

“I have spoken to my lawyer about changing my will to make the Weitzmann [sic] Institute take over my apartment now—but he said not to change it at the present time.
“So for now, Weitzmann [sic] will get the proceeds from the sale of the duplex upon my death.”

Other than these two additional documents, petitioner presented no documentary evidence or affidavits to substantiate the allegedly repeated conversations between decedent and its employees regarding the co-op or decedent’s alleged longstanding involvement with it.

Surrogate’s Court dismissed the verified petition. It held that deciding respondents’ motion required the application of two “intersecting standards of] review.” Because respondents moved to dismiss, the court reasoned that all facts pleaded in the verified petition must be accepted as true. But because petitioner sought to vacate a probate decree, it was required to present a “satisfactory showing of a substantial basis for contesting the will and [a] reasonable probability of success” on the merits of its claims. Applying these standards, the court concluded that the contract and undue influence claims failed. The contract claim was insufficient, the court said, because the 1994 letters and the 1998 letter did not constitute a “clear . . . commitment to enter into a firm obligation [to] . . . [forgo] the right to testation.” As for the undue influence claim, although “motive is readily alleged . . . as is opportunity,” the court held that petitioner had “not raised a prima facie case of undue influence,” because it failed to “raise an inference” that such influence was actually exercised. The court further reasoned that the fact that decedent’s will “provided for her closest relatives, including those who took care of her during her final illness” supported the conclusion that vacatur on undue influence grounds was not warranted.

The Appellate Division affirmed. Noting that it was “[g]ranting petitioner every presumption applicable to a pre-answer motion to dismiss,” the court held that the undue influence claim was properly dismissed because “[t]he record reflects no more than decedent’s choice of benefitting her niece . . . after decedent’s brother . . . had provided hospice care in his own home” (36 AD3d 419, 419 [2007]). Relying on Matter of Walther (6 NY2d 49 [1959]), the court reasoned that “[a] testator acting upon ‘ties of attachment arising from consanguinity, or the memory of kind acts and friendly offices,’ is not indicative of undue influence” (id. at 420, quoting Walther at 53, quoting Children’s Aid Socy. of City of N.Y. v Loveridge, 70 NY 387, 394 [1877]). Thus, the Court held that there was “no nonspeculative reason” to permit petitioner discovery regarding the execution of the January 11 will (id. at 420). In affirming dismissal of the contract claim, the court reasoned that decedent’s 1998 letter did “not unequivocally refer to the alleged [1994] contract” and that that letter also indicated that decedent’s intention regarding the bequest of the co-op was “not yet fully formed” (id.). We granted petitioner’s motion for leave to appeal and now affirm.

II.

Petitioner, joined by the Attorney General as statutory intervenor, argues that, when construed together, the 1994 letters between Mr. Brill and Mr. Samers and decedent’s 1998 letter to Ms. Begleiter form an integrated contract that clearly evidences decedent’s intent to bequeath her co-op to petitioner. Thus, they assert that this alleged contract satisfies the statute of frauds codified in EPTL 13-2.1. Respondents counter that none of the proffered correspondence is sufficient to satisfy the statute because in none of it does decedent unequivocally renounce her right to dispose of the co-op in a subsequently executed will. We agree with respondents.

EPTL 13-2.1 (a) (2) provides that “a contract to make a testamentary provision of any kind” is enforceable only if “it or some note or memorandum thereof is in writing and subscribed by the party to be charged therewith, or by his [or her] lawful agent.” This provision reflects the well-settled precept that “[t]he . . . freedom of testation is a jealously guarded right, and any promise to restrict that right must be analyzed closely for fraud” (Turano, Practice Commentaries, McKinney’s Cons Laws of NY, Book 17B, EPTL 13-2.1, at 449 [2001 ed]).

The parties do not dispute that a memorandum sufficient to satisfy EPTL 13-2.1 may be set forth in separate writings that clearly refer to the subject matter of the contract, so long as one writing is signed by the party to be charged or a duly authorized agent (see Marks v Cowdin, 226 NY 138, 145 [1919, Cardozo, J.]; see also Crabtree v Elizabeth Arden Sales Corp., 305 NY 48, 55 [1953]). But respondents dispute the contention that the three writings here unmistakably evince decedent’s intent to leave her co-op to petitioner and that, if those writings are unclear as to her intent, parol evidence should be taken to resolve any ambiguity.

This case does not involve the application of the statute of frauds to an ordinary commercial contract (see Rubin v Irving Trust Co., 305 NY 288, 298 [1953]). For more than a century, we have repeatedly emphasized that because a will is ambulatory in nature and because a testator has the right to freely revoke a will until death, an agreement not to revoke a prior will “demands the most indisputable evidence of . . . agreement” (Edson v Parsons, 155 NY 555, 568 [1898]; Hamlin v Stevens, 177 NY 39, 48 [1903] [contracts to make testamentary bequests should only be enforced “when they have been established by evidence so strong and clear as to leave no doubt”]; Oursler v Armstrong, 10 NY2d 385, 389 [1961] [because “the renunciation of the right to alter or revoke a will (is not) a casual matter . . . the Statute of Frauds ... as well as the decisional law requires clear evidence” of such a promise]; Rubenstein v Mueller, 19 NY2d 228, 232 [1967] [intention must be manifested “clearly and unambiguously”]; Blackmon v Estate of Battcock, 78 NY2d 735, 740 [1991] [“the law strictly scrutinizes the renunciation of the right to revoke a will and requires a threshold showing of clear and unambiguous evidence to give effect to this surrender of rights”]). The reason for this high evidentiary bar is simple: “[s]uch contracts are easily fabricated and hard to disprove, because the sole contracting party on one side is always dead when the question arises” (Hamlin, 177 NY at 47-48).

The courts below correctly concluded that petitioner failed to present indisputable evidence of a contract here. Even if sent on decedent’s behalf, as petitioner alleges it was, Mr. Brill’s 1994 letter does not unequivocally renounce decedent’s right to execute a will making no provision for petitioner. The letter inquires whether petitioner would assent to the conditions but makes no promise that any will would be executed in consideration of such assent. Even assuming that Mr. Brill’s letter could be construed as an offer, it does not promise to bequeath the co-op upon acceptance. Instead, it vaguely refers to a “very substantial bequest” as consideration for the establishment of the memorial fund. This is insufficient to satisfy the statute of frauds (see Morris Cohon & Co. v Russell, 23 NY2d 569, 576 [1969] [memorandum sufficient to satisfy statute of frauds must establish “the subject matter of the transaction”]; cf. Cobble Hill Nursing Home v Henry & Warren Corp., 74 NY2d 475, 482 [1989] [“If an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract”]).

Petitioner and the Attorney General rely on decedent’s 1998 letter to cure the ambiguity, but it too is unclear and ambiguous. Petitioner and the Attorney General argue that the sentence of the 1998 letter beginning “[s]o for now” should be construed as a confirmation that petitioner would receive the co-op or the proceeds of its sale upon decedent’s death, but that decedent had decided not to transfer title to the charity during her lifetime. But that construction is hardly indisputable. Indeed, respondent plausibly argues—and the Surrogate found—that the phrase could equally be interpreted as indicating decedent’s retention of the full complement of her testamentary rights, i.e., that petitioner was designated as a legatee “for now,” but that its status could change at her discretion. And, because the 1994 and 1998 letters do not clearly evidence decedent’s promise to bequeath the co-op’s proceeds to petitioner, the Surrogate could not have considered parol evidence to clarify decedent’s intent (see Marks, 226 NY at 143 [courts may not “import() into (a) contract a new element of promise” through the introduction of parol evidence]; Stulsaft v Mercer Tube & Mfg. Co., 288 NY 255, 260 [1942] [“A custom cannot create a contract where there has been no agreement by the parties and none is implied by law”]; cf. Crabtree, 305 NY at 57 [parol evidence permissible because there “can be (no) doubt that the memorandum contains all of the essential terms of the contract”]). Accordingly, under our well-settled precedents, requiring that evidence of an agreement to make a testamentary bequest must be indisputable, EPTL 13-2.l’s statute of frauds bars petitioner’s contract claim.

III.

