This motion, by defendants, to dismiss the complaint pursuant to CPLR 3211(a)(3), (5), and (7) is granted in part and denied in part.

This is a shareholder derivative action brought on behalf of Communicar Incorporated. Communicar is a cooperative livery dispatch service which provides limousine transportation to individual and corporate clients. Communicar is located in Queens and regulated by the New York City Taxi and Limousine Commission. The stock of Communicar is held by limousine drivers who own their own vehicles and are licensed by the Commission. Each share of Communicar stock entitles the shareholder to the rights generally attaching to stock ownership as well as "radio rights," that is the right to receive jobs from Communicar's central dispatch service. Class A drivers actually own Communicar stock, while Class B drivers lease radio rights from a shareholder. Plaintiffs are class A drivers who hold shares of Communicar and participate in its livery dispatch service.

Defendant Leonid Vayntrub is the President of Communicar and Chairman of the Board. Defendant Semyon Abynder is the Executive Vice President. Defendant Jean Charlemagne is the Vice President for rules and regulations and chairman of security. Defendant Vadim Kogan is the Vice President for public relations. Defendant Tony Morel is the Vice President for screening and training. Defendant Anthony Patti is the Treasurer. Defendant Essumon Kwesi is the corporate secretary. Defendant Christopher Barkas is the Chairman of the Communicar Savings and Loan Program. Defendants Raphael Pena, Vito DeVito, Alexander Smolyar, and Mohammad Malik are directors of the corporation.

Plaintiffs allege that from approximately October 2000 to October 2005, the management of Communicar engaged in a systematic practice of overcharging major corporate clients of the livery service company, including Bear Sterns and MTV. The complaint further alleges that on February 1, 2006, MTV ceased doing business with Communicar after an internal investigation by MTV revealed that it had been overcharged by approximately $3.5 million over a five year period.

Plaintiffs further allege that Communicar has a 75% owned subsidiary, Corporate Car Ltd, and a wholly owned subsidiary, Glendale Leasing Incorporated. According to the complaint, Corporate Car services clients with selected Communicar shareholder-drivers. Glendale Leasing operates through the use of temporary and contract drivers to whom Communicar outsources [*2]work during periods of high volume. Plaintiffs allege that in 2001 defendants changed the rule which had prohibited officers and directors of Communicar from holding office in either of the corporation's subsidiaries. After the rule was changed, Vayntrub became Chairman and Chief Executive Officer of Glendale Leasing and DeVito assumed these positions at Corporate Car. Plaintiffs allege that Communicar has invested in its subsidiaries through non-interest bearing loans. Plaintiffs allege that "self-dealing between the subsidiaries and the parent corporation," has allowed defendants to "gain financial benefits...to the detriment of the Corporation." Plaintiffs further allege that they have requested detailed financial information as to the subsidiary companies but defendants have refused to provide it.Thus, read liberally, the complaint alleges that defendants wasted corporate assets by transferring funds to the subsidiaries and also diverted business from Communicar to Corporate Car.

Plaintiffs allege that defendants through their actions have caused Communicar to be involved in a number of lawsuits which have resulted in substantial damage awards. In 1996 Lucille Padrone, who was employed in Communicar's pricing department, filed an action against the company for age discrimination and recovered a sizeable verdict. Larry Lewis was the corporate secretary of Communicar and testified for Padrone in her age discrimination action. After Vayntrub and DeVito caused him to lose his bid for reelection, Lewis filed an action against Communicar for wrongful discharge in 1999 and recovered a $200,000 verdict.In June 2004, plaintiff Zaber Hussain and another limo driver, Mujahid Ali Shah, were present at Communicar's office to attend a meeting concerning improprieties in the billing of certain customers of the company. After a fight broke out, Communicar conducted a disciplinary hearing against Hussain and Shah in absentia, fined each man $10,000, and expelled them from the company. Upon an Article 78 petition brought by Hussain and Shah, Supreme Court, Queens County vacated the disciplinary decision and restored the two men to their rights as shareholders of Communicar.

