FILED: NEW YORK COUNTY CLERK 12/04/ :03 PM INDEX NO /2017 NYSCEF DOC. NO. 50 RECEIVED NYSCEF: 12/04/2017. Exhibit A

Transcription

1 Exhibit A

2 PART SUPREME COURT OF THE STATE Of NEW YORK 3 COUNTY OF NEW YORK - CIVIL TERM - 53 THE CITY OF NEW YORK, x 4 Plaintiff, 5 6 -against Index No /17 FC 42nd STREET ASSOCIATES, L.P., 7 8 Defendant. x 9 60 Centre Street New York, New York 10 November 6, 2017 B E F 0 R E: HONORABLE CHARLES B. RAMOS, Supreme Court Justice A P P E A R A N C E S: 15 CARTER LEDYARD & MILBURN LLP Attorneys for the Plaintiff 16 2 Wall Street New York, New York BY: JOHN R. CASOLARO, ESQ. BY: LEE A. OHLIGER, ESQ fried, frank, HARRIS, SHRIVER & JACOBSON LLP Attorneys for the Defendant 20 One New York Plaza New York, New York BY: JANICE MAC AVOY, ESQ Diane Kavanaugh, RPR Senior CourL Reporter

3 2 2 THE COURT: Good morning. This is the motion 3 byfc. 4 MS. MAC AVOY: Yes. 5 THE COURT: For a stay. 6 By the way, the motion to compel arbitration is 7 still somewhere downstairs? $ MS. MAC AVOY: Yes. It has been fully 9 submitted and fully briefed. It was waiting for a date 10 at this point. 11 Your Honor, we1re here on Defendant FC 42nd 12 Street AssociatesT Order to Show Cause for an order 13 staying our time to answer the cross summary judgment 14 motion of the City. Janice Mac Avoy on behalf of Fried 15 Frank, on behalf of FC 42nd Street. 16 We had initially -- initially the City moved 17 for a declaratory judgment, interpreting the substance 18 of the ground lease between the two parties. 19 We moved for an order to stay this proceeding 20 and to compel arbitration on the grounds that the issue 21 as to the fair market value determination under the 22 lease was committed squarely to the province of the 23 arbitrator. 24 THE COURT: I know that there were some 25 quotations in the papers with regard to the provision in 26 the lease. But is the lease itself, that provision, an

4 3 2 exhibit to one of these affidavits? I wanted to take a 3 look at the arbitration clause. 4 MS. MAC AVOY: It is not, your Honor. 5 THE COURT: It is not. 6 MS. MAC AVOY: I have a copy that is 7 unfortunately written on. 8 Do you have a clean copy? 9 THE COURT: I don t care if it s been written 10 on. I m lucky I can read anything. If someone has a 11 copy of that provision, I would like to read it for 12 myself. 13 MR. CASOLARO: May I approach counsel? 14 THE COURT: Please. 15 I will give it back to you. Don t worry. 16 Thank you. 17 MS. MAC AVOY: Your Honor, I think that the 18 most 19 THE COURT: Hold on. I m reading subdivision 20 C, whatever that is, 3.01(c). 21 MS. MAC AVOY: Yes, your Honor. 22 THE COURT: I take it the landlord, the City, 23 has sent a notice setting forth its valuation of the 24 property? 25 MR. OHLIGER: That s correct. 26 THE COURT: And the objection was filed?

5 4 2 MS. MAC AVOY: Yes, your Honor. 3 THE COURT: Therefore, it s a justiciable 4 controversy. 5 Either party can invoke the arbitration 6 procedure. An arbitration notice, which I take it the 7 owner signed, the landlord has signed, correct? 8 MS. MAC AVOY: Yes. 9 I m not sure that the arbitration - we ve 10 stayed that, sending the arbitration notice. The 11 arbitration notice has not been sent yet, your Honor. 12 THE COURT: Not yet? 13 MS. MAC AVOY: Not yet. 14 THE COURT: But you are seeking to stay this 15 action and compel arbitration based on the arbitration 16 provision? 17 MS. MAC AVOY: Yes, your Honor. The 18 arbitration itself won t take place for another year and 19 a half, I think. It s set for 150 days before the end 20 of the re set term. I believe the end of the term is in Isn t that right? 23 MR. OHLIGER: I believe it s next year. 24 MS. MAC AVOY: THE COURT: Okay. 26 You are going to use AAA rules.

