Nearly a quarter of a century has passed since the New York Court of Appeals decided Levandusky v. One Fifth Avenue Apartment Corp.,1 the landmark case that established the business judgment rule as the standard for judicial review in lawsuits challenging condominium or co-op board actions: When a board acts for the purposes of the condominium or co-op, within the scope of its authority, and in good faith, a court may not substitute its judgment for the board’s. Thirteen years later, the Court of Appeals in 40 West 67th Street v. Pullman,2 cemented the business judgment rule standard, insulating protected board action from judicial review. To date, the business judgment rule remains intact.
Since our 2011 column, which surveyed business judgment rule case law,3 our research has disclosed approximately 80 cases where New York courts have applied the business judgment rule—in over half of these cases, the courts summarily and unanimously upheld board action, precluding judicial review. Importantly, the courts also adhered to the well-settled principle that conclusory and speculative allegations of bad faith, self-dealing or other wrongdoing by a board are legally insufficient to trigger judicial scrutiny of board action.
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