Some business divorce cases are about money. Others are about control. Today’s case, Homapour v 3M Properties LLC, 2026 NY Slip Op 04371 (1st Dept 2026), is about both.
As we often see with second and third generation closely-held family businesses, the informal trust and family hierarchy that may have helped build the enterprise can become a liability when relationships deteriorate, records are incomplete, and operating agreement formalities suddenly matter. Courts are often asked to untangle not only who owns what, and who owes what, to whom, but also whether equity can supply remedies the operating agreement omits.
Here, at the tail end of an 11-year litigation brawl — with trial already underway — the First Department’s latest decision dropped a late-breaking curveball into the proceedings, reviving a previously dismissed fraud claim mid-trial.
The Harounians of Great Neck
This has all the hallmarks of what should have been a classic New York success story.
Jacob Harounian emigrated from Iran to New York in 1970, and found his fortune in the Persian rug business. In 1985, Jacob teamed up with his son, defendant Mark Harounian, to parlay that success into the New York real estate market. From there, the family holdings grew from one company owning one property into 16 Family LLCs owning 24 buildings worth about $500 million by 2014.
By the time the family fight spilled into litigation, Mark was the managing member of the Family LLCs. Mark’s father Jacob and his two sisters, including plaintiff Mehrnaz Nancy Homapour, were passive minority members.
Fight Over the Harounian Family Real Estate Empire Passes the 10-Year Mark
In 2015, Mehrnaz commenced suit against Mark, individually and derivatively on behalf of the 16 Family LLCs, asserting 15 causes of action alleging that Mark used his control as manager to misappropriate Family LLC assets, fraudulently procure amended operating agreements, breach fiduciary duties, commit waste and conversion, unjustly enrich himself and Mark-controlled entities, and engage in related misconduct requiring, among other things, equitable relief, including constructive trusts, an accounting, injunctive relief, and removal of Mark as manager.
Importantly, Mehrnaz claims (and Mark does not deny) that when the latest amended operating agreements were executed, as was his usual practice, Mark handed her (and her father and sister) signature pages without providing copies of the entire agreement. But this time, those amendments contained material changes to the operating agreements. They gave Mark compensation rights he previously did not have (and was expressly precluded from receiving previously), waived certain fiduciary duties, and seriously narrowed remedies for manager misconduct.
Mehrnaz claims that these amendments served to post-hoc justify Mark’s financial and fiduciary misconduct, and limited her ability to hold him accountable.
Mark, for his part, claims that he was entitled to reasonable compensation for managing a valuable real estate portfolio, and that dad approved the practice of using business funds to support Mark’s admittedly lavish lifestyle.
After nearly 10 years of contentious litigation, on September 27, 2024, the parties submitted their cross-motions for summary judgment.
Motion Court’s Key Summary Judgment Rulings
On August 8, 2025, Justice Joel M. Cohen of the Commercial Division, New York County entered a 28-page decision and order that substantially narrowed the case for trial, describing the case as involving a “sprawling family-owned real estate business beset by internal acrimony, conflict, and accusations of self-dealing and other misconduct.”
Fraud: Dismissed. Mehrnaz claimed that Mark fraudulently induced her to sign amended operating agreements without reading those agreements by presenting signature pages only, saying the agreements had not materially changed, and representing that signatures were needed for bank or estate-planning purposes.
Justice Cohen’s analysis began with the familiar rule that: “One who signs but declines to read a document cannot claim to have justifiable relied on any misrepresentations regarding its contents.” The court, then, acknowledged that a fiduciary relationship can sometimes change the reliance analysis, but found that Mehrnaz’s evidence consisted mainly of her own affidavits and deposition testimony, she could not recall key representations concerning the relevant agreements, and she admittedly did not read or ask to read the agreements.
On that record, the court granted summary judgment dismissing the fraud claim, holding that Mehrnaz failed to raise a triable issue of justifiable reliance and that the latest operating agreements, including their remedial limits, governed.
Constructive Trust: Dismissed in Large Part. Mehrnaz’s constructive trust claims focused on Mark’s alleged use of Family LLC funds to acquire or improve properties held outside the Family LLC structure, including properties owned by Mark-controlled entities (i.e., the Harounian LLCs). She sought to impose constructive trusts over those assets, arguing that Mark had misappropriated Family LLC money and diverted real estate opportunities that should have belonged to the Family LLCs and their members.
The motion court gutted Plaintiff’s constructive trust claims.
