FILED: NEW YORK COUNTY CLERK 09/30/ :12 PM INDEX NO /2015 NYSCEF DOC. NO. 72 RECEIVED NYSCEF: 09/30/2016

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1 FILED: NEW YORK COUNTY CLERK 09/30/ :12 PM INDEX NO /2015 NYSCEF DOC. NO. 72 RECEIVED NYSCEF: 09/30/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X KAREL WAHRSAGER, Index No.: /2015 Plaintiff, - against - Assigned to: Hon. Ellen M. Coin RALPH B. PATERLINE, individually and as trustee of the RALPH B. PATERLINE REVOCABLE TRUST, EL MUSTAPHA JABRI, individually and as trustee of the Motion Seq. 04 RALPH B. PATERLINE REVOCABLE TRUST, the RALPH B. PATERLINE REVOCABLE TRUST, and 20 EAST 11 OWNERS CORP., named herein as a nominal defendant, Defendants X MEMORANDUM OF LAW OF DEFENDANT 20 EAST 11 OWNERS CORP. IN SUPPORT OF MOTION TO DISMISS PLAINTIFF S COMPLAINT Dunnington, Bartholow & Miller LLP Attorneys for 20 East 11 Owners Corp. 250 Park Avenue, Suite 1103 New York, NY (212) of 36

2 TABLE OF CONTENTS PRELIMINARY STATEMENT...1 PROCEDURAL BACKGROUND...4 FACTS RELEVANT TO THE MOTIONS...7 A. The Co-Op Called a Shareholders Meeting Which Cured Any Alleged Procedural Deficiencies to the Amendments to the Proprietary Lease...7 B. Amendments To the Proprietary Lease...8 ARGUMENT...15 I. The Applicable Standards...15 A. Declaratory Judgment...15 B. Motion to Dismiss Pursuant to CPLR II. The Amendments to the Proprietary Lease Were Adopted By The Majority Of Shareholders At A Duly Noticed Shareholders Meeting and Therefore Plaintiff s Amended and Supplemental Complaint Fails to State Any Viable Claims Against the Co-Op...18 A. By Holding a Shareholders Meeting, the Co-Op has Cured Any Alleged Deficiency in Adopting the Amendments to the Proprietary Lease Thus Rendering Plaintiff s Claims Moot...18 B. Because Plaintiff Failed to Attend the Duly Notice Shareholders Meeting, She Should Be Deemed to Have Waived And/Or Be Estopped From Questioning the Validity of the Amendment to the Proprietary Lease Adopted by the Majority of the Shareholders at the Shareholders Meeting...19 III. IV. Plaintiff s Claim for Declaratory Judgment Should Be Denied Because She Has Failed to Allege Facts Sufficient to Establish Actual Controversy Between the Parties...21 Plaintiff s Claim for Declaratory Relief to the Extent It Has Not Been Rendered Moot and Presents A Justiciable Controversy Should Still Be Dismissed Because It Is Palpably Insufficient As A Matter of Law...23 A. The Application of the Business Judgment Rule...23 i 2 of 36

3 B. Plaintiff s Allegation That the Amendments to the Proprietary Lease Benefit Defendants and Are Detrimental to Her Is Contradicted by the Unambiguous Language of the Amendments Imposition of Two Percent Transfer Fee Paragraph Restrictions on Lessee s Right to Transfer of Shares Fall Within the Business Judgment Rule...25 i. Right of First Refusal...26 ii. Right of Sale...26 iii. Consent And Assignment on Death of Shareholder...27 C. The Remaining Amendments Related to the Security of the Building Are Also Protected by the Business Judgment Rule...28 V. The Court Should Dismiss Plaintiff s Second Cause of Action Because She Has No Viable Claim for Money Damages...29 CONCLUSION...29 ii 3 of 36

4 TABLE OF AUTHORITIES Page(s) Cases 1050 Tenants Corp. v. Lapidus, 12 Misc. 3d 1196(A), 824 N.Y.S.2d 769 (Sup. Ct. New York County, April 14, 2006), aff d 1050 Tenants Corp. v. Lapidus, 35 A.D.3d 379, 835 N.Y.S.2d 68 (1st Dept. 2007) Broadway N.Y. Assoc., L.P. v. Bodner, 14 A.D.3d 1, 784 N.Y.S.2d 63 (1st Dept. 2004) West 67th Street v. Pullman, 100 N.Y.2d 147, 760 N.Y.S.2d 745 (2003)...20, West 67th Street v. Pullman, 296 A.D.2d 120, 742 N.Y.S.2d 262 (1st Dept. 2002), aff d 100 N.Y.2d 147, 760 N.Y.S.2d 745 (2003)...8, 23 ABN AMRO Bank N.V. v. MBLA Inc., 17 N.Y.3d 208, 928 N.Y.S.2d 647 (2011)...17 Alliance Network, LLC v. Sidley Austin LLP, 43 Misc. 3d 848, 987 N.Y.S.2d 794 (Sup. Ct. N.Y. County, March 20, 2014)...17 Bailey v. Fish & Neave, 30 A.D.3d 48, 814 N.Y.S.2d 104 (1st Dept. 2006)...16, 18 Biondi v. Beekman Hill House Apartment Corp., 257 A.D.2d 76, 692 N.Y.S.2d 304 (1st Dept. 1999)...24 Buccellato v. High View Estates Owners, Corp., 131 A.D.3d 912, 16 N.Y.S.3d 577 (2nd Dept. 2015)...22 Canon Point North, Inc. v. Abeles, 160 Misc. 2d 30, 612 N.Y.S.2d 289 (Sup. Ct. App. Term First Dept. 1993)...28 Deer Consumer Products, Inc. v. Little, 32 Misc. 3d 1243(A), 928 N.Y.S.2d 226, 2011 N.Y. Slip Op (U) (Sup. Ct. N.Y. County August 31, 2011)...17, 24 Matter of Enlarged City School District of Middletown, 96 A.D.3d 840, 946 N.Y.S.2d 208 (2nd Dept. 2012)...15, 16, 21 iii 4 of 36

