Committee to Save Polytechnic Univ. v Board of Trustees of Polytechnic Univ.

[*1] Committee to Save Polytechnic Univ. v Board of Trustees of Polytechnic Univ. 2009 NY Slip Op 50146(U) [22 Misc 3d 1116(A)] Decided on January 30, 2009 Supreme Court, Albany County Platkin, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on January 30, 2009
Supreme Court, Albany County

The Committee to Save Polytechnic University, THOMAS A. MAURO, DENNIS LANDSBERG, EDWARD BARRON, BERNARD FARKAS, JOEL SNYDER, PAUL CARDENAS and RONALD KUCHINS, Plaintiffs/, Petitioners, For a Judgment Pursuant to Article 78 and Section 3001 of the Civil Practice Law & Rules

against

The Board of Trustees of Polytechnic University, and THE BOARD OF REGENTS OF THE UNIVERSITY OF THE STATE OF NEW YORK, Defendants/, Respondents.



7454-08



APPEARANCES:

John T. Casey, Jr., Esq.

Attorney for Plaintiffs/Petitioners

47 Second Street

Troy, New York 12180

Andrew M. Cuomo, Esq.

Attorney for Defendant/Respondent Board of Regents

(Adele Taylor Scott, of counsel)

The Capitol

Albany, New York 12224

Whiteman, Osterman & Hanna LLP

Attorneys for Defendant/Respondent Board of Trustees

of Polytechnic University (Margaret J. Gillis and Christopher M. McDonald, of counsel)

One Commerce Plaza,

Albany, New York 12260

Richard M. Platkin, J.

Plaintiffs/petitioners move pursuant to Article 78 and CPLR 3001 for a judgment, inter alia, annulling certain actions and/or determinations of defendants/respondents The Board of Trustees of Polytechnic University ("Board of Trustees") and the Board of Regents of the University of the State of New York ("Board of Regents"). Defendants/respondents move to dismiss the Verified Complaint and Petition.

BACKGROUND

Polytechnic University ("Polytechnic") is an education corporation chartered by the Board of Regents pursuant to Education Law § 216. As an education corporation, Polytechnic is governed by the Not-for-Profit Corporation Law ("N-PCL"), subject to certain statutory exceptions, limitations and modifications that reflect the role of the Board of Regents in supervising and overseeing public and private educational institutions in New York (see Education Law § 216-a [4]).

In 1972, during a period of fiscal difficulty for New York University ("NYU"), the State Legislature enacted legislation that resulted in the divestiture of NYU's School of Engineering & Science. The School was merged into Polytechnic, an independent institution specializing in engineering and related sciences that was, at the time, in a superior financial position.

In or about 2005, NYU approached Polytechnic with a proposal to merge or consolidate the two institutions. As alleged in the Verified Complaint and Petition, the Board of Trustees of Polytechnic met on February 1, 2005 and adopted a resolution rejecting NYU's proposal. The resolution stated, in pertinent part: "Polytechnic should remain independent and that all discussions with New York University relating to its proposal for merger and/or consolidation shall immediately cease and be discontinued."

However, discussions between NYU and Polytechnic later resumed. On or about August 3, 2007, the Executive Committee of the Polytechnic Board of Trustees met to authorize its president to negotiate a non-binding memorandum of understanding ("MOU") that would lead to an "affiliation" between the two institutions. Polytechnic also established various committees to explore the possibility of a merger, consolidation or affiliation with NYU.

On October 10, 2007, a non-binding MOU was approved by a super-majority vote of the Board of Trustees. This MOU became the framework of the "Polytechnic University-New York University Affiliation and Proposed Consolidation Agreement" ("Affiliation Agreement"), referred to by plaintiffs/petitioners as the "Definitive Agreement".

Under the Affiliation Agreement, Polytechnic agreed to change from a Type B non-member corporation under the Not-for-Profit Corporation Law ("N-PCL") to a Type C membership corporation, with NYU becoming the sole member of Polytechnic. However, Polytechnic would remain a separate Regents-chartered corporation and retain control over its assets, including endowment funds, real property, and intellectual property.

