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WITH RESPECT TO A RESIDENTIAL COOPERATIVE, INDIVIDUAL MEMBERS OF THE BOARD OF DIRECTORS CAN BE SUED BY A SHAREHOLDER FOR BREACH OF A FIDUCIARY DUTY, BUT THE BOARD OF DIRECTORS IS NOT AMENABLE TO SUIT APART FROM A SUIT AGAINST THE CORPORATION (FIRST DEPT).

The First Department, reversing Supreme Court, in a full-fledged opinion by Justice Scarpulla, determined the board of directors of a residential cooperative is not amenable to a lawsuit separate and apart from a suit against the cooperative. Here plaintiff shareholder sued the board of directors for breach of fiduciary duty after the dismissal of a similar suit against the directors individually:

New York trial courts have explicitly held that a board of directors is not an entity that may be sued separately from the corporation … . * * *

Applying the Business Corporation Law … , the residential cooperative board of defendant … is not an entity with the capacity to sue and be sued separate and apart from the corporation on whose behalf it acts. * * *

While a shareholder cannot assert allegations of breach of fiduciary duty against a board of directors, a shareholder may assert the claim against the individual directors … . Here, plaintiff originally brought breach of fiduciary duty causes of action against fourteen of the individual board members and the corporation … . Those causes of action were largely dismissed, and plaintiff may not simply replace those parties with “the board” to revive those now dismissed claims. Tahari v 860 Fifth Ave. Corp., 2025 NY Slip Op 05584, First Dept 10-8-25

Practice Point: This opinion clarifies the law. The board of directors of a corporation is not amenable to suit for breach of a fiduciary duty separate and apart from a suit against the corporation. However, individual members of the board of directors may be sued for breach of a fiduciary duty.

 

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