5 Excel Graphics Tech. v. CFG/AGSCB 75 Ninth Ave., 1 A.D.3d 65, 767 N.Y.S.2d 99 [2003], lv. dismissed 2 N.Y.3d 794, 781 N.Y.S.2d 292, 814 N.E.2d 464 [2004]...16 Franklin v. Winard, 199 A.D.2d 220, 606 N.Y.S.2d 162 (1st Dep t 1993)...17 Horowitz v Fifth Ave. Inc. 7 A.D.3d 461, 777 N.Y.S.2d 482 (1st Dept. 2004)...28 Leibowitz v. Bickford s Lunch System, 241 N.Y. 489 (1926)...21 Levandusky v. One Fifth Ave., 75 N.Y.2d 530, 554 N.Y.S.2d 807 (1998)...28 Lopez v. Fenn, 90 A.D.3d 569, 937 N.Y.S.2d 1 (1st Dept. 2011)...16 McCorkle Cooperative Apartments, Inc. v. Gross, 54 A.D.2d 753 (2nd Dept. 1976), aff d 43 N.Y.2d 765 (1977)...27 Quirin v. 123 Apartments Corp., 128 A.D.2d 360, 516 N.Y.S.2d 218 (1st Dept. 1987)...24 Sokol v. Leader, 74 A.D.3d 1180, 904 N.Y.S.2d 153 (2nd Dept. 2010)...17 Thome v. Alexander & Luisa Calder Found, 70 A.D.3d 88, 890 N.Y.S.2d 16 (1st Dept. 2009)...15 Weisner v. 791 Park Ave. Corp. 6 N.Y.2d 426, 190 N.Y.S.2d 70 (1959)...2, 23 Winter v. Bernstein, 149 Misc. 2d 1107, 566 N.Y.S.2d 1012 (Sup. Ct. New York County, February 15, 1991), aff d 177 A.D.2d 452, 576 N.Y.S.2d 549 (1st Dept. 1991)...20 In re Workmen s Compensation Fund, 224 N.Y. 13 (1918)...15 Zilberfein v. Palmer Terrace Cooperative, Inc., 18 A.D.3d 742, 796 N.Y.S.2d 115 (2nd Dept. 2015)...24 Statutes N.Y. Condo. & Coop. Law 12: BCL 501(c)...24 iv 5 of 36

6 CPLR passim CPLR CPLR 3025(b)...1, 6 CPLR passim v 6 of 36

7 PRELIMINARY STATEMENT Defendant, 20 East 11 Owners Corp. ( 20 East or the Co-Op ), by its attorneys, Dunnington, Bartholow & Miller LLP, submits this memorandum of law in support of its motion pursuant to CPLR 3211(a)(1), (a)(2) and (a)(7) to dismiss Plaintiff, Karel Wahrsager s ( Plaintiff ) Amended and Supplemental Complaint ( Amended and Supplemental Complaint ) 1 on the grounds that the claims asserted therein are moot, and to the extent they are not moot, they should be dismissed because there exists no actual controversy between the parties and thus Plaintiff fails to state a claim for declaratory relief. CPLR Moreover, the documentary evidence, i.e., the amendments to the proprietary lease which are incorporated by reference in Plaintiff s Amended and Supplemental Complaint contradict Plaintiff s factual claims thus warranting the dismissal of the Amended and Supplemental Complaint pursuant to CPLR 3211(a)(1) and (a)(7). As explained below, there is no merit to Plaintiff s claims. Plaintiff commenced this action to challenge the amendments to the proprietary lease ( Proprietary Lease ) between the Co-Op, as Lessor, and her, as Lessee. Plaintiff concedes in the Amended and Supplemental Complaint that the amendments to the Proprietary Lease were adopted by a majority of shareholders at a duly noticed 2016 special meeting of shareholders ( Shareholders Meeting ). The sole basis of Plaintiff s challenge to the amendments is her specious claim that the amendments were adopted by Defendants to coerce [her] into selling her 1 By a Stipulation dated September 15, 2016, the parties stipulated that Plaintiff s proposed Supplemental Complaint filed with her motion pursuant to CPLR 3025(b) for leave to supplement her complaint be deemed to be amended and supplemented and the only operative complaint in this action. (NYSCEF Doc. Nos. 54) (Exhibit B to affirmation of Eva Adaszko, Esq. sworn to on September 30, 2016 ( Adaszko Affirm. )). 7 of 36

8 unit to [Defendants].... (See Amended and Supplemental Complaint 3 and 35) (see Exhibit C to Adaszko Affirm.) Plaintiff is a tenant-shareholder in a small, 6-apartment cooperative located at 20 East 11 th Street, New York, New York. As the Court of Appeals has held: [T]here is no reason why the owners of the co-operative apartment house could not decide for themselves with whom they wish to share their elevators, their common halls and facilities, their stockholders meetings, their management problems and responsibilities and their homes. Weisner v. 791 Park Ave. Corp. 6 N.Y.2d 426, 434, 190 N.Y.S.2d 70, 75 (1959). When Plaintiff purchased her shares in the Co-Op, she did so fully knowing that pursuant to the governing documents, including the Proprietary Lease and the By-Laws, a supermajority vote by the co-operative shareholders could result in changes being made to the form and content of the Proprietary Lease. As stated above, Plaintiff concedes in the Amended and Supplemental Complaint that the amendments to the Proprietary Lease she challenged in the original Complaint due to a lack of a meeting of shareholders have now been adopted at a duly noticed Shareholders Meeting on February 18, 2016 in accordance with the terms of the Proprietary Lease and the Co-Op s bylaws ( By-Laws ). Because the Co-Op cured any alleged procedural deficiency in adopting the amendments to the Proprietary Lease, Plaintiff s claims against the Co-Op have been rendered moot. Further, Plaintiff improperly seeks a declaration that the amendments are void. CPLR The amendments uniformly govern all shareholders. 2 Plaintiff s Amended and Supplemental Complaint is devoid of any facts to show that there is an actual dispute between 2 For the Court s convenience and for ease of reference, the text of the amendments is set forth in the footnotes 4-11, infra. 2 8 of 36

