Fletcher v Dakota Complaint

N21112011

*

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK

ALPHONSE FLETCHER, Jr., and FLETCHER ASSET MANAGEMENT, INC.

Plaintiffs,

V.

THE DAKOTA INC., BRUCE BARNES, PAMELA LOVTNGER, PETER NITZE, JOHN RYDZEWSKI, and ANTHONY R. SMITH AND GAEL SMITH ARNOLD as co-executors of THE ESTATE OF RUTH PROSKAUER SMITH,

Defendants.

Plaintiffs designate New York County as the place of trial.

The basis of venue is plaintiff Fletcher’s residence (CPLR 503(a)).

SUMMONS

Plaintiff Fletcher resides at: One West 72”d Street, Apt. 5 1, New York, NY

County of New York

To the above named Defendants: FEE3 0 1 2011

YOU ARE HEREBY SUMMONED to answer the complaint in this acw/&riMMK serve a copy of your answer, or, if the complaint is not served with t h i S R K S OFFICE serve a notice of appearance, on the Plaintiffs’ Attorneys within 20 days after the service of this summons, exclusive of the day of service (or within 30 days after the service is complete if this summons is not personally delivered to you within the State of New York); and in case of your failure to appear or answer, judgment will be taken against you by default for the relief demanded in the complaint.

Dated: February 1,201 1 New York, N.Y.

Attorneys for Plaintiffs:

K&NSTEIN ~ E I S Z WEXLER &

Defendants’ addresses:

The Dakota, Inc. 675 Third Avenue New York, N.Y. 10017

Ina R. Bod, E& 757 Third Avenue NewYork, N.Y. 10017 (212) 418-8600

Supreme Court Records OnLine Library - page 1 of 60

Bruce Barnes One West 72nd Street New York, N.Y. 10023

Pamela Lovin er One West 72" Street New York, N.Y. 10023

f

Peter Nitze One West 72"d Street New York, N.Y. 10023

John Rydzewski One West 72"d Street New York, N.Y. 10023

Anthony R. Smith and Gael Smith Arnold, as co-executors of the Estate of Ruth Proskauer Smith c/o Brill & Meisel 845 Third Avenue, 16" Floor New York, N.Y. 10022


SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK

ALBHONSE FIETCHER, Jr., and FLETCHER ASSET MANAGEMENT, INC .

Plaintiffs,

V.

THE DAKOTA INC., BRUCE BARNES, PAMELA LOVINGER, PETER NITZE, JOHN KYDZEWSKI, and ANTHONY R. SMITH AND GAEL SMITH ARNOLD, as co-cxccutors of THE ESTATE OF RUTH PROSKAUER SMITH,

Defendants.

VERIFIED COMPLAINT

Plaintiffs Alphonse (“Buddy”) Fletcher, Jr. (“Fletcher”) and Fletcher Assct Managcmcnt,

Inc. (“FA,”), by thcir counscl Kornstein Veisz Wexler & Pollard, LLP, for their verified

complaint against defendants, The Dakota Inc. (the “Dakota,” the “Building,” or the

“Corporation”), Bruce Barnes, Peter Nitze, John Rydzcwski and Pnmcla Lovinger (the

“Individual Defendants;” together with the Dakota, the “defendants”), as well as the Estate of

Ruth Proskaucr Smith (thc “Estate”) allege as follows:

Nature of the Action

1. This is an action for defamation, tortious intcrfererice with contract, breach of

fiduciary duty, aiding and abetting breach of fiduciary duty and unlawful discrimination arising

out of deleendants’ tortious and unlawful mistreatment of their fellow sharcholder and neighbor

Alphonse (“Buddy”) Fletcher Jr. (“Fletcher”). As foundcr and CEO of plaintiff FAM, a

succcssful investment management firm, Fletcher is a prominent African-American investor and


philanthropist. This lawsuit seeks relief as a result of the defendants’ acts and statements in

opposing Fletcher’s effort to accommodate his growing family by purchasing the apartment next

to his own at the Dakota, a renowned cooperative apartment building located on the Uppcr West

Side of Manhattan, and restoring the two apartments to thcir original size and configuration as

one unit. Thc facts also arise from Fletcher’s past efforts to defend thc rights of other minority

and femalc shareholders and applicants at the Dakota.

2. Motivated by unlawful animus and engaging in impermissible self-dealing, the

Dakota, thc Individual Defendants and the Dakota’s Board of Dircctors (the “Board”) unlawfully

blocked Fletcher’s cffort to purchase the adjoining apartment after he had already entered into a

contract for the purchasc with the apartment’s current owner, the Estate of Ruth Proskauer

Smith. In so doing, the defendants not only breached their fiduciary duty to Fletcher by self-

dealing and by failing to treat him in the same manner as other Dakota shareholders, but they

also committed further unlawful acts by spreading demonstrably false, insulting, and inherently

defamatory reports about Fletcher’s financial condition, his integrity, and the financial condition

of FAM. Thc rcports included, for example, the false, malicious, and harmful rumors that

Fletcher was cithcr unable or unwilling to satisfy commitments that hc had made to various

charities, that Fletcher lacked sufficient asscts to purchase the apartment and that FAM’s

financial condition was precarious.

3. More specifically, last spring Fletcher entered into a contract for thc all-cash

purchase of Apartment 50, with the apartment’s owner, free of any financing contingency. Ruth

Proskaucr Smith, whose Estate now owns the apartmcnt, was Fletcher’s next-door neighbor and

friend and had long madc clear to her fdmily and other Dakota shareholders that she wanted

Fletcher to purchasc the apartment after her death. She wantcd this to happen so that Fletcher


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could restore the two apartments to their original layout as one unit, and so that he could have a

larger residence in the Dakota for his family. Shortly after cntcring the purchase contract,

Fletcher, following long-established Board procedures, submitted his application for the Board to

approve the proposed transaction.

4. Yet dcspitc Fletcher’s great wcalth, longstanding responsible behavior as a

Dakota shareholdcr and his ownership of a highly profitable investment management firm, the

defendants rejected Fletcher’s application. In so doing, and in the course of their related

dealings, defendants maliciously and wrongfully impugned Fletcher’s reputation, financial

condition and that of his company, FAM, to Board members, Dakota shareholders not on the

Board, and othcrs, including current and potential FAM investors. Although such conduct by a

coop board on the Upper West Side of Mailhattan in thc bcginning of the twenty-first century

may seem surprising, this behavior was consistent with the defendants’ extensive pattern of

hostility toward non-white residents of the Building. Indeed, Fletcher had himself tried to stop

such unequal trcatrnent when he served as Board President scvcral years before and he himself

had been subjected to it as far back as 1992, when hc first sought to purchase an apartment in the

Dakota. This unequal treatment -- which several of the individual defendants have long referred

to as “the Buddy Rulc” --continues to this day, including through ongoing and highly unusual

restrictions on Fletcher and his mother’s use of their own apartments.

5. After the Board initially indicated its intention to reject his application to purchase

Apartment 50 in April 2010, Fletcher offered numerous times to address any questions or

concerns thc Board might have regarding his finances and those of FAM. In an attempt to reach

an amicable resolution, Fletcher repeatedly attempted to engage in discussions with defendants

over the C O U ~ S C of many months, to no avail. In addition, Fletcher agreed to submit hundreds of


pagcs of disclosures concerning his own finances and the financial situation of FAM, although

the Dakota’s cstablished policies -- specifically designed to protect existing shareholders from

burdensome procedurcs -- clearly did not require this. Thc Board, however, refused even to ask

Fletcher any questions rcgarding his extensive submission and instead presented a series of

purportcd concerns about Fletcher and FAM’s financial condition. Yet after Flctcher

indisputably addressed each issue, the Board came up with purportcd new concerns and

threatencd new, unique conditions in connection with its consideration of Flctcher’s application

to purchase Apartment S O .

6. Dcspite Fletcher’s numerous efforts, it eventually became clear that thc

defendants would not willingly rclcnt in their determination to block Fletcher’s purchase of

Apartment 50, notwithstanding his financial qualifications and past service to the Building. Thc

Board President went so far as to thrcaten that the Board would only approve Fletcher’s

application if Flctcher “won the lottery.” Presumably based on the theory that thc best defense is

a good offense, the Board also falsely and injuriously accuscd Flctcher of playing the “race

card.” Indeed, long before Flctcher began to raise concerns about Board misconduct in

connection with the handling of his application, the individual defendants sought to undermine

Fletcher by suggcsting to Board members and others that Fletcher might, in the future, use his

status as an African-Amcrican to persuade the Board to approvc his application. This basclcss

allegation caused further harm to Fletcher by raising hostility toward him and diminishing his

relationship with other shareholders in the Building.

7 . Other Board members’ actions confirm the Board’s breach of fiduciary duty and

othcr impermissible conduct. On or about November 3,2010, then-Board member Pamela

Lovinger suddcnly resigned from the Dakota Board arid announced that she would be listing her


own apartment (Apartment 51) jointly for sale with Apartment 50 as an 1 l-room aparttnent at a

combincd price of $19.5 million. On information and belief, Mr. Rydzewski instigated this plan

for the joint salc. On information and belief, the other Board rncmbers who are individual

defendants in this action encouraged Ms. Lovinger to enter this arrangcment for a combined

purchase based on their belicf that such a sale would bring financial benefit to them.

Specifically, thc market value of thcir own apartments at thc Dakota -- where priccs have been

significantly deprcsscd, in their view -- would increase substantially if such a large sale were to

occur within the Building. Indeed, should such a sale occur, Ms. Lovinger will have stolen the

cconornic opportunity wrongfully denied to Flctcher, made even worse by her having served on

the Board while it was considering Fletcher’s application and thus owing him a fiduciary duty of

the highest degree of trust and loyalty. And the othcr Board members who are individual

defendants in this action will have not only aided and abetted her breach of fiduciary duty, but

will also have breached their own fiduciary duties to Fletcher. Further, the apartment’s current

owner also aided and abetted Lovinger’s brcach of fiduciary duty by co-listing Apartment 50 for

salc with Lovinger’s own apartment.

8. As concerns Fletcher, the Board has abused its discretion, and can no longer be

rclicd upon to exercise that discretion in a fair and appropriate way.

9. Accordingly, by this action, Fletcher and FAM seck compensatory and punitive

damages, including damages for the defamatory statements made and repeated by defendants

about Flctcher and his business. Fletcher also seeks interim and final equitable relief. On an

interim basis, to preserve the status quo, Fletcher seeks an order that defendant Dakota notify

him of any offer to purchasc Apartment 50 (either alone or in conjunction with Apartment 5 l),

so that, if necessary, he can enjoin the sale of Apartment 50 to another purchaser. Fletchcr


further seeks perinancnt equitable rclief requiring defendants to approve his application to

purchase Apartment 50. Finally, Fletcher also seeks to put an end to the discrimination hc and

other minority residents have endurcd over the years within one thc City’s most cxpensive and

prcst igious cooperative apartment buildings.

10. Plaintiffs had no choice but to suc now, because Apartment 50’s current owncr,

the Estatc of Ruth Proskauer Smith, purported to cancel its contract with Fletcher last week, and

has announced its intention to pursue arrangements with alternative purchasers.

The Parties

Plaintiffs

I 1 . Fletcher has been a resident of the Dakota and a sharcholder of thc Corporation

since 1992. Hc currently livcs in Apartment 52. Fletchcr previously servcd on the Dakota Board

for a number of years, including two terms as Board President during the period 2007-2009. As

a past Board president, Fletcher also servcs, consistent with established Building practice, as a

permanent member of the Dakota’s Finance Cornmittcc.