In connection with the Affiliation Agreement, NYU agreed to loan Polytechnic the sum of $50,000,000 over five years, the maximum affiliation period contemplated under the [*2]agreement before a merger or consolidation of the two institutions. The loan is secured by certain "air rights" assets owned by Polytechnic. No payment of principal is due until the air rights are sold or until the institutions consolidate, in which case no repayment would be required.

With regard to the composition of the Board of Trustees, the Affiliation Agreement contemplates that NYU, as the sole member of Polytechnic, would appoint approximately 10% of Polytechnic's trustees each year. As a result, the Agreement contemplates that appointees of NYU would become a majority of the Polytechnic Board of Trustees over the course of about five years.[FN1]

During this period of affiliation, NYU and Polytechnic agreed to work together to develop and implement a plan for a consolidation of the two institutions. Upon a determination that there shall be a consolidation, which is defined as "the merger of Polytechnic with and into NYU, with NYU being the surviving corporation," the parties shall cooperate and apply for all necessary and appropriate governmental approvals and consents, including the New York State Education Department, which is an arm of defendant/respondent Board of Regents.

Following numerous meetings involving community groups, faculty, staff, alumni, students, state officials and other stakeholders, the Board of Trustees of Polytechnic met on March 6, 2008 and, by a three-quarters vote, approved the Affiliation Agreement, as well as the amendments to Polytechnic charter and by-laws necessary to implement the terms of the Agreement.

Defendant/respondent Board of Regents met on June 23 and 24, 2008 to consider the proposed amendments to the Polytechnic charter. On June 24, 2008, the Board of Regents unanimously approved the proposed amendments, effective July 1, 2008.

Section 4 of the charter amendments, which plaintiffs/petitioners refer to as a "de facto merger provision," reads as follows:

The corporation [Polytechnic] shall have one member, which shall be New York University. Pursuant to the By-laws of the corporation, the member of the corporation shall, among other things, elect the board of trustees of the corporation, appoint the Chief Executive Officer of the corporation after consultation with the Board of Trustees, and be required to consent to any amendment, changes or repeal of the By-laws, the charter or any other governing document of the corporation that is proposed by the board of trustees.

Plaintiffs/petitioners raise numerous objections to the action of the Board of Trustees, contending that implementation of the Affiliation Agreement: (1) violates the Board's prior February 1, 2005 resolution discontinuing merger and/or consolidation negotiations with NYU; (2) terminates Polytechnic's existence as a corporation under the Education Law and, effectively, conveys all of its assets, including real estate, air rights, personal property and intellectual property, to NYU; (3) runs afoul of the provisions of the N-PCL that require judicial approval of the resulting corporate governance changes and asset conveyances; and (4) substantially reduces or eliminates the role that dissenting alumni and faculty would play in administering the school. Plaintiffs/petitioners also contend that the Board of Trustees violated its fiduciary duty to [*3]Polytechnic in approving the Affiliation Agreement and in failing to obtain an appraisal of the corporation's assets prior thereto.[FN2]

The same claims form the basis of plaintiffs/petitioners' contention that the Board of Regents acted arbitrarily, capriciously and in violation of law in approving the Polytechnic charter amendments that implement the terms of the Affiliation Agreement.

Plaintiff/petitioner Committee to Save Polytechnic University ("the Committee") is an unincorporated group of Polytechnic alumni who oppose the changes to the charter and by-laws of Polytechnic.

All but one of the individual petitioners/plaintiffs are Polytechnic alumni who have contributed their efforts and/or money to the school's Alumni Association. One of these individuals, Thomas A. Mauro, also alleges that he is a former Advisory Trustee of Polytechnic who lost authority to participate in meetings of the Board of Trustees as a result of the new Polytechnic by-laws. Finally, petitioner/plaintiff Paul Cardenas is an adjunct professor at Polytechnic.

The individual plaintiffs/petitioners claim to be aggrieved "since their status, authority and ability to participate in decision-making has been substantially reduced or amended under the amended by-laws." They also claim to have been aggrieved collectively, since their alma mater will cease to exist as an autonomous educational institution. Plaintiffs/petitioners also allege harm to the general public, since the alleged merger/consolidation will reduce the educational opportunities available to young people.

