November 2011 through April 2013
1. Residential Bd. Of Mgrs. of The 62 Cooper Square Condominium v. C-Squarewood LLC - Supreme Court, New York County, November 9, 2011 - plaintiff sued the sponsor of its building for breach of contract for failing to correct renovations and repairs that would have cured violations issued by the Department of Buildings. Defendant moved to dismiss. The complaint asserted, among other things, a breach of implied warranty claim under NY Housing Merchant Implied Warranty Law/GBL § 777-a. Defendant claimed that the law only applied to newly constructed condominium buildings of five stories or less and plaintiff’s building was twelve stories. In opposition plaintiff argued that two of the three buildings that constitute the condominium only have five stories. Because neither party was able to put forth case law or even address whether each of the three building’s that made up the condominium could be treated independently for purposes of GBL § 777-a, the Court denied this branch of defendant’s motion. It granted the branch of the motion seeking specific performance in as much as defendant’s performance can be procured with suitable substitute performance and monetary damages can be ascertained with reasonable certainty. However, as defendant did not deny the allegations that it failed to fund an escrow account as required by the agreement with plaintiff and that certain boiler violations remained unresolved, the breach of contract cause of action was found viable.
2. Norton v. 360 Riverside Owners Corp. – Supreme Court, New York County, December 4, 2011 – Plaintiffs sued to recover a flip tax they were charged upon the sale of their shares in the cooperative allocated to their apartments. They alleged the tax was not authorized by the co-op’s by-laws and violated the Business Corporation Law. Defendants, including the cooperative, moved to dismiss the complaint. Plaintiffs cross-moved for summary judgment in their favor. Defendants argued the tax was in place for years before plaintiffs acquired their shares and that plaintiffs Norton and Printz were aware of and enforced the flip tax, as they both served as treasurer for the board. The court granted dismissal of the cause of action for breach of fiduciary duty against the individual named directors, finding the absence of allegations supporting an independent tort. It also dismissed the complaint as against Cooper Square, the selling agent for the cooperative. However, the Court denied dismissal of the claims asserted against the cooperative, holding that the documents defendants submitted, which included board meeting minutes in which plaintiffs Norton and Printz discuss assessment of the flip tax, did not conclusively establish that the tax was validly adopted. The Court noted the documents indicated the cooperative imposed a flip tax, but the underlying authorization was missing. As issue was not yet joined, plaintiffs’ cross-motion was premature and thus denied.
3. Beck v. Studio Kenji, Ltd. – Appellate Division, First Department, December 8, 2011 – Plaintiff commenced this action seeking to recover damages from defendants for their allegedly defective design work performed to his penthouse duplex. Third-party defendants -- the Condominium’s architects -- moved to dismiss the third-party complaint against them alleging negligent misrepresentation based on the existence of the functional equivalent of privity. The Court held that while the third-party complaint contained sufficient allegations that the architects for the condominium reviewed and approved plans submitted by plaintiff’s architect, the third-party complaint failed to adequately allege either that the Condominium’s architects intended plaintiff’s architect to rely on them in determining whether the plans complied with building codes and other regulations, or that the Condominium’s architects engaged in conduct evincing such an understanding. Accordingly, plaintiff’s architect failed to state a claim based on the functional equivalent of privity.
4. Assured Guar. (UK) Ltd. v. J.P. Morgan Inv. Mgmt. Inc.– Court of Appeals, December 20, 2011- Plaintiff sued to recoup losses it suffered as a result of defendant’s alleged overexposure of plaintiff’s investment portfolio in risky sub-prime securities. The Supreme Court had granted defendant’s motion to dismiss plaintiff’s breach of fiduciary duty and gross negligence claims on the ground that they were precluded by the Martin Act. The First Department modified the Supreme Court Order and reinstated the claims on the ground that there is nothing in the plain language of the Martin Act or its legislative history that supports the contention that it preempts otherwise validly pled common-law causes of action. The Court of Appeals affirmed, holding that the Martin Act only preempts claims that rely solely on violations of the Martin Act or its implementing regulations. However, an injured investor may assert common-law fraud and other claims that do not entirely rely on Martin Act filings, even if there is some overlap between the common law and the Martin Act.
5. Roni LLC v. Arfa, Court of Appeals, December 20, 2011 – Plaintiffs, investors in real estate entities that purchases, renovated, and then resold properties, sued the promoters of these investments, alleging that the promoters concealed that the properties’ sellers and mortgage brokers paid them commissions of up to 15% of the purchase prices and that this inflated the purchases prices by millions of dollars. The Court of Appeals found that plaintiffs adequately plead facts to support a claim that a fiduciary relationship existed between them and the promoters, as the promoters solicited the investors’ involvement and exercised control over their funds, and also represented that they had particular experience and expertise in the New York real estate market. The Court further affirmed the Appellate Division’s holding that plaintiffs’ constructive fraud cause of action was not preempted by the Martin Act because the complaint sufficiently alleged damages by asserting that plaintiffs suffered actual pecuniary loss in the form of the concealed commissions that inflated the purchase prices of the properties.
6. Murphy v. 14 Sutton Tenants Corp. – Supreme Court, New York County, December 23, 2011 – Plaintiff-shareholder sued her cooperative and its directors for breach of fiduciary duty and intentional infliction of emotional distress based on claims that they discriminated against her by requiring her to use the building’s service elevator when accompanied by her dog, even though all (but one) of the other dog-owners in the building were permitted to use the passenger elevator. Defendants moved to dismiss, asserting that plaintiff’s dog was exceptionally unruly, that they had received numerous complaints about plaintiff’s dog’s unsafe and unsanitary conduct, and that despite the rule prohibiting plaintiff from using the passenger elevator, she had still used it on several occasions. Defendants contended that their decision to implement the rule against plaintiff was within the scope of their authority and thus protected from judicial review by the Business Judgment Rule. Although plaintiff claimed bad faith, the Court found that she failed to plead independent tortious conduct and that even though defendants’ action deliberately singled out plaintiff, that fact alone did not expose the individual directors to personal liability.
7. Reinhard v Connaught Tower Corp. – Supreme Court, New York County, December 28, 2011 – Plaintiff-shareholder of defendant-cooperative brought an action for monetary and equitable relief against the cooperative and its president alleging that they failed to remediate second-hand smoke that penetrated into her apartment. The Court noted that plaintiff offered evidence of multiple occurrences of smoke within her apartment and found a triable issue of fact of whether the cooperative breached the warranty of habitability by not stopping second-hand smoke from infiltrating her apartment. It also found a triable issue of fact as to whether the tenant was constructively evicted. Although the cooperative had been put on notice of the smoking condition and an agent of the cooperative observed the presence of smoke upon an inspection, it did nothing to remedy it. The court found a question of fact as to whether the coop acted reasonably in failing to remediate the smoke problem.
8. Grubin v. The Gotham Condominium, et. al., Supreme Court, New York County, January 10, 2012 - Condo owners sued its board for damages for “abhorrent living conditions,” which they alleged included holes in floors, damage to walls, railings and terraces. The plaintiffs sued the condo’s individual board members, asserting causes of action for fraud and breach of fiduciary duty, claiming they promised to repair the conditions but never did. The individual board members moved to dismiss. The Court granted the motion to dismiss the complaint against the individual directors, except for two board members who were specifically mentioned by name in the complaint and were alleged to have made false statements to plaintiffs, such as that the manufacturer of their floors no longer makes those floors and that the board ordered new railings when in fact no such order was ever placed.
9. CRP/Extell Parcel I., L.P. v. Cuomo– Supreme Court, New York County, January 19, 2012 – Petitioner, a developer, challenged the determination issued by the New York Attorney General to return $16 million in down payments to purchasers of condominium units in a new construction. The Attorney General had determined that purchasers of the units in the condominium were entitled to rescind their contracts because the first closing did not occur by the date set forth in the offering plan. In the Article 78 proceeding, Petitioner argued that, due to a scrivener’s error, the year of the expected first closing was incorrectly drafted as September 1, 2008 instead of September 1, 2009, and thus sought reformation. The Court found that the Attorney General did not error in its determination that Petitioner was not entitled to reformation based on unilateral or mutual mistake because it had failed to meet its heavy burden to show that the alleged scrivener’s error was contrary to the parties’ intent and had provided no evidence that the parties intended a September 1, 2009 date. It further found rational the Attorney General’s determination that the integration clause in the purchase agreements precluded consideration of parol evidence even where a claim of scrivener’s error is asserted.
10. Keener v. Rifkin, et al., U.S. Dist. Court. (S.D.N.Y.), January 23, 2012 – Plaintiff, a union member who worked as a maintenance person at a cooperative, sued the coop’s managing agent and superintendant for alleged wrongful employment termination based on racial and national origin bias. Defendants sought to compel arbitration under a collective bargaining agreement (CBA) and supplemental agreement requiring union members to arbitrate employment discrimination claims even when the union declines to adopt them. The supplemental agreement provided that “arbitration [shall] apply to those circumstances in which the Union has declined to take an individual employee’s employment discrimination claim under the no discrimination clause of the CBA (including statutory claims) to arbitration and the employee is desirous of litigating the claim.” The Court held the arbitration provision enforceable, compelled arbitration and dismissed the action.
11. Latipac Corp. v. BMH Realty LLC, Appellate Division, First Department, February 2, 2012 – Plaintiff entered into a purchase agreement with defendant to purchase an apartment building participating in the J-51 rent stabilization program that plaintiff believed contained some units that had been deregulated. The deal broke down and plaintiff commenced this action against defendant for return of its down payment and for a preliminary injunction staying any default on the closing of the purchase. The motion was denied and, while plaintiff’s appeal was pending, the Court of Appeals affirmed the First Department’s holding in Roberts v. Tishman Speyer Properties, 62 A.D.3d 71, that no units in a J-51 building could be deregulated while the building was still receiving J-51 tax benefits. Plaintiff argued that Roberts applied retroactively to its contract with defendant and made defendant’s representations false concerning deregulation in the building. The First Department held that the rent stabilization laws were intended to protect tenants, not landlords such as plaintiff, and thus affirmed denial of plaintiff’s motion for a preliminary injunction. It further held that plaintiff bore the risk that the property’s value will be reduced by a change of the law between execution of the contract and the closing.
