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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interest as a shareholder in ensuring that the cellar units' nonconformity with the certificate of
occupancy is remedied because, for example, if someone in the cellar were injured in a fire due
to inadequate means of egress and Stable were successfully sued, such a judgment would
negatively impact Stable, and likely cause indirect harm to the shareholders, including Dogwood
LLC. Whether any such call was the best way to attempt to resolve this problem among the
shareholders is, however, another matter.

Although Dogwood LLC's amended 2017 complaint alleges that the Board failed to take any
measures to address the DOB violation, plaintiffs' counsel takes a position to the contrary,
namely that the Board breaches its fiduciary duty to Stable when it takes any steps to address the
issue and ascertain whether the cellar units can be legalized. This Court finds the foregoing
argument troubling, and suggests that Dogwood LLC might not be the best candidate to represent
[*29]Stable derivatively. See generally Gilbert v Kalikow,
272 AD2d 63 (1st Dept 2000), citing G.A. Enters. v Leisure Living Communities, 517
F2d 24, 26-27 (1st Cir 1975); James v
Bernhard, 106 AD3d 435, 436 (1st Dept 2013); Sigfeld Realty v Landsman, 234
AD2d 148 (1st Dept 1996); see
generally Pokoik v Pokoik, 146 AD3d 474, 475 (1st Dept 2017).

However, the cat is now out of the proverbial bag, since the cellar unit shareholders and the
current Board members are aware of the issue, and DOB has been alerted to it. The illegality
must by remedied, irrespective of whether Dogwood LLC's renovation plans warrant approval
and DOB has sufficient staffing to follow up on the violation. If one with knowledge and
responsibility for resolving the problem takes no action and bodily injury or property damage