NAME SEARCHED: Neptune, LLC

NAME SEARCHED: Neptune, LLC PWM 81S-RESEARCH performed due diligence research in accordance with the standards set by AML Compliance for your business. We completed thorough searches on your subject name(s) in the required databases and have attached the search results under the correct heading below. Significant negative media results may require escalation to senior business, Legal and Compliance management. Also, all accounts invoMng PEPs must be escalated. Search: Result: Click here for results: Reviewer Comments (as necessary): RDC * No Hit O Not Required Hit I. RDC Results No RDC alert (Please co: attached) ■ PCR No Hit O Not Required Hit II. PCR Results No PCR alert (Please sec attached) O BIS IS Yes O No Ill. Negative Media Result found(Plcase sec attached) IV. !Von-Negative Media Result found(Plcase sec attached) M Not Required V. Other Language Media There was no information found D&B Results? VI. D&H Result found(Platsc see attached) Yes • No • Not Required Smartlinx Results? 0 Yes O No VII. Smartlinx Result found(Please see attached) NI Not Required Court Cast% Review by Legal May VIII. Court Cases Result found(Plcasc sec attached) be Required O No Results O Search not requiral Prepared by: Shanu Gujaria Research Analyst Instructions: 1. Review and confirm that all results are returned for your client. 2. Please note that you are still required to perform any Martindale -Hubbell search (if applicable) on each search subject. We have attached the web link below for your convenicnce:Martindale-Ilubbellhttp://www.martindale.comisp/Martindakihome.xml 3. As needed, provide comment for any negative results. 4. If applicable, please obtain clearance from Compliance for all alerts. 5. Save any changes you make to this document and attach file to your KYC. Please note: Submission of a signed KYC is your confirmation that you have fully reviewed the research documents. Date:06/16/2017 CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) For internal use only CONFIDENTIAL SbNY_GM_00059700 DB-SDNY-0022524 EFTA_00170250 EFTA01296884 OFAC RESULTS RDC: 11602687 Not Alerted KYC 1790748 11602692 Not Alerted KYC 1790748 Neptune, LLC aa: Neptune, LLC Cc, J.Ir.:•..vIRGIN ISLANDS, U.S. 'NIIi E:1' EFATE'S, PCR: C20170637909090 Neptune, LLC 62012 15544 NCA customised Closed - No Hit 16/06/2017 C20170637909089 Neptune, LLC 6201215544 NCA customised Closed - No Hit 16/06/2017 BIS RESULTS Negative Media: The Santa Fe New Mexican (New Mexico) Distributed by McClatchy-Tribune Business News September 9, 2014 Tuesday King donors' address linked to sex offender BYLINE: Steve Terrell, The Santa Fe New Mexican SECTION: STATE AND REGIONAL NEWS LENGTH: 383 words Sept. 09—Democratic gubernatorial candidate Gary King has received more than $35,000 in campaign contributions from an address in the U.S. Virgin Islands that also is listed as For internal use only CONFIDENTIAL - PURSUANT TO FED. R.CON(F IDENTIAL DB-SDNY-0022525 EFTA_00I 7025 I SDNY_GM_00059701 EFTA01296885 Page 2 King donors' address linked to sex offender The Santa Fe New Mexican (New Mexico) September 9, 2014 Tuesday the address of a convicted sex offender who years ago bought property near Stanley from King's family. Jeffrey Epstein is listed in the New York state sex offender registry as currently residing at 6100 Red Hook Quarter B3, St. Thomas Virgin Islands. He was convicted in 2008 of soliciting sex from girls as young as 14. Police said Epstein had sex with five teenagers he hired to give him massages at his Florida home. More than $30,000 in contributions listed in King's latest campaign finance report, filed Monday, came from several businesses using Epstein's address. These include $10,200 from JEGE LLC: $5,200 from Maple Inc.; and $5,000 each from FT Real Estate, Laurel Inc. and Nautilus Inc. Earlier this year, King received another contribution from a business at the same address — $5,200 from Neptune LLC. A spokesman for the King campaign said Monday, "If anything is found to be improper about any contribution, they will be returned or donated to charity." If so, it wouldn't be the first time King returned campaign money linked to Epstein. In 2006, following Epstein's arrest, Democratic politicians from Bill Richardson down to the Santa Fe County sheriff returned Epstein campaign contributions. King gave back $15,000 that an Epstein company called The Zorro Trust had contributed to his campaign for attorney general. At the time, King said, "I don't think I've ever met him personally. He knows other members of my family better." Epstein had purchased his 10,000-acre Zorro Ranch in Stanley from King's father, former Gov. Bruce King, in 1993. Then-Gov. Bill Richardson donated $50,000 in Epstein campaign contributions to charity. Epstein's 23,000-square-foot hilltop mansion, which was twice the size of the second largest home in Santa Fe County, was thought at that time to be the biggest house in the state. Contact Steve Terrell at Read his political blog at www.santafenewmexican.com/news/blogs/politics. (c)2014 The Santa Fe New Mexican (Santa Fe, N.M.) Visit The Santa Fe New Mexican (Santa Fe, N.M.) at www.santafenewmexican.com Distributed by MCT Information Services LOAD-DATE: September 9, 2014 LANGUAGE: ENGLISH ACC-NO: 20140909 -SF-King-donors-address-linked-to-sex-offender-0909-20140909 PUBLICATION -TYPE: Newspaper JOURNAL -CODE: SF For internal use only SDNY_GM_00059702 CONFIDENTIAL - PURSUANT TO FED. R.QQN(FIDENTIAL DB-SDNY-0022526 EFTA_00I 70252 EFTA01296886 Page 3 King donors' address linked to sex offender The Santa Fe New Mexican (New Mexico) September 9, 2014 Tuesday Copyright 2014 The Santa Fe New Mexican Non-Negative Media: The Santa Fe New Mexican (New Mexico) Distributed by McClatchy-Tribune Business News July 4, 2014 Friday Reports show Martinez still has lopsided lead in race for campaign cash BYLINE: Steve Terrell, The Santa Fe New Mexican SECTION: NATIONAL POLITICAL NEWS LENGTH: 977 words July 04--Gov. Susana Martinez's campaign has more than 37 times more money in the bank than her Democratic opponent, Gary King, according to campaign finance reports filed Thursday. According to the reports, filed with the Secretary of State's Office, the incumbent Republican governor raised more than $869,000 in the past month and spent $860,054, which left her with more than $4.3 million in cash on hand. King, who won the five-person Democratic primary in early June, raised $320,665 - of which $200,000 came from his own pocket. He spent a little over $280,000, mostly on two television commercials, which left him with slightly more than $116,000 in the bank. While the person with the most money doesn't always win the election, the lopsided figures give Martinez a huge advantage for carrying her message to voters. And such a wide spread could discourage large out-of-state donors from contributing to King. The head of the Democratic Governors Association already has said that group won't be spending money in New Mexico. The television battle has been intense since the primary, with the Martinez campaign as well as the Republican Governors Association releasing ads bashing King, who is the state attorney general and the son of a former governor. For internal use only SDNY_GM_00059703 CONFIDENTIAL - PURSUANT TO FED. R.QQN(FIDENTIAL DB-SONY-0022527 EFTA_OOI 70253 EFTA01296887 Page 2 Reports show Martinez still has lopsided lead in race for campaign cash The Santa Fe New Mexican (New Mexico) July 4, 2014 Friday According to Martinez's reports, the campaign bought television and radio time totaling $475,327. The campaign also paid consultant Jay McCleskey's company more than $64,000 to produce the ads. In addition, a report filed Thursday by RGA New Mexico PAC, a political action committee of the Republican Governors Association, shows that group spent a total of $571,290 on ads attacking King. That's $12,650 to produce the spots and $548,040 for buying the TV time. King paid Canal Partners Media, a Georgia company, $200,000 to produce and place his ads. As has been the case in past Martinez reports, a large share of her money came from Texas. Eleven of her 15 largest contributors were from the Lone Star State. New Mexico election law limits individual campaign contributions to $5,200 for the primary and $5,200 for the general election. So this is the last report in this cycle in which contributors could give as much as $10,400 -- as long as $5,200 of it was made on or before June 3. Martinez's largest contributors all contributed on that date. Those who gave $10,400 were the Republican National Committee; Associations Inc of Dallas, a media services company; Noble Royalties, an oil and gas royalties company of Addison, Texas; Compass Royalty Management of Addison; Jay Adair of Dallas; Marcus Hiles, Chairman & CEO of Western Rim/Mansions Custom Homes in Grand Prairie, Texas, and his wife, Nancy Hiles, who listed her occupation as homemaker; George Ryan of Dallas, CEO of Ryan Separate Partnership, which is involved in real estate; the National Shooting Sports Foundation of Newton, Conn.; and Diane Wilsey, a San Francisco socialite and philanthropist. Martinez also had several $10,000 contributors: Lee Roy Mitchell of Dallas, founder of Cinemark Theaters; Eloisa Hendric, an educator in El Paso; the Border Livestock Co. of El Paso; someone listed as "Director of Mural Technologies" of El Paso; and Edgar Medina, an account executive in Glendale, Ariz. Many of the top contributors to Martinez's campaign also contributed to Susana PAC, a separate political committee run by the governors political team. Among those contributors were Hendric, Medina and the Border Livestock Co. All gave $10,000 to Susana PAC. The PAC raised $70,811, spent $20,764 and has $120,814 cash on hand. Susana PAC contributed $5,200 to Susan Riedel, the Republican candidate for attorney general; $2,700 to Secretary of State Diana Duran; and $2,575 to GOP Land Commissioner candidate Aubrey Dunn Jr. In 2012, there was a rift between the governor and Dunn because she didn't support him in his Senate race against Democrat Phil Griego. Apparently, that wound has healed. King had two $10,400 donors, rancher Ed Healy and his wife, Trudy Healy, of Taos. However, their contribution was made June 25, after the deadline. Ken Ortiz, chief of staff for the Secretary of State's Office, said Thursday, "If someone made two contributions of $5,200 after the primary, that would be $5,200 over the general election limit." For internal use only SDNY_GM_00059704 CONFIDENTIAL - PURSUANT TO FED. R.CON(FIDENTIAL DB-SDNY-0022528 EFTA_00 170254 EFTA01296888 Page 3 Reports show Martinez still has lopsided lead in race for campaign cash The Santa Fe New Mexican (New Mexico) July 4, 2014 Friday King campaign manager Keith Breitbach told The Associated Press on Thursday that he thinks the contributions are permissible because $5,200 from each went for retirement of King's debt from the primary election. King has more than $535,000 in unpaid campaign debt. King's $5,200 contributors included retired publisher Alan Webber of Santa Fe, who came in second to King in the primary. Others who gave King $5,200 were Pojoaque Gaming Inc.; the Buffalo Thunder Resort & Casino in Pojoaque Pueblo; Amelia Carson of Santa Fe; Bill King of Moriarty; HBRK Associates, a New York investment company; Neptune LLC, a Virgin Islands investment company; and Darren Indyke, a New York lawyer. King's report shows that the campaign paid Steve Verzwyvelt — his former campaign manager who only lasted two days - $7,538. Verzwyvelt was fired after a right-wing publication discovered several juvenile tweets that some women found offensive. Webber reported raising $41,263 in the last days of the primary. He spent $140,471 since the last report, leaving just over $71,00 in the bank. He still has $150,000 in unpaid campaign debt, but that is from loans from himself and his wife. Another also-ran, Lawrence Rael, raised $14,520 since the last report, spent $95,911 and has $28,094. Rael has $176,950 in unpaid debt. Contact Steve Terrell at Read his political blog at www.santafenewmexican.com/news/blogs/politics. (c)2014 The Santa Fe New Mexican (Santa Fe, N.M.) Visit The Santa Fe New