DSW Lenox LLC v Rosetree on Lenox Ave. LLC  2015 NY Slip Op 32244(U)  November 23, 2015  Supreme Court, New York County  Docket Number: 652786/2011  Judge: Saliann Scarpulla is an example of the principal of privity and how it affects a legal malpractice case.  DSW was a 30% owner of a condominium at 381 Lenox Avenue, New York.  They alleged fraud in the marketing and sale of units at the condo and sued a wide swath of persons and entities.  However, the Court found that when the balance of the owner/board decided not to sue the individuals, and for us, more importantly, the attorneys, the business judgment rule protected that decision, as well as the fact that the Board hired the attorneys, not DSW.

“According to the SAC, this derivative action seeks recovery for construction defects in a building at 381-387 Lenox Avenue (the “Condominium”) in New York, and it also seeks “damages for fraud committed by defendants in co~ection with the marketing and sale of the units in the [Condominium] pursuant to material misrepresentations and omissions in the Offering Plan which were never disclosed despite the eight amendments thereto.” Plaintiff DSW is allegedly a 30% owner of the Condominium. The Court incorporates by reference the facts of the SAC as discussed in the May 2014 Order, and I only address additional facts as they relate to this motion. In the May 2014 Order I found, in pertinent part, that the:breach of fiduciary duty claims could not be sustained because the board’s decision not to file suit was protected by the business judgment rule. I additionally dismissed the SAC in its entirety because “[ e ]very cause of action asserted in the Complaint seeks to remedy the same wrongs that the Board voted not to pursue.” I also noted that while some defendants did not move to dismiss, the business judgment rule nonetheless applied to claims against them, “and ‘[i]t would exalt form over substance’ to await motions from the nonmoving defendants that would be granted as ‘compelled by the doctrine of the law of the case.”‘ (Citation omitted) Therefore, the claims against the nonmoving defendants were also dismissed. ”

“”Reargument is not designed to afford the unsuccessful party successive opportunities to reargue issues previously decided or to present arguments different from those originally asserted.” William P. Pahl Equip. Corp. v. Kassis, 182 A.D.2d 22, 27 (1st Dep’t 1992) (internal citation omitted). Pursuant to CPLR § 2221 ( d)(3 ), counsel must move for leave to reargue “within thirty days after service of a copy of the order determining the prior motion and written I notice of its entry.” On May 19, 2014, the MSF Defendants filed their Notice of Entry with the May 2014 Order. On June 19, 2014, thirty-one days after the Notice of Entry was filed, qsw filed this motion for leave to reargue. Pursuant to the discussion at oral argument, held on February 5, 2015, I deny the motion to reargue as against the MSF Defendants as untimely.2 Also as articulated during oral argument, the narrow question that I review on this I motion is whether the cases cited by plaintiff indicate that I erred in finding that the application of the business judgment rule effectively ended this lawsuit. The other portions of plaintiffs motion are denied because plaintiff has not shown that I overlooked or misapprehended any law or fact.”

Pine Street, however, is distinguishable. Pine Street, the trial court described the plaintiffs as “owners of condominium units in defendant 20 Pine Street Condominium, and allege that they represent the Homeowners Association (HOA) thereof,” and they ‘ . brought suit “for damages allegedly sustained by plaintiffs as a result of defendants’ failure to construct the condominium in accordance with the promises appearing in the offering plan, the plans and specifications filed with and approved by the Department of Buildings (DOB), the New York City Building Code (Building Code), and local industry standards.” 2012 N.Y. Misc. Lexis 2365, 2012 NY Slip Op 31302(U), *5 (Sup Ct, NY County May 16, 2012), ajf’d as modified 109 A.D.3d 733 (lst Dep’t 2013). It is clear from the trial court’s opinion that this was a direct, rather than a derivative action. E.g., id. at 12 (“Although it is well-settled that ‘individual unit owners lack standing to seek 652786/2011 Motion No. 019 Page 7 of 8 [* 7] damages for injury to the building’s common elements’ the offering plan specifically grants such a right to the individual unit owners under circumstances in which the condominium Board fails to act to enforce the Sponsor’s obligati~ns” [citation omitted]). Notably, nowhere in the opinion does the trial court claim that this is a derivative action, and I do not find it instructive in this derivative action where DSW has stepped into the shoes of the board of directors. Accordingly, for those defendants as against whom the motion was timely, I deny that part of the motion referencing the business judgment rule because plaintiff has not shown that I overlooked or misapprehended any law or fact. I decline to award costs and sanctions as requested by the CTSW Defendants.”