Allannic v. Levin

57 A.D.3d 443, 870 N.Y.2d 286

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: December 30, 2008
• Status: Published

Opinion

The business judgment rule does not foreclose inquiry into the disinterested independence of those members of the board chosen to make the corporate decision on its behalf (Auerbach v Bennett, 47 NY2d 619, 631 [1979]). The rule shields such directors only if they possess a disinterested independence and do not have dual relations that prevent an unprejudicial exercise of judgment (id.; Matter of Comverse Tech., Inc. Derivative Litig., 56 AD3d 49, 57-60 [2008]). The defendant housing cooperative board members were not disinterested members when they voted to enter into a lease extension of a master lease pursuant to which all of the shareholders would not be treated fairly and evenly. As such there are questions of fact regarding whether the board engaged in self-dealing and whether its failure to treat all shareholders fairly and evenly constitutes a breach of its fiduciary duties (see Schwartz v Marien, 37 NY2d 487, 491-492 [1975]; Aronson v Crane, 145 AD2d 455, 456 [1988]; Demas v 325 W. End Ave. Corp., 127 AD2d 476, 478 [1987]). Concur— Tom, J.P., Friedman, Gonzalez, McGuire and Acosta, JJ. [See 2008 NY Slip Op 3001(U).]