Mexican (Santa Fe, N.M.) at www.santafenewmexican.com Distributed by MCT Information Services LOAD-DATE: July 7, 2014 LANGUAGE: ENGLISH ACC-NO: 20140704 -SF-Reports-show-Martinez-still-has-lopsided-lead-in-race-for- campaign -cash-20140704 PUBLICATION -TYPE: Newspaper JOURNAL -CODE: SF Copyright 2014 The Santa Fe New Mexican For internal use only SDNY_GM_00059705 CONFIDENTIAL - PURSUANT TO FED. R.CON(FIDENTIAL DB-SONY-0022529 EFTA_00 170255 EFTA01296889 Page 4 United States Courts Opinions: Supreme Court of New York: Neary v Burns US Official News April 1, 2014 Tuesday Plus Media Solutions US Official News April 1, 2014 Tuesday United States Courts Opinions: Supreme Court of New York: Neary v Burns LENGTH: 6047 words DATELINE: Albany Supreme Court of New York has issued the following order: Neary v Burns 2014 NY Slip Op 24083 Decided on March 28, 2014 Supreme Court, Kings County Demarest, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the printed Official Reports. Decided on March 28, 2014 Supreme Court, Kings County Thomas J. Neary and Salvatore Benevento, Plaintiffs, against Arthur Burns and 2784 West 15th Street, LLC, Defendants. 6290/2011 Attorneys for Plaintiff: Thomas Torto, Esq. 419 Park Avenue South, Suite 406 New York, NY 10016 Attorney for Defendants: Michele Forzley, Esq. For internal use only SDNY_GM_00059706 CONFIDENTIAL - PURSUANT TO FED. R.CON(FIDENTIAL DB-SONY-0022530 EFTA_00 170256 EFTA01296890 Page 5 United States Courts Opinions: Supreme Court of New York: Neary v Burns US Official News April 1, 2014 Tuesday 5405 Tuckerman Lane #231 N. Bethesda, MD 20852 Carolyn E. Demarest, J. In this action by plaintiffs Thomas J. Neary (Neary) and Salvatore Benevento (Benevento) (collectively, plaintiffs) against defendants 2784 West 15th Street, LLC (2784 LLC) and Arthur Burns (Burns), Burns moves for an order, pursuant to CPLR 3211, dismissing plaintiffs' complaint in its entirety, and awarding him full reimbursement of his legal fees and costs. BACKGROUND Salvatore Judice (Mr. Judice) was the owner of two parcels of real property. One of these parcels is located at 2776, 2778, and 2784 West 15th Street, in Brooklyn (Block 8996, Lots 89, 91, and 92) (the 2784 premises), and the other parcel is at located at 363-367 Neptune Avenue, in Brooklyn (the Neptune Avenue premises). The Neptune Avenue premises consists of two buildings with six units in each of them. When Mr. Judice died in 1973, he left the 2784 premises and the Neptune Avenue premises to his five children, i.e., Grace Burns (Grace), Anna Neary (Anna), Lucy Judice (Lucy), John E. Judice (John), and Julia J. Benevento (Julia), and, by subsequent deeds, both of these premises were conveyed to them as tenants in common. Plaintiffs Neary and Benevento have resided virtually their entire lives in residential apartments in the building at 367 Neptune Avenue within the Neptune Avenue premises as rent-stabilized tenants. Anna died in 1987, and she left her estate to her husband, Thomas J. Neary, Sr. (Thomas), who died on August 2, 2004. Thomas' estate passed to plaintiff Thomas Neary, Salvatore Neary (Salvatore), and Mary Ann Peraccio (Mary Ann), who thereby inherited Thomas' ownership interest both in the 2784 premises and the Neptune Avenue premises. In 2006, the family members that held interests in the 2784 premises and the Neptune Avenue premises agreed to form two limited liability companies (LLCs), i.e., 2784 LLC and 363-367 Neptune Avenue. LLC (Neptune LLC), to which their respective interests in these properties would be transferred, with Ray McRory, Esq. acting as their attorney. On November 10, 2006, the Operating Agreement of 2784 LLC was executed by its initial members, who were listed as: Grace (by Burns, as her attorney-in-fact), Julia (by Benevento, as her attorney-in-fact), Neary, Salvatore, and Mary Ann. An almost identical Operating Agreement of Neptune LLC was also executed by these members on the same date. The members conveyed their interests in the 2784 premises to 2784 LLC and their interests in the Neptune Avenue premises to Neptune LLC. Pursuant to the Operating Agreements, Burns was named the manager of both LLCs. Thereafter, John died on March 28, 2007 and his estate passed to Carmel Salerno, Patricia Judice, Joanne Judice Rafaella, and Salvatore Judice (Judice). The Estate of John ['2]conveyed its interests in the 2784 premises and the Neptune Avenue premises to the two LLCs. Lucy Judice died without having children, and her estate conveyed its interest in the 2784 premises and the Neptune Avenue premises to the two LLCs. To reflect these changes, on November 1, 2007, an Amended and Restated Operating Agreement for 2784 LLC was executed by all of the initial members, and by the Estate of John (by Judice, as the executor), as a new member. Schedule A to 2784 LLC's Operating Agreement For internal use only SDNY_GM_00059707 CONFIDENTIAL - PURSUANT TO FED. R.CON(FIDENTIAL DB-SDNY-0022531 EFTA_00I 70257 EFTA01296891 Page 6 United States Courts Opinions: Supreme Court of New York: Neary v Burns US Official News April 1, 2014 Tuesday (annexed as exhibit 2 to Burns' motion papers) lists the voting percentage interests of its members as being: 44.8% for the Estate of John, 18.4% for Grace, 18.4% for Julia, and 18.4% for the Neary Group, consisting of three listed members, i.e., Neary, Salvatore, and Mary Ann. At some time prior to 2011, Julia died, and her estate passed to her two sons, Benevento and Anthony Bevent (Anthony), in equal shares, pursuant to a will which also named them as co-executors. In April 2009, members of Neptune LLC were requested to vote on a proposal to sell the Neptune Avenue premises. Benevento (on behalf of the Estate of Julia) and Neary voted no to this proposal. By a letter dated April 21, 2009, the members of Neptune LLC were informed that on April 20, 2009, 73.3% of the Neptune LLC's membership had voted in favor of this proposal, and that, as a result, Burns was authorized to sell the Neptune Avenue premises at the highest and best price possible and to take any necessary steps to do so, including vacating all tenants