Business Judgment Rule

Levandusky v. One Fifth Avenue

In 1987, Ronald Levandusky decided to alter the kitchen of his co-op apartment. He was president of the co-op. Levandusky hired a contractor, who severed and jogged the kitchen steam riser although this had not been disclosed in any plans or approved by the board. In august 1988, when the board learned of this, it issued a stop-work order. Levandusky brought suit, claiming the board’s decision not to allow a change in the riser was unreasonable. The court decided the Business Judgment Rule governed the actions of the board.

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"Boards have broad authority to manage the affairs of the cooperative or condominium, but their authority is not unlimited, and they have to be careful not to exceed their authority. One of the principal guidelines for board decision-making is the Business Judgment Rule set forth in the Levandusky case. Here, the fundamental rule for boards to follow – in virtually all instances – is made clear."

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