Months after Hurricane Sandy devastated buildings all over New York City, co-op and condo owners are still filing lawsuits accusing their building managers of negligence in preparing for the storm.
These plaintiffs face a unique challenge: How can they show that the managers failed to prepare adequately for a disaster that no one had seen before?
Unlike lawsuits by renters, most of which were filed very soon after the storm, lawsuits by owners have been filed gradually over the last few months.
Some, like a proposed class action filed by condo owners at 2 Gold St. in lower Manhattan, Richard v. 2 Gold Street, 158155/12, were filed in November.
Others were filed months later, like a suit filed last month by residents of a Staten Island co-op, Puro v. B.S.L. One Owners, 100643/13. And many residents are still weighing whether or not to sue, attorneys say.
Aaron Shmulewitz, a partner at Belkin Burden Wenig & Goldman who handles co-op and condo litigation, said that many suits will likely be filed in the near future by insurers, acting as subrogees, rather than by residents themselves.
The suits that have been filed include two broad categories of claims: claims against co-op boards, or, less often, condo boards, and claims against management companies. The Staten Island suit targets both the co-op board and the managing agent; some other suits target only the managing agents.
Typically, the suits allege negligence against the defendants, claiming they did not make necessary preparations when they knew the storm was coming.
Though they have some similarities, the two categories of claims present very different challenges.
One of the biggest obstacles to a co-op or condo considering suits against their board is purely practical.
"When you are an owner in a building, whether it’s a condo or a co-op, you feel more vested in the building or the board, and to some extent, when you sue the co-op or the condo board, you are suing yourself," said Damon Howard of Ephron-Mandel & Howard. "People go through the political channels available in the building…Ultimately, if it comes to litigation, they could be on the other side of the fence from neighbors."
‘Very Tough Suits’
Other obstacles are legal. Corporate boards are protected by the business judgment rule, which says that a corporate board is not liable for decisions that are made in good faith.
"Basically, those are very tough suits," said Warren Estis of Rosenberg & Estis. "You have the business judgment rule, in the co-op situation, saying that if they made a good faith decision they’re going to be protected."
"In your judgment, if these were the prudent things to do, you’re immune from being second-guessed," Estis said. "If it’s willful, arbitrary, or if you have self-dealing or discrimination, you may have a claim."
"I do believe that the business judgment rule does provide significant protection for these boards," Howard said. "It’s been read by courts as protecting against all but the most outrageous or negligent acts."
The unprecedented nature of the storm makes it hard to show that a co-op or condo board acted arbitrarily, Estis said.
"If it was going to cost the condominium $20,000, $30,000, $50,000 to take certain protections, is that something where you could say someone was negligent when, if you look at the weather history of New York City, you can say you can take the risk?" he said. "No one had ever seen this degree of damage."
Co-op owners do have one big advantage over condo owners: a landlord-tenant relationship with the co-op, which gives them some statutory rights.
For example, Howard said, co-op owners are protected by a warrant of habitability, just as rental tenants are. That means that, even if they can’t prove negligence, they may be able to get an abatement of the charges they pay to the co-op if their apartments are found to be uninhabitable.
Condo owners have sometimes argued that they enjoy an implied warrant of habitability. For example, the residents in the 2 Gold lawsuit allege that the condo corporation "impliedly warranted to the Class that the buildings were fit for human habitation and further that the residents were not subject to any conditions endangering or detrimental to their life, health or safety."
However, Howard said that courts have generally rejected such claims. He cited the Appellate Division, First Department’s decisions in Frisch v. Bellmarc Management, 190 A.D.2d 383 (1993), and Linden v. Lloyds Planning Service, 299 A.D.2d 217 (2002), as examples of cases where the court refused to recognize an implied warrant of habitability for condo owners.
"I think that the co-op owners asserting statutory claims are likely to be more successful," he said.
Another obstacle is that boards are often not responsible for the day-to-day operations of their buildings.
In the Staten Island lawsuit, the plaintiffs allege the super of the complex stacked sandbags in front of a building that was set back from the water, but not in front of a building that was on the water, because he ran out of sandbags.
Estis said it might be hard to hold the co-op board responsible for that decision, even though it employed the super.
"It’s probably a good claim to get the super fired," he said. "Obviously it sounds stupid."
A more promising target for residents, attorneys say, are buildings’ managing agents, rather than co-op and condo boards. Unlike the boards, those companies are not protected by the business judgment rule because they have a contract to provide a particular service, and have arguably failed to provide it.
"It’s really the management company that’s directing the day-to-day operation of the building," Estis said. "Then it becomes a whole different story. It’s like for your home if you hire a security company to do certain things."
Howard said that tenants looking to prove a negligence claim against a management company might still have difficulty, given that Sandy is widely seen as a "one time in a century" storm.
However, he said they may be able to make a case that a manager ignored obvious vulnerabilities in a building.
"I would firstly look at whether or not the particular area the building is in has been subject to flooding in the past," he said. If it had, that would put the managing agent on notice that there was a flood risk.
Even without past flooding, physical characteristics of the building might be enough to establish a negligence claim.
"Is it below grade? Does it have any particular characteristics, such as windows that are placed low, that would make it more susceptible to wind or flooding?" Howard said. "What would a reasonable person, with the particular knowledge they have of this building, have done?"
"What we’re really looking for is quality of cases," said Adam Gana of Napoli Bern Ripka Shkolnik, who is representing residents in several co-op and condo lawsuits throughout the city. "What I really want to see are those situations where I really believe there was actual negligence."
He said that, while Sandy may have been one of a kind, there are still past warnings that residents can point to in order to establish negligence.
"Superstorm Irene happened the year before," he said. "There was substantial damage as a result of Irene. Buildings, especially in Zone A and Zone B, are on notice that there could be potential damages."
Furthermore, he said, "everyone was on notice that this was going to be an unprecedented storm at least 48 hours in advance" thanks to warnings from weather forecasters and state and city officials.
"Part of it is common sense," said Christopher Rooney of Mahon & Rooney, who represents the residents in the Staten Island suit. It would be reasonable to expect building managers to do "what you’ve seen done in many of the shore communities, and in many other hurricanes over the past 10 years," Rooney said. Those shore communities include not only those radically different climates like Florida, he added, but at the New Jersey shore.
Still, John Lyddanne, a partner at Martin Clearwater & Bell, who represents the management company in the Staten Island case, said he was confident his client would prevail.
"This was an unprecedented act of God," Lyddanne said. "It’s a natural tendency to look for someone to blame, but we don’t feel that there’s any liability here," he said.
No matter how the legal arguments are received by courts, attorneys say that most disputes between co-op and condo owners and their boards or managing agents will likely be resolved out of court.
One sign of that is that relatively few lawsuits have been filed.
"Given the number of buildings that have sustained damage, I don’t think [the lawsuits] represent a majority of the locations in New York that have sustained damages," Howard said. "I suspect most disputes have been settled amicably."
Even when they do sue, he said, it may be a negotiating tactic.
"In many cases this litigation has been begun by these tenants to provide a framework for settlement," he said. "It brings everyone to the table to talk about a resolution."
@|Brendan Pierson can be contacted at email@example.com.