Business

It is critical that defense counsel review all affirmative defenses with their clients to assure there aren’t any affirmative defenses available.  If you don’t raise the affirmative defense in the first responsive pleading (i.e., the answer to the complaint or motion to dismiss the complaint) then the affirmative defense will be waived as a matter of law in New York.

In Eida v. Board of Managers of 135 Condominium, the condominium board of managers did not raise affirmative defenses of statute of limitations or standing and the Appellate Division First Department held that the condo thus waived the right to defend itself with those defenses which could be case finishing.  In that case, Isaac Eida complained that the amendment of the condo’s by-laws was void because the Board did not abide by notice requirements in seeking an amendment.

The Court also held that the lower court  “erred in granting defendant attorneys’ fees since such award was not authorized by agreement between the parties or by statute (see e.g. Chapel v Mitchell , 84 NY2d 345, 349 [1994]), and defendant did not contend that plaintiff engaged in frivolous conduct.”

The lesson here is that the defendant condo and its attorney should have made sure it raised all the condo’s affirmative defenses.  If it had, the case likely would have been over.  Now the condo has to defend the case on the merits.  An approach the condo might take is just to call another meeting seeking an amendment of the by-laws and make sure it satisfies all the requirements for their to be an effective amendment.

Here is the Court’s decision.

Using Personal Email for Community Association Business is an Awful Idea Says Lawyers

There is increasing pressure towards Board transparency and member entitlement to records. This is yet another example. A New York City Appeal Court’s recent decision addressed in the article requiring greater access to Board records and the right to make paper and electronic copies of records subject to a confidentiality agreement is a huge transparency shift that Boards have to be prepared to deal with.

Read this Article from Habitat Magazine.

This time it happened in a 72-unit condominium in Massachusetts. The Board Member Treasurer did things like writing checks to her contractor son for made up work and none of the other Board Members or owners were reviewing condo records like bank statements. When other Board Members stumbled upon the records years later, the fraud was revealed but it was too late; the money was gone, there was no insurance available and the owners were left without $183,000.

It really is important for organizations to have framework, policies and procedures in place for their Boards. Board Members need to oversee their organization’s business but also their fellow Board Members. They are fiduciaries who are charged with looking out for the best interest of their members. There is no excuse for a Board Member of any type or size organization not to have unconditional and ready access to organization records and not to regularly review those records (like bank statements) and allow such a fraud to happen. This case also highlights what happens when volunteer organizations skimp on insurance that may have covered some of the damage for this inexcusable loss.

If you’re a volunteer Board Member you should ask yourself where are my organization’s records? How do I access them? When was the last time I looked at them? I may be responsible for the actions of my fellow Board Members and others running my organization so I’d better start overseeing them before its too late.