-vs- Case No. 16- CB HON. MADISON THEATRE BUILDING CB MASTER TENANT, LLC, FILED IN MY OFFICE a Michigan Limited Liability Company,

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1 la STATE OF MICHIGAN WAYNE COUNTY CIRCUIT COURT EGRINI, INC., d/b/a ANGELINA ITALIAN BISTRO a Michigan Corporation, DEAN ELLIOTT (P-60608) Dean Elliott, PLC Attorney for Plaintiff 201 East Fourth Steet Royal Oak, Michigan (248) Plaintiff, -vs- Case No. 16- CB HON. MADISON THEATRE BUILDING CB MASTER TENANT, LLC, FILED IN MY OFFICE a Michigan Limited Liability Company, WAYNE COUNTY CLERK 12/15/2016 3:41:04 PM Defendant. CATHY M. GARRETT / ERNST & MARKO, PLC By: Kevin Ernst (P44223) Attorney for Plaintiff 645 Griswold, Ste Detroit, MI (313) / COMPLAINT FOR DECLARATORY JUDGMENT Plaintiff, by Counsel, in support of its complaint for declaratory relief against Defendant, states as follows: 1. Plaintiff Egrini, Inc. d/b/a Angelina Italian Bistro is a lawfully formed Michigan Corporation doing business in the City of Detroit, County of Wayne, State of Michigan. Page 1 of 14

2 2. Defendant Madison Theatre Building Master Tenant, LLC is a lawfully formed Michigan Limited Liability Company doing business in the City of Detroit, County of Wayne, State of Michigan. 3. All events complained of occurred in the City of Detroit, County of Wayne, State of Michigan, and the leased premises is located in Detroit, Michigan. 4. This Court has jurisdiction because there is an actual controversy within this Court s jurisdiction necessitating a declaration of legal rights between the parties and the Court has jurisdiction to grant this equitable relief. FACTUAL ALLEGATIONS 5. The Plaintiff realleges and incorporates by reference the preceding paragraphs. 6. Madison Theatre Building, LLC owns the building located at 1565 Broadway, Detroit, Michigan 48226, more commonly known as the Mad@son Theater Building in Grand Circus Park. 7. It is the first building purchased in downtown Detroit by entities owned by Dan Gilbert. 8. Defendant Madison Theatre Building Master Tenant, LLC is the landlord and Plaintiff is one of three tenants on the first floor of the building, the others being Stub Hub and Asher Supply Coffee Company. 9. Plaintiff Angelina s is an upscale Class C licensed Italian restaurant which invested over $1,000, in renovations prior to opening. 10. It employs 25 people and served over 50,000 customers so far in Page 2 of 14

3 11. On January 4, 2007, Plaintiff Angelina s Bistro, Inc. entered into a lease with Broadway Property Partners, LLC, the former landlord and owners of the Madison Theatre Building, for 5909 square feet at 1565 Broadway in which to open its restaurant. 12. The lease called for the payment of monthly rent and common area maintenance (CAM). (Exhibit 1, Lease.) 13. The lease also called for the Plaintiff to pay all separately metered utilities such as heat, gas and electric bills. (Exhibit 1, 7.) 14. Broadway Property Partners, LLC had severe financial problems, and Plaintiffs, who were renting only a portion of the first floor, were forced to pay the heat and electric bills for the entire six story building, in order to stay open. 15. This lease was subsequently modified by the First Lease Amendment (May 11, 2007), the Second Lease Amendment (October 1, 2008), and the Third Lease Amendment (November 4, 2009), to reflect Plaintiff s additional expenditures. 16. On or about January 26, 2011, the Madison Theatre Building, LLC purchased 1565 Broadway, Detroit, Michigan from Broadway Property Partners, LLC. 17. On May 19, 2011, due to the adverse economic conditions that had prevailed for several years that adversely affected the entire region coupled with the landlord s delay of the project for one and a half years, including Plaintiff s business, Plaintiff filed a bankruptcy petition pursuant to Chapter 11 in the United States Bankruptcy Court for the Eastern District of Michigan. Page 3 of 14

4 18. When Plaintiff attempted to affirm its lease to stay in business, Madison Theatre Building, LLC filed an objection claiming that the lease was rejected from the bankruptcy estate because Plaintiff s attorney allegedly failed to accept or reject the lease within the required time. 19. After Defendant filed its bankruptcy objections, it entered into negotiations with Plaintiff on a Fourth Lease Amendment. 20. Part of the lease amendment negotiations involved a discussion of common area maintenance (CAM) charges that are generally part of every commercial lease. 21. The lease states that Plaintiff occupies 11.4% of the building and is responsible for 11.4% of the CAM charges for the building. 22. For the three years prior to Defendant buying the Broadway Theater Building, Plaintiff s share of CAM had historically been approximately $10,000 per year, or less than $ per month. 23. During the initial negotiations, Defendant stated that the CAM was going to be approximately $9, per month. This would have been more than the rent payment itself, which was approximately $6,400 per month. 24. Plaintiff objected noting this figure was astronomically more than it had ever paid in the past. 25. Defendant initially agreed that its proposed CAM statement had numerous charges that were not properly chargeable to Plaintiff, including the costs of a security command post that monitors the entire downtown area, and the costs of maintaining the entire fifth floor which holds a 75 seat private theater and private conference Page 4 of 14

