FILED: NEW YORK COUNTY CLERK 03/29/ :31 PM INDEX NO /2017 NYSCEF DOC. NO. 34 RECEIVED NYSCEF: 03/29/2017

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK DAVID & ROSETTE ZEITOUNE, RAQUEL AINI as Executor of the Estate of EZRA ABED, ASSA REALTY LLC, directly and derivatively on behalf of the 6 Times Square JV LLC, and the named and unnamed members of 6 Times Square JV LLC, -against- Plaintiffs, X Index No.: /2017 Hon. Eileen Bransten Motion Seq. No. 02 RALPH SITT, DAVID SITT, 6 TIMES SQUARE MEMBER LLC, 6 TIMES SQUARE JV LLC, 6 TIMES SQUARE MEZZ LLC, 1328 BROADWAY OWNERS LLC, PGRESS 2 HERALD LP and JOHN OR JANE DOE, 1 through 5, Defendants X MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS MOTION TO CANCEL NOTICE OF PENDENCY MEISTER SEELIG & FEIN LLP 125 Park Avenue, 7 th Floor New York, New York (212) Attorneys for Defendants Ralph Sitt, David Sitt, 6 Times Square Member LLC, 6 Times Square JV LLC, 6 Times Square Mezz LLC, 1328 Broadway Owners LLC 1 of 19

2 TABLE OF CONTENTS TABLE OF AUTHORITIES... ii PRELIMINARY STATEMENT... 1 ALLEGATIONS OF THE COMPLAINT... 3 STANDARD OF REVIEW... 7 ARGUMENT... 8 I. THE COURT SHOULD ORDER MANDATORY CANCELLATION OF THE NOTICE OF PENDENCY UNDER CPLR 6514(a) BECAUSE THE COMPLAINT DOES NOT SEEK A JUDGMENT THAT QUALIFIES UNDER CPLR 6501 FOR THE FILING OF A NOTICE OF PENDENCY... 8 II. ALTERNATELY, THE COURT SHOULD CANCEL THE NOTICE OF PENDENCY IN ITS DISCRETION UNDER CPLR 6514(b) A. Plaintiffs Have Commenced the Action in Bad Faith III. COSTS AND EXPENSES A. CPLR 6514(c) B. Rule 130 Sanctions CONCLUSION i 2 of 19

3 TABLE OF AUTHORITIES Cases Page(s) 1 Funding Center, Inc. v. H&G Operating Corp., 48 A.D.3d 908 (3d Dep t 2008) Realty Corp. v. O&Y Equity Corp., 64 N.Y.2d 313 (1984)... Passim Braunston v. Anchorage Woods, Inc., 10 N.Y.2d 302 (1961)...9 Brock v. Poor, 216 N.Y. 387 (1915)...9 Felske v. Bernstein, 173 A.D.2d 677 (2d Dep t 1991)...10 Gordon v. Marrone, 202 A.D.2d 104, 616 N.Y.S.2d 98 (2d Dep t 1994)...14 Henrietta Piping, Inc. v. Antetomasco & Micca Group, LLC, 816 N.Y.S.2d 663 (Sup. Ct. Monroe Cnt y Feb. 2006)...8 Hercules Chemical Co., Inc. v. VCI, Inc., 118 Misc.2d 814, 462 N.Y.S.2d 129 (Sup. Ct. N.Y. Cnt ty 1983)...12 Israelson v. Bradley, 308 N.Y. 511 (1955)... 7, 8, 11 at fn. 5 Josefsson v. Keller, 141 A.D.2d 700, 530 N.Y.S.2d 10 (2d Dep t 1988)...13 Jumax Assocs. v. 350 Cabrini Owners Corp., 46 A.D.3d 407 (1st Dep t 2007)... 5 at fn. 3 Long Island City Sav. and Loan Ass n v. Gottlieb, 131 A.D.2d 821 (2d Dep t 1987)...10 Nastasi v. Nastasi, 26 A.D.3d 32 (2d Dep t 2005)...8 Ostad v. Nehmadi, 2011 WL , 31 Misc.3d 1211(A) (Sup. Ct. N.Y. Cnt y, Apr. 8, 2011)...7 ii 3 of 19

