This legal case involves a cooperative building and a shareholder-tenant whose tenancy was terminated due to objectionable conduct. The shareholder challenged the cooperative's decision, arguing that termination can only be done through a court's independent evaluation of the reasonableness of the cooperative's action. However, the court ruled that the business judgment standard governs a cooperative's decision to terminate a tenancy in accordance with the parties' agreement. The defendant's behavior became increasingly disruptive and intolerable, resulting in a physical altercation with his elderly upstairs neighbors. He also made unauthorized alterations to his apartment and refused to comply with Board requests. The court relied on the precedent set in Matter of Levandusky v One Fifth Ave. Apt. Corp. (75 NY2d 530 ). The shareholders voted to declare the defendant's conduct objectionable and directed the Board to terminate their lease and cancel their shares. The Appellate Division granted the cooperative summary judgment, citing the Levandusky business judgment rule, which prohibits judicial scrutiny of cooperative board actions taken in good faith. The Court affirmed the application of the business judgment rule.
The case involves a dispute over the standard of review for a cooperative's termination of a tenancy due to a shareholder-tenant's objectionable conduct. The court applied the business judgment rule, which allows courts to defer to good faith decisions made by boards of directors. The cooperative had the authority to create a proprietary lease with a termination provision, which was properly followed in terminating the defendant's tenancy. The Board acted in good faith and exercised honest judgment in furthering the overall welfare of the cooperative. The cooperative will turn over all proceeds from the sale of the apartment to the defendant after deducting unpaid use and occupancy, costs of sale, and litigation expenses.
The Levandusky standard is deferential to cooperative board actions, but courts must exercise heightened vigilance in examining whether the board's action meets the Levandusky test. The defendant's arguments were deemed without merit and they will be responsible for any associated costs.
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