Plaintiffs allege that during the past ten to fifteen years, the value of Communicar stock has declined from approximately $85,000 per share to approximately $50,000 per share. Plaintiffs assert that the decline in value of the stock is due defendants' mismanagement, including 1) overcharging major customers 2) diversion of business to the subsidiaries, and 3) the payment of substantial damage awards resulting from litigation.

Plaintiffs allege that defendants made illegal loans to themselves from Communicar or from loan funds established for the benefit of the drivers. Plaintiffs further allege that defendants improperly commingled the Dollar Assessment Fund, a fund to provide loans to class B drivers, with monies belonging to Communicar.

Plaintiffs also allege that defendants have engaged in favoritism and other types of [*3]discrimination in job assignments. According to plaintiffs, "out of town" assignments are more profitable than local ones. Additionally, certain corporate customers of Communicar are less desirable because the individuals to be picked up do not appear promptly and the drivers are not paid for waiting time. Plaintiffs allege that Communicar dispatchers were not assigning the jobs to the drivers on an equitable basis. More specifically, plaintiffs allege that some of the drivers also work as dispatchers and dispatch jobs to each other on a reciprocal basis. Plaintiffs further allege that Communicar' s sales people assign jobs directly "over the phone" and bypass the dispatch system. Plaintiff Zaber Hussain claims that he was punished by being deprived of assignments because he had been a whistleblower and pointed out the "wrong actions" of the company.

Plaintiffs further allege that defendants discriminate in the granting of loans from the Dollar Assessment Fund. According to plaintiffs, defendants refused to grant loans to those drivers who opposed their illegal activities and control of the corporation. Additionally, plaintiffs allege that defendants show favoritism in connection with the sale and leasing of radio rights. Finally, plaintiffs imply that defendants have stifled opposition by having defendant Charlemagne organize and conduct Communicar elections. Plaintiffs also allege that defendants offer favorable treatment to shareholders who sign proxies or support them in the election.

Plaintiffs commenced this shareholder derivative action on September 15, 2006.Plaintiffs' first cause of action is for gross mismanagement and corporate waste. Plaintiffs' second cause of action is for theft of corporate opportunities through the diversion of business to Communicar's subsidiaries. Plaintiffs' third cause of action is for breach of fiduciary duty. Plaintiffs also assert causes of action for unjust enrichment, misapplication and misappropriation of corporate funds, tortious interference with business interests, monies had and received, an accounting, and punitive damages.

Plaintiffs request a judgment removing defendants as officers and directors of Communicar and its subsidiaries and permanently enjoining them from holding office in those corporations. Plaintiffs request an order directing a special meeting of the shareholders of Communicar in order to elect new officers and directors and to have the election administered by an independent third party. Plaintiffs further request a judgment for the damages caused by defendants' corporate waste and mismanagement and also for punitive damages.

Defendants move to dismiss the complaint pursuant to CPLR 3211(a)(3), (5), and (7). Defendants argue that plaintiffs are asserting several individual claims, and the complaint should be dismissed because it "impermissibly intertwines" direct and derivative causes of action. Defendants argue that plaintiffs lack standing to challenge the transactions set forth in the [*4]complaint because they acquired their shares after the transactions took place. Defendants argue that plaintiffs failed to comply with the demand requirement and have not established that a demand would have been futile. Defendants further argue that their actions are protected by the business judgment rule. Finally, defendants argue that the complaint must be dismissed because it fails to satisfy the notice pleading requirement of CPLR § 3013 and the particularity requirement for a fraud action under CPLR 3016(b).

