## Facts

- Ronald Levandusky was a tenant-shareholder and proprietary lessee in a Manhattan residential cooperative owned by One Fifth Avenue Apartment Corp.
- Levandusky planned a kitchen renovation that included relocating a steam riser serving the building’s heating system.
- The proprietary lease required the cooperative’s prior written consent for alterations to water, gas, or steam risers or pipes.
- Levandusky submitted renovation plans that were approved, but the plans did not disclose any change to the steam riser.
- Levandusky executed an alteration agreement and renovation guidelines that again required advance written approval for work affecting the heating system.
- After learning Levandusky still intended to move the riser, the board consulted an engineer who cautioned about risks to the building’s older heating system.
- The board adopted or reaffirmed a policy prohibiting relocation of steam risers, denied Levandusky a variance, and required a redesign that kept the riser in place.
- Levandusky proceeded to move the riser anyway; the cooperative issued a stop-work order and directed restoration.
- Levandusky brought an Article 78 proceeding to annul the stop-work order as arbitrary and capricious; the matter ultimately reached the New York Court of Appeals on the standard of review governing co-op board actions.

## Issues

1. What standard of judicial review applies to a cooperative apartment corporation board’s enforcement of building policy against a tenant-shareholder.
2. Whether a co-op board’s stop-work order enforcing a no-relocation policy for steam risers may be set aside as arbitrary and capricious, where the board acted pursuant to governing documents and engineering advice.

## Decision

- The Court of Appeals held that the business judgment rule supplies the proper standard for reviewing cooperative board decisions involving internal governance and building policy.
- Under that standard, courts defer to board action taken within the board’s authority, in good faith, and in furtherance of legitimate corporate purposes.
- The Court upheld the cooperative’s stop-work order and the requirement that Levandusky restore the steam riser.
- The Court rejected a review model that would invite courts to reweigh technical and policy judgments better left to the cooperative’s elected board.

## Legal Principles

- Cooperative housing corporations are governed by corporate principles; board decisions on internal management and building policy are treated as business judgments.
- The business judgment rule bars judicial inquiry into board action when directors act in good faith, with honest judgment, and for lawful and legitimate corporate purposes.
- Judicial intervention remains available where a board acts outside its authority, violates governing documents, or where the action is tainted by bad faith, discrimination, or self-dealing.
- Contractual governance matters: proprietary leases and alteration agreements requiring written approval for alterations to building systems support board enforcement measures.
- Courts will not substitute their judgment for that of a cooperative board merely because a different decision could also be reasonable.

## Conclusion

The Court of Appeals confirmed that challenges to cooperative board decisions on building policy are governed by the business judgment rule, and it sustained the board’s stop-work order because the board acted within its authority and in good faith to protect the cooperative’s legitimate interests.


Matter of Levandusky v. One Fifth Ave. Apt. Corp., 75 N.Y.2d 530 (1990)