40 W. 67th Street v. Pullman

In 40 W. 67th Street v. Pullman, 100 NY2d 147, 790 N.E.2d 1174, 760 N.Y.S.2d 745 (2003), the Court extended the business judgment rule to a residential cooperative corporation's decision to terminate a shareholder's tenancy based on objectionable conduct. Under this standard, a court will defer to the cooperative corporation's decision and will not undertake review of the decision unless the aggrieved shareholder tenant "makes a showing that the board acted: (1) outside the scope of its authority, (2) in a way that did not legitimately further the corporate purpose or (3) in bad faith." (Id. at 155.) Pullman expressly held that "when dealing, however, with termination, courts must exercise a heightened vigilance in examining whether the board's action meets the Levandusky business judgment test." (Id, at 158.) "While deferential, the Matter of Levandusky v. One Fifth Ave. Apt. Corp standard should not serve as a rubber stamp for cooperative board actions, particularly those involving tenancy terminations. (Id. at 157.) The Pullman Court found that in the case before it, "the cooperative unfailingly followed the procedures contained in the lease when acting to terminate defendant's tenancy." (Id. at 156.) In particular, the Court noted that the Board had called a special meeting and given the defendant an opportunity to be heard; acted by supermajority vote; properly fashioned the issue and the question to be addressed by resolution; and enacted a resolution which "specified the basis for the action, setting forth a list of specific findings as to defendant's objectionable behavior." (Id.)