13 A P P E A R A N C E S :

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1 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY : CIVIL TERM : PART x ACCESS INDUSTRIES I INC. l - against - Plaintiff REALTY, LLC, and DAVID WILDENSTEIN Defendants Ind. No. / x 0 Centre Street New York, New York March, B E F 0 R E HONORABLE SHIRLEY WERNER KORNREICH Justice A P P E A R A N C E S : DAVIDOFF BUTCHER & CITRON LLP Attorneys for Plaintiff 0 Third Avenue New York, NY BY: LARRY HUTCHER, ESQ. JOSHUA KRAKOWSKY, ESQ. SCHINDLER COHEN & HOCHMAN LLP Attorneys for Defendant 0 Wall Street, New York, NY 00 BY: STEVEN R. SCHINDLER ESQ. KATHERINE WILSON-MILNE, ESQ. Kathy Y. Jones Official Court Reporter KATHY Y. JONES OFFICIAL COURT REPORTER of

2 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / Okay. Basically, this is the first time on before me. I have two motions. One is a motion to dismiss and the other is a motion to vacate lis pendis. Huge case. Basicallyr the case alleges -- well, let me just take a step back. The case involves the negotiation and attempt to purchase of a townhouse on the east side for $ million. The townhouse had been an art gallery for the Wildensteins and it had been on the market. It had been off the ma.rket. At any rater the plaintiffs in this action and the plaintiff is a corporation. So, we re talking about a multimillion dollars deal that was negotiated and this was a $ million deal for this townhouse by sophisticated parties who were negotiating. month. They negotiated for about a In I believe it was the beginning of October, October I think it was of last year, there was a phone conversation between David Wildenstein and the defendants here are David Wildenstein and the LLC which owns the building and from what I gather, it s not specific ;in the papers, it appears to be made up of the Wildenstein family. The LLC -- well, David Wildenstein appeared to be negotiating on behalf of the LLC. He spoke to someone of

3 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / at the plaintiff on October and said, and they after a lot of back and forth said, you know what, orally, we have a deal. It will be $0 million million I believe it was, a little over percent as a down payment and there would be due diligence and it would be -- the contract would be signed quickly although they spoke I think it was subsequently about the contract being signed after Thanksgiving which would have been in November and the closing occurring in March for various reasons which aren t relevant. A week after this oral statement and I don t know -- this is the sell of land. So, we're not talking about a contract or agreement. David Wildenstein called and said -- this is th. So, it was exactly a week later, said I don t have the authority to sell, and the board and it s an LLC. So, I'm not sure if it s the board. There is nothing in the papers to show that anybody looked at the LLC Agreement or what it said about who managed or who was the managing member or whether land could be transferred from majority or unanimous. nothing here on this. There is But in any event David Wildenstein said I have no authority to close the deal without permission from the board according to the complaint. This lawsuit followed and it's a lawsuit for fraud, promissory estoppel and of

4 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / specific performance because a real estate deal has to be in writing. Now, there is a motion to dismiss. I'll hear you. You may argue. Thank you, your Honor. I m Steven Schnidler. I represent the defendants LLC and David Wildenstein. That was a completely accurate summation of the facts as they are contained in the complaint. This is a case about a sale of a piece of real property East th Street. The plaintiff in this case is a corpo.rate entity controlled by a very experienced real estate investor and also one of the richest men in the world Len Blavatnik. Interesting, the damages that I didn't mention is apparently on the loss of two deals, again large real estate deals which are not at all comparable to a townhouse or anything. They are for apartments. They are totally different. Absolutely different types of deals and consequential damages. Ultimately, the problem here it was sold to another entity for $. million. That party entered into a signed written Purchase and Sale Agreement which is attached to our order to show cause. That was entered into on Novem:ber,. The plaintiff was of