On the basis of the foregoing allegations, plaintiffs/petitioners seek the following relief: (1) a judgment that the March 6, 2008 action of the Board of Trustees was arbitrary, capricious, contrary to its own announced policy, and in violation of law; (2) a judgment that the June 24, 2008 action of the Board of Regents in approving the charter change was illegal, arbitrary and capricious; (3) an order rescinding the Board of Regents' approval of said charter amendments; (4) an order rescinding the action by the Board of Trustees and a direction that it immediately submit the Affiliation Agreement and their alleged plan of merger to the Attorney General for review; and (5) an order that the Board of Trustees seek and obtain judicial and/or Attorney General review of the charter amendments and conveyance of assets in Supreme Court, Kings [*4]County.

Defendants/respondents move to dismiss the Verified Petition and Complaint. First, defendants/respondents contend that plaintiffs/petitioners lack standing to maintain this proceeding. Second, they argue that the provisions of the N-PCL Law relied upon plaintiffs/petitioners are inapplicable to the charter amendments and other actions that are the subject of this proceeding. Third, defendants/respondents argue that their challenged determinations are rationally based, made in accordance with law, not arbitrary and capricious, and not an abuse of discretion. Finally, the Board of Trustees seeks dismissal of the claims for breach of fiduciary duty on various grounds.

Oral argument was held on the pending applications on November 7, 2008. At the close of argument, the Court gave the parties the opportunity to provide certain supplemental submissions, which were received.[FN3] This Decision & Order follows.

STANDING

The standing of parties to institute or maintain an action or proceeding is a threshold issue that must be determined by the Court at the outset of litigation (see Matter of Dairylea Coop. v. Walkley, 38 NY2d 6 [1975]). For the reasons that follow, the Court concludes that neither concerned alumni, current or putative adjunct faculty members, nor a committee of alumni opposed to the Affiliation Agreement have standing to maintain this proceeding.

To establish standing to challenge an administrative action in a proceeding brought pursuant to Article 78, plaintiffs/petitioners must show that they "would suffer direct harm, injury that is in some way different from that of the public at large" (Society of Plastics Indus. v County of Suffolk (77 NY2d 761, 773-774 [1991]). They also must show that the injury resulting from the challenged conduct falls within the zone of interests, or "concerns[] sought to be promoted or protected by the statutory provision under which the agency has acted" (id.).

The Court begins with the requirement that plaintiffs/petitioners demonstrate an injury-in-fact: a legally cognizable interest that "will actually be harmed by the challenged administrative action. As the term itself implies, the injury must be more than conjectural" (NY State Ass'n of Nurse Anesthetists v. Novello, 2 NY3d 207, 211 [2004]). And as noted above, the injury in fact must be "in some way different from that of the public at large" (Society of Plastics, supra, at 784).

Applying these principles, it is apparent that the individual plaintiffs/petitioners have failed to demonstrate that they have suffered an injury to a legally cognizable interest or that the injuries they claim differ in any meaningful way from the public at large. The donation of time, money and effort to an enterprise and investing pride in it simply are not enough to confer standing to sue (see Matter of New York City Coalition for Preserv. of Gardens v. Giuliani, 246 AD2d 399 [1st Dept 1998], affg 175 Misc 2d 644 [Sup Ct, NY Cty 1997]). Likewise, the desire to see one's alma mater remain an autonomous educational institution does not itself represent a legally cognizable interest. Further, the individual plaintiffs/petitioners have not demonstrated that any beneficial interest they claim in Polytechnic by virtue of their status as alumni is distinct from that enjoyed by the public at large. [*5]

With respect to the claim that "their status, authority and ability to participate in decision-making has been substantially reduced," plaintiffs/petitioners Landsberg, Barron, Farkas, Kuchins and Cardenas have not made any factual allegations supporting this contention.

As to Mr. Mauro, his alleged loss of status as Advisory Trustee does not constitute an injury to a legally protected right for at least two reasons. First, his position as an Advisory Trustee would have expired by its own terms in October 2008 without any action by the Board of Trustees, and there has been no demonstration (or even allegation) that Mr. Mauro had any right to serve beyond that date. In any event, the by-laws of Polytechnic, which are the source of his claimed legal interest, expressly permit the Board of Trustees to repeal or modify any provision thereof by a two-thirds vote, as was done here.