The nature of the claims asserted

Business Corporation Law § 626(a) provides that "An action may be brought in the right of a domestic or foreign corporation to procure a judgment in its favor, by a holder of shares or of voting trust certificates of the corporation or of a beneficial interest in such shares or certificates." Derivative actions brought by minority shareholders vindicate the corporation's rights (Bansbach v. Zinn, 1 NY3d 1, 8 , 2003). Thus, if the gravamen of the complaint is injury to the corporation, the suit is derivative. However, if the injury is to the stockholder individually and not to the corporation, the suit is individual in nature (Eisenberg v. The Flying Tiger Line, Inc., 451 F.2d 267, 269, 2d Cir. 1971). As the court noted in Flying Tiger, there are "borderline cases which are more or less troublesome to classify"(Id). Nevertheless, claims against corporate directors or others in control of the corporation for mismanagement, waste of corporate assets, and breach of fiduciary duty are clearly derivative in nature (Marx v. Akers, 88 NY2d 189, 193-99, 1996). A complaint, the allegations of which confuse a shareholder's derivative and individual rights, will be dismissed, though leave to replead may be granted in an appropriate case (Abrams v. Donati, 66 NY2d 951, 953, 1985).

While plaintiffs have joined a number of subsidiary individual claims, the gravamen of the complaint in this action is clearly injury to the corporation. The allegation of systematic overbilling of major corporate clients states a claim for mismanagement of the corporation.The allegation of diversion of assets and business to Communicar's subsidiaries states a claim for breach of fiduciary duty on behalf of the corporation. The allegation of subjecting the corporation to damage awards states a claim for waste of corporate assets. All of these claims assert injury primarily to the corporation and are derivative in nature. The claims of denial of access to the corporate books and records, discrimination in the transfer of radio rights, favoritism in job assignments, and election misconduct are personal to the individual shareholders.

As to the claims concerning the loan and insurance programs, the complaint does not distinguish between claims by the individual shareholders for loan or insurance benefits and breach of fiduciary duty claims in favor of the employee benefit plans. While plan participants [*5]have standing to enforce claims in the later category, under ERISA, jurisdiction resides exclusively in the federal courts(29 USC § 1132[e]). Accordingly, plaintiffs' claims concerning the loan and insurance programs are dismissed, and leave to replead is granted only as to claims by individual shareholders for loan or insurance benefits.

Aside from the claims relating to the administration of the loan and insurance programs, the complaint in this action does not confuse derivative and individual rights. Rather, the individual claims are related to the derivative ones because plaintiffs have alleged that defendants engaged in misconduct toward individual shareholders to carry out corporate malfeasance and maintain control of the corporation. Accordingly, defendants' motion to dismiss the complaint for the improper "intertwining" of direct and derivative claims is denied, except as to claims concerning the loan and insurance programs.

Standing

In a derivative action, "[I]t shall be made to appear that the plaintiff is such a holder at the time of bringing the action and that he was such a holder at the time of the transaction of which he complains, or that his shares or his interest therein devolved upon him by operation of law"(Business Corp. Law § 626[b]). The contemporaneous ownership doctrine is intended "to prevent litigious persons from buying stock for the purpose of bringing suit as to alleged mismanagement" (Independent Investor Protective League v. Time, Inc., 50 NY2d 259, 263, 1980). Because the contemporaneous ownership rule fosters the public policy of inhibiting speculation in litigation, it must, as a general matter, be rigorously enforced"(Id). On the other hand, the contemporaneous ownership requirement is "rooted in practical considerations. Although, in a theoretical sense, a derivative action is brought for the benefit of the corporation, in a very real sense, the standing of the shareholder is based on the fact that he is defending his own interests as well as those of the corporation"(Id).

In order to have been a shareholder at the time of the "transaction" of which he complains, a plaintiff must have owned stock in the corporation "throughout the course of the activities that constitute the primary basis of the complaint. This is not to say that a plaintiff must have owned stock in the company during the entire course of all relevant events. It does mean, however, that a proper plaintiff must have acquired his or her stock in the corporation before the core of the allegedly wrongful conduct transpired"(In re Bank of New York Derivative Litigation, 320 F.3d 291, 298, 2d Cir. 2003).

