Pullman, Six Months Out Examining the Decision in Theory and in Practice

In May, in a decision that has confused - and alarmed - some New York co-op shareholders, the New York Court of Appeals ruled that co-op boards had the right to apply the business judgment rule to vote so-called "objectionable tenants" out of their buildings for ongoing, objectionable behavior.

As reported in The Cooperator's June 2003 edition, the court's ruling provides that co-op boards can terminate the leases of troublesome or recalcitrant tenants without having to go to court to prove that they are "˜nuisance tenants' under the definition of such law.

This newly recognized application of the business judgment rule - which according to the 1990 ruling in Levandusky vs. One Fifth Avenue gave co-op boards wide discretion in handling their own affairs - emerged following long-running litigation between an Upper West Side co-op and one shareholder by the name of David Pullman. The 40 West 67th Street vs. Pullman decision allowed boards to extend the reach of the business judgment rule to include taking action against individual shareholders.

The Pullman case involved everything from alleged adultery to informal charges of libel and slander, and thousands of dollars-worth of attorney fees and court costs on both sides. The court eventually found in favor of the co-op corporation, and Pullman was forced out of the building and has since moved into a condominium.

With the Pullman case setting quite a precedent, some boards around the city greeted the decision with joy, certain that now they can finally do something about that eccentric shareholder who keeps unnerving his neighbors or the amateur aspiring chef who constantly fumigates the hallway (and the adjacent apartments) with the noxious vapors from her exotic cooking.

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