Aby Rosen suit re: 520 Fifth Avenue.

8/9/2019 Aby Rosen suit re: 520 Fifth Avenue.

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3 ON 21?412010

SUPREME COURTOF THE STATE OFNEW YORKCOUNTYOF NEW YORK

520Fifth Avenue Holdings,LLC

Plaintiff,

-against-

5 16Fifth Avenue LLC,

Defendant.

To the Above NamedDefendant:

5 16 Fifth Avenue,LLCc/o RFR Holding, LLC390 Park AvenueNew York, NewYork 10022

Index No.Purchase Date:

SUMMONS

Plaintiff designate New York Countyas the place of trial.

Thebasisof venue is GPLR6 503.

YOU ARE HEREBY SUMMONEDand required to serve upon plaintiffs undersigned

attorneysan answer to plaintiffs complaint in this action within twenty(20)days after the

service of this summons, exclusive of the day ofservice(or within thirty(30)daysafter the

sewiceis complete if this summons is not personally delivered to you within the State of New

York), and n the case of your failure to appear or answer, judgment will be taken against you by

default for the relief demanded in the complaint.

Dated: New York, New YorkFebruary24,2010

909916-1

Supreme Court Records OnLine Library - page 1 of 14

FILED: NEW YORK COUNTY CLERK 03/31/2010 INDEX NO. 600485/2010YSCEF DOC. NO. 2 RECEIVED NYSCEF: 03/31/2010


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OLSHANGRUNDMANFROMEROSENZWEIG& WOLOSKY LLP

By: ThomasJ. FlemingHowardJ. SmithAttorneys for PlaintiffPark Avenue Tower65 East 55 StreetNewYork, NewYork 10022212.451.2300

9099 6-12



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capitalization of the parties in the Company and pay certain expenses. Plaintiff was paid$4.5

million in cash and an additional $1.5 million was placed in escrow.

13. Subsequently, the Company obtained additional financing from the Lender.In

total, the Lender lent the Company $80,000,000.

Lenders Noticeof Default

14 . On or about July8,2009,the Lender gave the Company notice that it was in

default under its loan agreement with the Lender. Specifically, the Lender notified the Company

that the principal and all unpaid interest wasdue on April30,2009,and payment had not been

made.

15 . The Lender gave the Company ten days to cure such default.

The Essential Costs Call

16. On or about July 31, 2009,Defendant gave Plaintiff noticeof an Essential Costs

Call (the ECC) in the amount of $1,345,448, purportedly to cover essential costs that need to

be Eunded and paid immediately.

17. Defendant claimed that there wasan additional$1,550,000in development and

operating costs not covered by the ECC. Thus, Defendant claimed the Company faced total

expensesof $2,350,000. Defendant asserted that, based on its one-third interest, Plaintiffs

obligation was$775,000. In its notice, Defendant suggested that Plaintiff fund this amount from

the $1.5million held in escrow and offered that it would remit the balance of $725,000 to

Plaintiff and release it from all further obligations. Defendant indicated that it would solely

continue to deal with the Lender and cover any future costs associated with the asset.

18. At the time of the ECC, however, Defendant was already in material breach of the

Agreement. Defendant was obligated but failed to terminate all leases, and to spend up to $10

million per property to secure the complete vacancyof the 516 and 5 18 Properties by July 31

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2008because, without complete vacancy of the properties, their value would be substantially

diminished andthe properties could be unsuitable for development. Defendant, however, did not

secure vacant premises by July31,2008or at any time thereafter. Further, Defendant never

spent all of the $10 million per building it was obligatedto spend to secure the complete vacancy

of the 5 16 and 5 18 Properties. Specifically, Defendant spent only approximately$ 5 million to

vacate both buildings, leaving approximately$15 million unspent.

19. Section 4(c)(ii) of the Agreement provided that Plaintiff had the right to directly

negotiateand enter into agreements on Defendants behalf to secure vacancy of the516and 51 8

Properties. Further, the Agreement provided that Plaintiff could use the approximately

$15,000,000earmarked but unspent money for the purposes of vacating the5 16 and 5 18

Properties.

