author: Kaye, J. Titone, J.

text:
    In the Matter of Ronald Levandusky, Respondent, v One Fifth Avenue Apartment Corp., Appellant.
    Argued February 14, 1990;
    decided April 5, 1990

      POINTS OF COUNSEL

      Joel David Sharrow and Arthur F. Abelman for appellant.

      Irwin Brownstein for respondent.
   OPINION OF THE COURT

Kaye, J.

This appeal by a residential cooperative corporation concerning apartment renovations by one of its proprietary lessees, factually centers on a two-inch steam riser and three air conditioners, but fundamentally presents the legal question of what standard of review should apply when a board of directors of a cooperative corporation seeks to enforce a matter of building policy against a tenant-shareholder. We conclude that the business judgment rule furnishes the correct standard of review.

In the main, the parties agree that the operative events transpired as follows. In 1987, respondent (Ronald Levandusky) decided to enlarge the kitchen area of his apartment at One Fifth Avenue in New York City. According to Levandusky, some time after reaching that decision, and while he was president of the cooperative’s board of directors, he told Elliot Glass, the architect retained by the corporation, that he intended to realign or "jog” a steam riser in the kitchen area, and Glass orally approved the alteration. According to Glass, however, the conversation was a general one; Levandusky never specifically told him that he intended to move any particular pipe, and Glass never gave him approval to do so. In any event, Levandusky’s proprietary lease provided that no "alteration of or addition to the water, gas or steam risers or pipes” could be made without appellant’s prior written consent.

Levandusky had his architect prepare plans for the renovation, which were approved by Glass and submitted for approval to the board of directors. Although the plans show details of a number of other proposed structural modifications, including changes in plumbing risers, no change in the steam riser is shown or discussed anywhere in the plans.

The board approved Levandusky’s plans at a meeting held March 14, 1988, and the next day he executed an "Alteration Agreement” with appellant, which incorporated "Renovation Guidelines” that had originally been drafted, in large part, by Levandusky himself. These guidelines, like the proprietary lease, specified that advance written approval was required for any renovation affecting the building’s heating system. Board consideration of the plans — appropriately detailed to indicate all structural changes — was to follow their submission to the corporation’s architect, and the board reserved the power to disapprove any plans, even those that had received the architect’s approval.

In late spring 1988, the building’s managing agent learned from Levandusky that he intended to move the steam riser in his apartment, and so informed the board. Both Levandusky and the board contacted John Flynn, an engineer who had served as consulting agent for the board. In a letter and in a subsequent presentation at a June 13 board meeting, Flynn opined that relocating steam risers was technically feasible and, if carefully done, would not necessarily cause any problem. However, he also advised that any change in an established old piping system risked causing difficulties ("gremlins”). In Flynn’s view, such alterations were to be avoided whenever possible.

At the June 13 meeting, which Levandusky attended, the board enacted a resolution to "reaffirm the policy — no relocation of risers.” At a June 23 meeting, the board voted to deny Levandusky a variance to move his riser, and to modify its previous approval of his renovation plans, conditioning approval upon an acceptable redesign of the kitchen area.

Levandusky nonetheless hired a contractor, who severed and jogged the kitchen steam riser. In August 1988, when the board learned of this, it issued a "stop work” order, pursuant to the "Renovation Guidelines.” Levandusky then commenced this article 78 proceeding, seeking to have the stop work order set aside. The corporation cross-petitioned for an order compelling Levandusky to return the riser to its original position. The board also sought an order compelling him to remove certain air-conditioning units he had installed, which allegedly were not in conformity with the requirements of the Landmarks Preservation Commission.

Supreme Court initially granted Levandusky’s petition, and annulled the stop work order, on the ground that there was no evidence that the jogged pipe had caused any damage, but on the contrary, the building engineer had inspected it and believed it would likely not have any adverse effect. Therefore, balancing the hardship to Levandusky in redoing the already completed renovations against the harm to the building, the court determined that the board’s decision to stop the renovations was arbitrary and capricious, and should be annulled. Both counterclaims were dismissed, the court ruling that the corporation had no standing to complain of violations of the Landmarks Preservation Law, particularly as the building had not been cited for any violation.

On reargument, however, Supreme Court withdrew its decision, dismissed Levandusky’s petition, and ordered him to restore the riser to its original position and submit redrawn plans to the board, on the ground that the court was precluded by the business judgment rule from reviewing the board’s determination. The court adhered to its original ruling with respect to the branch of the cross motion concerning the air conditioners, notwithstanding that the Landmarks Preservation Commission had in the interim cited them as violations.

On Levandusky’s appeal, the Appellate Division modified the judgment. The court was unanimous in affirming the Supreme Court’s disposition of the air conditioner claim, but divided concerning the stop work order. A majority of the court agreed with Supreme Court’s original decision, while two Justices dissented on the ground that the board’s action was within the scope of its business judgment and hence not subject to judicial review. Concluding that the business judgment rule applies to the decisions of cooperative governing associations enforcing building policy, and that the action taken by the board in this case falls within the purview of the rule, we now modify the order of the Appellate Division.

At the outset, we agree with the Appellate Division that the corporation’s cross claim concerning Levandusky’s three air-conditioning units was properly dismissed, as the appropriate forum for resolution of the complaint at this stage is an administrative review proceeding. That brings us to the issue that divided the Appellate Division: the standard to be applied in judicial review of this challenge to a decision of the board of directors of a residential cooperative corporation.

As cooperative and condominium home ownership has grown increasingly popular, courts confronting disputes between tenant-owners and governing boards have fashioned a variety of rules for adjudicating such claims (see generally, Goldberg, Community Association Use Restrictions: Applying the Business Judgment Doctrine, 64 Chi-Kent L Rev 653 [1988] [hereinafter Goldberg, Community Association Use Restrictions]; Note, Judicial Review of Condominium Rulemaking, 94 Harv L Rev 647 [1981]). In the process, several salient characteristics of the governing board homeowner relationship have been identified as relevant to the judicial inquiry.

As courts and commentators have noted, the cooperative or condominium association is a quasi-government — "a little democratic sub society of necessity” (Hidden Harbour Estates v Norman, 309 So 2d 180, 182 [Fla Dist Ct App]). The proprietary lessees or condominium owners consent to be governed, in certain respects, by the decisions of a board. Like a municipal government, such governing boards are responsible for running the day-to-day affairs of the cooperative and to that end, often have broad powers in areas that range from financial decisionmaking to promulgating regulations regarding pets and parking spaces (see generally, Note, Promulgation and Enforcement of House Rules, 48 St John’s L Rev 1132 [1974]). Authority to approve or disapprove structural alterations, as in this case, is commonly given to the governing board. (See, Siegler, Apartment Alterations, NYLJ, May 4, 1988, at 1, col 1.)

Through the exercise of this authority, to which would-be apartment owners must generally acquiesce, a governing board may significantly restrict the bundle of rights a property owner normally enjoys. Moreover, as with any authority to govern, the broad powers of a cooperative board hold potential for abuse through arbitrary and malicious decision-making, favoritism, discrimination and the like.

On the other hand, agreement to submit to the decisionmaking authority of a cooperative board is voluntary in a sense that submission to government authority is not; there is always the freedom not to purchase the apartment. The stability offered by community control, through a board, has its own economic and social benefits, and purchase of a cooperative apartment represents a voluntary choice to cede certain of the privileges of single ownership to a governing body, often made up of fellow tenants who volunteer their time, without compensation. The board, in return, takes on the burden of managing the property for the benefit of the proprietary lessees. As one court observed: "Every man may justly consider his home his castle and himself as the king thereof; nonetheless his sovereign fiat to use his property as he pleases must yield, at least in degree, where ownership is in common or cooperation with others. The benefits of condominium living and ownership demand no less.” (Sterling Vil. Condominium v Breitenbach, 251 So 2d 685, 688, n 6 [Fla Dist Ct App].)

It is apparent, then, that a standard for judicial review of the actions of a cooperative or condominium governing board must be sensitive to a variety of concerns — sometimes competing concerns. Even when the governing board acts within the scope of its authority, some check on its potential powers to regulate residents’ conduct, life-style and property rights is necessary to protect individual residents from abusive exercise, notwithstanding that the residents have, to an extent, consented to be regulated and even selected their representatives (see, Note, The Rule of Law in Residential Associations, 99 Harv L Rev 472 [1985]). At the same time, the chosen standard of review should not undermine the purposes for which the residential community and its governing structure were formed: protection of the interest of the entire community of residents in an environment managed by the board for the common benefit.