Justice Cohen held that 11 of the amended operating agreements expressly limited the available remedy against the manager to money damages, meaning that constructive trust (an equitable remedy) could not be sustained for alleged diverted funds from those 11 Family LLCs, though the claim survived as to any claimed funds diverted from the remaining 5 entities. As for the Harounian LLCs, no confidential or fiduciary relationship ran directly between Mehrnaz and those entities to sustain the claim.
Manager Removal: Dismissed. Justice Cohen held that the amended operating agreements either limited the available remedy against the manager to money damages, or were otherwise silent on removal. The court reasoned that New York’s LLC Law, unlike the BCL, does not provide a statutory basis to remove managers without regard to the operating agreement. Thus, the court dismissed the manager-removal claim despite the unresolved factual disputes underlying Mehrnaz’s fiduciary duty allegations.
Jury Demand: Struck. The motion court struck Mehrnaz’s jury demand based on broad jury waivers contained in the amended operating agreements. The court held that the broad waivers explicitly covered disputes “arising out of” the agreements or “by reason of any other cause or dispute whatsoever” between the parties, and that the remaining claims were equitable which do not trigger a right to a jury trial.
Plaintiff appealed.
The First Department Reinstates Fraud, But Affirms the Balance of the Challenged Dismissals
On July 9, 2026, the First Department unanimously modified one part of Justice Cohen’s order and affirmed the rest: it reinstated the fraud claim against Mark. (You can read the briefs here, here, and here)
In reinstating the fraud claim, the appellate court relied on the same rule, but reached a different conclusion upon application. While the motion court found Mehrnaz’s proof too vague and self-serving to create a triable issue, the First Department, by contrast, focused on the fiduciary relationship and the specific attestations that Mark presented “just a signature page,” said “nothing is changed,” and did not provide the full document. Relying on those allegations, the appellate court held, “whether this principle applies to bar plaintiff’s fraud claim against Mark cannot be determined as a matter of law” because Mark had fiduciary obligations to Mehrnaz as managing member of the Family LLCs.
From there, the Appellate Court affirmed dismissal of the constructive trust and removal claims, and affirmed that portion of the order striking the jury demand, all based on the remedy-limitation and waiver provisions contained in the amended operating agreements.
The Appellate Court also denied Mark’s emergency application to stay the trial.
And so, the trial appears to have already commenced last week, on July 6, 2026 (3 days before the First Department issued this decision), and is expected to go at least two weeks. The late-breaking reinstatement of the fraud claim throws a wrench into trial strategy and prep for both sides, I would imagine.
Two Lingering Questions
On Fraud and Fraud Remedies:
When Justice Cohen dismissed the fraud claim, he held: “Accordingly, summary judgment is granted to the Harounian Defendants on Mehrnaz’s fraud claim, and the latest operating agreements—with their attendant limitations on remedies—govern.”
But now that the fraud claim has been revived, if the factfinder ultimately concludes that the amended operating agreements were fraudulently induced, what exactly follows? Full rescission of the agreements? Disregard of only the challenged provisions? Some narrower remedy tied to the alleged misrepresentations?
Plaintiff flirted with the concept of recission in her appellate briefs, but framed it more as defense against dismissal—an issue of fact as to whether those limitations on remedies should even apply if the agreement was fraudulently procured. The First Department reinstated the fraud claim, but simultaneously affirmed several rulings that depended on those same operating agreements’ remedial limits without much additional discussion.
Perhaps there was an election of remedies made earlier in the case, which failed to pursue rescission? As we’ve cautioned before, don’t sleep on your election of remedies.
On Removal of Managers:
As my partner Peter Sluka pointed out in 2022, Justice Cohen once invited appellate guidance on whether LLC Law § 414’s manager removal rights do not apply unless the operating agreement somehow opens the door. There certainly is some tension there, where on the one hand, the default rules of the LLC law is said to be a gap filler if the operating agreement is ambiguous. But if a provision is missing entirely, should that absence be read as the parties’ intent to forgo those rights or an intent to rely on the default statutory rules?
Here, the First Department supplied that requested guidance, but did so cautiously, stopping short of the kind of full-throated endorsement of a rule one might have hoped for:
“All of the agreements are silent regarding whether and when a manager may be removed. Under such circumstances, the majority of courts have concluded that they do not have the power to remove an LLC manager” (citing McCormack v Kuras, Fakiris v Gusmar Enterprises, LLC, and Friedman v Ridge Capital Corp., but comparing Goldstein v Pikus.)
Notably, the “majority of courts” the First Department referenced here are trial-level decisions.