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A Cautionary Tale
It is January 10th, 2016, you wake up at 5:15 in the morning, run to the gym, get home in time to get your kids ready for school, put in a full day of work, and rush home to have dinner with the family. Now at 9:15 at night, you begin your second job as a member of your Co-op’s Board of Directors. Tonight, your inbox contains another nasty missive from Bob Green, a tenant-shareholder, regarding the Board’s refusal to approve his request to relocate the gas line in his kitchen in order to accommodate a gut renovation of his apartment.
The Board’s managing agent and consulting engineer have recommended that the Board deny Mr. Green’s request to move his gas line due to the risk of a gas leak and a related shutdown of the gas service to an entire line of apartments in the building. Mr. Green has accused the Board of acting improperly in refusing to allow him to do the gas work, believing the Board withheld its consent due to a lawsuit he commenced against the Co-op four years ago over a dispute involving water damage in his apartment. Mr. Green also maintained he was being treated differently by the Board, particularly since several years ago the prior managing agent allowed a shareholder to move his gas line without incident. Outraged at Mr. Green, and exhausted from your long day, you fire off the following email to your fellow Board members and the managing agent:
Bob Green is a jack-ass. That guy makes my blood boil. He has lived in the building for 30 years and has not lifted a finger to help the Co-op and does nothing but complain about the Board’s decision-making. We do not work for Bob and we should not be bullied by him.
One of your fellow Board members responds to your email with the following comment: “Hell will freeze over before we allow him to move his gas line.” Another Board member chimes in writing: “Dealing with Mr. Green is a living hell.” “LOLs” and “hahas” are circulated all around.
One month later, a process server is at your door-step and hands you a complaint in an action started by Mr. Green in which he seeks an injunction permitting him to move his gas line, as well as claims for money damages against the Co-op for breach of contract and against all of the individual Board members for breach of fiduciary duty.
Your blood is now boiling when you send the following missive to your fellow Board members and general counsel on February 10, 2016:
That piece of sh*t Green sued the Co-op AGAIN, this time over the gas-line issue. I just got served. We should counter-sue him for harassment. We need to have a meeting to respond as soon as possible.
As a defendant in the action, you will be served with a discovery request that will require that you produce any document that you may have concerning Mr. Green’s request to move his gas line, other shareholder requests to perform similar renovations, and the prior water damage dispute with Mr. Green. Like most Board members, you have sent and received Board communications using your work and personal email accounts. In addition to gathering together any pertinent documents that you had in your office or apartment, you are obligated to review all of your email accounts to cull together any relevant emails that you may have sent or received over the four year period that you have been a Board member. The scope of documents that Mr. Green can demand that you produce in the litigation is particularly broad, i.e., any document that could lead to the discovery of admissible evidence. See CPLR § 3101; Polygram Holding, Inc. v. Cafaro, 42 A.D.3d 339, 839 N.Y.S.2d 493 (1st Dept. 2007) [disclosure extends not only to admissible proof but also to testimony or documents which may lead to the disclosure of admissible proof].
Email communications amongst Board members and the Co-op’s managing agent are typically not privileged, and pertinent communications (including the Board’s January 10th emails) will have to be produced. Communications between the Board members and their counsel about the dispute with Mr. Green are typically privileged and will not have to be disclosed in discovery. However, you will need to give your attorney a copy of emails exchanged between the Board and its counsel that are in your possession, as the attorney must review each document to determine whether (i) the document falls within the scope of Mr. Green’s document request, (ii) Mr. Green is entitled to request the document and (iii) the document contains a privileged communication. Not all communications with your attorney are privileged. The attorney-client privilege attaches only to communications that are seeking or giving legal advice. See Rossi v. Blue Cross & Blue Shield of Greater N.Y., 73 N.Y.2d 588, 542 N.Y.S.2d 508 (1989). The attorney-client privilege can be waived if you voluntarily disclose a confidential communication to a third-party.
Your February 10th email to your counsel – which was sent from your work account – would typically be privileged. However, when you started your job at a financial services company, amongst the mound of documents you signed was an acknowledgement of the company’s email policy, which provided that (i) any personal use of the company’s email system is prohibited, (ii) the company’s email system is the property of the company, and thus any communications stored and/or transmitted over the company’s system are deemed company records, and (iii) the company’s email system is monitored by the company. Under New York law, any emails exchanged between you and the Co-op’s general counsel might have to be produced to Mr. Green because you could be deemed to have waived the privilege. See Scott v. Beth Israel Medical Center, Inc., 17 Misc. 3d 934, 874 N.Y.S.2d 436 (Sup. Ct., N.Y. Co. 2007) (noting that “the effect of an employer e-mail policy…is to have the employer looking over your shoulder each time you send an e-mail.”); Long v. Marubeni America Corp., 2006 WL 2998671 (S.D.N.Y.) (held no attorney-client privilege for emails exchanged over employer’s e-mail system where employer had formal no personal use policy); In re Asia Global Crossing, Ltd., 322 B.R. 247 (Bankr. S.D.N.Y. 2005) (developed a test to “measure the employee’s expectation of privacy in his computer files and e-mail” in order to consider whether trustee could force the production of emails sent by company employees to their personal attorneys on the company’s email system).
