Pryor Cashman Wins Appeal Affirming Dismissal of Claims Brought by Toys "R" Us Against 44-45 Broadway, LLC
Pryor Cashman has won an appellate victory on behalf of client 44-45 Broadway LLC. In an October 17, 2013 decision, the N.Y. Appellate Division for the First Department affirmed dismissal of all claims brought by retail toy giant Toys “R” Us against 44-45 Broadway, the owner of the Times Square building in which Toys “R” Us operates its flagship store.
The dispute arose from a 15-year commercial lease between 44-45 Broadway and Toys “R” Us. Under the lease executed in 2000, Toys “R” Us was required to pay a portion of the building’s real estate tax liability, calculated as a percentage of the increase in taxes over the amount of taxes due during the first year of the lease. For 12 years, 44-45 Broadway sent to Toys “R” Us monthly invoices and biannual statements setting forth in detail the calculation of Toys “R” Us’s proportionate share of the building’s taxes, and for 12 years Toys “R” Us paid those invoices and its tax obligation without objection.
In 2011, for the first time, Toys “R” Us objected to the amount of taxes it was being invoiced, claiming that it should not have to pay its proportionate share of the building’s taxes to the extent that those taxes result from income the building receives from signs that do not belong to Toys “R” Us. 44-45 Broadway rejected Toys “R” Us’s argument and refused to modify the methodology of calculating Toys “R” Us’s tax obligation.
In April 2012, Toys “R” Us brought suit against 44-45 Broadway in N.Y. Supreme Court, N.Y. County, seeking damages for breach of contract in the amount of the taxes that Toys “R” Us allegedly had been overcharged during the course of the lease term, as well as a declaratory judgment that Toys “R” Us’s interpretation of the lease was the correct interpretation. In response, Pryor Cashman, on behalf of 44-45 Broadway, moved to dismiss Toys “R” Us’s complaint.
On January 2, 2013, N.Y. Supreme Court Justice Ramos granted 44-45 Broadway’s motion in its entirety and dismissed the complaint, rejecting Toys “R” Us’s interpretation of the lease and finding that “the contractual obligation to pay a defined portion of real estate taxes imposed on the building has nothing to do with taxes imposed against signs or the income derived from those signs.” Toys “R” Us appealed.
The Appellate Division for the First Department affirmed the lower court decision, holding that “the terms of the subject lease unambiguously contradict the allegations supporting plaintiff's claims, thereby warranting dismissal of the complaint.” The Court also concluded that “when reviewing the parties' course of conduct, including plaintiff's consistent payment of its share of the real estate taxes for over 12 years without protest, it is clear that defendant's construction of the relevant lease provisions comports with the parties' intent.”
44-45 Broadway was represented by Partners Todd Soloway, Chair of Pryor Cashman’s Real Estate Group, and Eric D. Sherman, and Associate Benjamin Akley.