12. Pesa v. Yoma Dev. Group, Inc., Court of Appeals, February 9, 2012 – Plaintiffs entered into three contracts with defendant to buy properties on which defendant would construct three-family dwellings. The contract contained a mortgage contingency clause and required defendant to deliver certificates of occupancy or sign-offs showing that they would be forthcoming. The closing never occurred and the houses were never built. Plaintiffs sued for breach of the contracts, claiming that they could not obtain mortgage commitments due to the defendant’s failure to build the houses and obtain the certificates of occupancy. Defendant argued that plaintiffs did not demonstrate they were ready, willing, and able to close the transaction. The Court noted a split among the Appellate Division Departments as to whether such a showing is required. It held that the correct rule is that a non-repudiating buyer show their readiness, willingness and ability to perform on the contract. In so holding, the Court made the point that damages for breach of contract are not recoverable where they were not actually caused by the breach, which is why this rule is logical. The Court further stated that the non-repudiating buyer has the burden of proof that they were ready to perform because they are in a better position to prove this ability than the seller is.
13. Berenger v. 261 West LLC, Appellate Division, First Department, February 14, 2012 – Plaintiff bought a penthouse in defendant’s condominium. He sued the sponsor for trespass, nuisance, fraud and misrepresentation alleging that noise and glycol emanated from a rooftop cooling tower into his penthouse. The Court dismissed plaintiff’s fraud and misrepresentation claims, holding that disclosures concerning the cooling towers were specifically required under the Martin Act. It dismissed all claims against individual defendants on the ground that plaintiff alleged no independent tortious conduct. However, the Court let stand plaintiff’s trespass and nuisance claims on the ground that triable factual issues were raised as to whether defendants’ conduct was intentional -- i.e., intentionally not repairing the cooling tower until June 2009, causing glycol to enter plaintiff’s property.
14. 1010 Tenants Corp. v. Hubshman, Supreme Court, New York County, February 15, 2012 – Defendant, who had been granted reverse summary judgment on her counterclaims against plaintiff-cooperative, moved for summary judgment on her remaining counterclaim for a declaration that plaintiff breached the proprietary lease and, thus, as the prevailing party she was entitled to reasonable legal fees. The court stated that while attorney fees are not available in an action for a declaratory judgment where the lessee simply sought a declaration regarding their rights and there was no default alleged, plaintiff sought a declaratory judgment that defendant is in default. Thus, the Court found that defendant was entitled to attorneys fees if she was the prevailing party. Because the Court granted defendant’s counterclaims and denied plaintiff’s motion for summary judgment, it held that defendant was the prevailing party.
15. JP Morgan Chase v. Malik, Supreme Court, Westchester County, February 17, 2012 – Defendant board of managers of a condominium moved for an order directing plaintiff to expeditiously proceed with a foreclosure action against co-defendant, which had been inactive for some time. The Court granted the motion to the extent of directing plaintiff’s counsel to contact its former counsel to obtain plaintiff’s file and thereafter contact the court-appointed referee who shall immediately proceed with his computation of the judgment of foreclosure.
16. Eastside Exhibition Corp. v. 210 East 86th Street Corp., Court of Appeals, February 22, 2012 – Plaintiff, a commercial tenant in defendant-landlord’s building, sued defendant claiming a partial eviction based on defendant’s erection of cross-bracing occupying 12 square feet in a 15,000 to 19,000 square foot space rented by plaintiff. Plaintiff sought a full abatement of rent. The Court held that the intrusion was so de minimus that it did not interfere in some, more than trivial, manner with plaintiff’s use and enjoyment of the premises, which, if it had, would be considered an actual partial eviction. The Court therefore held that plaintiff was not entitled to a full rent abatement, the proper remedy for a partial eviction.
17. Cia. Naviera Financiera Aries, S.A. v. 50 Sutton Place South Owners, Inc., United States District Court, Southern District of New York, February 24, 2012 – Plaintiff sought a declaratory judgment that it, a Panamanian corporation, was the rightful owner of shares of defendant-cooperative and the proper assignee of the lease to an apartment in defendant’s building. Plaintiff’s attorney-in-fact purchased the shares allocated to the apartment and attempted to transfer them into plaintiff’s name, but the cooperative limited ownership solely to individuals. Plaintiff’s attorney later transferred the shares and assigned the proprietary lease to his son. Plaintiff claimed that the rule prohibiting ownership of shares by a corporation was arbitrary. The Court held that while defendant could not unreasonably withhold approval of an assignment, it was not arbitrary to restrict ownership to individuals and, thus, its actions were shielded from judicial review by the Business Judgment Rule.
18. 433 Sutton Corp. v. Broder, Supreme Court, New York County, February 24, 2012 – Defendant moved for attorneys’ fees, on the ground that he was the prevailing party, following the Court’s denial of plaintiff’s motion for a preliminary injunction granting plaintiff permission to enter defendant’s apartment to remove noxious producing organic matter as a result of defendant’s cat. The Court had previously issued plaintiff a temporary restraining order permitting access to defendant’s apartment and, based on the issuance of the TRO, plaintiff was able to remove the noxious causing matter prior to the hearing of its motion for a preliminary injunction. The Court denied defendant’s motion on the ground that the denial of the preliminary injunction was not a finding that defendant was in compliance with house rules and the proprietary lease, but that there was no demonstrated continuing harm.
19. Binday v. Eleven Riverside Drive Corp., Supreme Court, New York County, March 2, 2012 - Plaintiff, a cooperative shareholder who owns the penthouse, moved for a preliminary injunction against the cooperative to enjoin it from cancelling plaintiff’s proprietary lease based on plaintiff’s refusal to remove certain mechanical equipment from the roof that serviced his apartment and which the cooperative previously gave him permission to install. Plaintiff argued the cooperative wrongfully sought to attribute shares to the storage area, and required plaintiff to purchase them, and that plaintiff would suffer substantial hardship if required to remove and relocate the equipment, without which he claimed the apartment was uninhabitable. Plaintiff also sought an injunction to restrain the cooperative from interfering with his alterations. The Court issued the preliminary injunction, noting any such order would be based on the defaults listed in the cooperative’s notice to cure. It further found that plaintiff was suffering irreparable harm as he was unable to cure the alleged defaults as plaintiff was being prevented from doing the same work the cooperative sought a cure of. Thus, the defendant was restrained from terminating or interfering with construction of the unit.
20. Rai v. WB IMICO Lexington Fee, LLC, U.S. District Court, Southern District of New York, March 19, 2012 - Plaintiffs, purchasers of units in defendant-sponsor’s condominium building, sought to recover their deposits based on alleged violations of the Interstate Land Sales Full Disclosure Act (“ILSA”). Defendant filed a counterclaim alleging plaintiffs breached their purchase agreements. All parties moved for summary judgment. The Court held that: ILSA applies to condominium units, as held by prior case law; that ILSA’s 100-lot exemption is not applicable to defendant, which claimed that it was because some units were combined leading to less than 100 units in the building, because the offering provided to purchasers stated that there would be 110 units in the building; and that defendant’s failure to include tax lot numbers in the purchase agreements, which plaintiffs argued failed to identify the units in a form acceptable for recording, constitutes a violation of ILSA that permits plaintiffs to rescind their purchase agreements and recover their deposits.
21. Hsu v. Millennium Partners, Supreme Court, New York County, March 19, 2012 - Plaintiff sued for personal injuries from mold in his apartment after a pipe in his HVAC unit burst. He settled an insurance claim with the insurer of the contractor that fixed the leak. Defendant commenced a third-party action against the contractor for indemnity and/or contribution. It claimed a second leak, caused by the contractor, was the sole proximate cause of the mold and that, even if it was negligent, the contractor must indemnify it for any damages it has to pay. The court found a triable issue of fact as to whether defendant was negligent and that neither contribution nor common law indemnification was available to defendant as statutorily barred by General Obligations Law § 15-108. It further rejected defendant’s claim that plaintiff entered into the settlement of the insurance claim in bad faith.
22. Fair Hous. Justice Ctr., Inc. v. Edgewater Park Owners Coop., Inc., U.S. District Court, Southern District of New York, March 22, 2012 - Plaintiffs sued defendant-cooperative alleging, among other things, violations of the Civil Rights Act, Fair Housing Act, and New York Human Rights Law for selectively enforcing a requirement that purchasers in the cooperative obtain three references from existing shareholder as a prerequisite for buying shares. Plaintiff, an organization that seeks to halt discrimination in connection with housing, sent two sets of testers, one Caucasian and the other African American, to see if they could successfully apply to become shareholders of defendant. Although the Caucasian tester was told by the broker that the references requirement would not be a problem and that she would be able to refer her to existing shareholders that would provide her with the references, the broker told the African American testers that they would have no shot at getting into defendant’s building because they did not know three existing shareholders and did not offer similar assistance. The broker further stated that defendant’s shareholders are prejudiced against people of ethnicity living in the building. Defendant moved for summary judgment. The Court denied defendant’s motion, holding that there were triable issues of fact as to whether defendant engaged in a policy of selectively enforcing the references policy against applicants who were not Caucasian.
