Steering Toward A Hearing: Second Department Reverses Summary Denial Of Auto Body Repair Shop Dissolution

Recently, my partner Peter Sluka wrote about two Kings County Supreme Court decisions testing the procedural boundaries of shareholder-oppression claims under BCL § 1104-a. One of the lessons from those cases is that procedure can shape the outcome of a case as much as the merits.

Today’s case highlights that point: Matter of Rizzotto v Romano, 2026 NY Slip Op 05401 (2d Dept 2026). The Second Department provided a lifeline to today’s petitioner, reversing summary dismissal of his BCL 1104-a dissolution petition, holding that the supreme court should not have denied dissolution without an evidentiary hearing, and remanding for further proceedings.

Manhasset Collision, Ltd.

Manhasset Collision, Ltd. (“MCL”) is an auto body repair shop on Long Island with approximately 16 employees. Ben Romano (the respondent and majority shareholder) incorporated MCL in 2018 and was its sole owner until recent events.

In February 2020, petitioner Anthony Rizzotto acquired a 25% interest from Ben for $200,000 and loaned another $25,000 to the company. Anthony joined MCL after 27 years at Geico.

The parties executed a Stockholders Agreement dated February 26, 2020. Key terms of the Stockholders Agreement included:

• Management Role: Anthony was designated “manager of the Corporation and will run the day to day affairs.” He could not be terminated “other than for cause as defined herein.” The Agreement did not define “cause.”
• Compensation: Anthony’s base salary was $2,000/week for an initial six-month period, increasing to $2,200/week ($114,400/year) thereafter. He was also entitled to health insurance reimbursement up to $725/month.
• Non-Compete: Restricted area defined as Manhasset; broader restrictions applied in cases of death, disability, or agreed sale.

The Stockholders Agreement also contained certain profit-sharing provisions, withdrawal and buyout provisions, as well as provisions concerning the allocation of proceeds should the company be sold.

The Dispute

The business relationship did not last long.

In August 2023, Ben sent Anthony an undated letter purporting to terminate his employment for cause, citing the unauthorized signing of a check in Ben’s name, inadequate oversight of shop employees, and unilateral changes to work hours. Anthony rejected the termination, arguing that “cause” was undefined in the Stockholders Agreement, and therefore, Anthony could not be terminated “for cause” or otherwise.

On August 16, 2023, MCL withdrew the termination letter and asked Anthony to return to work.

About a week later, Anthony returned to work but he contends that the environment was immediately hostile, claiming that Ben assigned him tasks inconsistent with his managerial role (cleaning the attic, organizing auto parts); restricted Anthony’s interactions with customers; yelled “I am the owner. I am the boss. I tell you what to do”; and told him he was “fired.”

Ben’s account, unsurprisingly, differs. He contends that upon Anthony’s return to work, Anthony became argumentative and refused to accomplish pressing tasks in the shop. Ben claimed he “instructed Anthony that if he refused to do his job as head manager, that he would not get paid, and should leave,” but denied ever “firing” Anthony.

From that point, August 22, 2023, MCL stopped paying Anthony’s salary and health insurance benefits. Anthony did not return to MCL and began working for a competing autobody shop approximately five miles away. Ben, meanwhile, commenced a separate action in Suffolk County seeking a declaratory judgment that Anthony was not a shareholder of MCL — relying in part on the fact that MCL had never issued Anthony a K-1 and that Anthony had insisted on W-2 employee treatment.

Anthony’s Dissolution Petition Falls Short In Nassau County Commercial Division

In January 2024, Anthony commenced a special proceeding by Order to Show Cause seeking dissolution under BCL § 1104-a, an accounting, and interim restraints.

Anthony alleged shareholder oppression, including that Ben terminated his employment, ceased paying his compensation and benefits, and misappropriated approximately $500,000 of company funds for noncorporate purposes.

In a Decision and Order entered May 24, 2024, Nassau County Commercial Division Justice Jerome Murphy denied the dissolution petition without conducting an evidentiary hearing.

The court began with the principle that, in determining whether conduct is oppressive, the majority’s actions should not be deemed oppressive “simply because the petitioner’s subjective hopes and desires in joining the venture are not fulfilled” and that “[d]isappointment alone should not necessarily be equated with oppression” (citing Matter of Kemp & Beatley, Inc., 64 NY2d 63, 73 [1984]).