from such premises. In September 2009, Burns, on behalf of 2784 LLC, executed a purchase agreement to sell the 2784 premises to M & A Realty Services, LLC for a sales price of $1,050,000. In 2010, the 2784 premises were sold with the purchase price for this sale paid in cash and by a purchase money mortgage. Prior to the sale, 2784 LLC's members signed a Certificate of Members of 2784 LLC Resolution to Sell Real Property (the Certificate) in accordance with section 3.4 of the Operating Agreement, which required that the manager have prior written approval of a majority vote of all members in order to sell the 2784 premises. The Certificate was signed by the Estate of John (by Judice), Grace (by Burns, as her attorney- in-fact), the Estate of Julia (by Anthony), and the Neary Group (by Mary Ann, as the authorized representative), and reflected their respective interests in 2784 LLC of 44.8% for the Estate of John, 18.4% for Grace, 18.4% for the Estate of Julia, and 18.4% collectively for the Neary Group. Using the funds obtained from this sale of the 2784 LLC premises, Burns, as the manager of 2784 LLC, gave a mortgage and loan from it to Neptune LLC for $250,000 at five percent interest with a mortgage on the Neptune Avenue premises to be paid when these premises are sold. These monies were allegedly used to buy out the non-family tenants of the Neptune Avenue premises so as to have them vacate their apartments there. On August 13, 2010, an action was filed by Neptune LLC against Neary, Benevento, Carmel Salerno (Carmel), and the Estate of Julia (363-367 Neptune Avenue, LLC v Neary, Sup Ct, Kings County, index No. 9282/10) (the Neptune Avenue action) for a judgment requiring Neary, Benevento, and Carmel to vacate their apartments, requiring (*3]the Estate of Julia to take action to remove Neary, Benevento, and Carmel from such apartments, and awarding damages in the sum of $108,000 against Neary, $216,000 against Benevento, and $324,000 against Carmel due to their failure to vacate. In the Neptune Avenue action, Neary and Benevento asserted that Burns had harassed them, refused to make repairs to the building, and denied them essential services in an effort to make the building uninhabitable so that they would be forced to vacate it. Neptune LLC, in that action, contended that it was entitled to sell and vacate the Neptune Avenue premises pursuant to the Operating Agreement for Neptune LLC. By a decision and order dated December 15, 2010. Justice Mark I. Partnow denied a motion by Neptune LLC to require Neary, Benevento, and Carmel to vacate the Neptune Avenue premises, finding that while For internal use only SDNY_GM_00059708 CONFIDENTIAL - PURSUANT TO FED. R.CON(FIDENTIAL DB-SDNY-0022532 EFTA_00I 70258 EFTA01296892 Page 7 United States Courts Opinions: Supreme Court of New York: Neary v Burns US Official News April 1, 2014 Tuesday Neptune LLC could elect to dissolve and sell the premises pursuant to the majority vote of its members, it could not evict Neary, Benevento, and Carmel and was required to sell the Neptune Avenue premises subject to their rent-stabilized leases. In December 2010, Burns resigned as the manager of 2784 LLC, and Judice is now its current manager. Burns claims that he and now Judice have been distributing 2784 LLC funds from the sale of the 2784 premises pro rata to the members after enough cash is accumulated and obligations paid, and that plaintiffs admit that they received distributions as members. The Neptune Avenue premises have not yet been sold and Benevento and Neary remain in occupancy as tenants there. On March 18, 2011, plaintiffs filed the instant action, which initially named 2784 LLC and Burns, along with McRory and McRory, PLLC and Raymond McRory, Esq. (collectively, the McRory defendants), as defendants. On May 2, 2011, plaintiffs served a complaint, and, on May 16, 2011, plaintiffs served an amended verified complaint as of right pursuant to CPLR 3025 (a). Plaintiffs' amended complaint alleged that Burns, acting on behalf of 2784 LLC and his own personal interests, unilaterally and improperly diverted funds belonging to 2784 LLC for purposes unrelated to it, including making payments in excess of $200,000 to buy out the tenants who resided in the building at the Neptune Avenue premises, and making payments of legal fees to the McRory defendants unrelated to 2784 LLC. It further alleged that Burns, acting on behalf of 2784 LLC and his own personal interests, unilaterally and improperly withheld from the net proceeds realized from the sale of the 2784 premises distributions due to them because they had not vacated their rent- stabilized apartments at the Neptune Avenue premises. Specifically, plaintiffs alleged that Burns withheld the sum of approximately $40,000 (as of the date of the amended complaint) in partial distributions due to them from the sale of the 2784 premises. Plaintiffs asserted that Burns, as the manager of 2784 LLC, owed them a fiduciary duty as members of 2784 LLC. Plaintiffs' amended complaint alleged three causes of action. Plaintiffs' first cause of action against Burns and 2784 LLC sought an accounting of the affairs and monies of 2784 LLC. Plaintiffs' second cause of action against Burns alleged that Burns diverted monies belonging to 2784 LLC and withheld distributions due to them from the sale of rtlithe 2784 premises, which constituted a breach of his fiduciary duties to them. It sought a judgment surcharging Bums in the amounts which are determined to be improperly diverted, converted, and/or misappropriated. Plaintiffs' third cause of action against the McRory defendants sought a judgment requiring them to disgorge all legal fees paid to them by 2784 LLC which were unrelated to 2784 LLC. On September 15, 2011, Burns served an answer to plaintiffs' amended complaint, which denied its material allegations and raised four affirmative defenses. Burns' first affirmative defense alleged that plaintiffs' amended complaint fails to state a cause of action. Burns' second affirmative defense alleged that the court should not proceed in the absence of persons who should