We conclude that these goals are best served by a standard of review that is analogous to the business judgment rule applied by courts to determine challenges to decisions made by corporate directors (see, Auerbach v Bennett, 47 NY2d 619, 629). A number of courts in this and other states have applied such a standard in reviewing the decisions of cooperative and condominium boards (see, e.g., Kirsch v Holiday Summer Homes, 143 AD2d 811; Schoninger v Yardarm Beach Homeowners’ Assn., 134 AD2d 1; Van Camp v Sherman, 132 AD2d 453; Papalexiou v Tower W. Condominium, 167 NJ Super 516, 401 A2d 280; Schwarzmann v Association of Apt. Owners, 33 Wash App 397, 655 P2d 1177; Rywalt v Writer Corp., 34 Colo App 334, 526 P2d 316). We agree with those courts that such a test best balances the individual and collective interests at stake.

Developed in the context of commercial enterprises, the business judgment rule prohibits judicial inquiry into actions of corporate directors "taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes.” (Auerbach v Bennett, 47 NY2d 619, 629, supra.) So long as the corporation’s directors have not breached their fiduciary obligation to the corporation, "the exercise of [their powers] for the common and general interests of the corporation may not be questioned, although the results show that what they did was unwise or inexpedient.” (Pollitz v Wabash R. R. Co., 207 NY 113, 124.)

Application of a similar doctrine is appropriate because a cooperative corporation is — in fact and function — a corporation, acting through the management of its board of directors, and subject to the Business Corporation Law. There is no cause to create a special new category in law for corporate actions by coop boards.

We emphasize that reference to the business judgment rule is for the purpose of analogy only. Clearly, in light of the doctrine’s origins in the quite different world of commerce, the fiduciary principles identified in the existing case law — primarily emphasizing avoidance of self-dealing and financial self-aggrandizement — will of necessity be adapted over time in order to apply to directors of not-for-profit homeowners’ cooperative corporations (see, Goldberg, Community Association Use Restrictions, op. cit., at 677-683). For present purposes, we need not, nor should we determine the entire range of the fiduciary obligations of a cooperative board, other than to note that the board owes its duty of loyalty to the cooperative— that is, it must act for the benefit of the residents collectively. So long as the board acts for the purposes of the cooperative, within the scope of its authority and in good faith, courts will not substitute their judgment for the board’s. Stated somewhat differently, unless a resident challenging the board’s action is able to demonstrate a breach of this duty, judicial review is not available.

In reaching this conclusion, we reject the test seemingly applied by the Appellate Division majority and explicitly applied by Supreme Court in its initial decision. That inquiry was directed at the reasonableness of the board’s decision; having itself found that relocation of the riser posed no "dangerous aspect” to the building, the Appellate Division concluded that the renovation should remain. Like the business judgment rule, this reasonableness standard — originating in the quite different world of governmental agency decision-making — has found favor with courts reviewing board decisions (see, e.g., Amoruso v Board of Managers, 38 AD2d 845; Lenox Manor v Gianni, 120 Misc 2d 202; see, Note, Judicial Review of Condominium Rulemaking, op. cit., at 659-661 [discussing cases from other jurisdictions]).

As applied in condominium and cooperative cases, review of a board’s decision under a reasonableness standard has much in common with the rule we adopt today. A primary focus of the inquiry is whether board action is in furtherance of a legitimate purpose of the cooperative or condominium, in which case it will generally be upheld. The difference between the reasonableness test and the rule we adopt is twofold. First —unlike the business judgment rule, which places on the owner seeking review the burden to demonstrate a breach of the board’s fiduciary duty — reasonableness review requires the board to demonstrate that its decision was reasonable. Second, although in practice a certain amount of deference appears to be accorded to board decisions, reasonableness review permits —indeed, in theory requires — the court itself to evaluate the merits or wisdom of the board’s decision (see, e.g., Hidden Harbour Estates v Basso, 393 So 2d 637, 640 [Fla Dist Ct App]), just as the Appellate Division did in the present case.

The more limited judicial review embodied in the business judgment rule is preferable. In the context of the decisions of a for-profit corporation, "courts are ill equipped and infrequently called on to evaluate what are and must be essentially business judgments * * * by definition the responsibility for business judgments must rest with the corporate directors; their individual capabilities and experience peculiarly qualify them for the discharge of that responsibility.” (Auerbach v Bennett, 47 NY2d, supra, at 630-631.) Even if decisions of a cooperative board do not generally involve expertise beyond the usual ken of the judiciary, at the least board members will possess experience of the peculiar needs of their building and its residents not shared by the court.

Several related concerns persuade us that such a rule should apply here. As this case exemplifies, board decisions concerning what residents may or may not do with their living space may be highly charged and emotional. A cooperative or condominium is by nature a myriad of often competing views regarding personal living space, and decisions taken to benefit the collective interest may be unpalatable to one resident or another, creating the prospect that board decisions will be subjected to undue court involvement and judicial second-guessing. Allowing an owner who is simply dissatisfied with particular board action a second opportunity to reopen the matter completely before a court, which — generally without knowing the property — may or may not agree with the reasonableness of the board’s determination, threatens the stability of the common living arrangement.

Moreover, the prospect that each board decision may be subjected to full judicial review hampers the effectiveness of the board’s managing authority. The business judgment rule protects the board’s business decisions and managerial authority from indiscriminate attack. At the same time, it permits review of improper decisions, as when the challenger demonstrates that the board’s action has no legitimate relationship to the welfare of the cooperative, deliberately singles out individuals for harmful treatment, is taken without notice or consideration of the relevant facts, or is beyond the scope of the board’s authority.

Levandusky failed to meet this burden, and Supreme Court properly dismissed his petition. His argument that having once granted its approval, the board was powerless to rescind its decision after he had spent considerable sums on the renovations is without merit. There is no dispute that Levandusky failed to comply with the provisions of the "Alteration Agreement” or "Renovation Guidelines” designed to give the board explicit written notice before it approved a change in the building’s heating system. Once made aware of Levandusky’s intent, the board promptly consulted its engineer, and notified Levandusky that it would not depart from a policy of refusing to permit the movement of pipes. That he then went ahead and moved the pipe hardly allows him to claim reliance on the board’s initial approval of his plans. Indeed, recognition of such an argument would frustrate any systematic effort to enforce uniform policies.

Levandusky’s additional allegations that the board’s decision was motivated by the personal animosity of another board member toward him, and that the board had in fact permitted other residents to jog their steam risers, are wholly conclusory. The board submitted evidence — unrefuted by Levandusky — that it was acting pursuant to the advice of its engineer, and that it had not previously approved such jogging. Finally, the fact that allowing Levandusky an exception to the policy might not have resulted in harm to the building does not require that the exception be allowed. Under the rule we articulate today, we decline to review the merits of the board’s determination that it was preferable to adhere to a uniform policy regarding the building’s piping system.

Turning to the concurrence, it is apparent that in many respects we are in agreement concerning the appropriate standard of judicial review of cooperative board decisions; it is more a matter of label that divides us. For these additional reasons, we believe our choice is the better one.

For the guidance of the courts and all other interested parties, obviously a single standard for judicial review of the propriety of board action is desirable, irrespective of the happenstance of the form of the lawsuit challenging that action. Unlike challenges to administrative agency decisions, which take the form of article 78 proceedings, challenges to the propriety of corporate board action have been lodged as derivative suits, injunction actions, and all manner of civil suits, including article 78 proceedings. While the nomenclature will vary with the form of suit, we see no purpose in allowing the form of the action to dictate the substance of the standard by which the legitimacy of corporate action is to be measured.

By the same token, unnecessary confusion is generated by prescribing different standards for different categories of issues that come before cooperative boards — for example, a standard of business judgment for choices between competing economic options, but rationality for the administration of corporate bylaws and rules governing shareholder-tenant rights (see, concurring opn, at 545). There is no need for two rules when one will do, particularly since corporate action often partakes of each category of issues. Indeed, even the decision here might be portrayed as the administration of corporate bylaws and rules governing shareholder-tenant rights, or more broadly as a policy choice based on the economic consequences of tampering with the building’s piping system.

Finally, we reiterate that "business judgment” appears to strike the best balance. It establishes that board action undertaken in furtherance of a legitimate corporate purpose will generally not be pronounced "arbitrary and capricious or an abuse of discretion” (CPLR 7803 [3]) in article 78 proceedings, or otherwise unlawful in other types of litigation. It is preferable to a standard that requires Judges, rather than directors, to decide what action is "reasonable” for the cooperative. It avoids drawing sometimes elusive semantical distinctions between what is "reasonable” and what is "rational” (the concurrence rejects the former but embraces the latter as the appropriate test). And it better protects tenant-shareholders against bad faith and self-dealing than a test that insulates board decisions "if there is a rational basis to explain them” or if "an articulable and rational basis for the board’s decision exists.” (Concurring opn, at 548.) The mere presence of an engineer’s report, for example — "certainly a rational explanation for the board’s decision” (concurring opn, at 548) — should not end all inquiry, foreclosing review of nonconclusory asser-, tions of malevolent conduct; under the business judgment test, it would not.