Your counsel’s production of the Board’s email exchanges regarding the alteration dispute with Mr. Green could result in a number of troubling consequences that were certainly not contemplated or intended at the time those communications were sent.
First, the production of the emails might derail Defendants’ motion for summary judgment. Your proprietary lease includes a typical provision requiring a shareholder to obtain board consent before performing any renovations, but such consent may not be “unreasonably withheld.” A common misconception is that the Board’s decision to deny a renovation request is protected by the business judgment rule. Where a proprietary lease sets forth a specific standard of review (such as “unreasonably withheld”), the business judgment rules does not apply to the Board’s determination. Rather, a challenge to a denial of an alteration request is reviewed under a “reasonableness” standard, i.e., “legitimately related to the welfare of the cooperative.” Rosenthal v. One Hudson Park, Inc., 269 A.D.2d 144, 701 N.Y.S.2d 899 (1st Dept. 2000).
While your attorneys have moved for summary judgment with seemingly unassailable affidavits from the managing agent and the Co-op’s consulting architect detailing all of the numerous problems and risks associated with moving a gas line, Mr. Green’s opposition to the motion emphasizes that the Board’s emails are supposed evidence that the Board denied his renovation request based on personal animus, particularly when combined with evidence that several years ago the prior managing agent permitted another shareholder to move her gas line and three years ago Mr. Green sued the Co-op regarding a water leak in his apartment (that resulted in the Co-op’s insurer paying a nominal sum to Mr. Green).
When reviewing a motion for summary judgment, the Court’s job is not to weigh or evaluate evidence. The Court’s function is to analyze the parties’ submissions to determine whether there are any issues of material fact that require a trial and, if there are no such issues, to apply the undisputed material facts to the law. See CPLR § 3212(b); Winegrad v. New York University Medical Center, 64 N.Y.2d 851, 487 N.Y.S.2d 316 (1985); Zuckerman v. City of New York, 49 N.Y.2d 557, 427 N.Y.S.2d 595 (1980). Even if ninety-nine percent of the evidence submitted on a motion for summary judgment favors dismissal of Mr. Green’s bogus complaint, the Board’s emails might create that one percent of evidence supporting Mr. Green’s complaint that will mandate denial of the motion and require the Board to defend Mr. Green’s claims at a full-blown trial.
Second, shareholder litigations against cooperative boards tend to be emotional confrontations. However, before documents were exchanged, counsel for Defendants and Mr. Green had a brief discussion about trying to settle the matter; and the Co-op’s directors and officers liability carrier, which is providing a defense to Mr. Green’s claims, has indicated a willingness to offer some money to Mr. Green to get the case settled. The Board’s hopes that the matter can be quickly settled are dashed when Mr. Green reads the Board’s emails, as Mr. Green finds them inflammatory and emboldens him to continue to vigorously prosecute his claims – rather than compromise -- because those emails only confirm his perspective that the Board was acting out of personal animus rather than out of a concern over a gas leak and shut-down.
Third, the Board elections are coming up in a month, and Mr. Green is part of a small, but very vocal, group of minority shareholders. In an effort to gather proxies, Mr. Green has placed a solicitation under the door of every shareholder, which includes a copy of the Board’s email exchanges that he obtained in discovery.
In order to avoid being on the defense against shareholders such as Mr. Green, Boards should consider the following “Do’s and Do not’s” for email communications involving Board business:
1. Do not use emails between your fellow Board members and managing agent as a vehicle to express your frustrations about other apartment owners who make the work of serving on the Board more difficult. If you need to vent about a fellow shareholder, make a telephone call. Think twice before you hit the send button on an email expressing personal views about other shareholders. Also, keep in mind that text messages are also discoverable.
2. Do not use multiple email accounts for Board business. If you are obligated to produce your emails in connection with a lawsuit, the task is more manageable if you used only one email account from which you need to search for relevant documents.
3. Avoid using your work email as your dedicated email for Board business. Aside from any potential risk that you may inadvertently waive a privilege, in the event that you need to produce emails, most people would rather not have to contact their employer’s IT department because they need to retrieve large numbers of documents relating to a private matter.
4. Boards should consider creating dedicated emails and group emails (such as Google groups). Using those email tools will ensure that all emails involving Board business will be in one location and, in the event of a litigation, it will be much easier to produce pertinent documents. Using a group email (such as Google groups) will ensure that emails involving Board business will be sent to all Board members. There are some software products, that help Boards organize the building’s emails and documents.
5. Please keep in mind that not every communication with the building’s attorney is privileged. The attorney–client privilege extends only to communications seeking or giving legal advice. Also be careful about who is “cc’d” on emails to counsel; copying other Board members and the managing agent will not affect the privilege, but adding former Board members, other shareholders, the superintendent or your spouse could raise issues as to whether the privilege has been waived.