9 the parties arising out of their respective rights under the Proprietary Lease as amended, a necessary element to be entitled to a declaratory judgment. Specifically, the right of first refusal, the right to sell, the succession provision, the transfer fee and the provisions related to the security of the Building are all well within the range of standard provisions that have all been upheld as commercially reasonable by the courts. Therefore, the majority shareholders having voted to amend the Proprietary Lease in accordance with its terms and the terms of the By-Laws, have done so in accordance with clearly-established rights under New York law. Here, Plaintiff merely speculates as to what Defendants may or may not do in the future and/or what their intent may be at some point in the future. Most importantly, Plaintiff does not allege that she is actually attempting to transfer her ownership interest in the Co-Op and that the amendments to the Proprietary Lease have wrongly impeded her doing so. As explained below, Plaintiff s speculation as to the amendments effect or Defendants intent in view of the unambiguous language of the amendments is insufficient as a matter of law to establish justiciable controversy. In sum, Plaintiff is improperly seeking an advisory opinion as to future events which may or may not happen. Further, to the extent the Court might determine Plaintiff s claims are not moot and that there is justiciable controversy as to any of Plaintiff s claims, the Court should still grant the Co- Op s motion because the allegations in Plaintiff s Amended and Supplemental Complaint are insufficient as a matter of law to state any viable claims against the Co-Op. Indisputably, the authority to amend the Co-op s Proprietary Lease derives from Article 6.2 of the Proprietary Lease and Section 5.1 of the By-Laws. Both sections vest in the majority of the shareholders the power to amend the Proprietary Lease. (see Exhibits D and E, respectively to affidavit of El Mustapha Jabri sworn to on September 30, 2016 ( Jabri Aff. ) 3 9 of 36

10 Plaintiff admits that by a notice dated February 5, 2016, she was advised of the Shareholders Meeting. (See Amended and Supplemental Complaint at 25) (see Exhibit C to Adaszko Affirm.) On February 18, 2016, in accordance with the terms of the Proprietary Lease and the By-Laws, at a duly noticed Shareholders Meeting, the shareholders holding 81.1 percent of the issued and outstanding shares voted to amend the Proprietary Lease. While both Plaintiff and her attorney of record, David Bolton, received proper notice of the Shareholders Meeting, neither she nor Mr. Bolton attended the meeting either in person or by proxy. Thus, despite Plaintiff s commencement of this action claiming her right under the Proprietary Lease and the By-Laws to a duly noticed meeting of shareholders, when she was actually given such notice, Plaintiff ignored it. Under the circumstances, Plaintiff should be deemed to have waived and/or be estopped from challenging the validity of the amendments. Further, the business judgment rule applicable under the circumstances here protects the Co-Op s acceptance of the amendments as duly authorized by the majority of shareholders amendments. As explained below, as is evident from the unambiguous language of the amendments, they apply uniformly to all shareholders on the terms stated. Plaintiff s conclusory allegation that the amendments are detrimental to her is refuted by the language of the amendments themselves. In sum, the Court should grant the Co-Op s motion to dismiss the Amended and Supplemental Complaint on its entirety with prejudice. PROCEDURAL BACKGROUND Defendant 20 East, a New York cooperative corporation, owns a building at 20 East 11 th Street, New York, New York (the Building. ) Plaintiff is an owner of 189 shares in the Co-Op 4 10 of 36

11 and appurtenant Proprietary Lease. (A copy of the Proprietary Lease is annexed as Exhibit F to Jabri Aff.) Plaintiff commenced this action on September 3, 2015 by filing a Summons and Complaint. (NYSCEF Doc. No. 1) (Exhibit A to Adaszko Affirm.) In the Complaint, Plaintiff asserted three causes of action seeking declaratory judgment and money damages arising out of the amendments to the Co-Op s Proprietary Lease. On the First Cause of Action, Plaintiff sought a declaratory judgment declaring that the amendments to the Proprietary Lease were not properly adopted. On the Second Cause of Action, Plaintiff sought a declaratory judgment that the amendments are void on the grounds that they were adopted for improper reasons and were beneficial only to the majority shareholders and detrimental to her. On the Third Cause of Action, Plaintiff sought money damages, including attorneys fees incurred in prosecuting this action and for alleged diminution in value of her ownership in the Co-Op. On November 20, 2015, Defendants made a motion pursuant to CPLR 3211(a)(1) and (a)(7) to dismiss Plaintiff s Complaint. (NYSCEF Doc. No. 6). On June 27, 2016, this Honorable Court issued a memorandum decision and order ( June 27 th Order ) granting Plaintiff declaratory judgment on her First Cause of Action. The Court held that under the terms of the Proprietary Lease and the By-Laws, absent a written consent of all of the shareholders, the Proprietary Lease could only be amended by a vote of the shareholders at a duly-noticed meeting. Therefore, the Court declared the Written Consent by less than 2/3 Shareholders was null and void. The Court then dismissed the Second Cause of Action without prejudice as moot, and severed the Third Cause of Action seeking money damages. (NYSCEF Doc. No. 24) 5 11 of 36

12 On August 16, 2016, Plaintiff e-filed/served a Notice of Entry. (NYSCEF Doc. No. 25) On August 26, 2016, the Co-Op timely e-filed/served its Answer and Counterclaim. (NYSCEF Doc. No. 26) On August 26, 2016, Defendants shareholders e-filed/served their answer (NYSCEF Doc. No. 39) and motion for reargument. (NYSCEF Doc. Nos ). On August 29, 2016, Plaintiff e-filed/served an Amended Complaint. (NYSCEF Doc. No. 42) On August 30, 2016, Plaintiff e-filed/served a motion for leave to file a supplemental complaint. (NYSCEF Doc. Nos ) By a Stipulation dated September 15, 2016, Defendants shareholders withdrew their motion for reargument as moot. (NYSCEF Doc. No. 54) By the same stipulation, Plaintiff withdrew the motion for leave to supplement the Complaint. (NYSCEF Doc. No. 54) (Exhibit B to Adaszko Affirm.) In addition, as stated below at n.1, by the same Stipulation, the parties stipulated that the Complaint be deemed amended and supplemented and that the Supplemental Complaint filed with Plaintiff s motion pursuant to CPLR 3025(b) is to be the only operative complaint in this action without prejudice to Defendants rights to move to dismiss. (NYSCEF Doc. Nos. 48 and 54) The parties further stipulated that the time to answer, move, or otherwise respond to the new complaint was extended up to and including September 30, In the Amended and Supplemental Complaint, the only operative complaint, Plaintiff repleads the Second Cause of Action, which the Court dismissed as moot in the June 27 th Order, as First Cause of Action and repleads the Third Cause of Action for money damages as Second Cause of Action. Plaintiff challenges the validity of the amendments in a chart without attaching 6 12 of 36