The loss of status alleged by Mr. Snyder is even weaker. He merely alleges that he had a "potential" to be an adjunct professor "but for" the challenged actions of the Board of Trustees. His claim falls well short of alleging a legally cognizable right to serve as a member of Polytechnic's adjunct faculty.

Having concluded that the individual plaintiffs/petitioners lack standing to sue because they have not alleged an actual injury to a legally cognizable interest, the same conclusion follows with respect to the Committee. An organization seeking standing "must demonstrate that at least one of its members would have standing to sue individually, that the interests it asserts are germane to its purpose and that the resolution of the claim does not require the participation of its individual members" (Matter of Saratoga Lake Protection & Improvement Dist. v Department of Pub. Works of City of Saratoga Springs, 46 AD3d 979, 982 [3d Dept 2007]; see Society of Plastics, supra, at 775). Thus, the failure of plaintiffs/petitioners to identify a member of the organization who would have standing to sue individually is fatal to the Committee's claim of organizational standing.

A similar conclusion follows with respect to the claims brought to enforce the provisions of the N-PLC. Pursuant to statute, such claims may be brought only "by the attorney general at the request of the regents of the university of the state of New York, by the corporation, or, in the right of the corporation, by any of the following: (1) a director or officer of the corporation; (2) a receiver, trustee in bankruptcy, or judgment creditor thereof; (3) under N-PCL § 623, governing derivative actions brought in the right of the corporation, by one or more of the members thereof; and (4) if the certificate of incorporation or the by-laws so provide, by any holder of a subvention certificate or any other contributor to the corporation of cash or property of the value of $ 1,000 or more (N-PCL § 720 [b]; Education Law § 216-a [4] [d] [9]; see Matter of Friends World Coll. v. Nicklin, 249 AD2d 393, 394 [2d Dept 1998]). It is clear that plaintiffs/petitioners do not fall into any of the enumerated statutory categories.

Nor is this case where "a particular group of people has a special interest in funds held for a charitable purpose, as when they are entitled to a preference in the distribution of such funds and the class of potential beneficiaries is sharply defined and limited in number," (Alco Gravure, Inc. v. Knapp Foundation, 64 NY2d 458, 466 [1985]), or one where the State's Attorney General has been "defrocked" from exercising his "traditional [role as] guardian of the public interest and trust beneficiaries" (Consumers Union of U.S., Inc. v State of New York 5 NY3d 327 [2005]).

Similar considerations compel the conclusion that plaintiffs/petitioners, as non-members [*6]of Polytechnic, lack standing to maintain breach of fiduciary claims against the Board of Trustees (see Not-For-Profit Corporation Law § 623 [a], [b]; Tae Hwa Yoon v. New York Hahn Wolee Church, Inc., 56 AD3d 752 [2d Dept 2008]; Matter of Romney v. Mazur, 52 AD3d 610 [2d Dept 2008]).

Finally, the Court rejects plaintiffs/petitioners contention, made for the first time in their reply papers, that they have standing to maintain this action pursuant to Education Law § 223. That statute provides, in pertinent part:

Any two or more corporations chartered under the powers of the regents . . . may enter into an agreement for the consolidation of such corporations, setting forth the terms and conditions of consolidation ... The agreement must be approved by three-fourths of the trustees or directors of such corporation at a meeting of the trustees or directors of each corporation, separately and specially called for that purpose, which approval, duly verified by the chairman and clerk of such meeting, shall be annexed to the petition. On presentation of a petition, together with the certificate of approval and the agreement for consolidation, and on such notice to interested parties as the regents shall prescribe, and after hearing such interested parties as desire to be heard, the regents may make and execute an order for the consolidation of the corporations on such terms and conditions as the regents may prescribe. When such order is made, such corporations shall become one corporation by the name designated in the order, and shall be subject only to such duties and obligations as a corporation formed under this chapter for the same purposes; and all the property belonging to the corporations so consolidated shall be vested in and transferred to the new corporation, which shall be subject to all the liabilities of the former corporations, to the same extent as if they had been contracted or incurred by it. (emphasis added).Even assuming that the Affiliation Agreement constitutes a consolidation of Polytechnic and NYU, as plaintiffs/petitioners maintain a conclusion at odds with the terms of the plain language of the Affiliation Agreement and the charter amendments approved by defendants/respondents the statute speaks only to a right to participate in administrative proceedings before the Board of Regents, and plaintiffs/petitioners do not sue to vindicate such a right.[FN4] Further, any right to notice and be heard pursuant to Education Law § 223 is itself limited to such "interested parties as the regents shall prescribe."