23. Denza v. Independence Plaza Assocs., Appellate Division, First Department, April 3, 2012 – Plaintiffs, residents of a Mitchell-Lama apartment complex, sued its owner claiming that the building was still subject to rent-stabilization even after it opted out of the Mitchell-Lama program. The Appellate Division was presented with the question of whether the continued receipt of J-51 tax benefits by the owner, following the owner’s withdrawal of the complex from the Mitchell-Lama program, triggers the applicability of the Rent Stabilization Law even if those benefits were determined to have been unauthorized from the moment of the withdrawal, and were retroactively repaid. The Court found that nothing in the mandatory language of HPD Rule 28 RCNY 5-07(f)(3), which that requires J-51 benefits be withdrawn if a building ceases to be subject to rent regulation, may be read to give HPD discretion as to whether an owner’s J-51 benefits could survive the building’s withdrawal from Mitchell-Lama, where no other rent regulation was ever applicable. Accordingly, the Court held that the erroneous continuation of the tax benefits after Mitchell-Lama coverage ended, which were refunded in full by plaintiffs, did not cause the buildings to take on a new form of rent regulation.
24. University Towers Apartment Corp. v. Boettner, Supreme Court, Kings County, April 5, 2012 – Plaintiff-cooperative sued three former directors of its board for breach of fiduciary duty and breach of the cooperative’s by-laws, and sought a judgment declaring that defendants committed such breaches, based on allegations that they acted beyond their authority as directors in switching managing agents and voting to postpone scheduling the 2009 annual shareholders meeting. Defendants asserted a counterclaim for indemnification based on the By-Laws’s provision entitling them to same unless they engaged in bad faith. Both parties moved for summary judgment. The Court dismissed the complaint and granted judgment to defendants on their counterclaim. In doing so, the Court held that plaintiff was not entitled to declaratory relief because there is no justiciable controversy. It further found that all of defendants’ acts were ratified by a board vote and were protected by the Business Judgment Rule.
25. Village Ctr. for Care v. Sligo Realty & Serv. Corp., Appellate Division, First Department, April 5, 2012 – Plaintiff-tenant entered into a commercial lease with defendant-landlord, which required performance of certain work to the premises. The lease contained a 10-day cure period and an unspecified longer period to cure if defaults could not be cured within 10 days. Defendant sought to terminate the lease for failure to cure certain defects concerning electrical, plumbing and HVAC work to be performed at the unit and plaintiff filed a motion seeking a Yellowstone injunction on the ground that it made immediate, diligent efforts to cure. The court held that where defaults are incapable of being cured in the time provided in the notice to cure, and the lease terms only require the tenant to commence diligent efforts to cure the defaults within the permitted time, service of a notice of termination does not automatically bar subsequent Yellowstone injunctive relief.
26. Maidstone Landing Homeowners v. Maidstone Landing LLC, Supreme Court, New York County, April 9, 2012 – Plaintiff sued the sponsor of a condominium conversion for, among other things, defectively constructing the condominium and not in accordance with the representations in the offering plan. The sponsor moved for summary judgment. The sponsor’s summary judgment motion on plaintiff’s contract claims was denied because the sponsor had violated “a specific covenant appearing in the purchase agreement,” meaning the offering plan. Plaintiff had alleged “specific provisions of the agreement in addition to those covered by the warranties.” The court dismissed the breach of fiduciary duty claims against the sponsor-appointed board members as time-barred by the three-year statute of limitations (although it would have sustained that claim on the merits). The court dismissed an aiding and abetting of breach of fiduciary duty claim on the ground that there was no evidence of “substantial assistance.” The court dismissed the GBL § 349 claim, holding that plaintiff had “failed to establish that the alleged deceptive practices have an impact on consumers at large.” The court recognized the contrary ruling in Bridge Street Homeowners Association v. Brick Condominium Development LLC, 18 Misc.3d 1128[A], citing 511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, but distinguished those cases. Lastly, the court granted the architect-defendant’s motion for summary judgment on the ground that plaintiff was no third-party beneficiary of the contract between the sponsor and the architect because there was no privity. It further found no evidence of malpractice or fraud by the architect, and that the architect had no independent duty to the plaintiff that would support plaintiff’s negligent misrepresentation claim.
27. Samson v. 91st St. Tenants Corp., Supreme Court, New York County, April 10, 2012 – Plaintiffs sued defendants for alleged property damage stemming from a leak in their apartment. Defendant Zash, who owns the apartment above plaintiffs and is alleged to have permitted water to leak from her bathtub into plaintiffs’ apartment, moved for summary judgment dismissing the complaint The court found conflicting testimony in the record that: (1) plaintiff did not see any water on the floor when he went with the super to Zash’s apartment to check on what caused the flood; (2) management could not identify the source of the leak; and (3) Zash admitted she was aware of having a leaky faucet in her bathtub causing water to drip and accumulate in the tub. Accordingly, the court found a triable issue of fact as to Zash’s negligence and denied Zash’s motion.
28. Natt v. White Sands Condominium, Appellate Division, Second Department, May 1, 2012 – Plaintiffs sued for a judgment declaring that the sponsor of defendant-condominium and its designee on the board are precluded from voting in the election for members of the board with respect to the office of each of the three members of that board not designated by the sponsor or its designee. The Appellate Division upheld the trial court’s decision granting plaintiffs summary judgment on their declaratory judgment cause of action. The court found that there were ambiguities in the condominium’s governing documents, including in the offering plan and by-laws, as to whether or not the sponsor and its designee may vote for non-sponsor seats on the board. The court construed the documents in the light most favorable to plaintiffs as the non-drafting parties. Further, the court found the sponsor’s designee was the alter-ego of the sponsor, as the parties had continuously switched board seats back and forth, and, therefore, was equally bound by the court’s determination as was the sponsor.
29. The 20 Pine Street Homeowners Association, et al. v. 20 Pine Street LLC, et al., Supreme Court, New York County, May 2, 2012 – Plaintiffs, owners of condominium units, sued the sponsor, its principals, and professionals who designed and constructed plaintiffs’ building, alleging that defendants failed to construct the building in accordance with the representations in the offering plan and the plans and specifications filed with the Department of Buildings. Several defendants filed motions to dismiss and the court converted the motions to motions for summary judgment pursuant to CPLR 3211(c). The court denied the branch of the sponsor’s motion to dismiss the breach of contract claim against it, but granted the non-sponsor-defendants’ motion to dismiss the same claim on the ground that plaintiffs were not third-party beneficiaries of the contract between the sponsor and those defendants. The court dismissed plaintiffs’ breach of express and common-law implied warranty causes of action, holding that the offering plan expressly excluded both express and implied warranties. The court also dismissed the causes of action for violations of the Martin Act for lack of standing, negligence on the ground that a breach of contract cannot be converted into a tort, and professional malpractice for lack of privity. The court further dismissed the causes of action for fraud and negligent misrepresentation on the grounds that allegations that defendants did not intend to perform the contract is not a fraud and the allegedly fraudulent statements in the offering plan were mere puffery. For the same reasons, the court dismissed the Interstate Land Sales Act claim. Finally, the court dismissed the cause of action alleging a violation of GBL § 349, holding that defendants’ alleged conduct did not affect the public at large. The Court then severed the dismissed causes of action and dismissed parties and directed entry of judgment accordingly.
30. Weinreb, et anno. v. 37 Apartments Corp., et al., Appellate Division, First Department, May 10, 2012 – Plaintiffs, shareholders of a cooperative apartment corporation, sued the cooperative and individual directors of its board alleging that the cooperative unreasonably withheld consent to plaintiffs’ alteration plans to renovate their penthouse apartment. The trial court dismissed the breach of fiduciary duty cause of action against the individual directors but let survive the cause of action for a permanent injunction compelling the individual directors to execute all applications to be filed with City agencies if the court ultimately finds that the renovation should proceed. On appeal, the First Department reversed the branch of the trial court’s order upholding the permanent injunction cause of action. It held that the a permanent injunction is a remedy not a independent cause of action and thus it cannot be asserted where the underlying substantive claim of wrongdoing – breach of fiduciary duty – is dismissed. The First Department further held that plaintiffs’ proprietary lease required the cooperative, and not its directors, to not unreasonable withhold consent to the renovation. Therefore, there was no basis, legal or otherwise, to keep the individual directors in the action as defendants and all the relief plaintiffs seek can be obtained from the cooperative.
31. The Bd. of Mgrs. of The Crest Condo. v. City View Gardens Phase II, LLC, et. al., Supreme Court, Kings County, May 11, 2012 – Plaintiff sued the sponsor, its principals, and professionals who designed and constructed plaintiff’s building, alleging that defendants defectively constructed the building and its units. Defendants moved to dismiss the complaint. The court denied the branch of the sponsor defendants’ motion to dismiss the breach of contract claim. As to the sponsor’s principals, it held that plaintiff make seek breach of contract damages against them based upon their execution of the certification in the offering plan and the incorporation of the terms of the offering plan in a specific provision of the purchase agreement. As to the non-sponsor defendants, the court dismissed the breach claim, holding that plaintiff’s unit owners were mere incidental third-party beneficiaries of the contracts between the non-sponsor defendants and the sponsor. The court declined to dismiss the breach of express warranty claim on the ground that, although the express warranty limited the sponsor’s liability to repairing the defective conditions, the sponsor abandoned its duties under the express warranty. The court also declined to dismiss the cause of action for breach of the common law implied warranty because the parties did not submit a complete copy of the offering plan and the court therefore could not determine whether the sponsor offered purchasers a limited warranty in place of the implied warranty. The court dismissed the fraud claim as duplicative of the breach of contract claim. It dismissed the cause of action for violations of GBL § 349, holding that plaintiff’s allegations in support of this claim are exclusively premised on representations in the offering plan and purchase agreement and, thus, are Martin Act claims that the Attorney General has the exclusive authority to prosecute. The court also found that plaintiff, the board of managers, did not have standing to bring a claim under the Interstate Land Sales Act, but dismissed the claim without prejudice to the claims brought by individual unit owners.
