Find out Who is Protected by the Business Judgment Rule

This case involved claims by the owner of a N.Y. Co-Op (“Owner”) against the Co-Ops board of directors (“Board”) and managing agent (“Manager”) for damages based on a failure to properly maintain the exterior of the building.

In 2010, Board became aware of a crack in the building’s façade. Board hired a contractor to caulk the crack periodically as needed in lieu of more extensive and costlier repairs. In 2017 and 2018 Board learned of substantial internal damage to the façade that was attributed by Co-Op’s architect to the improper installation of air conditioning sleeves in 1984. To remedy the situation, Board decided to undertake a significant repair project that would require a special assessment of approximately $980,000 on the shareholder owners. Unhappy with the prospect of a nearly $1,000,000 assessment on the owners to repair the façade, Owner demanded that Board assert claims against Manager for failing to ensure that the façade was properly inspected and maintained over the years.

When Board refused to take action against Manager, Owner brought suit against Board for failing to properly oversee the inspection and maintenance of the façade and for failing to take action to hold Manager responsible for the inaction that resulted in the damage to the façade. In the action, Owner was seeking to recover as damages, the cost of: