People v. Grasso

Mazzarelli, J.P. (dissenting).

The New York Stock Exchange

(NYSE or the Exchange), which traces its origins back to 1792, is the world’s largest equities market. On an average trading day in 2006, 2.3 billion shares, valued at $86.6 billion, were traded on the Exchange.1

That the NYSE plays a vital role in our state and federal economy is plain.

“The health of the U.S. economy is typically measured by the stock market. When stock prices rise, and there is a ‘bull market,’ U.S. business is assumed to be doing well. When stock prices fall and there is a ‘bear market,’ a downturn in business and the economy is assumed” (9 West’s Encyclopedia of American Law 353 [2d ed 2005]).

Over time, investment activity on the NYSE has seen a marked increase. Between 1995 and 1998, the number of individuals trading stock on the NYSE increased by 15 million and between 1989 and 1998 by 32 million (NYSE, Shareownership 2000, Based on the 1998 Survey of Consumer Finances, at 10). By 1998, there were approximately 84 million investors trading on the NYSE (id.). Likewise, the number of companies whose shares are traded on the Exchange has grown into the thousands.

The Securities and Exchange Commission (SEC) has regulatory oversight powers over the NYSE and monitors all Exchange activity to prevent the manipulation of stock prices or any other illegality. The NYSE itself, and its officers, in turn, have regulatory authority over the member organizations whose securities are listed on the Exchange. This includes the authority, at the direction of the SEC, to discipline member firms or enact rules for governance of the Exchange.

At all times relevant to this litigation, the NYSE was incorporated under article 14 of the Not-For-Profit Corporation Law (N-PCL) as a Board of Trade and self-regulating private nonprofit corporation. The NYSE has 1,366 shareholders, who *145are called “members,”2 and hold “seats” on the Exchange. Some members use their seats; others lease them to firms who wish direct access to the trading floor. Seat holders pay fees to the NYSE based upon their trades. However during the period relevant to this appeal, the NYSE, like all not-for-profit corporations, did not distribute profits or net earnings to anyone. Consistent with the practice of all not-for-profit corporations, profits were to be reinvested for the welfare of the Exchange.

The N-PCL was drafted to regulate a number of different types of corporations, classified according to their purposes and goals.3 Boards of Trade such as the NYSE are classified as Type A not-for-profit corporations (N-PCL 1410 [b]). The objective of a Type A not-for-profit is to “foster[ ] trade and commerce” (N-PCL 1410 [a]).4

Defendant Richard A. Grasso was the NYSE’s Chairman and Chief Executive Officer (CEO) from 1995 until September 17, 2003. During that period, Grasso executed three employment agreements, one in 1995, one in 1999 and one in 2003. The agreements outlined, in general terms, the scope of Grasso’s duties and the source of his compensation. In addition, during Grasso’s tenure the NYSE’s Board of Directors had a Compensation Committee whose duty it was to set Grasso’s annual compensation. As relevant here, the Compensation Committee met in February of each year, at which time it made decisions for the prior calendar year.

On August 27, 2003 the Board of Directors of the NYSE and Grasso executed his third and final employment agreement. The 1995, 1999 and 2003 agreements provided for a base annual salary of $1.4 million. However, before Grasso resigned, he received a lump sum payment of $139.5 million. He was also promised an additional $48 million to be paid pursuant to various benefit programs at a future date. Those benefit programs *146included: (1) an Incentive Compensation Plan (ICP); (2) a Long Term Incentive Plan (LTIP); (3) a Capital Accumulation Plan (CAP); (4) a Supplemental Executive Retirement Plan (SERF); and (5) a Supplemental Executive Savings Plan (SESP). Also on August 27, 2003, the NYSE issued a press release revealing that $139.5 million would be immediately payable to Grasso. The press release did not disclose the $48 million future payment.

In September of 2003, the Chairman of the SEC contacted the NYSE and requested information concerning Grasso’s compensation. In response to increasing internal and external pressure, Grasso agreed to forgo the future benefit payments he had been promised. Several weeks later, he resigned. In January 2004, the Interim Chairman and CEO of the NYSE wrote a letter to the Attorney General stating that serious damage had been inflicted upon the NYSE. The interim CEO requested that either the Attorney General or the Chairman of the SEC pursue the matter of Grasso’s “unreasonable compensation” and other “failures of governance and fiduciary responsibility.”

