When Co-op Shareholders & Condo Unit-Owners Sue, They Sue Themselves

So, what do you do if you find yourself being taken to court by your neighbors? It's not pleasant and is usually over a decision the board made affecting the residents. Tierman says there are three ways a board can react. "They can say, ‘Screw it. Let the D&O [directors' and officers' liability insurance] handle it. Let's fight them in court,'" he notes. "Or, they can say, ‘If we take it to court and are defended by our D&O lawyers, our insurance rates will go up. Let's try to settle.' Or, they can be flexible: ‘The last time, we did stood firm. So, this time let's try to compromise.' "

But Tierman has no explanation for why shareholders sue rather than settle, except to say, "We are a litigious society."

Dogged Board Member

Or a nutty one. I heard of one cooperative where things are apparently humming along. "Oh, yes, we've got our budget worked out, we've done capital work, and there are no major problems," the board president said to me suavely. Then I asked her how things were with the board. "It must be harmonious if things are running so smoothly." Long pause. "Ah, well, we have a problem," she said, not quite as suavely. Seems there was a board member who always came to the board meetings a half-hour late — and brought her little dog with her too. "She said it barked when she left it alone," said the president. And the woman always left early. "The dog got anxious if it was in one place too long."

If doggie duties were the only concern, the board might have tolerated the situation. But the woman was also pursuing a very personal agenda: pushing her apartment's interests to the forefront before the co-op's interests. For instance, she lived on a top-floor apartment – so roof concerns had to be paramount. Never mind that there were building-wide issues that needed addressing.

Then Again, Sometimes...

The board's big problem, discussed when this dutiful director wasn't present, was how to ease her off the board — without causing a major rift. As with the Absorbing Man, when fighting her, they were actually fighting themselves. After all, a co-op is about cooperation and living with your neighbors not battling them. The co-op appointed a diplomatic delegation of two to gently ask her to step down (but to make her feel wanted, they let her stay on a committee). Crisis narrowly averted.

Still, that said, you should also know when a lawsuit may be in the property's best interests. To wit: I recently received a phone call from a shareholder in a co-op who wanted advice. The board had just laid down a whoppingly large assessment, offering little by way of explanation, and exhibited a "Don't mess with us" attitude. The directors subsequently refused to hold an annual meeting and ignored a plea from a group of 14 shareholders (out of 50 or so) to partake in a special meeting — even though the group had gathered enough proxies to initiate one. It was a clear violation of the rules. I told her to hire a lawyer. Sometimes, I guess, it isn't so crazy to battle yourself.

Adapted from the November 2010 issue of Habitat. For complete articles from issues going back to 2002, join our Archive >>

Journey into Mystery #121 (Oct. 1965) . Cover art by Jack Kirby and Vince Colletta. © Marvel Comics.