DePrima v Lark St. Neighborhood Dist. Mgt. Assn., Inc.

[*1] DePrima v Lark St. Neighborhood Dist. Mgt. Assn., Inc. 2012 NY Slip Op 51999(U) Decided on October 10, 2012 Supreme Court, Albany County Lynch, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 October 10, 2012
Supreme Court, Albany County

Robert A. DePrima, Petitioner, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules

against

Lark Street Neighborhood District Management Association, Inc. f/k/a LARK STREET AREA DISTRICT MANAGEMENT ASSOCIATION, INC.; MATTHEW BADALUCCO; CHRISTOPHER SCHLOSS; JERRY AUMAND; MARK BROGNA; ELISSA HALLORAN; AND MARY SPINELLI, Respondents.



3234-12



Law Office of John T. Keenan, III, Esq.

Attorneys for Petitioner

By John T. Keenan, III, Esq.

600 Broadway, 3rd Floor

Albany, New York 12207

Dowling Law PLLC

Attorneys for Respondents

By Joanmarie M. Dowling, Esq.

31 Freeman Road

Albany, New York 12208

Michael C. Lynch, J.

Petitioner is a member of the Board of Directors of the Respondent Lark Street Neighborhood District Manangement Association Inc. f/k/a Lark Street Area District Management Association Inc. (hereinafter, DMA).Respondent Matthew Baddalucco is a former Director and immediate past Chairman of the DMA, Christopher Schloss is the current Chairman. Respondents Jerry Aumand, Mark Brogna, and Elissa Halloran currently serve as Directors and Officers of the DMA, and respondent Mary Spinelli served as its Executive Director. [*2]

On December 2, 2011, petitioner and Ms. Spinelli were involved in a "dispute" at the DMA offices, which are located next door to residential property managed by petitioner. According to petitioner , after he received a telephone call from a tenant who reported that there was a "strange man" on his fire escape, he called Spinelli, "to question her about any knowledge she may have about the trespasser".After Spinelli "hung up the telephone on [him]", petitioner went to the DMA office "to inquire as to the identity of the man who was on the fire escape and the reason for the trespass".As petitioner explains it:

Spinelli loudly and repeatedly demanded that I leave the DMA office, and when I refused to do so until Spinelli answered my questions, Spinelli called the Albany Police complaining that I was trespassing at the premises and menacing her.

A Directors meeting was held on January 30, 2012. The meeting agenda included the item, "Events of Friday 12/2/2011".Petitioner alleges that although another director told him that the meeting was scheduled and that the "dispute" was on the agenda, he was not provided notice of the meeting and did not receive the agenda until the day of the meeting. He retained an attorney to accompany him to the meeting and, over his objection based on insufficient notice, the Board proceeded with the meeting but ultimately decided not to address the "dispute" without first obtaining their own counsel.

On February 1, 2012, the DMA Board published notice of a Director's meeting to be held on February 9, 2012. Petitioner explains that because the agenda did not include an item titled "Events of Friday 12/2/2011", he attended the February 9, 2012 meeting without counsel.The "dispute" was raised as "New Business" at the February 9, 2012 meeting. At that meeting, the Chairman made a motion "[t]o suspend [petitioner's] membership on the board for actions that were reckless and that the suspension would stay in place unitl the Board votes to overturn the suspension or the No Trespass Order is lifted" (Meeting Minutes).

Following the February 9, 2012 meeting, the petitioner and newly elected Chairman Schloss agreed to participate in non-binding mediation to attempt to resolve the dispute. Spinelli also attended the mediation held on April 1, 2012.Petitioner contends that as a result of the mediation, the participants agreed that he would be restored as Director and that he would be provided access to the DMA's records.There was no agreement with regard to petitioner's legal fees.At a Director's meeting on April 26, 2012, petitioner contends that he was identified as a "guest" and not allowed to vote on any resolutions. Schloss made a motion to "lift" petitioner's suspension on the condition that he agree to not contact the DMA staff, not access the DMA office, and to obtain prior approval before raising issues for discussion at Board meetings.Petitioner avers that he would not agree unless the conditions were placed on all other Directors. According to petitioner, in early May 2012, he learned that his name was removed from the list of Directors on the DMA's website and the DMA still had not allowed access to its records.