The Attorney General brought this action on behalf of the People of the State of New York. The complaint alleges that the NYSE paid Grasso an unlawful amount of compensation and it seeks that such sums be returned to the Exchange. Various counterclaims and a cross claim have been interposed, and at least one third-party action has been commenced.

The Attorney General alleges that Grasso misused his authority to select only people he could control to serve on the Compensation Committee in order to obtain exorbitant sums for himself. In fact, the complaint alleges that Grasso’s total compensation and benefits from 2000 to 2002 were equal to 99% of the NYSE’s net income during those same years. The Attorney General accuses Grasso of exerting his influence over the NYSE’s Board of Directors to maximize his compensation, approving the actions of those inclined to increase his benefits and punishing those who sought to curb them. He also alleges that Grasso preformed a variety of insidious acts which directly affected pending deals by companies listed on the Exchange, in an effort to maximize votes in favor of his salary. For example, the Attorney General alleges that Grasso quietly assured a member of the Compensation Committee that a deal involving his company would be approved by the NYSE Market Performance Committee, allegedly in exchange for his vote in favor of Grasso’s compensation. The complaint also asserts that there was an industry perception that companies whose executives *147served on the Board of Directors of the NYSE would receive preferential treatment by the Exchange.

While not relevant to the disposition of this appeal, it bears noting that in March of 2006, nearly two years after the initiation of this action, the NYSE reorganized into two distinct entities: (1) a New York not-for-profit regulatory entity and, (2) a Delaware for-profit public corporation. This reorganization is currently the subject of a legal challenge (Higgins v New York Stock Exch., Inc., 10 Misc 3d 257 [2005]).

This Appeal

The complaint in this action contains six causes of action against defendant Grasso. This is an appeal from the motion court’s denial of defendant Grasso’s CPLR 3211 (a) (7) motion to dismiss four of those causes of action: the first, fourth, fifth and sixth. The first cause of action seeks to impose a “constructive trust,” or restitution to the NYSE of Grasso’s compensation. The fourth claims that Grasso is required to return money received by him in excess of reasonable compensation under a theory of money had and received. The fifth claims that defendants violated N-PCL 715 (f), which requires that the salaries of officers be fixed by the affirmative vote of a majority of the entire board. The claim in this cause of action is that a majority of the board did not effectively vote to approve various of Grasso’s compensation awards, because it was presented with allegedly inaccurate and incomplete information. The sixth is predicated on N-PCL 716. It alleges that defendants violated the statutory prohibition against the making of loans by a not-for-profit corporation to its directors or officers.

Standing

Defendant Grasso challenges the Attorney General’s ability to bring the causes of action at issue. He argues that the Attorney General is without authority because the sections of the N-PCL under which he is proceeding do not specifically empower the Attorney General to bring a lawsuit for their enforcement. He reasons that because a number of sections of the N-PCL do explicitly authorize claims by the Attorney General, this implicitly precludes the Attorney General from enforcing other sections of the statute. It is Grasso’s contention, adopted by the majority, that “that which was not explicitly included was implicitly excluded.”

I disagree. This is a case with far-reaching state and national economic implications. The complaint makes allegations which, if proved, call into question the integrity of the New York Stock *148Exchange during Grasse’s tenure. It is my view that the Attorney General has standing, under his broad parens patriae power, to protect the State, by protecting the NYSE, from a loss of public confidence because of allegations of serious mismanagement. Given the NYSE’s role in the state and national economy, problems with its corporate governance are the proper subject of the Attorney General’s concern. Dating back to the colonial era, the “Attorney General of New York served ... as this Colony’s chief law officer” (People v Gilmour, 98 NY2d 126, 129-130 [2002], citing 2 Lincoln, The Constitutional History of New York, at 526-527 [1906]). When the representatives met to draft the first New York Constitution, they recognized a need for a chief law enforcement officer (Karl Swanson, The Background and Development of the Office of Attorney General in New York State, at 121 [1958]). Although there was no express provision for an Attorney General in the original 1777 Constitution, “the institution had roots of almost a century in the jurisdiction” and the office was already functioning in the State’s government at this time (id. at 121). Eventually, New York State Constitution, art Y, §§ 1 and 4 were amended to expressly provide for an Attorney General to serve as the head of the State’s Department of Law. Although many statutes delineate a specific role in the enforcement of certain provisions by the Attorney General, his powers and duties do not derive from, and are not limited by those statutes. Accordingly, the fact that the challenged claims are not explicitly authorized by the N-PCL does not expressly preclude them.

