Cooperative Board’s Denial of Plaintiff’s Application to Sell His Shares in the Cooperative Was Not Tainted by Discriminatory Considerations—Denial Protected by the Business Judgment Rule

The Second Department determined the board of a cooperative dwelling acted within the scope of its authority (pursuant to the business judgment rule) when it denied plaintiff’s application to sell his shares in the cooperative to a specific buyer.  Although the board’s action would not be protected by the business judgment rule if it were tainted by discriminatory considerations, the court concluded there was no evidence discriminatory considerations played a role in the denial:

“In the context of cooperative dwellings, the business judgment rule provides that a court should defer to a cooperative board’s determination [s]o long as the board acts for the purposes of the cooperative, within the scope of its authority and in good faith'” … . ” [D]ecision making tainted by discriminatory considerations is not protected by the business judgment rule'” … .

Here, the cooperative demonstrated its prima facie entitlement to judgment as a matter of law dismissing the complaint by establishing that its denial of the resale application was protected by the business judgment rule … . In particular, the cooperative demonstrated that its denial of the resale application was authorized, and done in good faith and in furtherance of the legitimate interests of the cooperative, in light of significant debt the prospective buyer held relating to a separate property. The evidence the plaintiff submitted in opposition to this showing was insufficient to raise a triable issue of fact as to whether the resale application was actually denied for a discriminatory reason, or any other reason not protected by the business judgment rule. Griffin v Sherwood Vil., Co-op “C”, Inc., 2015 NY Slip Op 06112, 2nd Dept 7-15-15