4 Rose v. Montt Assets, Inc., 250 A.D.2d 451 (1st Dep t 1998)...8, 9 Savasta v. Duffy, 257 A.D.2d 435 (1st Dep t 1999)...10 Sealy v. Clifton, 68 A.D.3d 846 (2d Dep t 2009)...9 Second St. Housing Corp. v. Fridal Enters., Inc., 36 A.D.3d 608 (2d Dep t 2007)... 5 at fn. 3 Timoney v. Newmark & Co. Real Estate, Inc., 299 A.D.2d 201 (1st Dep t 2002)...14 Tucker v. Mashomack Fish & Game Preserve Club, 199 A.D.2d 957 (3d Dep t 1993)...13 Weisinger v. Rae, 19 Misc.2d 341, 188 N.Y.S.2d 10 (Sup. Ct., Queens Cnt y, 1959)...8 Wells Fargo Bank, N.A. v. Hunte, 27 Misc.3d 1209(A), 910 N.Y.S.2d 409 (Sup. Ct., Queens Cnt y, 1959)...11 Yenom v. 155 Wooster Street, 2005 WL (1 st Dep t 2005)...13 Yonaty v. Glauber, 40 A.D.3d 1193 (3d Dep t 2007)...9 Rules CPLR Passim CPLR Passim Statute N.Y. Ltd. Liab. Co..9 Regulation 22 NYCRR , 14, 15 iii 4 of 19

5 Defendants Ralph Sitt, David Sitt, 6 Times Square Member LLC, 6 Times Square JV LLC, 6 Times Square Mezz LLC, and 1328 Broadway Owners LLC (collectively Defendants ) respectfully submit this memorandum of law in support of its motion, brought by order to show cause: (i) directing the Clerk of Court, pursuant to CPLR 6514(a), to cancel the Notice of Pendency of Action ( Notice of Pendency ) placed against 1328 Broadway, New York, New York a/k/a as 2 Herald Square ( 2 Herald or the Property ), a leasehold interest in which is owned by defendant 1328 Broadway Owners, LLC; (ii) in the alternative, directing the Clerk of Court, pursuant to CPLR 6514(b), to cancel the Notice of Pendency placed on the property; (iii) awarding costs under CPLR 6514(c); and (iv) imposing sanctions against Plaintiffs under 22 NYCRR PRELIMINARY STATEMENT The Court should order the mandatory cancellation of the Notice of Pendency under CPLR 6514(a) because the judgment demanded in the Complaint would not affect title to, or the possession, use or enjoyment of real property. CPLR Indeed, the Notice of Pendency references the plethora of money damages claims asserted in the Complaint, including breaches of fiduciary, contractual and managerial duties, as well as unjust enrichment. Despite the Complaint s lacking any claim qualifying under CPLR 6501, the Notice of Pendency falsely states that the Complaint includes a claim for conversion of the real property located in the County of New York, State of New York, [as] described in Schedule A annexed hereto and made a part hereof. See Emergency Affirmation of Stephen B. Meister ( Meister. Aff ), Exh. B. But a cursory review of the Complaint reveals that no claim for conversion of real property is asserted. 5 of 19

