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Q&A: Curbing the Complaints

Q. We have a shareholder who has filed several frivolous and vindictive complaints against the cooperative with various city agencies. While he always loses, these complaints have cost the cooperative money in attorneys’ fees. His latest complaint is to NYC HPD. He never informed the board or management about any of the problems he now claims exist in his apartment, many of which he could have prevented by, for instance, availing himself of our free exterminator services.

Is the board permitted to name him in a newsletter to the shareholders, particularly informing them that his actions have cost them money? Are HPD complaints considered “public” such that they may be fully disclosed by the board?

A. “A much better remedy to stop this shareholder from frivolously making these claims is to review your corporate documents and look for the typical legal fee provision which awards you legal fees upon having to defend yourself against a claim or case or prevailing in such a claim,” says attorney Adam Leitman Bailey, founding partner of the New York firm Adam Leitman Bailey, P.C. “If in your corporate documents, such legal fees are also supported in 234 of the Real Property and Proceedings Law (RPAPL). And if somehow you are unable to collect legal fees at this time under your bylaws or offering plan, you may want to take the steps to amend those documents so you can do so in the future. Based on the number of cases this person is starting, you will fill your coffers with money for beneficial items for the building [when the co-op collects the legal fees and any compensatory damages associated with the shareholder’s claims], and eventually I recommend suing for an injunction seeking declaratory relief demanding that this conduct stop – and have him pay for those legal fees as well. In addition, if he does not pay these legal fees, and your cooperative law firm also has a landlord-tenant practice, they will call the legal fees ‘additional rent’ – and the firm can sue for legal fees in Housing Court and move to evict him if he does not pay.

“There is no law prohibiting you from naming this shareholder publicly – but if somehow you are incorrect in what you publish, and you are sued for defamation or libel/slander by the objectionable shareholder, New York Law prohibits insurance companies from insuring board members for lawsuits for intentional torts, such as defamation. So I would strongly advise against the naming of the shareholder in a public newsletter. Also, [rather than being] a preventive measure to stop this shareholder, you will likely cause him to be outraged and continue to harass the board with a fury you have not seen before. This will not end well, and you will most likely end up spending legal fees starting a Pullman case against the shareholder.

“The above are your weapons other than publicly shaming, which has only caused ‘terror’ every time it has been used in the past.”

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