Case Notes in

Discrimination

First published: Jan 2022
Elango Medical PLLC v. Trump Palace Condominium and Trump Corp.

Though the decision of the appeals court did not address whether there was discrimination by Trump — the case is still pending — the decision here points out three very important points every co-op and condo board should be aware of. First, courts will often look at past acts of a board, and inconsistency is frowned upon. The board’s decision to allow other units to be used as medical offices could only lead a court to conclude that there must be another reason for a rejection of the current applicant. A mantra of all boards should be: “Be reasonable, and be consistent.” This golden rule will alleviate much pain — and avoid many lawsuits. The second point is a simple piece of advice for avoiding charges of discrimination: Do not ask questions (or require things of an applicant) if it would elicit information that would lead you to know that they belong to a protected class. For example, do not ask an applicant’s age, since that may result in a claim that there was a rejection because the applicant was too old or too young. Do not ask if they will need any accommodations, because this is akin to asking: “Do you have a disability?” Do not ask the applicant’s religion or where they were born. None of these questions are relevant to whether they will be a good neighbor and pay their maintenance on time, and none of these questions can be asked on an application or at an interview. Likewise, requiring a photograph is wrong because it can elicit information that is inappropriate (and illegal) when making the admittance decision. The final important point involves the Trump Corp.’s role. In asking the court to dismiss the claim, Trump took the position that it was only the agent of the condo board, and the board made the decision. The court seemed to be warning managers that if there is discrimination, they may be held culpable if they took an active role. We do not know how the court will rule in this matter. However, given the two most important factors (the photo of the applicant and the prior use of the unit), it would be safe to say that the position of the condo board and Trump seems weak. The decisions of the court so far have taught a valuable lesson to boards that are wise enough to learn from the mistakes of others.

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First published: Dec 2020
Francis v. Kings Park Manor, Inc.

The Kings Park decision is a warning to all co-op boards that no complaint between neighbors should be ignored. In the past, many boards took the position that these were personal disputes and that the neighbors should work out a solution between themselves. While this might be the ultimate solution, the board (and management) should not take this stance immediately. The board should take every complaint seriously, and some investigation should take place. While it might be difficult to take action, a co-op board has a few remedies available. Most proprietary leases have provisions that require tenants to act in a cooperative manner and not do anything to disturb or interfere with other tenants’ enjoyment of their homes. Some leases even provide for fines in the event of certain violations of the lease. And, importantly, most leases have a provision (sometimes referred to as the Pullman clause) that states that the board may terminate the lease if it deems actions of the tenant to be objectionable. This advice does not apply only to complaints relating to racial or religious matters. If a tenant objects to noise or smoke from another apartment and the board refuses to get involved, the complaining neighbor might seek a partial abatement of maintenance due to a breach of the warranty of habitability (even though the condition was not caused by the co-op). No court would be sympathetic to the co-op board if it did nothing to investigate or attempt to remedy the problem. Finally, directors are fiduciaries who should be acting in good faith for the good of the co-op and its tenant-shareholders. To fully ignore any complaint is not acceptable. While it may not be necessary to act every time a complaint is received, the best practice is for a board to consider the complaint and to do some investigating in an effort to understand the validity of the complaint, the degree of the problem and possible solutions.

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First published: Mar 2016
OA Manhattan LLC v Condo Board of Managers of Cassa NY Condominium and Residential Board of Managers of Cassa NY Condominium

Many condominiums are governed by a single board of managers. Many others, however, have “sections” and each section typically has its own board. So, for example, a residential section will have its board manage all residential issues; a commercial section board will operate and oversee commercial common elements; perhaps there is a parking board, a rental board, an office board. Depending on the structure of your condominium’s declaration and bylaws, there are many possible ways for sections to be divided. When separate boards are given power and authority for their respective sections, there is typically an “over board” – a supervising entity – that determines issues that affect the entire condominium. More often than not, the commercial board doesn’t care what the residential board does and vice versa, in which case there is no reason for a supervising board to be involved. In fact, in some buildings, this over board never actually has to meet, the intent being that each sectional board be permitted to operate its section with as little interference as possible. But what happens when the boards have competing interests, or simply don’t believe the other board is doing the right thing for the building?

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First published: Feb 2016
Berkowitz v. 29 Woodmere Blvd. Owners Inc.