Turning to the standard that should govern the Surrogate’s consideration of a petition to vacate a probate decree upon allegations that a will was procured through the exercise of undue influence, petitioner and the Attorney General contend that the standard should be analogous to that applicable to a court’s consideration of a motion to dismiss for failure to state a claim. Emphasizing that it is seeking only the opportunity to take discovery pursuant to SCPA 1404 (4), petitioner argues that a probate decree should be vacated—and such discovery permitted—if a party’s verified petition contains allegations that, if taken as true, would cause a reasonable person to be uncertain that the probated will was validly made. In contrast, respondents contend that a probate decree should be vacated only if petitioner can demonstrate facts constituting a substantial basis for challenging the proffered will and a reasonable probability of success on the merits of its undue influence claim. We adopt respondents’ proposed standard. And we conclude that the Surrogate did not abuse her discretion in refusing to vacate the decree in order to allow petitioner discovery pursuant to SCPA 1404 (4).

Under SCPA 1404 (4), “[a]ny party” to a probate proceeding may:

“before or after filing objections to the probate of the will . . . examine any or all of the attesting witnesses, the person who prepared the will, and if the will contains a provision designed to prevent a disposition or distribution from taking effect in case the will, or any part thereof, is contested, the nominated executors in the will and the proponents.”

In connection with these examinations, a party is entitled to “all rights granted under article 31 of the civil practice law and rules with respect to document discovery” (id..).

Petitioner concedes, as it must, that it was not a necessary party to the probate proceeding. This is because it did not file any prior will in which the decedent allegedly named it as a beneficiary with Surrogate’s Court (see SCPA 1403 [1] [d] [listing as necessary party “(a)ny person designated as beneficiary ... in any other will of the same testator filed in the surrogate’s court of the county in which the propounded will is filed whose rights or interests are adversely affected by the instrument offered for probate”]). Accordingly, petitioner was not entitled to the discovery it now seeks as of right and was required to petition the Surrogate for vacatur of the previously-issued probate decree.

The SCPA does not set forth the standard applicable to the present vacatur petition. Thus, CPLR 5015 governs (CPLR 101 [the CPLR “shall govern the procedure in civil judicial proceedings in all courts of the state and before all judges, except where the procedure is regulated by inconsistent statute”]; see also SCPA 209 [10] [Surrogate’s Court “shall have all of the powers that the supreme court would have in like actions and proceedings”]). As relevant here, that statute requires a party seeking to vacate a final judgment upon the ground of newly discovered evidence to establish that such evidence “would probably have produced a different result” in the original proceeding (CPLR 5015 [a] [2]).

Echoing this statutory standard, courts considering attempts to vacate probate decrees have held that the reopening of a decree is permissible only when a petitioner “show[s] facts sufficient to afford a substantial basis for the contest and reasonable probability of success” on the merits of its challenge (Matter of Westberg, 254 App Div 320, 321 [1st Dept 1938]; accord Matter of Musso, 227 AD2d 404, 406 [2d Dept 1996] [“A petitioner seeking to vacate a probate decree must establish ‘with some degree of probability that his (or her) claim is well founded, and that, if afforded an opportunity, he (or she) will be able to substantiate it’ ”]).

Because we conclude that this standard strikes the proper balance between the Surrogate’s statutory duty to “inquire particularly into all the facts” and to be “satisfied with the genuineness of the will and the validity of its execution” before admitting a will to probate (SCPA 1408 [1]) and the policy favoring the finality of validly issued decrees, we adopt it here.

We hold that to establish its entitlement to vacatur under this standard, a party must demonstrate a substantial basis for its contest and a reasonable probability of success through competent evidence that would have probably altered the outcome of the original probate proceeding (see Siegel, NY Prac § 428 [4th ed] [courts have generally required showing of “competent evidence” before vacating judgments under CPLR 5015 (a) (2)]). Permitting vacatur of a probate decree based upon mere allegations of undue influence would be unduly disruptive and could encourage specious claims in the hope of securing unjustified settlements that would upset the legitimate expectations of a decedent’s intended beneficiaries. Moreover, SCPA 1404 (4) discovery is potentially burdensome. The Surrogate has broad discretion to order discovery of, among other things:

“correspondence, memoranda or notes between the executors of the decedent’s Will and the attesting witnesses; all billings, expenses and receipts by one of the witnesses or his law firm regarding the decedent; lists of prospective heirs or other memoranda in any way reflecting the decedent’s estate plan; copies of the decedent’s Federal and New York income and gift tax returns; checking account ledgers, canceled checks, and other bank books; safe deposit box inventories; records of advancements made by the decedent; and copies of all correspondence relating to stock transfers” {see 112 Warren’s Heaton § 112.08 [1] [a] [iii], citing Matter of Delisle, 149 AD2d 793 [3d Dept 1989]).

And, under SCPA 1404 (5), the testator’s estate is solely responsible for the cost of one or more depositions that may constitute no more than a prolonged fishing expedition into the circumstances surrounding the execution of an already validly probated will. Thus, in a close case such as this, a strong showing was required before embarking on discovery.

Petitioner argues that it met its burden by its verified petition showing a dramatic departure from a longstanding testamentary plan by a testator who, at the time the challenged will was executed, was in a weakened condition and in the care of persons benefitting from that will. But to support its allegations of decedent’s longstanding intent to benefit it in her will, petitioner only proffered documentary evidence consisting of: the unexecuted 1981 will, the 1994 correspondence between Messrs. Brill and Samers, and a 1998 letter purportedly drafted by decedent. The 1994 letter was an inquiry, however, and the 1998 letter did not constitute an unequivocal promise to bequeath the co-op. The verified petition also alleged that during conversations with two of its employees in 1994 and 1996 and unspecified “regular” meetings with Ms. Begleiter—from October 2, 1996 until the time of her death more than seven years later—decedent reconfirmed that she intended to bequeath the co-op’s sale proceeds to petitioner. Further, petitioner alleged that at “various times” decedent discussed with a “number of [its] officials” the possibility of transferring her co-op to it inter vivos. But petitioner produced no evidence establishing that any of these alleged meetings or conversations actually occurred. And although petitioner claimed that decedent “change[d] the residuary bequest” in the proffered unexecuted 1981 will to bequeath her co-op to it, no will evidencing this alteration was offered.

The Surrogate was only confronted with a verified petition annexing evidence of decedent’s alleged intent in 1981, 1994 and 1998—no evidence of her intent in the years prior to her death. The facts petitioner offered simply do not show a longstanding and detailed testamentary plan to benefit petitioner.

Petitioner has failed to establish a substantial basis for vacating the Surrogate’s decree or a reasonable probability of success on the merits of its undue influence claim. Given that wills are “ambulatory in nature” (Blackmon, 78 NY2d at 739), we cannot say that, on these facts, the Surrogate abused her discretion in denying vacatur of a probate decree. Indeed, that exercise of discretion is further supported by the fact that the challenged will left decedent’s co-op to her niece, a close relative whose father—decedent’s brother and executor—opened his home to decedent while she received hospice care for terminal cancer during her final days (cf. Walther, 6 NY2d at 55 [“The evidence does not irresistibly exclude the inference that family ties, natural demands of love and affection prompted the decedent to dispose of her property in this manner”]).

IV

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Smith, J. (dissenting).

I agree that the evidence here does not prove undue influence was exercised. It is quite possible that decedent’s brother did not do anything wrong. But there is some reason to suspect he did, and if he did petitioner will have, effectively, been cheated out of a legacy without any opportunity to prove the wrongdoing. I think this is unfair. Thus, while this record does not justify vacating the probate decree, petitioner should be given a chance, through discovery, to obtain evidence that would justify it.

Incomplete as the present record is, three troubling facts emerge: First, decedent’s estate plan, beginning more than 20 years before her death, included a large bequest to petitioner. Secondly, decedent changed her will in her last illness, five days before her death, to leave nothing to petitioner and the bulk of the estate to her brother’s daughter. Thirdly, at the time of the change decedent was being cared for in her brother’s home.

Of course, these facts could have a perfectly innocent explanation, but that leads me to a fourth troubling aspect of the case: Decedent’s brother (now deceased) and his daughter, the executor and successor executor under the will, have chosen to volunteer no information whatever. It is true, of course, that they had no obligation to speak, but in my experience litigants are rarely so reticent when the facts they know would help their case. I do not suggest that their silence justifies an adverse inference, in the sense that it would in itself support vacating the probate decree. But I think the Surrogate abused her discretion in not requiring them to tell their story before deciding whether to vacate the decree or not.