Petitioner commenced the instant proceeding to challenge the DMA's actions following the December 2, 2011 event. Specifically, he challenges the Resolution suspending him and the Resolution "lifting" the suspension with conditions. He also seeks an Order declaring that certain bylaws adopted by the DMA are invalid; directing the DMA to "re-insert petitioner's name as an active director of the corporation on all media in which the list of directors may appear", and directing the DMA to allow petitioner to examine its books and records. Finally, petitioner seeks an award of legal fees. [*3]

In response to the petition, the respondents do not oppose petitioner's request for a declaration that Article III, Section 7(b) of its bylaws is invalid.Respondents also claim that the DMA Board acted in good faith when it temporarily suspended petitioner, and that petitioner's name has since been restored to the list of Directors on the DMA's website (Dowling Affirmation ¶4).Further, according to respondents, petitioner was reinstated as a Director at its April meeting, but there was no Resolution imposing conditions on his reinstatement as a Director. Respondents oppose petitioner's request for access to DMA's books and records and for attorneys fees. The crux of respondents' opposition to the petition is that petitioner lacks standing to challenge his suspension or demand access to the DMA's books and records.

The Respondent DMA is a domestic not for profit corporation organized pursuant to Article 6 of the Not for Profit Corporation Law (hereinafter NFPCL), "[t]o execute the responsibilities of a district management association as set forth in Article 19 A of the General Municipal Law" (see DMA Bylaws Exhibit A). In accordance with General Municipal Law §980-m and NFPCL §601, the DMA has five voting classes of membership, including, as relevant here, a Class D member, defined as a residential tenant who occupies real property located in the district pursuant to a lease (Bylaws Article II, Section 1(D)).In January 2010, petitioner, a class D member, was elected to serve as one of the fifteen directors on the DMA's managing Board of Directors.

The NFPCL requires non-profit corporations to keep

"correct and complete books and records of account and minutes of the proceedings of its members, board and executive committee...[and] a list or record containing the names and addresses of all members, the class or classes of membership or capital certificates and the number of capital certificates held by each and the dates when they respectively became the holders of record thereof"

(NFPCL 621 (a)).A qualified member is authorized, upon at least five days written demand, "to examine in person ...during usual business hours...minutes of the proceedings of its members and list or record of members, and to make extracts therefrom" (NFPCL 621(b)). If, upon request, the non-profit refuses to allow inspection of its minutes or of the list of members, the requesting member may seek an Order directing the non-profit to allow inspection, "if it appears that the applicant is qualified and entitled to such inspection" (NFPCL 621 (d)).Also, a member, upon written request, is entitled to receive "an annual balance sheet and profit and loss statement or a financial statement performing a similar function for the preceding fiscal year" (NFPCL 621(e)).

Now, respondent contends that petitioner is not entitled to inspect DMA's records under NFPCL 621 because, "upon information and belief, [he] has not established his eligibility for Class D membership" (Memorandum of Law Point I; Respondents' Verified Answer - Second Defense).Further, respondents argue that petitioner's request was made in "bad faith" and seek a protective order limiting petitioner's "ability to abuse this information", that is, that he be prohibited from "record[ing] or copy[ing] social security numbers or bank account numbers and ...directed [to] use the information only in accordance with his fiduciary duties to the organization" (Memorandum of Law p. 20).

Based on the record before the Court, petitioner has demonstrated that he is a member of the DMA entitled to seek relief pursuant to NFPCL 621. The DMA's bylaws provide that a Class D membership of the Association is available for those "who are occupants pursuant to [*4]leases of residential spaces within the District" (Article II, Section 1 (D)).A person seeking Class D membership, "shall be eligible for membership in the Corporation upon submission to the Secretary of evidence of such qualification satisfactory to the Board" (Article II, Section I (E)).Although specific documentary evidence with regard to petitioner's membership is not provided, he avers that he submitted an application for membership, together with a copy of his lease, prior to his election as a Director. Petitioner's application was granted, he was elected as Director, and the DMA has not sought to terminate his membership with the DMA or otherwise disqualify him from further participation as a member of the Board based on its belief that he lacks the requisite qualifications [FN1].By his affidavit, petitioner confirms that he is a tenant in the District, pursuant to the terms of a lease agreement that was produced when he initially applied for membership and has since expired.

