Board Of Managers’ Lawsuit Dismissed Because Board Failed To Vote To Authorize Commencing Litigation
The Board of Managers of a Condominium is authorized to commence and maintain litigation on behalf of the Condominium. However, to properly commence litigation, the Board of Managers must decide to do so by a board action. Where the Board of Managers fails to vote to commence litigation at a duly convened board meeting, the Board lacks capacity to sue and the action will be dismissed. Board of Managers of Clermont Greene Condominium v. Vanderbilt Mansions, LLC, 2014 N.Y. Slip Op. 51023 (Sup. Ct. Kings Co. July 2, 2014).
In this case, the Board of Managers sued the Sponsor, alleging defects in the construction of the condominium building and asserting claims including breach of contract, breach of warranty, and breach of fiduciary duty. The Sponsor moved to dismiss the action on the ground that the Board had never voted to file the lawsuit. In its opinion, the court held that the Board of Managers would have standing to bring a properly authorized action based on the allegations in its complaint. The court also noted that the statute regulating condominiums contains no express requirement that a Board must conduct a vote or adopt a resolution to authorize litigation.
Nonetheless, the court observed, the legal effectiveness of Board actions is predicated upon the Board’s acting as a body within the constraints of the Condominium’s governing documents, such as the By-Laws, so that a Board lacks capacity to sue unless it has authorized such action in the manner permitted by the By-Laws. In this case, the By-Laws provided that the Board may take an “action” only by either a majority vote taken at a meeting, or by adoption of a resolution outside a meeting if all Board members consent in writing. Here, one of the Board members submitted an affidavit asserting that the Board never voted to commence this lawsuit at a meeting, nor was the Board member ever asked to sign a unanimous-consent resolution outside a meeting. (In a footnote, the court added that there was no evidence the President of the Board had authorized the litigation, which one court has held sufficient in the analogous context of a corporation.) Because “some form of vote is clearly required in order for the Board to act” and no such vote had taken place, commencement of the action was unauthorized and accordingly the action was dismissed.