The opinion of the United States Supreme Court in Alfred L. Snapp & Son, Inc. v Puerto Rico ex rel. Barez (458 US 592 [1982]) informs my analysis. In Snapp, the Supreme Court upheld the right of an individual state to bring an action in parens patriae to assert its sovereign interest of protecting its citizens from discrimination. The petitioners in Snapp, individual United States apple growers, questioned whether the Commonwealth of Puerto Rico had standing to bring an action in favor of the migrant workers denied jobs by them. The complaint alleged that the growers violated two statutes, resulting in discrimination against the residents of Puerto Rico. The Supreme Court upheld the Commonwealth’s authority to bring the action, emphasizing that while parens patriae authority cannot be used simply to vindicate individual interests, it can be asserted to protect what are properly sovereign interests. In Snapp the sovereign interest at stake was the “health and well-*149being—both physical and economic—of [the residents of Puerto Rico]” (Snapp, 458 US at 607).

Subsequent cases applying the Snapp rule have articulated three requirements for the assertion of parens patriae power:

“(a) the [S]tate ‘must articulate an interest apart from the interests of particular private parties, i.e., the State must be more than a nominal party’; (b) the State ‘must express a quasi-sovereign interest’; and (c) the State must have ‘alleged injury to a sufficiently substantial segment of its population’ ” (People v Mid Hudson Med. Group, P.C., 877 F Supp 143, 146 [SD NY 1995] [citation omitted] [allowing Attorney General to bring common-law action to enforce the rights of hearing impaired patients where governing statutes did not provide standing for state attorneys general]).

Here, it is plain that the allegedly excessive compensation paid to Grasso is a matter of statewide and national concern. The integrity of the NYSE is not merely a matter of concern to members holding seats on the Exchange. The complaint implicitly seeks relief for the protection of the investing public at large, and for the state and national economy (see State of New York v General Motors Corp., 547 F Supp 703, 705 [SD NY 1982] [“State’s goal of securing an honest marketplace in which to transact business is a quasi-sovereign interest”]; cf. People v Seneci, 817 F2d 1015, 1017 [1987] [Attorney General did not have standing to sue for damages where there was no alleged injury to a quasi-sovereign interest]). As discussed, millions of individual and institutional investors rely on the integrity of the NYSE. While these investors do not have standing to challenge the claimed excessive compensation at issue in this case, their interests are the proper subject of the Attorney General’s attention. To the extent that the complaint alleges that deals by companies whose executives voted favorably to Grasso would receive preferential treatment in their dealings, the Attorney General had a responsibility to bring this action to ensure that the Exchange was being operated in a fair and honest manner.

The importance of public oversight of not-for-profit corporations has been recognized before, in a case involving an alleged gross breach of fiduciary duty (American Baptist Churches of Metro. N.Y. v Galloway, 271 AD2d 92 [2000]). Although the claims at issue on appeal here do not involve the same type of willful misconduct claimed in American Baptist, the following *150quotation from that case is nonetheless relevant to an understanding of the issue:

“A not-for-profit corporation is not the same as a corporation that loses money. It is simply a corporation that devotes whatever proceeds it receives from its operations to charitable causes rather than disbursing the funds as dividends to shareholders and compensation to executives. Just as the goal of a for-profit corporation is to make money for its investors, the goal of a not-for-profit is to make money that can be spent on furthering its social welfare objectives. Both types of companies have suffered an injury when a fiduciary’s misconduct frustrates these goals” (id. at 97-98 [emphasis supplied]).

Consumers Union of U.S., Inc. v State of New York (5 NY3d 327 [2005]) also supports the Attorney General’s power to initiate these claims. In that case, the subscribers to a not-for-profit health plan challenged the insurer’s conversion to a for-profit corporation, and certain acts of the board of directors under N-PCL 720. N-PCL 720 (b) listed the individuals who could sue under section 720, and the list did not include the plaintiffs. However, the Court of Appeals held that the plaintiffs had “standing to prosecute th[e] action solely for purposes of protecting [the company’s] not-for-profit assets” (Consumers Union, supra at 354; see also Alco Gravure, Inc. v Knapp Found., 64 NY2d 458 [1985] [standing conferred on beneficiaries of not-for-profit corporation to challenge action taken under N-PCL 804 although standing was not specifically conferred upon plaintiffs by statute]).