Accordingly, the order of the Appellate Division should be modified, with costs to appellant, by reinstating Supreme Court’s judgment to the extent it granted appellant’s cross motions regarding the steam riser and severed and set down for assessment the issue of damages and, as so modified, affirmed.

Titone, J.

(concurring). I concur in the majority’s decision to modify, and I agree with much of its reasoning. Indeed, like the majority, I conclude that in fashioning standards for review of decisions made by cooperative apartment boards we should be guided by the need to afford these boards the greatest possible degree of deference, since excessive judicial interference would unquestionably undermine their effectiveness. My disagreement with the majority thus lies not in its rejection of a test of "reasonableness” that would embroil the courts in second-guessing the wisdom of every cooperative board decision, but rather in its choice to formulate the proper standard in terms of the "business judgment rule.” That standard, which is most often applied to review of management’s business decisions and use of corporate assets, is ill-suited to the entirely different task of reviewing management’s implementation of the bylaws and rules governing shareholders’ rights and duties. Accordingly, I write separately to express my own views as to the proper standard for judicial review in these cases.

My own analysis begins with the fact that the shareholder’s challenge to the cooperative board’s action in this case was made through the procedural vehicle of a CPLR article 78 proceeding. That procedural choice was not a mere "happenstance” or accident of nomenclature (majority opn, at 541). Petitioner was not making a claim of waste or self-dealing by corporate management of the type that would ordinarily be cognizable in a derivative action brought pursuant to Business Corporation Law § 626. Rather, petitioner was alleging misfeasance in the administration of the bylaws and rules governing shareholders’ rights to use and enjoy their apartments.

In the past, similar claims involving the administration of shareholders’ rights and duties vis-á-vis the other shareholders, the corporation’s management and the corporation as a discrete legal entity have been treated as matters cognizable under article 78 (see, e.g., Matter of Crane Co. v Anaconda Co., 39 NY2d 14; Matter of Auer v Dressel, 306 NY 427; see also, 5A Fletcher, Cyclopedia Corporations § 2214 [Perm ed 1987]). As one commentator has noted, "[m]andamus to review the discretional acts of a private corporation is commonplace since the corporation is a creature of the state” (McLaughlin, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, C7802:l, at 276 [and cases cited therein]; cf., Matter of Carr v St. John’s Univ., 12 NY2d 802 [decisions of educational corporations also subject to review for arbitrariness under article 78]). The justification for article 78 review in these circumstances is, quite simply, that the authority of corporations and their directors to act is derived directly from franchises issued by the State (McLaughlin, Practice Commentaries, op. cit., at 276). Since the decision of which petitioner complains was a discretionary act affecting shareholders’ rights and was made by a board of directors acting pursuant to the bylaws and rules of a franchised corporation, article 78 review was plainly the proper remedy.

Given that conclusion, our choice of an appropriate standard for judicial review must be guided by CPLR 7803, which describes with particularity "[t]he only questions that may be raised in a[n article 78] proceeding”. It is well established that the four "questions” set forth in CPLR 7803 (l)-(4) are the exclusive measures of the judiciary’s power of review in matters cognizable under article 78 (see, e.g., Matter of Pell v Board of Educ., 34 NY2d 222). It is equally well established that the standard for reviewing discretionary decisions of "bodies or officers” is whether the challenged decision was "made in violation of lawful procedure” or was "arbitrary and capricious or an abuse of discretion” (CPLR 7803 [3]). It is that test which should be our starting point here.

The "arbitrary and capricious” standard of CPLR 7803 (3), used judiciously, would be more than adequate to accomplish the primary goals identified by the majority, i.e., providing some check on the potential for abusive exercise of the power of cooperative apartment boards, while, at the same time, minimizing the type of judicial interference that could impair the ability of these boards to govern effectively (cf., Matter of Olsson v Board of Higher Educ., 49 NY2d 408, 413-414; Matter of Fiacco v Santee, 72 AD2d 652; Matter of Edde v Columbia Univ., 8 Misc 2d 795, affd 6 AD2d 780, cert denied 359 US 956 [all noting judicial reluctance to interfere with academic decisionmaking and applying minimal "arbitrary and capricious” scrutiny to such decisions]). Indeed, the cornerstone of article 78 review under the "arbitrary and capricious” test is that "a court may not substitute its judgment for that of the board or body it reviews unless the decision under review is arbitrary and unreasonable” (Matter of Diocese of Rochester v Planning Bd., 1 NY2d 508, 520).

Given the suitability of the statutory "arbitrary and capricious” standard, I cannot concur in the majority’s decision to reach out and embrace the "business judgment rule”, a standard that was developed to address an entirely different class of problems. The "business judgment” rule to which the majority refers is most relevant, and has most often been applied in the past, to shareholder derivative actions brought to challenge the propriety of management’s business decisions including such diverse matters as investment choices, the making of contractual commitments, long-range corporate planning and the decision as to whether it is in the corporate interest to pursue an action against a director for waste (see, e.g., Auerbach v Bennett, 47 NY2d 619; Kalmanash v Smith, 291 NY 142; Pollitz v Wabash R. R. Co., 207 NY 113). In fact, the classic formulation of the rule is closely tailored to the open-ended decisionmaking within a virtually limitless universe of economic options that typifies business choices: "Questions of policy of management, expediency of contracts or action, adequacy of consideration, lawful appropriation of corporate funds to advance corporate interests, are left solely to [the directors’] honest and unselfish decision, for their powers therein are without limitation and free from restraint” (Pollitz v Wabash R. R. Co., supra, at 124, quoted in Auerbach v Bennett, supra, at 629). Concomitantly, review under the "business judgment” rule is limited to determining whether the challenged action is "taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes”, because "courts are ill equipped * * * to evaluate what are and must be essentially business judgments * * * [as to which] there can be no available objective standard” for measuring their correctness (Auerbach v Bennett, supra, at 629, 630; see, Fe Bland v Two Trees Mgt. Co., 66 NY2d 556, 565).

This test may have some utility by analogy in a limited class of cases involving cooperative apartment boards. In Schoninger v Yardarm Beach Homeowners’ Assn. (134 AD2d 1), for example, the court used the business judgment rule to rebuff a shareholder’s challenge to a decision by a cooperative board to pursue a particular program of repair and rehabilitation in preference to the program suggested by the shareholder and her experts. Application of the rule to this problem was appropriate because the challenged action was, in essence, a business judgment, i.e., a choice between competing and equally valid economic options, albeit one not necessarily motivated by the desire to make a profit.

The justification for applying the business judgment rule to cooperative apartment board decisions falls short, however, in cases such as this one, which involves the administration of the corporate bylaws and rules governing shareholder-tenant rights (cf., Schoninger v Yardarm Beach Homeowners’ Assn., supra, at 8-9 [distinguishing between the two categories of decisionmaking and recognizing that different standards of review should be applied]). First, in contrast to cases involving sheer business choices, our courts’ extensive experience in reviewing licensing, zoning and other discretionary administrative matters renders them well suited, rather than "ill equipped,” to deal with questions such as the rationality or arbitrariness of a board decision to grant or deny a shareholder’s application for permission to renovate. Second, this test provides an objective standard and thereby minimizes the risk of excessive judicial intervention and entanglement in what, as the majority notes, are often highly emotional disputes.

In contrast, the standard of review mandated by the traditional business judgment rule focuses principally on the honesty and integrity of the decisionmaker, and the presence or absence of self-dealing or fraud in the decisionmaking process (see, e.g., Auerbach v Bennett, supra, at 629-630; Pollitz v Wabash R. R. Co., supra). However, questions of pure venality or dishonesty on the part of board members rarely enter into disputes about the use of residential cooperative apartment units. The more common sources of disputes in this area are the alleged arbitrariness of a particular board decision or, as here, the alleged existence of a vendetta or other personally malicious motive (see, e.g., Matter of Boisson v 4 E. Hous. Corp., 129 AD2d 523).

By its own admission, the majority’s adoption of the "business judgment” rule for these intramural controversies is motivated largely by its own view that the courts ought to mediate in the latter class of cases. It is this choice that most clearly differentiates my position from the majority’s and renders our disagreement more than a simple "matter of label” (majority opn, at 541). Unlike the majority, I believe that a rule which authorizes judicial inquiry into the personal motives and potentially vindictive aims underlying otherwise rational decisions is fundamentally unsound — for precisely the same reasons that have led the majority to reject the "reasonableness” test that the Appellate Division apparently used.