The court found that Anthony’s allegations of oppression and looting, as recited in the Petition, were “largely unsubstantiated.”

The court further noted that, in opposition, Ben submitted “unrebutted” and “unassailable” evidence — including financial records and an affidavit addressing the challenged payments — as well as evidence that MCL had paid Anthony total compensation of $623,054.57 during his tenure, and that Anthony “refused to return to work” and was working for a competitor.

The court concluded that “given the unsubstantiated allegations in the petition, coupled with the Respondent’s utterly undisputed evidence, the Court finds the Petitioner has failed to establish either the existence of ‘oppressive conduct’ or ‘looting’ thus rendering dissolution inappropriate.”

Anthony moved for leave to reargue, which motion was denied.

Anthony appealed (read the briefs here and here)

The Second Department Provides Anthony a Lifeline

The Second Department disagreed with the trial court’s decision, holding that the court “should not have denied that branch of the petition which was for judicial dissolution of MCL pursuant to Business Corporation Law § 1104-a without conducting a hearing.”

Without engaging in a detailed factual analysis, the appellate court concluded that “[t]he allegations in the verified petition and its supporting papers were prima facie sufficient to establish a basis for judicial dissolution,” holding that “[i]n light of the conflicting claims by the parties regarding the relevant facts, the court should have conducted a hearing before determining whether judicial dissolution was warranted.”

The Appellate Court thus reversed and remanded back to the trial court for further proceedings.

Evidentiary Hearing or No Evidentiary Hearing?

Is an evidentiary hearing always required before determination of a dissolution petition?

The answer is no. Although BCL 1109 requires that the court “shall hear the allegations and proofs of the parties and determine the facts,” New York courts have long interpreted that provision to allow a court to make such determination without conducting an evidentiary hearing, where appropriate. CPLR 409(b) directs the Court to “make a summary determination upon the pleadings, papers and admissions to the extent that no triable issues of fact are raised,” in determining Article 4 special proceedings governing BCL 1104-a dissolution proceedings.

There are ample cases where a court grants or denies a dissolution petition without an evidentiary hearing: Matter of Ribeiro v Libutti, 244 AD 2d 861 (2d Dept 2025) (see also Frank McRoberts’ post on the case); Matter of Quail Aero Service Inc., 300 AD 2d 800 (3d Dept 2002); Matter of Williamson, 259 AD2d 362 (1st Dept 1999); Matter of Goodman, 200 AD2d 670 (2d Dept 1994).

But there also exist numerous appellate authorities remanding a summary grant or denial of dissolution back to the trial court for an evidentiary hearing, just as the Second Department did here, including, for example: Matter of Nicastro v VJN Real Est. Corp., 175 AD 3d 1296 (2d Dept 2019); Matter of WTB Properties, Inc., 291 AD 2d 566 (2d Dept 2002); Matter of Fancy Windows & Doors Mfg. Corp, 244 AD 2d 484 (2d Dept 1997); Matter of Giordano v Stark, 229 AD 2d 493 (2d Dept 1996).

The volume of cases going back on remand suggests to me that the question of whether an evidentiary hearing is necessary can be less than clear, even among the judiciary.

A Word on Procedure

On appeal, Anthony emphasized that the trial court struck his request to submit reply papers and then characterized Respondent’s evidence as “undisputed.” Anthony dedicated a significant portion of his appellate brief to the evidence he would have presented had he been permitted a reply.

In New York, reply papers are not permitted on an order to show cause absent express court permission, which is rarely granted. Anthony could (or should) have anticipated that he would not be permitted to submit a reply. His choice not to press the issue until his appeal (which Respondent correctly points out is the first time the issue was raised), was a gamble to say the least.

Ultimately, the Second Department’s decision rescued Anthony’s case — or at least allowed him to live to fight another day.

But it calls to mind Peter Mahler’s evergreen best-practice exhortation from 2012, which remains good advice today: “If you’re a petitioner in a dissolution proceeding you need to load up your petition (or supplemental affidavits) with as many facts as are available in support of your claims.”