| Pomerance v McGrath |
| 2015 NY Slip Op 00466 [124 AD3d 481] |
| January 20, 2015 |
| Appellate Division, First Department |
[*1]
| Brenda Pomerance, on Behalf of Herself and in theRight of 310 West 52 Street Condominium Association,Respondent-Appellant, v Brian Scott McGrath et al.,Appellants-Respondents. |
Kagan Lubic Lepper Finkelstein & Gold, LLP, New York (Jesse P. Schwartz ofcounsel), for appellants-respondents.
Law Office of Brenda Pomerance, New York (Brenda Pomerance of counsel), forrespondent-appellant.
Lawrence P. Simms, amicus curiae pro se.
Order, Supreme Court, New York County (Barbara Jaffe, J.), entered June 30, 2014,which, to the extent appealed from as limited by the briefs, (1) granted plaintiff's motionfor leave to amend her amended complaint to the extent of accepting the first, third, fifth,eighth, tenth, eleventh, twelfth, thirteenth, fifteenth, and seventeenth causes of action inthe proposed "Verified Second Amended Complaint (Revision 1)," (2) denied the motionto the extent of striking the second, fourth, sixth, and ninth causes of action without leaveto replead and the seventh cause of action as against Robert J. Braverman without leaveto replead, and (3) denied defendants' motion for summary judgment on the fifth cause ofaction of the amended complaint, unanimously modified, on the law, to also strike thefirst, third, fifth, eighth, tenth, eleventh, twelfth, and seventeenth causes of action, andotherwise affirmed, without costs.
Plaintiff was not prohibited from amending her amended complaint, and plaintiff'smere lateness in moving to amend is not a barrier to amendment (Edenwald Contr.Co. v City of New York, 60 NY2d 957, 959 [1983]). Nor have defendants shownthat they were prejudiced by plaintiff's delay (see id.). Defendants' allegedexpenditure of $200,000 in legal fees so far does not constitute prejudice (see e.g. Jacobson v McNeilConsumer & Specialty Pharms., 68 AD3d 652, 654-655 [1st Dept2009]).
However, some of plaintiff's proposed claims are "palpably insufficient or patentlydevoid of merit" (MBIA Ins.Corp. v Greystone & Co., Inc., 74 AD3d 499, 499 [1st Dept 2010]).Indeed, although plaintiff's first cause of action, which alleges that individual boardmembers violated the subject condominium's bylaws, is not time-barred (see Brasseur v Speranza, 21AD3d 297, 297-298 [1st Dept 2005]), it is insufficient. The violation of bylaws isakin to a breach of contract (see Schoninger v Yardarm Beach [*2]Homeowners' Assn., 134 AD2d 1, 6 [2d Dept 1987]),and the "participation in a breach of contract will typically not give rise to individualdirector liability" (Fletcher vDakota, Inc., 99 AD3d 43, 47 [1st Dept 2012]; see also Hixon v 12-14 E. 64thOwners Corp., 107 AD3d 546, 547 [1st Dept 2013], lv denied 22 NY3d862 [2014]). For the same reasons, leave to amend should have been denied as to theeighth cause of action, and as to the tenth, eleventh, and twelfth causes of action insofaras they allege violations of the bylaws as against individual board members.
To the extent the twelfth cause of action alleges that the board violated the bylaws byfailing to "muster[ ] a quorum" of unit owners for the annual election of board members,that claim is insufficient, as plaintiff cites no authority actually imposing such a duty onthe board.
The eighth cause of action is also barred by the business judgment rule. The businessjudgment rule, which applies to the board of directors of a condominium (see Perlbinder v Board of Mgrs. of411 E. 53rd St. Condominium, 65 AD3d 985, 989 [1st Dept 2009]), providesthat a court should defer to the board's determination so long as the board acts in goodfaith, within the scope of its authority under the bylaws, and to further a legitimateinterest of the condominium (see id.; see also 40 W. 67th St. v Pullman,100 NY2d 147, 153 [2003]). Whether the board acted within the scope of its authorityunder the bylaws is a necessary threshold issue (see Perlbinder, 65 AD3d at 989).In the eighth cause of action, plaintiff alleges that the board acted outside the scope of itsauthority under the bylaws because it failed to get approval from unit owners of animprovement costing more than $10,000. However, the bylaw provision on whichplaintiff relies is not applicable to the elevator project at issue, because the project didnot constitute an improvement; rather, it merely involved "the replacement of existingbuilding components that had fallen into a state of disrepair" (Gennis v Pomona Park Bd. ofMgrs., 36 AD3d 661, 663 [2d Dept 2007]).
The business judgment rule also bars the seventeenth cause of action, which allegesthat the board acted in bad faith and for an improper purpose by wasting thecondominium's funds on unnecessary litigation with the Sponsor. The bylaws give theboard the power to negotiate and settle "all claims and actions relating to theCondominium." The issues of how aggressive the board should be toward the Sponsor,and whether it should discontinue a lawsuit against the Sponsor, are matters of businessjudgment.