32. Carol v. Madison Plaza Assocs., LLC., et al., Appellate Division, First Department, May 29, 2012 – Plaintiff sued the board of her cooperative and other defendants for breach of her purchase agreement and fraud. The court dismissed the breach of contract claim against the board on the ground that the board was not a party to the purchase agreement between plaintiff and the sponsor. The court also dismissed the breach of contract claim against the sponsor as barred by the statute of limitations. Finally, the court denied plaintiff’s motion for leave to amend her complaint to add a cause of action for fraud, holding that the proposed fraud cause of action is duplicative of the dismissed breach of contract cause of action and the amendment therefore would be futile.
33. The Plaza PH2001 LLC v. Plaza Residential Owner LP, Appellate Division, First Department, June 26, 2012 – Plaintiff sued the sponsor of the conversion of a portion of the Plaza hotel into condominium units, alleging that the penthouse unit it purchase for $31 million had construction defects and failed to contain certain features that were promised in the offering plan. Defendant filed a motion to dismiss the complaint. The court held that the complaint stated a cause of action for breach of contract based on representations in the offering plan that were inconsistent with the completed construction of the penthouse, such as the height of the ceilings in the unit. While the court maintained that the “no representations” provision in the contract precluded plaintiff from relying on representations in marketing materials, because the breach cause of action did not entirely rely on these representations, it was validly pled. However, the court dismissed plaintiff’s cause of action alleging the sponsor and selling agent violated General Business Law § 349 because the alleged violations lacked “a broad impact on consumers at large.”
34. Fletcher v. The Dakota, Inc., Appellate Division, First Department, July 3, 2012 – Plaintiff sued his cooperative and two of its directors claiming that he was refused permission to buy an adjacent apartment for the purpose of combining them because of his race and because he had been a voice against racial and ethnic discrimination in the building generally. Defendants filed a motion to dismiss, and the individual directors argued that the complaint did not allege they engaged in acts separate and distinct from actions they took as board members. The court held that a claim against individual board members of a cooperative corporation lies against them in their personal capacity for their personal participation in the corporation’s tortious conduct of engaging in unlawful racial discrimination. The court expressly overruled its prior contrary ruling in Pelton v. 77 Park Avenue Condominium, 38 A.D.3d 1 (1st Dep’t 2006). Fletcher also dismissed, but with leave to replead, a breach of fiduciary duty claim against the directors arising out of the same wrong. Citing Brasseur v. Speranza, 21 A.D.3d 297, 298 (1st Dep’t 2005), the court allowed a repleading because discovery may reveal violations of the individual directors’ fiduciary duty, although the complaint was held not to adequately plead such violations thus far in the action.
35. Cogut v. 1220 Park Ave. Corp., Supreme Court, New York County, July 24, 2012 – Plaintiffs, shareholders in a cooperative apartment corporation, sued the cooperative for, among other things, breach of an alteration agreement to renovate plaintiffs’ penthouse triplex and for breach of fiduciary duty. The complaint sought a permanent injunction that the cooperative’s board permit plaintiffs to increase the electrical service to their apartment to 300 amps. It also claimed the alteration agreement was unenforceable because of alleged misrepresentations made by defendant. The court granted defendant’s motion for summary judgment and dismissed the complaint. It held that the board’s decision not to permit the increased electrical service was not in bad faith and, thus, protected from judicial scrutiny by the Business Judgment Rule. The court further found that plaintiffs admitted they failed to read the alteration agreement they signed and because, by signing, they are presumed to know the contract’s terms, their claim is without merit. The court also upheld the liquidated damages provision in the alteration agreement that required plaintiffs to pay a penalty for not completing their alteration within 120 days from the date it was commenced.
36. Gurney’s Inn Resort & Spa Ltd. v. Benjamin, U.S. District Court, Eastern District, July 31, 2012 – Plaintiff sought a declaratory judgment to determine the respective rights of members of its board concerning which shareholders, of the two classes of shares outstanding, have the right to control the board. Plaintiff filed a motion for summary judgment, which was granted by the court. In its decision, the court held that plaintiff’s organizational documents, when read together, provide, unambiguously, that each board member has one, equal vote on all corporate matters.
37. Taylor v. Harbour Pointe Homeowners Assoc., U.S. Court of Appeals, Second Circuit, August 6, 2012 – Plaintiff sued her homeowners association and a board member alleging their failure to accommodate her under the Fair Housing Act based on claims that defendants trespassed on her property in order to clean up her terrace. Specifically, plaintiff alleged that defendants knew she was clinically depressed and that the cleaning would compromised her emotional state. The district court dismissed the complaint, but denied defendants’ claim for attorneys’ fees. On appeal, the court of appeals dismissed plaintiff’s appeal because she failed to comply with Rule 28 of the Federal Rules of Appellate Procedure and Local Rule 28.1, in that plaintiff’s appellant brief contained no jurisdictional statement or standard of review. The Second Circuit also granted defendants attorneys’ fees, holding that plaintiff, as a licensed attorney, should have known her case had no merit but, nevertheless, decided to pursue it.
38. Fernandez v. Akam Assocs., Inc., et al., Supreme Court, New York County, August 6, 2012 – Plaintiffs, out-of-possession owners of a condominium unit, sued the condominium and its managing agent for being subject to a moving-in fee and late fees in connection with their leasing of their unit. Plaintiffs claim that the fees were imposed on them arbitrarily and capriciously, and that the repayment options they were given for their failure to timely pay common charges differed from the options offered to other owners owing similar charges. Defendants filed a motion for summary judgment to dismiss the complaint. The court granted the motion holding that the complaint pled no facts that the Board acted outside the scope of its authority and the board’s actions were authorized by the condominium’s by-laws and house rules. The remaining allegations of discrimination were found to be conclusory.
39. Town Tennis Member Club, Inc. v. Plaza 400 Owners Corp., Supreme Court, New York County, August 17, 2012 – Plaintiff operates a tennis club on the roof of an existing garage that it leases from defendant. Plaintiff sued defendant alleging defendant’s renovation work performed at the adjacent building caused construction debris to fall onto the tennis club, causing damage, and that defendant also impermissibly stored construction materials on the garage rooftop. Plaintiff and defendant disputed whether the lease permitted defendant to enter plaintiff’s premises for the purpose of making repairs/renovations and whether, under the terms of the lease, plaintiff waived its right to seek damages against defendant. The court held that plaintiff’s causes of action for nuisance and trespass were intentional torts and, therefore, any waiver of the right to seek damages in the lease is unenforceable as against public policy. The court further found that a provision in the lease requiring defendant to maintain insurance does not act as such a waiver or a bar to plaintiff’s action.
40. Board of Managers of Marbury Club Condo. v. Marbury Corners, LLC, Appellate Division, Second Department, August 22, 2012 – Plaintiff sued for a declaratory judgment that a certain promissory note was unenforceable and moved for summary judgment on its complaint. The second department affirmed the trial court’s grant of plaintiff’s motion, holding that the subject promissory note was made in violation of Real Property Law § 339-jj(1).
41. Board of Mgrs. of The Heywood v. Wozencraft, Supreme Court, New York County, September 5, 2012 – Plaintiff sued defendant for failing to pay common charges on a condominium unit. Defendant asserted a counterclaim for a judgment declaring null and void plaintiff’s policy of denying certain services to unit owners who fail to pay their common charges. The court upheld the policy, which applied only to nonessential services, and found the policy not discriminatory because it applied to all nonpaying unit owners. However, the court denied plaintiff’s motion for summary judgment as to defendant’s counterclaim for breach of fiduciary duty, holding that even though defendant did not deny that he owed outstanding common charges, he raised a triable issue of fact as to whether plaintiff made physical threats to defendant, accused him of unauthorized subletting, and failed to deliver important deliveries to him, such as mortgage notices, all of which the court deemed non-conclusory allegations of breach of fiduciary duty.
42. Board of Mgrs. of 33-44 82nd St. Condo. v. Roman, Supreme Court, Queens County, September 5, 2012 – Plaintiff commenced this action to foreclose on a lien against defendants’ condominium unit for unpaid common charges. Defendants moved to dismiss the complaint and cancel the notice of pendency filed with the lien on the ground that the notice of lien is invalid because it was merely “acknowledged” and not duly verified, as required by RPAPL § 339-aa, in that there is no jurat or signature of the officer who allegedly administered the oath to the president of the condominium association. The court denied defendants’ motion, holding that although the verification on the notice of lien did not contain the precise wording “sworn to before me,” there is no specific form of oath required in New York other than that it be calculated to awaken the conscience and impress the mind of the person taking it in accordance with their religious beliefs. The court found that the verification here met such requirements.
43. T-Mobile Northeast LLC v. Town of Islip, et ano., U.S. District Court, Eastern District of New York, September 21, 2012 – Plaintiff telecommunications carrier alleged that defendants denied its request for a special use permit to construct a public utility wireless telecommunication facility in violation of the Telecommunications Act of 1996 (the “TCA”) and Article 78 of the CPLR. Plaintiff claimed that due to a service gap within the Town of Islip, it needed to build a new facility on the grounds of a Girls Scouts camp and close to a nature preserve. After a public hearing and numerous document submissions by plaintiff and members of the community, defendants denied plaintiff’s application to build the facility. The court found that the denial of plaintiff’s application did not violate the TCA because it was supported by substantial evidence on the legitimate grounds of aesthetic concerns and plaintiff’s failure to establish a need for coverage in the relevant area. Based the same findings that defendants had not violated the TCA, the court also found that defendants’ had not violated Article 78 in that their decision was supported by substantial evidence and was not arbitrary and capricious.
