Unit Owner Bombarded Residential Coop with Frivolous Suits: Was Board’s Termination of Lease Protected by Business Judgment Rule?

This was originally published on the SGR Blog.

How much litigation is too much litigation? In a recent case, the Board of a residential coop asked the Court to find that a shareholder/tenant and her husband had overstepped permissible bounds in repeatedly bringing suits claimed to be frivolous and vexatious.

800 Grand Concourse Owners, Inc. sued to evict Charlene Thomson, the shareholder and proprietary lessee of Apartment 4L-N, and James Pettus, her husband who also lived in the apartment. The Board terminated the lease for “objectionable conduct”— including the filing of at least a dozen frivolous civil cases against the coop. The suits forced the coop to incur unnecessary and excessive attorneys’ fees, court costs, and the loss of insurance coverage. At least one court declared Thomson and Pettus to be “vexatious litigants” and prohibited the filing of further suits without judicial permission.

The lease was terminated and eviction proceedings were filed only after months of correspondence and warnings from and by the Board. And, at an in-person meeting, Thomson and Pettus were warned that, unless the conduct ceased immediately, the proprietary lease would be terminated.

Thomson and Pettus moved to dismiss the petition for eviction. The Board cross-moved for summary judgment.

The Court found that the coop established a prima facie entitlement to summary judgment of possession under the business judgment rule. The evidentiary proof submitted established that the Board followed the requisite procedure set forth in the proprietary lease in terminating Thompson’s tenancy on the ground of objectionable conduct, namely, Thompson and Pettus’ vexatious litigation against the coop and its members, as found by several courts, consisting of multiple frivolous and duplicative suits, which caused the coop considerable expense and resulted in the loss of insurance coverage. The record showed that the Board acted within the scope of its authority and in good faith to further its legitimate interests. Evicting tenants who consciously and unabashedly inflict thousands of dollars in unnecessary legal fees was in furtherance of the coop’s legitimate interests.

The record also established that Thompson was provided with multiple opportunities to be heard, to defend, and to abate the objectionable conduct. The Board listened to Thompson but found that, after many chances given, the conduct continued unabated despite her promise to curb Pettus’ actions.

Thomson and Pettus failed to raise any factual issue as to whether the Board acted outside the scope of its authority, in a way that did not legitimately further its corporate purpose, or in bad faith. And therefore, The Board’s decision to terminate the tenancy was protected by the business judgment rule.

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