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In Win for Smith Villazor Client, N.Y. Supreme Court Lets Derivative Claims Proceed.

October 19, 2022

Consumer-products brand EOS’s co-founder Sanjiv Mehra’s derivative claims against his former business partner Jonathan Teller can proceed, according to an order of N.Y. Supreme Court Justice Andrea Masley issued on October 18, 2022.  Mr. Mehra filed the derivative action in late 2020, claiming that Mr. Teller was improperly using the business’s money to defend litigation in Delaware between Mr. Mehra and Mr. Teller, and was using company money for certain personal purposes and benefitting himself with interest on loans he made to the business.  Finding that the indemnity-and-advancement provisions in the companies’ operating agreements did not “unmistakably” apply to disputes among the contracting parties, as New York law requires, Justice Masley denied Mr. Teller’s motion to dismiss Mr. Mehra’ breach-of-contract claim, allowing Mr. Mehra’s challenge to proceed against Mr. Teller’s use of company money to finance the Delaware litigation.  The court also let stand Mr. Mehra’s challenges to Mr. Teller’s alleged use of company money to pay for personal public-relations services and to causing the company to accrue about $300,000 in interest to Mr. Teller’s benefit on loans he made to the business.  Smith Villazor represents Mr. Mehra in the case.  Brian Burns of Smith Villazor LLP argued the motion on behalf on Mr. Mehra.

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