6 Instead, the fourth cause of action asserts conversion of a membership interest in Defendant 6 Times Square JV LLC ( 6 TS JV LLC ), an entity that indirectly owns, through a remote subsidiary, not real property, but a leasehold interest in real property. Under blackletter law handed down by the Court of Appeals, a dispute concerning an equity interest in an entity that owns real property does not qualify under CPLR 6501 for the filing of a notice of pendency. See 5303 Realty Corp. v. O&Y Equity Corp., 64 N.Y.2d 313, 322 (1984) (declining to permit a notice of pendency where the the transaction was for a sale of stock in a corporation whose sole or primary asset was real estate. ) Alternatively, the Court should exercise its discretion under CPLR 6514(b) and order the Clerk to cancel the Notice of Pendency because Plaintiffs have not commenced the action in good faith. The absence of Plaintiffs good faith the presence of their bad faith is incontrovertibly documented by Plaintiffs false representation in their Notice of Pendency that the Complaint asserts a cause of action for conversion of real property, when, in reality, it asserts a claim for conversion of personal property a membership interest. Indeed, as stated above, the remote subsidiary 6 TS JV LLC, the entity in which Plaintiffs are members, only owns a leasehold, not real property. Moreover, Plaintiffs filing of the improper Notice of Pendency was both tactical and Machiavellian. As the Court is well aware, the $250 million first mortgage on the Property comes due on April 11, 2017, and, in the face of the newly filed Notice of Pendency, the efforts to refinance the mortgage debt have been completely derailed. The Notice of Pendency was filed just before the mortgage maturity years after Plaintiffs Page 2 of 15 6 of 19

7 learned about and accepted Paramount s investment to cause just that calamitous result, in an effort to achieve maximum leverage in the unjust buyout Plaintiffs truly seek. For these reasons, the improper Notice of Pendency should be cancelled promptly, and Defendants should be awarded costs under CPLR 6514(c). At the moment, Defendants seek only an interim costs award under CPLR 6514(c) for their legal costs in bringing this motion; but Defendants reserve the right to make a supplemental application to the Court for additional damages including the loss of the Property, and the attendant loss of equity, which, regrettably may flow even if the Notice of Pendency is cancelled, due to the taint created thereby. ALLEGATIONS OF THE COMPLAINT Plaintiffs David & Rosette Zeitourne, Raquel Aini as executor of the estate of Ezra Abed, Assa Realty LLC, directly and derivatively on behalf of 6 TS JV LLC, and the unnamed members of 6 TS JV LLC sued Defendants Ralph Sitt, David Sitt, 6 Times Square Member LLC ( 6 TS Member ), 6 TS JV LLC, 6 Times Square Mezz LLC, 1328 Broadway Owners LLC, PGRESS 2 Herald LP, and John or Jane Doe, 1-5. Plaintiffs assert 13 causes of action based on a series of patently false allegations centering around the preferred equity investment by Paramount Group, Inc., through its vehicle, PGRESS 2 Herald LP (referred to herein as Paramount ), having never been duly approved by 2/3rds of the 6 TS JV LLC investors (pursuant to an April 2010 release agreement with one of the Plaintiffs and 6 TS JV LLC) or duly approved by the unanimous vote of the 6 TS JV LLC investors pursuant to the entity s operating agreement. 1 Various other claimed breaches of 1 As for Plaintiffs inconsistent claim that the 6 TS JV LLC Agreement requires the unanimous consent of all of the members of that company to admit a member per Section Page 3 of 15 7 of 19