As the majority notes, these disputes over the use of the shareholder’s own living space often pit neighbor against neighbor under circumstances that are likely to generate bitterness and distrust. Further, the very nature of cooperative apartment living, which throws relative strangers together, requires them to reside in close proximity and forces them to cede a degree of personal freedom to the collective good, provides a fertile breeding ground for festering resentments and long-standing feuds. Thus, claims of "bad faith,” in the sense of personally directed animus, will be relatively easy to make in these cooperative board disputes — and will be equally easy to support with factual allegations dredging up the details of the parties’ old grievances. The likely consequence will be more claims capable of surviving a motion to dismiss (see, e.g., Matter of Boisson v 4 E. Hous. Corp., supra) and more judicial interference with management decisionmaking than the “reasonableness” standard the majority rejects would produce.

Moreover, a standard that would authorize our courts to explore the board members’ ulterior personal motives is, in my view, both impractical and undesirable as a matter of judicial policy. It is impractical because many, if not most, of the challenged decisions will involve a mixture of malevolent and legitimate motives. Exposing, separating and then measuring the role that the various motives played in the decisionmaking process is a daunting, and probably unrealistic, inquiry. Further, the undesirability of focusing on the parties’ subjective motives is plain, since such a focus will encourage the combatants to bring all of their dirty laundry into the courtroom and will place the court in the distasteful role of arbiter of a myriad of petty accusations and grievances.

Because of these serious pitfalls, I would simply apply the “arbitrary and capricious” standard of article 78 to these cases and hold that discretionary decisions of the cooperative board regarding individual shareholder-tenants’ rights are not actionable if there is a rational basis to explain them. Contrary to the majority’s suggestion (majority opn, at 541-542), there is nothing undesirable, or even particularly unusual, about applying differing standards of judicial review to cases involving different types of issues. Indeed, CPLR 7803 mandates the use of different standards for disputes between citizens and the State, depending upon the category of issue to be considered (CPLR 7803). Similarly, there is no sound reason to insist upon a single standard for judicial review for cases presenting diverse legal problems simply because they arise within the setting of cooperative apartment corporations. Again, this is not a matter of mere "happenstance” or "labeling,” but rather of claims which present fundamentally different problems requiring the use of different analytical tools. Disputes in which shareholder-tenants seek to vindicate their group interests as against the board of directors are analogous to Business Corporation Law § 626 derivative actions and lend themselves readily to the "business judgment” standard of review. In contrast, disputes which pit an individual shareholder-tenant against the other shareholder-tenants, acting either as a group or through their elected board, are more amenable to analysis under the CPLR 7803 (3) "arbitrary and capricious” standard. The distinction is not difficult to apply and is no more confusing than the well-understood distinction between representative shareholder actions for waste and mismanagement and those brought by individual shareholders to vindicate their personal rights.

Finally, despite the majority’s assertions to the contrary, the arbitrary and capricious standard, when properly applied, does not entail an inquiry into the "reasonableness” or the wisdom of the challenged decision. To the contrary, as in the case of article 78 review of discretionary administrative determinations, the judicial role in these cases is limited to ascertaining that an articulable and rational basis for the board’s decision exists.

Here, for example, the board’s stated concern — and its ostensible basis for refusing petitioner’s request for permission to tinker with a steam riser — was the risk of creating unforeseen problems elsewhere in the building’s old, well-worn pipe system. This concern, which was articulated by the building’s engineer, was certainly a rational explanation for the board’s decision and was therefore sufficient to remove that decision from the category of "arbitrary and capricious” determinations that are cognizable under article 78. This conclusion should, and would, end the inquiry under the test I propose.

In sum, the business judgment rule, with its attendant focus on the honesty of the decisionmaker, is a poor fit in the context of discretionary administrative decisions such as this one. Further, I can see no reason to stretch the contours of that rule’s standard of review for these cases, because a more apt test lies readily at hand, i.e., the standard set forth in CPLR 7803 (3). Since application of that test leads me to the same ultimate conclusion as the majority has reached by its somewhat more circuitous route, I concur, but only in the result.

Chief Judge Wachtler and Judges Simons, Alexander, Hancock, Jr., and Bellacosa concur with Judge Kaye; Judge Titone concurs in a separate opinion.

Order modified, with costs to appellant, in accordance with the opinion herein and, as so modified, affirmed.

       We of course do not disregard the form of action. In determining whether appellant’s decision was "arbitrary and capricious or an abuse of discretion” (CPLR 7803 [3]), we would use "business judgment,” the concurrence some form of "rationality” or "reasonableness.” By analogy, we hold today in Akpan v Koch (75 NY2d 561, 574 ([decided today]) that because a governmental agency took the required "hard look” under the State’s environmental protection laws, its action cannot be characterized as arbitrary and capricious or an abuse of discretion under CPLR 7803 (3). So too here, board action that comes within the business judgment rule cannot be characterized as arbitrary and capricious, or an abuse of discretion.

      . The majority’s decision to reject petitioner’s claims without an evidentiary hearing is difficult to reconcile with its expressed unwillingness to foreclose review of allegations of "malevolent conduct” (majority opn, at 542). Petitioner’s papers contained factual allegations that one of the board members "has for several years been * * * causing problems for any other cooperator who needs something from the Board” and that this board member "is causing problems for [petitioner] because [he] said publicly that she had violated her proprietary lease by hooking up a sink in the rooftop greenhouse of her apartment.” Petitioner further claimed that the full board knew about this violation but was "afraid to do anything because of the threat of becoming victim of [the board member’s] vendettas.” Although the majority describes petitioner’s claims on this point as "wholly conclusory” (majority opn, at 540), these allegations seem to me to be sufficiently specific to survive a motion to dismiss under a test that looks beyond the objective rationality of the decision and mandates an inquiry into the subjective motivations of the decisionmaker. Indeed, the allegations here are indistinguishable in principle from those made in Matter of Boisson v 4 E. Hous. Corp. (129 AD2d 523), in which the court concluded that a hearing into bad faith was warranted on the basis of an alleged "vendetta” arising from a prior incident involving the petitioner and the current board president.

      . These difficulties do not arise in the more conventional applications of the "business judgment” rule to shareholder’s suits involving the actions of business corporation boards, since the focus in these applications is on the alleged ulterior financial motives of the directors — a matter which is susceptible to objective verification.


source: Caselaw Access Project

author: Alexander, J.

license: Public Domain

text:
    The People of the State of New York, Appellant, v Alexander Jenkins, Respondent.
    Argued February 6, 1990;
    decided March 29, 1990

      POINTS OF COUNSEL

      Robert T. Johnson, District Attorney (Jonathan R. Walsh and Billie Manning of counsel), for appellant.

      James A. Cohen for respondent.
   OPINION OF THE COURT

Alexander, J.

On this appeal from an order of the Appellate Division, reversing defendant’s conviction, after jury trial, of robbery in the second degree and ordering a new trial because the prosecutor purposefully excluded blacks from the petit jury in violation of the Equal Protection Clause of the Fourteenth Amendment (Batson v Kentucky, 476 US 79), the People argue that no pattern of discriminatory use of peremptory challenges was shown and that because the number of blacks remaining on the jury, despite the exercise of their peremptory challenges, reflected the percentage of blacks in the community, any presumption of discriminatory use of peremptory challenges was overcome. Alternatively, the People urge that by ordering a new trial instead of remanding for a hearing, the Appellate Division improperly deprived them of an opportunity to offer nonpretextual, race-neutral reasons for the suspect peremptory challenges.

We conclude that defendant demonstrated a prima facie case of discrimination in the People’s use of their peremptory challenges, but because we agree that the Appellate Division’s remedial action was improper, we modify by remitting to that court for further proceedings in accordance with this opinion.

I

Defendant and codefendant Ronald Johnson, both of whom are black, were indicted for various crimes arising out of an armed robbery of a supermarket in Bronx County and a subsequent exchange of gunfire with pursuing police officers. The indictment charged them with two counts of attempted murder of a police officer, robbery in the first and second degrees, and criminal possession of a weapon.

During the voir dire at the ensuing trial, a total of 10 black and 37 white and Latino surname prospective jurors were examined during nine rounds of questioning. The prosecutor exercised 10 peremptory challenges, 7 of which were used to remove 7 of the 10 blacks on the panel while only 3 were used against the 37 white and Latino surname members of the panel.

The Appellate Division concluded from its examination of the record that the seven blacks challenged by the prosecution were a heterogeneous group of both sexes from different occupations and social backgrounds. Four of them were identifiable: one of the males was a psychiatric aide married to a former nurse; another male was a Con Edison employee; a third male was a computer programmer who had served on a Grand Jury and the female was an unemployed factory supervisor whose husband and child were employed by a food company. The record did not specifically identify which three of the remaining six venirepersons peremptorily challenged by the prosecution were black. However, of the three blacks on the panel not peremptorily challenged by the prosecutor, two had associations with law enforcement: one was a part-time security guard at Shea Stadium and Madison Square Garden whose duties included restraining alleged wrongdoers and turning them over to the police; the other had a brother in law enforcement and had served on a Grand Jury for a "number of years.” Defense counsel challenged these two prospective jurors and the one remaining black was seated on the final jury along with 11 whites.