be parties. Burns' third affirmative defense alleged that Benevento has no standing and is not a proper party to this action as he is a co-executor acting without authority in relation to the Estate of Julia, who was the member of 2784 LLC, and that Neary has no standing and is not a proper party to this action as he is a member of a group called the Neary Group that is the member of 2784 LLC. Bums' third affirmative For internal use only SDNY_GM_00059709 CONFIDENTIAL - PURSUANT TO FED. R.QQN(FIDENTIAL DB-SDNY-0022533 EFTA_00 170259 EFTA01296893 Page 8 United States Courts Opinions: Supreme Court of New York: Neary v Burns US Official News April 1, 2014 Tuesday defense further alleged that plaintiffs' amended complaint should be dismissed for failure to join indispensable parties. Burns' fourth affirmative defense alleged that the court lacks subject matter jurisdiction over plaintiffs' claims. Following discussions with the attorneys for the McRory defendants and limited document production by them, plaintiffs, by a Stipulation of Discontinuance dated January 27, 2012, discontinued this action as against the McRory defendants. On February 23, 2012, Grace (who, as noted above, was Burns' mother and a member of 2784 LLC) died at the age of 99 years. By notice of motion dated March 6, 2013, plaintiffs moved for a default judgment, pursuant to CPLR 3215, against 2784 LLC. On April 4, 2013, plaintiffs withdrew that motion and extended the time for 2784 LLC to serve an answer to their amended complaint in exchange for its production of bank statements for its checking account, which 2784 LLC produced in or about the end of May 2013. 2784 LLC has not yet interposed an answer to plaintiffs' amended complaint. On June 28, 2013, Burns produced some documents in response to a February 25, 2013 notice to produce for discovery and inspection which was served by plaintiffs. Plaintiffs assert that their review of 2784 LLC's bank statements and other documents produced in this action have revealed that they have direct claims against Burns and 2784 LLC for the alleged wrongful withholding from them of over $80,000 in distributions due to them from the net sale proceeds from the 2784 premises. On September 11, 2013, plaintiffs moved for leave to serve an amended summons and second amended verified complaint. Plaintiffs sought to amend the summons and first amended complaint to delete the McRory defendants from the caption and to remove the cause of action asserted as against them to reflect their voluntary discontinuance of all claims against them. Plaintiffs further sought to amend the first amended complaint in order to limit it to direct claims against 2784 LLC and Burns solely for wrongfully ["5]withholding from them over $80,000 in distributions due to them from the net sale proceeds from the 2784 premises. Plaintiffs' second amended verified complaint (annexed as exhibit A to plaintiffs' motion papers in motion sequence number 2) alleges that Neary is a member of 2784 LLC, having a 6.133% ownership interest therein. It further alleges that Benevento has a 9.2% beneficial interest in 2784 LLC through the Estate of Julia, who was a member of 2784 LLC, having a 18.4% ownership interest therein, and that Benevento was and is the co- executor of the Estate of Julia and is entitled to 50% of Julia's estate. Plaintiffs' second amended complaint sets forth that on January 20, 2010, 2784 LLC, under the sole and exclusive management of Burns, sold the 2784 premises to M & A Realty Services, LLC for the sum of $1,050,000. It alleges that as of January 22, 2010, the sum of $544,018.29 was available for distribution to 2784 LLC members from the net proceeds of the sale of the 2784 premises, and that, as of March 9, 2010, distributions of the net proceeds from the sale of the 2784 premises were made to 2784 LLC members, including distributions paid directly to Neary and Benevento, as members. It asserts that Burns, in breach of independent fiduciary duties he owed to Neary and Benevento in their own, individual capacities, unilaterally and wrongfully withheld from them their fair share of For internal use only SDNY_GM_00059710 CONFIDENTIAL - PURSUANT TO FED. R.QQN(FIDENTIAL DB-SDNY-0022534 EFTA_OOI 70260 EFTA01296894 Page 9 United States Courts Opinions: Supreme Court of New York: Neary v Burns US Official News April 1, 2014 Tuesday distributions due to them from the net proceeds of this sale in violation of the Operating Agreement and applicable Limited Liability Company Law. Specifically, it alleges that Burns withheld from these sale proceeds the sum of $35,745.83 from Neary and the sum of $44,831.58 from Benevento. Plaintiffs' second amended complaint alleges three causes of action. Plaintiffs' first cause of action against 2784 LLC alleges that 2784 LLC is in possession and control of the funds wrongfully withheld from them by Burns from their share of distributions of the net sale proceeds of the 2784 premises in violation of the Operating Agreement and applicable law, and that they have been damaged in the total sum of $80,577.41, plus interest from March 9, 2010. Plaintiffs' second cause of action alleges a direct claim by Neary against Bums, which asserts that Burns owed an independent fiduciary duty to Neary, as a member of 2784 with a 6.133% ownership interest, that Burns wrongfully withheld the sum of $35,745.83 from his share of distributions from the net proceeds of the sale of the 2784 premises, and that he is entitled to a judgment in this sum. Plaintiffs' third cause of action alleges a direct claim by Benevento against Burns, which asserts that Burns owed an independent fiduciary duty to Benevento as a member of 2784 LLC with a 9.2% ownership interest and/or as the holder of a 9.2% beneficial interest in 2784 LLC through the Estate of Julia, that Burns wrongfully withheld the sum of $44,831.58 from his share of distributions from the net proceeds of the sale of the 2784 premises, and that he is entitled to a judgment in this sum. On October 24, 2013, Burns filed his instant motion for an order dismissing plaintiffs' amended verified complaint. In his motion papers, Bums opposed plaintiffs' r6]motion to amend and sought an order denying plaintiffs' motion.