If petitioner had been entitled to notice of the probate proceedings, it could have had discovery as a matter of right before deciding whether to challenge the will (SCPA 1404 [4]). Since it was not entitled to and did not get notice, it could not seek any relief until after the decree was entered. The Attorney General, appearing here as intervenor as part of his duty to protect charitable beneficiaries, argues that in circumstances like these, where there are some signs of undue influence, a disinherited charity should have the same discovery rights that section 1404 (4) would have given prior to probate. I agree. Judging from the cases cited by the parties, either discovery or an evidentiary hearing has been the normal practice in similar situations (see Estate of Greene, NYLJ, May 22, 1996, at 29, col 6 [Sur Ct], affd 240 AD2d 745 [2d Dept 1997]; Estate of Sokol, NYLJ, Jan. 9, 1995, at 31, col 3 [Sur Ct]; Matter of Abrial, 286 App Div 916 [3d Dept 1955]; Matter of Callahan, 273 App Div 884 [1st Dept 1948]). I see no valid reason for denying discovery here.

Chief Judge Kaye and Judges Graffeo, Read, Pigott and Jones concur with Judge Ciparick; Judge Smith dissents in a separate opinion.

Order affirmed, with costs.

      . Prior to this appeal, Irving Dunn died. Petitioner has substituted Renee Dunn, the executor of his estate, as a respondent in his stead.

      . Although not alleged in its petition, before this Court petitioner asserted that Irving Dunn procured Mr. Schlesinger to draft the will. In addition, the Attorney General argued that Ms. Schlesinger is both Mr. Dunn’s “next-door neighbor” and Mr. Schlesinger’s daughter.

      . Decedent and her husband had no children.

      . Petitioner also claims that decedent attended the 1997 through 2002 Galas at no cost and that on one occasion she brought Irving Dunn as a guest.

      . Whether the correspondence here is characterized as forming a purported contract to make a testamentary bequest or one not to revoke a prior will is immaterial. We have held that such contracts are equivalent (see Rubin, 305 NY at 297 [“(T)here can be no difference between a contract ‘to bequeath property or make a testamentary provision’ and a contract to refrain from altering an existing will, for wills are ineffective until the death of the testator” (citation omitted)]).

      . Because petitioner failed to establish, through clear and unambiguous evidence, that decedent was contractually obligated to bequeath her co-op to it, it was not entitled to the co-op’s proceeds under SCPA 2105. That statute permits a party to petition the Surrogate for return of property that is “alleged to be in the possession of or under the control of a fiduciary” (SCPA 2105 [1]). But it requires a showing of “facts” necessary to sustain the claim (see id.; see also 5-64 Warren’s Heaton, Surrogate’s Court Practice § 64.05 [2] [2007] [hereinafter Warren’s Heaton] [SCPA 2105 petition “should set forth not only the claim to the property but the basis for that claim”]). Petitioner failed to make the required factual showing here.

      . The Attorney General’s proposed rule is similar. He would allow SCPA 1404 (4) discovery if a pleading, when liberally construed, identifies circumstances indicating the possible exercise of undue influence.

      . Despite this contention on appeal, respondents moved to dismiss below under CPLR 3211 (a) (7) for “fail[ure] to state a cause of action.”

      . Petitioner asserts that filing decedent’s prior will would have been “unseemly,” and that charities generally do not file wills containing philanthropic bequests because that practice would usurp a testator’s prerogative to file a will before death. We note, however, that SCPA 2507, which governs the filing of wills, permits “any person” to file “any will” in the Surrogate’s Court located in the county where the testator is domiciled, without providing notice of such filing to the testator (SCPA 2507 [1]).

      . The dissent correctly acknowledges that SCPA 1404 (4) does not support petitioner’s right to the discovery that it now seeks (see dissenting op at 99). But it asserts that such discovery should be permitted in this and other cases in which the denial of discovery seems “unfair” (see id. at 98). The propriety of such an expansion of section 1404 (4), however, is a matter best left to the legislature.

      . In adopting this standard, we recognize the difficulties faced by charities in asserting undue influence claims. But we emphasize that a charity must take care to carefully and consistently document its interactions with prospective donors throughout their lifetimes so that it is in a position to proffer evidence demonstrating a reasonable probability of success on the merits of an undue influence challenge.

      . Contrary to respondents’ assertion, the Dead Man’s Statute, CPLR 4519, would pose no bar to presentation of affidavits setting forth the circumstances surrounding the alleged conversations between petitioner’s employees and decedent or to the introduction of testimony consistent with such affidavits at trial (see Weinstein-Korn-Miller, NY Civ Prac ¶ 4519.15 [2d ed] [“(C)orporations are almost immune from the Dead Man’s Statute” because corporate employees are not “disqualified from testifying for (their) employer”]).


source: Caselaw Access Project

author: Smith, J. Read, J. (dissenting).

license: Public Domain

text:
    [ 884 NE2d 1005, 855 NYS2d 6]
    Soterios (Steve) Tzolis et al., Individually and in the Right and on Behalf of Pennington Property Co. and Another, et al., Respondents, v Herbert Wolff et al., Defendants, and Parkway LLC et al., Appellants.
    Argued January 3, 2008;
    decided February 14, 2008

      POINTS OF COUNSEL

      Loeb & Loeb LLP, New York City (David M. Satnick, David B. Eizenman and John A. Piskora of counsel), for appellants.
    I. The legislative history of the Limited Liability Company Law makes clear the Legislature’s intent that members do not have the right to assert derivative claims. (Riley v County of Broome, 95 NY2d 455; Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577; Hoffman v Unterberg, 9 AD3d 386; Lio v Mingyi Zhong, 10 Misc 3d 1068[A], 2006 NY Slip Op 50016[U]; Schindler v Niche Media Holdings, 1 Misc 3d 713; Bischoff v Boar’s Head Provisions Co., Inc., 436 F Supp 2d 626; Caprer v Nuss

      baum, 36 AD3d 176; People v Finnegan, 85 NY2d 53; Nachman Corp. v Pension Benefit Guaranty Corporation, 446 US 359; People v Korkala, 99 AD2d 161.) II. The Appellate Division’s decision constitutes judicial legislation. III. The express language of the Limited Liability Company Law precludes derivative actions by LLC members. (Klebanow v New York Produce Exch., 344 F2d 294; Riviera Congress Assoc. v Yassky, 18 NY2d 540; Stark v Goldberg, 297 AD2d 203; State of New York v Patricia II., 6 NY3d 160; Matter of M.B., 6 NY3d 437; People v Santi, 3 NY3d 234; City of New York v Stringfellow’s of N.Y., 96 NY2d 51; Nathanson v Nathanson, 20 AD3d 403; Lio v Mingyi Zhong, 10 Misc 3d 1068[A], 2006 NY Slip Op 50016[U]; Matter of Grand Jury Subpoena Duces Tecum Served on Museum of Modern Art, 93 NY2d 729.)

      Feldman Weinstein & Smith LLP, New York City (Eric S. Weinstein and Yong Hak Kim of counsel), for respondents.
    I. This case arising in equity, the Supreme Court’s jurisdiction is granted by the New York State Constitution; the Legislature cannot abridge that power. (Brinckerhoff v Bostwick, 88 NY 52; Ross v Bernhard, 396 US 531; Ettlinger v Persian Rug & Carpet Co., 142 NY 189; Klebanow v New York Produce Exch., 344 F2d 294; Riviera Congress Assoc. v Yassky, 18 NY2d 540; Strain v Seven Hills Assoc., 75 AD2d 360; Salm v Feldstein, 20 AD3d 469; Lio v Mingyi Zhong, 10 Misc 3d 1068[A], 2006 NY Slip Op 50016[U]; Waters & Co. v Gerard, 189 NY 302; Batas v Prudential Ins. Co. of Am., 281 AD2d 260.) II. Soterios Tzolis has a direct claim. (Bonham v Coe, 249 App Div 428, 276 NY 540; Breed v Barton, 54 NY2d 82; Eisenberg v Central Zone Prop. Corp., 306 NY 58; Alpert v 28 Williams St. Corp., 63 NY2d 557; Matter of Willcox v Stern, 18 NY2d 195; James v Lewis, 135 AD2d 785.)
   OPINION OF THE COURT

Smith, J.

We hold that members of a limited liability company (LLC) may bring derivative suits on the LLC’s behalf, even though there are no provisions governing such suits in the Limited Liability Company Law.