This case can be used as a teaching tool – because many of the issues and arguments involve practical, real-world acts that boards come across regularly. First, it is important to remember that, in the context of discrimination, there are two ways people may sue. The person who was allegedly the victim of discrimination may assert a claim against a board directly. Or the shareholder could have claims for breach of contract against the corporation or breach of duty against the individual board members, or even charges of discrimination. In its ruling, the court spends very little time discussing the action Lax brought against the co-op; however, it does note that Berkowitz was a party to the action. We are not certain why the board agreed to settle with Lax, yet there was no settlement at that time with Berkowitz. While it is true that boards do not need to set forth their reasons for rejecting a proposed purchaser, this does not mean that boards have carte blanche. Once a person raises an arguable basis for rejection that, if proven, would be actionable, the board cannot simply rely on the Business Judgment Rule to say that the person was rejected and that’s that. Boards, on occasion, believe they are safe from legal harm when rejecting a purchaser, particularly if there has been no interview – the theory being that board members would not know the rejected applicant was of a protected class because they had not met. That, of course, was not the case here, and the board’s apparent reliance on the fact that Lax had not been interviewed was irrelevant. The court’s decision to dismiss Manginelli’s claims is consistent with general court principles. If there is an objective reason to reject a purchaser, then there will be no viable claim. However, the rationale is suspect when an applicant is a member of a protected class, and the board rejects, citing a lowball price – then allows the sale to go forward for 20 percent less. In such a situation, the court will not simply dismiss the decision as a legitimate exercise of business judgment. Finally, boards must remember that even though the attorney-fees lease provision says the co-op can recover fees, the provision is reciprocal but not precisely parallel. Therefore, while a default by the shareholder is required to allow the corporation to recover fees, a default by the corporation is not necessary for a shareholder to seek fees against the corporation. As a best practice, if a board is going to reject a prospective purchaser – particularly if it is not for obvious financial reasons – it may be prudent for the board members to step back, take a breath, and call the board’s lawyer to ascertain what courts will consider when deciding whether the board and its individual members acted within their rights.

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First published: Sep 2012
Fletcher v. The Dakota Inc.

While this decision is being reported by some as a departure from prior decisions, and it does specifically “overrule” the Pelton v. 77 Park Avenue Condominium decision in which it was found that board members were not liable for discrimination, it is our belief that in many respects the appellate court is merely reiterating long-standing corporate law, i.e., that in the context of a tort or a claim of discrimination (and not contract claims), if a board member acts in furtherance of that tort, he or she may be liable. This is consistent with such well-known cases as the Broome v. Biondi (Beekman Hill Apartments) matter, where board members were held personally liable for refusing to allow a mixed-race couple to sublet based upon actions taken by board members, who, according to testimony, took the husband’s African-American race into consideration when rejecting the couple. Indeed, the court is clear that board members will not be responsible for the co-op’s breach of contract. What is of concern is whether board members may be held liable for torts committed by their co-op, such as negligence. While certain provisions of the decision would lead one to believe that this may be the case, the court specifically dismissed the claim of tortious interference with contract against a board member, stating that “the complaint does not allege that [the board member] committed independent tortious conduct outside of his role as a board member.” We believe these aspects of the case will be reviewed and interpreted by the courts in future decisions. As to the defamation claims, while there is a qualified privilege that permits board members and shareholders to discuss information about their building without being subject to a claim for defamation, that privilege will not apply in the event there is a claim of “malice,” i.e., that the statement was made with knowledge that it was false or with reckless disregard of whether it was true. In this case, it appears that certain statements were alleged to have been made to the press, and were not subject to the privilege in any event. Other statements made to board members and shareholders were alleged to have been made with malice and therefore were not dismissed. We note that the motion to dismiss the claims was made at the early stage of the case so that discovery may shed a different light on certain allegations and defenses.

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First published: Jun 2012
Fair Hous. Justice Ctr., Inc. v. Edgewater Park Owners Coop., Inc.

The court discussed intentional discrimination and the way in which the actions of an independent real estate broker can be used as circumstantial evidence of discrimination. Specifically, the court found that a jury could determine that the broker’s actions, even though she was not an agent or employee of the co-op, were evidence of intentional discrimination. The court also discussed “disparate impact” discrimination and cited statistics offered by the plaintiff based on census data. The statistics were glaring: the percentage of blacks who owned homes at Edgewater (to the extent there were any – the decision was not entirely clear on this point, apparently because Edgewater was not clear) was far less than the percentage of black homeowners in the Bronx and in New York City. Further, the court considered that the board members could not agree on who was eligible to give a reference under the three-reference rule. It is important for boards to remember that when a rule is in place, it must be applied uniformly, unless there is a good and identifiable reason for deviation. As we set forth in our November 2010 “Case Notes” comment, this case reminds us that it is important for all co-ops and condos to review their policies and procedures to ensure that they comply with all discrimination laws. There should not be a situation where members of a protected class are treated differently, even if the disparate treatment is unintentional and solely as a result of a policy that has been in place many years.

