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Firm News: co-ops and condo

G + B Trial Victory Protecting New York City Co-op

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Attorneys Arthur Xanthos and William Brophy recently obtained a stunning victory on behalf of an Upper East Side co-op, that had been sued by shareholder-tenants seeking seven figures in damages due to leaks into their apartment over a span of nine years.  Specifically, the shareholder-tenants sought money for a maintenance abatement, diminution in value to the apartment, property damage, and punitive damages.  The complaint sought more than $1 million, and the settlement demand at trial was $250,000.  After trial, however, the only damages awarded amounted to a little more than $16,000.       
                                                                     9/10/19
Arthur Xanthos, Business Judgment Rule, co-ops and condo, Gartner + Bloom, Insurance Defense, litigation, William Brophy

MOLD PERSONAL INJURY LAWSUITS: WHY DO THEY CONTINUE? By Arthur P. Xanthos

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In our August 6, 2014 article, we explained the import of the New York State Court of Appeals' Cornell decision -- without medical community acceptance of causation between mold and bodily injury, courts in New York State will dismiss lawsuits for bodily injury premised on mold.

Since the Cornell decision came down, this Firm has used it twice to dismiss mold-related bodily injury claims against our clients: first in June of 2014 in Benton v. 80 Cranberry, and now in August of 2016 in a case called Sylla-ba v. The Colton Condominium. (Both of these decisions can be accessed on the Firm's website, www.gartnerbloom.com, under Publications.)  In Sylla-ba, Justice Cynthia Kern reiterated what the Court of Appeals held: an 'association' between mold and the alleged symptoms of a plaintiff is not the same as 'causation' between them; therefore, proving that there is such an association is insufficient for the bodily injury claims to survive dismissal.  

Cornell should have resulted in a sharp drop in the number of mold-related personal injury lawsuits brought in New York's state courts; yet these lawsuits continue to be brought in roughly the same numbers as before Cornell. We suspect the reasons for this counter-intuitive statistic are, (1) the plaintiffs' bar's unfamiliarity with the 2014 Cornell decision (viz., the flawed belief that if you can get one doctor to say 'mold caused the plaintiff's illness', that such is sufficient), (2) the use of a mold-related bodily injury claim as an 'add on' claim to bolster the settlement value of the case, and (3) publication in the popular press of other states' mold verdicts and settlements.

So, we repeat what we wrote in our August 6, 2014 entry: Absent a major change in the science of mold illness, the next few years will see many more summary judgment decisions in favor of land owners and against mold plaintiffs.

                                                         -APX 8/15/2016
        
Arthur Xanthos, bodily injury, buildings, causation, co-ops and condo, Cornell v. 360 W. 51st Realty, Gartner + Bloom, lawsuit, mold, personal injury, toxic tort

The Legal Fees Sword, by Arthur Xanthos

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Many proprietary leases between a Co-op and a shareholder-tenant contain a boilerplate legal fees provision, obligating the shareholder-tenant to pay reasonable attorneys fees if the Co-op has to sue to enforce a provision of the lease. Because most lawsuits between Co-ops and shareholders are relatively quick summary proceedings in landlord-tenant court, the attorneys fees in question tend to be modest.

Sounds great, right? Except that sometimes it’s the shareholder-tenant who sues the Co-op (e.g., on a claim that the Co-op has breached the warranty of habitability), and by operation of the Real Property Law it is the shareholder-tenant who will be owed the reasonable attorneys fees if he or she prevails. These shareholder initiated lawsuits usually are plenary actions in Supreme Court, take years to litigate, and the attorneys fees in question can be substantial.   Our Firm's experience is that most Co-ops are willing to take that risk; thus, the boilerplate legal fees provision remains, well, boilerplate in most proprietary leases.

We believe however that serious consideration should be given to removal or modification of the legal fees provision in proprietary leases. Here is why. Assume a shareholder-tenant’s apartment is flooded due to a burst pipe from inside a wall. For whatever reason (inattentive Board, inexperienced managing agent), the apartment is not repaired for several months, and the shareholder-tenant relocates to a hotel. Disillusioned with the slow pace of repair, the shareholder-tenant repairs the apartment herself and sues the Co-op in Supreme Court for out-of-pocket expenses (the hotel bills, dry cleaning cost), the cost of repair (putting up new walls and ceiling), the damage to her personal property (furniture, artwork), a refund of maintenance payments for the period in question, and attorneys fees under the proprietary lease. The shareholder-tenant's lawsuit is based, in part, on the allegation that the Co-op breached the proprietary lease. If the shareholder-tenant prevails on her claim, she is likely entitled to attorneys fees, and the amount will be far more than the typical amount generated in the usual summary proceeding. That is because a fully litigated plenary action almost always generates significantly more legal fees than a summary proceeding generates. Worse for the Co-op, the award of attorneys fees to the shareholder-tenant (and for that matter, any award refunding maintenance payments) is almost never covered by the Co-op’s general liability insurance policy. Thus, a Co-op that has the boilerplate legal fees provisions in its proprietary lease and loses such a case will, (a) have to pay with out-of-pocket, non-insurance dollars, and (b) have to explain to its shareholders the reason for the hit to the Co-op's finances.

With no attorneys fees provision in the proprietary lease, the Co-op never faces this scenario; but must a Co-op forgo entirely the right to collect attorneys fees in all cases involving shareholder-tenants? Maybe not. Consider this: a proprietary lease that allows recovery of legal fees but only up to a specified dollar amount, say $15,000.00. In the majority of non-payment proceedings against shareholder-tenants, the Co-op will in most instances be made whole, as the legal fees generated will not exceed the specified dollar amount (i.e., $15,000.00). On the other hand, the maximum exposure the Co-op would face in Supreme Court if a shareholder-tenant prevailed would similarly be limited to $15,000.00, and most likely result in a “savings” of tens of thousands of dollars. In this light, a modified attorneys fees provision can be considered an additional insurance policy for the Co-op. We are unaware of any reported case addressing the validity of such a modified attorneys fees provision, but there is no good reason why a well-drafted limited attorneys fees provision wouldn’t be enforced in accordance with ordinary contract principles.

                                                                                             -APX 1/17/14
Arthur Xanthos, attorneys fees, co-ops and condo, legal fees, proprietary lease, shareholders, tenants