Facts and Procedural History

Pennington Property Co. LLC was the owner of a Manhattan apartment building. Plaintiffs, who own 25% of the membership interests in the LLC, bring this action “individually and in the right and on behalf of’ the company. Plaintiffs claim that those in control of the LLC, and others acting in concert with them, arranged first to lease and then to sell the LLC’s principal asset for sums below market value; that the lease was unlawfully assigned; and that company fiduciaries benefitted personally from the sale. Plaintiffs assert several causes of action, of which only the first two are in issue here: The first cause of action seeks to declare the sale void, and the second seeks termination of the lease.

Supreme Court dismissed these causes of action. It held that they could not be brought by plaintiffs individually, because they were “to redress wrongs suffered by the corporation” (12 Misc 3d 1151[A], 2006 NY Slip Op 50851[U], *4). It also held, following Hoffman v Unterberg (9 AD3d 386 [2d Dept 2004]), that “New York law does not permit members to bring derivative actions on behalf of a limited liability company” (id. at *5). The Appellate Division, concluding that derivative suits on behalf of LLCs are permitted, reversed (39 AD3d 138 [1st Dept 2007]), and granted two defendants permission to appeal on a certified question. We now affirm the Appellate Division’s order.

Discussion

The issue is whether derivative suits on behalf of LLCs are allowed. The basis for appellants’ argument that they are not is the Legislature’s decision, when the Limited Liability Company Law was enacted in 1994, to omit all reference to such suits. We hold that this omission does not imply such suits are prohibited. We base our holding on the long-recognized importance of the derivative suit in corporate law, and on the absence of evidence that the Legislature decided to abolish this remedy when it passed the Limited Liability Company Law in 1994.

I

The derivative suit has been part of the general corporate law of this state at least since 1832. It was not created by statute, but by case law. Chancellor Walworth recognized the remedy in Robinson v Smith (3 Paige Ch 222 [1832]), because he thought it essential for shareholders to have recourse when those in control of a corporation betrayed their duty. Chancellor Walworth applied to a joint stock corporation—then a fairly new kind of entity—a familiar principle of the law of trusts: that a beneficiary (or “cestui que trust”) could bring suit on behalf of a trust when a faithless trustee refused to do so. Ruling that shareholders could sue on behalf of a corporation under similar circumstances, the Chancellor explained:

“The directors are the trustees or managing partners, and the stockholders are the cestui que trusts, and have a joint interest in all the property and effects of the corporation. . . . And no injury the stockholders may sustain by a fraudulent breach of trust, can, upon the general principles of equity, be suffered to pass without a remedy. In the language of Lord Hardwicke, in a similar case [Charitable Corp. v Sutton, 2 Atk 400, 406 (Ch 1742)], T will never determine that a court of equity cannot lay hold of every such breach of trust. I will never determine that frauds of this kind are out of the reach of courts of law or equity; for an intolerable grievance would follow from such a determination.’ ” (3 Paige Ch at 232.)

Eventually, the rule that derivative suits could be brought on behalf of ordinary business corporations was codified by statute (see Business Corporation Law § 626 [a]). But until relatively recently, no similar statutory provision was made for another kind of entity, the limited partnership; again, the absence of a statute did not prevent courts from recognizing the remedy. In Klebanow v New York Produce Exch. (344 F2d 294 [2d Cir 1965, Friendly, J.]), the Second Circuit Court of Appeals held that limited partners could sue on a partnership’s behalf. For the Second Circuit, the absence of a statutory provision was not decisive because the court found no “clear mandate against limited partners’ capacity to bring an action like this” (id. at 298 [emphasis added]). We agreed with the holding of Klebanow in Riviera Congress Assoc. v Yassky (18 NY2d 540, 547 [1966, Fuld, J.]), relying, as had Chancellor Walworth long before, on an analogy with the law of trusts:

“There can be no question that a managing or general partner of a limited partnership is bound in a fiduciary relationship with the limited partners . . . and the latter are, therefore, cestuis que trustent. . . . It is fundamental to the law of trusts that cestuis have the right, ‘upon the general principles of equity’ (Robinson v. Smith, 3 Paige Ch. 222, 232) and ‘independently of [statutory] provisions’ (Brinckerhoff v. Bostwick, 88 N. Y. 52, 59), to sue for the benefit of the trust on a cause of action which belongs to the trust if ‘the trustees refuse to perform their duty in that respect’. (Western R. R. Co. v. Nolan, 48 N. Y. 513, 518 .. . .)”

After Klebanow and Riviera were decided, the Partnership Law was amended to provide for derivative actions by limited partners (see Partnership Law § 115-a [1]).

We now consider whether to recognize derivative actions on behalf of a third kind of entity, the LLC, as to which no statutory provision for such an action exists. In addressing the question, we continue to heed the realization that influenced Chancellor Walworth in 1832, and Lord Hardwicke 90 years earlier: When fiduciaries are faithless to their trust, the victims must not be left wholly without a remedy. As Lord Hardwicke put it, to “determine that frauds of this kind are out of the reach of courts of law or equity” would lead to “an intolerable grievance” (Charitable Corp. v Sutton, 2 Atk at 406).

To hold that there is no remedy when corporate fiduciaries use corporate assets to enrich themselves was unacceptable in 1742 and in 1832, and it is still unacceptable today. Derivative suits are not the only possible remedy, but they are the one that has been recognized for most of two centuries, and to abolish them in the LLC context would be a radical step.

Some of the problems such an abolition would create may be seen in the development of New York law since the Limited Liability Company Law, omitting all reference to derivative suits, was passed in 1994. Several courts have held that there is no derivative remedy for LLC members (see Hoffman v Unterberg, 9 AD3d 386 [2d Dept 2004]; Lio v Mingyi Zhong, 10 Misc 3d 1068[A], 2006 NY Slip Op 50016[U] [Sup Ct, NY County 2006]; Schindler v Niche Media Holdings, 1 Misc 3d 713, 716 [Sup Ct, NY County 2003]). But since the Legislature obviously did not intend to give corporate fiduciaries a license to steal, a substitute remedy must be devised. Perhaps responding to this need, some courts have held that members of an LLC have their own, direct claims against fiduciaries for conduct that injured the LLC—blurring, if not erasing, the traditional line between direct and derivative claims (see Matter of Marciano [Champion Motor Group, Inc.], 2007 NY Slip Op 34071[U], *4 [Sup Ct, Nassau County 2007]; Out of the Box Promotions LLC v Koschitzki, 15 Misc 3d 1134[A], 2007 NY Slip Op 50973[U], *7 [Sup Ct, Kings County 2007]; Lio, 2006 NY Slip Op 50016[U], at *4). Similarly, Supreme Court’s decision in this case upheld several of plaintiffs’ claims that are not in issue here, characterizing the claims as direct, though they might well be derivative under traditional analysis (see generally, Kleinberger, Direct Versus Derivative and The Law of Limited Liability Companies, 58 Baylor L Rev 63 [2006]).

Substituting direct remedies of LLC members for the old-fashioned derivative suit—a substitution not suggested by anything in the language of the Limited Liability Company Law—raises unanswered questions. Suppose, for example, a corporate fiduciary steals a hundred dollars from the treasury of an LLC. Unquestionably he or she is liable to the LLC for a hundred dollars, a liability which could be enforced in a suit by the LLC itself. Is the same fiduciary also liable to each injured LLC member in a direct suit for the member’s share of the same money? What, if anything, is to be done to prevent double liability? No doubt, if the Legislature had indeed abolished the derivative suit as far as LLCs are concerned, we could and would answer these questions and others like them. But we will not readily conclude that the Legislature intended to set us on this uncharted path.

II

As shown above, courts have repeatedly recognized derivative suits in the absence of express statutory authorization (Robinson v Smith, 3 Paige Ch 222 [1832]; Klebanow v New York Produce Exch., 344 F2d 294 [2d Cir 1965]; Riviera Congress Assoc. v Yassky, 18 NY2d 540 [1966]). In light of this, it could hardly be argued that the mere absence of authorizing language in the Limited Liability Company Law bars the courts from entertaining derivative suits by LLC members. It is argued, however, by appellants and by our dissenting colleagues, that here we face not just legislative silence, but a considered legislative decision not to permit the remedy. The dissent finds, in the legislative history of the Limited Liability Company Law, a “legislative bargain” to the effect that derivative suits on behalf of LLCs should not exist (dissenting op at 113). We find no such thing. For us, the most salient feature of the legislative history is that no one, in or out of the Legislature, ever expressed a wish to eliminate, rather than limit or reform, derivative suits.