20. On August 19,2009, Plaintiff notified Defendant in writing that it was in breach

of the agreement.In addition, pursuant to its rights under Section 4(c)(ii) of the Agreement,

Plaintiff had the right to contact information for the current tenants in the event it chose to

exercise its rights under the Agreement to itself obtain vacancyof the properties. Plaintiff

requested this information but Defendanthas refused to provide this information in violation of

the Agreement, further frustrating Plain tif fs right to vacate the premises.

21. In addition, Defendant breachedthe Agreementin otherways. As managingmember of the Company, Defendant was requiredto but failed to furnish Plaintiff with certain

key financial information including i) the financial statements, reports and other information the

Company was required to provide the Lender, including the personal financial statements of Aby

Rosen and Michael Fuchs, ii) the Companys annualand quarterly financial statements and tax

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returns, iii) proposed annual budgets, and iv) certain other reports to members required under the

Agreement.

22. In addition, Plaintiff requested proof that Defendant itself complied with the ECC

and paid the Company its pro rata share of the ECC. Despitethis demand, Defendant has never

provided proof that it contributed its share of the purported ECC.

23.

24.

On August20,2009,Defendant withdrew the ECC.

On September 3,2009, Defendant responded to Plainti ffsAugust 19 letterand

admitted that the 5 16 and518 Properties were still not vacant.

25. On September 14,2009, Defendant issued a new ECCin the amountof $470,000

and demanded that Plaintiff fund one third, or $156,666.67, by October5,2009.

26. On October2,2009,counsel for Plaintiff wrote Defendant and rejected theECC.

The ECC was also defective because,amongother reasons, Defendant had not secured vacancy

of the 516 and 518 Propertiesas required by the Agreement. In addition, Defendant still failed to

provide certain information as required under the Agreement including the tenant contact

information and other financial information that was required to be disclosed to Plaintiff.

Defendant has also failed to provide Plaintiff withanyproof that it complied with the second

purported ECC and contributed its pro rate share.

The Buv/Sell

27. The Agreement provides that if the members cannot agree on certain decisions

including, in some circumstances, anECC, then one party may invoke the Agreements

Buy/Sell provision. In certain cases, a member may purchase another members interest in the

Company in the amount of its Net Equityas defined in the Agreement.

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28. On November2,2009,Defendant purported to exercise the Buy/Sell in the

Agreement to buy Plaintiff membership interest and requested that BerdonLLP, an accounting

firm, calculate the members Net Equity in the Company.

29 .

30.

On November19,2009,BerdonLLP found Plaintiffs Net Equity to be$25,278.

On January 15,2010, counsel for Plaintiff again wrote Defendant and objected to

both the ECC and Defendants improper initiationof the Buy/Sell because Defendant was in

breach of its own obligations under the Agreement.

3 1. On January28,2010,DefendantsentPlaintiff a check in the amount$25,278,

purported to extinguish Plain tiff s membership interest and claimed toown one hundred percen.

of the Company.

32. On February3,2010,Plaintiff wrote Defendant, returned the $25,278 check,

rejected the purported Buy/Sell.

33 . Defendants purported execution of the Buy/Sell violates the Agreement and its

fiduciary duty to Plaintiff. Specifically, Defendant was in breach of the Agreement because it

did not secure the vacancy of the5 16 and 5 18 Properties and refbe dto provide the contact

information forthe existing tenants. This information was deliberately withheld by Defendantin

an effort to frustrate Plaintiff from exercising itsrights under the Agreement, directly negotiating

with current tenants, and expending approximately $15,000,000 of Defendants money to obtainvacancy of the5 16 and 518 Properties. In short, Defendant has wronghlly attempted to

extinguish both Pla intiff s membership interest anda potentially $15,000,000liability for

$25,278.