In support of dismissing the causes of action here, Grasso cites Lefkowitz v Lebensfeld (68 AD2d 488, 495 [1979], affd 51 NY2d 442 [1980]). In Lefkowitz, the issue before the court was whether the Attorney General had standing under the Estates, Powers and Trusts Law (EPTL) to sue the board of directors of a charity on behalf of a number of unrepresented beneficiaries. The Lefkowitz complaint alleged that the hoard breached its fiduciary duties, and the action sought to compel the declaration and payment of dividends. This Court held that the Attorney General did not have standing to bring the action. The Court of Appeals affirmed, holding that the Attorney General was precluded from bringing an action in a “quasi-shareholder-derivative” capacity, without first making a demand upon the board of the not-for-profit corporation and satisfying the other *151prerequisites of a shareholder derivative suit. The Court of Appeals also noted that the EPTL did not explicitly provide for a right of action on behalf of the Attorney General. However, the Court of Appeals stated: “we do not decide whether and in what instances the Attorney-General possesses standing under the Not-For-Profit Corporation Law” (51 NY2d at 448).

The facts in this case are entirely dissimilar to Lefkowitz. The charities at issue in Lefkowitz chose not to sue to enforce their rights, and the court held that the Attorney General could not step in and do so for them without following certain procedural preconditions. Here, by contrast, the Attorney General is not attempting to sue on behalf of the NYSE seat holders to vindicate their rights. The action is brought by the Attorney General, through his authority as parens patriae, to protect the integrity of the NYSE and to promote a healthy economy for the citizens of this state (cf. Lefkowitz, supra; Clearing House Assn., L.L.C. v Spitzer, 394 F Supp 2d 620 [SD NY 2005] [commercial banks enjoined Attorney General from bringing an action to enforce residential mortgage lending practices on their behalf]).

Grasso also relies upon three other cases, Uhr v East Greenbush Cent. School Dist. (94 NY2d 32 [1999]), Mark G. v Sabol (93 NY2d 710 [1999]) and Sheehy v Big Flats Community Day (73 NY2d 629 [1989]), each of which is also distinguishable on its face. In each of these cases individual plaintiffs sought to recover money damages. The statutes in each of the cases did not explicitly provide for private rights of action. Thus, applying a formula articulated in Sheehy,5 the Court of Appeals concluded that the plaintiffs in all three actions did not have standing to sue. Further, in Uhr and Mark G., the courts found that defendants did not have a duty to the plaintiffs which would subject them to common-law tort liability.

Here, unlike Uhr, Mark G. and Sheehy, the Attorney General, the chief law enforcement official in the state, is suing on behalf of the People of the State of New York. The action is not for money damages. The Attorney General’s office requests that Grasso’s compensation, to the extent deemed improper, be returned to the Exchange (cf. People v Seneci, 817 F2d 1015 [1987] [Attorney General did not have the power to bring an ac*152tion seeking money damages for state’s citizens, where there was no quasi-sovereign interest at stake]).

As discussed earlier, the Attorney General’s powers preexist the N-PCL. He enjoys broad authority to enforce that and other statutes. The Attorney General’s powers are not merely coextensive with those provisions in the statute which refer to his office (see 64th Assoc., L.L.C. v Manhattan Eye, Ear & Throat Hosp., 2 NY3d 585, 590-591 n 7 [2004]). Further,

“not-for-profit [corporations], unlike their for-profit counterparts, by definition and concept do not have shareholders to whom profits are distributed. Given the absence of shareholders, profits and other market devices to ensure the efficacy of contracts and regularity of operations, the statute contemplates significant public oversight of the finances and major transactions of such entities” (id. at 590 [emphasis supplied]).

The NYSE, during the period at issue, was a Type A not-for-profit corporation, formed for a lawful nonbusiness purpose, here as a Board of Trade created to foster “trade and commerce” (N-PCL 201 [b]; 1410 [a] [1]). Profits generated by the trades conducted by the NYSE seat holders at that time provided no benefit to the Exchange. Conversely, the seat holders’ income did not increase if the assets of the NYSE increased. Thus, members of the NYSE had no incentive to challenge the Board of Directors on the issue of the amount of executive compensation packages.

Moreover, here, the Attorney General alleges that Grasso’s compensation was the result of misuse of the corporation’s regulatory authority with far-reaching financial implications. If the allegations as to Grasso’s ability to effect specific transactions are substantiated, the integrity of the entire NYSE during Grasso’s tenure is at issue. Allowing the Attorney General standing to prosecute the common-law claims in the complaint is not only in the interest of promoting the health of the state’s economy, but it is also vital to protect public confidence in the NYSE and the investing community (see Consumers Union, 5 NY3d 327 [2005], supra).