12. Fletcher was maxricd in 2007 to Ellen K. Pao and they have a two-year old

daughter. Fletcher owns and operates FAM, an investment maiiagerncnt firm based in New York

City. Nained to the most recent Forbes’ List of the Wealthiest Black Americans, his success as

an investiment manager is well known.

13. Fletcher is also a philanthropist and has, over the past two decades, donated tens

of millions of dollars of his own weallh, primarily for initiatives aimed at eradicating racial

inequality through education. In 1994, for example, he cndowed a University Professorship at

his alma mater, Harvard College. Similarly, in 2004, on thc 50th anniversary of the Supreme

Court’s dccision in Browrr v. Bourd of Education, Fletcher and entities affiliated with him

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launched a $50 million multi-ycar initiative to support those working to create educational

opportunities for all. Fletcher has been gcneroiis in New York City, supporting churches,

museums, schools, and community organizations, including co-sponsoring exhibitions rclated to

African Americans at the New York Historical Society, the Metropolitan Museum of Art, and

The Studio Museum in Harlem. Fletcher has also provided African-American history resources

to thousands of public schools both in and outside New York City.

14. FAM is a successful investment management firm. Founded by Fletcher in 1991,

FAM serves in an advisory capacity with rcspcct to a series of funds that include outside

investors. Since 1991, FAM has completed more than 50 transactions that have providcd

additional capital to companies through thc purchase of newly issued securities. The investments

have helped thesc companies create and prcscrve tens of thousands of quality jobs from upstate

New York to Southern California in industries including affordable and energy-cfficient housing,

alterriativc energy, education services, and environmental services. FAM is currently focuscd on

providing additional capital and other support to community banks aimed at helping to

reinvigoratc the economy and gencratc attractive returns.

15. FAM’s constructive investment approach has led to superior, risk-adjusted, long-

tcrm returns for pension funds, philanthropists, foundations, cndowrnents and other investors.

FAM has thrived throughout this most recent and the previous rcccssions, generating profits for

its institutional investors in each year since the firm’s inccption in 1991. Of significancc to the

instant lawsuit, several of the Dakota’s shareholders are individuals who have invested in FAM’ s

funds or associatcs of individuals who havc invested in FAM’s funds and they, in turn, socializc

and do business with other individuals who are past, prcscnt and prospective investors in FAM’s

funds.


Defendants

16. Defendant The Dakota, Inc. is a domestic corporation with its principal exccutive

office at 675 Third Avenue, New York, NY. The Corporation owns and operates the Dakota, a

cooperativc apartment building locatcd at One West 72nd Street, Ncw York, NY. The Dakota

cooperative is one of Ncw York City’s most legendary apartment buildings. Built in 1884, it is

known for its uniquc architecture and for the many high-profile individuals who have resided in

the Building over the years.

17. Dcfcndant Bruce Barnes is a rcsiderit at the Dakota and a sharcholder of the

Corporation, currently servcs on the B o d as President, and is a member 01 the Finance

Committcc. Prior to May 2010 when hc became Board President, Barnes served on the Board as

Treasurer and as a mcrnber of Finance Committcc.

18. Dcfcndant Peter Nitze is a rcsidcnt at the Dakota, a shareholder of the

Corporation, a member of the Board and a member of the Financc Cotnmittee. Nitze is also a

past President of thc Board, a permanent member of the Finance Committcc and previously

served as Vice Presidcnt of the Board.

19. Dcfendant John Rydzewski is a resident at the Dakota, a shareholder of the

Corporation, a past and current rnctnber of the Board and a prcvious President of the Board. By

virtue of bcing a past Board President, Rydzewski is a permanent rncmber of the Finance

Committee. Although Rydzewzki was not a member of the Board during the 2009/2010 term, he

was actively involved in discussions and deliberations conccrning Fletcher’s application to

purchase Apartmcnt 50.

20. Defendant Pamela Lovinger is a rcsident at the Dakota, a shareholder of the

Corporation and a frequent past mernbcr of the Board. Lovingcr currently resides in Apartment


5 1, which is located on the other side of the apartment (Apartment 50) that Fletcher contracted to

purchasc. On or about November 15, 2010, Lovinger publicly listed her own apartment for sale,

together with Apartment 50, at a price of $19.5 million.

21. Defcndant the Estatc of Ruth Proskauer Smith is the current owner of Apartment

50. On March 19,2010, the Estate entered into a contract with Fletcher to sell Apartment 50 to

him. That contract would have been fully performed by now and the transaction closed but for

the improper and illegal actions of the defendants.

Factual Backmound

22. The facts rclcvant to plaintiffs’ causes of action for breach of fiduciary duty,

aiding and abctting breach of fiduciary duty, tortious interference, declaratory judgment,

defamation and unlawful discritnination in violation of the New York Human Rights Law and

New York City Administrative Code and breach of contract are set lorth below.

The “Buddy Rule”: The Beginning of the Dakota’s Unequal Treatment of Fletcher and His Mother

23. Long before thc events involving the rejection of his application to purchase

Apartment 50 that givc rise to this lawsuit, the Dakota Board treated Fletcher differently and less

favorably than white shareholders and residents of the Dakota.

24. In the fall of 1992, Fletcher entered into a contract for the all-cash purchase of

Apartmcnt 1 1, a small, one-bedroom apartment located on the Dakota’s first floor. On

information and belief, Fletchcr’s purchase of Apartment 11 marked only the second time that

the Board had permitted a black applicant to purchase shares in the Corporation and reside at the

Dakota. And it did so with great reluctance. Despite submitting information to thc Board

conGrming that he had financial resources far in excess of those required to purchase


Apartment 11, Flctcher was subsequently told by a Board member that the Board had felt that

thcre was “no way” that he would bc approved. Nevertheless, Fletcher’s purchase was

ultimately approved by the Board after Fletcher was interviewed by scvcral Board members.

Indeed, prior to purchasing Apartment 1 1 , Fletcher submitted bids for threc larger apartments on

higher floors, but those shareholders refused to enter into contracts with him, presumably based

on the assumption that the Board would reject his application.

25. In 1993, Fletcher entered a contract to purchase Apartment 52, a larger unit within

the Dakota and the unit in which he currently lives. Thc Board raised numerous obstacles to thc

purchase, ultimately explicitly conditioning its approval on two harsh conditions. First, the

Board rcquired Fletcher to immediately sell Apartment 11 and, second, the Board requircd

Fletcher, in the interim, to cease using Apartment 11 for any purpose whatsocver, including

using thc apartment himself or allowing any gucst or f m i l y member to stay there, even for one

night. Fletcher subsequently learned that scvcral other, white residents of the Dakota, by

contrast, owned multiple units within the Building and openly used thein as guest rooms, offices,

gyms and storage units, without any such rcstriction. Indeed, the prohibitions that the Board

arbitrarily imposed on Fletcher at that time with rcspect to Apartment 11 were so unique that

they bccame known within the Building, and Board members mockingly referred to thcm, as

“the Buddy Rule.”’

26. In or around May of 2002, Fletcher sought to purchase a sccond apartment at the

Dakota for his mother, Dr. Bcttye R. Fletcher, a noted educator and a Trustee of the Bank Street

Thus, in connection with his purchase of Apartment 52, the Board imposed the following condition: “You confirm your intent to purchase Apartment 52 for yourself and to promptly sell Apartrncnt 1 1 . . . You understand that while you own more than one Dwelling Unit or Apartment, the Board will not entertain any rcquest that any of the spaces owned by you be . . . occupied by anyone other than you. . .”

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College of Education. Fletcher entered into an all-cash contract for the purchase of Apartment

92. After much delibcration, the Board permitted Flctcher to purchasc Apartment 92, but

required him to form a special trust to purchase the apartment. In addition, and once again, thc

Board conditioned its approval on an explicit limiting condition - that only Dr. Fletcher and no

one else would be perrnittcd to reside in Apartment 92, even overnight and even including close

relativcs.2 On information and belicf, no Dakota Board ever imposed any similar condition on

any previous owners of Apartment 92, all of whom had been white. Once again, the Board

provided no rationale for the stringent condition it imposed on Flctcher and his mother. In the

years that followed, relatives visiting Fletcher or his mother did not feel comfortable staying

overnight in the Dakota specifically due to concerns regarding the so-called “Buddy Rule.”

The Board’s Hostility Toward Other Minority Dakota Shareholders and Prospective Purchascrs

27. In addition to enduring, and watching his mother endure, this unequal treatment,

Fletcher also witnessed thc Board’s discriminatory acts against other nun-white shareholders and

persons seeking to purchase units in the building.

28. For example, in 2005, while serving on thc Board, Fletcher witnessed Board

members’ discriminatory statcments regarding the purchase application of a prominent,

finaiicially well-qualified white woman and her husband, a Hispanic man. The Board refused to

grant thc couple an intervjcw. At the Board rnceting itself, at dcfcndant Nitze’s insistence, no

discussion of thc matter was permitted. Instead, thc Board rejected the application outright. At

* Specifically, the Board required the Fletchers to agree that “[tlhe Apartment shall be used as a residence only, and only by Bettye R. Fletcher. . . the Apartment shall not be occupicd at any time by any other person without the prior written consent of [Thc Dakota Inc.] in each instance.”


subscquent Board meetings however, Board members made jokes regarding the Hispanic

husband’s desire to have a first floor apartment so that hc could purchase drugs from people on

the strect. Board members repeated this offensive joke for many years.

29. Similarly, beginning in or around 2006, Fletcher witnessed the Board discrirninatc

against the only other African-American shareholder of the Corporation, a prominent individual

in the arts. In that case, thc Board rejected the shareholdcr’s requests to perform much-needed

renovations and rcpairs to her apartment, without explanation. And indeed, when the Board did

rcspond to her inquiries conccrning the repeated rejections, the shareholder was givcn an

cxplanation that either did not make sense or was told that the Board did not know thc reason.

As a result of the Board’s conduct, the shareholdcr endured the humiliation of applying multiple

times for pcrmission to fix or replace her bathtub.

30. In addition, Flctcher witnessed the discriminatory enforcement of Building rules

against this same African-Amcrican shareholder. While thc Dakota’s rules require sharcholders

to use a scrvice elevator, rather than thc main elevators, to transport thcir pet dogs, the Board

strictly enforced this rulc onl-y against this African-American shareholder and not against white

shareholders. Moreovcr, because her apartment was not accessible via the servicc clcvator, this

shareholder was rcquired to wait, often for long periods of time, at an operator-dependent freight

elevator until a staff mcrnbcr was available to transport her and her dog to the appropriate floor.

Indeed, dcfendant Rydzewski - opcnly at Board meetings - insistcd that the Building’s

managing agcnt make sure that the Building keep careful track of every time this same

shareholder “violated” the Building rule by not using thc service elevator with hcr dog. Further,

defendant Rydzewski went so far as to send a series of offcnsive and threatening lettcrs to this

shareholder about this issue and others and dircctcd counsel to the Board to do the same.


3 1. In early 2007, Fletcher again witnessed discrimination by certain Board members

during discussions regarding a Jewish couple’s application to purchase a unit in the Dakota.

Although the couple was financially well-qualified to make the purchase, thc Board quickly

rejected the couplc, without even an intcrview, after one Board member had described them as

members of the “Jewish mafia.” Flctcher and one other Board member had voted to grant the

hmily an interview, but they were outvoted.

32. In May of 2007, Fletcher was electcd Board President after an internal power

struggle on thc Board. Just prior to his clection, several Board members (including defendant

Rydzewski) were accused of having conflicts of interest that were previously unknown to the rest

of the Board, and most other Board members took sides in the disputc. Although Fletcher had

been critical of the substaiitivc conflicts, he had remaincd neutral with respect to personality

conflicts. As a result, Fletcher becamc one of the few candidates who was still acccptable to a

majority of Board members, and they elected him Board President.

