Court Appoints Receiver to Perform Long-Delayed Winding Up

On April 19, 2019, Justice Borrok of the New York County Commercial Division issued a decision in Tufenkian v. Tirakian, 2019 NY Slip Op. 31052(U), appointing a receiver to perform a long-delayed winding-up, explaining:

CPLR 6401(a) also authorizes the appointment of a temporary receiver as a provisional remedy when property that is the subject of litigation is in danger of harm, injury or damage and such remedy is necessary to protect the interests of the parties. Specifically, 6401(a) provides: Upon motion of a person having an apparent interest in property which is the subject of an action in the supreme or a county court, a temporary receiver of the property may be appointed, before or after service of summons and at any time prior to judgment, or during the pendency of an appeal, where there is danger that the property will be removed from the state, or lost, materially injured or destroyed. A motion made by a person not already a party to the action constitutes an appearance in the action and the person shall be joined as a party.

Although the appointment of a temporary receiver is a an extreme remedy resulting in the taking and withholding of possession of property from a party without an adjudication on the merits, which should be granted only where the moving party has made a clear evidentiary showing of the necessity for the conservation of the property at issue and the need to protect the moving party's interests, here, the appointment of a receiver is necessary to wind up the affairs of Harvest Song and provide a proper accounting. In the three years since the Dissolution Order was issued, Mr. Tufenkian has not wound up Harvest Song's affairs in any way and, in fact, has continued to pursue consignment and licensing arrangements on its behalf. Under these circumstances, Ms. Tirakian has met her burden of establishing that a temporary receiver is appropriate and necessary to protect the parties' interests.

(Internal quotations and citations omitted).

This decision relates to a significant part of our practice: business divorce (a break-up between the owners of a closely-held business). Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding a business divorce.