SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK

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In the Matter of the Application of BLEECKER CHARLES CO.,          : Index No.: 110835/02
                                                                   :
                              Petitioner,                          :
                                                                   :
For the Inspection of the Minutes of Meetings of the               : Hon. Joan A. Madden
Directors and Shareholders and Record of Shareholders              :    
of 350 Bleecker Street Apartment Corp.                             :    
                                                                   :     
                -against-                                          :  
                                                                   : 
350 BLEECKR STREET APARTMENT CORP.,                                :
                                                                   : 
                              Respondent.                          :
                                                                   :
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MEMORANDUM OF LAW (A) IN
OPPOSITION TO PETITIONER'S MOTION
FOR AN ORDER PURSUANT TO BCL §624 AND
FOR ATTORNEYS' FEES; AND (B) IN
SUPPORT OF THE COOP'S MOTION FOR
AN ORDER DISMISSING THE PROCEEDING
AND FOR SANCTIONS

Cantor, Epstein & Degenshein, LLP
Attorneys for the Coop
57 West 38th Street
New York, New York 10018
212-768-4343

PRELIMINARY STATEMENT

          This memorandum is respectfully submitted on behalf of the Coop (a) in opposition to petitioner's application for an order (i) pursuant to Business Corporation Law §624 and/or common law directing the Coop to turn over various books and records; and (ii) for attorneys' fees; and (b) in support of the Coop's cross motion for an order (i) dismissing the proceeding; and (ii) awarding sanction in its favor as a result of the frivolous nature of this proceeding. [1]

          The bad faith evidenced by sponsor in bringing this proceeding is glaring. Notwithstanding more than six months of silence from the sponsor, it commenced the within proceeding upon no notice to the Coop in order to recover documents which were offered to it in November 2001. The only difference in positions is that the Coop offered to permit a review of its board minutes, as redacted with respect the Garage Lease Litigation.

          In support of its position, the sponsor conclusorily asserts that he must have the board minutes in order to file an amendment to the offering plan (at ¶8). He does so with no back-up documentation from the Attorney General, no demonstration that the Attorney General rejected redacted minutes and no citation to that portion of 13 NYCRR §18 which requires it to produce minutes.

          Moreover, sponsor's demand for attorneys' fees equally smacks of bad faith. It is of course axiomatic that such fees are awarded only when a contract or statute permit and that Business Corporation Law §624 does not allow for recovery of such fees. Thus, because the only thing the sponsor can accomplish with this suit is to harass the Coop, it is entitled to an award of sanctions in the form of attorneys' fees, 22 NYCRR §130-1.1.

ARGUMENT

POINT I

PETITIONER IS NOT ENTITLED TO
UNREDACTED MINUTES

          Business Corporation Law §624 provides that a shareholder has the right under certain circumstances to examine, during normal business hours, Aits minutes of the meetings of its shareholders and record of shareholders and to make extracts therefrom for any purpose reasonably related to such person's interest as a shareholder@. BCL §624(b). There is no statutory right to review board minutes; such right derives solely from common law. Thus, when determining whether to permit a shareholder to review other books and records of a corporation, the Court must, in its discretion, first satisfy itself that the shareholder is acting in good faith.

           Application of RDR Associates, Inc. v. Media Corporation of America, 63 AD2d 888, 889, 405 NYS2d 702 (1st Dept., 1978); see also In the Matter of Crane Co. v. Anaconda Company, 39 NY2d 14, 20, 382 NYS2d 707 (1976).

          At bar, the sponsor is not acting in good faith and it cannot be found that the inspection is sought for a proper purpose. In a request dated October 9, 2001 (six days after a decision was rendered in the Garage Lease Litigation), sponsor demanded to see certain documents, offering absolutely no reason as to why it sought to review the Coop's board minutes. In an affidavit prepared by petitioner and sworn to on October 30, 2001, petitioner again offered no basis to support its request for review. Indeed, until commencement of this proceeding, at no time did petitioner offer an explanation as to why it wanted to review the board minutes.

          Notwithstanding, the Coop offered petitioner an opportunity to review the documents it now seeks with the sole exception that the board would not permit review of those sections of the board minutes which discuss the Garage Lease Litigation. The Coop's position gives the sponsor even more than he is entitled to receive.

          In In re Application of Salantino, 180 AD2d 434, 580 NYS2d 11 (1st Dept., 1992) a shareholder and cooperative corporation were embroiled in a bitter litigation concerning the cooperative's failure to approve a proposed sale of the shareholder's apartment. The Court denied the shareholder's request for the production of the corporate books, records, minute books, etc. upon a finding that the request was not made in good faith.

          Similarly, in Haberman v. 257 Central Park West, Inc., Supreme Court, New York County, Index Number 124590/01 (Friedman, J), a non-resident shareholder sought to review omnibus corporate records, including board minutes, after he had already commenced an action against the cooperative challenging an assessment levied by the cooperative. The Court denied the request for minutes, granting the shareholder the right to review only the records the cooperative was statutorily or contractually bound to provide [a copy of the decision is annexed hereto]. Accord: Ochs v. Washington Heights Federal Savings and Loan Association, 17 NY2d 82, 268 NYS2d 294 (1966) [because issues were raised concerning whether a member of federal savings and loan sought to review records in good faith and for a proper purpose, particularly in light of litigation commenced by the member, a hearing was directed to be held].

          Accordingly, the Coop submits that it would be improper to permit the sponsor to review any records in which the board referred to or discussed the Garage Lease Litigation.

POINT

PETITIONER IS NOT ENTITLED TO
AN AWARD OF ATTORNEYS' FEES
AND A REQUEST FOR SAME ADDS
TO THE FRIVOLOUS NATURE OF THIS PROCEEDING

          It is axiomatic that attorneys' fees are only awarded if there is a contract or statute which calls for said award, AG Ship Maintenance Corp. v. Lezak, 69 NY2d 1, 511 NYS2d 216 (1986). Assuming, arguendo, that the sponsor were successful in its within application, because the proceeding was commenced pursuant to Business Corporation Law §624 (which does not provide for such an award), attorneys' fees may not be awarded, Spinale v. 10 West 66th Street Corporation, 210 AD2d 85, 621 NYS 2d 840 (1st Dept., 1994).

          Sponsor's demand for attorneys' fees, coupled with the facts of this matter require that the Court award sanctions in favor of the Coop in the form of its attorneys' fees, 22 NYCRR 130-1.1. The sponsor demanded documents immediately after receiving a favorable decision in the Garage Lease Litigation; it failed to provide the required affidavit for another three weeks; it was advised to contact the managing agent for the shareholders' list (or to provide the agent with a letter which the agent would forward to all shareholders at no cost beyond postage); it was advised it could review redacted board minutes; it attended the annual election; it lost the annual election; it was again told the documents were available for review; it made a motion for legal fees in the Garage Lease Litigation and thereafter made no more requests for the documents since November. The sponsor then commenced this proceeding with absolutely no notice or further request.

          Under the circumstances, we respectfully request that the Coop be awarded sanctions in the form of attorneys' fees based upon the sponsor's conduct.

CONCLUSION

          For the foregoing reasons, the Coop respectfully requests that the Court dismiss the within proceeding and award to it sanctions in the form of attorneys' fees as well as such other and further relief as to the Court seems just, proper and equitable.

CANTOR EPSTEIN & DEGENSHEIN, LLP
Attorneys for Respondent

/s/ Dale J. Degenshein
By: Dale J. Degenshein
57 West 38th Street
New York, New York 10018