Clearly, the N-PCL was not specifically drafted to regulate the NYSE, and the alleged egregious misuse of funds was an unanticipated event. It is not determinative that N-PCL 202 (a) (12), which requires that compensation of the officers of not-for-profit corporations must be “commensurate with services *153performed,” and N-PCL 515 (b), which mandates that officers’ compensation be “reasonable,” do not include language giving the Attorney General enforcement power. Accordingly, a flexible approach allowing the Attorney General standing to pursue the claims at issue is called for here and does not violate the required separation of legislative and judicial powers.

CPLR 3211 (a) (7) Motion to Dismiss

It must be emphasized that this is an appeal of the denial of a CPLR 3211 (a) (7) motion to dismiss four causes of action for failure to state a claim. In reviewing the trial court’s ruling on defendant’s motion, we, like the motion court, must assume the truth of all of the factual allegations in the complaint, resolve every reasonable inference in favor of the Attorney General (Leon v Martinez, 84 NY2d 83 [1994]), and “determine . . . whether the facts alleged fit within any cognizable legal theory” (Morone v Morone, 50 NY2d 481, 484 [1980]). The issue is not whether the Attorney General will ultimately prevail on the claims at issue, but only whether he should be allowed to offer evidence to support them (see People v Mid Hudson Med. Group, P.C., 877 F Supp at 146).

First Cause of Action: Based upon violations of N-PCL 202 (a) (12) and 515 (b), seeking imposition of a constructive trust and restitution

In the first cause of action, the Attorney General asserts that as an officer and director of the NYSE, Grasso violated N-PCL 202 (a) (12) and 515 (b) because his compensation was neither “reasonable” nor “commensurate with services performed.” The extant record reveals that as CEO of the NYSE defendant Grasso was charged with the management of a company with a net income in 2002 of $28 million. His job included setting the rules about the trading of stocks under NYSE jurisdiction and managing the workings of this not-for-profit corporation. His 2003 compensation was well in excess of $139.5 million, more than four times the net income of the organization he ran. These facts alone are sufficient to state a claim under N-PCL 202 (a) (12) and 515 (b).

The Attorney General characterizes these acts as ultra vires, beyond the power of the corporation, in the common-law sense. He thus requests, in this cause of action, that the court place any of Grasso’s compensation deemed unreasonable or not commensurate with the services he performed in a constructive trust (see Simonds v Simonds, 45 NY2d 233 [1978]). “ ‘[A] constructive trust is the formula through which the conscience *154of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee’ ” (id. at 241, quoting Beatty v Guggenheim Exploration Co., 225 NY 380, 386 [1919]). Defendant Grasso contends that because N-PCL 203 provides a mechanism for redressing alleged ultra vires acts, the Attorney General is foreclosed from claiming that Grasso’s compensation was ultra vires as part of the first cause of action. However, section 203 (a) is not at issue here.6 The Attorney General’s contention with respect to Grasso’s compensation is that it violated N-PCL 202 (a) (12) and 515 (b). I would find that the pleadings allege sufficient facts to support the first cause of action under the common law, as informed by N-PCL 202 (a) (12) and 515 (b).

Fourth Cause of Action: Under N-PCL 202 (a) (12) and 515 (b), for payment had and received

The fourth cause of action is for payment had and received. The Attorney General asserts that inasmuch as the annual compensation received by Grasso was unreasonable and not commensurate with the services he performed, it would be contrary to the laws and public policy of New York to permit Grasso to retain such unlawful gains. Such a cause of action is premised

“upon the equitable principle that a person shall not be allowed to enrich him[ or herself] unjustly at the expense of another . . . It is an obligation which the law creates, in the absence of any agreement, when and because the acts of the parties or others have placed in the possession of one person money . . . under such circumstances that in equity and good conscience he [or she] ought not to retain it” (Miller v Schloss, 218 NY 400, 407 [1916]).

Defendant Grasso argues, in part, that the claim for money had and received is precluded because his compensation was the product of several written agreements. However, the complaint alleges that very little of Grasso’s compensation was set forth in any contract, and instead was the result of, among other things, computations derived based upon eligibility formulations. Further, the Attorney General alleges that the Compensation Committee was not fully or accurately informed. He alleges that it was furnished with misleading information. Applying the stan*155dard of review for a CPLR 3211 (a) (7) motion to dismiss, a viable claim for money had and received is set forth in the Attorney General’s allegation that the NYSE paid Grasso compensation that violated both common-law and basic contractual principles (see Citipostal, Inc. v Unistar Leasing, 283 AD2d 916, 919 [2001]; Manufacturers Hanover Trust Co. v Chemical Bank, 160 AD2d 113, 117-118 [1990], lv denied 77 NY2d 803 [1991]).