8 fiduciary duty and purported mismanagement are centered around Ralph Sitt having supposedly taken improper steps, including obtaining the preferred equity investment by Paramount Group, to remain in control. See Complaint, at Meister Aff. Exh. A. 2 Notably, Paramount has been an equity investor in the Property for going on four years, and Ralph Sitt has been the sole manager of the Property since it was purchased nearly a decade ago; yet, it was not until days before the first mortgage was coming due, that Plaintiffs saw fit to sue over the Paramount investment or Ralph Sitt s management, both of which they have known of and accepted without objection for years of the Operating Agreement, the fact is that PGRESS 2 Herald LP (Paramount) was admitted as a member to 6 Times Square Mezz LLC, a subsidiary of 6 TS JV LLC, not a member of 6 TS JV LLC itself, and as such, the unanimous consent of the members of 6 TS JV LLC was not required. 2 The Court is already in possession of sworn affidavits from investors in 6 TS JV LLC showing that, including the approximately 51% interest in 6 TS JV LLC owned by 6 TS Member LLC, in excess of the 2/3rds threshold in the release agreement have approved the Paramount deal. These affidavits were recently filed in the related action, Jack Sitt v. Ralph Sitt, et al., Index. No /2014 (Bransten, J.S.C.), in support of the defendants application to modify the terms of a preliminary injunction to increase the undertaking from $5, to $4,000, based on mounting damages incurred by the defendants (and non-party investors) with respect to 2 Herald (Mot. Seq. 013, NYSCEF Doc. Id. 642). See Meister Aff, Exh. C, resubmitting these affidavits. The Plaintiffs in this action are unquestionably allied with Jack Sitt. The main investor, Assa Realty LLC, is owned and controlled by Salim Assa, Jack Sitt s brother-inlaw and the Complaint and accompanying papers were filed by his in-house counsel, Richard J. Migliaccio, who previously represented Jack Sitt in a dispute with Ralph Sitt. See Affidavit of R. Sitt ( Sitt Aff. ), Exh 2. In prior moving papers concerning an Order to Show cause seeking the appointment of a receiver for 6 TS JV LLC, the Plaintiffs called for Jack Sitt to be appointed as receiver this request was later withdrawn, following Defendants highlighting the clear alliance between Plaintiffs and Jack Sitt to the Court. See Meister Aff. at Exhs. D and E. 3 See Exh. 1 to Sitt Aff. showing that he informed Plaintiffs of the Paramount investment in For the past almost four years Plaintiffs have not objected, but instead accepted the benefits of the Paramount investment and Ralph Sitt s actions as manager, Page 4 of 15 8 of 19

9 Eight of the 13 causes of action seek monetary damages only ($30,000,000.00). The remaining causes of action seek: by way of permanent injunction, to prevent Ralph Sitt from acting as Venture Coordinator for the Property, a reformation of the Paramount financing agreement, a declaratory judgment with respect to indemnification for this action, an accounting of the defendant entities, and a rescission of the alleged improper transfer of an approximate 1% member interest in 6 TS JV LLC. Below is a summary of the relief sought in the 13 causes of action asserted in the Complaint: First Cause of Action: awarding a permanent injunction enjoining Ralph Sitt and David Sitt from taking further action as manager of 6 TS JV LLC or as Venture Coordinator of 6 TS Member in the management of 6 TS JV LLC; and appointing a third-party real estate manager to act as manager of 6 TS JV LLC. Second Cause of Action: awarding judgment against Ralph Sitt, David Sitt, 6 TS Member, Paramount and the Defendant Transferor for breach of the 6 TS JV LLC operating agreement in the amount of not less than $30,000, Third Cause of Action: awarding judgment against Ralph Sitt, David Sitt, 6 TS Member, and Paramount for breach of the April 2010 release agreement in the amount of not less than $30,000, Fourth Cause of Action: awarding judgment against Ralph Sitt, David Sitt, 6 TS Member, and Paramount for conversion of Plaintiffs 6 TS JV LLC member interests through, among other things, wrongful dilution, in the amount of not less than $30,000, Fifth Cause of Action: awarding judgment against Ralph Sitt, David Sitt, 6 TS Member, and Paramount for rescission or reformation of the 6 Times Square Mezz LLC Second Amended and Restated Limited Liability Company Agreement dated December 17, and their claims are now barred by waiver, estoppel, and laches. See Jumax Assocs. v. 350 Cabrini Owners Corp., 46 A.D.3d 407 (1st Dep't 2007) (dismissing the complaint based on affirmative defenses of waiver and estoppel where plaintiff's failure to assert its right...evinced a knowing intent not to claim such right ); Second St. Housing Corp. v. Fridal Enters., Inc., 36 A.D.3d 608 (2d Dep't 2007) (affirming summary judgment based on equitable estoppel where the lender acquiesced in the borrower's payments at a reduced rate without complaint or objection for a period of several years). Page 5 of 15 9 of 19

