Background
Bruce Bent sued individual members of a condominium board, asserting both personal claims and derivative claims on behalf of unit owners. The amended complaint alleged that the board members collectively participated in, directed, controlled, or approved tortious retaliatory acts motivated by animus.
Bent was not himself the unit owner. His wife assigned him litigation claims, but the assignment did not transfer her condominium membership interest. Supreme Court dismissed the claims against the individual board members, and Bent appealed.
The Court’s Holding
The First Department reinstated several direct causes of action. At the pleading stage, nonconclusory allegations that each board member participated in or approved the challenged conduct were enough to pursue personal liability. The business judgment rule did not require dismissal where the complaint plausibly alleged an animus-driven course of tortious retaliation.
Nor did bylaws limiting director liability resolve the case. Those provisions preserved exposure for bad faith or willful misconduct, which the pleaded retaliation allegations encompassed. Discovery, rather than a pre-answer dismissal, would test whether the individuals actually engaged in the conduct.
The court kept the derivative claims dismissed. An assignment of claims is not the same as ownership of a condominium membership interest, which is required to sue derivatively for the unit owners. It also treated the records-inspection claim as abandoned and denied a cursory request to replead without prejudice.
Key Takeaways
- The business judgment rule does not shield adequately pleaded bad-faith or tortious conduct at the motion-to-dismiss stage.
- Board members may face direct liability when allegations identify their participation or approval, even if action was taken collectively.
- A claim assignment does not transfer the ownership status required for a condominium derivative suit.
Why It Matters
The ruling matters to New York condominium boards, managing agents, unit owners, and insurers. Minutes, communications, voting records, and conflict procedures may become central when a complaint alleges targeted retaliation rather than a merely debatable governance choice.
Plaintiffs must distinguish personal injury from harm to the condominium and confirm that the party asserting derivative rights actually owns the necessary membership interest. Boards should also understand the limits of bylaw exculpation for alleged bad faith.