A Queens Coop, governing pursuant to a staggered election process, did not hold elections during the Covid-19 Pandemic (2020-2022). Two shareholders brought an action contesting the 2023 election.
What the shareholders alleged
Those shareholders alleged that since the terms of all 7 directors lapsed during those years, the 2023 election should have been conducted as if the 2023 meeting was the initial meeting of the shareholders. Under their preferred scheme they would have won two seats on the Board.
What the Court said
The Court was not convinced. The Court agreed with the Board that the by-laws “do not set forth a procedural mechanism for holding an annual meeting and election of directors where same had not been held for several years.” The Court further reasoned that since the shareholders failed to adequately plead any irregularities in conducting the election, they failed to meet their burden required in order to vitiate the protections of the business judgment rule.
Although the shareholders’ pleading did not expressly rely on BCL §619, the Court also considered the facts and circumstances as if they had. Pursuant to BCL §619, a shareholder aggrieved by election results may bring an action seeking an order of the Court overturning that election upon sufficient proofs. One means of overturning an election is showing that the election was not properly conducted, taking issue with notices, proxies, ballots, tabulation, quorum, to name a few.
Yet, the by-laws confer a degree of discretion to Boards in conducting elections and annual meetings, with that discretion arising from the relevant terms of the by-laws. As this Court explained, if the by-laws are silent on a specific term or event, the Court should be extremely reluctant to read into it terms which are not specifically stated.
Jazwinski v. Justice Court Mutual Housing Cooperative, Sup. Ct., Queens Cty., March 6, 2025.