In support of a timely mistrial motion, defense counsel pointed out for the record that both defendant and his counsel, as well as the codefendant were black, and that the population of Bronx County was at least 50% black. Defense counsel also argued that the prosecutor was aware that a prudent defense attorney would exercise peremptory challenges against two of the black venirepersons not removed by the prosecution since one was associated with law enforcement and the other a "professional grand juror.” This, he argued, was consistent with the prosecutor’s strategy to allow a token number of blacks to remain on the panel unchallenged in order to avoid a charge of systematic exclusion.

During the colloquy following a defense objection to the peremptory strikes, the prosecutor volunteered that "if [counsel] would like me to go [in]to the qualifications of each of the other jurors, I would go through them at this time.” The trial court denied the mistrial motion, concluded that there had not been any systematic exclusion and declined the prosecutor’s ofier to explain her challenges. The jury subsequently convicted defendant of second degree robbery. On appeal, a divided Appellate Division reversed the conviction and ordered a new trial, concluding that a "pattern of strikes against black[s]” (145 AD2d, at 233), evincing a discriminatory use of peremptory challenges had been established. Leave to appeal to this court was granted to the People by a dissenting Justice of the Appellate Division.

The People argue that inasmuch as the prosecutor did not exclude all blacks from the jury defendant failed to establish a prima facie showing of discrimination under Batson v Kentucky (476 US 79, supra). They further argue that since three blacks were left unchallenged by the prosecutor, the defendant had a jury containing a percentage of blacks (25%) closely reflecting the percentage of the black population of The Bronx at the time of trial (30%). Based on these percentages they argue that defendant cannot establish a "real claim of discrimination” because he was not prevented by the actions of the prosecutor from having a jury whose racial makeup was roughly representative of his own race in the community. Additionally, they contend that in concluding that there had been a Batson violation, the Appellate Division considered as a "relevant circumstance”, improperly ascribed to the People, the defendant’s exercise of two peremptory challenges against black venirepersons. Finally, the People argue that in any event, assuming a prima facie case of racial discrimination in jury selection was established, by ordering a new trial of this 10-year-old case rather than remanding for a hearing, the Appellate Division deprived the People of an opportunity to demonstrate nonpretextual race-neutral reasons for the exercise of their peremptory challenges.

II

That the racially motivated exercise of peremptory challenges by the prosecution violates the Equal Protection Clause of the Fourteenth Amendment, is no longer open to question. (Batson v Kentucky, 476 US 79, supra; Griffith v Kentucky, 479 US 314; People v Scott, 70 NY2d 420; see also, People v Kern, 75 NY2d 638 [decided today].) In order to establish a prima facie case of discrimination based on the prosecution’s use of peremptory challenges to strike members of the defendant’s race from the petit jury, a defendant must show (1) that he or she is a member of a cognizable racial group, (2) that the prosecutor exercised peremptory challenges to remove members of the defendant’s race from the venire, and (3) facts and other relevant circumstances sufficient to raise an inference that the prosecutor used the challenges to exclude people because of their race (Batson v Kentucky, 476 US 79, 96-98, supra; People v Scott, 70 NY2d 420, 423, supra). In tendering a prima facie case of racial discrimination, defendant "may also rely on the proposition that peremptory challenges permit discrimination by those inclined to discriminate” (People v Scott, 70 NY2d 420, 423, supra) and the court may properly consider that a " 'pattern’ of strikes against black jurors included in the particular venire might give rise to an inference of discrimination,” (Batson v Kentucky, 476 US 79, 97, supra.) Once defendant has made a prima facie showing of discrimination, the burden shifts to the prosecution to come forward with nonpretextual race-neutral explanations for challenging the black jurors (id., at 96-97). It is not sufficient for the prosecution to merely allege its good faith or to claim that those jurors stricken likely would be biased because they share the defendant’s race (Batson v Kentucky, 476 US 79, 96-98, supra; see People v Hernandez, 75 NY2d 350).

Turning to the facts of this case, we agree with the Appellate Division majority that a "pattern of strikes” was established prima facie. The prosecutor used only 10 peremptory challenges, 7 of which were used to strike 7 of the 10 blacks on the venire, while only 3 peremptory challenges were used against the 37 nonblacks. Not only were a disproportionate number of blacks excluded, but also the prosecutor’s exclusion of black venirepersons who as the Appellate Division concluded were "a heterogeneous group of both sexes with different occupations and social backgrounds” (145 AD2d, at 232) and did not otherwise appear to be unsuited for jury service on this case, raises an inference that the prosecutor impermissibly measured prospective black jurors by an unconstitutional standard: specifically, their race. These circumstances were sufficient to establish a "pattern of strikes” against black prospective jurors based " 'solely on account of their race or on the assumption that black jurors as a group will be unable impartially to consider the State’s case against a black defendant’ ” (People v Scott, 70 NY2d 420, 425, quoting Batson v Kentucky, 476 US, at 89, supra).

Moreover, it cannot be said, on this record, that the Appellate Division erred as a matter of law in considering as a "relevant circumstance,” in determining whether or not a pattern of discriminatory strikes had been shown, the fact that the People did not exercise peremptory challenges against the two black prospective jurors who had relationships with law enforcement. It was not unreasonable to assume that in a case involving crimes against police officers defense counsel would be particularly intent on excluding from the jury panel persons who had any connection with law enforcement. Thus, in these circumstances, the inference that the prosecution used its peremptory challenges discriminatorily is not diminished by the prosecutor’s failure to challenge these two prospective jurors.

The People argue however, that absent the peremptory strikes of two blacks by the defense, the jury would have been composed of a percentage of blacks commensurate to the percentage of blacks in the community of Bronx County. Thus, according to the People, because they did not strike all blacks from the panel, no discriminatory use of peremptory challenges was demonstrated. We reject these arguments.

A defendant is entitled to a jury composed of " 'neighbors, fellows, associates, [and] persons having the same legal status in society as that which he holds.’ ” (Batson v Kentucky, 476 US 79, 86, supra, quoting Strauder v West Virginia, 100 US 303, 308.) A Batson violation is not avoided, however, simply because notwithstanding the discriminatory use of peremptory strikes, the prosecutor leaves some blacks on the jury panel and those left are enough to form a petit jury containing a percentage of blacks not significantly lower than the percentage of blacks in the local community.

This is so for two reasons. First, Batson’s interdiction of the discriminatory use of peremptory challenges safeguards the right to equal protection not only of a defendant but of citizens who are called for jury duty as well. The exercise of peremptory challenges against prospective jurors solely because of race discriminates unconstitutionally against the excluded juror (Batson v Kentucky, 476 US, at 87-88; People v Kern, 75 NY2d 638, supra [decided today]). Jury duty is an important privilege and obligation of citizenship that should not be denied to some citizens simply because of their race. As we have only today noted in People v Kern (supra) the Batson court recognized that it was both the defendant and the excluded juror who were denied equal protection (Batson v Kentucky, 476 US, at 87-88, supra; see also, Strauder v West Virginia, 100 US, at 308, supra). The Supreme Court’s decision to prohibit racial discrimination in the exercise of prosecution peremptories was also premised upon the injury to the criminal justice system inherent in such discrimination: "The harm from discriminatory jury selection extends beyond that inflicted on the defendant and the excluded juror to touch the entire community. Selection procedures that purposefully exclude black persons from juries undermine public confidence in the fairness of our system of justice. Discrimination within the judicial system is most pernicious because it is ’a stimulant to that race prejudice which is an impediment to securing to [black citizens] that equal justice which the law aims to secure to all others’ ” (Batson v Kentucky, 476 US, at 87-88, supra [citations omitted]).

Surely, jurors dismissed because of their race will leave the courtroom with a lasting impression of exclusion from jury participation and perhaps of isolation from mainstream society generally (see, Holland v Illinois, 493 US —, 110 S Ct 803, 811-812 [Kennedy, J., concurring]). No argument based on percentages of the population would remove from these excluded prospective jurors the sense of exclusion resulting from being assumed to be incompetent to sit on a jury solely because of their race. Further, this type of discrimination undermines public confidence in the fairness of our system of justice (Batson v Kentucky, 476 US, at 87, supra) and is repugnant to the just operation of a free society. Thus the fact that all black jurors were not removed by the prosecution’s discriminatory use of peremptory challenges does not render the use against some any less a violation of Batson.