Fifth Cause of Action: Under N-PCL 715 (f)

The fifth cause of action invokes N-PCL 715 (f), which provides: “The fixing of salaries of officers, if not done in or pursuant to the by-laws, shall require the affirmative vote of a majority of the entire board unless a higher proportion is set by the certificate of incorporation or by-laws.” The Attorney General asserts that this section was violated because a majority of the board did not properly vote to approve the future payments of CAP and SERF benefits to Grasso. The Attorney General alleges that the vote was not effective because the Board of Directors was presented with inaccurate and incomplete information regarding the extent of future benefits to be paid Grasso. He thus seeks restitution of all such sums which were not obtained with proper board approval.

Grasso answers that section 715 is only applicable to salaries and not to his pension benefits and deferred bonuses. However, the record is plain that the bulk of Grasso’s compensation was in the form of bonuses and pensions. The requirements of section 715 may not be circumvented merely by designating most of an officer’s compensation as bonuses and pensions, rather than salary. Again, we must view the allegations in the light most favorable to the Attorney General to determine whether a cause of action has been pleaded. Accordingly, I would hold that the fifth cause of action should be sustained (see Mid Hudson Med. Group, 877 F Supp at 146).

Sixth Cause of Action: Allegation that Grasso obtained illegal loans pursuant to N-PCL 716

The sixth cause of action is predicated on N-PCL 716, which states:

“No loans, other than through the purchase of bonds, debentures, or similar obligations of the type customarily sold in public offerings, or through ordinary deposit of funds in a bank, shall be made by a [not-for-profit] corporation to its directors or *156officers, or to any other corporation, firm, association or other entity in which one or more of its directors or officers are directors or officers or hold a substantial financial interest, except a loan of one type B corporation to another type B corporation. A loan made in violation of this section shall be a violation of the duty to the corporation of the directors or officers authorizing it or participating in it, but the obligation of the borrower with respect to the loan shall not be affected thereby.”

The Attorney General alleges that Grasso, while serving as an officer and director, received two substantial loans from the NYSE to which he was not entitled. Grasso urges that N-PCL 716 is not applicable to the NYSE since such Boards of Trade are specifically exempt from that section and are permitted to make loans to their officers and directors pursuant to N-PCL 1410 (c) (2). However, that section provides that loans may only be made where the “board of directors finds that the making of such loan will be in furtherance of its corporate purposes and for a lawful public or quasi-public objective” (emphasis supplied). Viewing the allegations in the complaint in the light most favorable to the Attorney General, it cannot be said that, as a matter of law and prior to any disclosure, the purported loans extended to Grasso were in furtherance of the NYSE’s corporate purposes and for a lawful public or quasi-public objective. Thus, I would conclude that the Attorney General has a cognizable claim under N-PCL 716.

Accordingly, I would affirm the order appealed denying defendant Grasso’s motion, pursuant to CPLR 3211 (a) (7), to dismiss the first, fourth, fifth and sixth causes of action against him.

Buckley and Malone, JJ., concur with McGuire, J.; Mazzarelli, J.E, and Saxe, J., dissent in a separate opinion by Mazzarelli, J.E

. (See <http://www.nyse.com>.)

. A “member” of the NYSE, as presently defined, is an individual approved by the Exchange and designated by a member organization to effect transactions on the floor of the Exchange, on any facility thereof, on its behalf (http://www.nyse.com).

. N-PCL 201 (b) provides for the formation of four types of not-for-profit corporations: Type A, Type B, Type C and Type D.

. When the acts at issue occurred, the NYSE was a Type A not-for-profit, which is one which may be formed for any nonbusiness purpose including, but not limited to, any one of the following nonpecuniary purposes: civic, patriotic, political, social, fraternal, athletic, agricultural, horticultural, animal husbandry and for a professional, commercial, industrial, trade or service association.

. The Sheehy three-part test asks: “(1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme” (73 NY2d at 633).

. The Attorney General’s common-law claim does not concede, under section 203 (a), that Grasso’s compensation was “otherwise lawful.”