181 East 73rd Street Co. v. 181 East 73rd Tenants Corp.
United States Court of Appeals for the Second Circuit
954 F.2d 45 (1992)
A building located at 181 East 73rd Street in Manhattan, New York, was converted from rental to cooperative ownership. The building contained residential units and a commercial area that included a parking garage. The conversion’s sponsor was 181 East 73rd Street Corporation (the sponsor) (plaintiff), and the new owner was 181 East 73rd Tenants Corporation (the tenants corporation) (defendant). During the conversion, the tenants corporation executed a 99-year master lease devising the commercial portion to the sponsor. At the time, the tenants corporation was controlled by the sponsor. However, in June 1985, the tenants corporation replaced the sponsor and elected a new board of directors. Shortly thereafter, asbestos was discovered in the building, including the garage. The sponsor and the tenants corporation entered into an agreement for asbestos abatement and confirmed the remainder of the master lease. The asbestos agreement did not go before the cooperative membership for a vote. Shortly thereafter, a two-thirds vote of the membership of the tenants corporation terminated the master lease for the parking garage. The sponsor filed a declaratory action in the United States District Court for the Southern District of New York, alleging that the tenants corporation had waived its termination rights by ratifying the master lease through the asbestos agreement. The tenants corporation filed a counterclaim, seeking a declaratory judgment regarding the master lease’s validity and unconscionability. The district court found that the termination of the master lease was valid, but that the lease was not unconscionable. The sponsor filed an appeal.
Rule of Law
Holding and Reasoning (Oakes, C.J.)
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