5 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / clearly upset by not getting apparently the building that he wanted and seeking to prevent the sale to the purchaser who ultimately did enter into the agreement. Mr. Blavatnik s company filed on the plaintiff a lis pendis on the property in the New York county clerk's office on November,. The stated basis for the lis pendis was the complaint that we are seeking to dismiss here today. Plaintiff seeks specific performance of an oral agreement made on -- An oral real estate agreement. An oral real estate agreement made on a single telephone call on October,, between an agent of plaintiff and David Wildenstein who is an officer of the parent company that owns the LLC. According to the complaint, as your Honor had recited, they agreed on a price, on a deposit, no other terms were agreed to but it was stated at least alleged in the complaint that there would ultimately be a written contract that wouldn t be signed until after Thanksgiving with a closing. the plaintiff. And there would be due diligence by And there would be due diligence in between. That's it. So, plaintiff's entire complaint of

6 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / particularly the specific performance claim and the file of the lis pendis is based upon that one oral conversation. And it's beyond dispute, I don't think it can be ' that contracts - - agreements for the sale of real property in New York State must be in a signed writing. We have neither a writing and it's certainly not signed. Also, if there is an agent who wants to sell property, that agent has to have a signed writing that gives that agent authority, am I correct? Correct. We cite that in our brief as well. That reason and that reason more than any other, the specific performance claim and the lis pendis should be dismissed and canceled respectively. Now, the plaintiff also asserts a claim for promissory estoppel based upon the very same oral promise. And not surprisingly, there is some pretty tough law to get around the statute of frauds particularly when it comes to sell of real estate. And there is some law that's cited by the plaintiffs to the effect you can sometimes get around the statute of frauds in a promissory estoppel claim by alleging and proving something called unconscionable injury, neither of which is alleged here in the complaint nor could it possibly be proved. of

7 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / get over the statute. Otherwise, it would just be a way to Correct. And the other thing I would just point out to your Honor is that even though there are a few cases where there have been some egregious circumstances that have allowed courts to circumvent the statute of frauds, we have not found any case and they certainly have not cited one where you had a contract for the sale of real estate where a court ordered specific performance of a piece of real estate based upon a promissory estoppel claim where there was no writing as it is here. There are other reasons to dismiss the promissory estoppel claim including the fact that the damages that are alleged here are consequential damages and not reliance damages. As I understand the claim, as its pled in the complaint in the promissory estoppel claim, they said, well, because we were so busy for one week doing due diligence this entire organization which has law firms at its disposal across the city -- Well, it doesn't specify who, what, where but it does say they lost out on two other deals that were somewhere else because they were so focused on buying the townhouse. of

8 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / Without specifying them, without saying what they were and what the due diligence on those would have been. So, it s both it s neither specific nor are there reliance damages. Finally, with respect to the fraud claim which is, you know, against both the entity and David Wildenstein, you know, people say you :re entitled to your own opinions but not your own facts, what we have here is a plaintiff pleading within two pages entirely inconsistent facts that both require that the fraud claim be dismissed as well. If you look at the facts alleged in the promissory estoppel claim and the specific performance claim, the plaintiffs allege and have to allege that in order for them to sort of -- to claim that there was a deal, that David Wildenstein was authorized to enter into the deal and they do allege that. Then on the fraud claim, they say he said he was authorized but in fact he wasn t authorized. Thatts the heart of the fraud claim for them that David Wildenstein misrepresented the fact that he had authority to sell this building. didn't. So, either he did or he There is nothing here to show whether he did or didn*t. of

9 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / Correct, except two allegations, s and even though you can of course make alternative and sometimes inconsistent legal arguments, you can't make inconsistent factual arguments. You can't say on one page he was authorized and then on the next page say he wasn't authorized. So, for that reason, the fraud claim should be dismissed. Of course, they failed to plead with any particularity the nature or the the misrepresentation that was made, how was it made, what he said, how they relied upon it. Additionally, there is no reasonable reliance here. Again, if you look at the Swerdloff case in the second department, here you have an experienced real estate investor, could not have reasonably relied upon a telephone agreement to then not enter into other important transactions, et cetera. Finally -- There is no scienter. In addition to all of that, the plaintiffs do not allege any but for causation with respect to the fraud claim and their inability to enter into these other transactions. indication. You're saying there is no loss cause of

