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Unknowns of Litigation Could Outweigh the Possible Rewards

William D. McCracken in Legal/Financial on March 22, 2022

New York City

Co-op and condo boards, litigation against shareholders and unit-owners.
March 22, 2022

When my co-op and condo board clients decide to start a lawsuit against one of their tenant-shareholders or unit-owners, they want to know what the litigation will be like. Will they win? How long will it take? How much will it cost? The answers to those questions are rarely satisfying because litigation can be uncertain, inefficient and expensive. Here are the five questions co-op and condo boards need to ask — and answer — before they file a lawsuit.

What is our likelihood of success? The answer to this question obviously depends on the specific facts and circumstances, but here are a couple of reasons why it is so difficult to predict the outcome: the court might make close calls against us; and sometimes the judge just gets it flat wrong, as in “2 + 2 = 5.” Clients can have a hard time understanding that due to the inherent randomness of litigation, the “right” side does not always win. That is why, when boards interview potential litigation attorneys, they shouldn’t necessarily choose the most “optimistic” candidate, because the lawyer may not be presenting the most realistic appraisal of the client’s chances of success.

How long will the litigation take? The answer to this question is almost always “much longer than you think it should.” Right now, I have a two-year-old case against a tenant that probably will not be tried for another two years. I have another case that was started last September but will not see a judge before the end of June of this year at the earliest. Litigation in New York has never been swift, but the backlogs and staffing shortages caused by the pandemic have slowed the system to a crawl.

How much will it cost? Litigation can be expensive for many reasons, all of which are exacerbated by slow and unpredictable courts. I recently inherited a case with more than a dozen boxes of litigation files — and hundreds of thousands of dollars in legal fees — that had begun life as a “simple” nonpayment proceeding. When filing a lawsuit, it’s impossible to know whether costs will stay manageable or spiral out of control. Even in cases where the board is theoretically entitled to recover its legal fees, this is not necessarily guaranteed to happen.

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Should we sue our neighbor? Co-op and condo litigation can be especially unpleasant because it involves neighbors suing neighbors. If the Ace Corp. sues Acme Inc., the principals might never see each other. When a board sues one of its residents, however, board members may encounter their adversary at any time in the lobby, in the elevator, in the laundry room — or at the next board or shareholders’ meeting. In my experience, board members underestimate how personally difficult it is to live this way. I have known board members who had to resign because the sustained social discomfort generated by a lawsuit against a neighbor became too much for them to endure.

Is there another way to resolve our dispute? Fortunately, the community character of co-ops and condos can help resolve disputes without litigation. Social pressure can be brought to bear on wayward residents. Board members can use lines of communication among mutual friends to break deadlocks. Managing agents with sufficient poise and gravitas can mediate disputes without bringing in the lawyers. 

Of course, disputes with shareholders or unit-owners are inevitable, and sometimes boards have no choice but to bring a lawsuit after other alternatives have been exhausted. But if boards have a clear-eyed understanding of the limits of the court system, they may choose not to litigate disputes in cases where the unknowns outweigh the possible rewards.

William D. McCracken is a partner at the law firm Ganfer Shore Leeds & Zauderer.

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