As a member of the DMA, petitioner has standing to seek the requested relief, provided that his request was made in good faith and for a proper purpose (Smith v. Calvary Baptist Church, 35 AD3d 749 [2006]; Watson v. Christie, 288 AD2d 29 [2006]). Here, petitioner contends that he is seeking to review the records because he

"believe[s] that there has been a significant level of fiscal mismanagement by Spinelli as the district manager and by Badalucco when he was chairman and Schloss when he was treasurer and now by Schloss as the chairman and by Brogna, the current treasurer...I also believe that the assets of the DMA are being mismanaged by the use of favoritism and or nepotism in the hiring of DMA staff"

In response to the petition, respondents submit affidavits by Mr. Schloss, Mr. Badalucco, and Ms. Spinelli. As relevant to petitioner's request to review the books and records pursuant to NFPCL 621, Mr. Schloss details his experience with petitioner's requests for information in the past.He avers that the requests are, "burdensome...exhaustive, duplicative of information already provided or available on the [DMA's] website, unnecessary to address the concern raised, frivolous, or made in bad faith or to harass" (¶16). As an example, Mr. Schloss explains that petitioner requested detailed financial records with regard to holiday lights purchased for Dana Park, including copies of both the front and back of checks, in order to investigate a claim that a donor was promised that the DMA would display a plaque recognizing his donation. Schloss avers that he attempted to explain to petitioner that his request would not lead to discovery of the requested information, but that petitioner refused to narrow the scope of his request.

Mr. Baddalucco similarly details his experience with petitioner. He claims that petitioner requested documentation available on the website, requested "trivial or insignificant" information, and that petitioner's "frequent and often exhaustive requests...divert[ed] resources from more productive work" (¶ 8).As an example of petitioner's behavior, Mr. Baddalucco provides copies of emails wherein petitioner requested that staff copy meeting minutes that were available on the DMA's website. Baddalucco avers that petitioner demanded that responses be made within a very short time frame and that the timing and tone of his requests "sometimes appeared to be motivated by an intent to retaliate against an individual he disliked or with whom [*5]he disagreed" (¶ 10).

The submissions before the Court reveal that the relationship between the petitioner and the Executive staff and Board is strained.Despite this, however, "[i]ll feelings and a desire to change [the DMA's] management and policies do not render [a request pursuant to NFPCL 621] improper ***, nor do efforts to communicate with the members and to investigate the conduct of management ***" (Mayer v. National Arts Club, 192 AD2d 863 [1993]). In contrast, "[i]f ... the driving motive is personal gain completely apart from a purpose of respondent, the denial of access to [the requested records] would not be improper" (Id.).

In this Court's view, the record presents factual questions with regard to petitioner's motivation in seeking access to the DMA's books and records. Further, it appears that petitioner's request is broad (see Smith, Supra) and that respondents are amenable to providing access to the records, albeit with some limitations.Accordingly, unless the parties are able to resolve this issue, a hearing will be held on October 29, 2012 at 10:30 a.m. at the Albany County Courthouse to determine both the validity and scope of petitioner's request pursuant to NFPCL 621.

Contrary to respondents' argument, as a member and duly elected director, the petitioner also has standing to challenge the respondent's resolution suspending his membership.As a general rule, however, this Court should "avoid interference with the internal management and operation of corporations (Grace v. Grace, 19 NY2d 307 [1967]). This Court's review of the Board's action is generally limited to determining whether the DMA followed its own by-laws (Clark v. Eastern Tennis Umpires Asso., 118 AD2d 853 [1986]) or whether its disciplinary process was improper or illegal (Berich v. Ithaca Police Benevolent Association, Inc., 23 AD3d 904 [2005])

Here, petitioner contends that the DMA's by laws provide no authority for the DMA to suspend a director.This Court disagrees. Even in the absence of a specific bylaw, "[w]ithin contracts of association there inheres a term binding members to loyal support of the society in the attainment of its proper purposes, and that for a gross breach of this obligation the power of expulsion is impliedly conferred on the association"*** A person who displays disloyalty, performs acts injurious to the association or tending to its disruption is said to have breached the implied obligation of loyal support" (Id., at 905).Based on the record presented, the Court finds that the DMA had implied authority to suspend petitioner for conduct that it considered to be disruptive and potentially harmful to the the organization. Further, because the suspension was not a "removal" the provision of the bylaws requiring a two-thirds vote before removing a Director "for cause" was not applicable (see Article III, Section 7).

