Real Estate Sales + Acquisitions

Pryor Cashman clients, Salvatore Gaudio, 444 Park Avenue South Associates LLC and A&L 444 LLC (collectively, the “LLC”), prevailed against a former business partner in a suit seeking upwards of $10 million in damages for alleged breach of contract, breach of fiduciary duty and other claims.  Partner James O’Brien, Jr., a member of the firm’s Litigation Group and Real Estate Litigation practice, led this successful representation, with assistance from associate Madelon Gauthier.

The Properties At Issue

The claims in this action pertained to two Manhattan properties, at one time co-owned by the LLC and the plaintiffs; one located at 1420 Second Avenue (“Second Ave”), the other at 444 Park Avenue South (“444 Park”).

In 2011, plaintiffs sold their interest in 444 Park to the LLC, who ultimately sold the building to Moin Development and a hotel developer.  Plaintiffs alleged that they were not informed of the potential partnership with the hotel developer when they sold their interest in the building to the LLC, and as such lost an opportunity to profit from the deal.

Later, in 2012, plaintiffs and the LLC entered into two redemption agreements, which effectively unwound all of their joint ventures and divided their properties between them – with the LLC assuming ownership of Second Ave.  Prior to this transfer of ownership, the LLC signed a lease with a separate entity, Kids in Sports (“Kids”), for the retail space located at Second Avenue. 

Plaintiffs’ failed suit alleged that the LLC lacked authority to enter into the lease, that they had no knowledge of the lease when they signed the redemption agreements because it was never disclosed by the LLC, and that they were precluded from sharing in the profits when the LLC later sold Second Ave.

The Court’s Findings and “Seller’s Remorse”

In a decisive ruling granting the LLC’s motion to dismiss the complaint without leave to replead, Justice Anil Singh of the N.Y State Supreme Court, N.Y. County held, inter alia:

• Because the LLC’s lease with Kids was not an “encumbrance” as defined by the relevant redemption agreement, plaintiffs’ claim for breach of contract failed; 
• The LLC did not make false representations regarding encumbrances in the relevant redemption agreement, given that the encumbrances described therein related solely to the title of Second Ave;
• Plaintiffs’ allegations with respect to the lease seemed to indicate “seller’s remorse;”
• Plaintiffs’ claims for breach of fiduciary duty failed, since the redemption agreement concerning 444 Park specifically stated that the property could be utilized “for the development and conversion of the property as a hotel,”
• Allegations of fraud against the LLC were dismissed because they were not pled with particularity, as required by law, nor were they “material misrepresentations.”

The Court’s full decision, dated August 26, 2016, can be read here.

More About Pryor Cashman’s Real Estate Litigation Group

With one of the premiere real estate litigation practices in the country, Pryor Cashman has a proven track record of success handling sophisticated real estate matters involving high-profile parties and properties across the U.S. and internationally.  Our attorneys are particularly well-known for their work in cases involving real estate finance, development, and hotels and hospitality.

To learn more about our experience in this area, please visit our Real Estate Litigation practice page.