The Legislature clearly did decide not to enact a statute governing derivative suits on behalf of LLCs. An Assembly-passed version of the bill that became the Limited Liability Company Law included an article IX, entitled “Derivative Actions.” In the Senate-passed version, and the version finally adopted, the article was deleted, leaving a conspicuous gap; in the law as enacted, the article following article VIII is article X. Nothing in the legislative history discusses the omission. Our only source of information on the reason for it is a sentence written by the author of the Practice Commentaries on the Limited Liability Company Law: “Because some legislators had raised questions about the derivative rights provisions, to avoid jeopardizing passage of the balance of the entire law, Article IX was dropped” (Rich, Practice Commentaries, McKinney’s Cons Laws of NY, Book 32/32A, Limited Liability Company Law, at 181 [2007]). Nothing tells us what the “questions” were, or why they would have jeopardized the bill’s passage.

The dissent attempts to fill this gap by reviewing some other events preceding the passage of the legislation. The dissent points out that New York politicians in 1993 and 1994 wanted to improve “New York’s overall business climate” (dissenting op at 110), and that among the proposed means of doing so were “bills ... to modify the treatment of derivative lawsuits and authorize limited liability companies” (id., quoting Blackman, Corporate Update, Move Over Delaware! Making New York Incorporation-Friendly, NYLJ, Dec. 16, 1993, at 5, col 2 [emphasis added]). But the dissent cites no evidence, and we know of none, that anyone ever suggested doing away with derivative suits entirely—a radical step, as we have already pointed out, and one that might be expected to harm the “business climate” more than help it.

In fact, the reforms of derivative suits that were under discussion in 1993-1994 came nowhere near to abolition. They were, in substance, proposals to codify and expand on our decision in Auerbach v Bennett (47 NY2d 619 [1979]), holding that a decision by disinterested directors to terminate a derivative suit would be honored by the courts (see Blackman, NYLJ, Dec. 16, 1993, at 5, col 2). All three of the bills introduced to reform derivative suits began with an endorsement of such suits in principle:

“The legislature finds and declares it to be the public policy of the state of New York to maintain the shareholder derivative suit proceeding as a remedy for shareholders on behalf of New York corporations because such suits, when meritorious, serve as an important deterrent against breaches of fiduciary duties by directors of such corporations.” (See NY Senate Bill S6222 [introduced Dec. 15, 1993]; NY Senate Bill S6222-A [amended Dec. 17, 1993]; NY Assembly Bill A8938 [Dec. 17, 1993]).

The connection, if any, between the proposed reforms of derivative suits and the fate of proposed article IX of the Limited Liability Company Law is obscure. It seems to be true that the Senate favored a bill from which article IX was absent, and that the Assembly acquiesced in the Senate’s preference. But this does not prove that any legislator, much less the Legislature as a whole, thought that the absence of article IX would render derivative suits nonexistent—an extreme result that no legislator is known to have favored. We simply do not know what consequences the legislators expected to follow from the omission. It is possible that some legislators did expect—though no one expressed the expectation—that there would be no derivative suits. It is possible that some legislators expected the courts to follow the established case law, and to recognize derivative suits in the absence of a “clear mandate against” doing so (Klebanow, 344 F2d at 298); one witness at a legislative public hearing did express that expectation (statement of Howard N. Lefkowitz, chair of Committee on Corporation Law, Association of Bar of City of NY, Transcript of Assembly Public Hearing on Limited Liability Company Legislation, June 11, 1992, at 133). It is possible that the Senate expected one thing, and the Assembly the other. It is even possible that neither expected anything, except that the problem would cease to be the Legislature’s and become the courts’. The legislative history is, in short, far too ambiguous to permit us to infer that the Legislature intended wholly to eliminate, in the LLC context, a basic, centuries-old protection for shareholders, leaving the courts to devise some new substitute remedy.

The dissent says that, in upholding the right of LLC members to sue derivatively, we leave that right “unfettered by the prudential safeguards against abuse that the Legislature has adopted ... in other contexts” (dissenting op at 121). But the right to sue derivatively has never been “unfettered,” and the limitations on it are not all of legislative origin. The case in which derivative suits originated, Robinson v Smith, held that such a suit could be brought only on “a sufficient excuse”—i.e., a showing that those in control of the corporation “refused to prosecute” because they were themselves the wrongdoers, or were in “collusion with” them (3 Paige Ch at 232, 233). Later cases reaffirmed the rule that a derivative action could not be brought “unless it is necessary because of the neglect and refusal of the corporate body to act” (see e.g. Continental Sec. Co. v Belmont, 206 NY 7, 15 [1912]). The statutes governing ordinary business corporations and limited partnerships now reflect the existence of that rule, requiring the complaint in a derivative suit to allege “the efforts of the plaintiff to secure the initiation of such action ... or the reasons for not making such effort” (Business Corporation Law § 626 [c]; Partnership Law § 115-a [3]). Other statutory provisions impose other limitations (see Business Corporation Law § 626 [b]; Partnership Law § 115-a [2] [contemporaneous ownership of plaintiffs interest]; Business Corporation Law § 627; Partnership Law § 115-b [posting security for expenses]). What limitations on the right of LLC members to sue derivatively may exist is a question not before us today. We do not, however, hold or suggest that there are none.

Finding no clear legislative mandate to the contrary, we follow Robinson, Klebanow and Riviera in concluding that derivative suits should be recognized even though no statute provides for them. We therefore hold that members of LLCs may sue derivatively (accord Bischoffv Boar’s Head Provisions Co. Inc., 436 F Supp 2d 626 [SD NY 2006]; Weber v King, 110 F Supp 2d 124 [ED NY 2000]; contra Pennacchio ex rel. Old World Brewing Co., Inc. v Powers, 2007 WL 446355, 2007 US Dist LEXIS 8051 [ED NY 2007]).

Accordingly, the order of the Appellate Division, insofar as appealed from, should be affirmed with costs and the certified question answered in the affirmative.

Read, J. (dissenting).

The result in this case is unique in the annals of the Court of Appeals. Never before has a majority of the Court read into a statute provisions or policy choices that the enacting Legislature unquestionably considered and rejected. I respectfully dissent.

Background and Legislative History

The limited liability company (LLC) first appeared in Wyoming in 1977, followed by Florida, which adopted an LLC act similar to Wyoming’s in 1982. “As in Wyoming, the Florida statute was enacted to lure capital into the state,” but “[a]s a result of the lingering uncertainty as to both tax treatment and the protection of the entity’s members from personal liability,” other states did not immediately follow suit (Keatinge et al., The Limited Liability Company: A Study of the Emerging Entity, 47 Bus Law 375, 383-384 [1992]). After the Internal Revenue Service’s public ruling in 1988 that it would treat a Wyoming LLC as a partnership for tax purposes, however, many states and drafting commissions began to consider, or experiment with, LLC laws (id. at 384).

While all of this was happening, New York’s Business Corporation Law was increasingly viewed as unfriendly to fledgling businesses. Indeed, in late 1993 a corporate lawyer in a major New York City law firm suggested that “[t]here are many cases where a lawyer who uses New York as the state of incorporation without discussing it in advance with his client is probably guilty of malpractice because of the many disadvantageous aspects of the New York law” (Peter Blackman, Corporate Update, Move over Delaware! Making New York Incorporation-Friendly, NYLJ, Dec. 16, 1993, at 5, col 2 [statement of Richard R. Howe]).

