In an Apparent Case of First Impression, First Department Holds That a Board of Directors Cannot Be Sued as a Collective Entity

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Posted on: Oct 13 2025

Today, we consider Tahari v. 860 Fifth Ave. Corp., 2025 N.Y. Slip Op. 05584 (1st Dept. Oct. 9, 2025) (here), an apparent case of first impression in the Appellate Division, First Department, involving the suability of a board of directors under New York law.

In New York, “the business of a corporation [is] managed under the direction of its board of directors…”[1] Notwithstanding, a corporation’s board of directors is neither empowered to commence an action in its own capacity nor susceptible to being sued as such. In fact, no provision of New York law describes a corporation’s board as a distinct, suable entity.

The Business Corporation Law (“BCL”) makes this point clear, providing that only a corporation can “sue and be sued in all courts and … participate in [all] actions and proceedings, whether judicial, administrative, arbitrative or otherwise, in like cases as natural persons.”[2] Thus, while the individual directors of a corporation may vote for their corporation to commence litigation, it is the corporation that actually serves as the party to that litigation, not the board that voted to institute the action.

The BCL underscores this point by identifying the circumstances under which the directors of a corporation in their individual capacity may be subject to suit from its shareholders.[3]

Significantly, the BCL does not contain a provision authorizing a corporation’s board of directors to commence suit in its own capacity, separate from the corporation. Nor does the BCL contain any provision permitting suit directly against a board of directors.

New York trial courts are in accord, holding that a board of directors is not an entity that may be sued separately from the corporation.[4]

In Stromberg v. East Riv. Hous. Corp., the plaintiffs – owner of shares appurtenant to an apartment in a residential cooperative – sued the corporation, its management company, an individual board member, and the board of directors, in connection with the board’s refusal to consent to the sale of the apartment. Among other motions, the plaintiffs moved for additional time to serve the board with their amended complaint. The motion court denied the relief, holding that, since the board of directors was not a distinct entity, it was not subject to suit. The motion court concluded that, “based on its review of statutory and decisional law, … no basis exists to treat the board of a cooperative corporation as a juridical entity distinct from the cooperative itself.” The motion court explained that it had “found no cases expressly approving—or even expressly discussing—a suit brought against both a co-op and also the co-op’s board as an entity (as opposed to claims against the co-op and some or all of the board’s members).” “At most,” said the motion court, “courts have decided claims brought against co-op boards without considering, or having occasion to consider whether the board was a proper defendant.” The motion court “conclude[d, therefore,] that a plaintiff claiming to be aggrieved by decisions of a co-op board may not sue the board itself as an entity.”

The Stromberg court noted, however, that its conclusion “would not leave a plaintiff in this scenario without means of obtaining redress.” “A plaintiff[,]” said the motion court, “could sue the co-op directly, seeking to hold it liable for the actions of its board—as plaintiffs are already doing here. A plaintiff could also sue the board members individually, in appropriate cases.” “But a co-op board, as a board, is not amenable to suit[,]” said the motion court.

Courts outside of New York (both federal and state) have reached a similar conclusion as the Stromberg court.[5] In Flarey v. Youngstown Osteopathic Hosp., highlighted by the First Department in Tahari, held that a board of directors is incapable of owning property and cannot sue in its own name.” The reason, said the Flarey court, is because “a board of directors is the collection of individuals with the ultimate responsibility of making decisions on behalf of the corporation. . . .” After all, noted the court, “a corporation may only act through the acts of its agents, such as its directors, officers, or employees.” For this reason, said the court, “any action of the board of directors is an action of the corporation.” Thus, “[a]lthough the board of directors is the body with the ultimate responsibility of making decisions on behalf of the corporation,” “the individual members of the board are [not] liable for corporate torts merely by reason of their relation to the corporation.”

The Flarey court went on to note:

As a practical matter, it would be nonsensical to hold a board of directors liable as a collective entity. A board of directors may not own property in its own name. Thus, any judgment against it could not be recovered from the collective group. Furthermore, a judgment against the collective entity cannot apply to the individuals as the individuals are only liable if they participated in the tortious conduct. Thus, such a suit would be, for all practical purposes, pointless.

Against the foregoing analysis, the First Department decided Tahari.

Tahri concerned a long-running dispute between a shareholder of a residential cooperative corporation and the cooperative corporation regarding the shareholder’s combination and renovation of two penthouse apartments. Plaintiff commenced the action in 2018 and asserted a variety of contract and tort causes of action against the cooperative corporation and individual board members in his complaint and amended complaint.

In an earlier appeal, Tahari v. 860 Fifth Ave. Corp., 214 A.D.3d 491 (1st Dept. 2023), the First Department, among other things, dismissed plaintiff’s breach of fiduciary duty causes of action against the cooperative corporation and most of the individual board members for failure to state a cause of action. Thereafter, plaintiff filed a second amended complaint in which he asserted a breach of fiduciary duty cause of action against the board of directors of the cooperative corporation, as distinct from the dismissed breach of fiduciary duty causes of action against the cooperative corporation and the individual board members.