Second, any consideration of the percentage of blacks remaining on the petit jury compared to the percentage of blacks in the community of The Bronx is irrelevant to an equal protection analysis under the Fourteenth Amendment (Holland v Illinois, 493 US —, 110 S Ct 803, supra). Contrary to the assertions of the People and the dissenting Justice at the Appellate Division such considerations more aptly pertain to those guarantees of the Sixth Amendment relating to the composition of the venire. Defendant raises no such claim here. Nevertheless the People attempt to invert the Sixth Amendment concept of a “representative venire” drawn from a fair cross section of the community to impose it upon the petit jury selection in support of the conclusion that since blacks remaining on the jury following completion of the exercise of peremptory challenges by the People were fairly representative of the blacks in The Bronx community there had not been any violation of the Fourteenth Amendment’s equal protection guarantee against the discriminatory use of peremptory challenges.

This argument is fatally flawed. Concepts of "representative venire” and "fair cross-section” of the community cannot legitimize a prosecutor’s discriminatory exercise of peremptory challenges in violation of the Equal Protection Clause. For the purposes of equal protection, the constitutional violation is the exclusion of any blacks solely because of their race. If any blacks are so excluded, it is of no moment that the jury nevertheless contains a token number of blacks.

Ill

Notwithstanding our agreement with the Appellate Division that the defendant sufficiently demonstrated prima facie a discriminatory use of peremptory challenges by the People, we note that unlike the prosecution in People v Scott (70 NY2d 420, supra), here the People apparently were prepared to offer nonpretextual race-neutral explanations for the exercise of their peremptory challenges which may have successfully rebutted defendant’s prima facie showing. The trial court summarily rejected this offer, however, based upon its conclusion, in reliance upon Swain v Alabama (380 US 202), that there had not been any "systematic exclusion” of black jurors. Batson of course, overruled Swain in part and established new criteria and procedures for determining whether peremptory challenges were being impermissibly used for discriminatory purposes.

The Appellate Division declined to remit for a hearing in order to provide the People an opportunity to explain their pattern of strikes against black prospective jurors, reasoning that a hearing would be inappropriate because of the lapse of nine years since the trial and "the improbability of reconstructing the voir dire”. (145 AD2d, at 233.) Consequently, the court vacated the conviction and ordered a new trial. The People contend however, that they should be afforded an opportunity to demonstrate nonpretextual race-neutral explanations for their peremptory challenges against black jurors pointing out that the trial court rejected their offer of reasons at the time of the voir dire.

While we acknowledge the difficulty the lapse of time may well present, we nevertheless conclude that the People should be afforded the opportunity requested. In other contexts we have held that the. "People are * * * entitled to a hearing when a court makes an error of law which functionally deprives the People of their one opportunity to put in their case” (People v Giles, 73 NY2d 666, 671; see also, cases cited therein). Here, as in Giles, it was the "ruling by the hearing court” applying the then-valid pr e-Batson law and "not a failure of proof by the People” that resulted in the lack of race-neutral reasons in the record to explain the exercise of their peremptory strikes against blacks (id.). Indeed the record is clear that the prosecutor offered to give such explanations, but that offer was rejected by the court. The rationale of fairness has guided us in according such an opportunity to the People in the past (People v Giles, 73 NY2d 666, 671, supra) and is no less applicable here.

Because the Appellate Division’s decision was made on the law and it does not appear that the court exercised its factual review powers, the case should be remitted to the Appellate Division for determination of the facts (CPL 470.25 [2] [d]; 470.40 [2] [b]). If on such review, the Appellate Division determines that the judgment of conviction should be affirmed, it should remit to Supreme Court for a hearing to afford the People an opportunity to establish nonpretextual race-neutral explanations for the exercise of their peremptory challenges. If such legitimate explanations are not satisfactorily established, the judgment of conviction should be vacated and a new trial ordered. Should it be determined that the prima facie demonstration of racially motivated exercise of peremptory challenges is satisfactorily rebutted, the judgment of conviction should be amended to show that result.

Accordingly, the order of the Appellate Division should be modified, and the case remitted to that court for further proceedings in accordance herewith.

Chief Judge Wachtler and Judges Simons, Kaye, Titone, Hancock, Jr., and Bellacosa concur.

Order modified and case remitted to the Appellate Division, First Department, for further proceedings in accordance with the opinion herein and, as so modified, affirmed.

       The People point out, as did the dissenting Justice at the Appellate Division, that this percentage figure is a gross exaggeration. The Appellate Division noted that according to the 1980 census report of the Bureau of the Census of the U. S. Department of Commerce, blacks constituted 29.8% of the total Bronx population while Latinos constituted 33.9%, 2% of whom identified themselves as Latino-black.


text:
    Vernice Akpan et al., Appellants, v Edward I. Koch, as Mayor of the City of New York and as Chairperson of the Board of Estimate of the City of New York, et al., Respondents.
    Argued February 14, 1990;
    decided April 5, 1990

      POINTS OF COUNSEL

      Jane Greengold Stevens, John C. Gray, Jr., Raun J. Rasmussen, Russell Engler and Andrew Scherer for appellants.

      Victor A. Kovner, Corporation Counsel (Ronald E. Sternberg, Dana Martine Robbins and Leonard Koerner) for Edward I. Koch and others, respondents.

      Richard C. Seltzer and Stanley N. Alpert for Rose Associates, respondent.

      Mitchell S. Bernard and Katherine Kennedy for Natural Resources Defense Council, amicus curiae.

   OPINION OF THE COURT

Alexander, J.

Plaintiffs argue on this appeal that the Board of Estimate of the City of New York, the "lead” agency for the purposes of the State Environmental Quality Review Act (SEQRA) failed to take a "sufficiently hard” look at the environmental impact of a proposed urban renewal project known as the Atlantic Terminal Project. Specifically, they contend that the Board of Estimate (BOE) failed to properly evaluate the secondary displacement of local residents which plaintiffs assent will result from approval of the project. The record demonstrates, however, that this issue was extensively examined and given a "hard look” such that the BOE was able to and did make a reasoned elaboration of the proposed project’s impact upon the secondary displacement of local residents. Accordingly, the mandates of the statute have been satisfied and we therefore affirm the order of the Appellate Division.

I

The Atlantic Terminal Urban Renewal Area and the Brooklyn Center Urban Renewal Area were created by the City of New York in 1968 and 1970, respectively. The original urban renewal plan called for the removal of structurally unsound buildings and the construction of new housing units as well as parks and other community facilities. According to the original plan, 2,400 new housing units were to be constructed, including 1,000 units earmarked for low-income residents. Only 806 units have been constructed to date, which include only 300 units for low-income residents. The Atlantic Terminal Project (ATP), was planned in 1978 and is located on a 24-acre site which overlaps both these urban renewal areas. The ATP site is located on mostly vacant land near the Long Island Railroad Terminal in Brooklyn.

In 1985, the City, acting through the New York City Public Development Corporation, entered into a sole source agreement with defendant Rose Associates, a private developer, to develop the ATP site. The Rose proposal for the ATP site includes a mix of commercial and residential uses. When complete, the ATP is to contain 4.5 million square feet of commercial space including two large office towers, movie theaters, a supermarket and parking garages. The residential component of the ATP is to contain 641 units of condominium type housing, which is earmarked for families with annual incomes ranging from $25,000 to $48,000. The housing is to be constructed with the New York City Housing Partnership, a nonprofit organization which will apply for Federal subsidies for 273 of the 641 units. In addition, Rose estimates that another 182 units will be eligible for State subsidies under New York State’s Affordable Home Ownership Program. The plan does not, however, provide for the construction of any housing targeted for low-income residents.

As required by the City’s Uniform Land Use Review Procedure (New York City Charter § 197-c), several levels of municipal approval were required before the plan could be implemented. Applications were duly made by the Public Development Corporation, the Department of Housing Preservation and Development and Rose Associates for various zoning changes, including special permits and amendments to the urban renewal plan, the City map and the zoning map. Since the ATP would also impact upon the environment, final approval of the project also depended upon the results of the preparation of an environmental review and the issuance of impact statements in compliance with SEQRA and the City Environmental Quality Review Act (CEQR). In accordance with CEQR, which implements SEQRA in the City of New York, the Department of Environmental Protection (DEP) and the Department of City Planning (DCP) were designated the "co-lead” agencies concerning the ATP, with responsibility for the preparation of the necessary environmental impact statements (see, Mayoral Executive Order No. 91 § 1 [k] [Aug. 24, 1977]).

