Enforcing The Rules: The Case Of The Jacuzzectomy

When a condo or co-op resident openly defies board policy, the board is faced with a predicament: Does it stand down to avoid controversy? Or litigate to preserve the integrity of its regulations? Our cooperative board client, who requested anonymity for this article, chose to defend the board's building ban against Jacuzzis in the face of a shareholder's direct challenge in order to set a precedent for future compliance.

In the case, which was adjudicated in Nassau County Supreme Court, Anderson Kill P.C. shareholder Bruce A. Cholst and Alan M. Goldberg who is of counsel to the firm successfully represented the co-op in an action for declaratory judgment, a permanent injunction, and money damages for a breach of fiduciary duty in connection with a tenant-shareholder's unauthorized apartment renovation. The tenant-shareholder in question — who was also a board member — initiated his massive apartment renovation without any prior discussion, much less submission of plans to the board or management. When management became aware of his unauthorized construction, it requested plans. The plans submitted by the tenant-shareholder omitted any reference to a hydrotherapy tub/Jacuzzi. After the Jacuzzi was fully installed, the tenant-shareholder advised management and his colleagues on the board of its existence and claimed to have "inadvertently" left off mention of the Jacuzzi in the plans he submitted.

The board thereafter approved the tenant-shareholder's plans with the specific exception of the Jacuzzi and demanded its immediate removal. The board then enacted a new house rule generally banning installation of Jacuzzis throughout the community.

The Board Commences Suit

Following the tenant-shareholder's adamant refusal to dismantle the Jacuzzi, the board commenced suit both on the basis of unapproved installation and on the continuing violation of the newly enacted house rule. Its claim for breach of fiduciary duty was predicated on the bad faith nature of the tenant-shareholder's conduct in first concealing the Jacuzzi, and then flouting the board's directive to remove the offending appliance, particularly in view of his status as a board member who should have known better.

The Tenant-Shareholder's Counterclaims

The tenant-shareholder responded to this suit by counterclaiming against the board, and by also suing individual board members and the co-op's managing agent, engineering firm and architect (both of whom recommended against approval...