Adam Leitman Bailey, P.C. Convinces Court to Vacate Temporary Restraining Order and Allow Vital Remediation of Historic Cooperative Property
A historic cooperative in New York was faced with a difficult situation. A number of issues simultaneously confronted the cooperative, including deferred maintenance on the nearly 100 year-old buildings and a costly misinterpretation of city ordinances resulting in fines and requiring remediation, the coop was looking at a significant assessment for all of its shareholders, as well as a disruptive construction plan that would require a number of residents to relocate while the work was being done.
The elected coop board had acted in the best interests of the coop; they hired architects and engineers who performed a great deal of testing and probing of the structures, which in turn revealed additional issues and resulted in ever-increasing estimates of the cost of the work. The board kept the shareholders apprised of the situation as they negotiated with contractors, financial institutions and assorted specialists, including hazardous materials experts and professionals to guide them through the permitting process at the New York Department of Buildings.
The magnitude of the job, as well as the size of the anticipated assessment, caused understandable concern among the shareholders, which the board tried to assuage. But a small group of dissident shareholders ran to court to stop the project, alleging that the board members had conflicts of interest and had breached their duties to the shareholders. The application to the court came at a crucial moment when the board was concluding negotiations over construction and financing and the commencement of the project was imminent.
A judge signed an emergency Temporary Restraining Order (TRO) directing the coop to stop work while issues allegedly raised by the dissident group were litigated. Upon receiving the TRO, the attorneys at Adam Leitman Bailey, P.C. got to work, putting together a counter-application to the court which set forth the herculean efforts undertaken by the coop board in making plans for the project and keeping the shareholders apprised on an ongoing basis of the magnitude of the job, the status of the planning and the potential costs to the shareholders.
Working closely with the members of the board, within two weeks of the original TRO the lawyers at Adam Leitman Bailey, P.C. were able to convince the court that the complaints of the dissident shareholders were false, and that the board members had acted well within their authority and with the best interests of the coop. As a result, the court agreed that the board was entitled to the benefit of the business judgment rule, which says that a judge will defer to
the decisions of a duly elected coop board as long as those decisions were within the board’s authority and made in good faith, and reversed its earlier decision and vacated the TRO. The court confirmed its decision in an appearance by the parties, and the coop has been able to continue with its vital work to remediate and modernize the coop while continuing to address the concerns of all of the shareholders.
Partners John M. Desiderio and Laurence Sklaw, together with Associate Nurie Metodieva, are the Adam Leitman Bailey, P.C. attorneys who worked on the matter.