13 a copy of the Proprietary Lease or the amendments which she asks the Court to declare void. 3 Nonetheless, by making references to the amendments (see Amended and Supplemental Complaint at 4 7, 21, 26, 27, and 37) (Exhibit C to Adaszko Affirm.), these documents are incorporated by reference and constitute Plaintiff s pleadings for the purpose of this motion. The Court, therefore can, and should fully consider them on this motion. (See Part I(B), infra.) FACTS RELEVANT TO THE MOTION A. The Co-Op Called a Shareholders Meeting Which Cured Any Alleged Procedural Deficiencies to the Amendments to the Proprietary Lease By a written request of Ralph B. Paterline and El Mustapha Jabri, in their capacities as and on behalf of themselves and the Ralph B. Paterline Revocable Trust as shareholders collectively owning 81.1% of the issued and outstanding shares of the Co-Op (the Request ) and Notice to All Shareholders of 20 East 11 Owners Corp. (the Notice ) dated February 5, 2016, the Co-Op called a Shareholders Meeting to be held on February 18, (See Jabri Aff. at 5 and Exhibits A and B, thereto.) As further explained by Mr. Jabri, the Notice was mailed to Plaintiff on February 8, 2016 by registered mail. (See Jabri Aff. at 6) In addition to serving the Notice on Plaintiff, 20 East served the Notice on Plaintiff s attorney, Mr. Bolton. (Copies of the receipts for registered mail are annexed as Exhibit C to Jabri Aff.) The Notice expressly stated that the purpose of the Shareholders Meeting was to vote upon changes (explained in Part II(B), infra) to the form and provisions of the Proprietary Lease as were set forth in the Written Consent to Change Proprietary Lease dated May 5, (See Jabri Aff. at 7 and Exhibit B, thereto.) 3 It is also questionable whether the chart is in compliance with CPLR 3014, which requires that [e]very pleading shall consist of plain and concise statements in consecutively numbered paragraphs of 36

14 During the Shareholders Meeting, the previously authorized changes to the Proprietary Lease by written consent dated May 5, 2015 were reviewed. (See Jabri Aff. at 8 and Exhibit D.) However, despite being given proper notice of the Shareholders Meeting, neither Plaintiff nor her attorney, Mr. Bolton, appeared in person or by proxy. (See Jabri Aff. at 9. and Exhibit D) The proposed amendments to the Proprietary Lease were duly adopted. (A copy of the Minutes of 2016 Special Meeting of Shareholders is annexed as Exhibit D to Jabri Aff. and a copy of the Shareholders Resolution signed at the Shareholders Meeting is annexed as Exhibit E to Jabri Aff.) B. Amendments To the Proprietary Lease There is the settled notion of a co-op as a voluntary association of individuals who agree to compromise their rights to obtain the benefits of living in a cooperative type of community. This includes choosing with whom they wish to share their elevators, their common halls and facilities, their stockholders meetings, their management problems and responsibilities and their homes West 67 th Street v. Pullman, 296 A.D.2d 120, 126, 742 N.Y.S.2d 262, 268 (1 st Dept. 2002), aff d 100 N.Y.2d 147, 760 N.Y.S.2d 745 (2003) (citing Weisner, supra). In sum, Plaintiff, by having bought into the co-operative living community, is bound by the governing documents and the authority of the shareholders by supermajority vote to enact amendments to the Proprietary Lease. Absent discriminatory treatment or bad faith, and here, as evident from the documentary evidence, there is none, Plaintiff is bound by the amendments to the Proprietary Lease, thus, warranting the dismissal of the Amended and Supplemental Complaint in its entirety with prejudice of 36

15 Specifically, the provisions of the Proprietary Lease which were amended are: Article 16 of the Proprietary Lease by adding Section 16.0, Rights to Purchase and Rights to Sell. As to the Right of First Refusal (paragraph 16.0(a)), the Co-Op s right to purchase the Proprietary Lease and appurtenant shares is triggered only if the Lessee desires to enter an agreement to sell the Lease and shares. Under this amendment the Lessee is required to provide written notice specifying the details of the transaction including cash purchase price and material business terms of such transaction. The time periods applicable to the right of first refusal are entirely within those routinely included in such provision. This provision applies equally to all shareholders Rights to Purchase and Rights to Sell (a) Right of First Refusal to Purchase The Corporation shall have the following right of first refusal to purchase this Lease and appurtenant Shares. (i) If Lessee desires to transfer the Lease and Shares, or if Lessee otherwise receives an offer from a party other than the Corporation or any shareholder for any such transfer that Lessee intends to accept, then Lessee shall, prior to entering into an agreement with respect to such transfer, provide written notice (the ROFR Notice ) to Lessor of its intention to effect such a transaction, which ROFR Notice shall append or fully describe the proposed agreement, specifying the cash purchase price for such Shares and Lease, and terms of payment, closing date and all other material business terms of such transaction. The ROFR Notice shall constitute an offer by the Lessee to sell his or her Lease and appurtenant Shares to the Lessor or its designee on the same terms and conditions as described or appended in the ROFR Notice and shall also constitute a representation and warranty by Lessee to the Lessor that the Lessee believes the desired transfer or offer to be bona fide in all respects. Lessor shall have fifteen (15) business days after receipt of the ROFR Notice ( Acceptance Date ) to notify such Lessee in writing (the ROFR Acceptance Notice ) of an intended purchase of the Shares and Lease on such terms and conditions in the ROFR Notice. (ii) Lessee and Lessor shall have thirty (30) business days after receipt of the ROFR Acceptance Notice to close on the terms and conditions appended or described in the ROFR Notice, if Lessor deems them sufficient, or else to negotiate and execute a 9 15 of 36