Because the contemporaneous ownership requirement applies only to derivative claims, it may not be applied to individual claims asserted by the shareholders. Plaintiffs assert that the value of Communicar stock declined over a fifteen year period. Nevertheless, the court [*6]concludes that at least one of the named plaintiffs acquired his stock in the corporation before the core of the allegedly wrongful conduct transpired. The complaint suggests that the alleged overbilling of MTV, and presumably Bear Sterns as well, occurred during the period October, 2000 to October, 2005. Plaintiffs allege that defendants changed the rule prohibiting officers and directors of Communicar from holding office in the corporation's subsidiaries in 2001 and began the diversion of assets and business to the subsidiaries at that time. Plaintiffs allege that defendants subjected Communicar to damage awards, commencing with an age discrimination suit commenced by Lucille Padrone in 1996. Thus, the core of the allegedly wrongful conduct forming the basis of the derivative claims occurred between 1996 and 2005.

Plaintiffs assert, without contradiction, that plaintiff Hans Roy became a Communicar shareholder in 1993 and has been a shareholder in the corporation continuously to the present time. The court concludes that Roy owned stock in Communicar throughout the course of the activities that constitute the primary bases of the complaint. Since a derivative action is brought on behalf of the corporation, it is irrelevant whether the other plaintiffs are also able to satisfy the contemporaneous ownership requirement.

Defendants argue, nonetheless, that the complaint must be dismissed because it does not allege the date on which any plaintiff acquired his share in the corporation, and compliance with the contemporaneous ownership requirement has been pleaded in only a conclusory fashion. Defendants further argue that the contemporaneous ownership requirement is not simply a matter of the shareholder's capacity to sue but rather his standing to sue on behalf of the corporation.

In Community Board 7 v. Schaefer, 84 NY2d 148, 154-55, 1994, the Court of Appeals distinguished the concepts of standing, capacity, and failure to state a cause of action. The court described "standing" as an element of the larger question of "justiciability." Thus, the various tests to determine standing are "designed to ensure that the party seeking relief has a sufficiently cognizable stake in the outcome so as to cast the dispute in a form traditionally capable of judicial resolution" (84 NY2d at 154-55). The court noted that the concepts of standing and capacity are often confused, but the two legal doctrines are not interchangeable. The court defined "capacity" as the "litigant's power to appear and bring its grievance before the court." The court further distinguished the concept of lack of capacity from the "analytically distinct" concept of failure to state a cause of action(Id).

Since the contemporaneous ownership requirement of Business Corporation Law § 626(b) implicates the shareholder's power to sue on behalf of the corporation, it relates to the shareholder's capacity to assert a derivative cause of action rather than his standing. However, failure to satisfy the demand or contemporaneous ownership requirement of § 626(b) is such a fundamental lack of capacity that it results in failure to state a cause of action (Barr v. [*7]Wackman, 36 NY2d 371, 1975). "On a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction....[The court must] accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference" (Arnav Industries, Inc. v. Brown, 96 NY2d 300, 303, 2001). Because the complaint in this shareholder derivative action must be read liberally, plaintiffs' failure to allege the specific date on which Roy acquired his stock does not require dismissal of the complaint for failure to state a cause of action. Since plaintiffs have demonstrated compliance with the contemporaneous ownership requirement, defendants' motion to dismiss for lack of standing is denied (Mattes v. Rubinberg, 220 AD2d 391, 393, 2d Dept., 1995).

Demand

Business Corporation Law § 626(b) provides that in a shareholder derivative action, "the complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort."Because derivative actions ask courts to second-guess the business judgment of the individuals charged with managing the company, they are not favored by the courts (Bansbach v. Zinn, supra, p.8). On the other hand, derivative actions serve an important purpose by protecting corporations and minority shareholders against officers and directors who, in discharging their official responsibilities, place other interests ahead of those of the corporation(Id).

These competing considerations are balanced by § 626(b)'s demand requirement. Since the board of directors has primary responsibility for acting in the name of the corporation, the board is often in a position to correct alleged abuses without resort to the courts (1 NY3d at 9). The demand requirement relieves courts of unduly intruding into matters of corporate governance by first allowing the directors themselves to address alleged abuses. The demand requirement also provides boards with reasonable protection from harassment on matters clearly within their discretion and discourages "strike suits" commenced by shareholders for personal rather than corporate benefit(Id).

