Allannic v. Levin

Appellate Division of the Supreme Court of New York

Allannic v. Levin

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

Appellate Division of the Supreme Court of the State of New York·Decided December 30, 2008·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., [444] 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).]

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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., [444] 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).]

Allannic v. Levin, 57 A.D.3d 443, 870 N.Y.2d 286 (N.Y. Ct. App. 2008).

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Opinion

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