Thereafter, DEP and DCP supervised the preparation of a draft environmental impact statement (DEIS). The issue of secondary displacement was raised at the preliminary "scoping” hearing, and although the issue was not expressly addressed in the DEIS, the statement did contain demographic data demonstrating a trend of "gentrification” already in progress in the neighborhood. On July 9, 1986, after a notice had been published in the New York Post, a public hearing on the DEIS was held by the City Planning Commission (CPC). After the hearing, the period for public comments remained open through July 21, 1986. At the hearing and in the subsequent public comment period, several questions, comments and opinions were raised as to the effect of the ATP on low-income housing in the surrounding area, particularly, the possibility of the secondary displacement of these residents. A draft response to these comments, prepared by outside consultants for inclusion in the final environmental impact statement (FEIS), concluded that the ATP would not cause any significant secondary displacement. Rather than merely accepting this conclusion, DCP ordered that additional information be gathered on the issue of secondary displacement. In response, outside consultants made a further inquiry and analyzed relevant data from the City’s computer data bank. These consultants informed DCP that, according to the 1980 census data, the ATP study area contained 2,850 dwelling units in three-to-five-family homes and an additional 4,907 single-room occupancy (SRO) units. The census data indicated that 80% of the housing in the study area was not vulnerable to secondary displacement, either because it was protected by rent stabilization (buildings with six or more units) or because it consisted of owner-occupied one- and two-family homes. The consultants indicated, however, that not all the remaining 20% were vulnerable to secondary displacement because of a variety of factors, including (1) a 13% vacancy rate, (2) tenants in occupancy since the late 1960’s were protected by rent control, (3) the likelihood that some of the buildings had already been upgraded over the past 10 years, thus precluding their occupancy by low- and moderate-income tenants, (4) virtually all the SRO units were protected by the City moratorium on the conversion or demolition of such housing then in effect, and (5) in any event, a current survey of the area revealed that only 44% of the SRO units identified in the 1980 census data were in fact used as such. In addition, DCP personnel conducted an independent block-by-block survey of the study area and further confirmed that the ATP would not have a significant impact on the secondary displacement already in progress there.

Thereafter DCP and DEP concluded that the ATP would not have a significant impact on secondary displacement and, on August 8, 1986, issued a final notice of completion of the FEIS. In addition to the demographic data demonstrating the established trend toward redevelopment and higher rents in the study area, the FEIS included a "Response to Comments” chapter which expressly addressed the issue of secondary displacement. In its response to the comments regarding the issue of secondary displacement the FEIS evaluates the problem and concludes that the ATP "would not be reversing or modifying established land use and development trends” and therefore that the ATP would "not be responsible for triggering significant secondary displacement.” The DEP and DCP then circulated the FEIS to the City BOE and other agencies. On August 18, 1986, the CPC approved the ATP and recommended approval by the BOB. Following another public hearing which extensively addressed the issue of secondary displacement, on October 9, 1986, the BOB approved the ATP, as well as the FEIS, zoning changes, amendments to the urban renewal plan, and the conveyance of land pertaining to it.

Plaintiffs commenced this action for declaratory and injunctive relief, seeking to annul the BOE’s October 9, 1986 approval of the ATP. Supreme Court granted defendants’ motion for summary judgment and dismissed the complaint in its entirety. A divided Appellate Division affirmed, and plaintiffs appeal to this court as of right (see, CPLR 5601 [a]).

On this appeal, plaintiffs argue that the proper lead agency, the BOE, failed to comply with both the substantive and procedural requirements of SEQRA. They contend that the BOE failed to comport with the substantive requirements of SEQRA because the agency failed to take a "hard look” at the proposed project’s impact on secondary displacement and consequently failed to undertake a "reasoned elaboration” of the issue. Plaintiffs also assert a procedural violation of SEQRA, contending that the BOE improperly delegated its decision-making authority to the DEP and the DCP. Additionally, as an independent basis for reversal, plaintiffs urge that approval of the ATP was not given in accordance with a comprehensive plan for the City of New York (see, Udell v Haas, 21 NY2d 463, 469).

II

The primary purpose of SEQRA is "to inject environmental considerations directly into governmental decision making” (Matter of Coca-Cola Bottling Co. v Board of Estimate, 72 NY2d 674, 679). To that end, the statute mandates the preparation of an environmental impact statement (EIS) when a proposed development project "may have a significant effect on the environment” (ECL 8-0109 [2]). Pursuant to the statutory procedure, a draft EIS (DEIS) is prepared and, after a comment period and any public hearings deemed necessary by the agency, is reevaluated to determine in what way, if any, the EIS should be revised or supplemented so as to adequately address issues raised by the comments (ECL 8-0111 [6]; 8-0105 [7]; 8-0109 [2]; 6 NYCRR 617.8 [g]). The agency then files a final EIS (FEIS) and, after a final comment period and any appropriate public hearings, the agency must make express findings that SEQRA’s requirement’s have been met (ECL 8-0109 [8]). Where two or more agencies are involved in the environmental review process, it is the "lead” agency which must assess the environmental impact of a proposed action (ECL 8-0109 [4]; Matter of Coca-Cola Bottling Co. v Board of Estimate, 72 NY2d, at 680, supra). In addition to these procedural requirements, SEQRA also imposes substantive requirements, delineating the content of the EIS (ECL 8-0109 [2]) and requiring the lead agency to "act and choose alternatives which, consistent with social, economic and other essential considerations, to the maximum extent practicable, minimize or avoid adverse environmental effects” (ECL 8-0109 [1]; see generally, Matter of Jackson v New York State Urban Dev. Corp., 67 NY2d 400, 417).

Judicial review of a lead agency’s SEQRA determination is limited to whether the determination was made in accordance with lawful procedure and whether, substantively, the determination "was affected by an error of law or was arbitrary and capricious or an abuse of discretion” (CPLR 7803 [3]; Chinese Staff & Workers Assn. v City of New York, 68 NY2d 359, 363; Matter of Jackson v New York State Urban Dev. Corp., 67 NY2d, at 416, supra). In assessing an agency’s compliance with the substantive mandates of the statute, the courts must "review the record to determine whether the agency identified the relevant areas of environmental concern, took a 'hard look’ at them, and made a reasoned elaboration’ of the basis for its determination” (Matter of Jackson v New York State Urban Dev. Corp., 67 NY2d, at 417; see also, Chinese Staff & Workers Assn. v City of New York, 68 NY2d, at 363-364, supra; Aldrich v Pattison, 107 AD2d 258, 265; H.O.M.E.S. v New York State Urban Dev. Corp., 69 AD2d 222, 232). An agency’s compliance with its substantive SEQRA obligations is governed by a rule of reason and the extent to which particular environmental factors are to be considered varies in accordance with the circumstances and nature of particular proposals (Matter of Jackson v New York State Urban Dev. Corp., 67 NY2d, at 417, supra). Similarly, agencies have considerable latitude evaluating environmental effects and choosing between alternative measures (id.). While judicial review must be meaningful, the courts may not substitute their judgment for that of the agency for it is not their role to "weigh the desirability of any action or [to] choose among alternatives” (id., at 416).

A

Plaintiffs argue that the lead agency, in this case the BOE, failed to comply with the substantive requirements of SEQRA because the agency did not take a "hard look” at the ATP’s impact on the secondary displacement of local residents and further failed to make a "reasoned elaboration” of the basis for its determination that the ATP would not trigger significant secondary displacement. As plaintiffs concede that the agency "looked” at the issue of secondary displacement, this case requires this court to determine when an agency has given sufficient consideration to an environmental issue to constitute the required "hard look” at the subject. Since it is not the court’s role to evaluate de novo the data presented to the agency, the court must, as with substantive SEQRA obligations generally, be guided by a rule of reason and refrain from substituting its judgment for that of the agency. Thus challenges to the conclusions drawn from the data presented requiring such a substitution of judgment will likely fail.

Nevertheless, an agency, acting as a rational decision maker, must have conducted an investigation and reasonably exercised its discretion so as to make a reasoned elaboration as to the effect of a proposed action on a particular environmental concern (see, HO.M.E.S. v New York State Urban Dev. Corp., 69 AD2d, at 231, supra). Thus, while a court is not free to substitute its judgment for that of the agency on substantive matters, the court must ensure that, in light of the circumstances of a particular case, the agency has given due consideration to pertinent environmental factors. This determination is best made on a case-by-case basis and we need not and do not delineate the precise parameters of the hard look doctrine beyond our holding here. Upon a careful review of the record before us, we are satisfied that the BOE, acting as the lead agency, gave due consideration to the issue of secondary displacement in approving the ATP.