Based on the foregoing, the Court concludes that plaintiffs/petitioners lack standing to maintain this combined action/proceeding.

ALLEGED VIOLATIONS OF THE N-PCL LAW

Even if plaintiffs/petitioners had standing to maintain this action, which they do not, their claimed violations of Sections 510, 511, 804 (a) (ii) and 907 of the N-PCL are foreclosed as a matter of law.

A.N-PCL § 510 and 511

N-PCL § 510 set forth the terms on which the "sale, lease, exchange or other disposition [*7]of all, or substantially all, the assets of a corporation may be made." The statute requires, inter alia, that a Type B or C corporation obtain "leave of the supreme court in the judicial district or of the county court of the county in which the corporation has its office or principal place of carrying out the purposes for which it was formed" (N-PCL § 510 [a] [3]).

The undisputed documentary evidence in this case demonstrates that the transaction at issue does not involve the "sale, lease, exchange or other disposition of all, or substantially all, the assets of [Polytechnic]." Rather, the record is clear that Polytechnic remains in existence as a separate not-for-profit educational corporation and continues to exercise full ownership and control of its assets.[FN5]

Nonetheless, plaintiffs/petitioners argue that judicial review still is required pursuant to N-PCL § 510 (a) (3), based on the theory that Polytechnic's assets "will most assuredly vest in NYU" after five years. Plaintiffs/petitioners contend that as a result of the change in Polytechnic's status from a non-member corporation to a corporation with NYU as the sole member, a majority of the Polytechnic Board of Trustees will have been selected by NYU by the end of the fifth year. On that basis, plaintiffs/petitioners argue that "NYU would gain control in the Poly Board as well as title to all Polytechnic assets" within this period. They further contend that this arrangement "is the functional equivalent of a contract to dispose of all of Polytechnic's assets over five years."

This claim fails for several reasons. First and foremost, the Appellate Division, Third Department expressly has rejected the argument that a change in membership of a not-for-profit corporation in connection with an affiliation agreement "is the functional equivalent of a sale, lease, exchange or other disposition of corporate assets" for purposes of N-PCL § 510 (Nathan Littauer Hosp. Ass'n v. Spitzer, 287 AD2d 202, 207 [3d Dept 2001], lv. denied 98 NY2d 602 [2002]). This binding precedent of the Third Department is not distinguishable in any meaningful way from the instant case.

Second, insofar as the Board of Trustees ultimately determines that there should be a consolidation with NYU, the attendant transfer of assets presumably would be subject to judicial review in accordance with N-PCL § 510 (a) (3) at that time. Indeed, the Affiliation Agreement expressly contemplates as much. Thus, judicial review of any claimed transfer of assets pursuant to N-PCL § 510 is not yet ripe for determination.

In view of the Court's conclusion that N-PCL § 510 (a) (3) is inapplicable to the charter amendments at issue, any claim founded upon N-PCL § 511 must also fail.

B.N-PCL § 907

Pursuant to N-PCL § 907, judicial approval is required before certain mergers or consolidations of not-for-profit corporations become effective. However, Education Law § 216-a (4) (c) expressly provides that this provision shall not be applicable to education corporations. Accordingly, even if the charter amendments were held to constitute a merger or consolidation [*8]between Polytechnic and NYU, the provisions of N-PCL § 907 would not be applicable.