10 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / Correct. And for all those reasons, your Honor, we ask that the complaint be dismissed in its entirety and that this court direct the county clerk to cancel the lis pendis. Thank you, your Honor. Morning, your Honor. Good morning. Josh Krakowsky on behalf of the plaintiff Access Industries, Inc. They're all very fine arguments from the defendants but I don t think that any of them are appropriate on motion to dismiss. I think you have a very hard road here. You have to have something. The facts have to make out some cause and I really don t see it here. Well, Judge, on the statute of frauds, we do cite several cases where things, the circumstances were less egregious than the circumstances here. None that I saw. I read those cases and they were truly unconscionable and people changed their positions dramatically and over periods of time and you're talking about the estoppel claim perhaps how it would trump the statute of frauds and I just don't see it of

11 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / here. Well, you have one case Trilogy Variety Stores F Supp where there was a $,000 investment made because of a promise to renew a lease. $,000 investment. But you have someone who had a valuable leasehold and who probably relied on that valuable leasehold and made a $,000 investment. Here you have nothing. You don't even have a penny of investment. You have one week during which this very sophisticated businessman was supposed to do due diligence. Basic due diligence I would think would be at least looking at who owns the property, who has the right to transfer. There was nothing done here and it was a week and then he claims to wit or it claims beca.use it's a company. To them this is damages. Plaintiff lost an opportunity to purchase select service hotels in the pacific northwest for approximately $0 million and then there was another similar type of deal which and it doesn't explain what this -- oh, ten senior care facilities. What this possibly could have had to do with a townhouse and how the purchase of a townhouse could possibly trump these two deals and why an organization of

12 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / l that has billions of dollars would have given up these deals for the purchase of a townhouse in New York City. s It make no sense. Well Judge, first, the townhouse was very important to my client and the truncated due diligence that was agreed on between the parties required that my client devote substantial resource to this transaction for East th Street. Doesn't even say what he did. What truncated due diligence? What occurred in one week and who worked on it? What did they do? There is nothing here. It s all conclusory statements. Judge, it is in the complaint that we had legal counsel and a senior vice president of real estate basically devote their entire time.to this transaction, the closing. of the plaintiff suffered. Because of that, other business And there was no one else at the company who could have done any of this other business including the owner of this corporation? It's not a large company in terms of the number of people that work there. I don't know how many number of people. It doesn t say. It says nothing. Let's look at the causes of action. First of of

13 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / all, fraud. You're alleging a misrepresentation by David Wildenstein and the LLC who owned the building. The misrepresentation is that he has authority to sell. And also that he omitted the fact that a board had to approve this transaction~ Well, the omission would be entirely because David Wildenstein owed some kind of duty to them or that he was the only person who had that kind of information and knowledge. case. It's not clear that that's the Certainly, there would be inquiry notice if nothing else on the part of your client. There is supposed to be scienter, that David Wildenstein did this intentionally in order to fraud and with the notion that your client would rely on that. There is nothing here that would prove that. Then there has to be justifiable reliance which means your extraordinarily sophisticated and well-h~eled client justifiably relied on an oral telephone conversation. He's done from what -- well, I mean he's done at least one deal be,fore to make that kind of money and probably from what he claims to be his lost other deals, many deals. So, he clearly knows that is not sufficient for a deal and I don t know how he could have justifiably relied and I still don't understand what the of