44. Trump Vil. Sect. 3, Inc. v. City of N.Y., Appellate Division, Second Department, October 3, 2012 – Plaintiff, a former Mitchell-Lama housing corporation, by vote of its shareholders, terminated its participation in the Mitchell-Lama program after paying off its mortgage loan, and reconstituted itself as a corporation under the BCL by amending its certificate of incorporation. Although plaintiff amended its certificate of incorporation to remove all references to the PHFL, under which Mitchell-Lama housing corporations are governed, plaintiff did not change the number and names of its shareholders, the number of shares owned by each shareholder, and its tax identification number. The New York City Department of Finance assessed plaintiff a real estate transfer tax based on its reconstitution, claiming that the transaction qualified as a conveyance of underlying real property. Plaintiff commenced this action seeking a declaratory judgment that the transfer tax applies only to transfers and conveyances of real property, not reconstitutions under the Mitchell-Lama program. In holding that plaintiff was not subject to the transfer tax, the court rejected defendant’s argument that the amended certificate of incorporation constituted a “deed” within the meaning of NYC Admin. Code § 11-2102(a), which provides for a transfer tax on each deed at the time of delivery by a grantor to a grantee when the consideration is real property. The court further stated that the Code exempts deeds that merely effect a change of identity or form of ownership to the extent the beneficial ownership of the real property and economic interest therein remains the same. Accordingly, the court found that plaintiff was covered under this exemption.
45. Razzanno v. Woodstock Owners Corp., Supreme Court, New York County, October 5, 2012 – Plaintiff, a shareholder of a cooperative apartment corporation, sued the cooperative for breach of contract and breach of fiduciary duty claiming that the cooperative improperly refused to permit the plaintiff to sublease her apartment. Although the cooperative had ratified a policy in 2002 that no new shareholder may sublet their apartment, and even though the plaintiff acknowledged in writing that she was bound by this policy, the plaintiff nevertheless pursued her claim alleging that, during her board interview, she informed the board’s co-president that she may need to sublet her apartment due to a temporary relocation for work and that the co-president responded that the no-sublet policy was flexible if the plaintiff suffered a financial hardship due to unemployment. The Court dismissed the plaintiff’s complaint on the ground that the documentary evidence conclusively refuted her claim that the no-sublet policy was inapplicable to her. It also held that the Business Judgment Rule shielded from judicial review the tort claims against the board.
46. Cave v. Riverbend Homeowners Assoc., Inc., Appellate Division, Second Department, October 10, 2012 – Plaintiff, an owner of a condominium apartment unit, sued the homeowners association seeking a declaratory judgment that certain fines and fees imposed on her are null and void. The Court found that, pursuant to the condominium by-laws, the board has broad authority to adopt rules concerning the use of the units and the common elements and to levy fines for violations of those rules. The Court held that the board made a prima facie showing that the board’s actions in amending the by-laws concerning the leasing of units, parking, and pet ownership were within the scope of its authority and taken in good faith. It further held that the by-laws authorized the assessment of late fees for unpaid common charges. Accordingly, the plaintiff’s complaint was properly dismissed by the lower court.
47. Baker v. 40 East 80 Apt. Corp., Supreme Court, New York County, October 10, 2012 – Plaintiffs are owners of shares of a cooperative apartment corporation allocated to a penthouse apartment in the building. They sued the cooperative and its managing agent for damages based on water infiltration into their apartment that caused mold. The complaint alleged, among other things, that plaintiff had notified the cooperative and its managing agent several times about the water infiltration, but they had failed to remediate the mold and failed to repair the defective condition causing the leaks. The managing agent moved for summary judgment to dismiss the causes of action against it for gross negligence as well as the claims for relief in the form of punitive damages, an injunction, and a declaratory judgment. The Court found that the managing agent had hired several experts between 2004 and 2008 to perform work to curb the leaks and, thus, it cannot be said that the managing agent failed to exercise even slight care or slight diligence to respond to plaintiffs’ complaints that would evidence gross negligence. The Court dismissed the claim for punitive damages holding that there was no evidence the managing agent intentionally or willfully disregarded the plaintiffs’ rights. The Court also dismissed the claims for injunctive and declaratory relief as moot because the managing agent no longer managed the property at the time of the Court’s decision. The cooperative also moved for summary judgment dismissing the causes of action asserted against it. The Court denied the cooperative’ motion as to the negligence claim, holding that it is not duplicative of the contract claim because it relates to property damage arising from the cooperative’s breach of its statutory duties to maintain the premises in good repair and to keep the roof drainage system in working order. However, the Court dismissed the causes of action for gross negligence and breach of fiduciary duty holding, respectively, that the cooperative’s conduct did not smack of intentional wrongdoing and that a corporation owes no fiduciary duty to its shareholders. The Court also dismissed the causes of action for breach of the implied covenant of good faith and fair dealing and for constructive eviction as duplicative of the breach of contract cause of action. Finally, the Court denied dismissal of the claims for injunctive and declaratory relief against the cooperative on the ground that the plaintiffs had no adequate remedy at law as they were not allowed to make the repairs to the roof terraces. The claim for punitive damages, however, was dismissed.
48. Hemmings v. Ivy League Apt Corp., Supreme Court, New York County, October 20, 2012 – Plaintiffs, a number of shareholders in a cooperative apartment corporation, sued the sponsor of the building’s conversion to a cooperative and the cooperative corporation itself alleging that, at a board meeting, the defendants wrongfully approved issuance of shares of the corporation to the sponsor, which shares would be allocated to the professional apartment in the building. Specifically, at the time of the conversion in 1986, the offering plan provided that the one professional apartment would have shares designated, but not allocated, to it and would be leased to the sponsor for a period of 25 years. Upon expiration of the 25-year lease, the coop’s board, which still was controlled by the sponsor, passed resolutions that issued shares to the sponsor and authorized performance of work to the professional apartment to convert it to residential use. The plaintiffs filed a motion to disqualify the attorney representing the defendants in the action on the ground that he participated at the board meeting and drafted the resolutions and, thus, is a necessary witness. The Court found that the attorney at issue would not be serving as the “advocate before the tribunal” for the defendants, but rather a different attorney from the same firm would be representing the defendants in court. The Court further found that even if the attorney at issue was serving as an advocate, he would not be deemed a necessary witness because there were nine other individuals at the board meeting in question and the plaintiffs are also not contesting the accuracy of the minutes of the meeting. The Court also rejected the plaintiff’s argument that if the attorney at issue is called to testify, his testimony will be prejudicial to his clients.
49. Board of Managers of 255 Hudson Condo. v. Hudson St. Assocs., LLC, Supreme Court, New York County, October 22, 2012 – Plaintiff board sued the sponsor, architect, and engineer who were responsible for designing and constructing its condominium building. The complaint asserted causes of action for breach of contract, breach of express warranty, and negligence. Some of the defendants moved to dismiss the complaint. The court dismissed as time-barred the claims against the architect and engineer on the ground that the action was filed more than three years from the date that they completed their work at the building. In so holding, the court rejected plaintiff’s argument that the statute of limitations accrued on the date that the sponsor transferred control of the board to the unit owners. The court also dismissed the cause of action for breach of contract against the design professionals holding that plaintiff merely was an incidental beneficiary of their contracts with the sponsor. The court further found that there was no privity of contract between plaintiff and the general contractor for the project.
50. Board of Managers of Marbury Club Condo. v. Marbury Corners, LLC, Supreme Court, County of Westchester, November 8, 2012 – Plaintiff sued for a declaratory judgment that a certain promissory note was unenforceable. The second department had previously affirmed the trial court’s ruling that the subject promissory note was made in violation of Real Property Law § 339-jj(1) and therefore unenforceable. Plaintiff’s motion for summary judgment on its damages claim for amounts already paid to defendant on the unenforceable promissory note was then heard by the trial court. The court denied that branch of plaintiff’s motion, holding that plaintiff did not satisfy its burden of proof that payments on the note were made by plaintiff, as opposed to by defendant, the sponsor, who controlled plaintiff at the time the alleged payments were made. In particular, the court stated that “Plaintiff has not provided any information at all as when it ceased to be under the Sponsor’s control and when money other than the Sponsor’s began to flow into Plaintiff’s coffers.” The Court, however, granted plaintiff’s motion for summary judgment dismissing defendant’s counterclaim for unjust enrichment based on the conveyance of the parking garage to plaintiff as consideration for payment of the unenforceable promissory note. The Court dismissed this counterclaim for the substantive reason that, pursuant to the Offering Plan’s terms, the garage was “to be part of the common elements held by Plaintiff and in which all unit owners have an undivided interest.” Accordingly, plaintiff could not have been unjustly enriched by the receipt of the garage to which it already was entitled.
51. Salzberg v. Brooks, Supreme Court, New York County, November 13, 2012 – Plaintiffs sued defendant for breach of a contract to purchase a cooperative apartment and sought return of their down payment. The contract stated that plaintiffs would not apply for financing in connection with the sale. However, plaintiffs notified defendant they were applying for a loan to partially finance the purchase of the apartment. When the cooperative board denied their application, plaintiffs sought return of their down payment, which was refused by defendant who claimed the down payment was liquidated damages for plaintiffs’ attempt to finance. Plaintiffs argued that defendant failed to properly notify them of the claimed breach and, thus, waived his right to such liquidated damages. The court held that while plaintiffs did breach the contract, it was not up to defendant to determine that plaintiffs’ breach was incurable and deny them an opportunity to cure. Accordingly, the court granted plaintiffs’ motion for summary judgment based on defendant’s failure to notify plaintiffs of their breach and provide them with a cure period.