10 Sixth Cause of Action: a declaratory judgment that Ralph Sitt, David Sitt, and 6 TS Member are not entitled to indemnification for this action. Seventh Cause of Action: awarding judgment against all Defendants for an accounting of the entity defendants. Eight Cause of Action: awarding judgment against Ralph Sitt, David Sitt, 6 TS Member, and Paramount for breach of the implied covenant of good faith and fair dealing, in an amount not less than $30,000, Ninth Cause of Action: awarding judgment against Ralph Sitt, David Sitt, 6 TS Member, and Paramount for breach of fiduciary duty, in an amount not less than $30,000, Tenth Cause of Action: awarding judgment against Ralph Sitt, David Sitt, 6 TS Member, and 6 Times Square Mezz LLC for unjust enrichment, in an amount not less than $30,000, Eleventh Cause of Action: awarding judgment against Ralph Sitt, David Sitt, 6 TS Member, and 6 Times Square Mezz LLC for gross negligence, in an amount not less than $30,000, Twelfth Cause of Action: awarding judgment rescinding the transfer of the approximately 1% member interest in 6 TS JV LLC against Ralph Sitt, David Sitt, 6 TS Member and John Doe and Jane Doe 1 through 5. Thirteen Cause of Action: awarding judgment on behalf of 6 TS JV LLC and other unnamed members of 6 TS JV LLC for damages in an amount as determined by the Court due to the breaches of fiduciary duties, breaches of contract, misconduct, gross negligence, self-dealing and wrongful conduct of the Defendants. See Meister Aff., Exh. A. As can be seen, the sole conversion claim, the Fourth Cause of Action, centers around the alleged conversion of a membership interest in 6 TS JV LLC, not real property, as is falsely stated in the Notice of Pendency. None of the 13 causes of action seek a judgment that would affect title to, or the possession, use or enjoyment of real property. Page 6 of of 19

11 STANDARD OF REVIEW The Court of Appeals has called a party s ability to file a notice of pendency an extraordinary privilege. Israelson v. Bradley, 308 N.Y. 511 (1955). It permits a party to effectively retard the alienability of real property without any prior judicial review Realty Corp. v. O & Y Equity Corp., 64 N.Y.2d at 320. Under CPLR 6501, [a] notice of pendency may be filed in any action in which the judgment demanded would affect the title to, or the possession, use or enjoyment of real property But, under CPLR 6514(a), the Court shall direct the Clerk to cancel a notice of pendency where, according to judicial interpretation (discussed below), the claims asserted in the underlying complaint do not qualify for the filing of a notice of pendency under CPLR (b): Separately, a Court may, in its discretion, cancel a notice of pendency under CPLR The court, upon motion of any person aggrieved and upon such notice as it may require, may direct any county clerk to cancel a notice of pendency, if the plaintiff has not commenced or prosecuted the action in good faith. The Court of Appeals has stated that CPLR 6514(b) vests a court with the discretion to counterbalance the powerful impact a notice of pendency has on the alienability of property Realty Corp. 64 N.Y.2d at 315. Because a notice can be filed so easily and exacts a harsh penalty, the court must examine the complaint in its entirety to determine if it truly affects title, possession, use or enjoyment of real property, rather than simply relying on the words of the prayer for relief. Id., 323. See also Ostad v. Nehmadi, 2011 WL *2, 31 Misc.3d 1211(A) (Sup. Ct. N.Y. Cnt y, Apr. 8, Page 7 of of 19

