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The New York Times
Real Estate
http://www.nytimes.com/2006/12/03/realestate/03home.html
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Court Ruling Protects Buildings’ Boards
By JAY ROMANO
Published: December 3, 2006
AN appellate court ruling issued last month gives New York co-op and condominium board members the ability to do their jobs without fear of being held personally liable for decisions made in good faith on behalf of their buildings.
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Illustration by Tom Bloom
“This decision has far-reaching implications for thousands of New Yorkers who own apartments in co-ops and condominiums,” said Lawrence D. Bernfeld, a Manhattan lawyer who represented the condominium and its board of managers in the case.
“The court has confirmed that people who volunteer to serve on boards do not have to live in fear of personal financial peril as long as they act in good faith and do not commit an independent wrong against their neighbors,” Mr. Bernfeld said.
In its Nov. 21 ruling in the case, Pelton v. 77 Park Avenue Condominium, the Appellate Division, First Department, dismissed a $23.5 million lawsuit brought by an apartment owner against the condominium association, its board, its management company and each of the nine board members.
Dean Pelton, who owns one of the 104 condos at 77 Park Avenue (at 38th Street), asked the board to make it easier for him to navigate steps in the building because he has muscular dystrophy. The board, acting on the advice of its architect and lawyers, provided a temporary solution by installing a portable motorized “stair climber.”
As a permanent solution, the board sought, and received, approval from unit owners for a $130,000 plan to install self-operating “mini-lifts,” one on each side of the lobby, that can be used to reach the passenger elevators. The plan also included a modification of the front entrance to eliminate the step there.
But Mr. Pelton contended that the board discriminated against him by failing to resolve the problem for more than two years and sought $23.5 million in damages in State Supreme Court in Manhattan.
After the trial court judge rejected a motion to dismiss the case, the Appellate Division, First Department, which has jurisdiction over Manhattan and the Bronx, reversed that ruling and dismissed the complaint.
Justice Joseph P. Sullivan, writing for a unanimous court, said the business judgment rule, applied to co-op and condo boards by a 1990 Court of Appeals decision, prohibits courts from second-guessing the actions of corporate directors “taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes.”
Justice Sullivan said that nothing in Mr. Pelton’s allegations would provoke judicial scrutiny of the board’s action.
He noted further that in bringing an action against the nine board members individually, Mr. Pelton was required to “plead with specificity” the discriminatory acts each member had committed. He concluded that Mr. Pelton had “failed to show that any board member, much less each board member, has engaged in individual wrongdoing.”
Marc Luxemburg, a Manhattan lawyer who filed a “friend of the court” brief in the case on behalf of the Council of New York Cooperatives and Condominiums, said its outcome sent an unambiguous signal that volunteer board members should not be intimidated by threats of litigation.
“This case sends a strong message that you can’t sue board members individually just because they’re board members, even in discrimination cases,” Mr. Luxemburg said. “It puts a stop to the tactic of plaintiffs’ lawyers attempting to browbeat board members into submission or settlement by suing them personally.”
Jay Gurfein, the Manhattan lawyer who represented Mr. Pelton, said: “We view this as a victory for the plaintiff. We got the condominium to make the building handicap-accessible, and that is what we wanted.” He added that his client had not decided whether to appeal. -->
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