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Court Grants Attorney General’s Application To Compel Condominium Sponsor To Call A Meeting And Adopt A Resolution

The New York courts continue to address cases requiring interpretation of the Martin Act (General Business Law Article 23-A) insofar as it governs cooperatives and condominiums. Among other things, the Martin Act gives the Attorney General of the State of New York the authority to regulate, investigate and take enforcement action against sponsors in connection with marketing and public offering of cooperative shares or condominium units, as well as the sponsor’s operation of the building and the board of directors or board of managers.


In Schneiderman v. 15 Broad Street, LLC, Index No. 450454/14 (Sup. Ct. N.Y. Co. Apr. 29, 2014), the court reaffirmed that on application of the Attorney General, the court may grant a preliminary injunction compelling the sponsor to call a board meeting at which the sponsor-designated board members must adopt a specific resolution drafted by the Attorney General to ensure the Condominium’s compliance with the Martin Act.  In upholding the preliminary injunction, the court distinguished two sections within the Martin Act, each of which authorizes preliminary injunctive relief at the Attorney General’s request.  In this case, the Attorney General relied on GBL § 354, which authorizes such relief while the Attorney General is conducting a Martin Act investigation and it is “proper and expedient” to grant an injunction pending completion of the investigation.  Here, the resolution prescribed by the Attorney General required the Board to delegate its decision-making authority over the residential portion of the Condominium to a previously established committee of independent directors.


The court emphasized that the Attorney General’s burden in seeking an injunction under GBL § 354 is lower than when an injunction is sought after the investigation has been completed. At that stage, the applicable statute is GBL § 357, under which the ordinary standard for obtaining a preliminary injunction under the Civil Practice Law and Rules (CPLR) will be applied.