6 it s 5 2 The arbitrator shall be instructed, and shall 3 be empowered only, to select as the fair market value 4 one of the determinations, and those are the 5 determinations submitted by either party, correct? 6 MS. MAC AVOY: Correct, your Honor. 7 THE COURT: Believes is the more accurate 8 determination of such fair market value. Without 9 limiting the generality of the foregoing, in rendering 10 his or her decision, the arbitrator shall not add to, 11 subtract from, or otherwise modify the provisions of 12 this lease or either of the determinations. 13 So the arbitrator has to stick to 14 or the other. one 15 MS. MAC AVOY: Right. And those determinations 16 have not been submitted. They are submitted after the 17 arbitrator is appointed. 18 THE COURT: Fair market value, that s the 19 issue that the City wants me to determine, as to what 20 definition the arbitrator is going to use. 21 MR. CASOLARO: It s under the definition fair 22 market value later on that page. You will see that the 23 fair market value is defined as a fee simple interest in 24 the property subject only to the development and use 25 provisions of the lease. 26 THE COURT: Let me take a look at that and

7 6 2 read it for myself. 3 MS. MAC AVOY: Your Honor, I think the critical 4 point is 3. 5 THE COURT: You are way ahead of me. 6 MS. MAC AVOY: Before we get to the definition I 7 of fair market value, your Honor - 8 THE COURT: Please. 9 And we re dealing now with the second rental 10 period? 11 MS. MAC AVOY: Yes, your Honor. 12 THE COURT: There is a definition of fair 13 market value. I am not going to get into that 14 definition. But it seems to be pretty complete. I 15 imagine the arbitrator is going to know what to do. 16 Why should I determine the City s motion for 17 summary judgment in light of the fact that there is an 18 arbitration provision that defines fair market value and 19 we have the general arbitration rules that apply? 20 Let me hear from the City now. 21 I know what your argument is. 22 Yes, sir. 23 MR. CASOLARO: It s in the interest of judicial 24 economy, your Honor, because once you have before you an 25 order to decide whether or not - 26 THE COURT: Why should I be concerned about

8 7 2 judicial economy when I can send this to arbitration? 3 That s the most economical thing I can do. 4 MR. CASOLARO: I would like to explain to you 5 why. 6 THE COURT: Please. 7 MR. CASOLARO: In order to determine whether or 8 not to send this matter to arbitration, your Honor has 9 to be familiar with the terms of the lease and familiar 10 with the cases that deal with when matters go to 11 arbitration and when they are decided by a Court. 12 And once your Honor has those things before 13 him, and you ve looked at these issues, if your Honor 14 determines it goes to arbitration, fine. 15 But if your Honor decides that it should be 16 determined by the Court, which we think the cases 17 support, then your Honor has already looked at the 18 lease, looked at the law, is in a position to make a 19 decision right away, rather than this step procedure, 20 first determine whether or not it goes to arbitration, 21 then if your Honor decides you should decide it, a few 22 months later the very same issues come back to you, the 23 very same, very long lease, the very same group of 24 cases. We ve already briefed the cross motion. 25 THE COURT: Well, here s the problem, though. 26 I don t have before me now formally the motion to compel

9 7 2 judicial economy when I can send this to arbitration? 3 That s the most economical thing I can do. 4 MR. CASOLARO: I would like to explain to you 5 why. 6 THE COURT: Please. 7 MR. CASOLARO: In order to determine whether or 8 not to send this matter to arbitration, your Honor has 9 to be familiar with the terms of the lease and familiar 10 with the cases that deal with when matters go to 11 arbitration and when they are decided by a Court. 12 And once your Honor has those things before 13 him, and you ve looked at these issues, if your Honor 14 determines it goes to arbitration, fine. 15 But if your Honor decides that it should be 16 determined by the Court, which we think the cases 17 support, then your Honor has already looked at the 18 lease, looked at the law, is in a position to make a 19 decision right away, rather than this step procedure, 20 first determine whether or not it goes to arbitration, 21 then if your Honor decides you should decide it, a few 22 months later the very same issues come back to you, the 23 very same, very long lease, the very same group of 24 cases. We ve already briefed the cross motion. 25 THE COURT: Well, here s the problem, though. 26 I don t have before me now formally the motion to compel