C.N-PCL § 804

A certificate of amendment to the charter of Type B or C corporation that "seeks to change or eliminate a purpose or power enumerated in the corporations certificate of incorporation, or to add a power or purpose not enumerated therein, shall have endorsed thereon or annexed thereto the approval of a justice of the supreme court of the judicial district in which the office of the corporation is located," on notice to the Attorney General (N-PCL § 804 [a] [ii]).

As an initial matter, the Court rejects the Attorney General's contention that this statute is inapplicable to education corporations. Given that the State Legislature specifically exempted educational corporations from all of the provisions of "article eight [of the N-PCL] except section eight hundred four" (Education Law § 216-a [4] [c]), there is no basis for inferring an implicit legislative exemption for educational corporations from N-PCL § 804.

With respect to the merits, plaintiffs/petitioners can point to no change in Polytechnic's corporate purpose, which remains the offering of undergraduate and graduate degree-granting programs in engineering and related sciences. This conclusion is confirmed by the Littauer decision, which makes clear that changes to the governance structure of a not-for-profit corporation do not, without more, constitute a change in corporate purpose so as to trigger the review process set forth in N-PCL § 804 (a) (ii) (Littauer, supra, 287 AD2d at 204. Moreover, this is not a case like Matter of Herbert H. Lehman Coll. Found., Inc. v. Fernandez (292 AD2d 227, 229 [1st Dept 2002]), where the manner in which the not-for-profit corporation is governed bears on its ability to carry out its stated corporate purpose.

Nor have plaintiffs/petitioners alleged a cognizable change in Polytechnic's corporate powers. The charter and by-law amendments at issue in this proceeding do not change or eliminate the corporate powers possessed by Polytechnic, but rather pertain to who exercises those powers. As the Littauer Court explained, N-PCL § 804 (a) (ii) "is designed to require prior court approval only in instances where the proposed amendment truly seeks to change the nature, object or powers of a particular corporation" ((Littauer, supra, 287 AD2d at 205). As in the Littauer case, "[NYU], as [Polytechnic's] sole member, would derive no fewer or greater powers than those currently possessed by [Polytechnic]" (id.). Further, contrary to the suggestion of plaintiffs/petitioners, a change from the delineation or illustration of powers to reliance on equivalent generalized authority does not implicate the review procedures mandated by N-PCL § 804 (a) (ii) (Littauer, supra, 287 AD2d at 205).

Accordingly, the procedures of N-PCL § 804 are inapplicable to the Affiliation Agreement.

REMAINING CLAIMS

A.Prior Board of Trustees' Resolution

Plaintiffs/petitioners argue that the Board of Trustees' action in approving the Affiliation Agreement was ultra vires and arbitrary and capricious because it was done in violation of its February 1, 2005 resolution. The Court disagrees. It is clear that the Board of Trustees resolved only that "all discussions with New York University relating toits proposal for merger and/or consolidation shall immediately cease and be discontinued" (emphasis added). By its terms, the resolution does not speak to discussions relating to future proposals. And in any event, plaintiffs/petitioners have failed to demonstrate that the Board of Trustees was powerless to [*9]rescind this resolution through a subsequent resolution adopted by a super-majority vote.

B.Board of Regents' Action

The Court rejects the contention of plaintiffs/petitioners that the actions of the Board of Regents in approving the Polytechnic charter amendments should be set aside as being "affected by an error of law or . . . arbitrary and capricious or an abuse of discretion" (CPLR 7803 [3]). "It is well settled that in reviewing administrative action a court may not substitute its judgment for that of the agency responsible for making the determination, but must ascertain only whether there is a rational basis for the decision or whether it is arbitrary and capricious. Deference to the judgment of the agency, when supported by the record, is particularly appropriate when the matter under review involves a factual evaluation in the area of the agency's expertise" (Matter of Warder v. Board of Regents, 53 NY2d 186, 194 [1981]).

