Realtor associations spar in court over failed merger attempt 

An attempted merger of the Long Island Board of Realtors (LIBOR) with a much smaller neighboring Realtor association has gone awry and ended up in court.

On Oct. 8, a New York state judge granted a preliminary injunction requested by the 275-member Hamptons and North Fork Realtors Association (HANFRA) — but only to preserve the association's records until he can figure out who actually has the authority to speak for HANFRA.

What this case is about: Tahir Baig, who claims to be HANFRA's president and a member of its board of directors, filed a lawsuit on behalf of HANFRA last month in the Suffolk County Supreme Court against LIBOR and two HANFRA insiders, Michael Coughlin and Horace Barrow. 

The suit alleges that Coughlin, whose removal as HANFRA CEO is disputed, negotiated an unauthorized merger with LIBOR — one of the nation's largest Realtor associations at nearly 30,000 members — in which LIBOR would pay him $19,500 and in return he would indemnify the organization.

A questionable merger vote? The complaint asks the court to declare void an Aug. 13 membership vote on the merger that Coughlin and Barrow, who was HANFRA's vice president at the time, held allegedly without board authorization.

The complaint asserts that the vote failed because only 43 members voted in favor of the merger, rather than the minimum of 55 required under the association's bylaws. Nevertheless, Coughlin declared the merger approved by the members, after which the board fired Coughlin and suspended Barrow as an officer on Aug. 31.

In addition to requesting that the Aug. 13 vote be declared void, Baig's complaint asks for "damages from LIBOR for knowingly inducing and substantially assisting the scheme and for restraint of trade; a declaration of who holds HANFRA's offices; an accounting, damages, forfeiture, and restitution from Coughlin, a faithless fiduciary; the return of the corporation's property; the statutory removal of Horace Barrow as an officer and director for cause; and, preliminary and permanent injunctive relief."

LIBOR says claims 'fail as a matter of law': In correspondence with the court, Barrow denied the allegations and Coughlin both sought the complaint's dismissal and disputed Baig's authority to conduct affairs on behalf of HANFRA. Coughlin has alleged that Baig had become ineligible to serve as president when he failed to pay his dues on time and that his position had not been restored after payment.

In an Oct. 14 motion to dismiss, LIBOR's attorneys contended that LIBOR is being dragged into a power struggle over control of HANFRA regarding a merger that never happened.

"Given this, and because Plaintiffs do not allege — because they cannot — that LIBOR controls HANFRA, possessed its records or credentials, received its assets, collected its dues, acquired any of its members, or owed it any fiduciary duty whatsoever, Plaintiffs' claims against LIBOR fail as a matter of law," LIBOR's attorneys wrote.

In addition, they alleged that the plaintiffs lack standing to bring the suit at all. Baig had not proven he had the authority to assert claims on behalf of HANFRA against LIBOR, they argued, and his allegations show that "HANFRA itself does not possess a duly constituted Board with authority to commence this action." 

HANFRA records must not be destroyed, altered: "Plaintiffs argue that LIBOR knowingly supported these alleged breaches of fiduciary duty to absorb HANFRA and remove it as an independent association and potential MLS competitor," Judge Paul E. Hennings wrote in his Oct. 8 order.

Despite Coughlin's reported firing, the judge noted that he "continued to withhold corporate records, member data, and account credentials after repeated demands for their return."

Hennings also acknowledged that Coughlin disputes Baig's assertion that he is HANFRA's president and declined to give Baig control over HANFRA's records at this point. But the judge did bar Coughlin from: destroying or altering HANFRA's corporate records; changing its administrative credentials associated with functions such as banking, email, domain-registration and membership-system accounts; or transferring HANFRA funds to himself or any entities under his control.

What happens next: The judge ordered all parties to attend a Nov. 12 hearing "to determine the authority of the persons seeking control of HANFRA's property and accounts, the validity of the relevant board appointments and resolutions, Michael Coughlin's present possession or control of the requested materials, and the continuing need for mandatory preliminary relief."