“Court Orders New Vote at Troubled HDFC” – Habitat Case Watch
WHAT HAPPENED: This case arises from a series of disputes concerning the governance, financial management, and compliance with bylaws of the 123-25 East 102nd Street Housing Development Fund Corporation (HDFC). Further, this action concerns the assault and harassment to shareholder-tenants of the HDFC.
The plaintiffs, a group of shareholders, allege significant misconduct by the defendants, including members of the HDFC board and associated individuals, which has undermined the integrity and purpose of the cooperative. The HDFC, established under Article XI of the Private Housing Finance Law, is intended to provide affordable housing for low-income individuals. Despite the HDFC’s mission, defendants have engaged in self-dealing, mismanagement, and other actions that contravene the HDFC’s bylaws and corporate purpose.
The plaintiffs further allege that they have made repeated demands for transparency and accountability, including requests for access to books and records, financial audits, and adherence to election procedures. Despite these efforts, the defendants have obstructed these requests, further exacerbating tensions within the cooperative. The defendants’ actions have not only violated the HDFC’s bylaws but have also caused harm to the shareholders and the cooperative as a whole.
Central to this dispute are allegations of improper transfers of apartments, failure to conduct required financial audits, and the use of the HDFC for personal gain rather than its intended purpose of providing affordable housing. The plaintiffs also highlight incidents of harassment and intimidation by certain defendants, which are part of a broader effort to suppress dissent and maintain control over the HDFC. These issues have culminated in the present action, as the plaintiffs seek judicial intervention to restore proper governance, ensure compliance with the bylaws, protect the rights of the shareholders, and protect the lives of the tenants.
IN COURT: The court partially granted and partially denied relief sought. The relief granted included these measures: compelled the board to provide plaintiffs access to, and inspection of, cooperative books and records; declared the election unlawful for failure to give requisite notice under bylaws; directed holding a new election for directors; provided for hiring an accountant to perform audits of prior years’ financials, and enjoined the board members from harassing and assaulting and taking retaliatory actions against plaintiffs or other co-op occupants.
The court denied requests to appoint a receiver to oversee the next election and management of the cooperative; compel the board to commence foreclosure/eviction proceedings; and restrain sale or lease of co-op apartments absent court or receiver approval.
TAKEAWAY: Judicial relief, where warranted, will be granted to protect the integrity of corporate (cooperative) elections, but will not necessarily be granted to compel boards to take explicit, specific mandatory actions that a board, presumed in its business judgement, may not wish to take, or to
be taken.
