2018 NY Slip Op 51958

Citation: 2018 NY Slip Op 51958
Jurisdiction: New York (state)
Source verification: cross_accepted_sealed
Original Source: https://www.nycourts.gov/reporter/3dseries/2018/2018_51958.htm ↗

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or parts thereof, surely has economic implications for all of Stable's shareholders.

That two of the three Board members are cellar unit shareholders is problematic in terms of
their conflicting interests, as is the fact that Dogwood LLC, which has asserted derivative claims
involving the cellar units, wants its renovation plans approved by a Board, the majority of which
owns cellar units and whom Dogwood LLC could unfairly attempt to pressure. Yet, irrespective
of whether Dogwood LLC dangles the carrot of dropping any derivative claim in exchange for
approval of its plans, the Board must ensure that the building conforms to the certificate of
occupancy. No other shareholder has offered to step in as plaintiff in connection with any
derivative claim. See e.g. James v Bernhard, 106 AD3d at 435-436. This Court cannot
ascertain from the motion papers the extent to which the other shareholders have been made
aware by the Board, or otherwise, of the potential conflicts on both sides, and the implications
such conflicts may have for Stable.

Moreover, given that the safety of the cellar units' occupants may be imperiled and the fact
that the majority of the Board has conflicting interests and that some additional oversight may be
needed, including to see that Stable's funds are reasonably spent in light of the [*30]probabilities of legalizing the units, this Court does not believe
that the derivative claims warrant dismissal based solely on the assertion that Dogwood LLC is
an inappropriate plaintiff for the derivative causes of action.

Despite the foregoing, the branch of defendants' motion which seeks an order dismissing the
eighth through eleventh causes of action is granted, and such causes of action are dismissed.