Appellate Court Broadens Scope of Tort Liability for Members of Cooperative Boards

07/04/12

On Tuesday, the Appellate Division, First Department overturned a 2006 ruling that limited the liability for members of cooperative boards in torts cases. Differing from previous precedents, the Appellate Division, First Department held that board members of residences can be personally sued for racial discrimination.

In the instant case involving board members at the Dakota, an exclusive residence in New York City, a money manager, whose request to double the size of his apartment was rejected by board members, had alleged racial discrimination. Alphonse “Buddy” Fletcher, a hedge fund manager, who is African-American, held that his offer to purchase an adjoining apartment was denied by board members due to his race.

All in the last week in the last month in the last 3 months in the last 6 months in the last year

Search Career Advice

The Appellate Division, First Department, allowed some of Fletcher's discrimination claims to move forward against two individual board members of the residence observing that “Although participation in a breach of contract will typically not give rise to individual director liability, the participation of an individual director in a corporation's tort is sufficient to give rise to individual liability.”

Fletcher's lawsuit had made headlines when the media learned that Fletcher had mentioned on court papers offensive behavior of board members including calling Jewish applicants as the “Jewish mafia” and making jokes about minority shareholders. According to Fletcher's lawsuit, he had stood up for such individuals and the board countered by rejecting his application to purchase the apartment adjoining the one he owned. The board has claimed that it had rejected Fletcher's application because Fletcher did not have the financial capacity to buy the apartment.

• Search Legal Jobs
• Search Articles
• Employer Listing

United States

Search jobs

All in the last week in the last month in the last 3 months in the last 6 months in the last year

Search Career Advice

Select In-House Law Firms Government Recruiters Public Interest

Search Employer

Last year in July, Acting Manhattan Supreme Court Justice Eileen Rakower had denied a motion brought by the board members attempting to have certain causes of action in Fletcher's lawsuit dismissed. The board members, Bruce Barnes and Peter Nitze appealed against the decision arguing that they could not be sued individually as the actions complained against were decisions they had taken as board members. The Appellate Division, First Department, did not buy their arguments.

The Appellate Division distinguished from the earlier judgment in Pelton, upon which the appellants relied, holding, “Pelton failed to disentangle the principles of individual corporate director liability in the breach of contract context (understood to provide a shield against liability) from the principles applicable to tort cases (where there is no such shield).

The case is Fletcher et al v. Dakota, Inc, et al, Appellate Division, First Department, No. 6630.