Before turning to plaintiffs’ specific contentions, we note that the record reveals that the issue of secondary displacement was raised at every level of the SEQRA review process. Although the DEIS did not include a section expressly denominated "secondary displacement”, it did analyze and discuss socioeconomic data demonstrating a trend toward a more affluent population base in the ATP study area, an annual appreciation rate of 20% for one-to-four-family brownstone properties in the area, and an increase in owner-occupied housing at the same time that the number of SRO units in the area decreased. The statement concluded that these existing trends would continue with or without the construction of the ATP. The question of secondary displacement and the possibility of its acceleration was extensively discussed in the comments submitted on the DEIS. These commentators argued that the project would accelerate the secondary displacement of low- and moderate-income residents, particularly those residing in SROs or two-to-five-family dwellings which were not protected by rent stabilization. A draft response to these comments was prepared by environmental consultants and submitted to the DCP. This draft response concluded that the ATP would have no significant displacement impacts. Rather than simply accepting this conclusion, however, the DCP rejected the draft response, and directed that additional information be gathered to address the specific concerns raised in the comments. As a result, the consultants submitted an analysis of City census data concluding that considerably fewer dwelling units were vulnerable to secondary displacement by the ATP than had been argued by the comments. The DEIS conclusion that the ATP would not significantly impact on secondary displacement was also confirmed by additional data gathered in block-to-block surveys of the study area conducted by DCP’s own personnel. Additionally, the issue of secondary displacement was further analyzed at the FEIS stage. The comments addressing the issue were appended to the FEIS and a new chapter, entitled "Response to Comments” was added. These responses addressed the specific issues of secondary displacement raised throughout the SEQRA process and repeated by plaintiffs in this litigation. Finally, the issue of secondary displacement was publicly aired at the hearing before the BOE prior to the lead agency’s final approval of the ATP.

Plaintiffs’ primary criticism of the SEQRA review in this case is directed at the substance of the "protected housing study” submitted to the DCP in response to that agency’s request for additional information on the specific concerns about secondary displacement raised in the comments on the DEIS. They contend that this analysis was incomplete and cannot support the ultimate conclusion of the FEIS (accepted by the BOE) that the ATP would not trigger significant secondary displacement. Specifically, they argue that the analysis is incomplete because it did not provide all the specific information on secondary displacement requested by DCP, to wit, the precise number, location, and rent structure of every vulnerable dwelling unit surrounding the project site. While the protected housing study identified the number and location of vulnerable housing units unprotected by rent stabilization, the study frankly conceded that "[a]t this time, it is not really possible to establish an accurate universe of potentially affected low and moderate income households in multiple dwellings with fewer than six units.” The study was able to establish nevertheless that only 20% of all the dwelling units in the study area were unprotected by rent stabilization, and that this entire 20% was not vulnerable to secondary displacement for a variety of factors. While plaintiffs continue to dispute the accuracy of the factors cited in the study, we cannot say that the BOE’s acceptance of this analysis was irrational, nor may we substitute our judgment as to the accuracy of the data presented.

We also reject plaintiffs’ contention that in accepting the study, the DCP irrationally assumed based upon the listed factors, that all potentially vulnerable units were protected from secondary displacement. The appropriate inquiry is not whether the ATP will have any impact on secondary displacement; it is whether, given the information in the study, the ATP will have a significant impact on secondary displacement. Although the protected housing study did not provide all current information on every dwelling unit in the study area, it did provide a basis for a reasoned consideration of the secondary displacement issue. Moreover, before accepting the conclusions of the FEIS based in part on this study and in part" on the independent surveys conducted by DCP personnel, the BOE also considered the contrary information presented in the comments on the FEIS and the responses to those comments. Thus, the record does not support plaintiff’s assertion that the claimed inadequacies in the protected housing study demonstrate that the BOE failed to take the required hard look at the issue.

Similarly unpersuasive is plaintiffs’ additional argument that the SEQRA process here is fatally flawed because the raw data of the protected housing study was not included in the FEIS. There is no requirement that the FEIS contain all the raw data supporting its analysis so long as that analysis is sufficient to allow informed consideration and comment on the issues raised (Matter of Jackson v New York State Urban Dev. Corp., 67 NY2d, at 423, supra). We conclude that the FEIS analysis, which emphasized that the ATP would not alter the already established displacement trends in the study area, was sufficient to allow such informed consideration.

Finally, the BOE’s failure to consider the cumulative impact on secondary displacement of the ATP and other, unrelated development projects in the same geographic area does not render the agency’s consideration of the issue deficient. While it was within the agency’s discretion to consider the cumulative impact of such unrelated projects, the agency was not required to do so (6 NYCRR 617.15 [a] [1]); see, Matter of Save the Pine Bush v City of Albany, 70 NY2d 193, 205). We find no allegations in the complaint, nor any evidence in the record, to substantiate plaintiffs’ belated claims that the ATP was in fact integrally related to other development projects in the same geographic area.

Thus the record before us demonstrates that the BOE, acting as the lead agency, took the required hard look at the issues concerning the ATP’s potential impact on the secondary displacement of local residents. Consequently, the agency’s action in approving the ATP cannot be characterized as arbitrary and capricious or an abuse of discretion.

B

Plaintiffs argue alternatively that reversal is nevertheless required because the ATP approval in this case was not given in accordance with lawful SEQRA procedure. Since the BOE was responsible for the final approval of the ATP, the parties agree that it was the proper "lead” agency for the purposes of SEQRA review (see, ECL 8-0109 [4]; 6 NYCRR 617.2 [v]). Plaintiffs contend, however, that the BOE failed to fulfill its function as a lead agency because it improperly delegated that role to two non-decision-making agencies — the DEP and the DCP. Relying on our decision in Matter of Coca-Cola Bottling Co. v Board of Estimate (72 NY2d 674, supra), plaintiffs argue that the designation of the DEP and the DCP as "co-lead” agencies pursuant to Mayoral Executive Order No. 91 violated SEQRA because it insulated the BOE from the consideration of environmental factors required by SEQRA.

Matter of Coca-Cola (supra), however, is inapposite. There, we held SEQRA’s lead agency requirement violated where the DEP, designated a "co-lead” agency by Mayoral Executive Order No. 91, issued a conditional negative declaration requiring modification of a proposed action to alleviate significant environmental effects (see, ECL 8-0109 [2], [4]; 6 NYCRR 617.2 [h]). In so doing, as established by the affirmed findings of the trial court in that case, it was the DEP and not the BOE (the SEQRA lead agency) that made the determination of the proposed action’s environmental impact and thereby insulated the lead agency from its required consideration of environmental factors (Matter of Coca-Cola Bottling Co. v Board of Estimate, 72 NY2d, at 681, supra). We held Executive Order No. 91 contrary to the spirit and form of SEQRA because it operated to remove from the lead agency the determination of the significance of the environmental effect of a given proposal (id., at 682). We noted, however, that lead agencies are "likely to be nonexpert in environmental matters, and will often need to draw on other[] [agencies]” (id.).

Here, the record supports the affirmed finding of the trial court that the BOE, rather than either of the designated "co-lead” agencies, properly fulfilled the function of the lead agency for the purposes of SEQRA. The record reveals that the BOE reviewed and evaluated the DEIS and the FEIS, conducted public hearings on the FEIS, determined that the ATP would not have a significant impact on the environment, and ultimately made the final decision to approve the ATP. Thus unlike Matter of Coca-Cola, the BOE in this case was not insulated from review of the environmental impact of the ATP and properly acted as a lead agency, notwithstanding the designation of the DEP and DCP as co-lead agencies. While the DCP and the DEP were undeniably involved in the SEQRA review process, the trial court found that the BOE merely relied upon the expertise of these agencies, but fully retained and exercised its role as the lead agency assessing the environmental impact of the ATP. This finding, affirmed by the Appellate Division and having support in the record, is beyond our further review (id., at 681).

C

We must also reject plaintiffs’ contention that the land use changes approved for the ATP were not in accordance with a well-considered plan because the project did not provide for low-income housing (see Udell v Haas, 21 NY2d 463, 469, supra). As we explained in Asian Ams. for Equality v Koch (72 NY2d 121, 132), such zoning amendments meet the general requirement for a well-considered plan, when, as here, they are "carefully studied, prepared and considered” and are adopted for a legitimate government purpose. Nor is there any requirement that a particular development project include low-income housing (id., at 134-135).

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Chief Judge Wachtler and Judges Simons, Kaye, Hancock, Jr., and Bellacosa concur; Judge Titone taking no part.

Order affirmed, with costs.

      . This moratorium was subsequently declared unconstitutional (Seawall Assocs. v City of New York, 74 NY2d 92, cert denied sub nom. Wilkerson v Seawall Assocs., — US —, 110 S Ct 500 [1989]).

      . The parties agree that the secondary displacement of local residents, as well as any acceleration of such displacement, is an environmental impact which must be considered during the SEQRA process (see, ECL 8-0105 [6]; Chinese Staff & Workers Assn. v City of New York, 68 NY2d 359, 367 [construing CEQR]).