16 Plaintiff alleges that the amendments render it impossible for her to transfer her apartment to her daughter. (See Amended and Supplemental Complaint at 5) (Exhibit C to Adaszko Affirm.) However, this allegation is contradicted by the documentary evidence and thus has no merit. Specifically, nothing in the Right of First Refusal provision incorporated into the allegations in the Amended and Supplemental Complaint, takes away Plaintiff s right to give or bequeath her shares in the Co-Op to her daughter. In other words, Plaintiff retains her right to transfer her Proprietary Lease and the shares to her daughter gratuitously subject only to the normal procedures for transfer, which have long existed under section 16.1 of the Proprietary Lease. 5 mutually acceptable contract of sale... at the cash purchase price stated in the ROFR Notice. (Exhibit B to Jabri Aff.) 5 The remaining provisions of paragraph 16.0(a), provide: (iii) If a transaction on the terms and conditions described or appended in the ROFR Notice is not closed - - or such a mutually acceptable contract of sale is not executed - - within thirty (30) calendar days after receipt of the ROFR Acceptance Notice, then either Lessee or Lessor, on behalf of both, may then request the American Arbitration Association to select an arbitrator who is an attorney, in which event the Lessee and Lessor or their respective counsel shall submit their proposed forms of contract of sale to the arbitrator. The arbitrator shall determine which of the two forms of contract of sale better reflects the terms and conditions set forth in the ROFR Notice, and/or how to fairly elaborate them in a standard form. Such terms shall then apply (in addition to the cash purchase price stated in the ROFR Notice, which shall not be subject to such arbitration). The reasonable costs incurred in connection with such arbitration process shall be borne by the Corporation. (iv) If Lessor fails or elects not to give timely a ROFR Acceptance Notice by the Acceptance Date, then the Lessee shall have one hundred twenty (120) days from the Acceptance Date to enter into an agreement to transfer the Shares and Lease, subject to the other provisions of the Lease, with any third party (including any party making the offer described in paragraph (i) above) for a purchase price not less than the cash purchase price and on the terms and conditions as specified in the ROFR Notice. If such an agreement is not executed within such one hundred twenty (120) day period, then the of 36

17 As to the Right of Sale (paragraph 16.0(b)), the amendment gives a Lessee holding less than one third of the issued shares a right to sell his or her shares and lease to the Co-Op at fair market value determined by appraisal. This provision gives Plaintiff the option to sell her shares should she want to do it without selling them on the open market, which she is still free to do. This provision is clearly beneficial to Plaintiff. 6 For such a sale, Fair Market Value and Qualified Appraiser are both defined in paragraphs 16.0(b)(iii) and (iv), respectively. 7 transfer of the Shares and assignment of the Lease shall once again be subject to the right of first refusal set forth in this subsection (a). (Exhibit B to Jabri Aff.) 6 (b) Right to Sell The Lessee shall have the following right to sell this Lease and appurtenant Shares to the Corporation or its designee, if the Lessee owns less than one third (33 1/3%) of the Shares then issued, so long as the Lessee s title remains clear and free of any mortgage, security interest, judgment, lien or other encumbrance that will not with reasonable certainty be satisfied from sale proceeds at closing. (i) If and only if such Lessee so elects, such Lessee may cause to be provided written notice (the Sale Notice ) to Lessor that the Lessee exercises his or her right to assign this Lease, and sell and transfer all of the Shares to which it is appurtenant, to Lessor. Lessee s Sale Notice shall constitute the irrevocable election by Lessee to assign this Lease and sell the Shares specified in the notice, whereupon Lessor shall be obliged to purchase the Shares and assume the Lease from Lessee, and Lessee shall be obliged to sell the Shares and assign the Lease, for a purchase price in cash equal to the Fair Market Value of such Shares and Lease, on the terms and conditions described next and in Section 16.1 (i), (iii), (iv) and (v). (ii) Lessee and Lessor shall have thirty (30) business days after receipt of the Sale Notice to negotiate reasonable terms for payment, closing date and the other customary, material business terms of such transaction, and to close or enter a mutually acceptable purchase and sale agreement ( Closing Contract ), such as on Form RE022A, incorporating without limitation the purchase price or provision for its determination in accordance with the procedure described below. If closing does not occur and a Closing Contract is not executed and delivered within thirty (30) calendar days after receipt of the Sale Notice, then Lessee or Lessor, on behalf of both, may request the American Arbitration Association to select an arbitrator who is an attorney, in which event the Lessee and Lessor or their respective counsel shall submit their proposed forms of of 36

18 Included in paragraph 16.0(c) is a provision for financing in the event the Co-Op decides or is required to purchase the Lease and the shares pursuant to Article 16.0(a) or (b). 8 The purchase and sale agreements to the arbitrator. The arbitrator shall determine which of the two forms of purchase and sale agreement contain the more reasonable terms of payment, closing date and customary, material business terms of such transaction. Such terms shall then apply and bind the Lessee and Lessor ( Terms ). The arbitration costs shall be borne equally by the parties. (Exhibit B to Jabri Aff.) 7 (iii) Fair Market Value shall mean, with respect to any Shares and appurtenant Lease, the price that a willing buyer not compelled to buy would pay a willing seller not compelled to sell for such Shares and appurtenant Lease, determined by agreement of the parties or, absent agreement within thirty (30) days after receipt of the Sale Notice, by appraisal of the individual cooperative interest, with respect to the apartment as is, in the residential apartment Building as is, based on apartment sales comparisons and in accordance with the following process. The Lessee and Lessor shall each at his or her own expense select and appoint a Qualified Appraiser within five (5) days after the notice from either party demanding arbitration. If either party shall fail to select and appoint a Qualified Appraiser within such five (5) day period, such party shall be deemed to have accepted the fair market value determined by the other party s Qualified Appraiser. If Lessee and Lessor shall each select and appoint a Qualified Appraiser within such five (5) day period, but the two appraisers shall fail to agree upon the fair market value within thirty (30) days of their appointment, then either Lessee or Lessor, on behalf of both, may then request the American Arbitration Association to select a third Qualified Appraiser, in which event the two appraisers shall submit their appraisals to the third appraiser in writing, and such third appraiser shall determine which of the two appraisals is the fair market value. The costs of arbitration, including the third appraiser, shall be borne equally by the parties. (iv) Qualified Appraiser shall mean any disinterested person who is a member in good standing of the American Institute of Real Estate Appraisers or the American Society of Real Estate Counselors (or the successor to either of such organizations) and who has had not less than ten (10) years experience in appraising and valuing cooperative apartments of the size, type and nature of the Apartment and related shares and leases. (Exhibit B to Jabri Aff.) 8 (c) Financing. In the event of a purchase under Section 16.0(a) or (b), the Lessor may fund the purchase price (i) from working capital or reserve, if sufficient, (ii) by imposing an assessment on Lessees who remain after closing, and/or (iii) by application for financing, in which case Lessor s obligations to purchase under Section 16.0(a) or (b) is contingent upon of 36