In this case, the administrative record demonstrates that the Office of Higher Education, an arm of the Board of Regents, conducted a full and thorough investigation into the Affiliation Agreement and the correspondent charter amendments. On the basis of its review, the Office of Higher Education recommended to the Board of Regents that such amendments be approved in order to enhance Polytechnic's viability as an engineering school and enhance its undergraduate and graduate course offerings. At an open public meeting, the Board of Regents unanimously approved the proposed charter amendments. Plaintiffs/petitioners have failed to demonstrate that the Regents' determination, which falls within its "broad policy-making responsibility for the State's educational system . . . [and its special power] to charter institutions of higher education," is arbitrary, capricious or in violation of law.

C.Breach of Duty

The claims for breach of fiduciary asserted against the Board of Trustees are also without merit. As explained supra, the provisions of the N-PCL relied upon by plaintiffs/petitioners do not require judicial approval of the Affiliation Agreement. And plaintiffs/petitioners' claim that the Board of Trustees was required to obtain an appraisal of Polytechnic's assets before entered into the Affiliation Agreement is premised on their flawed contention that such agreement constitutes a disposition of Polytechnic's assets. Finally, the facts alleged by plaintiffs/petitioners are insufficient as a matter of law to demonstrate that the actions taken by the Board of Trustees' fall outside the business judgment rule. "Absent a showing of bad faith in the form of self dealing, fraud or unconscionability, a court will not overturn or invalidate the decisions made by directors" of a not-for-profit corporation (Matter of Midway Jewish Center, 16 Misc 3d 607, 612 [Sup Ct Nassau Cty 2007], citing Consumers Union, supra).

CONCLUSION

The Court has considered the remaining contentions offered by plaintiffs/petitioners and finds them unavailing.[FN6] Accordingly, the motions of defendants/respondents to dismiss the Verified Petition and Complaint are granted, and the Verified Petition and Complaint is hereby [*10]dismissed.

All papers, including this Decision and Judgment are being returned to counsel for the Board of Trustees. The signing of this Decision and Judgment shall not constitute entry or filing underCPLR § 2220. Counsel are not relieved from the applicable provisions of that section respecting filing, entry and notice of entry.

Dated: Albany, New York

January 30, 2009

Richard M. Platkin

A.J.S.C.

Footnotes

Footnote 1: The Agreement also requires NYU to appoint two Polytechnic Trustees to its governing body.

Footnote 2: Plaintiffs/petitioners also complain Polytechnic has received and used public funds "to finance and effect an affiliation' with NYU, as defined in the secret [Definitive Agreement]. Defendant/Respondent Board has not disclosed the terms of this agreement to the public, in violation of its inherent duty to do so in return for receiving and expending public dollars." Plaintiffs/petitioners do not seek any specific relief associated with this contention in their Verified Complaint and Petition, but do request that the Court conduct an in camera review of the Agreement. By letter dated January 9, 2009, the Court requested a true and correct copy of the Affiliation Agreement for its in camera inspection. On January 23, 2009, counsel for the Board of Trustees provided the Court with the requested document. The Court's review of the Affiliation Agreement confirms that the summary of such agreement provided to the Court in the affidavit of Bryon P. Connell, an employee of the State Education Department, accurately depicts the contents of the Affiliation Agreement in all respects material to the disposition of this application.

Footnote 3: The post-argument request of plaintiffs/petitioners to make additional evidentiary submissions is hereby denied.

Footnote 4: The Court notes that the Board of Regents' approval of the Affiliation Agreement was done at an open, public meeting, and plaintiffs/petitioners do not allege that they were not on notice of such meeting or that they were denied the opportunity to make their views on the Affiliation Agreement known to the Board of Regents.

Footnote 5: This is true even if, as plaintiffs/petitioners appear to suggest, the $50 million loan from NYU to Polytechnic secured by the latter's air rights is viewed as equivalent to the sale of such rights. Plaintiffs/petitioners do not and cannot contend that Polytechnic's air rights represent "all or substantially all" of the university's corporate assets.

Footnote 6: With respect to plaintiffs/petitioners' claims founded upon Polytechnic's Hart-Scott-Rodino "premerger" filing, the Court notes that applicable federal law deems the acquisition of control over an existing not-for-profit to be the equivalent of an acquisition of the assets of such corporation (16 CFR 801.2 [f] [3]). Since, as explained supra, the Third Department's decision in Littauer rejects this view, this filing is not probative of the issues to be decided by the Court.