You may get better answers to your question as a question regarding contracts, legal retainer agreements and, possibly, legal malpractice (I added the tags for those areas).
As a general matter, if the law firm that represented the coop is the same firm that sent the net refund check to each shareholder (i.e., refund due, net of the 22% fee), then I see no reason why any shareholder should be required to return the check until and unless this law firm can explain why and can point to either language in the retainer agreement or some other binding authority that says the shareholders must return the checks. If this firm is also asking you to send them money for their 22% fee when they've apparently already deducted and retained it for themselves, then I would be rather suspicious; either (1) you're misreading the letter (please don't take offense, it's just one possibility that should be considered), (2) the letter was not properly authorized by the firm, or (3) this firm is displaying the heighth of chutzpah and is engaging in conduct of a dubious ethical nature.
Since you and the other shareholders are at least third party beneficiaries of the retainer agreement between the coop itself and this law firm, you are all entitled to an adequate explanation of what's going on, not only from this law firm but also from the coop board itself. All of you should demand such an explanation in writing - and mailed to the managing partner or partners of the law firm by certified mail, return receipt requested - and unless a good reason appears that you haven't mentioned, don't send them a penny until they've given you a good explanation for why you should.
Finally, please keep in mind that you didn't retain me, or anyone else here, to give you proper legal advice, so please don't just DIY without at least consulting with a competent local coop attorney in Babylon; the fee for a one-time consultation should not be that expensive and would almost certainly be money well-spent if it gives you a good answer you can rely on.
My answer does not constitute legal advice and may not be relied upon by anyone for any purpose and does not constitute an attorney/client relationship or an offer to form such a relationship. This disclaimer is intended to be fully compliant with the requirements of Treasury Department Circular 230 and the terms thereof are fully incorporated by reference. If you wish to consult with me please contact me at dwatchley@newyorktaxcounsel or visit my website at www.newyorktaxcounsel.com
This is not a question of tax law, and this portion of AVVO is for tax law questions. You need to hire a lawyer who specializes in representing co-ops, a business lawyer or a litigator. There is no way to know the answer to the question based on the facts you have submitted. Of course if you received incorrect tax refunds the county has the right to get them back. You should contact the local taxing authority to find out the status of the matter. You should then pick up the phone and call the law firm and get an oral explanation. But, of course, you should hire a lawyer to help you on this.
My guess is that the Board wants to assess against the rebate or keep the money for the reserve fund. I don't understand why the law firm thinks who have to reimbuse its legal fee. The Board may be able to make trouble for the shareholders if they don't return the money but I would not pay more than i received. The shareholders might want to consider banding together to hire a real estate lawyer to represent them. I would ask the Board for a written explanation too.
I am a former federal and State prosecutor and now handle criminal defense and personal injury/civil rights cases. Feel free to check out my web site and contact me at (212) 385-8015 or via email at Eric@RothsteinLawNY.com. The above answer is for informational purposes only and not meant as legal advice.