However, demand is futile, and excused, when the directors are incapable of making an impartial decision as to whether to bring suit. Futility occurs in three circumstances: 1) a majority of the board of directors is interested in the challenged transaction. Director interest may either be self-interest in the transaction at issue, or a loss of independence because a director with no direct interest in a transaction is controlled by a self-interested director; 2) the board of directors did not fully inform themselves about the challenged transaction to the extent reasonably appropriate under the circumstances. A director does not exempt himself from liability by failing to do more than "rubber-stamp" the decisions of the active managers; 3) The challenged transaction was so egregious on its face that it could not have been the product of [*8]sound business judgment of the directors(Id). In all three circumstances, the facts establishing futility must be alleged with particularity in the complaint. If demand is excused, it becomes the court's role to "chart the course for the corporation which the directors should have selected," that is to decide whether the action should proceed as in the best interests of the corporation(Id).

The court will now proceed to consider whether the complaint sufficiently sets forth the efforts of the plaintiffs to secure the initiation of this action by the board, and if not, whether further efforts would have been futile. Exhibit A to the complaint is a letter dated January 19, 2004 from plaintiff Zaber Hussain to President Vayntrub, Vice President Morel, Security Chairman Charlemagne and unnamed members of the board. In the letter, Hussain complains about "sign-off jobs," a term which might refer either to irregular pricing or favoritism in job assignments. Hussain also refers to a recent contract between MTV and Communicar which provided for a price discount and twenty minutes of free waiting time. Hussain also refers to a previous request that elections for Communicar officers and directors be held every two years rather than every four years. Hussain requested a copy of the new MTV contract and inquired as to "what actions have been taken" concerning these matters. While this letter makes clear that the board was aware of certain of plaintiffs' individual grievances, it did not make explicit reference to the derivative claims raised in the present litigation, namely overcharging of major customers, diversion of assets to subsidiaries, and wasteful litigation. Moreover, this letter did not constitute a demand on the part of Hussain for the board to initiate any type of litigation.

Exhibit B to the complaint is a letter dated August 26, 2004 from Hussain to President Vayntrub and the board of directors. In the letter, Hussain complains about not receiving enough jobs generally and also not receiving sufficient out-of-town assignments. Hussain suggests that his low earnings were caused by favoritism on the part of the dispatchers. Hussain claims to have discussed the matter with defendant Mohammad Malik, a member of the board, in January. According to Hussain, Malik informed him that in April that the board had enacted a rule that any driver who took four local jobs would have a "priority" on a "good, out-of-town" assignment. However, Hussain insisted that despite the new rule, favoritism was persisting. Hussain also complained about not receiving any "Presidential jobs," an apparent reference to another type of preferred assignment. Finally, Hussain requested to be "taken off" the Bear Sterns and Cravath, Swaine & Moore accounts because he did not receive any "waiting time" when servicing these customers. Hussain also made general reference to "people who are stealing jobs and are causing corruption in the company." Hussain also suggested that he did not receive his fair share of assignments because he was being punished for being a whistleblower and "pointing out all the wrong actions in this company." While this letter made oblique reference to more serious matters, it referred explicitly only to Hussain's personal grievances and favoritism in job assignments. As with the first letter, Hussain did not request the board to initiate any type [*9]of litigation. Rather he requested only "a written response" concerning the issues raised in his letter.

Exhibit D to the complaint is a "report" dated October 14, 2005 submitted by Josif Shvarts, a driver who is not a named plaintiff, to Leonid Vayntrub, the President of Communicar. In the report, Shvarts claimed that "There is a complete robbery and deceit going on in our company." According to Shvarts, "two big shots," Vice President "Sam" [Semyon Abynder] and an "even bigger shot of the company," "making up a myth on the loss of work" had "started servicing MTV." In order to provide limousine service to MTV, Abynder and the other "big shot" "chose the drivers that fit [their scheme]" and assigned the jobs "without work orders" and without "go[ing] thru the computer." By these drivers "remaining idle for hours under or near the building," and charging for "so-called waiting time," "the ordinary local call, which costs $19-20, this work becomes a $100-120 job." When Shvarts "asked why this is happening," he was told by Vayntrub that the "400 drivers that work for the company cannot perform these jobs because they are mentally retarded."