33. When Fletcher becamc Board President, he tricd (unsuccessfully, as it turned out)

to put an end to the discriminatory behavior of certain Board members. For example, in advance

of the Scptember 12,2007 Board meeting, Fletcher conveyed his view to defendant Nitze that

the “Jewish mafia” comments and the process and general tenor of the discussion surrounding

the Jcwish applicants’ ethiiicity and religion were not appropriate. Although defendant Nitze

tried to persuade Flctcher not to raise the issuc again, Fletcher urged the Board to reconsider the

couplc’s application “on tlic record” and the Board voted to grant the couple an interview.

Following that interview, the Board changed its earlicr position and approved the couple’s

application.


34. The issue of the African-American tcnant’s repeated efforts to gain approval for

her bathtub renovation resurfaced as well during Fletchcr’s tenure as Board President. During a

Board meeting on or about March 13,2008, Fletcher observed defendant Rydzewski and the

Corporation’s counsel, Eric Balber, whispering and snickering with each other. When Fletcher

askcd them what they were discussing, Rydzewski explained, with obvious amusement in his

voice, that they had been speculating about how many times that shareholdcr would have to

“apply to fix her bathroom.” Fletcher made it clear to them and to the rest of the Board that such

jokes at that sharcholder’ s expense were not appropriatc and that the shareholder understandably

ticcded to have the issue resolved. Shortly after Fletcher challenged those Board members’

conduct, and years of rcjecting the shareholder’s requests, the Board finally voted to allow the

proposed renovation.

35. Despite Fletchcr’s cfforts to stop discriminatory practices during his tenure as

Prcsident, the hostility of certain Board members toward non-white shareholders and Fletcher in

particular persistcd both during and after his term as Board Prcsidcnt ended in May 2009.

36. For example, on information and belief, during a Board mceting held on

October 7,2009, the Board discussed three shareholders’ rcqucsts to have guests reside in their

respective apartments for limitcd periods of time. The Board quickly approved the two requests

from white shareholders after little discussion and with no restrictions. The Board rcfused,

however, to approve the request of the third shareholdcr, a South-Asian woman, unless she

agreed to subject her proposed guests, mernbcrs of her own family, to background ~ h c c k s . ~

At one point during his communications with the dcfendants concerning his application to purchase Apartment 50, the Board cvcn insisted that Fletcher, who by that time had lived in the Building for ncarly two decades, consent to a background check. Fletcher initially agreed. The Board, however, appeared to have rejected his application to purchase

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37. On information and belief, reinforced by the Board’s past practiccs described

abovc, the defendants were determined to prcvent the Board from approving Fletchcr’ s purchase

of Apartment 50 at any cost. This agenda arosc from longstanding hostility toward Flctcher due

to his race, from thc defendants’ similarly longstanding dcsire to retaliate against Fletcher for

exposing and challenging thc defendants’ past acts of racially-motivatcd hostility, and from the

defendants’ desire to increase the value of their own balance sheets by blocking Fletcher’s

purchasc and by facilitating the sale of a $19.5 million joint unit in the Building.

Ruth Proskaucr Smith’s Intention for Fletcher to Purchase Apartment 50, and Fletcher’s Purchase Contract with thc Estate

38. Until her death in January 2010, Fletcher’s next-door neighbor at the Dakota was

Ruth Proskauer Smith, the notcd women’s rights activist and the daughtcr of Judge Joseph M.

Proskauer, who was a justice of thc New York State Suprcme Court before becoming a partner in

thc law firm that bears his name, Proskauer Rose. Mrs. Smith, who lived in Apartment SO for

inany years prior to her death, had become good friends with Fletcher ovcr many years of living

next door to him.

39. As a result, on many occasions, Mrs. Smith exprcssed to Fletcher and others her

intention that Fletcher purchase Apartment SO after her death, so that he could re-combine and

restore the two apartments into the single residence they had once bcen. Mrs. Smith also

expressed that she wanted Fletcher to purchase the apartmcnt so that he could havc a home at the

Dakota for his growing family.

Apartrncnt 50 so quickly that Fletcher had not yet undergone the check. At that point, he withdrew his consent.

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40. Tony Smith, Mrs. Smith’s son and the executor of her Estate, was well aware of

his mother’s wishes in this regard. On January 20, 2010, while his mother was quitc ill and near

death, Mr. Smith crnailed Fletcher asking to speak with him by phonc. When they spoke

Mr. Smith inforrncd Fletcher that the Smith family wished to fulfill Mrs. Smith’s longstanding

dcsirc and intention to sell Apartment 50 to Fletcher.

41. Accordingly, shortly after Mrs. Smith’s death on January 21, 2010, Mr. Smith

began negotiations with Fletcher concerning Fletcher’s purchase of Apartment 50.

42. Those negotiations were rcsolved quickly since there was little haggling ovcr

price and both parties were clcar about the objective. On March 19, 2010, Fletcher cntered into a

contract with Mr. Smith, as the executor of Mrs. Smith’s Estate, to purchase Apartment S O . It

was well known that the Dakota policy at the time permitted quick approval and closing for long-

time Dakota residents in good standing such as Fletcher.

43. The contract betwccn Fletcher and the Estate providcd for an all-cash transaction

of the apartment for $5.7 million, without any financing. In other words, Fletcher was to pay for

thc apartment out of his own funds, without a mortgage or any other type of loan in connection

with thc purchase.

44. On inlormation and belief, the defendants had long known that Mrs. Smith

intendcd for her Estate to sell Apartmcnt 50 to Fletcher and were aware that Fletcher was

negotiating a contract of sale with the Estate. Accordingly, on or around March 10,2010, the

individual defendants hcgan discussing ways to prevcnt Fletcher’s purchase of Apartment 50

from thc Estate no matter what.

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Dcfcndant’s Efforts to Change the Dakota’s Transfer Disclosure Policy to Impede Fletchcr’s Purchase

45. Several ycars earlier, the Board had streamlined thc Dakota’s policy for Board

approval regarding purchase applications by existing shareholders (the “Transfer Disclosure

Policy’’ or “Policy”). The Policy, which was adopted on March 22, 2007 and was in force in

2010 when Flekher sought approval to purchase Apartment 50, provides in pertinent part:

When ;1 current Dakota shareholder applics to purchase another apartment in the Dakota, and the purchase would materially incrcasc the shareholder’s sharc ownership, the shareholder will only be required to provide a one page balance sheet, indicating the shareholder’s principal assets and liabilities and signed by the shareholder, if the shareholder making such application has (i) resided in the Building for more than four years and (ii) a personal history of timely payment of all financial obligations to the Dakota.

(emphasis added). This Policy remains in effect today.

46. When he applicd to the Board to purchase Apartment 50, Fletcher qualified for

this limited disclosure provision and he remains qualified to this day. Fletcher has been a

shareholder of thc Corporation and a rcsident of the Dakota sincc 1992 (considerably more than

the four years required by the policy) and he has timely fulfilled all of his financial obligations

(including monthly maintenance charges) to the Dakota. Indeed, the defendants have never

asserted that Fletcher did not meet the requirements for the Transfer Disclosure Policy’s limited

disclosure provision.

47. On information and belief. some or all of the individual defendants recominendcd

changing the Transfer Disclosure Policy to preemptively impede Fletcher’s forthcoming

application to purchase Apartment SO. This efor t began during a March 10, 2010 Board


meeting, at a time when these defcndants knew that Fletcher was in negotiations to buy

Aparttnent S O .

48. Fletcher learned of the Board’s effort lo change the Policy just days after hc had

signed a contract with the Estatc. Robert McFarland of Douglas Elliman, the Dakota’s managing

agent, informed Fletcher by phonc that the Board was considering making the application

process for cxisting shareholders seeking to purchase additional units within the Building more

onerous. Although Mr. McFarland also informed Fletcher that the Board had formed a Special

Committee to consider this issue and make recomrncndations, the Board, at its March 10

meeting, had actually delegated the issue to the Finance Committee to consider.

49. To date, on information and belief, the Financc Committee has made no

rccotnmendations to the Board regarding the Transfcr Disclosure Policy and the Board has not

formally acted to amend the Policy. Indeed, Fletcher, as a permanent member of the Finance

Committee, has not becn given notice of any report or action from the Financc Committee

regarding the Transfer Disclosure Policy and has never been asked to consider any amendment to

thc Transfer Disclosure Policy.

Flctcher Also Satisfies the Dakota Policy in Favor of Recombining Apartments

50. In addition to thc Transfer Disclosure Policy described above, at the same time it

adopted the Transfer Disclosure Policy, thc Corporation also adopted a policy in 2007 entitled

“Apartment Ownership Guidelines: Combining Apartments” (the “Recombination Policy”).

This policy expressed the Dakota’s approval of apartment recombinations under the following

conditions: (i) the apartments were originally configured as one apartment; (ii) the combination

furthers a building objcctive; (iii) the combination can be accornplishcd without risk of damage

18


to the building’s structurcs; and (iv) the rcsulting numbcr of shares held by the purchasing

sharcholder will bc less than the number of sharcs held by the Dakota shareholdcr holding the

largest number of sharcs at the time of the request.

51. Once again, Fletcher’s application to recombine Apartment 50 with his own

Apartrncnt 52 satisfied all of these criteria: Apartments 50 and 52 were originally one unit; they

can bc restored to thcir original configuration without any risk of damaging the Dakota’s

structurcs. Important Building objectives would be achievcd because the recombination would

provide Apartrncnt 50 with emergency egress, a scrvice entrance, and independent wiring, all of

which it currently lacks. And, upon purchase, Fletcher’s total share ownership will remain

bclow that of the Dakota’s largest shareholder.

52. Moreovcr, as with the Transfer Disclosurc Policy, there has been no noticc given

to thc shareholders or members of the Finance Committee to amend or altcr this policy in any

way.

Flctcher’s April 5 Submission to the Board

53. On April 5 , 2010, Fletcher submitted to the Board his application to purchasc

Apartment 50 (thc “April 5 Submission”). The contcnts were precisely those required by the

Transfer Disclosurc Policy described above. That is, Fletcher’s application included a copy of

his contract with the Estate, which showed the $5.7 million purchase price to be paid in cash

without financing, and, as dirccted by the Building’s policy, a onc-page balance sheet presenting

his “principal assets and liabilities,” the cost of those assets, and the amount of those liabilities.

That docurncnt showed Fletchcr’s principal assets and their cost basis of $29,475,998 (their

market value, a multiple of cost basis, was not required and was not included) and his principal

liabilities (non-callable business loans each maturing after 2031) at $20,814,251. Thus, the A ~ I 1

19


5 presentation demonstrated that Fletcher had more than sufficient mcans to purchase Apartment

50 and to pay any associated futurc maintenance or other charges, still leaving a multi-million

dollar asset cushion.

54. In his covcr letter, Fletcher explained the transaction as follows:

The estatc of Mrs. Smith has offered to sell me Apartment 50 and we have signed a purchase contract. There would be no financing associated with this cash purchase. Apartment 50 has less than half thc quantity of shares that 1 currently hold and our two apartments wcrc originally one. As with my past transactions, I havc cnclosed a current balancc shcet (prepared by Duhallow Financial Services, LLC valuing assets at the lower of cost or market value) and a letter from my attorney . . .