By the early 1990s, New York legislators and Governor Cuomo had advanced improving New York’s overall business climate to the forefront of the political agenda in Albany (see id. [“In an effort to make New York a more attractive state in which to incorporate, several legislators have moved to even the imbalance between (New York and Delaware)”]). Although this pro-business agenda manifested itself in various ways—for example, it was in 1994 that Governor Cuomo and Chief Judge Kaye first sought to establish the Commercial Division of the Supreme Court (see Gary Spencer, Cuomo Seeks State Commercial Court, Other Bills Aimed at Improvement of Business Climate, NYLJ, Jan. 6, 1994, at 1, col 3)—two of the highest-profile pro-business initiatives were “bills pending in Albany to modify the treatment of derivative lawsuits and to authorize limited liability companies” (Blackman, NYLJ, Dec. 16, 1993, at 5, col 2). They were often cited together in reports of the legislative and gubernatorial agenda in 1993 and 1994 (see id.; see also Spencer, NYLJ, Jan. 6, 1994, at 1, col 3 [“pro-business proposals include bills that would: (d)iscourage shareholder derivative lawsuits . . . and (a)llow the formation of limited liability companies”]; Dao, New York Times, June 30, 1994, at B7 [“(Governor Cuomo) has lobbied for legislation to limit a type of lawsuit, known as derivatives, brought by shareholders against corporate boards for wrongdoing. . . . He has advocated creating a hybrid business entity—a limited liability company—that would possess the liability protections of corporations but have the lower tax rates of partnerships”]).

By mid-1992, “18 states . . . permit[ted] the formation of LLCs[,] . . . two states [recognized] LLCs formed in other stalest,] LLC statutes [we]re pending or [we]re being considered in approximately 28 other states, and the National Conference of Commissioners on Uniform State Laws [wa]s drafting a uniform LLC statute” (Brian L. Schorr, Limited Liability Companies: Features and Uses, 62 CPA J [Issue 12] 26 [Dec. 1992], reprinted in 805 PLI/Corp 191, 193). On March 19, 1992, a Joint Drafting Committee of the Association of the Bar of the City of New York and the New York State Bar Association submitted a proposed limited liability company act for the New York Legislature’s consideration; by early May 1992, LLC bills had been introduced in both houses of the New York State Legislature (New York Limited Liability Company Law Update, 805 PLI/Corp at 211-212).

A limited liability company bill was introduced in the New York State Assembly as A11016 on March 31, 1992, less than two weeks after receipt of the Joint Drafting Committee’s draft. A11016 was, for purposes of this case, substantially identical to the finally enacted Limited Liability Company Law with two related exceptions: article IX of the bill authorized members to bring derivative actions; and section 610, which set out the general rule that a member may not initiate an action by or against the company, included a derivative suit under article IX as an exception to this rule. A11016 was referred to committee after its introduction; the Assembly took no further action on this bill in 1992.

On May 12, 1992, a limited liability company bill was introduced in the New York State Senate as S8180. This bill was substantially identical to the Assembly bill except for the notable absence of any language authorizing derivative actions. S8180 was amended and reprinted three times between May 12 and June 25 of 1992, at which point S8180-C—which still did not contain any provisions relating to derivative actions—was referred to committee and left for a subsequent session.

On June 11, 1992, public hearings were held on the Assembly bill. Testifying at these hearings on behalf of the Bar Association of the City of New York and the Joint Drafting Committee were Brian Schorr3 and Howard Lefkowitz. At the Assembly hearings, Mr. Schorr observed that “[t]he Assembly bill does contain provisions concerning the right of a member to bring a derivative action. These provisions are adapted from the [Partnership Law] . . . [T]he Senate bill contains no comparable provisions” (testimony of Brian L. Schorr, Transcript of Assembly Public Hearing on Limited Liability Company Legislation, June 11, 1992, at 27). At those same hearings, Mr. Lefkowitz, who was the chair of City Bar’s Committee on Corporation Law, spoke extensively in favor of derivative actions on behalf of LLCs. Before the Senate, however, the only reference to derivative rights in any testimony was the following statement by Mr. Schorr:

“The Senate bills are based in large part on the proposed limited liability company law prepared by the Joint Drafting Committee, with changes that have been agreed to with other proponents of a limited liability company law. Subject to two exceptions, [City Bar] enthusiastically supports the Senate bills . . . The two exceptions are the inclusion of a publication requirement and the lack of derivative action provisions” (testimony of Brian L. Schorr, Senate Public Hearing on Limited Liability Company Legislation, Dec. 4, 1992, at 2).

As the subsequent legislative history of the Limited Liability Company Law confirms, the omission of provisions authorizing derivative actions was a material—if not the material—term in the legislative bargain struck by the Senate and the Assembly.

As noted earlier, LLC bills were introduced, in substantially complete form, in both chambers of the Legislature in the spring of 1992. The Assembly bill (A11016) authorized derivative actions; the Senate bill (S8180) did not. After both chambers failed to pass an LLC bill in 1992, efforts to negotiate a mutually agreeable statute resumed in 1993. On January 6, 1993, an LLC bill, S27, was introduced in the Senate; neither S27 nor any of its three reprints in 1993 contained any provision authorizing derivative actions. On March 30, 1993, an LLC bill containing article IX and the accompanying language in section 610 was again introduced in the Assembly as A7127. This bill was referred to committee, and no further action was ever taken on it. On June 25, 1993, the Assembly Rules Committee introduced A8676, another LLC bill containing these same provisions authorizing derivative actions. On July 7, 1993, the Assembly passed the “B” print of this bill—which still allowed for derivative actions—and delivered it to the Senate. The Senate, which had never introduced any LLC bill sanctioning derivative actions, did not act on A8676-B, thus delaying the passage of any LLC law until at least 1994.

On March 8, 1994, S27 was reintroduced. On April 5, 1994, the Assembly Rules Committee introduced A11317, a companion to S7511, which was introduced in the Senate the same day. Unlike all prior Assembly bills, A11317 did not authorize derivative actions; as was the case with every prior Senate bill, S7511 likewise did not authorize derivative actions. On June 30, 1994, S7511 passed the Senate and was delivered to the Assembly. That same day, the Assembly substituted S7511 for A11317, and on July 1, 1994, the Assembly passed S7511 and returned it to the Senate. The adopted bill was delivered to the Governor on July 15, 1994, and was signed into law on July 26, 1994, as chapter 576 of the Laws of 1994.

The deletion from the adopted LLC legislation of provisions authorizing derivative actions manifests a legislative bargain: the Senate refused to pass an LLC statute if it allowed for derivative suits. Nearly finalized LLC bills appeared in the Legislature as early as spring of 1992, and the Assembly actually passed a bill in mid-1993. Yet the Senate was unbending: at a time when serious consideration was being given to legislation cutting back on the derivative actions authorized by existing laws, the Senate refused to endorse any legislation allowing members of this new form of business entity, the LLC, to sue derivatively. It is this compromise—excision of provisions authorizing derivative actions from the Assembly bill in exchange for the Senate’s agreement to the balance of the law—to which Mr. Rich, a participant in the drafting of the proposed Limited Liability Company Law, no doubt refers when he states that “[t]he absence of an Article IX from the LLCL was a conscious omission, not a typographical error, as the decision to omit derivative rights occurred late in the legislative session” (Practice Commentaries, McKinney’s Cons Laws of NY, Book 32/32A, Limited Liability Company Law, at 181 [2007 ed]). The rejection of language authorizing derivative actions “strongly militates against a judgment that [the Legislature] intended a result that it expressly declined to enact” (Gulf Oil Corp. v Copp Paving Co., 419 US 186, 200 [1974] [conference committee deleting House language]; see also Pacific Gas & Elec. Co. v State Energy Resources Conservation & Development Comm’n, 461 US 190, 220 [1983] [House bill deleting Senate language]; Posner, Statutory Interpretation—in the Classroom and in the Courtroom, 50 U Chi L Rev 800, 820 [1983] [“(W)here the lines of (legislative) compromise are discernible, the judge’s duty is to follow them, to implement not the purposes of one group of legislators, but the compromise itself’]).

The majority contends, however, that the Legislature’s deletion of language authorizing derivative actions does not necessarily bespeak compromise, and is, in any event, essentially unimportant because the language was superfluous. This is so because derivative rights are so well-entrenched in existing law that the Legislature might have reasonably expected the courts to do what the majority has now done: extend the right to commence a derivative action to an LLC member based on analogy to either a cestui que trust or a shareholder, both of whom historically enjoyed standing to sue derivatively, as a matter of equity in the former case and common law in the latter. To support this proposition, the majority relies on the Second Circuit’s decision in Klebanow v New York Produce Exch. (344 F2d 294 [2d Cir 1965, Friendly, J.]) (see majority op at 104-105, 106), and an oblique reference to Klebanow and Riviera Congress Assoc. v Yassky (18 NY2d 540 [1966]) (without referring to either case by name) made by Mr. Lefkowitz in his testimony at Assembly (not Senate) hearings in 1992 (see majority op at 108).