Shvarts asserted that Vayntrub was "not controlling the situation and [had] no idea what is going on in the company." Nevertheless, Shvarts also asserted that, "[Y]ou can be considered to be an accomplice....[W]ith the presence of the district attorney and police, I will name the drivers, who were involved in this shameless scheme, and how the money was demanded from the drivers for the work performed." Shvarts claimed that "I was a part of [the scheme], and have ... copies of vouchers that have OK by Sam' written on them." Shvarts asserted that, "[I]f a driver is sitting for 4-5 hours, and earns for 5 working days $2,000-2,500, under any calculation of the time, the drivers have to live in their cars [to have enough hours to earn that much money.]" Shvarts claimed that he could "document" that Communicar had "stolen" $5 to 6 million from MTV over a four to five year period "with [Vayntrub 's] knowledge." Shvarts called on Vayntrub to "Be a man, finally, and show some courage with regard to these people." If Vayntrub was unwilling to show some courage, Shvarts promised that, "After the two week period, I will report of the crime scheme at the company in detail."

Shvarts' report to Vayntrub clearly charged explicitly that MTV was being systematically overbilled, that Abyndar and another top executive were the ring leaders of the multi-million dollar scheme, and that Vayntrub had at least acquiesced in the theft if he had not been a knowing participant.Furthermore, the fact that Shvarts' report contained a declaration against penal interest gave it additional reliability. However, the report was directed to Vayntrub, who was arguably an "accomplice" to the criminal activity. Because Vayntrub may have had an incentive to keep the scheme "quiet," it cannot be inferred that notice to Vayntrub was notice to the board. Furthermore, while the report calls upon Vayntrub to take action to terminate the [*10]scheme, as by reporting it to law enforcement, it does not specifically demand that Vayntrub initiate any type of litigation on behalf of the corporation.

Exhibit E to the complaint is a written "demand" by plaintiffs Hans Roy, Zaber Hussain, and Safraz and Naseem Bajwa to the board of directors of Communicar dated November 28, 2005. Plaintiffs stated that they were making an "official" demand to the board to investigate the "theft, abuse and continued violations" as well as the "corruption" which was occurring within the company, and in particular the MTV matter. Plaintiffs referred to Shvarts' letter as "fully implicating" the Executive Vice President, Semyon Abynder, and also the Vice President of public relations, Vadim Kogan. Plaintiffs requested that an "independent lawyer" be retained to insure "proper handling" of the investigation. While the November 28, 2005 "demand" clearly put the board on notice of the alleged MTV overbilling scheme, it requests the board only to retain outside counsel to conduct an investigation. It does not request the board to commence litigation against Vayntrub, Abynder, or any other corporate official based upon the alleged wrongdoing.

On December 9, 2005, Vayntrub wrote to Hussain inviting him to attend a board meeting on December 15, 2005 to discuss his claim of wrongdoing. Exhibit C to the complaint is a letter that Hussain wrote to Vayntrub and the board on January 8, 2006. In this letter, Hussain claimed that he and other shareholders had been willing to attend the board meeting, but the board had been unwilling to meet with the shareholders' attorney. Hussain referred to the letter from car #330 (Josif Shvarts), and stated that based upon Shvarts' letter he knew that Vayntrub was "involved with this corruption."

Hussain also referred to the practices of sales people assigning jobs "over the phone" and the dispatchers assigning jobs to each other. Hussain asserted that for the past two years he and other shareholders had requested Vayntrub to stop "these false actions," apparently referring to both favoritism and the overbilling scheme. Hussain claimed that he and the other shareholders had "pulled slips on drivers who were sitting in front of the MTV building billing them" but that Vayntrub had failed to "further investigate." Hussain claimed that he had complained to the security chairman, but the chairman had told him to "go to the board of directors [because] they are the ones who authorize drivers to do those kinds of jobs." Hussain noted that such practices were "hurting our living," and "those who benefit from such practices are the body of you and the vice-president."