14 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / damages are. And the damages would only be out of pocket damages and it doesn't allege any out-of-pocket damages. I can address each of those in turn. That's the flaw. So, you talk to me please. As to scienter, Judge, that is alleged in the complaint that Mr. Wildenstein st.rung my client along. For a week? From before a week, wanted to get basically a stalking-horse bid to get somebody else to buy the property and defraud my client into making an offer and doing due diligence. That would mean that any time there are the negotiations for any property, it might well result in a fraud action. Well, not in this case. In this case, there was a deal. There was a deal. How could there be a deal if a real estate deal bas to be in writing. Well, we have the promissory estoppel claim, Judge, and I think given the circumstances Let's look at the promissory of

15 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / estoppel claims. You have to have a clear unambiguous promise and let me see. Then you have to again have reasonable reliance and you have to have injury. So, you re claiming that he's saying I will sell it to you for million, a deposit of and a half percent is the clear and unambiguous promise. Then also said that there would be a truncated due diligence schedule, said when the agreement would be entered and when -- When there would be a real agreement after Thanksgiving and then a closing. promise. So, that s your What is the reasonable reliance? The reasonable reliance is the fact that this is a person who held himself out with apparent authority that he was the one negotiating on behalf of LLC. Is it reasonable for a sophisticated businessman who does real estate deals to rely on negotiation and one phone call. Yes, we plead in our complaint why we had that faith in Mr. Wildenstein to make those representations. between lawyers here? Had there been any exchange drafts of

16 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / MR. KRAKOWSKY! There were drafts, yes, your Honor. I don't see any here. They weren' t pled in the complaint but you're asking me something off the record which is exactly the point, Judge. that require discovery. These a.re all issues Doesn't that happen all the time with deals that fall through? Not in this circumstance. Why is this circumstance unique? There was an agreement that had specific terms and my client put a lot of effort, you know, devoted resource to this. It had several employees For a whole week? -- working for a week virtually non-stop for this deal and that's the damages. Just the amount of time that we had to give up. The opportunity to have those people working on this transaction and also not being able to close on other transactions that they were then working on. That's damages. Why couldn't they close these other transactions? It doesn't even say that they were working on it. Doesn't say anything. All it says is the of

17 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / opportunity to purchase hotels was trumped by this townhouse deal and for one week and that purchase of ten senior care facilities for $0 million was trumped by this one deal That's in our pleading. of one week. Judge, that's in our pleading. But it's unbelievable. If I said the moon green or red or yellow or there is no moon over the earth in my pleading, the court doesn't have to take that at face value. It has to at least be believable. On a motion to dismiss, this is believable. This is believable that because they because Access the plaintiff wanted to buy this townhouse for and a half million dollars, they devoted substantial resources to it and because of that lost out on other deals. That is believable. I must say also there is other facts within the complaint that are just prejudice and irrelevant but that doesn t matter at this point because at this point I am dismissing this complaint with prejudice. There is absolutely nothing here that makes out f the three causes of action. It is a way to get over the of

18 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / requirements that any real estate deal be in writing, that an agent who says he has authority to sell have a writing to show that. It would throw the entire real estate market certainly in New York City and probably the whole state and country into turmoil if this could really be a case and I am vacating the lis pendis. I will write a gray sheet. Please moving party order the transcript and efile it. This shall constitute the decision and order of the Court. Judge, very clear. I understand your ruling. Can we ask for a stay of the closing pending appeal? Absolutely not. MR~ KRAKOWSKY: Judge, can we have a bond amount set so we can appeal so we don t have to make an application? Go to the Appellate Division. You will have the record. Go to the appellate division. Thank you, Judge. Thank you, your Honor. Could I ask just one logistical question? of

19 FILED: NEW YORK COUNTY CLERK 0/0/ :0 AM INDEX NO. / Yes.. scheduled for March 0. The closing in the other case is I assume that if we order this transcript immediately, we can get the order to the -- Unless they go to the Appellate Division. I understand. Thank you, your Honor. MR. ~TCHER: Thank you for your time, your Honor. I'm going to write that gray sheet. C E R T I F I C A T E to be a accurate transcript of of