Advisories

Tenant-Shareholder Is Not Entitled to Books and Records Access to Develop Evidence for a Lawsuit That Has Already Been Dismissed

A tenant-shareholder is not entitled to access to a Cooperative’s books and records for the purpose of obtaining documents for use in a lawsuit, where the court has already dismissed that lawsuit. Ciccone v. One West 64th Street, Inc., 2018 N.Y. Misc. LEXIS 2662, 2018 N.Y. Slip Op. 31372 (Sup. Ct. N.Y. Co. June 25, 2018). 

This is the most recent decision in protracted litigation between plaintiff (the entertainer Madonna) and the Cooperative in which she owns a unit.  In 2016, plaintiff sued the Cooperative seeking a declaratory judgment that certain amendments to the residency provisions of the proprietary lease, which had been adopted by the board of directors and the shareholders in 2014, were invalid.  In 2017, the court dismissed the declaratory judgment claim, holding that the challenge to the proprietary lease amendments should have been brought as an Article 78 proceeding and was untimely under the four-month statute of limitations for such proceedings.  (Plaintiff has appealed from this decision.)

In the same complaint, plaintiff sought access to the Cooperative’s books and records, pursuant to both Business Corporation Law § 624 and New York common law.  The Cooperative provided meeting minutes and a shareholder list, but declined to turn over other documents and asserted that her request was not made in good faith or for a valid purpose.  Plaintiff asserted that the purposes of her request were to investigate how and why her lease was amended, whether the Board complied with the By-Laws in making the amendment, and how her family could use the unit without breaching the amended proprietary lease.

The court held that plaintiff was not entitled to the additional records she sought.  The court observed that “[t]he common-law right of inspection of corporate records is broader than the statutory right and can go beyond the specific materials delineated in” the Business Corporation Law.  However, “[t]his common-law right is subject to the motion judge’s discretion.  When asserting a common-law right of access, petitioner must plead and prove that the inspection is desired for a ‘proper purpose.’”

Here, plaintiff was seeking records relating to legal claims that the court had already rejected.  “Plaintiff does not need those materials anymore to prove a case that, by law, she is no longer allowed to prove.  To seek the records at this phase is merely harassing.  Plaintiff is unable to demonstrate that she is entitled to the additional records.”

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