12 2011) ( in reviewing the complaint, courts are not bound by the labels a plaintiff assigns to his claim or the relief sought ). 4 Given the opportunity for abuse, courts have recognized that: the privilege of filing a lis pendens may be used only as a shield for the protection of the bona fide rights of a plaintiff in real property, but [ ] such privilege ceases when the lis pendens is used as a sword against the owner [or possessor] of realty. Weisinger v. Rae, 19 Misc.2d 341, 188 N.Y.S.2d 10 (Sup. Ct., Queens Cnt y, 1959) (citing Israelson v. Bradley, 308 N.Y. 511 (1955). The Appellate Division has held, in Nastasi v. Nastasi, 26 A.D.3d 32, 41 (2d Dep t 2005), [w]here a plaintiff is using the notice of pendency for an ulterior purpose, a finding of lack of good faith can be made. The Court of Appeals has instructed: it is simply improper to use a notice of pendency as a form of attachment. See 5303 Realty, 64 N.Y.2d at 324. ARGUMENT I. THE COURT SHOULD ORDER MANDATORY CANCELLATION OF THE NOTICE OF PENDENCY UNDER CPLR 6514(a) BECAUSE THE COMPLAINT DOES NOT SEEK A JUDGMENT THAT QUALIFIES UNDER CPLR 6501 FOR THE FILING OF A NOTICE OF PENDENCY The mandatory cancellation section, CPLR 6514(a), is regularly used by courts to cancel notices where the underlying complaint does not seek a judgment qualifying for the filing of a notice of pendency under CPLR See Rose v. Montt Assets, Inc., 250 A.D.2d 451 (1 st Dep t 1998); Henrietta Piping, Inc. v. Antetomasco & Micca Group, LLC 4 Critically, when considering a cancellation motion, a court is confined to reviewing the complaint as pled at the time the notice is filed, and may not consider any amended allegations. As the Court of Appeals explained in 5303 Realty, a subsequent, amended complaint cannot be used to justify an earlier notice of pendency Realty, 64 N.Y.2d at 320. Page 8 of of 19

13 816 N.Y.S.2d 663 (Sup. Ct. Monroe Cnt y Feb. 2006); see generally Braunston v. Anchorage Woods, Inc., 10 N.Y.2d 302 (1961). CPLR 6501 only permits the filing of a notice of pendency where the complaint seeks a judgment that would affect title to, or the possession, use or enjoyment of real property. Here, it is plain that the Complaint does not seek such a judgment. Although the Notice of Pendency falsely states that that the Complaint asserts a claim for conversion of real property, that is not so. The Complaint only asserts a claim for conversion of a memberhip interest. In New York, a membership interest in an LLC does not equate to ownership of the individual assets of the LLC. See N.Y. Ltd. Liab. Co. Law 601. ( A membership interest in the limited liability company is personal property. A member has no interest in specific property of the limited liability company. ); Yonaty v. Glauber, 40 A.D.3d 1193 (3d Dep't 2007) (finding that plaintiff's interest in an LLC was not equivalent to an ownership interest in the real property owned by the LLC); Sealy v. Clifton, 68 A.D.3d 846, 847 (2d Dep't 2009) ( A member has no interest in specific property of the limited liability company. ). Accordingly, under blackletter law handed down by New York s highest court, where the subject of a lawsuit is a membership interest in an entity that owns real property, and not real property itself, a notice of pendency may not be filed. See 5303 Realty Corp., 64 N.Y.2d at 323 citing Brock v. Poor, 216 N.Y. 387 (1915) ( In the present action, plaintiff cannot have the advantage of a notice of pendency. Although the prayer for relief seeks a transfer of title, the court must examine the complaint in its entirety. It is apparent from the allegations that the true action is to enforce a contract to sell stock ownership of capital stock is by no means identical with or equivalent to ownership of corporate Page 9 of of 19

