Board of Managers of the 432 Park Condominium et al. v 56th and Park (NY) Owner, LLC et al.
Attorneys and Parties
Brief Summary
Condominium governance and indemnification, specifically whether a condominium's offering plan and bylaws required the board to indemnify a board member against breach of fiduciary duty claims brought by the board itself.
The lower court denied plaintiffs' cross-motion for summary judgment seeking dismissal of Harry Macklowe's counterclaims for a declaratory judgment and indemnification.
The Appellate Division reversed the denial of plaintiffs' cross-motion, dismissed Macklowe's second and third counterclaims, and declared that he is not entitled to indemnification under the condominium's governing documents.
Under Hooper Assoc. v AGS Computers and Sage Sys., Inc. v Liss, indemnification provisions must unmistakably and unequivocally state that they apply to intraparty disputes. The condominium documents did not clearly provide indemnification for claims between the board and a board member, and their references to self-dealing and limits on liability did not satisfy that strict standard.
Background
The plaintiffs, the Board of Managers of the 432 Park Condominium and related parties, asserted breach of fiduciary duty claims against board member Harry Macklowe. In response, Macklowe asserted counterclaims seeking a declaration that the condominium's governing documents required indemnification and seeking indemnification for the claims asserted against him. He relied principally on provisions in the offering plan and bylaws addressing self-dealing, limits on board-member liability, and indemnification arising from service as a board member.
Lower Court Decision
Supreme Court, New York County, denied plaintiffs' cross-motion for summary judgment insofar as it sought dismissal of Macklowe's counterclaims for declaratory relief and indemnification, thereby allowing those counterclaims to remain pending.
Appellate Division Reversal
The Appellate Division unanimously reversed and granted plaintiffs' cross-motion for summary judgment dismissing Macklowe's second counterclaim for a declaratory judgment and third counterclaim for indemnification. It also expressly declared that Macklowe is not entitled to indemnification under the condominium's governing documents. The court held that the cited provisions did not unequivocally cover disputes between the condominium board and one of its own members. The self-dealing carveout and related bylaw language merely narrowed when self-dealing could be found and limited liability in certain circumstances; they did not clearly require the board to indemnify Macklowe against the board's own fiduciary-duty claims.
Legal Significance
The decision reinforces New York's strict rule that contractual indemnification clauses are not read to cover attorney's fees or liability in intraparty disputes unless that intent is unmistakably clear from the text. General language protecting board members from liability or providing indemnification for acts arising from board service is insufficient, without explicit wording, to shift fees or insulate a board member from claims brought by the condominium itself.
If condominium governing documents are intended to require indemnification in a lawsuit between the board and a board member, they must say so expressly and unequivocally. Absent that clear language, courts will not infer indemnification for intraparty fiduciary-duty claims.