55. The April 5 Submission fully satisfied the terms of the Transfer Disclosure

Policy. It clearly confirmed Fletcher’s ability to incur all costs associated with his proposed

purchase of Apartment 50. It also dcmonstrated that Fletcher’s proposed purchase satisficd thc

Dakota’s Recombination Policy described above. In blatant disregard of thc Transfer Disclosure

Policy, then-President Goldsmith and thcn-treasurer defendant Barnes jointly wrote to Fletcher

on April 10, 2010 and demanded that he satisfy a new Board policy rcgarding prospective

purchasers. Their lcttcr, in pertinent part, states as follows:

In the wake of the recent financial crisis, thc Board of Directors has adopted a policy of rcquiring the following information from all prospective purchasers, regardless of whether the prospcctive purchaser is currently a shareholder-resident of the Dakota:

1. Copy of the executed contract of sale;

2. Cuwcnt financial statement (see attached), with current bank and broker statements;

3. Three most rcccnt ycars of income tax returns (2007,2008,2009). In addition, the Dakota now requires a background check on all prospective purchasers, including current residents.


56. On April 14,2010, in response to this letter, Fletcher emailed defendant Barnes to

ask when this “new policy” had been adoptcd. Barnes replicd vaguely that it had been adopted

“a few months ago.”

57. On information and belief, no such policy was ever adopted by the Board. This

purported policy does not appear in the minutes of the Board; nor was it mentioned, much less

approved, at any shareholders’ meeting. Instead, thc representation that such a “policy” existed

or cxists was false and was known to be false by Barnes and Goldsmith. To the contrary,

defendants couched their ncvcr-ending list of demands as “policy rcquirements” in an effort to

create a pretext for denying Fletcher’s application.

The Defcndants Reject Fletcher’s Application and Defame Fletcher and FAM

58. On information and belief, at a Board meeting held on April 14, 2010, one or

more of the Individual Defendants repcatedly made false and misleading statements to other

Board members rcgarding Fletcher’s financial condition. This occurred on the same day that

Fletchcr questioned the “new” policy and before he could provide the new information

demanded by Barnes and Goldsmith’s April 10 letter.

59. In particular, one or more of the Individual Defendants told the other members of

the Board that Fletcher had not fulfilled binding charitable commitments arid pledges, that

Flctcher’s assets wcrc all illiquid and difficult to value, and that FAM’s business loans left it

over-cxtended and at risk of collapse. The defendants made thcse false statements maliciously

and with the intent both to taint thc Board’s consideration of Fletcher’s application to purchase

Apartment SO and to damage Fletcher and FAM’s reputation within the Dakota and the broader

investment community.


60. The very next day, April 15, 2010, Mrs. Smith’s son, Anthony Smith, emailed

Fletcher, stating that Mr. Nitze had informed him that the Board had not approved Fletcher’s

purchase application because it had “questions.” Smith has never been a shareholder or resident

of the Dakota.

6 1. Rcmarkably, the Board had not communicated any concerns or updates on the

purchase application’s status to Fletcher, even after it conveyed both concerns and the status

update to Smith, a non-resident of the building. Later that day, Fletcher emailcd Goldsmith to

inquirc about the status of his application.

‘The April 21 Tclcphone Call

62. Fletchcr spoke with Barnes and Goldsmith by phone on or about April 21,2010.

During that call, these Board members raised scvcral completely unfounded conccrns regarding

his ability to afford Apartmcrit 50. These alleged concerns presumably arose from the false

statements made during the April 14 Board mccting, at the prior Finance Committee meetings, as

well as discussions among individual Board members, including the Individual Dcfcndants.

63. More specifically, defendant Barnes and Goldsmith said on the April 21 call that

there were “three issues.” First, they said that Fletcher had not honored “binding charitable

commitmcnts’’ that “amounted to undisclosed liabilities” that should have been on his balance

sheet and that “require an investigation by a privatc investigator.”

64. As for the second issue, dcfendant Barnes and Goldsmith told Fletcher that they

believed that his assets were “illiquid and difficult to value.” They elaborated that Fletcher

needed to “prove” that hc had “liquid assets.” They negatively contrasted Fletchcr’s interest in

FAM with AT&T stock, which can be sold. They acknowledged, however, that a fair valuation

of FAM could be done, and that “there are plcnty of people who can valuc the business.”

22


65. Finally, they said that Fletcher’s “business loans” had left him “over-extcnded and

at risk.” Thcy incorrectly asserted that the FAM loans had call provisions and thus were not

long-term capital.

66. In responsc, Fletcher made it clear that he had substantial liquidity and that the

FAM business loans were, in contrast to their accusations, very attractive financing because they

do not mature for 20 years, had low interest rates, were tax deductible, and were not callable.

Fletcher further pointed out that most of Barnes’ and Goldsmith’s allegations werc not actually

relevant to the Board’s evaluation of his application given that his proposed purchase of

Apartment 50 was an “all cash” transaction, without any financing. He further noted that thc

balance shcet submitted listed his “principal assets and liabilities,” as required by Dakota policy,

and that the market value of the assets far exceeded the assets, as listed on a cost basis.

67. The Board could not have derived these concerns about Fletcher’s finances from

any of the material provided by Fletchcr since his application at this point coiisistcd only of the

one-page balance sheet that was part of thc April 5 submission which contained limited financial

detail. Rather, on information and bclief, these concerns stemmed from the Individual

Defendants’ deliberate concoction of false and defamatory statements regarding Fletcher and

FAM’s finances.

68. Fletchcr was troubled by all of defendant Barnes’s and Goldsmith’s unfounded

concerns cxpressed during the April 21 call. But he was particularly insulted and appalled by

their false allcgation that he had failed to satisfy binding commitments he had made to charities.

Fletcher qucstioned Barnes and Goldsmith as to the basis for this claim. In response, thcy

referred to a 2004 article in The New York Times that describcd Fletcher’s plan that he would

give $50 million over the coursc of his lifetime for individuals and institutions working to


improve racc relations. Fletchcr had formulatcd this plan to honor the fiftieth anniversary of the

Unitcd States Supremc Court’s decision in Brown v. Board of Education. Barnes and Goldsmith

claimed that ‘‘someone said that you haven’t paid those charities and we need a private

investigator to call each one to determine how much you owe arid what claims they have on

you.’’

69. This six-year old articlc concerning Fletcher’s 2004 plan could hardly havc led to

reasonable concerns among Board members regarding Fletcher’s financial condition. If

anything, the vcry fact that Fletcher was able to commit so much of his personal wealth to

charity commends his financial success and stability. Neither the refercnced New York Times

article nor any other articlc regarding Fletcher published sincc that time has questioned in any

way Fletcher’s sincerity. Indeed, Fletcher explained to Barnes and Goldsmith on the April 21

call that he did not owe any amounts to any charity.

70. Neither Barnes nor Goldsmith provided a legitimatc explanation in response to

Fletcher’s questions regarding the basis of the Board’s supposed concerns and the Board’s

demands for additional financial disclosures during the April 21 call. Instead, they simply stated

that the Board “can do whatever it wants and does not have to give a reason” - a statement that

the Board has made to Fletcher or his represcntatives many timcs before and since concerning

his application to purchase Apartment 50.

Fletcher Submits Additional Financial Information in an Effort to Move Ahead with the Purchase (the April 24 Submission)

71. Given his practical nature and his desire to move forward amicably with

purchasing Apartincnt 50, Fletcher opted not to argue ovcr the Board’s unjustified requests for

additional financial disclosures. He instead agreed to providc the additional information that the

24


Board said was necessary and, on April 24, 201 0, submitted a supplemental application package

to the Board totaling over 300 pages (the “April 24 Submission”).

72. The April 24 submission included a completed financial disclosure form;

Fletchcr’s checking account statements for the period ending March 3 1, 2010; Fletcher’s tax

retuiiis for 2007 and 2008: financial condition statcrnents and income statcrnents for Fletcher’s

private businesses from 2007 - March 2010; an independent valuation of FAM by Quantal

Inteimational, a global service provider to financial institutions and advisors, and a business loan

security agreement pcrtaining to Fletcher’s existing Dakota shares.

73. In a lcttcr accompanying this submission, counsel for Fletcher, Denis Kiely,

summarized the strength of Fletcher’s financial condition in pertinent part as follows:

Liquidity, Income and Net Worth: Mr. Fletcher’s current and projected liquidity, income, and net worth greatly cxceed the $5.7 million needed to consummate his cash purchase (i.e. without financing) of Apartment 50, any associated purchasing expenses, the $5,236.40 monthly maintenance, and his aggregate financial commitments. Bcyond his history of fulfillment of his obligations, Mr. Fletcher’s ability to satisfy all of these commitments is evidenced by the fact that his net worth excecds $80 million, his avcrage income has exceeded $3 million for two decades, and he could comfortable pre-pay several years of the additional maintenance should that be a concern.

Valuation: Mr. Fletchcr is the sole owner of an investment managemcnt business and a natural resources investment company. All of his securities and investments arc made through his firm which holds stakes in its funds managed by his firms. In addition to the previous balance shcct presented, which valued assets at a Cost Basis/Book Value, we have completed the Dakota’s required financial disclosure form which requests “actual valuc.” To this end, we quickly commissioned an independent valuation firm, Quantal International Inc., to providc a valuation report, which is attached hereto.

Charitable Giving: Mr. Fletcher has alrcady given to charity a substantial portion of his camings. Though Mr. Fletcher intends to continue both his substantial annual charitable giving and, from timc to time, award capital gifts, 1 can confirm that as of this writing, hc has no binding commitments to fund any charitable gifts.

Mr. Kiely concludcd: “I trust that this package of information, coupled with Mr. Fletcher’s long history, record and service as a shareholder, provides amplc support for this transaction.”

25


74. In this second presentation, Flctcher’s assets and liabilities were valued based on

thcir conservative market value, as opposed to the “cost basis” on April 5 , and the submission

showed Fletcher’s net worth to be $80 million. Fletcher knew and understood that his April 21

presentation contained complicated financial information. Accordingly, after submitting the

package and on multiplc occasions thereafter, Flctcher repeatedly asked that the Individual

Dcfendants meet with him in order to allow him to answcr thcir questions and said that he would

be happy to make his accountants or other cxpcrts available to answer their questions as well.

Each tirnc, however, the defendants either ignored his requests to rncct, or quickly rejected his

offer with the statement cither that “nothing” would change the defendants’ mind or that the

Board did not need to meet with Fletcher because it had its “own experts.” Revealingly, the

Board offered that speaking to Fletcher, even to ask a single question about Fletcher’s cxtensive

financial submissions, was dangerous because he would surely accusc the Dakota of racial

discrimination.

The Board’s Approval of Two Purchase Applications, One from a White Shareholder and Another from an Outside Purchaser, at thc Same Time as it Refused to Approve Fletchcr’s Application

75. Whilc Flctcher’s application was pending, the Dakota Board also received two

purchasc applications from white applicants. Consistent with its general practice, the Dakota

Board refcrrcd these applications to the Finance Committee, as it had referred Fletcher’s, to

make recommendations for approval or denial based upon the financials supplied by the

prospective purchaser.

76. On information and belief, thc Finance Committee and the Board subjected thosc

applications to different rcview practices and less burdensome standards than it imposed on

26


Fletcher's application. In addition, during this time, the defendants impermissibly excludcd

Fletcher, a permanent member of the Finance Committee, from the Committee’s deliberations

regarding the white shareholders’ applications.

77. More specifically, on information and belief, the Financc Committee never

seriously considcred Fletcher’s April 24 Submission, despite having requested and received

hundreds of pages of detailed financial disclosures addressing the concerns raised by Barnes and

Goldsmith. By contrast, days later, the Finance Committee considered and recommended for

approval two pending purchase applications submitted by whitc applicants. One application,

most comparable to Fletcher’s, because submitted by existing shareholdcrs, had financial

qualifications clearly not as strong as Fletcher’s, despite the applicants’ proposal to purchase an

apartment twice as expensive as Apartment S O .

