DBP Shareholders Celebrate Another Win  in HPD & Board Battle

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In the battle of Dayton Beach Park shareholders versus the New York City Housing Preservation and Development and the board of directors, things are looking good for the tenants. Last week, the Department of Investigation found that some of the allegations made against the board were true, and this week, the board’s corporate counsel backed out of the case.

On Tuesday, June 18, a group of Dayton Beach Park shareholders, represented by attorney Mike Scala, learned corporate counsel would no longer be defending board members in an Article 78 proceeding the group brought against NYC HPD. The shareholders in the case seek to compel HPD to provide oversight of the board of directors, accused of improperly using corporate funds to advance their personal interests.

"It was egregious that in a case where shareholders complained about the board using shareholder money to engage in self-dealing, including by using corporate counsel for their own private matters, shareholders were expected to foot the bill for corporate counsel to represent the board," Scala said.

When the law firm in question, Norris McLaughlin, P.A., refused to withdraw from the case, Scala filed a motion to disqualify on behalf of the shareholders. The motion cited case law that held corporate attorneys could not represent shareholders (i.e., board members) in cases where their interests were adverse to other shareholders. Instead of opposing the motion at Tuesday's return date in Queens Supreme Court, the law firm indicated it would remove itself from the case.

"Another small victory for the shareholders of Dayton Beach Park," Joanne Smith, a petitioner in the lawsuit said. "Between this and the release of the [Department of Investigation] memo validating the shareholders' claims, it has been a good two weeks."

A recent report from the city's Department of Investigation substantiated allegations made in the case. Board members will now have to face the music on these claims without the benefit of the corporation's lawyers.

"The arrests of Lindsay Park and Luna Park’s board presidents should make every Mitchell Lama board sit up and take notice that shareholders will not tolerate this kind of behavior. We have recourse and it is a court of law," added Smith.

While the board of directors will be given time to change lawyers, Tuesday's development is a win for the Dayton Beach Park bottom line, as shareholders have been relieved of the burden of paying the corporate counsel's pricey legal fees.

A previous motion directed that the case be heard in the shareholders' borough of Queens, rather than in Manhattan where the other parties contested it should be.

"For those keeping score at home," Scala concluded, "It's Dayton Beach Park shareholders two, HPD and the board zero."

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