52. East Midtown Plaza Housing Company, Inc. v. Cuomo, et al., New York Court of Appeals, November 19, 2012 – In this Article 78 proceeding, plaintiff sought to withdraw from New York’s Mitchell-Lama program -- which offers financial incentives to housing companies to develop low-income housing -- and become a private cooperative apartment complex. Plaintiff brought this proceeding to compel the Attorney General (“AG”) to accept an amendment to its offering plan declaring its privatization plan effective, and to direct the New York City Department of Housing Preservation and Development (“HPD”) to recognize that the privatization plan achieved the necessary two-thirds shareholder vote under a one-vote-per-share formula. Plaintiff also sought a declaration that the AG lacked jurisdiction over Plaintiff’s efforts to exit the Mitchell-Lama program on the theory that the Martin Act did not apply to the transaction. The Court of Appeals ruled against plaintiff and affirmed the dismissal of the proceeding. The Court found that the Martin Act applies to the proposed privatization of a Mitchell-Lama cooperative because the privatization would substantially change the nature of the cooperative shareholders’ interests and amount to an “offering or sale” of securities under the Martin Act. The court also found that although the BCL establishes a default rule one-vote-per-share, the statute allows corporations to adopt a different vote-count methodology in their certificates of incorporation. Here, the cooperative properly adopted a different methodology in its certificate of incorporation, namely a one-vote-per-household formula. However, because the privatization plan did not pass under this formula, the AG properly refused to accept the amendment declaring the plan effective.
53. The Bd. of Managers of the Lore Condo. v. Gaetano, Supreme Court, New York County, November 29, 2012 – Plaintiff board sued defendants, the principals of the sponsor of plaintiff’s condominium building, for breach of contract, fraud, and negligence, among other causes of action, arising out of misrepresentations they made in the condominium’s offering plan that the building would be constructed in compliance with the building code. The complaint asserted that the building was actually constructed with a number of defects. The court found that the architect’s certification in the offering plan, which was executed by one of the defendants, clearly indicated that he disclaimed any duty to ensure that the condominium was constructed in accordance with the architect’s report, which contained the alleged misrepresentations. Thus, the court held that the defendants could not be liable for negligent construction of the condominium. The court also dismissed the fraud claim against defendant, in his capacity as the architect, as “preempted” by the Martin Act because the claim was based on representations in the architect’s report and certification, which were required to be filed by the New York State Attorney General’s implementing regulations. The court found that the defendants could be liable for breach of the offering plan’s requirements that the sponsor obtain a permanent certificate of occupancy and common charges on unsold units. As to the branch of the breach of contract claim that the condominium building and its units were defectively constructed, the court found that even though they were sold “as is” as described in the offering plan, a factual issue exists as to whether their construction was consistent with the representations in the offering plan.
54. Taylor v. Harbour Pointe Homeowners Assoc., U.S. District Court, Western District of New York, December 11, 2012 – Plaintiff sued her homeowners association and a board member alleging their failure to accommodate her under the Fair Housing Act based on claims that defendants trespassed on her property in order to clean up her terrace. Specifically, plaintiff alleged that defendants knew she was clinically depressed and that the cleaning would compromise her emotional state. In a prior order, the district court dismissed the complaint, but denied defendants’ claim for attorneys’ fees. On appeal, the Second Circuit reversed the district court’s holding and awarded defendants attorneys’ fees, holding that plaintiff, as a licensed attorney, should have known her case had no merit but, nevertheless, decided to pursue it. The Second Circuit remanded the case back to the district court for a hearing on attorneys’ fees. After a hearing was conducted, the district court ordered plaintiff to pay $107,322 in attorneys’ fees and, in so ordering, rejected plaintiff’s argument that if her case was so baseless it should have been dismissed at the outset.
55. Valentini v. 326 East 30th Street Owners, Inc., Supreme Court, New York County, December 11, 2012 – Plaintiff commenced the action against her cooperative, its Board of Directors, and certain shareholders for breach of the warranty of habitability, among other claims, as a result of structural damage to the building’s roof that caused water infiltration into plaintiff’s apartment. Plaintiff sought to have defendants repair the damage or give plaintiff permission to repair the damage at defendants’ cost. Because plaintiff vacated her apartment and ceased paying maintenance, the cooperative commenced a separate non-payment proceeding against her. In the main action, plaintiff moved for an injunction enjoining the defendants from refusing to consent to making the repairs or allowing plaintiff to make the repairs. That motion was denied. Plaintiff then moved for leave to amend her complaint to add causes of action for constructive eviction, negligence, and attorneys’ fees. Defendants argued, relying on a one-year lease plaintiff signed to rent another apartment, that plaintiff moved out of her apartment four months before the roof damage occurred and, therefore, intended to abandon her apartment for reasons other than the water damage. The court granted plaintiff’s motion for leave to amend, however, finding that the documentary evidence, consisting of the lease that was signed before the damage occurred, did not utterly refute the factual allegations in plaintiff’s affidavit that she had only temporarily moved out of her apartment because she was having marital issues with her husband and intended to move back in.
56. Board of Managers of the Britton Condo. v. C.H.P.Y. Realty Associates, Appellate Division, Second Department, December 19, 2012 – Plaintiff-board commenced this action against the defendant, an owner of commercial units in the condominium building, for a judgment declaring that plaintiff has the right to enter one of those units for the purpose of accessing certain water pipes in order to alter and repair the same. The Supreme Court granted plaintiff’s motion for a preliminary injunction directing the defendant to grant plaintiff access to the subject unit for the purpose of making the required alterations and repairs. On appeal, the Second Department held that although plaintiff may ultimately be successful in this action, the Supreme Court’s preliminary injunction order effectively altered the status quo and granted plaintiff the exact relief which it sought in the complaint. In addition, it found that plaintiff failed to demonstrate irreparable harm in the absence of the injunction. Accordingly, the Second Department held that the preliminary injunction motion should have been denied.
57. Bacolitsas v. 86th and 3rd Owner, LLC, U.S. Court of Appeals for the Second Circuit,, December 19, 2012 – Plaintiffs sued the developer of a luxury condominium with whom they had entered into purchase agreements to purchase condominium units for revocation of those purchase agreements under Section 1703(d) of the Interstate Land Sales Full Disclosure Act (“ILSA”). They claimed the purchase agreement did not contain a description of the lot which makes such lot clearly identifiable and which is in a form acceptable for recording. The Second Circurcut reversed the District Court’s granting of plaintiffs’ motion for summary judgment and held that Section 1703(d)(1) requires the description, and not the agreement itself, be “in a form acceptable for recording” and that the description at issue satisfied this requirement of ILSA. The basis for the Second Circuit’s holding was, among other reasons, that ILSA seeks to prevent false and deceptive practices in the sale and marketing of undeveloped land and requiring the agreement itself, as opposed to the description, to be in a form acceptable for recording does not further this intended purpose of ILSA.
58. RiverBay v. New York City Commission on Human Rights, Supreme Court, Bronx County, December 20, 2012 – Plaintiff, a handicapped resident of Co-op City, sued the cooperative alleging that the front entrance door to the building was not handicapped accessible. The parties settled the action for a $16,000 settlement payment to the plaintiff and a $5,000 settlement payment to New York City. The settlement also provided that the cooperative would make the entrance door handicapped accessible. Although the building contained a side door that was handicapped accessible, the plaintiff complained to the Commission on Human Rights that using the side door made him feel like a second-class citizen. The Supreme Court agreed with the Commission’s finding that the cooperative and its managing agent discriminated against the plaintiff, but held that the amount of the award and fine issued by the Commission was excessive.
59. 405 Condo. Associates LLC v. Greenwich Ins. Co., U.S. District Court, Southern District of New York, December 24, 2012 – Plaintiff commenced the action against its insurer for indemnification for losses from Hurricane Irene. Defendant move for summary judgment dismissing the complaint and to preclude the testimony of plaintiff’s expert. Defendant’s investigation had revealed that the damage to plaintiff’s building resulted exclusively from seepage or wind-driven rain and that it did not first sustain damage by a covered loss under the policy, such as wind damage. Plaintiff argued in opposition that both the exterior and interior damage resulted from gusts of wind. The court granted defendant’s motion to preclude expert testimony on the grounds that it was speculative, contained no methodology for differentiating wind damage caused by the Hurricane from prior damage or rain damage alone, and plaintiff’s expert did not examine the damage until eight months after it occurred. The court however denied defendant’s summary judgment motion holding that even without the testimony of plaintiff’s expert it has raised a triable issue of fact as to whether the cause of the damage is a covered event based on documentary evidence in the form of invoices for repairs and the testimony of plaintiff’s fact witness.
60. Katz v. Third Colony Corp., Appellate Division, First Department, December 27, 2012 – Plaintiffs, former shareholders of defendant-cooperative, sued the cooperative over a flip tax they paid under protest upon their sale of their shares of the cooperative. They repeatedly alleged in the complaint that the cooperative’s assessment of the flip tax was an “ultra vires” act. However, upon realizing their claim as it stood was not viable, they attempted to characterize their claim before the First Department as one for money damages for the amount of the flip tax paid that plaintiffs alleged was wrongfully assessed. In affirming the Supreme Court’s granting of the cooperative’s motion for summary judgment, the First Department held that plaintiffs’ claim, despite their characterization of it, is barred by the statute of limitations. Specifically, the complaint alleged that the ultra vires acts occurred in 1997 and 2008 when the by-laws and proprietary lease were amended to, among other things, institute a 2% flip tax. Plaintiffs were therefore required to prosecute their claim by way of an Article 78 proceeding, pursuant to CPLR §§ 217(1), 7802(2), and 7803(2), within four months of the alleged ultra vires act, which they did not do.
