HERSH v. Constance Ellis, et al., Defendants–Respondents. (2018)

Order, Supreme Court, New York County (Carol R. Edmead, J.), entered April 25, 2017, which, inter alia, granted the motion of defendants-respondents to dismiss the fourth cause of action of the complaint as against them, and denied plaintiff's motion to amend the complaint except with respect to the ad damnum clause, unanimously affirmed, without costs.

In this case, plaintiff alleges that her apartment sustained extensive water infiltration due, in large part, to the condition of the greenhouse on the roof terrace located on the floor above her.  According to plaintiff, the individual owners of the offending greenhouse (defendants Alan Belzer and Susan Martin), the cooperative (defendant One Fifth Avenue Corp.), and the individual board members failed to adequately address and remedy the situation, and their failure to act resulted in catastrophic water damage to plaintiff's apartment.  Plaintiff alleged six causes of action, including one for breach of fiduciary duty against the individual board members, the only claim at issue on this appeal.

It is well-settled that a breach of fiduciary duty claim does not lie against individual cooperative board members where there is no allegation of “individual wrongdoing by the members ․ separate and apart from their collective actions taken on behalf of the” cooperative (20 Pine St. Homeowners Assn. v. 20 Pine St. LLC, 109 A.D.3d 733, 735–736, 971 N.Y.S.2d 289 [1st Dept. 2013];  Brasseur v. Speranza, 21 A.D.3d 297, 298, 800 N.Y.S.2d 669 [1st Dept. 2005] ).  Here, the complaint does not allege that any of the individual board members committed an independent wrong that was distinct from the actions taken as a board collectively.  Thus, the breach of fiduciary duty claim is not viable.  Because the proposed amended complaint fails to cure this deficiency, plaintiff's motion seeking to amend the complaint was properly denied.

Contrary to plaintiff's contention, this result is entirely consistent with Fletcher v. Dakota, Inc., 99 A.D.3d 43, 948 N.Y.S.2d 263 (1st Dept. 2012) ).  In Fletcher, we concluded that “although participation in a breach of contract will typically not give rise to individual director liability, the participation of an individual director in a corporation's tort is sufficient to give rise to individual liability” (id. at 47, 948 N.Y.S.2d 263).  Thus, we declined to dismiss claims against a cooperative board director who was alleged to have participated in the cooperative's violation of the State and City Human Rights Laws.

Here, in contrast, there is no viable corporate tort alleging breach of fiduciary duty, because a corporation owes no fiduciary duty to its shareholders (Fletcher, 99 A.D.3d at 54, 948 N.Y.S.2d 263;  Hyman v. New York Stock Exch., Inc., 46 A.D.3d 335, 337, 848 N.Y.S.2d 51 [1st Dept. 2007] ).  Thus, in the absence of a corporate tort in which the individual board members could have participated, the breach of fiduciary duty claim as against them was properly dismissed.  Indeed, Fletcher made this very point by dismissing the breach of fiduciary duty cause of action against an individual board director, while at the same time sustaining Human Rights Law claims against him.