14 property To allow plaintiff here to have its notice of pendency would run counter to the Brock rule and muddle an otherwise clear concept. Consequently, the notice must be canceled. ). Following 5305 Realty, the New York courts have routinely cancelled notices of pendency where the parties who filed them claimed an interest in personal not real property. See Rose v. Montt Assets, Inc., 250 A.D.2d at ( a notice of pendency is not proper in an action concerning personal property that respents a beneficial ownership in real property ); Felske v. Bernstein 173 A.D.2d 677, 678 (2d Dep t 1991) ( even if the defendants were granted specific performance in the underlying action, that fact alone would not give them an interest in the subject realty because the defendants interest in the joint venture would be an interest in personal property, not an interest in the realty ); Savasta v. Duffy, 257 A.D.2d 435, 436 (1 st Dep t 1999)( The court properly canceled the notice of pendency since shares in a cooperative apartment are personal not real properly). In any event, the majority of the Complaint s 13 cause of action seek solely monetary relief ($30 million), including the conversion claim. See Long Island City Sav. and Loan Ass'n v. Gottlieb, 131 A.D.2d 821 (2d Dep t 1987) ( [I]f a complaint asserts in essence only in money claim, the plaintiff forfeits his right to use the notice of pendency. ) As explained above, the claims seeking non-monetary relief seek: by way of permanent injunction, to prevent Ralph Sitt from acting as Venture Coordinator for the Property (First Cause of Action); a recision/reformation of the Paramount financing agreement (Fifth Cause of Action), a declaratory judgment with respect to indemnification for this action (Sixth Cause of Action), an accounting of the defendant entities (Seventh Page 10 of of 19

15 Cause of Action); and rescission of the alleged transfer of an approximate 1% member interest in 6 TS JV LLC (Twelfth Cause of Action). Thus it is inarguable that the Complaint asserts no claim that seeks a judgment that would affect title to, or the possession, use or enjoyment of real property. Compounding matters, the entity in which Plaintiffs hold their allegedly converted membership interest 6 TS JV LLC only owns, through its remote subsidiary, defendant 1328 Broadway Owner LLC, a leasehold interest in (not fee title to) the Property, yet the Notice of Pendency purports to encumber the underlying land (see Schedule A to the Notice of Pendency, Meister Aff., Exh. B.) Said differently, Plaintiffs Notice of Pendency is not only improper because their conversion claim relates to personal property (a membership interest), it is doubly wrongful because it purports to encumber title to land held by 1328 Broadway Owner LLC s landlord, who is not even a party to the suit. II. ALTERNATIIVELY, THE COURT SHOULD CANCEL THE NOTICE OF PENDENCY IN ITS DISCRETION UNDER CPLR 6514(b) A. Plaintiffs Have Commenced the Action in Bad Faith A lis pendens requires promptness on the part of the litigant so favored 5 and may be used only to protect bona fide interests in real property. Plaintiffs have instead used the notice as a sword to coerce an undeserved settlement by using the lis pendens to thwart the refinancing of the Property days before the first mortgage comes due and years after they learned of the complained of alleged wrongs. See Sitt Aff., 13, Wells Fargo Bank, N.A. v. Hunte, 27 Misc.3d 1209(A), 4, 910 N.Y.S.2d 409 (Sup. Ct., Queens Cnt y, 1959) citing Israelson v. Bradley, 308 N.Y. 511 (1955). Page 11 of of 19

16 Here the Plaintiffs bad faith is quickly and dispostively demonstrated by simply comparing the Complaint to the Notice of Pendency. While the Notice of Pendency states that the Complaint asserts a claim for conversion of real property, a cursory review of the Complaint reveals that is not so. The Complaint s sole conversion claim alleges conversion of a memberhip interest. None of the relief sought in the Complaint would affect title to, or the possession, use or enjoyment of real property, which is why the Plaintiffs resorted to falsely stating otherwise in the Notice of Pendency. Absent that false statement, the Clerk doubtless would have rejected the Notice of Pendency. Compounding matters, as stated above, the Notice of Pendency purports to encumber the underlying land, which is owned by 1328 Broadway Owners LLC s landlord, who is not even a party hereto. Plaintiffs bad faith is further underscored by the timing of their Complaint and Notice of Pendency days before the first mortgage comes due but years after they learned of the complained of wrongs. III. COSTS AND EXPENSES A. CPLR 6514(c) To counterbalance the ease of the nonjudicially supervised filing of a notice... [and] [t]he risk of an erroneous deprivation for unscrupulous plaintiffs to hold up owners, or to force settlements Hercules Chemical Co., Inc. v. VCI, Inc., 118 Misc.2d 814, 825, 462 N.Y.S.2d 129, 137 (Sup. Ct. N.Y. Cnt ty, 1983), CPLR 6514(c) provides: The court, in an order cancelling a notice of pendency under this section [meaning (a) or (b) of 6514], may direct the plaintiff to pay any costs and expenses occasioned by the filing and cancellation, in addition to any costs of the action. (emphasis added). Page 12 of of 19