[FN1] 2784 LLC has not submitted any papers with respect to Burns' motion, and it took no position at oral argument In support of their motion to amend, plaintiffs maintained that their proposed amendment was meritorious since they were entitled to their full share of distributions from these sale proceeds and that the withholding of over $80,000 from their distributions was wrongful and improper. Moreover, no prejudice was demonstrated by Burns with respect to the proposed amendment since it simply streamlines plaintiffs' amended complaint and does not assert any new facts or causes of action against Bums. In addition, there could be no prejudice to 2784 LLC since, as noted above, it has not as yet served an answer in this action, and prejudice to warrant denial of leave to amend requires some indication that the defendants were hindered in the preparation of their case or were prevented from taking some measure in support of their position (see McGhee v Odell, 96 AD3d 449, 450 [1st Dept 2012]; Kocourek v Booz Allen Hamilton Inc., 85 AD3d 502, 504 [1st Dept 2011]). Furthermore, while there was a two-year delay by plaintiffs in seeking such leave, discovery is ongoing, and depositions have not yet been held (see Rosicki, Rosicki & Assoc., P.C. v Cochems, 59 AD3d 512, 514 [2d Dept 2009]). Thus, since a motion for leave to amend a complaint should be freely granted, absent prejudice or surprise directly resulting from the delay in seeking leave, unless the proposed amendment is palpably insufficient or patently devoid of merit (see CPLR 3025 [b]; Aurora Loan Servs., LLC v Thomas, 70 AD3d 986, 987 [2d Dept 2010]; Lucido v Mancuso, 49 AD3d 220, 222 [2d Dept 2008], appeal withdrawn 13 NY3d 813 [2009]), and, here, the proposed amendment was not palpably insufficient or patently devoid of merit and there For internal use only SDNY_GM_00059711 CONFIDENTIAL - PURSUANT TO FED. R.CON(FIDENTIAL DB-SONY-0022535 EFTA_00170261 EFTA01296895 Page 10 United States Courts Opinions: Supreme Court of New York: Neary v Burns US Official News April 1, 2014 Tuesday was also no showing of prejudice or surprise resulting directly from plaintiffs' delay in seeking leave, the court, at oral argument held on November 20, 2013, granted plaintiffs' motion for leave to file their second amended verified complaint. While Burns' motion was originally directed as against plaintiffs' first amended complaint, since the court has granted plaintiffs' motion to amend their first amended complaint during the pendency of Burns' motion, the court will address this motion as against plaintiffs' second amended complaint (see 49 W. 12 Tenants Corp. v Seidenberg, 6 AD3d 243, 243 [1st Dept 2004]; Livadiotakis v Tzitzikalakis, 302 AD2d 369, 370 [2d Dept 2003]; Sage Realty Corp. v Proskauer Rose, 251 AD2d 35, 38 (1st Dept 1998]). DISCUSSION In support of his instant motion, Bums argues that this action must be dismissed based upon plaintiffs' lack of standing to sue. CPLR 3211 (a) (3) provides for dismissal [*7]of an action where "the party asserting the cause of action has not legal capacity to sue." CPLR 3211(a) (3) also embraces the ground of the lack of standing to sue, and this statute is, therefore, available to support a motion to dismiss on this ground (see Hecht v Andover Assocs. Mgt. Corp., 2014 NY Slip Op 0063, *2 (2d Dept 2014]). Burns, in arguing that plaintiffs lack standing to sue, relies upon the third affirmative defense in his answer to the first amended complaint and contends that plaintiffs are not proper parties and lack standing to sue 2784 LLC and him, as its former manager, because they are allegedly not members of 2784 LLC in their individual capacities. Burns argues that Neary is not a proper party and lacks standing to sue because the member of 2784 LLC is the Neary Group, as opposed to Neary. He points to Schedule A of the Operating Agreement (exhibit 2 to his motion papers), which lists the Neary Group as consisting of three members with a 18.4% voting percentage interest, and the footnote to that Schedule which states that the three Nearys (Weary, Salvatore, and Mary Ann) have each contributed 100% of their respective undivided interest as tenants in common in the 2784 premises to 2784 LLC, and that "[t]he Neary Group owns an 18.4% Member Interest as a group," and "has appointed Mary Ann ... to represent them in voting their total 18.4% Voting Percentage Interest until otherwise notified in writing by them." Burns' argument must be rejected. The membership interest of the Nearys was referred to as the Neary Group simply because their interest in the 2784 premises derived from Anna and thereafter passed to Neary and his two siblings, which formed the Neary Group. The mere fact that Neary permitted Mary Ann to vote the collective 18.4% of the Neary Group does not negate Neary's status as an individual member of 2784 LLC in his own individual right with a 6.1333% (one-third of 18.4%) ownership interest. Indeed, Schedule A of the Operating Agreement lists Neary separately as a "Member" and sets forth his residence address and social security number. In fact, Neary was an initial member of 2784 LLC at the time of its formation in 2006, and he signed the initial Operating Agreement and the Amended and Restated Operating Agreement as an "Initial Member' (see exhibit A to plaintiffs' opposition papers). Additionally, Neary, by an e-mail dated February 24, 2010 (exhibit C to plaintiffs' opposition papers), gave Burns written notice of his intent to vote his own 6.133% membership interest separately. Thus, Neary has established that he is, in fact, an individual member of 2784 LLC and entitled to maintain this action in his own right without the joinder of the other members of the Neary Group. For internal use only SDNY_GM_00059712 CONFIDENTIAL - PURSUANT TO FED. R.QQN(FIDENTIAL DB-SDNY-0022536 EFTA_00 170262 EFTA01296896 Page 11 United States Courts Opinions: Supreme Court of New York: Neary v Burns US Official News April 1, 2014 Tuesday Burns