10 8 2 arbitration. That s still winding its way through the 3 court system. 4 But, generally speaking, I mean, my impression 5 is I am going to grant the motion to compel arbitration 6 on this issue. I don t see why the Court should be 7 involved in this at all. 8 MR. CASOLARO: Well, your Honor, maybe we 9 should spend a minute to talk about that. 10 If you look at what goes to arbitration, page 11 42, section 3, which says, This section shall 12 constitute, page 42, section 3, a written agreement to 13 submit any dispute THE COURT: Page 42? 15 MR. CASOLARO: Yes, sir. 16 THE COURT: Yes. A written agreement to 17 submit any dispute regarding the determination of fair 18 market value. All right. 19 MR. CASOLARO: It doesn t state that any 20 determination as to what fair market value means goes to 21 the arbitrator. 22 And what we have are Court of Appeals cases 23 like New York Overnight Partners that say, A threshold 24 legal interpretation, I m quoting from the Court of 25 Appeals, should be made by the Court to determine what 26 is meant by fair market value. In that case it was a

11 9 1 Proceedings 2 meaning of the value of the land. And then those, the 3 issues, once the Court determines the parameters, is it 4 subject to the lease, is it subject to the 5 THE COURT: Do you have a copy of that case? 6 MR. CASOLARO: I do. Right here, your Honor. 7 THE COURT: Please hand it up. 8 MS. MAC AVOY: I would point out in New York 9 10 Overnight Partners, the parties agreed to seek judicial determination. a 11 THE COURT: Hold on. When somebody cites to 12 me from the Court of Appeals, I take the time to look at 13 the case. 14 MR. CASOLARO: Should I direct you to the 15 language I was quoting, your Honor? 16 THE COURT: Already I see a problem in the 17 first paragraph of the decision. 18 Judge Ciparick states, When the parties 19 deadlocked on the meaning of the lease term appraised 20 value of the land during negotiations for lease renewal, 21 they agreed to seek a judicial interpretation of that 22 term to settle their dispute. 23 That s been no such situation here. There is 24 no agreement by the landlord to go to court to settle 25 that dispute. The landlord s position is it s already 26 covered in the lease and it s up to the arbitrator.

12 10 Proceedings 2 MS. MAC AVOY: Exactly, your Honor. 3 MR. CASOLARO: well, that, of course, is true But here the courts said it is an appropriate issue for the Court to decide the threshold legal determination. It s true, in that case they both agreed to have a declaratory judgment. But it was still a case where there was an arbitration provision. And so the Court knew there was an arbitration provision. If the Court 10 thought the Court of Appeals, Appellate Division, it was 11 affirmed, if either of those courts thought that the 12 matter should be decided by the arbitrators, not the 13 Court, they would have sent it to the arbitrators. The 14 reason they decided it is because it made sense. 15 THE COURT: No. The key word is agreed. The 16 parties agreed. 17 The general rule, whether it is under the CPLR 18 or the FAA, Federal Arbitration Act, is that when you 19 have a contract that says any dispute regarding the 20 determination of fair market value goes to arbitration, 21 that means the Court is hands off. You don t even look 22 at it. 23 MR. CASOLARO: But it doesn t, your Honor. It 24 means the arbitrators decide what their role is, which 25 is to decide how the factors they are to consider affect 26 fair market value. That s the determination of fair

