Court Dismisses Shareholder's Attempt to Dismiss Lawsuit over Apartment Leak

It sometimes takes going before a judge to get leaks and other types of issues between shareholders resolved, and it’s not uncommon for shareholders to try to get the case dismissed. But, as the board and the Stouts learned in this case, their evidence needs to be more than an exchange of emails (390 Riverside Owners Corp. v Stout).

THE BACKSTORY  

The cooperative at 390 Riverside Drive is a 15-story building in Morningside Heights with sweeping Hudson River views. The Stouts have lived in apartment 5E since 1973, seven years before the building became a co-op. In October 2018, they were notified that apartment 4E, directly below theirs, had water damage stains on a section of the living room and bathroom ceiling. The managing agent directed the Stouts to stop using the master bathroom sink for a period of time, which they say they did. 

Nearly a year-and-a half later, the managing agent and a plumber requested access to the Stouts’ apartment to inspect the master bathroom for a possible source of the leak. The plumber concluded that the drain pipe needed to be repaired or replaced as soon as possible in order to avoid additional leakage, damage to 4E, and possible mold growth. The super asked the Stouts to make extensive use of the sink and tub/shower for a week so he could conduct a moisture test. According to an email from the super, the test indicated that the moisture reading was normal.

A few months later, however, the co-op’s managing agent requested access so that the co-op’s plumber could perform a dye test. The Stouts and the co-op disagree about the scheduling details, and when the super and plumber showed up at the Stouts’ door, the couple refused to provide access.

The co-op took the next step and sent a letter from its attorney directing the Stouts to contact the building’s super or managing agent to arrange access for the plumber to perform the necessary repairs. The Stouts feared the plumber was going to tear up their master bathroom, and responded by hiring their own attorney. The co-op sought injunctive relief to allow for access to carry out repairs and a declaratory judgment relating to the same, and claims breach of the proprietary lease for failure to provide the Stouts failure to provide access. 

THE RULING   

The Stouts moved to have the case dismissed, but the court ruled that the co-op had made sufficient allegations to support its claim of a breach of the proprietary lease. The lease explicitly allows the co-op to enter the apartment and make repairs to fix any defects. The court also held that the Stouts cannot dismiss the case by relying on emails from the building superintendent discussing moisture testing. It determined that at the motion to dismiss stage, these emails are not admissible as evidence, as they do not qualify as “party admissions.” In this case, the emails only reflect the super’s opinion and do not meet the standard of traditional documentary evidence, such as official records or contracts, that can be used to dismiss a case. 

THE LESSON FOR BOARDS  

While it was probably worth the shot at moving to dismiss based on what seemed to be fairly damning emails that there was no leak damage in apartment 4E coming from 5E’s bathroom, ultimately courts are often hesitant to rely on board emails in a motion to dismiss as documentary evidence. Here, maybe if a moisture expert, or even a plumber, had undertaken the same testing as the super and issued a report, it is possible such would have been more appropriately relied upon as documentary evidence on a motion to dismiss.  Still, the shareholders of Apt. 5E face an uphill battle, as the proprietary lease plainly provides the co-op access to examine the pipes in apartments in order to find and fix leaks.

COUNSEL 

For 390 Riverside Owners Corp.: Seyfarth Shaw

For the Stouts: Davidoff Hutcher & Citron and Gallet Dreyer & Berkey

Richard J. Shore is an attorney at the law firm Nixon Peabody. The statements and views in this article are his own and not necessarily those of the firm.