On July 18, 2022, Justice Ruchelsman of the Kings County Commercial Division issued a decision in Larsen v. Larsen, 2022 NY Slip Op. 32415(U), holding that a derivative plaintiff’s motives are irrelevant to its standing to bring a derivative claim, explaining:
The defendant cites to Steinberg v. Steinberg, 106 Misc2d 720, 434 NYS2d 877 [Supreme Court New York County 1980) for the proposition that a shareholder with a conflict of interest cannot initiate a derivative action. However, in that case the conflict did not concern allegations of equal and improper looting of the corporation. Rather, it concerned the fact the plaintiff only filed the derivative lawsuit to gain leverage in a matrimonial action. Thus, the court concluded the plaintiff did not represent the interests of the other shareholders and did maintain capacity to sue. However, the Second Department did not adopt this broad understanding of capacity. Thus, in Dukas v. Davis Aircraft Products Co., Inc., 129 Misc2d 846, 494 NYS2d 632 [Supreme Court Suffolk County 1985] the court disagreed with Steinberg and held that capacity to sue only concerns a legal disability such as infancy or lunacy and not the reasons for such derivative suit. The Second Department adopted this approach. Indeed, in Corcoran v. Corcoran, 192 AD2d 503; 596 NYS2d 86 [2d Dept., 1993] the court held that a shareholder had a right to bring and maintain this derivative action regardless of his personal motive for so doing.
Moreover, the mere fact there are allegations that the plaintiff’s likewise received funds for work they did not perform and hence do not deserve does not mean the allegations are made in bad faith. Rather, the defendant can surely file counterclaims against the plaintiffs for such alleged improprieties.
(Internal quotations and citations omitted).