17 Plaintiffs should be directed to pay the costs and expenses incurred by Defendants due to the filing of the Notice of Pendency, along with the costs to cancel. While the calculation of the final costs and expenses is best left to a separate inquest, and because this figure cannot be determined with finality until after the Notice of Pendency is cancelled, at a minimum the Court should enter an interim costs award that includes the costs and expenses Defendant has incurred to litigate this motion, See, generally, Josefsson v. Keller, 141 A.D.2d 700, 530 N.Y.S.2d 10 (2d Dep t 1988) (awarding costs and expenses when action including lis pendens was not filed in good faith); Tucker v. Mashomack Fish & Game Preserve Club, 199 A.D.2d 957 (3d Dep t 1993) (holding that costs and expenses incurred due to the continuation of a notice of pendency included taxes, carrying charges, interest on monies borrowed to pay taxes, and the loss of interest on funds that would have been realized by a sale); #1 Funding Center, Inc. v. H&G Operating Corp., 48 A.D.3d 908, 911 (3d Dep t 2008) (holding that the purpose of CPLR 6514(c) is to reimburse a party for costs and expenses incurred as a result of a wrongful filing of a notice of pendency, and such costs and expenses are in addition to, and separate and distinct from, any damages sustained by a party arising from the underlying claims in the action ); and Yenom v. 155 Wooster Street, 2005 WL (1st Dep t 2005) (holding that in the absence of credible evidence the action and filing of the notice of pendency constituted frivolous and sanctionable conduct and affirming costs and expenses pursuant to CPLR 6514(c)). Here, the Defendants have incurred $15,000 in legal fees in bringing this motion to date, but will incur additional fees in writing their reply papers and arguing the motion. See Meister Aff., 16. That should form the basis of the interim costs award. Page 13 of of 19

18 B. Rule 130 Sanctions In addition to an award of costs and expenses pursuant to CPLR 6514(c), this action also warrants the imposition of sanctions. 22 N.Y.C.R.R permits a court, in its discretion, to award to any party or attorney in a civil action, costs in the form of reimbursement for actual expenses reasonably incurred and reasonable attorneys fees, resulting from frivolous conduct, as defined under Rule 130 if: 1.) It is completely without merit in the law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law; or 2.) It is undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another. 3.) It asserts material factual statements that are false. A court properly imposes Rule 130 sanctions against a party where, as here, the party s claims are barred by the plain language of a written agreement between the parties (see, e.g., Timoney v. Newmark & Co. Real Estate, Inc., 299 A.D.2d 201 (1st Dep t 2002), or where, as here, a claim is brought for improper purposes (see, e.g., Gordon v. Marrone, 202 A.D.2d 104 (2d Dep t 1994). Defendants reserve the right to submit supplemental applications for further costs including the potential loss of the equity in the Property, even if that happens following the cancellation of the Notice of Pendency, due to the taint it imposed on the Property. CONCLUSION Because the Complaint does not seek a judgment that would affect title to, or the possession, use or enjoyment of real property the Court should order the mandatory cancellation of the Notice of Pendency under CPLR 6514(a). Alternatively, the Court should order the cancellation of the Notice of Pendency in its discretion under CPLR Page 14 of of 19

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