19 financing terms contained in paragraph 16.0(c) are typical to contract for sale of residential property. The financing (mortgage) contingency period is often 45 to 60 days and sometimes as long as 90 days. The Right of Sale is a benefit offered to shareholders holding less than onethird of the shares, while the burden of an assessment or other financing by the Co-op, if any, would be borne only the remaining shareholders, not a minority shareholder who elects to sell. Paragraphs 16.2, 16.5 and 16.8 were adopted to replace paragraphs 16.2, 16.5 and 16.8, respectively. These sections of Article 16 are denominated as: Consents: On Death of Lessee; Further Assignment; Fees on Sale, respectively. Specifically, Paragraph 16.2, as amended, generally provides that no consent is needed for an assignment within 8 months of a Lessee s death to certain resident relatives who meet a definition of financial responsibility. 9 issuance of a loan commitment letter within thirty (30) days after the date that a ROFR Acceptance Notice is received, a Closing Contract is executed and delivered, or Terms are determined by arbitration, as the case may be, applying the financing provisions of Form RE022A mutatis mutandis in the Contract or arbitration Terms. (Exhibit B to Jabri Aff.) Consents: On Death of Lessee. If the Lessee shall die, consent shall not be required for - - and Section 16.0 shall not apply to - - an assignment of the Lease and Shares within eight (8) months of Lessee s death to Lessee s spouse, child, mother, father, brother or sister who has resided in the Building with the Lessee for a majority of the Lessee s period of ownership, and who has either (x) individual net worth, or joint net worth with the person s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person, or (y) income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year. As used in the provisions of this Proprietary Lease relating to assignment, transfer or bequest of the Shares and appurtenant Lease, spouse means spouse at the time of execution of the original Proprietary Lease. (Exhibit B to Jabri Aff.) of 36

20 Paragraph 16.2 thus provides a more detailed provision regarding relationship, financial responsibility and occupancy than the previous Paragraph It defines family membership as well as financial responsibility. It applies uniformly to all shareholders. Paragraph 16.8 imposes a 2% transfer fee in addition to the sum fixed by the Board of Directors pursuant to paragraph 16.1(iv). It applies equally to all the shares and is not imposed on a shareholder who sells pursuant to a right of first refusal or right to sell. 10 Paragraphs 18.1 and 18.3, in Article 18, Certain Obligations of Lessee, were amended to clarify the use of washing machines in the Building. (Exhibit B to Jabri Aff.) Article 25, Right of Entry; Key, was amended to comport with House Rule 21 regarding the safety of the Building. 11 (Exhibit B to Jabri Aff.) Article 43, Lessor s Additional Remedies, was amended to provide a precatory version of a standard policy for non-binding mediation of disputes between or among Lessees. 12 (Exhibit B to Jabri Aff.) Fees on Sale. In addition to the sum fixed by the Board as described in paragraph 16.1(iv) above, a fee shall be paid to the Corporation upon the sale and transfer of this Lease and the Shares to which it is appurtenant, in the amount of two percent (2%) of the purchase price of the Lease and Shares. However, in the event of a sale or transfer pursuant to rights of the Corporation to purchase, or rights of the Lessee to sell to the Corporation, as set forth in Section 16.0 above, the fee shall not be imposed upon the Lessee, but shall be paid by the Corporation, as part of the purchase price, whether by working capital or reserve, assessment, financing or otherwise. (Exhibit B to Jabri Aff.) 11 Unless written consent is given by Lessees owning at least two thirds of the Shares then issued, or by the Board, Lessee shall not provide any key or grant any other access to the Building to any workman or other person who Lessee knows (or has reason to know) to have performed services for the Corporation that have terminated. (Exhibit B to Jabri Aff.) of 36

21 As fully explained below, all of the amendments fall within the powers of the Co-Op to enact such provisions and under the circumstances here are governed by the business judgment rule. (See Part IV, supra.) A. Declaratory Judgment ARGUMENT I THE APPLICABLE STANDARDS As Judge Cardozo observed, [t]he function of the courts is to determine controversies between litigants.... They do not give advisory opinions. The giving of such opinions is not the exercise of the judicial function. In re Workmen s Compensation Fund, 224 N.Y. 13, 16 (1918)(citations omitted). provides that: CPLR 3001 governs the granting of declaratory judgments. Specifically, CPLR 3001 The supreme court may render a declaratory judgment having the effect of a final judgment as to the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is or could be claimed. See also 43 NY Jurs.2d, Declaratory Judgments 22. The general purpose of the declaratory judgment is to serve some practical end in quieting or stabilizing an uncertain or disputed jural relation either as to present or prospective obligations. Thome v. Alexander & Luisa Calder Found, 70 A.D.3d 88, 99, 890 N.Y.S.2d 16, 24 (1 st Dept. 2009). The request for a declaratory judgment is premature if the future event is beyond the control of the parties and may never occur. Matter of Enlarged City School District of Middletown, 96 A.D.3d 840, 841, See Ass n of the Bar of the City of New York, Committee on Cooperative and Condominium Law, Model Mediation Provision for Cooperative Proprietary Lease or Condominium Bylaws, available at of 36