Petitioner also contends that the respondents' determination was in error because he was not provided adequate notice of the charges against him nor an opportunity to be heard in defense of these charges. This Court disagrees.Generally, a member or director of a non-profit organization facing disciplinary action is entitled to a "[r]easonable opportunity to be heard and to answer the charges leveled against him" (Grace, Supra at 314).Here, it is undisputed that no disciplinary procedure is included within the DMA's bylaws.Nevertheless, even in the absence of a written disciplinary procedure,the right to be advised of charges and the right to appear and be heard in defense of the charges at a hearing, are fundamental (Anderson v. Bd. of Dirs. of the Powelton Club, 183 Misc 2d 200 [1999]).

Here, petitioner was advised that a meeting was scheduled for February 9, 2012 and he was aware that the "Events of 12/2/2011" remained unresolved. When the agenda for the [*6]February 9, 2012 meeting did not specifically refer to the event, as it had prior to the January 30, 2012 meeting, he avers that he chose to attend the meeting without counsel. Contrary to petitioner's claims, however, review of the digital audio record of the meeting (Petitioner's Exhibit D) reveals that petitioner attended the meeting, which lasted forty nine minutes, voluntarily discussed the "dispute", questioned Ms. Spinelli, answered questions from the Board members, and was afforded ample opportunity to explain his role in the event.

Contrary to petitioner's argument, the by-laws do not require that the subject of disciplinary action be represented by counsel, nor do they require advance written notice of the charges. In this Court's view, unless the bylaws require specific advance written notice of the charges, the petitioner's appearance and active participation at the meeting constituted a waiver of the alleged procedural violations, including the allegedly defective notice (compare, Kendrick v. Watermill Beach Club, Inc., 8 Misc 2d 798 [1957]).

Petitioner has not objected to petitioner's request that the proceeding be dismissed as against the individual respondents. Certain directors and officers of not-for-profit corporations have qualified immunity from suit (NFPCL 720-a). Because it appears that petitioner consents to such dismissal, respondents' application is granted and the proceeding is dismissed as against the individual respondents.

Finally, the Court denies petitioner's request for attorneys fees. As a general rule, "attorney's fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rule" (Hooper Assoc., Ltd. v AGS Computers, 74 NY2d 487, 491[1989]; Gage v. Monescalchi, 17 AD3d 770 [2005]). Here, even assuming that petitioner is a "prevailing party", because he has not provided any statutory or contractual authority for his request for fees, it is denied (Baker v. Health Mgmt. Sys., 98 NY2d 80 [2002]; Gage v. Monescalchi, 17 AD3d 770 [2005]; Wells v. League of Am. Theatres & Producers, 183 Misc 2d 915, 922 [2000]).

The parties remaining contentions have been considered and are either without merit or not necessary to resolve given the foregoing determination.

Accordingly, based on the foregoing, it is

ORDERED AND ADJUDGED, that the petition is granted, to the extent that a hearing pursuant to NFPCL 621 will be held on October 29, 2012 at 10:30 a.m. at the Albany County Courthouse; and it is further

ORDERED AND ADJUDGED that the petition is dismissed as against respondents Matthew Badalucco, Christopher Schloss, Jerry Aumand, Mark Brogna, and Elissa Halloran; and it is further

ORDERED AND ADJUDGED that in all other respects, the petition is denied.

The foregoing represents the Decision and Order/Judgment of this Court. This Original Decision and Order/Judgment is being returned to the attorney for petitioner. The below referenced original papers are being mailed to the Albany County Clerk. The signing of this Decision and Order/Judgment shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the provisions of that rule regarding filing, entry, or notice of entry.

DATED: October 10, 2012

Albany, New York [*7]

____________________

______________________________

Hon. Michael C. Lynch

Justice of the Supreme Court

Papers Considered:

1.Order to Show Cause dated June 11, 2012, with Affirmation in Support (John T. Keenan, III, Esq.), Verified Petition, and Exhibits A-K, Memorandum of Law;

2.Verified Answer dated June 25, 2012, with Affirmation in Support (Joanmarie M. Dowling, Esq.), Affidavit in Support (Christopher Schloss) and Exhibits thereto, Affidavit in Support (Matthew Badalucco) and Exhibits thereto, Affidavit in Support (Mary Spinelli) and Exhibits thereto, Affidavit in Support (Frank Quackenbush) and Exhibit thereto, Memorandum of Law;

3.Reply Affidavit Sworn July 18, 2012 (Robert A. DePrima) and Exhibit L thereto. Footnotes

Footnote 1:Absent such action by the Board, the Court declines respondents' invitation to direct the petitioner to substantiate his qualifications as a member of the DMA.