34. In addition, Defendant, despite numerous demands by Plaintiff, refused to furnish

it with key financial information as required by the Agreement including the financial

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statements, reports and other informationthe Company was required to provide the Lender, the

personal financial statementsof Aby Rosen and Michael Fuchs, the Companys annual and

quarterly financial statements and tax returns, proposed annual budgets, and certain other reports

to members required under the Agreement.This information was critical to Plaintif fs ability to

assess both the ECC and the Buy/Sell and was deliberately and consciously withheld by

Defendant. By withholding this information, Defendant made it impossible for Plaintiff to

evaluate the worth of the properties and its membership interest in the Company.

35. Defendant also breached the Agreement by failing to advise Plaintiff as to the

statusof i) the Companys current negotiations with the Lender to restructure the Companys

debts and ii) theCompanys marketing of the propertiesfor saleor to find a joint venture partner.

Under the Agreement, Defendantis obligated to provide this information but has failedto do so.

This information was critical to Plain tif fs ability to assess the ECC, the Buy/Sell and the value

of Plain tiffs membership interest in the Company. Defendant deliberately and consciously

withheld this information to frustrate Plaintiffs ability to evaluate the worth of the properties

and, therefore, its membership interest in the Company.

FIRSTCAUSEOF ACTION(Declaratorv Relief)

36. Plaintiff repeats and realleges eachof the foregoing allegations asif set forth fully

herein.

37. On January 28,2010, Defendant purported to execute rights to buy Pla int iffs

membership interest in the Company. Defendants purported execution of the Buy/Sell was

improper and in breachof the Agreement.

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38. Plaintiff rejected the purported execution of the Buy/Sell. Defendant claims that

it has purchased Plain tif fs interest in the Company and that Plaintiff is no longera member of

the Company.

39. As a result, there is a real and actual controversy between Plaintiff and Defendant

as to the purported Buy/Selland Plaintiffs status as a member of the Company.

40. Plaintiff is entitled toa declaration that i) Defendant's purported buyout of

Plain tiff s interest in the Company is void, ii) Plaintiff is still a memberof the Company and iii)

that all acts taken by Defendant as managing member without Plain tiff s consent are void.

SECONDCAUSEOF ACTION(Breach of Contract)

41. Plaintiff repeats and realleges eachof the foregoing allegations as if set forth fully

herein.

42. The Agreement providesthat Defendantwas to deliver complete vacancyof the

5 16 and 5 18 Properties before July3 1,2008. The Agreement hr ther provides that Defendant

was to spend up to$10 million per property to secure completely vacant properties. Defendant

was also obligated to provide Plaintiff with the contact information forany current tenants or

occupantsso that Plaintiff could seek to vacate the properties directly.

43 . Defendant failed to obtain vacancyof the 5 16 and 5 18 Properties. Defendant also

failed to spend $15,000,000 in remaining funds that were earmarked to secure vacancy of the

516 and 5 18 Properties. Despite demand by Plaintiff, Defendant refused to provide contact

information for the current tenants. This information was deliberately withheld by Defendant in

an effort to prevent Plaintifffrom exercising its rights under the Agreement, directly negotiating

with current tenants , and expending approximately $15,000,000 to obtain vacancyof the 5 16 and

5 18 Properties.

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44. Defendant breached the Agreement by not only failing to vacate the properties but

also by leasing space to at least two additional tenants in the5 16 and 5 18 Properties which has

greatly reduced the properties marketability and value.

45. As managing member of the Company, the Agreement required Defendant to

provide Plaintiff with financial information including but not limited to i ) the financial

statements, reports and other information the Company was required to provide the Lender,

including the personal financial statements of Aby Rosen and Michael Fuchs ii) the Companys

annual and quarterly financial statements and taxreturns,iii) proposed annual budgets, and iv)

certain other reports to members required under the Agreement. Defendant failed to provide the

required information, making it impossible for Plaintiff to evaluate the purported Buy/Selland o

value the properties and its membership interest in the Company.

46. Defendant also breached the Agreement by failing to advise Plaintiff as to the

statusof i) the Companys current negotiations with the Lender to restructure the Companys

debts and ii) the Companys marketing of the properties for sale or to find a joint venture partner.

