DECISION AFTER NON-JURY TRIAL This is a long-running dispute among unit owners in the Empire Condominium (“Empire”). Several unit owners (“Plaintiffs”) brought this derivative action on behalf of Empire against the original Sponsor (and multi-unit owner) of Empire, Katherine Chou (“Katherine”), her husband Robert Chou (“Robert”), the couple’s daughter Rita Chou (“Rita”), and Robert’s wholly owned management company, Chou Management Co., Inc. (“CM”) (collectively, “Defendants”). Plaintiffs claim that Katherine, Robert, and Rita have improperly dominated Empire’s Board of Managers (the “Board”),1 are using their influence to maintain control of the Board, and engaged in an inappropriate self-dealing transaction by hiring CM to manage Empire without recusing themselves or providing full disclosure of relevant background facts to the Board. Plaintiffs claim that Defendants’ alleged actions are in breach of Empire’s Offering Plan (NYSCEF Doc. No. 270 [the "Plan"]), By-Laws (NYSCEF Doc. No. 279), and their fiduciary duties to Empire’s condominium owners (“Unit Owners”). In response, Defendants claim that they have not wrongfully entrenched themselves as members of the Board, that they fully disclosed all relevant background facts before the Board retained CM, and that they are not individually liable for Plaintiffs’ alleged grievances. In a summary judgment decision prior to trial, the Court determined that Katherine breached the Plan when she did not obtain an amendment reflecting her continued ownership of several Units that she decided not to sell (see Plan at p. 63). Further, Katherine improperly continued to vote for a majority of Board seats despite a provision of the By-Laws that prohibited her from doing so (By-Laws at Art. 3, §1). After a three-day bench trial, the Court finds with respect to the remaining claims that: 1. The Board (dominated by Katherine, Robert, and Rita) breached the Plan and By-Laws by disregarding provisions governing the election of Managers to the Board, thereby permitting Katherine, Robert, and Rita to collectively control 50 percent of the Board without the required approval of the Unit Owners; 2. Katherine, Robert, and Rita breached their fiduciary duties by failing to recuse themselves from the Board’s decisions to retain and renew CM as Empire’s management company; 3. The Court finds that certain non-monetary remedies with respect to Board elections and selection of a management company, described herein, are necessary and appropriate to address the foregoing breaches of contract and fiduciary duty; 4. Plaintiffs failed to prove that they or Empire suffered any monetary damage from Defendants’ conduct (including the hiring of CM); 5. Within 90 days after a “Reset Election,” described infra, the Board will hire independent certified public accountants to produce annual verified financial statements to be distributed to Unit Owners prior to each Annual Unit Owners Meeting; and 6. Plaintiffs are entitled to Attorneys’ Fees per B.C.L. §626(e) with respect to the trial of this matter, including pre-trial and post-trial briefing. Procedural History In August 2013, Plaintiffs filed their initial Complaint against Katherine, Robert, and CM seeking declaratory and injunctive relief, as well as monetary damages for claims of trespass, breach of contract, breach of fiduciary duty, the imposition of a constructive trust, and attorneys’ fees (NYSCEF Doc. No. 1). On July 7, 2014, this Court (Schweitzer, J.) dismissed Plaintiffs’ Amended Complaint (NYSCEF Doc. No. 66). The First Department reversed that dismissal with respect to all claims other than trespass and constructive trust: “The motion court incorrectly determined that plaintiffs’ breach of fiduciary duty and breach of contract claims are barred by the business judgment rule. Plaintiffs, suing derivatively on behalf of all unit owners of a condominium, allege in the amended complaint that the Chou defendants breached their fiduciary duties by, among other things, failing to disclose various lawsuits and defendant Robert Chou’s criminal record, failing to account for missing monies and receipts, commingling funds, denying access to information and documentation, and improperly renewing defendant Chou Management’s management agreement. Plaintiffs also allege that defendant board members improperly extended their terms on the board beyond the allowable period under the bylaws. There is nothing in the record to indicate that the board discussed or informed themselves as to these allegations. The board’s determination not to pursue these claims was arbitrary and therefore not protected under the business judgment rule. Moreover, even if the board did consider the allegations of improper extension of their terms, any determination on that issue would not be protected under the business judgment rule, as the voting members were clearly self-interested. There is nothing in the record to indicate that the board discussed or informed themselves as to plaintiffs’ breach of contract cause of action, which is based on allegations that, among other things, defendant sponsor breached the offering plan and declaration by refusing to sell condominium units. The board’s decision not to pursue these allegations was arbitrary and therefore not entitled to deference under the business judgment rule.” Tsui v. Chou, 135 AD3d 597, 597 [1st Dept 2016] [citations omitted]. The parties subsequently engaged in discovery and motion practice for the next few years, including Defendants’ successful motion to disqualify Plaintiffs’ prior counsel (NYSCEF Doc. No. 101). On August 9, 2019, Plaintiffs amended their pleadings, adding Salma Abdelnour (“Abdelnour”) as a plaintiff and Rita as a defendant (NYSCEF Doc. No. 158). For their breach of fiduciary duty claim, Plaintiffs allege that Defendants failed to disclose material facts to the Board when selecting a management company for Empire. Plaintiffs allege that the Board’s eventual hiring of CM was a self-dealing transaction arranged by Defendants (see NYSCEF Doc. No. 162 ["Verified Second Amended Complaint"] at
183-195). For those alleged breaches, Plaintiffs seek the following relief: (1) a money judgment against Robert and CM consisting of all Empire funds paid to CM or any of Robert’s other businesses; (2) rescission of CM’s 2017 Management Contract with Empire; (3) a permanent injunction banning members of the Chou family from being Board members or approving any contract with CM; and (4) an award of costs, disbursements, and attorneys’ fees (id. at 195). For their breach of contract claim, Plaintiffs allege that Robert and Katherine breached the Plan by retaining ownership of Units, failing to relinquish control of the Board, and improperly voting for a majority of the Board (id. at
