Roberts v. WVH Housing Corporation

Elections at a cooperative or condominium can often be messy, as different factions may fight for control of the governing board. As if this were not complicated enough, when an election is held and a mistake is made, the whole process can be tainted, resulting in litigation. That is precisely what took place in Roberts v. WVH Housing Corporation.

WVH, a cooperative in New York City, had a seven-person board, with staggered two-year terms, and at the 2021 election four positions on the board were open. The election was scheduled to take place from 6:30 to 8 p.m., and shareholders were able to vote in person, by proxy, by directed proxy or by online ballot. The entire process was administered by MK Elections, the contractor hired to handle the election. That evening, a few hours after the meeting, MK Elections emailed the official results to the candidates and to all shareholders.

The president of the cooperative, Julia Rosner, reviewed the results and recognized something was wrong, as the totals did not seem to add up. Rosner realized that although she had tendered 65 undirected proxies from shareholders to MK Elections and had received back from it ballots for voting, she had neglected to actually cast the ballots. She admitted that she received the ballots and filled them out in her home with another shareholder present, and that she returned to the management office and “to the best of [her] memory” handed the ballots to MK. But when the results were sent by email later that evening, she realized that there were far fewer votes counted than there should have been. The representative of MK recalled in an affidavit that although Rosner tendered her proxies and received ballots, he did not recall her handing him the completed ballots.

The day after the election, Rosner handed MK the ballots she had in her possession, and MK was asked to recalculate the results. When MK recalculated the results, three of the four announced winners had lost, and other candidates were elected. Initially, the board was inclined to accept the new results from MK, but there was resistance from a number of the directors. Looking to quell any controversy, the board decided that a new election should take place and sent out notices to that effect.

Two shareholders who opposed the actions of the board brought this lawsuit against WVH, its board, MK and members of its board; they asked the court to prohibit the cooperative from having the new election and to allow the candidates originally announced as winners to take their seats on the board.

In discussing the case, the court noted that Section 619 of the Business Corporation Law (BCL) allowed the court to confirm an election, order a new one or “take such other action as justice may require.” In citing two other cases, it also noted that considering the facts the court must “determine whether improprieties produced a result different from what otherwise would have been or whether an inequitable result has been thereby produced.” However the court also stated that “the election should only be set aside where it is so clouded with doubt or tainted with questionable circumstances that the standards of fair dealing” require the court to take action. The court held that no such doubt or taint had been established at the WVH election. A mistake in voting is not considered an impropriety.

The court noted that the same section of the BCL also states that no ballot or proxy shall be accepted “after the closing of polls” and that votes “cannot…be added after the polls have closed and the result formally announced.” Citing an Appellate Division case, it stated that “mistakes can be corrected…before the final vote is announced.” In this case, the polls had clearly closed, and the results were announced before Rosner realized that she still had the ballots in her possession.

This result may seem extreme, since the court ruling in effect deprives dozens of shareholders their vote due to a mistake by Rosner, their proxy holder. However, this ruling is consistent with the position of many New York courts. In a similar case a few years ago (cited by the plaintiff-shareholders in their papers submitted to the court) a shareholder had actually delivered proxy ballots to the management of the cooperative, which was supervising the election. The employee of the management company who attended the meeting and who held the proxy ballots simply left them in the office and forgot to count them, and the results were announced without adding them. The mistake was discovered the next day when an officer was suspicious that there was an error and went to management. In that case, which is even a step beyond the WVH case in that the proxy ballots were actually delivered, the court held similarly: There can be no change once the polls are closed and the winners are announced. If a mistake is noted the next day, neither the entity overseeing the election nor the co-op can change the announced results, and the court will not intercede.

Attorneys:

For Steven Roberts and Joseph Menzie: Kagan Lubic Lepper Finkelstein & Gold LLP

For WVH Housing Corp.: Nixon Peabody LLP