On December 12, 2023, Justice Ostrager of the New York County Commercial Division issued a decision in South Beach Tristar 800 LLC v. Lincoln Arts ERFR LLC, 2023 NY Slip Op. 34425(U), holding that a foreign LLC’s failure to register before bringing an action in New York was a curable defect, explaining:
Section 808(a) of the LLC Law provides that:
A foreign limited liability company doing business in this state without having received a certificate of authority to do business in this state may not maintain any action, suit or special proceeding in any court of this state unless and until such limited liability company shall have received a certificate of authority in this state.
The indicia for doing business in New York, established in the case law, include the company’s designation of its principal place of business in New York, as RFR alleges has been the case here since October 2014 when the parties’ Agreement was signed. Also relevant are the business meetings in New York attested to in the Reifler Affidavit. To acquire the requisite authority to sue, a foreign limited liability company must obtain a certificate of authority from the New York Department of State by (1) submitting a certificate of existence and an application for authority to do business in this state, and (2) complying with certain publication requirements, including publishing a copy of its application in two newspapers for six successive weeks, and then filing proof of the publication with the Department of State.
RFR has produced evidence of the failure by South Beach to obtain the requisite certificate, which, if true, would bar South Beach from maintaining this action.
In opposition to the motion, South Beach has submitted an Affirmation from Tom Herrschaft, Head of Retail at Commerz Real AG, a real estate asset management and holding company incorporated in Germany and the parent company of CRI, which is the sole member of South Beach. South Beach urges denial of the motion for two reasons. First, South Beach insists it does not do business in New York but was obligated to bring this action under the exclusive jurisdiction clause in the parties’ Agreement. Herrschaft provides pages of detail explaining the business of South Beach, an LLC registered in Florida which conducts its business primarily in Miami. The New York address on the South Beach registration is the address of its legal counsel, not the place where South Beach conducts its business, Herrschaft maintains.
Second, Herrschaft asserts that, to proceed to the merits as expeditiously as possible, South Beach registered to do business in New York on November 20, 2023, which moots the motion to dismiss. South Beach points to the amendment to LLC Law § 802(b)(i), which South Beach construes as providing a 120-day period for the LLC to establish its compliance with the law. Since the action was commenced on September 13, 2023, the November 20, 2023 filing authorizes South Beach to commence this action, plaintiff claims.
South Beach further argues that noncompliance with LLC Law 808(a) is not a jurisdictional defect but instead is a curable defect. Thus, the November filing is sufficient authority for the case to proceed, even if the statute is not construed to provide the 120-day period that South Beach advocates.
In reply, RFR maintains its position, arguing that while South Beach has submitted an application for a certificate of authority to do business, it has yet to fully comply with the above referenced statutory requirements relating to publication that are needed to actually obtain the certificate. And South Beach’s insistence that it is not doing business in New York at most creates an issue of fact that requires a hearing after limited discovery. Significantly, though, while RFR distinguishes many of South Beach’s cases, it does not dispute that plaintiff’s failure to obtain a certificate of authority to do business in New York is a curable defect.
Having considered the papers and various arguments presented by the parties, the Court denies the motion to dismiss without prejudice on the condition that South Beach fully comply with the statute and present to RFR by February 26, 2024, proof that South Beach has satisfied the statutory requirements needed to obtain authority to do business in New York, including the
(Internal quotations and citations omitted).
publication requirements. In the opinion of the Court, the $2.75 million claim by South Beach in its Complaint should proceed on the merits once all the requirements of the LLC Law have been met. Granting RFR’s motion and dismissing the action would serve no purpose, as plaintiff South Beach could easily commence the action anew once New York State issues the certificate of doing business. Nor would judicial or party resources be wisely spent on discovery and a hearing to determine whether or not South Beach is doing business in New York. The most efficient course of action is for South Beach to complete the registration process as expeditiously as possible. Should South Beach fail to obtain the certificate of authority to do business in New York . . . .