In Klebanow, the United States Court of Appeals for the Second Circuit held that, even in the absence of statutory authorization, a limited partner in a dissolved firm had capacity to sue on behalf of the partnership (i.e., derivatively) for injury arising out of conduct proscribed by the antitrust laws where the partnership and the liquidating partner had disabled themselves or had a conflict of interest, rendering futile any demand for the partnership to sue. The court reasoned that this was so because a limited partner was more like a shareholder (especially a preferred holder), or perhaps a cestui que trust, than a creditor.

But this case is not Klebanow. First, as Judge Friendly acknowledged, there was no suggestion “that the framers of the Uniform Limited Partnership Act or the legislature of 1922 had focused on the problem ... at issue” (344 F2d at 298); i.e., whether to authorize limited partners to bring derivative suits. In this case, we know that the Legislature did indeed “focus[ ] on the problem ... at issue”—whether to authorize members of LLCs to bring derivative suits—and decided not to do it. Second, section 118 of the Partnership Law, captioned “Rules for cases not covered,” specifies that “[i]n any case not provided for in this article the rules of law and equity, including the law merchant, shall govern” (emphasis added). This provision lends support for the view implicitly taken by the courts in Klebanow and Riviera that the Legislature intended judges to interpret the Partnership Law with the freedom with which they would construe and apply principles of the common law or equity to fill in perceived legislative blanks, and—without doubt—at common law a shareholder could maintain a derivative suit, which is a remedial invention of equity. There is no provision comparable to section 118 in the Limited Liability Company Law. Although one federal judge has expressed the view that “[h]ad the legislature intended to preclude derivative claims by LLC members, it easily could have written an explicit prohibition into the law” (Bischoff v Boar’s Head Provisions Co., Inc., 436 F Supp 2d 626, 632 [SD NY 2006]), the Legislature does not customarily write zipper clauses into its statutes, or explicitly prohibit the courts from implying rights or liabilities that it did not choose to include. Rather, the modern Legislature reasonably expects the judiciary to respect its policy choices (see e.g. Sherman v Robinson, 80 NY2d 483, 489 [1992] [where the legal duty owed to a third party by a store selling alcoholic beverages is limited by General Obligations Law § 11-101 and does not include a duty to investigate possible indirect sales, “(g)iven the Legislature’s choice not to provide liability for (indirect sales), we decline to expand the common law to impose such liability”]).

Next, Mr. Lefkowitz, who testified in favor of the right of LLC members to bring derivative suits, observed that “[s]tate and federal courts in New York have permitted derivative actions by a limited partner on behalf of limited partnerships without express statutory authority” and opined that

“if and to the extent that members of a limited liability company are analogous to a minority shareholder or a limited partner . . . such member would, as a matter of common law precedent, have the right to bring a derivative action on behalf of a limited liability company whether or not the statute contains such an express right” (testimony of Howard Lefkowitz, Assembly Transcript, June 11, 1992, at 132, 133 [emphasis added]).

This testimony has been cited to support the proposition that the absence of an explicit provision in the Limited Liability Company Law authorizing derivative actions does not matter because the Legislature was aware that, under settled law, these provisions were unnecessary (see Bischoff, 436 F Supp 2d at 632-633; majority op at 108).

Courts have on occasion taken the position that “disappearance” of a provision from a statute “during the legislative travel” may not be significant “when settled law indicates that the omitted provision would have been surplusage” (Diamond Crystal Salt Co. v P.J. Ritter Co., 419 F2d 147, 148 [1st Cir 1969] [in light of “the overwhelming weight of judicial authority favor(ing) retrospective construction,” the Massachusetts long-arm statute applied retroactively notwithstanding that, in the year the law was enacted, four bills were filed, two of which expressly provided for retroactivity, and the Legislature enacted a bill omitting this language]). But here, there is no settled law in New York, or elsewhere for that matter, respecting LLCs and derivative suits (see Walker, New York Limited Liability-Companies and Partnerships: A Guide to Law and Practice § 3:22, at 67 [1 West’s NY Prac Series 2002] [while “(t)here is well-established case law for the treatment of C corporations, S corporations, limited partnerships and general partnerships” on many questions, “(n)o such extensive body of law yet exists for LLCs, although all of the states and the District of Columbia have enacted LLC statutes”]).

This vacuum no doubt exists because LLCs are a fairly recent statutory innovation, unknown to the common law; a new business form combining corporate-type limited liability with partnership tax advantages and organizational characteristics. On the matter of derivative suits in particular, there are divergent views throughout the country. The Uniform Limited Liability Company Act developed by the National Conference of Commissioners on Uniform State Laws provides for derivative suits modeled on the provisions of the Revised Uniform Limited Partnership Act. Many states have adopted laws along similar lines. By contrast, other states, preferring the American Bar Association’s (ABA) Prototype Limited Liability Company Act, require disinterested members or managers to authorize litigation. The co-author of the major treatise on limited liability companies—who (unlike the majority) questions the utility of derivative suits in the LLC context—advocates the ABA’s approach as “a reasonable compromise” (see Ribstein, The Emergence of the Limited Liability Company, 51 Bus Law 1, 23 [1995-1996] [“If the (derivative suit) remedy is justified . . . , it is only because requiring plaintiffs to seek authorization from the thousands of shareholders of publicly held firms could prevent some legitimate suits,” but “(t)he same point does not apply ... to closely held firms. Moreover, LLC members generally have other means of self-protection at their disposal that corporate shareholders may lack, including a default right to sell their interests back to the firm and substantial veto and removal powers”]).

In short, there is no settled law in New York or elsewhere on the subject of derivative rights for LLC members. Certainly, a third-party advocate’s prediction that the courts might ignore the Legislature’s policy choice (which, after years of contrary Supreme Court and Appellate Division holdings, is today made prescient) does not express or create settled law. Essentially, the majority simply disagrees with the Legislature, calling a decision not to authorize derivative suits in the context of LLCs a “radical step . . . that might be expected to harm the ‘business climate’ more than help it” (majority op at 107). But whether or not to vest LLC members with the right to sue derivatively is the Legislature’s choice to make, not ours. Moreover, although the majority argues that failing to recognize a derivative right under the statute is an “extreme result” (id. at 108), creating an “uncharted path” upon which “we will not readily conclude that the Legislature intended to set us” (id. at 106), the “uncharted path” is the one taken by the majority: judicially legislating a cause of action that was rejected by the Legislature, and, for more than a decade after the Limited Liability Company Law’s enactment, was not recognized by any New York court.

Our Precedents

The majority does not cite a single case where we have read into a statute a provision or policy choice that we know the enacting Legislature rejected. Indeed, we have never done such a thing before. We have, in fact, consistently deferred to the Legislature in cases where the facts are far less compelling than they are here. For example, in Majewski v Broadalbin-Perth Cent. School Dist. (91 NY2d 577, 581 [1998]), we were asked “whether certain amendments to the Workers’ Compensation Law should be construed as retroactively applicable to pending actions.” We noted “[i]mportantly,” that the statute’s initial draft included language providing for retroactive application, which “[did] not appear in the enacted version. A court may examine changes made in proposed legislation to determine intent” (id. at 587). Further, we quoted People v Korkala (99 AD2d 161, 166 [1st Dept 1984]) to the effect that “rejection of a specific statutory provision is a significant consideration when divining legislative intent” (Majewski, 91 NY2d at 587). Noting that the deletion of the provision was consistent with settled law presumptively favoring prospective application, we held that the statute “should be applied prospectively to actions filed postenactment” (id. at 581).

In Matter of Grand Jury Subpoena Duces Tecum Served on Museum of Modern Art (93 NY2d 729, 732 [1999]), we were called upon to decide “whether Arts and Cultural Affairs Law § 12.03, which protects the artwork of nonresident lenders from any kind of seizure while on exhibit in New York State, encompasses a subpoena duces tecum requiring production of two paintings . . . on loan to the Museum of Modern Art in New York” from a museum in Vienna (internal quotation marks omitted). The statute’s predecessor’s Bill Jacket included a letter from a City Bar committee questioning whether the legislation, as drafted, might prevent a rightful owner from recovering stolen art, and proposing a distinction to prevent this from happening. The Bill Jacket also, however, included a memorandum from the Attorney General, cautioning against creating any such “loopholes” in the statute, which “would force potential good-faith lenders to seek legal advice before lending artwork to museums, thus defeating the bill’s purpose” (id. at 737). The Legislature did not adopt the change recommended by City Bar; as a result, the statute did not include any language embodying City’s Bar’s proposed exemption. Citing Majewski, we stated that

“[i]t is well settled that legislative intent may be inferred from the omission of proposed substantive changes in the final legislative enactment. Thus, this history, coupled with the language of the statute, demonstrate a clear mandate from the Legislature. The statute’s ‘no loopholes’ approach compels our holding that Arts and Cultural Affairs Law § 12.03 is not limited to civil process” (id. at 738 [citation omitted and emphasis added]).

