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How the Rutherford Rewrote Its Future

Lisa Prevost in Legal/Financial on February 3, 2017

Gramercy Park

Docs Revision

The Rutherford co-op, where governing documents were updated with the help of an explanatory booklet (photo by Lorenzo Ciniglio)

Feb. 3, 2017

Two events precipitated James Ramadei’s 2011 decision to run for the board at the Rutherford, a 174-unit co-op at 230 East 15th Street. The sitting board president, who had been in office since the co-op’s conversion in 1981, decided not to run again. And the entrenched board suddenly fired the building’s well-liked superintendent without providing shareholders with any explanation.

“People were just really tired of the board; they were getting involved in people’s personal lives,” says Ramadei, a financial services consultant who has lived at the Rutherford since 1987. “Meanwhile, the things they should have been doing were getting neglected. I wanted to change the government of the building.”

And he did just that. After being elected to the board and chosen for the presidency, Ramadei set in motion a remarkable undertaking that spanned almost three years: a comprehensive review and overhaul of the co-op’s governing documents that culminated in shareholder approval of more than 20 revisions to the bylaws and proprietary lease. Before being asked to cast their ballots, shareholders received a four-color, 50-page bound booklet laying out clear explanations for each of the proposed amendments. The motivation for the booklet was simple: it’s easy to change words, but it’s hard to get shareholders to understand and approve those changes.

That booklet – which cost about $2,000 to produce – was crucial in helping shareholders digest so many changes, says Donald J. Tobias, a commercial litigator and shareholder who wrote most of the explanations. But even more important to the process’s success, he adds, was Ramadei’s decision to appoint a panel of non-board shareholders to review the bylaws and proprietary lease.

“It wasn’t the board ramming this down people’s throats,” says Tobias, who chaired the panel. “Jim allowed another group to have the first shot at this.”

As with most New York co-ops, the Rutherford’s governing documents hadn’t been updated since its formation. Lawyers involved in setting up the wave of conversions in the 1980s often used the same boilerplate language for governing documents, and that outdated language can lead to all sorts of problems, including lawsuits. At the Rutherford, some of that outdated language had begun to interfere with the smooth running of the building, Ramadei says.

One of the biggest issues, he felt, was the provision in the bylaws allowing for cumulative voting in the election of directors. Cumulative voting was frequently put into bylaws at the time of conversion in order to allow the sponsors to maintain representation on the board even after a majority of units had been sold. The process allows a shareholder to vote all shares for one candidate. So in an election with five contested seats, for example, a shareholder with 200 shares might vote all 1,000 shares for one candidate. At the Rutherford, that was allowing a small minority to keep the same board in place for years. “It had to go,” Ramadei says.

And so it went – along with 20 other outdated items in the bylaws and proprietary lease.

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