A New York Supreme Court decision by Justice Lebovits in Board of Managers of The Promenade Condominium v. Eshaghour could significantly impact the condominium community, highlighting the potential for individual board members and their management companies to face personal liability for their actions. This ruling serves as a stark reminder that board members must act in good faith and within the scope of their authority, or risk facing serious legal repercussions. We expect that there may be an appeal of the decision and not withstanding an appeal, that the condo, its board members and management company will vigorously defend against the owners’ claims against them.

The Case: Beyond Unpaid Common Charges

While the initial lawsuit was filed by the condominium board to recover unpaid common charges, the defendants countersued with a litany of allegations against individual board members, the management company, and others. The defendants accused them of breach of fiduciary duty, private nuisance, intentional infliction of emotional distress, and sought permanent injunctions against several parties.

Key Takeaways for Condo Boards and Management

1. Individual Liability is Real: The court’s decision to allow several claims to proceed against individual board members underscores that they can be held personally accountable for their actions, even when acting in their official capacity.
   
   
2. Breach of Fiduciary Duty: The court emphasized that board members have a fiduciary duty to act in the best interests of the condominium and its unit owners. Allegations of unequal treatment, harassment, and intimidation can pierce the business judgment rule, potentially exposing board members to liability.
   Specific allegations: Preventing the defendants from fixing hot-water problems, hiring management and security companies that allegedly harassed the defendants, issuing notices of breach of settlement agreement, prohibiting the defendants’ child from using the gym for therapy, forcing the defendants to pay for violations caused by others, and amending bylaws to target the defendants.
   
   
3. Private Nuisance: Actions that substantially interfere with a unit owner’s right to use and enjoy their unit or the common areas can lead to a private nuisance claim.
   Specific allegations: Intimidating the defendants as they entered the building, making threats in the lobby, glaring at their children, yelling at their child to leave the laundry room, and trying to block access to the premises.
   
   
4. Intentional Infliction of Emotional Distress: While difficult to prove, a pattern of extreme and outrageous conduct can result in an IIED claim.
   Specific allegations: A board member threatening a “brawl” with the defendant, screaming at the defendant’s child, physically blocking the defendant from entering the building, repeatedly mocking the defendant, and giving threatening looks.
   
   
5. Permanent Injunctions: The court clarified that permanent injunctions can be granted against individual board members and their management companies if they are found liable for underlying claims.
   

Considerations

• Board Member Education: Boards should invest in training for their members, ensuring they understand their fiduciary duties and the potential consequences of breaching them.
• Transparent Communication: Open and honest communication with unit owners can help prevent misunderstandings and potential disputes.
• Experienced Management and Counsel: Engaging an experienced management company and general counsel can help ensure that the condominium is run professionally and in compliance with applicable laws and regulations.
• Conflict Resolution: Implement procedures for addressing disputes early on, potentially avoiding costly litigation.

Conclusion

The Eshaghour case serves as a powerful reminder that condo board members and their management companies must act responsibly and ethically. Failure to do so can lead to significant personal liability and damage the reputation of the condominium community. By prioritizing good governance and open communication, boards can protect themselves and foster a positive living environment for all residents.

Here is the August 20, 2024 decision.