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Habitat Magazine July/August 2020 free digital issue

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ARCHIVE ARTICLE

Getting the Hook

There may be one in every crowd but when he or she ends up on your board, it’s one too many. Commonly known as “the troublemaker,” they can run the gamut from nuisance to nutcase and, depending on degree, can make life extremely unpleasant for all.

The good news for long-suffering co-op.condo boards is that there is a methodology for removing real troublemakers. As one Manhattan co-op recently found out, the bad news is that it very often comes at a cost, both emotional and financial.

According to a member of that co-op’s board, the behavior of one director was “so disruptive and egregious” that the board was literally unable to function and had to take action to remove him. “The kinds of people who cause these sorts of problems are not shrinking violets. Once someone like this is empowered, they are not going to go away unless you aggressively act to remove them,” he says.

To an extent, the board was lucky because the person in question was already known in the building as a problem case. Consequently, shareholders were less likely to sympathize with him. In fact, the police were called in a number of times because of excessive noise and questionable renovations being made inside his unit without board approval and proper legal documentation.

“The board member was in violation of some of the provisions of his proprietary lease and the house rules,” notes David L. Berkey, managing partner at Gallet Dreyer & Berkey and the co-op’s attorney in connection with the removal process. “When the board tried to get him to cure his defaults, it led to a lot of hostile reactions.”

Those responses included screaming, cursing, and yelling during meetings, which effectively brought them to a standstill. On the advice of its lawyer, the board finally excluded him from meetings so it could operate. The board also started a process to terminate his lease and bring an eviction action. In this and most similar cases, a special shareholders meeting must be called, and a majority vote by the shareholders secured at that meeting, to remove a board member. Prior to the meeting, the board must prepare a special “charges and specifications” document for shareholders outlining all of the reasons why this is a necessary action. At the meeting, both sides present their cases and the shareholders vote.

In this situation, the troublemaker responded to the board’s actions by countersuing: he filed lawsuits against the building, the individual board members, and the managing agent. “He sought damages from the board for ‘wasting corporate assets,’ for terminating his lease, and for bringing an eviction action against him as well as an order permitting him to attend board meetings,” Berkey notes.

The troublemaker sought an order to “show cause,” allowing him to bring a motion to obtain a temporary restraining order and preliminary injunction to prevent the co-op from bringing a summary proceeding evicting him. The judge refused to sign his order and would not grant such temporary relief. The board member then sought an order preventing the co-op from holding the special shareholders meeting to remove him from the board.

Since the judge refused to prevent the special shareholders meeting, the troublemaker was removed from the board by 94 percent of the vote. Berkey says the troublemaker then sought an order to allow him to amend his complaint to add a claim for libel, based upon the “charges and specifications” language presented to the shareholders. This was denied by the court, but the original lawsuits were still pending in early June.

“I don’t think a board engages someone on this level unless they feel they have no choice. The person has to create a large amount of havoc before you take action,” advises the beleaguered fellow board member. “It’s a battle and you can’t enter it unless you are resolved to win and you can’t give up if the going gets tough.”

He cautions that this is not for the faint of heart and whatever you think the time and emotional requirements will be to stay the course, “they will be much more.”

Financially, there may be issues, as well. Although board members who are sued are protected from damages under the directors and officers’ liabilities insurance policy, they are not covered for attorney’s fees and those can cost shareholders a bundle.

That said, are there ways to avoid taking such a drastic step? “It’s the way you approach these things that determines the outcome to a large extent,” observes Arthur Davis, a managing consultant in corporate planning and a former cooperative board president himself. “Have you taken the right steps? Do you have consensus amongst the other board members? Have you clearly defined the issues?”

Davis notes that the board needs to agree on its threshold of tolerance of inappropriate behavior from a fellow member. When it is reached, it must act immediately. “Seek the advice of the managing agent, co-op attorney, and proceed judiciously. But you must proceed.”

Berkey advises that all board members should be made aware they are fiduciaries that are responsible to the shareholders, and their behavior should set an example. Some buildings even have a code of conduct for board members, a move highly recommended by professionals.

“If someone is disruptive and causes trouble, they should be warned that if it does not stop they run the risk of being removed from the board,” says Berkey. He cautions, however, this cannot be done “willy-nilly.” All legalities must be observed and the troublemaker given a chance to respond.

Unfortunately, observes Davis, contentious behavior on a board happens “all the time,” and getting a group to work well together often takes a tremendous amount of effort. But the alternative is a dead end. Or, as one of America’s founding fathers, Ben Franklin, put it in another context, “We must all hang together. For if we don’t, we shall all surely hang separately.”

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