13 11 2 market value. It s the Court s job to tell the 3 arbitrators what factors to consider. That s what the 4 Court did here. That s what the courts have done in 5 several other cases. 6 THE COURT: That runs so contrary to the law 7 in this jurisdiction with regard to arbitration. I am 8 confident that my ruling in this case is going to be 9 upheld. This is an arbitral issue. It does not belong 10 in the court of law. It really doesn t. 11 I will hold the case in abeyance pending 12 resolution by the arbitrators. Sooner or later you ll 13 have an arbitration award. I will not be here when the 14 arbitration award is rendered. Someone will be here in 15 my place. And they ll confirm it or vacate it. 16 In the first instance this is up to the 17 arbitrators. There is no agreement between the parties 18 to have that term interpreted by the Court. 19 Absent such an agreement, I am without the 20 power to render any kind of relief other than to say go 21 to arbitration. 22 Thank you very much, folks. 23 HR. CASOLARO: Your Honor, today the only 24 issue - we don t have a motion before your Honor. I 25 don t think your Honor can rule on the motion before 26 seeing the papers. The only issue today is whether or

14 12 1 Proceedings 2 not the City is allowed to proceed with its cross 3 motion. 4 THE COURT: It is a free country. You can 5 proceed with the cross motion, if you want. I m telling 6 you right now it s going to be denied MR. CASOLARO: I understand, but you can decide to stay the cross motion. THE COURT: Is it a cross motion? 10 MS. MAC AVOY: Yes, your Honor. ft was a cross 11 motion for summary judgment on the actual merits. 12 THE COURT: But this is neither the motion to 13 compel arbitration nor the cross motion? 14 MS. MAC AVOY: No. This is a motion to stay, 15 essentially to stay their cross motion. 16 THE COURT: Again, since counsel has invoked 17 the principles of judicial economy, since I don t want 18 to see people wasting any time and money, this motion 19 will be adjourned until the return date of the motion 20 and cross motion with regard to arbitration. And I will 21 decide, most likely decide to compel arbitration and to 22 deny the cross motion for summary judgment. 23 I don t want to see any papers, and any time 24 and any effort expended on this summary judgment motion 25 until the threshold issue is whether or not it is 26 arbitrable.

15 13 2 If it s not arbitrable, then, of course, it s 3 the Court s determination. But I am 99.9 percent 4 convinced, after reading this provision, which I thank 5 you for giving me copies of, that it s going to go to 6 the arbitrators. 7 HR. CASOLARO: You are going to decide this 8 without considering our papers, your Honor? 9 THE COURT: No, I m not. But I m 99.9 percent 10 convinced. 11 Look, the only thing that is operative, as far 12 as I m concerned -- look, you are very good lawyers. 13 And I appreciate that. I have been a commercial 14 practitioner, litigator, I know what it s like, but 15 cases like this are decided on the language of the 16 contract. 17 And the contract provision, the arbitration 18 provision is very clear. This is up to the arbitrators. 19 You want to wait until -- there is no harm in waiting. 20 The arbitration is not going to take place until, what, or MS. MAC AVOY: It will happen sometime next 23 year, your Honor. 24 THE COURT: We don t have a date yet for the 25 motion, do we? 26 MR. CASOLARO: November 9th. Isn t it

16 14 2 returnable November 9th? 3 MS. MAC AVOY: Well, that s downstairs. 4 MR. CASOLARO: Yes, downstairs. 5 THE COURT: If you tell me the motion is ready 6 and I can decide it today, I will. I don t want to 7 bring you back another day. But I don t have the papers 8 here. It s up to you. Then you can run to the 9 Appellate Division. 10 MR. CASOLARO: We would like you to read the 11 papers, your Honor. So can we have another date for 12 argument after your Honor had the benefit of looking at 13 our papers? 14 THE COURT: The file hasn t come up yet. I 15 can t set a date. I don t know what the calendar is 16 going to look like. You will be notified by Miss 17 O Neill, who will tell you when it could be done. 18 Meanwhile, no further papers other than on the 19 motion to compel arbitration. That s the only thing I 20 am going to consider. If I determine that I cannot 21 compel arbitration, then I ll set a briefing schedule on 22 the summary judgment motion. 23 MS. MAC AVOY: Thank you, your Honor. 24 MR. CASOLARO: Thank you. 25 THE COURT: Thank you very much. 26 This is disposed of on the record. Nothing

17 Proceedings dispositive happened with it yet. 3 4 * * * * Certified to be a true and accurate transcript of the stenographic minutes taken within. 8 9 ull 10 Diane Kavanugh, RPR 11 Senior Court Reporter