The tenth and eleventh causes of action as against the board and its members,alleging an improper assessment in violation of the bylaws, are barred by the businessjudgment rule (see Matter of Levandusky v One Fifth Ave. Apt. Corp., 75 NY2d530, 537-538 [1990]).
The thirteenth and fifteenth causes of action, seeking to inspect certain documents,are a permissible repleading of causes of action in the original complaint.
Although a nonclient may sue an attorney for aiding and abetting misconduct (seeJoel v Weber, 197 AD2d 396, 397 [1st Dept 1993]), the motion court properlydenied leave to add the second, fourth, sixth, and ninth causes of action. The second andninth causes of action, alleging that Braverman and his firm aided and abetted violationsof the bylaws, are insufficient. As noted above, violating a bylaw is akin to breaching acontract, and no cause of action exists for aiding and abetting a breach of contract (see Purvi Enters., LLC v City ofNew York, 62 AD3d 508, 509 [1st Dept 2009]).
The fourth cause of action is time-barred. This claim alleges that Braverman and hisfirm aided and abetted the board's violation of Real Property Law § 339-bb,which requires the board to give unit owners written notice of any termination of thecondominium's insurance. Plaintiff alleges that the termination occurred in or aroundOctober 2008. She moved to add claims [*3]againstBraverman and his firm in August 2013. "A claim that a person aided and abetted a tortis governed by the same statute of limitations that is applicable to the underlying tortallegedly aided and abetted" (Hudson v Delta Kew Holding Corp., 43 Misc 3d 1223[A],2014 NY Slip Op 50756[U], *4 [Sup Ct, Suffolk County 2014]). The three-year statuteof limitations under CPLR 214 (2), as opposed to the six-year statute of limitations underCPLR 213 (1), applies to the underlying statutory violation at issue (see Hartnett vNew York City Tr. Auth., 86 NY2d 438, 443-444 [1995]). Accordingly, the fourthcause of action is untimely. For similar reasons, the third cause of action, alleging aviolation of Real Property Law § 339-bb, is time-barred.
The fifth cause of action, ostensibly for fraud, does not state a viable claim for fraud.Rather, this cause of action, brought more than four months after the election in question,amounts to a time-barred attack on the results of that election (see CPLR 217 [1];7801). Moreover, plaintiff's arguments that more candid communications fromdefendants would have led to the election of a new board, and that this hypothetical newboard would have averted the alleged losses, are too speculative to support a claim fordamages.
Plaintiff's sixth cause of action, alleging that Braverman and his firm aided andabetted the board's allegedly fraudulent conduct, is insufficient. A plaintiff alleging anaiding-and-abetting fraud claim must allege, among other things, that the defendantsubstantially assisted in the underlying fraud (Oster v Kirschner, 77 AD3d 51, 55 [1st Dept 2010]).Plaintiff merely alleges that Braverman and his firm failed to act. "[T]he mere inaction ofan alleged aider and abettor constitutes substantial assistance only if the defendant owesa fiduciary duty directly to the plaintiff" (Kaufman v Cohen, 307 AD2d 113, 126[1st Dept 2003]). "[T]he fiduciary duties owed by a limited partnership's attorney to thatentity do not extend to the limited partners" (Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d553, 561 [2009]). Hence, Braverman and his firm—the attorneys for thecondominium, an unincorporated association—do not owe a fiduciary duty toplaintiff, a unit owner and member of the association.
While it was not improper for plaintiff to bring a Judiciary Law § 487claim in this action even though it is based on alleged deceit in a prior action (seeNewin Corp. v Hartford Acc. & Indem. Co., 37 NY2d 211, 217 [1975]; Specialized Indus. Servs. Corp. vCarter, 68 AD3d 750, 752 [2d Dept 2009]), the motion court properly deniedleave to add this claim—the seventh cause of action—due to a failure toallege "a chronic and extreme pattern of legal delinquency" (Kaminsky v Herrick, FeinsteinLLP, 59 AD3d 1, 13 [1st Dept 2008] [internal quotation marks omitted], lvdenied 12 NY3d 715 [2009]).
Since leave to amend was properly granted, at least in part, the motion court correctlydeclined to reach defendants' summary judgment motion, which addressed the priorcomplaint (see Schoenborn v Kinderhill Corp., 98 AD2d 831, 832 [3d Dept1983]; see also Plaza PH2001[*4]LLC v Plaza Residential Owner LP, 98 AD3d89, 99 [1st Dept 2012]).
We have considered the parties' remaining arguments for affirmative relief and findthem unavailing. Concur—Tom, J.P., Friedman, Acosta, Saxe and Kapnick, JJ.[Prior Case History: 2014 NY Slip Op 31686(U).]