78. Fletcher had received copies of these two other applications in his capacity as a

Finance Committee member and, in that capacity, was obligated to evaluate thcm in accordance

with the Corporation’s best interests. In April 20 10, Fletcher evaluated these applications, with

the cxpectation that the Finance Committee would follow its customary practice and discuss the

applications prior to conveying a Committee rccomrnendation to the Board. The Finance

Committcc improperly excluded Flctcher from discussions regarding these applications,

however, revcaling the defendants’ intcnt to conceal their uncqual treatment of Fletcher in

comparison to the white applicants.

79. This exclusion of Fletcher began on April 20,2010, when defendant Barnes

scheduled a Financc Committee conferencc call via email for April 26 at 8:30 a.m. to discuss the

two pending applications. As a Committee rncmber, Fletcher was included on the scheduling

email. Howevcr, on April 26, only a few minutes past the scheduled call start time, Barnes sent

27


an email to Committee membcrs, including Flctcher, indicating that he could not activate the call

because he did not have the chairman’s code. Barnes indicated in this email that he would

circulatc a new time for thc call.

80. The following day, in the course of an email exchangc regarding his April 24

Submission, Fletcher asked Ms. Kaswaree Narine of Douglas Elliman whether a new time had

been set for the Finance Committcc call. Narine responded that the call had not yet becn

reschedulcd. Later that day, Narine emailed Barnes conveying Fletcher’s inquiry regarding the

call. Barnes emailcd Fletcher shortly thereafter, stating that the consensus among Financc

Committcc members was that they were satisficd with the financial packages submitted by these

applicants. When Fletcher responded, asking whether he had overlookcd an email rescheduling

the call, Barnes did not reply.

81. One day later, on April 28, 2010, thc Finance Committcc held its meeting.

During this meeting, they voted unanimously to recommend the other two pending applications

from the whitc applicants to the Board for approval, including the existing shareholder couple

who could not alford to purchase the new apartment without financing and who had a

questionablc financial history. At the same time, thcy voted unanimously not to recornmend

Fletchcr’s application to purchase Apartment 50. Fletcher received no notice of this meeting.

Although Flctcher could not havc participated in the Committee’s discussions regarding his own

application, thc defendants impermissibly excluded him from discussions rcgarding the other two

applications. Given his exclusion from the meeting, Fletcher was not permitted to ask any

questions concerning the other applicants and was told nothing about the deliberations, othcr

than the decision was unanimous.


82. The minutes from the April 28 meeting rcport the Finance Committee’s reason for

its decision regarding Fletcher’s application: “the risk of thc applicant’s inability to meet his

futurc financial obligations.” Fletcher later learned that the defendants took the position that

while Fletcher might today have sufficient liquidity and net worth, he may, bccause he works in

the financial industry, encounter financial distress at some undetermined point in the future. Of

course, the Dakota has many shareholders who likewise work in the financial industry, including

the shareholders whosc application the Finance Committee recommended for approval at its

April 28 mccting.

83. As discussed above, the Financc Committee had no basis for this determination.

Yet, if Committee members had questions regarding Fletcher’s extensive submission, they never

asked him. At no tirnc prior to the April 28,2010 mceting did any Finance Committce member

pose a single question or solicit any clarification regarding the hundreds of pages of financial

information in the April 24 Submission. In othcr words, as discussed above, they refused to

permit Fletcher to address any questions they might have, provide any clarifications, or

othcrwise attempt to bridge the unexplainable gap between what the third-party experts had

concluded and what thc Finance Committee seemed to be concluding. On information and

belief, the Committee recorded its decision in this way to disguise the Individual Defendants’

disregard of their fiduciary duty, as motivated by their unlawful animus and discriminatory

intent.

84. At that same meeting, the minutes rcport that the Finance Committee decided,

unanimously, to rccomrnend that the Board approve the application from the white shareholders,

a married couple, to purchase another apartment in the Building. The Finance Committee made

this recommendation despite numerous facts related to the couple’s finances, including their

29


limited liquidity post-purchase and thc debt that the couple required in order to make the

purchase. In addition, a background check regarding the couple shows bad debt judgments,

evictions, and a number of UCC liens.

85. By contrast, Fletcher’s application had none of these issues. His April 24

submission included a financial statement calculating Fletcher’s net worth in excess of $80

million and an independent valuation of FAM, which valued the company conservatively at $45

million. In addition, it showed approximately $14 million of liquid assets, and $8 million after

the proposed all-cash purchase of Apartment 50.

86. On May 2, 2010, the day before the shareholders’ annual meeting which would

include the election of a new Board, the Board held a hastily-called meeting and voted to

approve the whitc shareholders’ purchase application. The Board also referred the application by

a white non-shareholder to the Interview Committee, indicating that the Board had been

sufficiently satisfied about that applicant’s financial status.

87. At the same time, on information and belief, Goldsmith informed the Board that

thc Finance Comrnittce recommended that the Board deny Fletcher’s application.

88. Shortly thereaftcr, the Board voted to withhold its consent to the transfer of

Apartment 50 to Flctcher. On information and belief, the Individual Defendants again, during

this mceting, made falsc and misleading statements regarding Flctcher’s fulfillment of his

charitable commitments as well as his finances and those of FAM.

Defendants’ Continued Unlawful Conduct Following the Board’s Rejeclion of Flctcher’s Application

89. On May 3, 2010, the Corporation held its annual shareholders’ meeting and

elected a new slate of directors for the 2010-201 1 term. Defendants Barnes and Nitze, and

30


Dr. Fletcher, were all re-elected to the Board. Defendant Rydzewski was also elected to serve as

a director for the new term. A week later, Barnes was electcd Board president.

90. On May 14,2010, Fletchcr spoke with defendant Barnes by phone regarding the

Board’s rejection of his application. During this call, Fletcher followed up with Barnes, again,

about his exclusion from the Finance Committee discussions and the April 28 meeting regarding

the other pcridiiig applications.

91. Barnes informed Fletcher that hc was not invited to that meeting because the

Committcc members had already agreed to approve the other two applications and because the

exclusive purpose of the meeting was to discuss his application to purchase Apartment 50. Yet

the April 28 meeting minutes specifically state that the other transfers were discussed and voted

upon by the Committee.

92. Mr. Barnes also, and remarkably, in light of the submissions and history to that

point, told Fletcher that, “No additional information regarding your application will result in a

different decision by the board.”

93. Word of Fletcher’s rejection spread quickly throughout the Building and

throughout the larger community of successful, philanthropic New Yorkers. On or about May 7,

201 0, for example, Flctcher had conversations with a Dakota sharcholder, Craig Hatkoff, On

information and belief, Hatkoff, along with others, had becn informed of the Board’s decision to

deny Fletcher’s application from one or more of the Individual Defendants. These dcfendants

had told Hatkoff the same kinds of lies regarding Fletcher’s financial condition and that of his

company, FAM, as had been discussed during Board meetings.


94. In a conversation with anothcr Dakota shareholder, Mark Myers, Myers suggested

to Fletcher that Fletcher have his wife, Ellen, purchase the apartment, because, Myers speculated,

“her financials must be clean,” implying that Fletcher’s wcrc not.

95. Hatkoff similarly reported to Flctcher a recent convcrsation he had with two

directors, including, on information and belief, defendant Nitze. During this conversation,

Hatkoff asked about the status of Fletcher’s application. After being told that the Board was

concerned about Fletcher’s finances, Hatkoff asked how thc Board could havc that concern,

given the amount of money he givcs to charity. On information and bclief, Nitze replicd that

Fletcher had not actually given the money he had promised to give and “he owes it.”

96. Mr. Hatkoff later reported to Fletcher that he had a coilversation with another

shareholder and forrncr Board president, Toni Sosnoff, in which she stated that she had heard

that Fletcher was not financially qualified to purchase Apartment 50. On information and belief,

Mrs. Sosnoff‘s erroneous impression originated from the false rumors maliciously spread by the

dcfendants.

97. In short, the defamatory lics of the Individual Defendants havc tarnished and

otherwise harmed Fletcher’s rcputation as an investment advisor and philanthropist, which he

earned after working for years to build.

Coercion of the Estate/Self-Dealing

98. Causing evcn more harm, thc defendants also acted tortiously to interfere with

Flctcher’s contract to purchase Apartment 50 from the Estate. In so doing, they also breached

their fiduciary duty to thc Dakota by acting to give the cconomic opportunity posed by thc sale to

defendant Lovinger a fellow Board member.

32


99. On May 19, 2010, Smith emailed Fletcher to say that he had learned of the

“absurd, unfair and inexplicable” rejection of Fletcher’s application through a call from the

Dakota’s managing agent. On May 21, Fletcher replicd that he was preparing a response to the

Board in an attempt to understand and resolve their concerns and offered to pay to the Estate the

rnaintcnance charges and other out-of-pocket expenses associated with Apartment 50 while

discussions with the Board were on-going.

100. On May 24, 2010, counsel for the Estate negotiated with Fletcher’s counsel to

hold Apartment 50 off of the market in exchange for monthly payments by Fletcher. On

information and belief, one or more of the Individual Defendants sought to coerce the Estate not

to enter into any such agreement with Fletcher.

101. On June 2, 2010, the Board held a meeting at which it discussed a request by the

Estate to apply for a bridge loan to pay the estate taxes on Apartment 50. Though Board

approval is not required for this type of financing, the Board granted conditional approval to thc

Estatc’s request. The minutes indicate that approval was conditioned upon satisfaction of

Barnes’ “inquiries” on the Board’s behalf. The naturc of these “inquiries” is nowhere specified.

102. On June 14, 2010, Kiely, Fletcher’s counscl, spoke with counscl to the Estate,

Elliott Meisel. Meisel conveyed that the Estate did not believe that the Board’s decision

regarding Fletcher’s application would change. He also indicated that the Estate did not want to

be seen as supporting a litigation against the Board for fear that the directors would exact

revenge upon the Smiths. Still, he said that the Estate would give Fletchcr time to resolve the

dispute because Mrs. Smith had so clearly wanted Fletcher to purchase the apartment.

103. As Fletcher sought to have the Board remove its block on his purchase, Board

member defendant Pamela Lovinger suddenly resigned from the Board on or about November 3,

33


2010. Shortly thereafter, at the instigation of defendant Kydzewski, she listed her own apartment

for sale with a real estate broker who, on information and belief, is a friend of defendant

Rydzcwski’s. The listing indicatcd that the sale would bc in conjunction with Apartmcnt 50 as

part of a 5 bedroom, 4 bathroom, 1 1-room combined unit. Thc price for this joint listing was

posted at $19.5 million.

104. On information and belief, the Board cncouraged defendant Lovinger to do so

because the Individual Defendants had concluded that the values of the apartments at the Dakota

wcrc too depressed, that the valuc of their own apartments wobld be significantly higher if

Apartments SO and 51 were sold together for $19.5 million, and that the value of their own

apartments would certainly be higher than if Fletcher were to buy Apartment SO for $5.7 million.

Morcover, Lovinger’s apartment alone is worth substantially lcss than $6 million so she stands to

gain a huge windfall if the apartments are sold together.

105. Prior to the joint listing, the Estate broke its tcntative deal with Fletcher not to list

Apartment 50 and listed it with the same broker who listed the joint sale of Apartments 50 and

5 1. That broker again, is a friend of defendant Rydzewski’s.

Fletcher’s Continued Efforts to Purchase Apartment 50

106. On June 24, 2010, counsel for Fletcher wrote to ihe Board. He outlined the

Board’s unfair and unlawful treatment of Fletcher and urged the, Board to work with Fletcher

amicably to reach a solution.

