Frank Lovece in Board Operations on December 16, 2011
The case of Elizabeth Weston Murphy v. 14 Sutton Tenants Corporation began on April 30, 2010, when bulldog Theo — one of two dogs the writer owns, along with golden retriever Kodi — bit Lola, a wire fox terrier owned by a fellow resident, Jane Herrick, on the tail, resulting in a $600 veterinary bill that Weston paid. Herricks' husband, Ed Wollman, told the New York Post, "Her dogs have attacked multiple times. . . . In the spring, my wife was in the elevator and . . . her bulldog was in the hall with no leash and it went hog wild. The bulldog tore into the elevator and attacked Lola."
Weston, who has lived in the building 11 years, has said that Lola was the instigator, and that Theo is normally such a gentle animal that both he and Kodi are official therapy dogs registered with the Delta Society, and have been used to calm and to cheer up sick children at both New York Presbyterian Hospital and Ronald McDonald House.
Regardless, the board had to respond to the attack. After weighing the competing concerns, it found Theo "an unruly, ill-behaved dog." The board directed that Weston must use choker leashes on both dogs and take the service elevator when accompanied by them, even though all of the building's other dog-owners except one use the passenger elevator.
Weston — who couldn't be reached for this story — sued in February, claiming that the board and individual members Judith Saffer, Linda Fargo, Amy Bonoff, Amy Bender, Salvio Flemmo, Robert Lope and David Officer breached their fiduciary duty to her and intentionally inflicted emotional distress upon her. She contended that as a result of their bad-faith dealing, the board members weren't insulated from individual liability under the Business Judgment Rule .
The board, for its part, cited numerous instances of Weston violating the new rule "and ongoing complaints by neighbors, as to Theo’s unsafe and unsanitary conduct," according to the court.
Unleashing the Board
Judge Emily Jane Goodman gave a split decision on Nov. 23. She noted that the Business Judgment Rule as it applies to co-ops and condos, formalized in Levandusky v. One Fifth Ave. Apt. Corp. (1990), requires courts to "exercise restraint and defer to good faith decisions made by boards of directors in business settings," quoting Pelton v. 77 Park Ave. Condominium (2006), which involved a presumably unincorporated condo association and not a cooperative corporation.
The judge also pointed out that the Business Judgment Rule is not an "insuperable barrier," and that it "permits review of improper decisions, as to when the challenger demonstrates that the board’s action . . . deliberately singles out individuals for harmful treatment."
Weston certainly felt they did that. So the judge looked at what's required for the court to look into things further. Quoting the landmark court decision in 40 West 67th Street vs. Pullman (2002), Goodman said, "an aggrieved shareholder-tenant must make a showing that the board acted (1) outside the scope of its authority, (2) in a way that did not legitimately further the corporate purpose or (3) in bad faith."
Now, following a 1994 decision by the state's highest court, a plaintiff — the person filing the lawsuit — has to be afforded the benefit of the doubt: "We accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference," and only have to make sure the alleged facts fit within the scope of law. In other words, you have to believe a plaintiff when he says he's cooking meth, but that doesn't mean he can sue the landlord for not allowing him to cook meth.
So Judge Goodman accepted Weston's claims in good faith. Now, are board members insulated from individual liability in such a case? In order to overcome the Business Judgment Rule, Goodman said, citing past cases, that her claims would have had to specifically allege "independent tortious acts" (a "tort" being any wrongful act other than breach of contract). And since Weston didn't allege any independent wrongful conduct by any individual board member, case dismissed … but only as far as the individual board members were concerned.
As for the rest of the case, well, as far as judge is concerned, every dog will have his day — in court!
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