Art Students League of New York building, 215 West 57th Street (NYLJ/Rick Kopstein)
Three months after refusing to block the Art Students League of New York’s $31.8 million transfer of air rights over its historic West 57th Street building, Manhattan Acing Supreme Court Justice Melvin Schweitzer (See Profile) has disposed of a suit challenging the sale brought derivatively by a segment of the league’s membership.
In a ruling released Friday in Caraballo v. The Art Students League of New York, 650522/2014, Schweitzer granted summary judgment to the league and its board, finding the 249 petitioner members of the league had raised no triable issue of fact.
The judge said the petitioners failed to produce any new evidence to rebut the board’s argument that it acted in good faith and with reasonable exercise of its business judgment when it voted to confer the air rights to Broadway Trio, an affiliate of Extell Development, in 2005.
Extell is building a 1,440 foot-high luxury residential tower next to the American Fine Arts Building, which the league owns. The air rights relate to a planned section that would cantilever over the landmark building beginning at floor 30 of the 88-story tower.
In his April 14 decision, Schweitzer denied a preliminary injunction to the petitioners, who argued that a majority of the league’s membership did not approve the transaction or that alternatively, campaign materials sent to members ahead of the vote were misleading.
In his previous order, the judge said the board exercised proper business judgment when it mobilized voting league members “to vote on an extremely important opportunity for the league.”
In Friday’s decision, the judge said he was unconvinced by the plaintiffs’ submission of 25 affidavits and an informal survey emailed to league members in wake of that ruling asking whether both inactive and active members believed an abstention from voting meant a vote against the cantilever transaction.
Calling the survey “severely flawed,” the court noted that among the 2,004 recipients, 59 percent did not open the email and that among the 831 members who did read it, 711 did not respond.
“Given that over thirteen hundred people voted in favor of the cantilever transaction, the court finds that the survey has little probative value as to the materiality of the allegedly misleading statements by the board,” the judge wrote in his July 25 decision.
Moshe Mortner, who represents the petitioners, told Law Journal affiliate Commercial Litigation Insider that he intends to appeal. “We brought this case as a derivative action against the league’s board on behalf of more than 200 members of the Art Students League based on an improper voting process,” he said in an email.
Michael Volpe, a partner at Venable who represents the league’s board, said the judge “consistently and definitively upheld the decision-making of the board and the process the board followed.”
“You had a group of people that incorrectly thought that the board wasn’t listening to their concerns,” Volpe said in an interview. “There were a number of dissidents and the judge was very careful to give them their hearing in court so they could put forth evidence.”
“From the art students’ perspective, it would now like to move on,” he added.