Hussain claimed that he had been bypassed twice for an "OT [overtime] pickup." When he confronted Vayntrub about the issue, Vayntrub claimed that it was a "computer error." Hussain claimed that Vayntrub had "set [it] up in the system" that Hussain would be bypassed for the more profitable assignments.Hussain closed by stating that he hoped that Vayntrub would "fix the illegal practice taking place in the company." While Hussain makes reference to the MTV overbilling scheme, his letter seems equally concerned with fairness in the dispatch [*11]system. In any event, while Hussain requests Vayntrub to remedy the illegal practices, he does not request Vayntrub or the Board to initiate any litigation. Thus, the court concludes that plaintiffs did not demand that the board bring an action on behalf of the corporation. The court will now proceed to consider whether a demand would have been futile.

Futility

The affirmation of Roberta Pike, Communicar's Inspector of Elections, indicates that not only the board of directors but also the President, the various vice presidents, and all of the official positions mentioned above are elected by the shareholders. While the bylaws and the certificate of incorporation of Communicar have not been submitted to the court, it appears that the named individuals, eight corporate officers and four members of the board of directors are in control of the corporation. However, reading the complaint and its exhibits liberally, plaintiffs have alleged that only six individuals, Vayntrub, DeVito, Kogan, Morel, Abyndar, and Charlemagne, are "interested" in that they participated in the misconduct giving rise to the derivative causes of action. Thus, the complaint does not allege with particularity that a majority of the board, or a majority of the broader control group, is interested in the challenged transactions.

Furthermore, plaintiffs do not allege that the board members did not fully inform themselves about the challenged transactions. Indeed, the complaint alleges in great detail the efforts that plaintiffs took to ensure that the board was fully informed of their various grievances.

However, the court concludes that the demand requirement should be excused as to one of the challenged transactions because it was so egregious on its face that it could not have been the product of sound business judgment. The business judgment doctrine "bars judicial inquiry into actions of corporate directors taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes" (Auerbach v. Bennett, 47 NY2d 619, 629, 1979). "Necessarily such decision must be predicated on the weighing and balancing of a variety of disparate considerations to reach a considered conclusion as to what course of action or inaction is best calculated to protect and advance the interests of the corporation" (47 NY2d at 631).

The diversion of business to subsidiaries and subjecting the corporation to wasteful litigation are garden variety forms of director misconduct. However, given the unfortunate "realities of corporate life," the court cannot conclude that they are so egregious that they could not result from sound business judgment (Frankel v. Slotkin, 984 F.2d 1328, 1335, 2d Cir. [*12]1993). To hold otherwise would be to render all breaches of fiduciary duty egregious on their face and eviscerate §626(b)'s demand requirement.Nonetheless, the alleged scheme to systematically overbill major clients of the corporation is so egregious because it strongly suggests organized criminal activity. Thus, the court concludes that the demand requirement is excused as to the allegation of systematic overbilling of Communicar's major customers.Moreover, the vivid detail with which the fraud is alleged belies any claim that plaintiffs failed to comply with the particularity pleading requirement.

Accordingly, defendants' motion to dismiss the complaint for failure to state a cause of action is denied as to the derivative claim of systematic overbilling but granted as to the derivative claims of diversion to subsidiaries and wasteful litigation. The motion to dismiss the complaint is granted as to the claims relating to the loan and insurance programs with leave to replead as to claims for loan or insurance benefits and denied as to the other individual claims of the shareholders.

This shall constitute the decision and order of the court.

A Preliminary Conference has been scheduled for March 30, 2007 at 9:30 a.m. in Chambers of the undersigned. Counsel appearing for the Preliminary Conference shall be fully versed in the factual background and their client's schedule for the purpose of setting firm deposition dates. [*13]

DatedJ.S.C.