Appeals Court Limits Liabilities of Board Members of Co-op Corporations

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On Thursday, the Appellate Division, First Department affirmed a lower court ruling dismissing a petition for injunction against several members of the board of directors of a residential society. The court held that in order to sue individual board members of a co-operative corporation, plaintiffs would need to show “independent tortuous acts” committed by such board members.

The court remarked, “As a general matter, courts are prohibited from inquiring into the propriety of actions taken by a director on behalf of the corporation.”

In the instant matter, Robert and Champa Weinreb sued the boards along with several individual board members after years of altercation over renovations to their apartment. The plaintiffs held that the board had blocked their plans of renovation unreasonably, and extensive renovations were required to make the apartment properly habitable.

  

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However, the court held that the terms of the lease required the consent of the cooperative corporation and not the consent of its individual directors. Therefore, the claims could be aimed at the board, but not at the individual board members as many of them may not be there when the case is decided and relief, if any, is granted.

The lawyer on behalf of the individual board members, Steven Sladkus, said that the ruling would prevent plaintiffs from unfairly targeting individual board members.

Sladkus said, “This ruling helps continue the trend of the courts of New York State in making it more and more difficult to name board members ad defendants in lawsuits … from a legal point of view, if the corporation loses the case, the court can order the corporation to sign the forms. Then the corporation, by whoever is running it, would sign the forms. There’s no need to name them.”

The case is Weinreb v. 37 Apts. Corp., Appellate Division, First Department, No. 7004.