Supreme Court of the State of New York, County of New York, March 20, 2019
Plaintiff, Ronen Segev (“Segev”), entered into a contract with defendant, 262 N 9 LLC (the “Seller”), for the purchase of an individual condominium unit. Pursuant to the bylaws of the condominium and a clause in the contract, the defendant Board of Managers (the “Board”) of the condominium had a right of first refusal to purchase the apartment. After the Board exercised its right of first refusal and closed on the unit, Segev commenced an action alleging six causes of action: (1) breach of contract against the Seller; (2) tortious interference with contractual relations; (3) conspiracy to tortuously interfere with contractual relations; (4) breach of fiduciary duty as against the selling broker; (5) conspiracy to breach fiduciary duty; and (6) tortious interference with fiduciary duties and/or aiding and abetting breach of fiduciary duty.
Segev alleged that the Board engaged in misconduct in exercising the right of first refusal and did not follow the protocols as required by the by-laws and that a member of the Seller was also a member of the Board and thus there was a conflict of interest in the vote to exercise the right of first refusal. Seller and the Board moved to dismiss all causes of action, alleging that the Board properly exercised its right of first refusal and did not engage in misconduct.
In dismissing the complaint as against the Seller and the Board, the Court held:
Breach of Contract
Since the parties agreed in the contract that the Board had a right of first refusal, the sale to the Board was not a breach. The Court also rejected the argument that the member of the Seller, who was also a member of the Board, needed to recuse himself from the vote. The Court reasoned that since the other four members of the Board voted in favor of exercising the right of first refusal, the outcome of the vote would not have changed and thus a recusal was unnecessary.
Tortious Interference with Contractual Relations
Segev had no standing to challenge whether the Board properly followed the protocols in the by-laws to exercise the right of first refusal as there was privity between Segev and the Board. Additionally, the Court held that Segev did not “sufficiently plead that the Board, in allegedly violating its by-laws, acted to intentionally procure the breach of Segev’s contract,” and did not show that “exercise of the right of first refusal was not taken in good faith in the lawful and legitimate furtherance of corporate purpose.”
The conspiracy causes of action were dismissed as Segev “failed to adequately identify a fiduciary duty owed to him by the members of the alleged conspiracy, or a breach of any such duty.” Additionally, New York does not recognize an independent cause of action for conspiracy.
Tortious Interference with Fiduciary Duty
This cause of action was dismissed as Segev failed to allege facts showing that any members of the Board “purposefully aided and abetted in any potential breach on the part of Segev’s broker.