In a related vein, just this past year in People v Bratton (8 NY3d 637 [2007]) we rejected a plea to read into article 12-B of the Executive Law an exception to the warrant requirement for violations taking place in a parole officer’s presence. Acknowledging that this “would make sense” and that CPL 410.50 (4) authorizes a probation officer to take a probationer into custody without a warrant in such circumstances, we observed that “[t]he Legislature . . . did not include language comparable to CPL 410.50 (4) in the provisions of the Executive Law governing violation of parole. Nor can there be any doubt that this was a considered legislative choice” (Bratton, 8 NY3d at 641-642). For the latter proposition, we relied on legislative history showing that when the Legislature enacted article 12-B, it omitted the language found in predecessor statutes authorizing warrantless arrests for violations in a parole officer’s presence. In short, we declined the invitation to read into a statute a provision that we knew the enacting Legislature chose not to include. We did not look to common law or to provisions in related statutes for license to second-guess the Legislature’s policy choice.

Conclusion

The enacting (not a subsequent) Legislature considered and explicitly rejected language authorizing the very result that plaintiffs have successfully sought from the judiciary in this case. Fourteen years after the fact the majority has unwound the legislative bargain. The proponents of derivative rights for LLC members—who were unable to muster a majority in the Senate—have now obtained from the courts what they were unable to achieve democratically. Thanks to judicial fiat, LLC members now enjoy the right to bring a derivative suit. And because created by the courts, this right is unfettered by the prudential safeguards against abuse that the Legislature has adopted when opting to authorize this remedy in other contexts (see Business Corporation Law §§ 626, 627; Partnership Law §§ 115-a, 115-b).

Presumably, those businesses electing to organize as LLCs relied on what the Limited Liability Company Law says, and counted on the New York judiciary to interpret the statute as written. Instead, the majority has effectively rewritten the law to add a right that the Legislature deliberately chose to omit. For a Court that prides itself on resisting any temptation to usurp legislative prerogative, the outcome of this appeal is curious. I respectfully dissent.

Chief Judge Kaye and Judges Ciparick and Pigott concur with Judge Smith; Judge Read dissents in a separate opinion in which Judges Graffeo and Jones concur.

Order, insofar as appealed from, affirmed, with costs, and certified question answered in the affirmative.

      . Article IX, as proposed in A11016 and the LLC bills introduced in the Assembly in 1993 (discussed infra at 113), authorized a member of an LLC to bring a derivative action; required at least one plaintiff to be a member at the time the action was commenced and at the time of the challenged transaction; required the complaint to set forth with particularity the plaintiff’s or plaintiffs’ efforts to secure the initiation of the action by the LLC’s managers or those members who would otherwise have the authority to cause the LLC to sue in its own right; required court approval for the discontinuance, compromise or settlement of an action, and vested the court with discretion to require prior notice thereof by publication or otherwise to potentially affected members, and to assess the costs of this notice on one or more of the parties to the action; vested the court with discretion to award reasonable expenses, including reasonable attorneys’ fees, to a successful plaintiff or plaintiffs; gave the LLC the right to security for expenses, including attorneys’ fees, incurred in connection with the action unless the plaintiffs or plaintiffs’ contributions or allocations amounted to 5% or more of the contributions or allocations of all members, or had a fair market value in excess of $50,000; and vested the court with discretion to determine the amount of any security even where the 5% or $50,000 test had been met, based upon the LLC’s showing of need. These provisions were substantially the same as sections 115-a and 115-b of the Partnership Law, which were, in turn, patterned after sections 626 and 627 of the Business Corporation Law respectively.

      . Section 610, as proposed in A11016 and LLC bills introduced in the Assembly in 1993 (discussed infra at 113), read as follows:
      “A member of a limited liability company is not a proper party to proceedings by or against a limited liability company, except where the object is to enforce a member’s right against or liability to the limited liability company and except in cases provided for in section nine hundred one of this chapter” (emphasis added).
      This provision mimics section 115 of the Partnership Law. Notably, the Legislature amended section 115 in 1968 to add the language excepting “cases provided for in section [115-a]” when it added the latter provision, which authorizes and regulates derivative suits commenced by limited partners (see L 1968, ch 496, § 2).

      . Mr. Schorr, then a partner at a major New York City law firm, was co-chair of the Joint Drafting Committee. Another participant in the drafting of the proposed Limited Liability Company Law was Bruce A. Rich, author of the oft-cited McKinney’s Practice Commentaries (see McKinney’s Cons Laws of NY, Book 32/32A, Limited Liability Company Law, Preface, at III [2007 ed]; see infra at 114).

      . In 1999, the Limited Liability Company Law was amended to update various provisions. The original Senate bill included article IX (member’s derivative actions), but was revised in committee to remove these provisions (compare 1997 NY Senate Bill S7331 with 1997 NY Senate Bill S7331-A, which is, as relevant here, identical to 1999 NY Senate-Assembly Bill S1640A, A2844A, enacted as chapter 420 of the Laws of 1999).

      . The District Court Judge had dismissed the complaint principally on the ground that a limited partner was a creditor rather than an owner, and that the antitrust laws do not allow a creditor to bring a treble damages suit against third parties who have allegedly injured the firm (see 232 F Supp 965 [SD NY 1964]).

      . Even so, Klebanow was a controversial decision. A majority of a distinguished panel of the First Department flatly rejected its holding in Millard v Newmark & Co. (24 AD2d 333 [1st Dept 1966]). Millard was authored by Justice Harold Stevens, who was subsequently an Associate Judge on this Court as well as Presiding Justice of the First Department. He was joined in the three-judge majority by Justice Charles Breitel, subsequently the Chief Judge of this Court. In Millard, the Court held that because limited partnerships “are solely creatures of statute,” limited partners “have only such rights, duties, obligations, etc., as the statute may provide” (id. at 335), and therefore no derivative action should be implied where the Legislature failed to create one. Further, the Court observed that the Second Circuit in Klebanow “seem[ed] to have gone on the basis of policy considerations and to have overlooked the fact that the New York Legislature has not so extended the law as to limited partnerships” (id. at 339-340). In his writing for the two-judge partial dissent, Justice Benjamin Rabin generally subscribed to the Second Circuit’s reasoning in Klebanow, stating at the outset that he “dissented] because [he] believe[d] that unless such right be given there will be a failure of an adequate remedy for the wrongs alleged to have been done” (id. at 340). In light of the unsettled nature of the law in the wake of Klebanow and Millard, the Law Revision Commission undertook a study “examin[ing] the power of a limited or special partner to commence a derivative action in the right of the limited partnership, ... [a] problem [that presumptively] arises because the general partners are unable, or wrongfully have refused, to maintain the action on behalf of the firm” (Act, Recommendation and Study relating to Derivative Actions by Limited Partners, 1967 NY Legis Doc No. 65[B], at 13). The study, which recommended legislation to authorize derivative actions by limited partners, was completed (but not issued) before we handed down our decision in Riviera, which held that limited partners are analogous to cestuis que trustent, and are “authorized to sue as limited partners on behalf of the partnership entity to enforce a partnership claim when those in control of the business wrongfully decline to do so” (18 NY2d at 547). Although Riviera resolved the conflict prompting its study and recommendations, the Commission nonetheless took the position that legislation remained “appropriate ... to clarify and regulate the right and obligations resulting from the [Riviera] decision . . . rather than to allow rules to be formulated on a case-by-case basis” (1967 NY Legis Doc No. 65[B], at 9). The Legislature adopted the Commission’s proposed bill in 1968 (see L 1968, ch 496, amending Partnership Law § 115 and adding Partnership Law §§ 115-a, 115-b, 115-c).