further asserts that Benevento is not a member of 2784 LLC, but, rather, the member is the Estate of Julia. He argues that Benevento cannot claim a payment allegedly due to the Estate of Julia. He states that while Benevento is a co-executor of the Estate of Julia, he is not acting on behalf of the Estate with his brother, Anthony, who is the co- executor. This argument by Burns is unavailing since Benevento is not making a claim on ralbehaff of the Estate of Julia, but in his own right as the holder of a beneficial interest of 9.2% of 2784 LLC. Benevento does not seek to recover sums due to the Estate of Julia. Rather, he seeks to recover distributions from the sale of the 2784 premises owed to him individually which, he claims, Burns wrongfully withheld from him by making deductions to his share of such sale proceeds because he resides as a rent-stabilized tenant at the Neptune Avenue premises. This claim belongs to Benevento and is not shared by Anthony, the other beneficiary and the co-executor of the Estate of Julia, who is not a tenant at the Neptune Avenue premises and received his full share of such proceeds without any deductions. Thus, Benevento, and not the Estate of Julia, is the real party in interest in this litigation.Moreover, it is undisputed that Benevento is the transferee of one-half of the interest held by Julia, and, thus, the holder of a "beneficial interest" in 2784 LLC. Such a beneficial interest has been recognized as conferring standing upon a party to bring a derivative action on behalf of a corporation pursuant to Business Corporation Law § 626 (a) (see Bernfeld v Kurilenko, 91 AD3d 893, 894 [2d Dept 2012]; Shui Kam Chan v Louis, 303 AD2d 151, 152 [1st Dept 2003]), which has been held applicable to limited liability companies (see Tzolis v Wolff, 10 NY3d 100, 121 [2008]). While this is not a derivative action, this beneficial interest likewise furnishes a basis for Benevento's individual claims against 2784 LLC and Burns, and the fact that Benevento obtained his interest through the Estate of Julia does not deprive him of standing in this action (see Bernfeld, 91 AD3d at 894). Furthermore, Burns previously recognized and acknowledged both Neary and Benevento as members of 2784 LLC. An e-mail by Burns dated February 9, 2009 (exhibit B to plaintiffs' opposition papers) stated that "the three Nearys ... are direct owners" of 2784 LLC. An e-mail by Burns dated February 22, 2010 (exhibit 6 to Burns' motion papers) regarding distributions sent to Neary and Benevento inquired as to "[h]ow do the Nearys want their checks" and whether they wanted "[o]ne to Mary Ann or 1/3 to each sib[ling]." Burns, in this e-mail, further inquired as to how he should distribute Julia's funds, noting that the checks would have to be made out to her Estate, and he asked whether he should issue two checks, or one each with the co-executors name also on the check. He additionally stated, in this e-mail, that he "only want[ed] to hear from members," that "title Nearys should elect if they want to vote as a group or individually," and that the Beneventos will have to decide themselves." By an e-mail dated February 24, 2010 (exhibit C to plaintiffs' opposition papers), Neary responded that he wanted the check issued to him. Significantly, plaintiffs point out that Bums has already issued separate checks to them in payment of their distributions of the net sale proceeds, and that they are now simply complaining that they did not receive the full amount due to them. Burns, in paragraph 17 of his attorney's affirmation in support of his motion, admits that plaintiffs have "received distributions." Thus, by such distributions, Bums has acknowledged Neary's membership For internal use only SDNY_GM_00059713 CONFIDENTIAL - PURSUANT TO FED. R.CON(FIDENTIAL DB-SONY-0022537 EFTA_00170263 EFTA01296897 Page 12 United States Courts Opinions: Supreme Court of New York: Neary v Burns US Official News April 1, 2014 Tuesday interest and Benevento's beneficial membership in 2784 LLC and [*9]their rights to receive such distributions. Notably, in the December 15, 2010 decision and order in the Neptune Avenue action, Justice Partnow previously acknowledged that Neary is a member of Neptune LLC and that Benevento has a beneficial interest in Neptune LLC. Burns. in his attorney's affirmation, has admitted that both Neptune LLC and 2784 LLC "have identical members with only a slight difference in percentage ownership." Therefore, it follows that Neary is a member of 2784 LLC in his own right in the same way that he is a member of Neptune LLC, and that Benevento holds a beneficial interest in 2784 LLC in his own right in the same way that he holds a beneficial interest in Neptune LLC. Thus, Neary and Benevento do not lack standing to maintain this action. Dismissal of this action, pursuant to CPLR 3211 (a) (3), must, therefore, be denied. Burns further contends that plaintiffs have failed to join the other members of 2784 LLC and that, therefore, this action must be dismissed, pursuant to CPLR 3211 (a) (10), which provides for the granting of dismissal of a claim against a party based upon the ground that "the court should not proceed in the absence of a person who should be a party." This contention by Burns is devoid of merit since plaintiffs' second amended complaint asserts direct claims by plaintiffs to recover for distinct injuries that they individually sustained by Burns' alleged wrongful withholding of their proportionate share of distributions of the net proceeds from the sale of the 2784 premises. Plaintiffs are thus alleging claims based upon the breach of a duty owed directly to them, independent of any duty owed to 2784 LLC or any of its other members (see generally Abrams v Donati, 66 NY2d 951, 953 [1985], rearg denied 67 NY2d 758 [1986]; Behrens v Metropolitan Opera Assn., Inc., 18 AD3d 47, 50 (1st Dept 2005]; Lawrence Ins. Group, Inc. v KPMG Peat Marwick LLP, 5 AD3d 918, 919 [3rd Dept 2004]). Plaintiffs do not seek to recover any sums that may be due to the other members of 2784 LLC or for any damage to 2784 LLC. Plaintiffs' claims relate