Decided and Entered: April 09, 2026

Index No. 155742/23|Appeal No. 5688|Case No. 2024-05593|

Before: Webber, J.P., Gesmer, Higgitt, Michael, Chan, JJ.

[*1]

Order, Supreme Court, New York (Melissa A. Crane, J.), entered August 13, 2024, which granted the motion of defendants Paul, Weiss, Rifkind, Wharton & Garrison LLP and Peter E. Fisch to dismiss the complaint, unanimously affirmed, without costs.

This derivative action is brought by plaintiffs Randolph W. Slifka and David Dove (as trustees of and on behalf of a trust created under the will of Alan B. Slifka), on behalf of nominal defendants 477 Madave Associates and 477 Madave Holdings LLC. Plaintiffs assert that defendants Paul Weiss and Paul Weiss partner Peter E. Fisch engaged in misconduct in connection with a division of the proceeds from the sale of a Manhattan office building, located at 477 Madison Avenue, between the owners of its separate fee and leasehold interests. The two interests, the fee and leasehold together, ultimately sold for $258.25 million. According to plaintiffs, defendants simultaneously represented entities on both sides of the transaction without any attempt to obtain a conflict waiver, thus engaging in professional malpractice. Plaintiffs further allege that instead of using a fair and unbiased allocation procedure, defendants deliberately favored the leasehold interest and blocked the fee interest from participating in the process. Plaintiffs assert causes of action for professional malpractice, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, and common-law fraud.

Initially, we note that the releases given by the nominal defendants in favor of defendants are invalid. Plaintiffs sufficiently alleged that defendants violated the New York Rules of Professional Conduct by failing to obtain a release of claims from the nominal defendants, failing to give notice about their conflict of interest, and failing to counsel nonparty Barbara Slifka, who had exclusive control over entities on both sides of the transaction, to seek independent counsel (see New York Rules of Professional Conduct [22 NYCRR] § 1200.0, rules 1.4[b], 1.8[h][2]; Swift v Ki Young Choe, 242 AD2d 188, 192-193 [1st Dept 1998]). Additionally, plaintiffs pleaded sufficient allegations to support their contention that the releases were invalid because Barbara was not competent to enter into those releases (see Gormley v Marist Bros. of the Schs., Province of the United States of Am., 236 AD3d 868, 869-872 [2d Dept 2025]). According to the allegations in the complaint, Barbara Slifka was 91 years old when she signed the relevant agreements and conceded more than once that she did not understand aspects of the transaction or the allocation of the sale proceeds. Under the relevant standard, this evidence is sufficient at the motion to dismiss stage to constitute evidence of Barbara's incompetence (see Fleming v Ponziani, 24 NY2d 105, 111 [1969]).

[*2]

Nevertheless, Supreme Court properly dismissed the complaint. The settlement agreements, including the indemnification provisions in those agreements, among certain of the parties with interests in the property are valid as to nonparties David Slifka and Michael Slifka (both of whom also held interests in nominal defendants through their trusts) and the entities they control. Both David and Michael were represented by independent counsel in connection with those settlement agreements. Accordingly, there is no conflict or self-dealing by defendants with respect to that representation.

Moreover, the indemnification provisions of the settlement agreements are triggered by this action and cover plaintiffs' claims. The indemnification provisions apply to any action on a "Released Claim," and, according to the agreement, Released Claims expressly include "derivative actions." It is therefore "clearly implied" from the agreement that this action is covered in the indemnification provisions (see Shah v 20 E. 64th St. LLC, 230 AD3d 405, 410 [1st Dept 2024]). In addition, contrary to plaintiffs' contentions, the indemnity clauses are triggered because this action is maintained on behalf of the beneficial owners as well as the nominal defendants.

As a result, as Supreme Court properly found, plaintiffs cannot "fairly and adequately" represent the nominal defendants and their other owners, given the totality of the relationship (see Gilbert v Kalikow, 272 AD2d 63, 63 [1st Dept 2000], lv denied 95 NY2d 761 [2000]; see also James v Bernhard, 106 AD3d 435, 435 [1st Dept 2013]; Steinberg v Steinberg, 106 Misc 2d 720, 721-722 [Sup Ct, NY County 1980]). The interests of the plaintiffs conflict with those of the nominal defendants and their other owners, as the action would undo the settlements reached by those owners and would trigger financial risk through the indemnification clauses (see James, 106 AD3d at 435). Moreover, because plaintiffs have already been made whole in a prior arbitration, it is unclear whether their financial motives now align with the other owners (see Jakob v Gershwin Partners, Inc., 2011 NY Slip Op 33873[U], *4 [Sup Ct, NY County 2011]).

In light of our determination, we need not consider plaintiffs' further contentions.

THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: April 9, 2026