107. On July 21,2010, Fletcher, along with his counsId, attcnded a meeting proposed

by counsel for the Board, who along withdeferidant Barnes, attended on the Board’s behalf.


108. Rather than discuss the Board’s supposed concerns regarding Fletcher’s finances,

howcver, Barnes reiteratcd at that meeting that nothing would cause thc Board to approve

Fletcher’s application, except if Flctcher “won the lottcry.”

109. Barnes’ staterncnt revealed far morc than Barnes intended, as it revealed that the

Board’s decision did not rest on a rational or fair review of Fletchcr or FAM’s assets, liabilities

or balance sheet but instead dcrived from underlying, impermissible animus and self-interest.

Later that day, Barnes informed Fletcher that it had appointed Board member

Matthcw Mallow as the chair of a Special Sub-Committee to consider thc issue of Fletcher’s

application to purchase Apartment 50. The Board comprised this Committee primarily of the

very same people who had rejccted Fletcher’s original application, including defendant Nitze,

whom Barncs described as a leader in the decision to deny Fletcher’s application.

Notwithstanding the committee’s composition, Fletcher had at least some confidencc in this

process since Mallow was a long-time investor in FAM’s funds and was or had recently becn a

partner at the law firm of Skadden, Arps LLP, the primary law firm that Flctcher and FAM had

uscd for more than ninctccn years.

110.

I 1 1. Beginning in July, Fletcher and his counsel had a series of convcrsations with

Mallow in an attempt to understand and bring to an end the Board’s opposition to his application.

On August 5 , 2010, Flctchcr and Mallow had lunch at the Harvard Club in New York. At that

lunch, Mallow said that he wanted to find something that Flctcher could “give” thc Board in

exchange for its approval, even if it was not “terribly real.” Mallow suggested a letter-of-credit

for two years’ maintenance; or having Fletcher’s wifc purchase the apartment instead of Fletcher.

In rcsponse, Fletcher told Mallow that he did not know if he could accept either of these

demeaning demands and that Barncs had indicated that thc Board would not acccpt Fletcher’s


application no matter what Fletcher did or said. Mallow then commcntcd that defendant Barnes’

comments about Fletcher “winning the lottery” was the “dumbest f****** comment” he had

ever heard.

112. On August 27, 2010, Barnes sent a lctter to Fletcher on the Board’s behalf, finally

offering to meet with Fletcher if therc was any information Fletcher wanted to provide.

Following a series of exchanges between Barnes and Fletcher, Barnes told Flctcher on

Septernbcr 8, 2010 that the Board would like him to submit documents relating to the FAM

business loans. The Board indicated that it wanted the Special Sub-committee to review the

business loans.

1 13. While these discussions were ongoing, on information and belief, one or more of

the Individual Defendants communicated with several Dakota shareholders and maliciously

made False and misleading statements regarding the state of Fletcher’s finances and those of

FAM, as well as statements that Flctchcr had not fulfilled his charitablc commitments. By

September 2010, for example, before Fletcher had a chancc to respond to the Board’s most

rcccnt request regarding the business loans, m e or more of the Individual Defendants falsely and

maliciously statcd to IIatkoff that Fletcher had “checked out of his business” and was living on

“borrowed money.”

114. On September 14, 2010, in purported response to a letter from Fletcher’s counsel

to the Board which Fletcher had shared with a fcw concerned neighbors, the Board sent a letter

to certain Dakota shareholders that contained several false and defamatory statements about

Fletchcr. First, the Board claimed that “[iln reviewing Fletcher’s application, the Board and its

Finance Committee . . . followed the procedures and applied the standards applicable to all

existing shareholders.” This statement is false in at least thrcc respects. First, the Board and

36


Finance Committee did not follow the Transfer Disclosure Policy for existing shareholders.

Even after Fletcher’s compliance with the morc demanding financial disclosures, the Board did

not rcvicw his application under thc same standards as it applicd to the white shareholders whose

application was approved.

115. Second, the September 14 letter falsely implies that Fletcher’s application was

kept “in confidencc” and that the Board “prefcrl red] not to discuss publicly the details of his

application.” These statements arc patently untrue. As indicatcd above, Fletcher heard dircctly

from scvcral Dakota shareholders not on the Board -- as well as others who do not even live in

the Dakota -- that the Board did not approve the sale because of the fdse allegations that his

financial situation was in disarray and becausc he had reneged on financial commitments to

charitable organizations.

116. Third and most importantly, while disclaiming any motive based on “improper

motivation” and noting that it held Flctcher in “high regard,” the Board repeated, publicly, the

defamatory statement that “[blased on thc financial information subrnittcd by Fletcher, the Board

concluded that approving such a purchase would not be in the best interest of the Dakota.”

117. The September 14 letter also contained the false and misleading statement that

Fletcher had declined the Board’s request to provide additional financial information. As

discusscd above, he had provided extensive financial information in response to the Board’s

requests. In addition, Flctcher was in the process of gathering the additional documents

requested by the Board for review. He wrote specifically to defendant Barnes by email on

Scptcrnber 17, 2010, confirming this and stating that “our documcnt collection for your latest

request continues with a current estimate of 500.”


118. On October 18,2010, Fletcher sent a follow-up email to the entire Board, in an

effort to correct thc false and misleading statements that defendant Barnes and other Individual

Defendants had madc regarding Fletcher’s finances. In addition, Flctcher stated that he had

collected the documents requested and was, along with his advisors, completing an initial review.

119. Fletcher submitted these documents to the law firm of Skadden Arps, where

Mallow is a retired partner, for review. allow told Fletcher that he believcd this review would

succccd in convincing the Board to approve Fletcher’s application to purchase Apartment 50.

Both the attorneys at Skadden and Mallow confirmed that the FAM loan covenants were “plain

vanilla” and that there was nothing unusual or of concern regarding the FAM loans. Indced, the

FAM loans had becn made on extremely attractive terms that were economically advantageous

to FAM’s business, particularly during a period of low liquidity in the rest of the market.

120. Remarkably, on November 4, 2010, Mallow informed Fletcher that the Board had

yet anothcr series of unprecedented and insulting demands beforc it would consider approving

his application to purchasc Apartment 50. These dcmands included, among others, that Fletcher

give thc Board a release, that he purchase from the Building interior hallway space betwcen the

two apartments at the same price per square foot as he had agreed to pay for Apartment 5 1, and

that he agree to sell $6 million of real estate that he owns in California and further agree to sell

Apartment 51 in the cvent that the California rcal estate was not sold within 12 months.

121. By this point, Fletcher had had enough. He had already spent months of his time

and more than one hundred thousand dollars as he tricd to assuage the Board’s purported

concerns despite the defendant’s unlawful self-dealing and hostility toward him. In addition, as a

direct result of the defendants’ conduct. Fletcher suffered extreme stress, as have his wife and

38


family. Among other ha rm, Fletchcr has been diagnoscd with stress-induced shingles and

prescribed treatment for that condition.

122. Although Fletcher would have much prefcrrcd to resolve this conflict amicably, as

shown by his extcnsive efforts to satisfy the Board’s increasingly unreasonable requests and by

his ycars of turning the other cheek in the face of disparate treatment, it had bccorne apparent

that deIendant Barnes meant his threat that Fletcher would literally have to “win the lottery”

before he would be permitted by the defendants to purchasc Apartment 50. The defendants’

actions have thus lcft him and FAM with no choice but to bring thc instant lawsuit.

Thc Estate Purports to Canccl, and Breaches, Its Contract with Fletcher

123. Indeed, plaintiffs had no choice but to sue now because the Estate has purported

to cancel its contract with Fletcher and has announced its intention to pursue arrangements with

“alternativc” purchasers.

124. By letter dated January 24,201 1, the Estate wrote to Fletcher informing him that

it was canceling the contract.

125. The Estate bascd its purported cancellation of the contract with Flctcher solely on

the Board’s purported refusal to consent to the transaction: “in view of the Board’s refusal to

consent to thc transaction, the Seller is hcreby canceling the Contract. . . .” (emphasis added).

126. The Estate concluded the letter by stating that “it does not appear that there is any

likelihood” that Fletcher “will be able to” buy Apartment 50, and that thc Estate accordingly

“must pursuc other alternatives.”

127. In its lcttcr, the Smith Estate acknowledged its agreement with Fletcher to keep

Apartment S O off the rnarkct pending Fletcher’s efforts to persuade the Board to reconsider his

39


application.

128. Enclosed with the January 24, 201 1 letter was a chcck for $250,261.00,

rcpresenting the return of Fletcher’s down payment on Apartment SO, plus accrued intcrcst.

129.

130.

Fletcher has not dcposited the Estate’s chcck.

The Estatc’s action has created an urgent situation. Now that the Estate has

purported to canccl its contract with Flctcher and has announced its intention to put Apartment

50 on the market, Fletcher faces imrnincnt risk or irreparable harm. The great desirability of

apartments at The Dakota and thc rarity with which those apartments become available mean that

there is now a significant risk that Apartment 50 will promptly bc purchased by somconc other

than Fletcher, and Fletchcr’s opportunity to makc that purchase, consistent with Ms. Smith’s

intentions as well as the Dakota’s combination policy, will be destroyed.

13 1. But even bcfore its purported cancellation with Fletcher, the Estate breached its

contract with Fletcher.

132. It did so, on infortnation and belief, by listing Apartment 50 for sale both

indepcndcntly and as a joint listing with defendant Lovingcr’s apartment, even whilc having

already contracted to scll that apartment to Fletcher. The Estate thus marketed to the public an

apartment that it had already promised to sell to Fletcher.

133. In so doing, the Estate also aided and abetted defendant Lovinger’s breach of the

fiduciary duty that she owed to Fletcher as a mcmber of the Dakota Board.

134. To date, Apartment 50 remains unsold and is still owned by the Estate.


FIRST CAUSE OF ACTION

BREACH OF FIDUCIARY DUTY - UNEQUAL TREATMENT (By Fletcher Against thc Dakota and the Individual Defendants)

135.

136.

Fletcher repeats the foregoing allegations.

Each member of the Board and each member of the Finance Committee owes a

fiduciary du y to each of the Corporation’s shareholders, including Fletcher, to treat all

shareholders equally and to evaluate in good faith shareholder applications to purchase additional

units.

137. Each member of the Board and cach member of the Finance Committee also owes

to Fletcher a duty of loyalty not to damage Fletcher’s reputation by spreading false and

misleading rumors in a recklcss or malicious manncr.

138. The Dakota and the Individual Defendants brcached its, his or her fiduciary duty

to Fletcher by (a) refusing to adhere to the Transfer Disclosure Policy; (b) imposing arbitrary and

unreasonable conditions upon Fletcher’s application to purchase Apartment 50; (c) subjecting

Flctcher to racial discrimination and/or otherwise impermissible treatment and retaliating against

him for his efforts to assure unbiascd treatment of minority residcnts of the Dakota; (d) failing to

take reasonable stcps to inform themselves of the meaning and significance of Fletcher’s

financial disclosurcs; (e) knowingly and maliciously spreading false rumors concerning

Flctcher’s financial condition; (f) tendering and/or accepting the recommendation to reject

Fletcher’s application while at the same time approving an application from white shareholders

who were far less qualified financially; (g) tendering and/or accepting the recommendation to

rcjcct Fletcher’s application with knowledge that the recommendation was based upon racial

To reiterate, the “Individual Defendants” for purposes of this Complaint do not include the Estate.

41


animus; (h) conspiring with other Individual Defendants to devise a prctext for rejecting

Fletcher’s application.

139. As a result of the foregoing, plaintiff Fletcher has been damaged.

SECOND CAUSE OF ACTION

BREACH OF FIDUCIARY DUTY - SELF-DEALING (By Flctcher Against the Dakota and the Individual Defendants)

140.