only to their own direct claims as against Burns and 2784 LLC and, as a result, do not require the joinder of the other members of 2784 LLC. Consequently, dismissal of plaintiffs' action for failure to join necessary parties must be denied. Burns also contends that this action must be dismissed, pursuant to CPLR 3211 (a) (7), based upon plaintiffs' failure to state a cause of action. "It is well settled that, as a general rule, on a motion to dismiss the complaint for failure to state a cause of action under CPLR 3211 (a) (7), the complaint must be construed in the light most favorable to the plaintiff" (Gruen v County of Suffolk, 187 AD2d 560, 562 [2d Dept 1992]; see also Rosen v Watermill Dev. Corp., 1 AD3d 424, 425 [2d Dept 2003]), and the pleading is to be afforded a liberal construction (CPLR 3026). The court must also accept the facts as alleged in the complaint and submissions in opposition to the motion as true and accord the plaintiff "the benefit of every possible favorable inference" (Sokoloff v Harriman Estates Dev. Corp., 96 NY2d 409. 414 [2001]; see also Thomas v LaSalle Bank N.A., 79 [*10]AD3d 1015, 1017 [2d Dept 2010]). The court, in accepting the facts alleged in the complaint to be true, must " determine only whether the facts alleged fit within any cognizable legal theory"' (Ruffino v New York City Tr. Auth., 55 AD3d 817, 818 [2d Dept 2008], quoting Morris v Morris, 306 AD2d 449, 451 [2d Dept 2003]; see also Hurrell-Harring v State of New York, 15 NY3d 8, 20 [2010]; Goldman v Metropolitan Life Ins. Co., 5 NY3d 561, 570-571 [2005]). For internal use only SDNY_GM_00059714 CONFIDENTIAL - PURSUANT TO FED. R.QQN(FIDENTIAL DB-SDNY-0022538 EFTA_OOI 70264 EFTA01296898 Page 13 United States Courts Opinions: Supreme Court of New York: Neary v Burns US Official News April 1, 2014 Tuesday Burns argues that plaintiffs have failed to state a cause of action because there was no wrongdoing by him. Burns' attorney asserts that Bums sent e-mails discussing at length that 2784 LLC would give a loan to Neptune LLC and that this loan was authorized by the members. She further asserts that there is no damage to any member because the $250,000 loaned by 2784 LLC is earning interest at five percent and is secured by the real estate, and that when the Neptune Avenue premises are sold, the mortgage will be paid to 2784 LLC with interest and all of the members of both 2784 LLC and Neptune LLC will receive their pro rata shares. She also states that plaintiffs received payments at the same time and "in pro rata amounts as the other members." The second amended complaint, however, does not challenge the $250,000 loan made by 2784 LLC to Neptune LLC and does not allege that the sale of the 2784 premises was unauthorized. Rather, plaintiffs assert that Burns wrongfully deprived them of their fair share of the distributions from the net proceeds of the sale of these premises. Specifically, plaintiffs contend that Burns unilaterally and wrongfully withheld sums from their individual distributions because of their refusal to vacate their rent-stabilized apartments at the Neptune Avenue premises. Plaintiffs have annexed a letter by Burns dated March 9, 2010 (exhibit E to plaintiffs' opposition papers), which establishes that Burns, referring to Benevento and Neary's apartments at the Neptune Avenue premises, unilaterally deducted from their individual distributions of the net sale proceeds of the 2784 premises that were issued by 2784 LLC in March 2010, amounts for "disparate benefits" that Burns claims they received by virtue of their rent-stabilized tenancies at the Neptune Avenue premises. This letter shows that in contrast to the distributions to plaintiffs, these sums were not deducted from the distributions received by the other two Neary members (Salvatore and Mary Ann), Anthony (Benevento's brother), or Grace, who were paid their distributions in full. Burns further argues that he should be absolved from liability pursuant to article 4.5 of the Operating Agreement (exhibit 7 to Burns' motion papers), which provides as follows: "A Manager shall not be personally liable to the Company or its Members for damages for any breach of duty as a Manager, except for any matter in respect to which such Manager shall be liable by reason that, in addition to any and all other requirements for such liability, there shall have been a judgment or other final adjudication adverse to such ["11]Manager that establishes that such Manager's acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law or that such Manager personally gained in fact a financial profit or other advantage to which such Manager was not legally entitled or that with respect to a distribution the subject of Section 508 of the [Limited Liability Company Law], such Manager's acts were not performed in accordance with Section 409 of the [Limited Liability Company Law] ..." Limited Liability Company Law § 508 refers to limitations on distributions to members. Limited Liability Company Law § 409 (a) provides that "[a] manager shall perform his or her duties as a manager, including his or her duties as a member of any class of managers, in good faith and with that degree of care that an ordinarily prudent person in a like position would use under similar circumstances." Burns contends that he did not act in bad faith or engage in intentional misconduct. However, plaintiffs' allegations, which must be deemed true for purposes of this motion, For internal use only SDNY_GM_00059715 CONFIDENTIAL - PURSUANT TO FED. R.CON(FIDENTIAL DB-SDNY-0022539 EFTA_00I 70265 EFTA01296899 Page 14 United States Courts Opinions: Supreme Court of New York: Neary v Burns US Official News April 1, 2014 Tuesday sufficiently allege such bad faith, asserting that Burns acted "maliciously, wrongfully, and unlawfully," and in breach of his fiduciary duties. Thus, despite Burns' attorney's argument that Burns acted properly, questions of fact are raised as to this issue. Burns additionally argues that he is entitled to be indemnified and reimbursed for the expenses which he has incurred related to this litigation pursuant