Gentile v. Flyer

Business Law

New York Law Journal


Justice Kenneth Thompson Jr.

Defendant 2400 Johnson Ave. Owners moved for summary judgment dismissing the complaint against the cooperative. Flyer also moved for summary judgment dismissing the complaint against him. Co-op shareholder Gentile brought this derivative action under Business Corporation Law §626 to recover funds allegedly lost due to Flyer's alleged breach of fiduciary duty as a member of the co-op's Board of Directors. Flyer designed and manufactured storage bins mounted above vehicles parked in the co-op's garage, while a member of the board. The bins were acquired by the board in a lease-agreement, after which the co-op purchased them outright and receives the entirety of the rental fee for them. Gentile argued the board was not entitled to the business judgment rule as they exhibited bad faith in investigating his allegations against Flyer for fraud and self-dealing. The board concluded the co-op suffered no damages resulting from the installation of bins, and now had a substantial source of revenue. The board found the co-op benefitted from the bins and any recovery would be outweighed by litigation fees. Thus, in the absence of any breach of fiduciary duty, Flyer and 2400 were granted summary judgment.

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