If a "precedent" isn't a "legal precedent" then it HAS NO FORCE OF LAW.

If it has no force of law, then you are NOT stuck with it.

I know most board members haven't previously served on corporate boards -- which is what a co-op board is -- but a board is allowed to, and often does, make nimble, flexible decisions that can involve reasonable exceptions to past policy.

Then it becomes a political issue -- but it's not a legal issue.

As long as the board can show it's acting in the best long-term interests of the corporation, is not enriching itself, and it not arbitrarily favoring one shareholder over another, "A board can decide to not enforce a rule," according to attorney Joseph G. Colbert, a partner at Kagan Lubic Lepper Lewis Gold & Colbert, and an adjunct professor at St. John's University School of Law, quoted right here on the Habitat site. Speaking about house rules and bylaws that the board passed, and not amendments to the article of incorporation, "the board, like any political body, can interpret when these rules can be enforced, subject of the approval or disapproval of the residents."

Just because a board gives exception to a quiet, aged cat on defensible grounds doesn't mean it's legally required to allow someone to keep three snarling pit bulls.

JB wrote:
>If a "precedent" isn't a "legal precedent" then it HAS NO FORCE OF LAW.

Who's talking about "force of law"? We're talking about the requirement to treat all shareholders even-handedly.

>If it has no force of law, then you are NOT stuck with it.

Of course you are. From the moment you allow one shareholder to move in with an aging pet for compassionate reasons, every new shareholder from then on will demand exactly the same exception for *their* aging pets. And they will be correct to do so.

>I know most board members haven't previously served on corporate boards
>-- which is what a co-op board is -- but a board is allowed to, and often
>does, make nimble, flexible decisions that can involve reasonable
>exceptions to past policy.

Yes, reasonable. And consistent. And not arbitrary. If you make an exception, you're implicitly agreeing to make the same exception for other shareholders in the same circumstances.

>Then it becomes a political issue -- but it's not a legal issue.

But it *becomes* a legal issue if someone challenges the decision for being capricious and arbitrary. ("You let in his aging pet; now you gotta let in mine!")

>As long as the board can show it's acting in the best long-term interests
>of the corporation, is not enriching itself, and it ***not arbitrarily
>favoring one shareholder over another,***

Aha! You found it! If you allow one person to move in with an aging pet, but not ALL such people, you are indeed "arbitrarily favoring one shareholder over another."

>"A board can decide to not enforce a rule," according to attorney
>Joseph G. Colbert, a partner at Kagan Lubic Lepper Lewis Gold & Colbert,
>[...] "the board, like any political body, can interpret when these rules
>can be enforced, subject of the approval or disapproval of the residents."

Sure, absolutely true. But as you yourself noted above, the board can't arbitrarily favor one shareholder over another when deciding whether to enforce a rule.

>Just because a board gives exception to a quiet, aged cat on defensible
>grounds doesn't mean it's legally required to allow someone to keep three
>snarling pit bulls.

Naturally. But it does mean you're going to be stuck with allowing quiet, aging cats because you've set that precedent. And from a practical standpoint, I'd guess you're going to start getting complaints from people who want to keep quiet, aging dogs as well.

On top of all this, the original poster noted that the prospective shareholder is the son of a board member. To avoid any appearance of a conflict of interest, the board needs to be exceptionally careful to define precisely why an exception is being made.

First you say

>>Who's talking about "force of law"? We're talking about the requirement to treat all shareholders even-handedly. [If it has no force of law, then you are NOT stuck with it.] Of course you are.

No. If it's not force of law, how can you be stuck with it?

No one can make you stuck with anything unless there's force of law behind it.

And as I've repeatedly said, it's not "arbitrary" if you give a justifiable business reason that doesn't violate the law regarding self-interest, etc. As I've also said good will is a tangible corporate asset.

RE: >>it *becomes* a legal issue if someone challenges the decision

Anybody can sue anybody else over anything. That doesn't mean the law is on their side or that they have a case. I can think of a dozen reasons off the top of my head that two situations with quiet, aging cats could lead to completely opposite decisions. I'm sure you could, too.

Only courts can set legal precedent. Not corporate boards. We're doing a disservice to co-op boards by giving them the false impression that they cannot make nuanced, flexible decisions when need be for the long-term good of the co-op.

I think the best example of that may be the board maybe three years ago that demanded a shareholder remove a small U.S. flag magnet from his door, put up in the wake of 9/11, citing co-op rules. This became a cause celebre that embarrassed the co-op on TV and in national newspapers, affected potential buyers' perception of the co-op, etc. -- all bad things for the long-term business of the corporation. The board eventually came up with -- you guessed it -- a nuanced, flexible response that solved everyone's problems. THAT'S what we should be encouraging boards to do, and not simply make unthinking, kneejerk decisions out of fear of some non-existent "precedent."

I'd love to know what you think of the above example.

I think we should move on to another topic. The horse is dead...

Bob

It's interesting that you bring up the Willoughby Walk case, as it illustrates precisely the points I've been making. The case is pretty much as you describe it: a guy had had a flag magnet on his door for years, but one day the board decided to start enforcing their "No decorations on doors" rule and ordered him to take it down.

Predictable embarrassment resulted. The board knew they couldn't just say, "Okay, THIS guy can have his flag magnet, but no one else can have any door decorations!" This would favor one shareholder over another, which is both intrinsically unfair and a violation of NY BCL Sec. 501(c).

The solution that the board devised was anything but "nuanced and flexible" -- that's exactly what you *don't* want when crafting an exception to a rule. You want the exception to be as unambiguous and precise as possible, since you're obligated to make the same exception for ANY shareholder under the same circumstances. In this case, the board simply grandfathered in any door decorations that were more than five years old. The exception applied to ALL shareholders, as required.

I think we may be saying the same thing at this point, and semantics is getting in the way.

"Nuanced" MEANS "unambiguous and precise." Nuanced is the OPPOSITE of "vague and overly broad."

JB wrote:
>"Nuanced" MEANS "unambiguous and precise."

Hmmm, my sources say that "nuanced" means "possessed of multiple layers of detail, pattern, or meaning."

But in any case, I agree that we've pretty much exhausted the subject for now.

I don't know what source you're using, but Merriam-Webster defines it as

"a subtle distinction or variation"

Which is exactly what I was saying.

When co-op boards react like Pavlov's dogs and don't try to actually, y'know, LEAD by finding Solomonic, nuanced solutions to difficult issues, then they might as well by interns working off a yes/no checklist.

A creative solution for shareholder N is great, so long as the board realizes it will need to offer the same solution to shareholder N+1 under the same circumstances.

That's debatable. We can certainly agree to disagree.