22 N.Y.S.2d 208 (2 nd Dept. 2012). Further, [t]he threat of a hypothetical, contingent, or remote prejudice to a party does not represent a justiciable controversy. Id. B. Motion to Dismiss Pursuant to CPLR 3211 A complaint should be dismissed under CPLR 3211(a)(1) where the documentary evidence utterly refutes [the complaint s] factual allegations, conclusively establishing a defense as a matter of law. Lopez v. Fenn, 90 A.D.3d 569, 572, 937 N.Y.S.2d 1 (1 st Dept. 2011)(quoting Goshen v. Mutual Life Ins., Co. of N.Y., 98 N.Y.2d 314, 326, 746 N.Y.S.2d 858, 865 (2002). Thus, where a written agreement (such as the lease in this case) unambiguously contradicts the allegations supporting a litigant's cause of action... the [written agreement] itself constitutes documentary evidence warranting the dismissal of the complaint pursuant to CPLR 3211(a)(1), regardless of any extrinsic evidence or self-serving allegations offered by the proponent of the claim (see Excel Graphics Tech. v. CFG/AGSCB 75 Ninth Ave., 1 A.D.3d 65, 69, 767 N.Y.S.2d 99 [2003], lv. dismissed 2 N.Y.3d 794, 781 N.Y.S.2d 292, 814 N.E.2d 464 [2004] ). 150 Broadway N.Y. Assoc., L.P. v. Bodner, 14 A.D.3d 1, 784 N.Y.S.2d 63, 65 (1 st Dept. 2004). While CPLR 3211(a)(1) provides for dismissal based on documentary evidence, CPLR 3211(c) allows both parties to submit any evidence that could properly be considered on a motion for summary judgment. However, when a case can be decided on the merits upon documentary evidence submitted on the motion to dismiss, as here, it need not be converted to one for summary judgment but may be decided as a motion to dismiss. Bailey v. Fish & Neave, 30 A.D.3d 48, 55, 814 N.Y.S.2d 104, 110 (1 st Dept. 2006). Here, the governing documents i.e. the Certificate of Incorporation, the Proprietary Lease, and the By-Laws, as well as the amendments to the Proprietary Lease, which Plaintiff of 36

23 concedes were adopted at a duly noticed Shareholders Meeting in accordance with the terms of the Proprietary Lease and the By-Laws, all constitute such documentary evidence which contradict the allegations in Plaintiff s Amended and Supplemental Complaint and dispose entirely of her claims. Further, although on a motion to dismiss pursuant to CPLR 3211(a)(7), the facts as pleaded are presumed to be true, allegations consisting of bare legal conclusions as well as factual claims either inherently incredible or flatly contradicted by documentary evidence, are not entitled to such consideration. Franklin v. Winard, 199 A.D.2d 220, 606 N.Y.S.2d 162, 163 (1 st Dep t 1993). Thus, on a motion to dismiss pursuant to CPLR 3211(a)(7), the court must accept the facts as alleged in the complaint as true, accord [plaintiff] the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory. ABN AMRO Bank N.V. v. MBLA Inc., 17 N.Y.3d 208, 227, 928 N.Y.S.2d 647, 658 (2011). However, where a moving party submits evidentiary material in support of the motion to dismiss, the criterion then becomes whether the proponent of the pleading has a cause of action, not whether he [or she] stated one.... Sokol v. Leader, 74 A.D.3d 1180, 1181, 904 N.Y.S.2d 153, (2 nd Dept. 2010)(citation omitted.) Finally, on a motion to dismiss pursuant to CPLR 3211(a)(1) or (a)(7), it is undisputed that the Court... may consider documents referred to in a Complaint... even if the pleading fails to attach them. Deer Consumer Products, Inc. v. Little, 32 Misc. 3d 1243(A), 928 N.Y.S.2d 226, 2011 N.Y. Slip Op (U) at *4 (Sup. Ct. N.Y. County August 31, 2011); Alliance Network, LLC v. Sidley Austin LLP, 43 Misc. 3d 848 n. 1, 987 N.Y.S.2d 794 (Sup. Ct. N.Y. County, March 20, 2014)(citing Deer, supra) of 36

24 As explained below, based solely on the factual allegations in the Amended and Supplemental Complaint, as viewed against the documentary evidence submitted on this motion (specifically the amendments to the Proprietary Lease), the Court should dismiss the Amended and Supplemental Complaint because Plaintiff fails to state and does not have any viable cause of action against the Co-Op. II THE AMENDMENTS TO THE PROPRIETARY LEASE WERE ADOPTED BY THE MAJORITY OF SHAREHOLDERS AT A DULY NOTICED SHAREHOLDERS MEETING AND THEREFORE PLAINTIFF S AMENDED AND SUPPLEMENTAL COMPLAINT FAILS TO STATE ANY VIABLE CLAIMS AGAINST THE CO-OP A. By Holding a Shareholders Meeting, the Co-Op Has Cured Any Alleged Procedural Deficiency in Adopting the Amendments to the Proprietary Lease Thus Rendering Plaintiff s Claims Moot As explained above, the Co-Op served the Request and Notice notifying all shareholders of 20 East of the Shareholders Meeting to be held on February 18, The Notice was mailed to Plaintiff on February 8, 2016 by registered mail. (See Exhibit C to Jabri Aff.) There is no dispute that Plaintiff received the Notice. In fact, in the Amended and Supplemental Complaint Plaintiff concedes that the Shareholders Meeting was duly held in accordance with the procedures set forth in the Proprietary Lease and the By-Laws. Indisputably, when Plaintiff purchased the shares in the Co-Op and entered into the Propriety Lease, one of the governing documents, she knew and consented to the provision in the Proprietary Lease that the majority of shareholders had the power to amend it. (See Exhibit G to Jabri Aff. at 6.1.) A similar provision also binding on Plaintiff is contained in the Co-Op s By- Laws. (See Exhibit H to Jabri Aff. at 5.1.) Because the governing documents permit the amendment of the Proprietary Lease by the majority of the shareholders, which she concedes was done, Plaintiff s claims challenging the amendments have been rendered moot. Cf. Bailey v of 36