61. Junior v. The City of New York, Hous. Preservation and Dev. Corp. (HPD), U.S. District Court, Southern District of New York, January 17, 2013 – This action arises out of the conversion of a Mitchell-Lama housing development to unsubsidized, market-rate housing. Plaintiffs, tenants who hold Section 8 enhanced vouchers, commenced the action alleging illegality in the rent recertification process claiming that it resulted in increased rents. Plaintiffs also claimed that HPD violated their due process rights by not conducting a hearing into the recertifications, that it did not inform them of the consequences of their voucher participation, and that defendant Department of Housing and Urban Development (HUD) did not supervise the program’s administration. The court granted HUD’s motion to dismiss for lack of subject matter jurisdiction based on sovereign immunity. It also granted HPD’s summary judgment motion holding that HPD did not violate federal regulations for the Section 8 program’s implementation and that plaintiffs failed to show entitlement to a protected property interest required to prove a due process violation. In so holding, the court found that plaintiffs’ assistance payments were not terminated and the statute governing the voucher program created a permissible ceiling on tenants’ rental shares, which HPD followed. HPD also followed HUD’s directive setting forth the formula for calculating tenants’ shares of rent. Finally, plaintiffs were unable to demonstrate how non-voucher tenants’ rents were relevant to their shares as voucher holders.
62. Latora v. Ferreira, Appellate Division, Second Department, January 23, 2013 – Plaintiff had commenced an action for specific performance of a contract for the sale of real property and was awarded a judgment by the trial court after a bench trial. On appeal, the Second Department reversed and dismissed the cause of action for specific performance. It held that plaintiff’s attorney never scheduled a specific date for the closing and, thus, it cannot be concluded that the seller willfully defaulted or was unable to tender his performance. The Second Department further held that plaintiff’s contention that defendant anticipatorily repudiated the contract by refusing to close title was not supported by the record, which indicated that the parties conducted extensive negotiations on the amount of a possible adjustment for open violations on the property.
63. Langston v. Gonzalez, Supreme Court of the State of New York, Kings County, February 4, 2013 – Plaintiff sued defendants for personal injuries he sustained when he tripped and fell over metal cellar doors, which were closed at the time, on a sidewalk located appurtenant to defendant Gonzalez’s grocery store, which is located in the commercial space in defendant Long’s apartment building. Gonzalez moved for summary judgment dismissing the complaint and cross-claims of long for indemnification. Long also moved for summary judgment dismissing the complaint or, alternatively, for a judgment on its cross-claims. The court dismissed the complaint as against Gonzalez holding that the NYC Administrative Code does not impose any duty of care on Gonzalez – a commercial tenant and not an owner of the property – to plaintiff and the lease between Long and Gonzalez does not create a duty that runs from Gonzalez to plaintiff, a pedestrian. The court also dismissed Long’s cross-claims for contractual indemnification because Long failed to show he was free from negligence and the lease provision requiring indemnification under any circumstance, including for Long’s own negligence, was unenforceable under GBL § 5-321. In addition, Long was unable to establish that he was an out-of-possession owner that would have formed a basis for indemnification from Gonzalez if Long ultimately had not been found to be negligent.
64. Alphonso v. Commissioner of Internal Revenue, U.S. Court of Appeals, Second Circuit, February 6, 2013 – Plaintiff, a shareholder of a cooperative apartment housing corporation, brought a petition for a redetermination of a deficiency determination by defendant based on defendant’s rejection of plaintiff’s claim of a casualty loss deduction for her share of the cost of repairs associated with the collapse of a retaining wall on the cooperative’s property. The tax court had granted defendant’s motion to dismiss the petition on the basis that plaintiff held no property interest in the cooperative’s grounds sufficient to entitle her to the claimed deduction. In reversing the determination of the tax court, the Second Circuit held that plaintiff had a property interest in the cooperative’s land pursuant to her proprietary lease. In particular, plaintiff had the exclusive right to reside in the apartment represented by her shares in the cooperative and the proprietary lease allowed her to use the cooperative’s grounds. Further, the proprietary lease gave a defined group of persons (i.e., building residents such as plaintiff) the right to use the cooperative’s property. Accordingly, as held by the Second Circuit, plaintiff’s right to use the grounds, shared with other residents and their respective guests but not anyone else, was a property interest in the grounds.
65. Board of Managers of The South Star v. Grishanova, Supreme Court of the State of New York, County of New York, February 7, 2013 and March 8, 2013 – Plaintiff, the board of managers of a condominium building, commencing this action and simultaneously moved for a TRO and preliminary injunction enjoining defendant from engaging in the short-term rental of her condominium unit in plaintiff’s building in violation of the condominium’s by-laws and New York Multiple Dwelling Law. After the Court granted the TRO pending a hearing on the preliminary injunction motion, plaintiff discovered that defendant was violating the TRO by continuing to rent her unit unlawfully and not using the unit as her residence. Thus, plaintiff filed a motion to hold defendant in contempt of court for violating the TRO. In support of the contempt motion, plaintiff submitted video footage, a log book documenting defendant’s activity at the building, and affidavits of six eye-witnesses establishing that after the TRO went into effect transient tenants continued to use defendant’s unit as their residence without defendant also residing in the unit. In opposition, defendant submitted a deed that purported to sell the unit to one of the transient tenants and to defendant as joint unit owners, but the deed was voided by plaintiff because defendant failed to offer plaintiff a right of first refusal as required. After a contempt hearing was conducted, the Court, in its February 7, 2013 Order, granted the contempt motion ordering defendant to pay plaintiff a $250 fine for every day defendant was evidenced to have violated the TRO and pay plaintiff’s attorneys’ fees in connection with the contempt motion. The Court further permitted plaintiff to make an ex parte application for an order of commitment against defendant if she did not pay the fine and purge her contempt within twenty days. In its March 8, 2013 Order, the Court granted plaintiff’s preliminary injunction motion based upon the evidence of defendant’s continued use of her unit for short-term rentals. It also denied defendant’s motion to vacate her default and/or for leave to reargue and/or renew the contempt. As to the branch of the motion to vacate the default, the Court found that there was no default since defendant submitted opposition to the contempt motion and counsel appeared on her behalf at the contempt hearing. As to the branch of the motion for leave to reargue and/or renew, although the court granted reargument, upon reargument it adhered to its earlier determination on the ground that the Court did not misapprehend or overlook any facts or law in granting the contempt motion, and that defendant presented no new facts to warrant renewal.
66. Elias and Senbahar v. Orsid Realty Corp. and 75 East End Owners, Inc., Supreme Court of the State of New York, County of New York, February 8, 2013 – Plaintiffs, the holders of unsold shares in defendant cooperative corporation, sought a declaratory judgment that sales of their shares are not subject to a “Financing Rule,” which automatically disqualifies buyers who propose to finance more than two-thirds of the purchase price, adopted by the Cooperative and defendant managing agent. In addition, plaintiffs sought to prohibit the managing agent from applying financial restrictions to the sale of unsold shares. Defendants moved for summary judgment to dismiss plaintiffs’ claims and plaintiffs cross-moved for summary judgment on their claims. Defendants argued that they have permissibly applied the Financing Rule and may continue to apply it. Nothing in the cooperative’s Proprietary Lease prohibits the managing agent from adopting policies consistent with the cooperative’s policies, nor does it limit the managing agent’s approval process. However, the Proprietary Lease does require that the managing agent not unreasonably withhold its consent to the sales of unsold shares. Defendants argued that the Financing Rule is justified on the premise that the Rule protects the cooperative’s interest in the financial stability of its building. The Court granted plaintiff’s cross-motion for summary judgment to the extent of awarding a declaratory judgment and permanently enjoining Defendants from applying the Financing Rule. The Court opined that, although the disapproval of financially weak buyers is rationally and legitimately related to the cooperative’s interests, insofar as the Financing Rule automatically disqualifies buyers who propose to finance more than two-thirds of the purchase price, the Rule results in an unreasonable withholding of consent in violation of the Proprietary Lease.
67. State Bank of India v. Gagliani, Civil Court of the City of New York, County of New York, February 8, 2013 – Petitioner commenced this proceeding to recover possession of a cooperative apartment from respondents. Petitioner had obtained the shares to the subject apartment following respondents’ default on a loan. Pursuant to the foreclosure and judgment, respondents’ cooperative stock was sold and a new stock certificate and a new proprietary lease were issued to the petitioner in petitioner’s name. Despite obtaining the cooperative shares and proprietary lease, respondents remained in possession of the apartment. Petitioner commenced this holdover proceeding to obtain possession by serving a “Notice of Termination of License and/or Notice to Quit.” When respondents held over after expiration of the Notice to Quit, petitioner serve respondents a Notice of Petition and Petition, alleging that respondents had no current written lease and any license that may have existed was revoked by the Notice of Termination of Licenses/ Notice to Quit. At no time before or during the trial did respondents move to file an answer to the petition. Petitioner proved by a preponderance of the evidence that it is the owner of the cooperative shares and proprietary lease of the subject premises and that respondents are licensees whose license terminated upon the expiration of the Notice to Terminate License/Notice to Quit. However, respondents argued that the petition should be dismissed due to “irregularities” in the Notice to Terminate License/Notice to Quit. Specifically, respondents claimed that the Notice was facially deficient in that it did not detail all of the circumstances leading to respondents’ loss of tenancy and ownership rights, that it was ambiguous because petitioner stated that respondents had a license to occupy the premises “upon information and belief” and petitioner failed to introduce into evidence an assignment which was referenced to in the Notice. In addition, respondents argued that petitioner incorrectly based the proceeding upon RPAPL § 713(7), when it should have been based on RPAPL § 713(1). Petitioner argued, and the Court agreed, that by failing to file and serve an answer or include a defense in their pre-trial CPLR 3211(a) motion, respondents waived their right to challenge the predicate Notice to Terminate License/Notice to Quit. Furthermore, the Court opined that even if respondents hadn’t waived their right to challenge the Notice to Terminate License/Notice to Quit, the irregularities in the notice alleged by respondents do not rise to the level of deficiencies or defects that would render the predicate notice invalid.
