First published: Jul 2025
The Big ‘Don’t’
TAKEAWAY Once again, the corporate documents rule and dictate the outcome. Don’t add conditions that are not set forth in the by-laws. Don’t disenfranchise your shareholder’s ability to vote for properly qualified candidates of their choosing. Don’t try to rely on the business judgment rule to justify non-compliance with the by-laws or the proprietary lease.
MCCARDLE V. EDGEWATER PARK OWNERS COOPERATIVE, INC.
WHAT HAPPENED Edgewater Park is a 675-home cooperative located in the Bronx where shareholders own and maintain their individual homes while paying monthly charges for common area maintenance and property taxes. The property includes a separate building known as the Mansion, which is leased to the Edgewater Athletic Association (EAA), an independent organization that uses the space for social purposes. Disputes developed between the EAA and Edgewater Park regarding the operation of the Mansion, and an adversarial relationship emerged between the two. Before the 2024 annual meeting, the Edgewater Park board disqualified four candidates because they were all affiliated in some way with the EAA and the board felt that created a conflict of interest. The board asserted that the bylaws require all board candidates to be "in good standing," a term they interpreted broadly to encompass moral, ethical, and fiduciary obligations. According to the board, these obligations were violated by what they called the "destabilizing conduct" of the EAA.
However, the cooperative's bylaws had only three requirements for eligibility to serve on the board and run for office. You had to be a stockholder in the cooperative, an occupant of a dwelling on the property and must have submitted a petition signed by 15 percent of the shareholders at least 20 days before the annual meeting supporting their nomination. The four shareholders satisfied all of these criteria and challenged the board’s decision by filing an Article 78 proceeding.
IN COURT The court ruled that the shareholders were all entitled to be candidates and ordered the cooperative to add them to the ballot. It found the board’s decision to exclude the candidates to be arbitrary and capricious and that the business judgment rule could not be used to justify actions taken in contravention of the by-laws. The court said that If there are issues with the EAA the proper course of conduct for the board would be to bring action directly against the EAA and not to preclude otherwise qualified individuals from running for the board. The candidates’ alleged conflict of interest could be aired at the shareholder’s meeting and considered by the shareholders in determining whether to vote for them or not.
COUNSEL for the board and co-op BRIAN HOCH Brian R. Hoch; for the challenging shareholders CRAIG NOTTE, ANNA GUILIANO Borah, Goldstein, Altschuler, Nahins & Goidel; Justice Raymond P. Fernandez