141.


Thc Dakota and the Individual Defendants owed a fiduciary duty to Fletcher.

142. The Dakota and the Individual Defendants breached its, his or her fiduciary duty

to Fletcher by (a) refusing to adhere to the Transfer Disclosure Policy; (b) imposing arbitrary and

unreasonable conditions upon Fletcher’s application to purchase Apartment 50; (c) failing to take

reasonable steps to inform themselves of the meaning and significance of Flctcher’s financial

disclosures; (d) knowingly and maliciously spreading false rumors concerning Fletchcr’s

financial condition; (e) conspiring with other Individual Defendants to devise a pretext for

rejecting Fletcher’s application; and (f, engaging in or allowing othcr Board members to engage

in sclf-dealing by denying Fletcher’s application to purchase Apartment 50 so that one of the

Board members could list it on thc market with her own apartment at a combined purchase price

of $19.5 million.

143. In so doing, the Dakota and thc Individual Defendants believed that the value of

the Individual Defendants’ and all other Dakota apartmcnts would be maximized if Apartments

50 and 51 were sold together as one unit for $19.5 million and that value would certainly be

greater than if Fletcher wcre to purchase Apartment 50 for $5.7 million.

144. As a result of the foregoing, plain1 ff Fletcher has bcen damaged.

42


THIRD CAUSE OF ACTION

BREACH OF FIDUCIARY DUTY - INJUNCTION (By Fletcher Against the Dakota and the Individual Dcfcndants)

145.

146.


Fletcher has been irreparably harmed as a result of the Dakota’s and the

Individual Defendants’ conduct outlined above, in that he has bcen deprived of the ability to

purchase Apartment SO and combinc it with his existing apartment at the Dakota.

147. Only if he is allowed to go forward with the purchase of Apartment 50 and the

combination of that apartment with his current apartment can the harms that Flctcher has

suffered be remedicd. Apartment 50 is uniquely situated, as it is next to Fletcher’s apartment in

the building in which he has lived for ncarly two decades and in which he and his wife wish to

deepen their roots and raise thcir growing family.

148. Fletcher’s purchase of Apartment SO is, moreover, in keeping with the dying

wishes of its former owner, and with the Dakota’s original, historic layout.

149. If thc Dakota and the Individual Defendants are not enjoined from continuing to

breach thcir fiduciary duty by refusing to allow Fletchcr to purchase Apartment 50 and combinc

it with his existing apartment, Fletcher will continue to suffer irreparable harm for which he has

no adequate remedy at law.

FOURTH CAUSE OF ACTlON

AIDING AND ABETTING BREACH OF FIDUCIARY DUTY (By Fletcher Against the Dakota and the Individual Defendants)

150. Fletcher repeats the foregoing allcgations.

I5 1. As a member of the Dakota Board, dcfcndant Lovinger owed Fletcher, a Dakota

resident, a fiduciary duty.


44

4.

152. Defendant Lovinger breached her fiduciary duty to Fletcher by engaging in

financial self-dealing for her own benefit and to Fletcher’s detrimcnt.

153. The Dakota and the Individual Defendants aided and abetted that breach and

knowingly participated in that breach. They were aware that Fletcher had contracted to purchase

Apartment 50, that he had made two submissions to the Board seeking the Board’s approval of

his purchase of Apartment 50, and that he was engaged in on-going discussions with the Board

regarding approval of his purchase of Apartment 50.

154. Rathcr than evaluate Fletcher’s submissions in a fair and appropriate way,the

Dakota and the Individual Defendants intentionally provided substantial assistance to one

another to unlawfully block the Board from approving Fletcher’s application to purchase

Apartment 50, and to enable and allow defendant Lovinger to list hcr apartment in conjunction

with Apartmcnt SO for a substantial profit, and thus breach the fiduciary duty that she owed to

Fletcher.

155. As a result of the foregoing, plaintiff Fletcher has been damaged.

FIFTH CAUSE OF ACTION

TORTIOUS INTERFERENCE WITH CONTRACTUAL RELATIONS (By Fletcher Against the Dakota and the Individual Defendants)

156. Fletcher repeats the foregoing allegations.

157. Fletcher had a valid contract with the Estate, a third-party, for the purchase of

Apartrncrit 50.

158. Thc Dakota and the Individual Defendants knew about the existence of the

contract and imposed unjustified preconditions on the approval of the sale to Fletcher.


159. The Dakota and the Individual Defendants intentionally prcvcntcd the

performance of the contract, and their wrongful acts have resulted in the Estate’s purported

cancellation of the contract with Fletcher..

160. The Dakota’s and thc Individual Defendants’ actions in this regard have been

wanton, willful, malicious, and without justification at law.

161. Fletcher has been damaged as a result of defendant’s interference with the

contract.

SIXTH CAUSE OF ACTION

DEFAMATION (By Fletcher and FAM Against the Dakota and the Individual Dcfendants

162. Plaintiffs rcpeat the foregoing allegations.

163. Beginning in April 2010, the Individual Defendants knowingly made false

statements, or made such statements in rcckless disregard of their truth or falsity, about Fletcher

and FAM to the Board, Dakota shareholdcrs and to other third parties, as set forth above.

164. Defendants disscminatcd false statements regarding Fletcher and FAM for the

purpose of preventing Fletcher’s purchase of Apartment 50.

165. Defendants’ falsc statcmcnts are defamatory per se. They expose Fletcher and

FAM to contempt, ridicule and disgrace because they charge Fletcher with being dishonest in

pledging millions of dollars to charity without the ability to follow through, and because they

allege that Fletcher and FAM are in poor and unstable financial condition, thereby harming

Fletchcr’s rcputation as an investinent professional and FAM’s reputation as an investment firm.

166. None of the defendants’ statements is privileged bccausc the statements were

made by defendants with malice and ill will toward Flctcher and FAM and with the desire to

injure, disgrace and dehme Fletcher and his company.

45


a.

167. None of thc defendants’ false statements is privileged because defendants made

them with knowledge that they were false, or with reckless disregard for whether the statcmcnts

were true or false.

168. Fletcher has suffered injury in that defendants’ false statements have prevented

him from rcalizing the premium valuc associated with his proposed acquisition of Apartment 50

and rccornbination with his existing residence, Apartment 52. In addition, Fletcher has suffered

damages to his reputation as a trusted and successful invcstrncnt advisor, which has interfered

with his business dealings.

169. FAM has suffered injury in that defendants’ false statements have damaged its

reputation as a successful investment firm, and this reputational injury has had a further

damaging effect on relationship with currcnt and prospective investors, and on resulting profits.

170. Defendants’ false statements were made with malice and willful and wanton

disrcgard of the rights of Fletcher and FAM, thus entitling plaintiffs to punitive damages.

Further, punitive damages are necessary to deter such misconduct by the individual defendants in

the future.

SEVENTH CAUSE OF ACTION

DECLARATORY JUDGMENT (Fletcher’ss Compliance With, and Defendant’s Breach of, Transfer Disclosure Policy and

Dakota Policy in Favor of Recombining Apartments - Declaratory Relief) (By Fletcher Against thc Dakota and the Individual Defendants)

17 1. Fletcher repeats the foregoing allegations.

172. There are genuine, existent controversies between the parties as to the adequacy

of Fletcher’s application for the purchase of Apartment 50, and the propriety of the Board’s

failure to approve that application.

46


173. The controvcrsy concerning the adequacy of Fletchcr’s application for the

purchase of Apartment SO, and concerning the propriety of the Board’s failure to approve that

application, is justiciable.

174. If this controversy is not resolved through declaratory judgment, adequate relief

will not be obtainable through other existing causes of action.

175. Fletchcr is therefore entitled to a declaration that (a) his April 5 , 2010 application

for thc purchase of Apartment SO satisfies thc Dakota’s Transfer Disclosure Policy and Policy in

Favor of Rccoinbining Apartments; and (b) the Board is required to approve Plaintiff‘s

application for the purchase of Apartment 50.

EIGHTH CAUSE OF ACTION

DECLARATORY JUDGMENT (By Fletcher Against the Dakota and the Individual Defendants)

176. Fletcher repeats the foregoing allegations.

177. There is a genuine, existcnt controversy between the parties as to the legality of

the Board’s purported refusal to approve Fletcher’s application to purchase Apartment SO given

that such refusal was the outgrowth of discrimination by the Board on the basis of Flctchcr’s race

and/or otherwise impermissible differential treatment, and of financial self-dealing on the part of

at least OIK Board member.

178. The controversy concerning the legality of the Board’s purported refusal to

approve Fletcher’s purchasc application is justiciable.

179. If this controversy is not rcsolvcd through declaratory judgment, adequate relief

will not be obtainable through other existing causes of action.

180. Flctcher is therefore entitled to a declaration that the Board’s purported refusal to

approvc Fletcher’s application to purchasc Apartmcnt 50 is null, void, and of no effect.


NINTH CAUSE OF ACTION

UNLAWFUL DISCRIMINATION IN VIOLATION OF NEW YORK HUMAN RIGHTS LAW 4 290 ET SEQ.

(By Fletcher Against the Dakota and the Individual Defendants)

181. Flctchcr repeats the foregoing allegations.

182. Fletcher is an African-American man who sought to purchase Apartmcnt S O .

183. Fletcher is financially wcll-qualified to purchase Apartment SO and pay the

monthly financial obligations associated with Apartment S O .

184. The Dakota and the Individual Defendants have not identified any objective

standard against which Mr. Fletcher could be deemed financial unqualified to purchasc

Apartment S O .

185. Apartment SO remains available for sale.

186. The Dakota and the Individual Defendants (i) denied Fletcher the benefit of

having thc Transfer Disclosure Policy govern his application to purchasc Apartmcnt 50;

(ii) denied Fletcher the impartial, fair, and unbiased review of his financial disclosures;

(iii) rccommended rejection of Fletcher’s application; and (iv) rnadc that rccommcndation based

upon Flctchcr’s race and in retaliation [or his prior efforts to defend other victims of racial

discrimination.

187. Thc Dakota’s and the Individual Defendants’ conduct with respect to Flctchcr’s

application to purchasc Apartment 50 resulted in Fletcher being treated differently by the

Corporation than other similarly-situated white applicants.

188. The differential treatment and rejection of Fletcher’s application were unlawful

discriminatory acts, as defined by the New York Human Rights Law, N.Y. Executive Law 8 290,

et seq.

48


189. The Dakota and each of the Individual Dcfendants actively participated in and

causcd the unlawful discriminatory acts.

190. Fletcher is entitled to an award of compensatory and punitive damages, and

attorneys’ fees, from thc Dakota and each of thc Individual Defendants, jointly and severally, in

amounts to be determined at trial.

TENTH CAUSE OF ACTION

RETALIATION IN VIOLATION OF NEW YORK HUMAN RIGHTS LAW 6 290 ET SEQ. (By Flctchcr Against the Dakota and the Individual Defendants)

191. The Dakota and the Individual Defendants have retaliated against Fletchcr in

violation of New York Human Rights Law, N.Y. Executive Law 8 290, et seq. by (i) denying

Fletcher the benefit of having the Transfer Disclosure Policy govern his application to purchasc

Apartment 50; (ii) denying Fletcher the impartial, fair, and unbiased review of his financial

disclosures; (iii) recommending rejection of Fletcher’s application; (iv) spreading false and

defamatory rumors about the statc of Fletcher’s financcs and those of FAM.

192. The Dakota’s and the Individual Defendants’ retaliatory conduct occurred as a

result of Fletcher’s crigagement in the protected activity of opposing the Dakota’s and the

Individual Dcfcndants’ discriminatory treatment of other shareholdcrs and non-shareholdcrs

seeking to purchase units in the Dakota.