25 Fish & Neave, 30 A.D.3d 48, 614 N.Y.S.2d 104 (1 st Dept. 2006), aff d 8 N.Y.3d 523, 837 N.Y.S.2d 600 (2007) (holding that an amendment of provision of partnership s agreement which was passed by a majority vote in accordance with the terms of the partnership agreement was valid.) Here, it is indisputable that Plaintiff was given proper notice of the Shareholders Meeting. (See Jabri Aff. at 6 and Exhibits A, B, and C to Jabri Aff.) In accordance with paragraph 6.1 of the Proprietary Lease, the changes to the form of the Proprietary Lease were properly authorized by the Lessees owning at least sixty-six and two-thirds (66 2/3%) percent of Lessor s shares then issued are binding on all Lessees even if they did not vote for such changes.... (See Exhibit F to Jabri Aff.) Similarly, as provided in the By-Laws the changes were approved by lessees owning at least two-thirds in amount of the shares of the Corporation then issued and outstanding. (See Exhibit H to Jabri Aff. at 5.1) Plaintiff is therefore now bound by the changes to the Proprietary Lease. Any alleged claims to the propriety of the amendments have been rendered moot thus warranting the dismissal of her Amended and Supplemental Complaint. B. Because Plaintiff Failed to Attend the Duly Noticed Shareholders Meeting, She Should Be Deemed to Have Waived And/Or Be Estopped From Questioning the Validity of the Amendments to the Proprietary Lease Adopted by the Majority of the Shareholders at the Shareholders Meeting As explained above, Plaintiff was given Notice of the Shareholders Meeting at which the changes to the Proprietary Lease, previously authorized, were to be discussed. The Notice served on Plaintiff, and her attorney, Mr. Bolton, contained a copy of the proposed changes. (See Exhibit B to Jabri Aff.) Plaintiff was thus provided with the opportunity to attend the Shareholders Meeting and voice any alleged concerns she had about the proposed amendments as well as the opportunity to debate the reasons for the proposed amendments. Indeed, she of 36

26 commenced this action seeking to vindicate her right to such a meeting. Instead, neither Plaintiff nor her attorney, Mr. Bolton, attended the meeting either in person or by proxy. Plaintiff speculates in the Amended and Supplemental Complaint as to the reasons for the amendments and alleges without any factual or legal support that the amendments are detrimental to her. Having been given the additional opportunity to attend and participate in the Special Shareholders Meeting, which Plaintiff chose not to do, Plaintiff should now be estopped from questioning the actions taken by the majority of the shareholders at that meeting. Further, the Court should find that by failing to attend the Shareholders Meeting of which she received proper Notice, Plaintiff is deemed to have consented and ratified the amendments and thus waived any challenges as to their validity. See Winter v. Bernstein, 149 Misc. 2d 1107, 566 N.Y.S.2d 1012, 1014 (Sup. Ct. New York County, February 15, 1991), aff d 177 A.D.2d 452, 576 N.Y.S.2d 549 (1 st Dept. 1991) (a shareholder is estopped from challenging a corporate act of which the shareholder had knowledge but to which no objection was interposed); cf 40 West 67 th Street v. Pullman, 100 N.Y.2d 147, 760 N.Y.S.2d 745 (2003) (business judgment rule applicable to shareholder s decision to terminate the proprietary lease where shareholder failed to attend duly noticed meeting of shareholders.) In sum, the Court should find that Plaintiff is deemed to have waived and/or is estopped from questioning the validity of the amendments to the Proprietary Lease adopted by the majority of shareholders at a duly noticed Shareholders Meeting of 36

27 III PLAINTIFF S CLAIM FOR DECLARATORY JUDGMENT SHOULD BE DENIED BECAUSE SHE HAS FAILED TO ALLEGE FACTS SUFFICIENT TO ESTABLISH AN ACTUAL CONTROVERSY BETWEEN THE PARTIES Generally, the court may properly determine respective rights of the parties under a lease. See Leibowitz v. Bickford s Lunch System, 241 N.Y. 489 (1926). A declaratory judgment is a discretionary remedy which may be granted as to the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is or could be claimed. CPLR (Emphasis added.) However, the law is well settled that [i]n order to be amenable to declaratory relief, [t]he dispute must be real, definite, substantial and sufficiently matured so as to be ripe for judicial determination.... Matter of Enlarged, supra, 96 A.D.3d at 841 (citations omitted) (explaining CPLR 3001); see also Part I(A), supra. Further, [t]he threat of a hypothetical, contingent, or remote prejudice to a party does not represent a justiciable controversy. Id. at 842. Here, as discussed above, Plaintiff has not alleged an actual controversy and therefore the allegations in the Amended and Supplemental Complaint are not ripe for judicial determination. Plaintiff speculates that the Proprietary Lease was amended in an attempt to coerce [her] into selling her unit to [defendants] so that they can occupy or sell the building as a whole (see Amended and Supplemental Complaint at 3) and to impair her ownership interests and rights. (See Amended Complaint at 4 and 37) (Exhibit C to Adaszko Affirm.) However, plaintiff offers no shred of detail for her projection, it is indisputable that the Co-Op has not taken any action towards selling the Building and nothing on the face of the amendments supports this specious claim of 36

28 Further, Plaintiff proffered no evidence that as a result of the amendments she has suffered diminution of value of her shares. She merely speculates as to what Defendants Shareholders intend to do with their shares in the future. (See Amended Complaint at 37) (Exhibit C to Adaszko Affirm.) And as to her own intentions, Plaintiff has not identified or secured a potential buyer, or attempted to dispose of her shares in any other way. In sum, Plaintiff instead speculates as to what may, or may not happen in the future should she and/or the other shareholders make future decisions as to their shares in the Co-Op. Thus, Plaintiff presents no justiciable controversy which would permit a declaration of the rights and obligations of the parties. Buccellato v. High View Estates Owners, Corp., 131 A.D.3d 912, 913, 16 N.Y.S.3d 577, 579 (2 nd Dept. 2015). In Buccellato, supra, the Appellate Division held that the Supreme Court should have granted summary judgment to defendants dismissing claims for declaratory judgment on plaintiff shareholder tenant s claim in connection with the sale of the shares: 131 A.D.3d at 913. [S]ince the plaintiff has not identified or secured a potential buyer who is fiscally responsible or secured a potential buyer and has offered the sum of $42,500 to purchase the shares referable to the subject apartment unit, no justiciable controversy exists that would permit a declaration of the rights and obligations of the parties. Rather, any declaration in this regard would constitute an impermissible advisory opinion. Similarly, as to the diminished value of Plaintiff s interest in the Co-Op, Plaintiff fails to allege any facts to show actual controversy. Instead, Plaintiff seeks a declaration from the Court based on entirely speculative argument. Therefore, no justiciable controversy exists and the Amended and Supplemental Complaint fails to state a claim for declaratory relief. CPLR 3001; CPLR 3211(a)(2) of 36