Cascading Conflicts Finally Brought Her Down

By James Woods
Managing Partner

James Woods, Woods Lonergan

Conflicts between boards and the building’s shareholders or unit-owners are nothing new in New York City. But once in a long while, these disputes wind up going to trial. You’re familiar with a recent case. What was the nature of the beef? 

The essence of the complaint was that the sponsor controlled the board. In 1986 the building submitted an offering plan to become a condominium, and the sponsor had control of the building for five years or so. She wound up putting family members on the board and giving out contracts to family members to be the management company. It was self-dealing.

What did the unit-owners do?

They filed a lawsuit, a derivative action, on behalf of the condominium. They wanted to hold the sponsor and the board to task for what was going on. The case has an interesting procedural history. Initially, the New York Supreme Court wound up dismissing the complaint. The amended complaint then went up to the Appellate Division, which said: “The lower court erred. We’re going to send this back. We’re not going to allow the business judgment rule to bar the court from examining whether or not these self-dealings were breaches of fiduciary duty, or if they were breaches of contract.”

About the Author

James Woods, Managing Partner of Woods Lonergan, holds more than 25 years of experience in corporate, real estate, and business legal matters. His expertise in handling negotiations, litigation, jury trials, and all forms of alternative dispute resolution spans multiple areas, including corporate, real estate, and commercial litigation. James actively represents dozens of Cooperative and Condominium Boards and serves as counsel to many Corporate Boards. Prior to founding the firm, James proudly served as an Assistant District Attorney for Nassau County and handled both jury and bench trials. With experience that also covers sophisticated transactions and complex acquisitions, James also serves as counsel to several domestic companies in a range of industries and commercial arenas, including real estate, insurance, banking, transportation, and construction. If you have any questions about this article you can contact attorney James Woods through his biography page.

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