68. Gentile v. Flyer, Supreme Court of the State of New York, County of Bronx, February 19, 2013 – Plaintiff commenced this action derivatively as a shareholder of nominal defendant cooperative to recover funds allegedly lost due to defendant Flyer’s alleged breach of fiduciary duty as a member of the cooperative’s board of directors by approving the lease and eventual purchase of overhead storage bins mounted in the building garage that were designed and manufactured by Flyer through an entity named Tiger Lease LLC. The cooperative and Flyer moved for summary judgment dismissing the complaint on the grounds that the cooperative excluded Flyer in its determination on how to address plaintiff’s claims of self-dealing against him and that the cooperative suffered no damages, but rather made a profit, as a result of the installation of the bins by renting them out to shareholders of the building. The Court granted both summary judgment motions holding that plaintiff failed to present any evidence that the cooperative suffered damages or of a breach of fiduciary duty in light of the Business Judgment Rule’s protections.
69. Romero-Mitchell v. NYC Department of Housing Preservation and Development, Supreme Court of the State of New York, County of New York, March 5, 2013 – Petitioner commenced this Article 78 proceeding to annul an HPD Order denying her succession rights. Petitioner claimed, among other things, that HPD erred in imposing on her the burden of proving succession rights, including the required co-residency, since petitioner is a named shareholder on the original stock certificate and an initial member of the household approved by HPD from its waiting list. The apartment at issue, a Mitchell-Lama cooperative, was originally occupied by petitioner and her mother. A stock certificate was issued by the cooperative certifying petitioner and her mother owned shares in the housing company “as joint tenants with right of survivorship and not as tenants in common.” Petitioner argued that the burden should have been on HPD to prove non-primary residence or some other ground for terminating documented ownership rights. HPD argued that ownership does not guarantee occupancy rights and it was therefore petitioner’s burden to prove she had occupied the apartment as her primary residence with her mother for the two years preceding her mother’s death. The Court agreed with petitioner and annulled the Order. The Court opined that HPD improperly placed the burden to prove succession rights on petitioner. As a shareholder and approved occupant of a Mitchell-Lama apartment, she is entitled to the procedural safeguard of a hearing, not a succession rights proceeding, before her ownership rights are terminated and she is evicted.
70. Gochberg v. Sovereign Apartments, Inc., Alan Kersh and Paul Bloom, Supreme Court of the State of New York, County of New York, March 8, 2013—Plaintiffs, shareholders of defendant Sovereign Apartments, Inc. (“SAI”), commenced the underlying action against SAI and two members of the board of directors, Alan Kersh and Paul Bloom. Plaintiffs alleged, among other things, a breach of fiduciary duty. Defendants Kersh and Bloom move to dismiss the claim of breach of fiduciary duty because plaintiffs failed to state a cause of action. According to plaintiffs, defendants supplied their apartment with discolored, foul-smelling water with levels of bacteria in excess of legal limits. Plaintiffs brought samples of the water to both Kersh and Bloom to be analyzed. Plaintiffs allege that Kersh and Bloom intentionally misled plaintiffs and withheld the reports as to the water quality and failed to remedy the issue. Plaintiffs assert that the actions of Kersh and Bloomer were taken in their individual capacity. However, the court disagreed. The court found that plaintiffs failed to allege any facts indicating Kersh’s and Bloom’s actions were taken in their individual capacity. Rather, their actions were taken as part of their responsibility as members of the board. Because the business judgment rule protects individual board members’ decisions from judicial scrutiny where the decisions were within the scope of the board members’ authority, plaintiffs failed to state a cause of action for breach of fiduciary duty against Kersh and Bloom for their actions in withholding the reports and for their failure to remedy the water quality issue.
71. Barasch v. Williams Real Estate Co., Inc., Appellate Division, First Department, March 14, 2013—Petitioner, a shareholder and director of respondent Williams entities, commenced this special proceeding to compel respondent to pay the fair value of plaintiff’s shares pursuant to BCL §623. Respondent sold a 65% interest in the business in October 2008. Petitioner objected to this transaction. In connection with the special proceeding, petitioner served a broad discovery demand, including a demand for all communications to or from the transaction counsel, concerning petitioner and the transaction from January 2008 to date. The respondent opposed the motion to compel, arguing that petitioner was not entitled to the attorney-client communications because she was in an adversarial relationship with respondents. The lower court disagreed and held that a director, by dissenting from a corporate transaction, retaining separate counsel and threatening potential legal challenges to block the transaction, does not become adverse to the corporation and does not waive her absolute right to inspect corporate books and records, including attorney-client communications. The First Department disagreed with the lower court’s finding and held that petitioner, suing in her capacity as a shareholder, sought to invade the corporation’s attorney-client privilege, which took place at a time when she was adverse to the corporation, in order to advance her own interest as a shareholder. The First Department further found it evident from the communications between respondent and its attorney that respondent believed petitioner to be hostile. Furthermore, petitioner’s retention of separate counsel demonstrates her belief that respondent’s counsel did not represent her interests as a shareholder. Therefore, the communications sought by petitioner are privileged.
72. Campaniello v. Green Street Holding Corp. and the Board of Directors of Greene Street Holding Corp, Supreme Court of the State of New York, County of New York, March 20, 2013—This action arises out of a notice to cure, which defendants served upon plaintiff. Plaintiff, a commercial tenant-shareholder, sought permission from defendants to sublet the leased premises. Defendants refused consent unless plaintiff agreed to pay a sublet fee, pursuant to an amendment to the coop’s by-laws. Plaintiff signed a written consent to pay the 10% sublet fee. However, plaintiff withheld payment. Plaintiff commenced this action by summons and complaint, asserting five causes of action and seeking various relief, including (1) a declaratory judgment against defendants declaring that the amendment to the by-laws is unauthorized by the BCL under the coop’s certificate of incorporation; (2) a declaratory judgment against defendants declaring that the coop’s lease does not permit the imposition of a sublet fee; and (3) an order enjoining the coop from collecting the sublet fee from plaintiff. Subsequently, plaintiff moved by Order to Show Cause seeking a TRO and a Yellowstone Injunction seeking to enjoin defendants from taking any action to terminate plaintiff’s leasehold or tenancy. Defendants cross-moved for summary judgment. In support of their cross-motion, defendants argued that the amendment to the by-laws imposing a sublet fee is a valid and enforceable. The court agreed with defendants holding that the broad language of the coop’s proprietary lease gave the coop the right to collect and impose a sublet fee even without a shareholder vote. It further found that since the coop’s by-laws permit the board to amend the by-laws without seeking shareholder approval, the by-laws were properly amended and proper notice was given to the shareholders of the intention to impose a sublet fee.
73. Mendez v. Land Investors, Corp., United States District Court, M.D. Florida, March 22, 2013— Plaintiff, a French citizen, purchased 10 lots from defendant in Port Charlotte Subdivision. Plaintiff paid all monies due under the contract. Thereafter, the properties lost substantial value and as a result, plaintiff filed a four count complaint against defendant asserting, among other things, violation of the Interstate Land Sales Full Disclosure Act (“ILSFDA”). Plaintiff asserted that defendant violated ILSFDA by (1) failing to provide a printed property report as required by the statute; (2) failing to notify plaintiff of her statutory two-year right to revoke the contract of sale under the Statute; and (3) failing to provide the requisite disclosure under the Statute. ILSFDA prohibits a developer from selling or leasing a lot unless a printed property report has been furnished to the purchaser or lessee in advance of signing any contract or agreement. Where a property report has not been furnished before executing a contract for sale, such contract may be revoked at the option of the purchaser within two years from the date of signing, and the contract must clearly provide this right. Defendants assert that ILSFDA does not apply because there is no evidence that it used interstate commerce in the transaction, nor is it a developer because it did not sell the lots as a part of a “common promotional plan.” In addition, defendants countered with two affirmative defenses: first, that defendant is exempt from the ISLFDA under the “25 lot exemption,” and second, that plaintiff’s claims are time-barred. The court rejected defendant’s claim that it did not use interstate commerce; plaintiff provided uncontroverted evidence that she utilized the telephone and email communications when communicating with defendant’s agents and a telephone is a facility of interstate commerce. However, the court concluded that there was a genuine issue of material fact with respect to whether or not the lots sold were pursuant to a “common promotional plan,” thus denying plaintiff’s motion for summary judgment. As to defendants’ two affirmative defenses, the court denied summary judgment as to the “25 lot exemption” defense. The court opined that the “25 lot exemption,” which provides a full exemption, is measured from the date of sale and, in order to invoke the exemption, defendants must establish that their method of selling was not adopted for the sole purpose of evading the ILSFDA’s protection. Therefore, the court found that it was without sufficient evidence to determine whether the exemption applied. As to the defense that plaintiff’s claim was time-barred, the court found this defense without merit. Although plaintiff only had two years from the date of the contract to rescind the contract under ILSFDA, plaintiff had three years from the date of the contract to assert an equitable damages claim. Because plaintiff is not attempting to revoke the contract, her claims are not time-barred under the three-year statute of limitation.
74. Bacolitsas v. 86th & 3rd Owner, LLC., United States District Court, S.D.N.Y., April 1, 2013—Defendants moved for an award of attorney fees arising out of an action brought pursuant to the Interstate Land Sales Full Disclosure Act (“ILSFDA”). The case went up to the Second Circuit Court of Appeals, which reversed the lower court’s holding that plaintiffs were entitled to judgment as a matter of law, and remanded with instructions to enter judgment for defendants. The purchase and sales agreement, by which plaintiffs contracted to purchase a condominium from defendants, provided that the purchaser would be obligated to reimburse the sponsor for any legal fees incurred by the sponsor in defending its rights under the contract. The court held that under New York law, an attorneys’ fees provision in a real-estate contract is enforceable and the provision contained in the PSA is enforceable against plaintiffs. Further, the court held that because the case turned on complicated issues of first impression concerning the interpretation and enforcement of ILSFDA, and the extensive experience and expertise of defendants’ counsel, the fee of $577,788.32 was reasonable in light of the time required, difficulty of the issues, level of skill required, and the experience, reputation and ability of counsel.