Under the Agreement, Defendant is obligated to provide this information but has failed todo so

despite numerous demands by Plaintiff, This information was critical to P lainti ffs ability to

assess the ECC, the BuyBell and the valueof Pla intif fs membership interest in the Company.

Defendant deliberately and consciously withheld this in fom ation to frustrate Plain tif fs ability toevaluate the worth of the properties and, therefore, its membership interestin the Company.

47. Defendant further breachedthe Agreement by failing to provide Plaintiff with

proof that it contributed its own pro rata shareof its purported ECC.

48. By reason of the foregoing, Defendant breached the Agreement and its purported

ECC and Buyisell were void.

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49. As a result, Plaintiff is entitled toan order that Defendants purported exercise of

an ECC and the Buy/Sell was improper and void, that Plaintiffis stilla memberof the Company

and that all acts taken by Defendant without Plaint iffs consent are void.

THIRDCAUSEOF ACTION(Breachof Duty of GoodFaith and Fair Dealing)

50. Plaintiff repeats and realleges eachof the foregoing allegations as if set forth fully

herein.

5 1. Under the Agreement, there is an implied covenant of good faith and fair dealing

governing the members obligations to each other.

52. In addition,as managing member of the Company, Defendant owed Plaintiffa

fiduciary obligation.

53. By attempting to use the ECC for itsownbenefit and the Buyhell to extinguish

Plain tif fs membership interest in the Company, Defendant breached the duty of good faith and

fair dealing it owed Plaintiff.

54. In addition, Defendant also breached the duty of good faith and fair dealing by

frustrating Plain tif fs access to key financial information it needed to evaluatethe ECC and the

Buy/Sell and from exercising its rights under the Agreement, directly negotiating with current

tenants, and directly spending approximately$15,000,000to obtain vacancyof the 5 16 and 518

Properties.

55. As a result, Plaintiffis entitled to an order that Defendants purported exercise of

an ECC and the Buy/Sell was improper and void, that Plaintiff is still a memberof the Company

and that all acts taken by Defendant without Plaintiffs consent are void.

WHEREFORE, Plaintiff prays for a judgment, as follows:

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. I* ,

On the First Cause of Action,for an order declaringi) Defendants purported

exercise of an ECC and the Buy/Sell was improper and void, ii) Plaintiff is still a memberof the

Company and iii) all acts taken by Defendant without Plaintiffs consent are void.

On the Second Causeof Action, foran order declaring i) Defendants purported

exercise of an ECC and the Buy/Sell was improper and void, ii) Plaintiffis stilla memberof the

Company and iii) all acts taken by Defendant without Pla int iffs consentare void.

On the Third Cause of Action, foran order declaring i) Defendants purported

exerciseof an ECC and the Buy/Sell was improper and void, ii) Plaintiff is still a memberof the

Company and iii) all acts takenby Defendant without Plaintif fs consent are void.

For reasonable attorneys fees, costs and interest;

For such other and further relief as theCourtdeems just and proper.

Dated: New York, New YorkFebruary 24,2010

OLSHAN GRUNDMAN FROMEROSENZWEIG& WOLOSKY LLP

ThomasJ. FlemingHowardJ. SmithAttorneysfor PlaintiffPark Avenue Tower65 East SSth StreetNew York, New York 10022(212) 451-2300

and

DAVIDROZENHOLC& ASSOCIATESDavid Rozenholc,Esq.400 Madison Avenue, 19th FloorNew York, NY 100 17(212) 983-4141

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I

c

SUPREMECOURTOF THE STATE OF NEW YORKCOUNTYOF NEW YORK

~~~

520 Fifth AvenueHoldingsLLC,

Plaintiff,

-against-

S 16 Fifth Avenue LLC,

Defendant.

IndexNo,PurchaseDate:

SUMMONS ANDCOMPLAINT

OLSHANGRUNDMAN FROME ROSENZWEIG& WOLOSKYLLPAttorneysfor PlaintiffPark Avenue Tower65 East Sth treet

New York, New York 10022(212) 451-2300

909925-1

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Aby Rosen suit re: 520 Fifth Avenue.

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