Defendants moved to dismiss the cause of action against the board of directors on the ground, among others, that the board was not amenable to suit. In response, plaintiff cross-moved to serve a third amended complaint, naming the current board president as a representative of the board. The motion court denied defendants’ motion to dismiss and granted plaintiff’s cross-motion to amend the complaint to add the board president as a representative of the board of directors. In doing so, the motion court relied on the First Department’s decision in 2023 and held that the board of directors of a cooperative corporation was directly amenable to suit, as opposed to the cooperative corporation and/or individual board members.

The First Department unanimously reversed, holding that the motion court “misinterpret[ed] our precedent.”[6] In doing so, the Court “clarify[ied] that the board of directors of a corporation is not amenable to suit, separate and apart from being sued in its representative capacity for the corporation.”[7]

The Court explained that the “motion court’s reliance upon Dau v. 16 Sutton Place Apt. Corp. (205 AD3d 533 [1st Dept 2022]) to find otherwise was misplaced.”[8] In Dau, the plaintiff commenced an action against both a residential cooperative corporation and its board of directors.[9] The issue in Dau, with respect to the breach of fiduciary duty claims against the board of directors, was whether those claims were sufficiently and timely pled.[10] “Whether the board of directors could be sued separately from the corporation itself was never raised.”[11] “Thus,” said the Court, “Dau should not be read to hold that a claim for breach of fiduciary duty may be brought directly against a board of directors.”[12]

Therefore, “[a]pplying the Business Corporation Law and consistent with the … cases [discussed above],” the Court held that “the residential cooperative board of defendant 860 Fifth Avenue Corporation [was] not an entity with the capacity to sue and be sued separate and apart from the corporation on whose behalf it acts.”[13]

Takeaway

In Tahari, the First Department held that a board of directors cannot be sued as a collective entity under New York law. The Court grounded its holding on the BCL and case authority from New York lower courts and state and federal courts around the country.

Although the Court deemed its decision to be a clarification of its prior jurisprudence, the decision reads more like a case of first impression. Regardless, Tahari makes clear that under the BCL, only corporations—not their boards—may sue or be sued. Individual directors may be sued in their personal capacity for misconduct, but not the board as a whole.

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

[1] BCL §701 (“[T]he business of a corporation shall be managed under the direction of its board of directors…”).

[2] BCL § 202(a).

[3] See BCL § 720(a) (providing that “[a]n action may be brought against one or more directors or officers of a corporation . . .” for certain types of misconduct); BCL § 719(a) (providing that “Directors of a corporation who vote for or concur in any of the [enumerated] … corporate actions shall be jointly and severally liable to the corporation for the benefit of its creditors or shareholders, to the extent of any injury suffered by such persons respectively, as a result of such action . . .”).

[4] Stromberg v. East Riv. Hous. Corp., 82 Misc. 3d 871, 883-884 (Sup. Ct., N.Y. County 2023) (concluding that “no basis exists to treat the board of a cooperative corporation as a juridical entity distinct from the cooperative itself” following its review of statutory and decisional law); Biales v. 10 E. End Ave. Owners, Inc., 85 Misc. 3d 1202(A), 2025 N.Y. Slip Op. 50074(U) (Sup. Ct., N.Y. County 2025)).

[5] See e.g. Siegler v. Sorrento Therapeutics, Inc., 2021 WL 3046590, *10 (Fed. Cir. 2021) (noting that “California’s Corporation Code only identifies a corporation or association as entities that may be sued”); Heslep v. Americans for African Adoptions, Inc., 890 F. Supp. 2d 671, 678-679 (N.D. W.Va. 2012); Team Sys. Int’l, LLC v. Haozous, 2015 WL 2131479, *2 (W.D. Okla. May 7, 2015); Lopez-Rosario v. Programa Seasonal Head Start/Early Head Start de la Diocesis de Mayaguez, 245 F. Supp. 3d 360, 370 (D.P.R. 2017), aff’d, 847 Fed. Appx. 9 (1st Cir. 2021) (holding that “[a] board of directors is not a legal entity separate and apart from the corporation it directs . . . and, thus, lacks capacity to be sued”); Flarey v. Youngstown Osteopathic Hosp., 151 Ohio App. 3d 92, 96, 783 N.E.2d 582, 585 (7th Dist. 2002).

[6] Slip Op. at *1.

[7] Id.

[8] Id. at *2.

[9] Dau, 205 A.D.3d at 534.

[10] Id. at 535-536.

[11] Slip Op. at *2.

[12] Id.

[13] Id. Consequently, said the Court, “[w]hile a shareholder cannot assert allegations of breach of fiduciary duty against a board of directors, a shareholder may assert the claim against the individual directors.” Id. (citing Weinreb v. 37 Apts. Corp., 97 A.D.3d 54, 57 (1st Dept. 2012); Peacock v. Herald Sq. Loft Corp., 67 A.D.3d 442-443 (1st Dept. 2009)). The Court noted that plaintiff had “originally brought breach of fiduciary duty causes of action against fourteen of the individual board members and the corporation (see Tahari, 214 AD3d at 492).” Id. The Court made clear that since “[t]hose causes of action were largely dismissed, … plaintiff [could] not simply replace those parties with ‘the board’ to revive those now dismissed claims.” Id.

Tagged with: Business Corporation Law, Business Litigation, Commercial Litigation