193. Fletcher has been injured as a result of the Dakota’s and the Individual

Defendants’ discriminatory conduct and is entitled to an award of compensatory and punitive

damages, and attorneys’ fees, from the Dakota and each of the Individual Defendants, jointly and

scverally, in amounts to bc determined at trial.


ELEVENTH CAUSE OF ACTION

UNLAWFUL DISCRIMINATION IN VIOLATION OF

(By Fletcher Against the Dakota and the Individual Defendants) NEW YORK CITY ADMINISTRATIVE LAW ff 8-107 ET SEQ.

194.

195.

Fletcher repeats thc foregoing allegations.

Thc differential treatment and rcjcction of Fletcher’s application were unlawful

discriminatory practices, as defined by New York City Administrative Law 8 8-107 et seq.

196. The Dakota and each of the Individual Defendants actively participated in and

caused the unlawful discriminatory practice.

197. Fletcher is entitlcd to an award of compensatory and punitive damages, and

attorneys’ fees, from the Dakota and each of the Individual Defcndants, jointly and severally, in

amounts to be determined at trial.

TWELFTH CAUSE OF ACTION

RETALIATION IN VIOLATION OF

(By Fletcher Against the Dakota and the Individual Defendants) NEW YORK CITY ADMINISTRATIVE LAW $8-107 ET SEO.

198. Flctcher repeats the foregoing allegations.

199. The Dakota and the Individual Defendants have rctaliated against Fletcher in

violation of New York Human Rights Law, N.Y. Executive Law 9 8-107, et sey. by (i) denying

Fletcher the benefit of having thc Transfer Disclosure Policy govern his application to purchase

Apartment 50; (ii) denying Fletcher the impartial, fair, and unbiased review of his financial

disclosures; (iii) recommending rejection of Fletcher’s application; (iv) spreading false and

defamatory rumors about the state of Fletcher’s finances and thosc of FAM.

200. Thc Dakota’s and the Individual Defendants’ retaliatory conduct occurred as a

result of Fletcher’s cngagement in the protected activity of opposing the Dakota’s and the

50


a

Individual Dcfcndants’ discriminatory treatrncnt of other shareholders and non-sharcholders

secking to purchase units in the Dakota.

201. Flctcher has been injured as a result of the Dakota’s and the Individual

Dcfcndants’ discriminatory conduct and is entitled to an award of cornpcnsatory and punitive

damages, and attorneys’ fees, from the Dakota arid cach of the Individual Defendants, jointly and

scvcrally, in amouiits to be determined at trial.

THIRTEENTH CAUSE OF ACTION

DECLARATORY JUDGMENT (By Flctcher Against the Estate)

202. Fletcher repeats thc foregoing allegations.

203. There is a genuine, existent controversy between the parties as to the validity of

the Estatc’s purported cancellation, on or about January 24, 201 1, of its contract with Fletcher for

the sale and purchase of Apartment 50, givcri that: (a) such cancellation was premised solely on

the Board’s purported refusal to consent to Fletcher’s purchase application for Apartrncnt S O ;

and (b) the Board’s purported refusal was thc product of illegal race discrimination and/or

otherwisc impermissible differential treatment, and of financial self-dealing on the part of at least

one Board mcmbcr.

204. The controversy surrounding the validity of the Estate’s purported cancellation of

its contract with Fletcher is justiciable.

205. If this controversy is not resolved through dcclaratory judgment, adequate relief

will not be obtainable through other causes of action.

206. Fletchcr is therefore entitled to a declaration that the Estate’s purported

cancellation of its contract with Fletcher is null, void, and of no effect

51


Y

FOURTEENTH CAUSE OF ACTION

BREACH OF CONTRACT (By Fletcher Against the Estate)

207.

208.


On or about March 19,2010, Flctcher and the Estate entered into a valid, signcd

contract for Flctcher’s purchase of Apartment SO.

209. Pursuant to the tcrms of that contract, the Estate promised to sell Apartment 50 to

Fletcher, and to no one else.

210.

21 1 .

Fletcher fully performed all of his obligations under the contract with the Estatc.

The Estate breached the contract by making efforts to scll Apartment 50 to

individuals other than Fletcher; specifically, by listing Apartment 50 as available for sale, along

with defcndant Lovingcr’s Apartment 51, in a co-listing that was circulated to the public, even

before it purported to cancel its contract with Fletcher.

212. If thc Estatc is not enjoined from continued efforts to sell Apartment 50 to

purchasers other than Fletcher, Fletcher will continuc to suffcr harm for which he has no

adequate remedy at law.

FIFTEENTH CAUSE OF ACTION

AIDING AND ABETTING BREACH OF FIDUCIARY DUTY (By Fletchcr Against the Estate)

213. Flctchcr rcpcats the foregoing allegations.

214. Defendant Lovingcr, as a member of the Dakota Board, owed a fiduciary duty to

Fletcher, a resident of The Dakota.


215. Defcndant Lovinger breached her fiduciary duty to Fletcher by engaging in

financial self-dealing for hcr own bencfit and to Fletcher’s dctrirncnt.

216. Thc Estate had knowledgc of Lovingcr’s breach and knowingly participated in

that breach. On information arid belief, it knew that Lovinger had been on the Dakota Board and

had suddenly resigned from the Board, and it coordinated with Lovingcr to enable her to co-list

her apartment for sale along with Apartment SO and, thereby, thwarted Fletcher’s efforts to

purchase Apartment 50.

2 17. If the Estate is not enjoined from continuing to aid and abet defendant Lovinger’s

breach of fiduciary duty to Fletcher, Fletcher will continue to suffer harm for which he has no

adequate remedy at law.

WHEREFORE Plaintiffs demand judgment as follows:

a. on the First Cuuse ojAction, an award of compensatory and punitive

damages to Plaintiff Fletcher jointly and severally against the Dakota and the Individual

Defendants, in an amount to be dctermined at trial, but in any event not less than $15 million;

b. on lhe Second Cuuse qf Action, an award of compensatory and punitive

damages to Plaintiff Fletchcr jointly and severally against the Dakota and the Individual

Defendants, in an amount to be determined at trial, but in any event not less than $15 million;

c. on the Third Cuusc of Action, an order (i) directing the Dakota and thc

Individual Defendants to provide immediate notice to plaintiffs’ counsel of any application to

purchase Apartment 50 (either alone or in conjunction with any other apartment), such notice to

be provided no more than one business day after such application is submitted to the Board; (ii)

enjoining, in the event of such notice of an application to purchase Apartment 50, the Dakota and

the Individual Defendants, prclirninarily and permanently, from taking any action to approve any

53


application for the purchase of Apartment 50; (iii) regardless of whether any other application to

purchase Apartment SO is submitted by any potential purchaser, requiring thc Dakota and the

Individual Defendants to approve Fletcher’s purchase application of Apartment 50; and (iv)

preliminarily and permanently enjoining the Dakota and thc Individual Defendants from

interfering with or impeding in any way plaintiff‘s purchase of Apartment 50;

d. on the Fourth Cuuse qj‘Action, an award of compensatory and punitivc

damages to Plaintiff Flctchcr jointly and severally against the Dakota and the Individual


c. on the Flfth Cuuse ofAction, an award of compensatory and punitive

damages to Plaintiff Fletcher, jointly and severally against the Dakota and the Individual


f. on zhe Sixth Cause ofAction, an award oP compensatory and punitive

damages to Plaintiffs jointly and sevcrally against the Dakota and the Individual Defendants, in

an amount to be determined at trial, but in any event not less than $15 million;

g. on the Seventh Cuuse QfActinn, a declaration that (i) Plaintiff‘s

application for thc purchase of Apartment SO satisfies the Dakota’s Transfer Disclosure Policy

and Policy in Favor of Recombining Apartments; and (ii) the Board is required to approve

Plaintiff‘s application for thc purchase of Apartment 50;

h. on the Eighth Cuuse of Action,, a declaration that the Dakota’s and the

Individual Defendants’ purported rcfusal to consent to Fletcher’s purchase of Apartment 50 is

null, void, and of no effect;


i. on the Ninth Cuust‘ ofAction, an award of compensatory and punitivc

damages and reasonable attorneys’ fees to Plaintiff Fletcher jointly and severally against the

Dakota and the Individual Defendants, in an amount to be determined at trial, but in any event

not less than $15 million;

j . on the Tenth Cuuse qfActinn, an award of compensatory arid punitivc

damages and rcasonable attorncys’ fees to Plaintiff Fletcher jointly and severally against the

Dakota and the Individual Defendants, in an amount to hc determined at trial, but in any cvcnt

not less than $15 million;

k. on the Eleventh Cause qfAction, an award of compensatory and

punitive damages and reasonable attorneys’ fees to Plaintiff Fletcher jointly and severally against

the Dakota and thc Individual Defendants, in an amount to be determined at trial, but in any

event not lcss than $15 million;

I . on the Twelflh Cause ojActiori, an award of” compensatory and punitive

damages and rcasonable attorneys’ fees to Plaintiff Fletcher jointly and severally against the

Dakota and the Individual Defendants, in an amount to be determined at trial, but in any event

not less than $1 5 million;

m. on the Thirteenth Cuuse ofAction, a declaration that the Estatc’s

purported cancellation of the contract with Fletcher for the purchase of Apartment 50 is null,

void, and of no effect;

n. on the Fourteenth Cuuse ofAction, an order (i) directing the Estate to

providc immediate notice to plaintiffs’ counscl of any application to purchase Apartment S O

55


(either alone or in conjunction with any other apartment), such notice to be provided no more

than one business day after such application is submitted to the Board; and (ii) enjoining the

Estate, prclirninarily and permancntly, from taking any further action of any kind to sell

Apartment 50 to any purchaser other than Fletchcr; and

0. on the Fifteenth Cause qj’Aczion, an order (i) directing the Estate to

provide imrnediatc notice tu plaintiffs’ counsel of any application to purchase Apartment 50

(cither alone or in conjunction with any other apartment), such notice to bc provided no more

than one business day after such application is submittcd to the Board; and (ii) cnjoining the

Estatc, preliminarily and permanently, from taking any further action of any kind to scll

Apartment 50 to any purchaser other than Fletcher; and

p. Such other and further relief as to the Court may deem just and proper,

including rcasonable attorney’s fees, together with the costs and disbursements of this action.

Dated: New York, New York January 3 1, 201 1

KORNSTPIN VETSZ WEXLER & POLVARD, LLP

’ Daniel J. Kor$steih h a . R. Bort ‘ ~

757 Third Avenue New York, New York 10017 (212) 418-8600

Attorneys for Plaintiffs

Of Counscl: Suzanne B. Goldberg, Esq.


*. f

VERIFICATION

STATE OF CALIFORNIA )

ALPHONSE FIETCHER, JR., being duly sworn, dcposes and states:

1 . I am onc of the Plaintiffs in the within action. I am also the founder, Chairman and Chief Executive Officer of Plaintiff Fletcher Asset Management, h C .

2. I have read the foregoing Complaint and know the contents thereof, and the same is true to my own knowledge, except as to those matters alleged upon information and belief, and as to those matters, I believe them to bF true.

A1,PHONS’E FLETC ER, JR P h l Sworn to beforenme this


Index No.:

SUMMONS AND VERIFIED COMPLAINT

FEB 0 1 2019

NEW YOHK COUNTY CERKS OFFICE

KORNSTEIN VEISZ WEXLER & POLLARD, LLP 757 Third Avenuc

New York, New York 10017 (212) 418-8600

Attorneys for Plaintiffs


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Fletcher v Dakota Complaint

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