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First published: May 2011
Taylor v. Harbour Pointe Homeowners Association and Candace Graser

We frequently see situations where apartment owners or homeowners are unable to keep their premises in a clean and orderly condition. This is important – as it was in this case – for maintaining the community and allowing the entire development to be at its best when neighbors are attempting to sell their homes. It is also important in vertical communities where often clutter brings bugs, odors, vermin, and other conditions to the apartment and neighboring apartments. This case makes clear that a board is not required to make a reasonable accommodation to address a disability unless unit-owners advise that they have a disability and that an accommodation is necessary to allow them to enjoy their home. Here, while it appears that the plaintiff hinted at a disability, at no point did she specifically tell the board that she could not clean her patio because of depression or any other disability. Nor did she tell the board that her desire to clean the patio at her own pace and in her own time was a request for an accommodation that, if denied, would make her unable to use and enjoy her house. While we cannot comment on whether the individuals in the community properly conducted themselves when they cleaned the patio and removed some items, we believe that it is the better practice to obtain a court order or a unit-owner’s specific consent before cleaning or moving items from that person’s dwelling.

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First published: May 2011
Taylor v. Harbour Pointe Homeowners Association and Candace Graser

We frequently see situations where apartment owners or homeowners are unable to keep their premises in a clean and orderly condition. This is important – as it was in this case – for maintaining the community and allowing the entire development to be at its best when neighbors are attempting to sell their homes. It is also important in vertical communities where often clutter brings bugs, odors, vermin, and other conditions to the apartment and neighboring apartments. This case makes clear that a board is not required to make a reasonable accommodation to address a disability unless unit-owners advise that they have a disability and that an accommodation is necessary to allow them to enjoy their home. Here, while it appears that the plaintiff hinted at a disability, at no point did she specifically tell the board that she could not clean her patio because of depression or any other disability. Nor did she tell the board that her desire to clean the patio at her own pace and in her own time was a request for an accommodation that, if denied, would make her unable to use and enjoy her house. While we cannot comment on whether the individuals in the community properly conducted themselves when they cleaned the patio and removed some items, we believe that it is the better practice to obtain a court order or a unit-owner’s specific consent before cleaning or moving items from that person’s dwelling.

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First published: Nov 2010
Fair Hous. Justice Ctr., Inc. v. Silver Beach Gardens Corp.

This case discusses two forms of discrimination and raises the question of whether facially neutral policies and procedures of a co-op or condo could be considered discriminatory. Although in the context of a motion to dismiss, the court concluded that a policy requiring prospective purchasers to obtain references from three current owners in co-op communities constitutes a sufficient basis to allow a complaint based on “disparate impact discrimination,” i.e., where a policy does not discriminate on its face but, when implemented, has the effect of discriminating. The court made note of the fact that residents of the co-ops are predominantly white in an area where homeowners are 35 percent black. It is unclear whether the court would have permitted the claim to go forward if the co-ops were racially mixed. The court also considered statements made by a real estate agent and employees of one of the cooperatives in order to determine that plaintiff had the right to attempt to prove “intentional discrimination” by virtue of a claimed selective enforcement of the three-reference policy. Even though the real estate agent was not an “agent” of either co-op, and her comments could not be directly attributable to them, the court clearly took the statements into consideration when determining that the plaintiff should have the right to prove intentional discrimination. Finally, we note that, although not part of the motion, the black testers were also plaintiffs, having sued the real estate agent. It is important for all co-ops and condos to review their policies and procedures to insure that they comply with all discrimination laws and do not – even unintentionally – create a situation where members of a protected class are treated differently from others.

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First published: Oct 2007
Hirschmann vs. Hassapoyannes

This co-op board appears to be in trouble and without a good basis to justify its withdrawal of its approval of the purchase applications. This is a case where sound legal counsel before the board withdrew its approval might have led to a different result and less liability exposure for the board members involved.

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