5 rooms for the exclusive use of employees of companies owned by or affiliated with Dan Gilbert s Quicken Loans empire, including companies that were not and are not tenants of the Madison Theater Building. 26. Notably, Plaintiff s owners and employees are excluded from the use of these private facilities. 27. Defendant Madison Theater LLC also made substantial improvements to the roof of the building, transforming it from a blacktop roof supporting a billboard sign into a private indoor/outdoor entertainment facility, complete with a bar, outdoor cooking facilities, and seating for several dozen (if not hundreds) of people. 28. Despite adding this additional space, and despite a provision of the lease that provides that Defendant shall adjust the cam If it added additional space, Defendant refused to reduce Plaintiff s pro-rata share of any CAM expenses as specifically required by the lease. (Exhibit 1, 33.) 29. Plaintiff s owners and employees are also excluded from the roof facility, and like the private theater and conference rooms of the fifth floor, they are reserved for the exclusive use of the employees of Gilbert owned and affiliated companies. 30. In fact, these facilities can only be accessed through an entrance area that is completely separate from Angelina s space, and entry requires a badge or visitor status of one of the Gilbert-owned or affiliated tenants of the building, who occupy the second through the fourth floors. Page 5 of 14

6 31. The security guard who restricts access to these floors does not provide security for the entire building or premises, but his job is solely to restrict access to the office spaces on the upper floors. 32. Despite this, Defendant adds these security costs to the CAM. 33. After Plaintiff objected to the excessive CAM charges, the parties verbally agreed that Plaintiff would pay $2, per month in CAM until the 2012 CAM expenses were settled at which point Plaintiff would get a refund of the overpayments. 34. On April 12, 2012, the Fourth Lease Amendment was signed. 35. Since signing the Fourth Lease Amendment, Plaintiff has paid all rent due in a timely fashion. 36. Defendant has fully leased the Mad@son Building to businesses affiliated with Dan Gilbert and or companies that he controls. 37. However, nothing has changed in Plaintiff s tenancy or the premises leased by Plaintiff except that Plaintiff s use of and access to other parts of the building beyond its demised premises has become more restrictive and diminished. 38. No benefits have inurred to Plaintiff s tenancy as a result of any of the substantial renovations to the upper floors that benefit the Broadway lobby tenants only. 39. Beginning in January, 2013, Plaintiff began demanding a settlement of the 2012 CAM expenses so that it could receive its refund. 40. On January 30, 2013, Plaintiff received an from Casimer Daniewski, Property Manager for Bedrock Real Estate Services (Defendant s rental management agent) Page 6 of 14

7 that stated, We are still working on it. You should pay the same this month and then receive a credit once we adjust it. We hope to have it finalized shortly. 41. Plaintiff requested the 2012 CAM settlement statement in each subsequent month following January, 2013, and did not receive one until July, On July 3, 2013, Defendant finally sent a CAM statement for In it, Defendant claimed that the total CAM was $433, (approximately 500% more than it had been in each of the five years Plaintiff had occupied the same premises), and that Plaintiff s share of the 2012 CAM charges were approximately $50,000. In other words, Plaintiff s CAM charges went from less than $10,000 per year, which it had paid in each of the five years to the previous landlord, to nearly $50,000 per year to the new landlord. Thus, instead of receiving a refund based on the overpayment that Defendant s agent admitted Plaintiff had paid, Defendant after waiting six months to send the statement, demanded Plaintiff pay an additional $24, within 30 days. 44. Plaintiff s rent is approximately $6,648 per month. Thus, the new CAM charge is approximately 62% of the rent. 45. Notably, Defendant did not charge Plaintiff CAM for the passenger elevator because it is for the exclusive, private use of upper floor tenants who can only access the elevators after being checked through by the security guard. However, Defendant continues to charge Plaintiff for other private services provided only to these exclusive tenants. Page 7 of 14

8 46. Further, in Defendant s CAM accounting, Defendant stated, If anything is unclear or you have questions, call us. We are happy to provide clarification wherever needed. 47. In response, On August 1, 2013, Plaintiff sent Defendant a letter questioning the dramatic increase in CAM charges. 48. The letter specifically questioned the CAM charges based on the Defendant s reconfiguration of the building, the new restricted areas of the building, security charges for services provided only to selected tenants, the utility charges that had a 1400% increase, $100,000 in maintenance charges (for a completely renovated building), and $100,000 in management and administrative labor for a five story building. 49. Plaintiff also questioned why Defendant s previous agreement that there would be a reduction in the percentage of CAM charges given the roof build out, and that the security, command center, and guard service charges were not properly chargeable to Angelina s, were not reflected in the CAM statement. 50. On August 23, 2013, in response to Plaintiff s request for clarification which Defendant invited, Defendant sent a notice to quit, claiming that Angelina s was in default because it had not paid the alleged $24,000 in outstanding CAM charges, and because it had short paid the July electric bill. 51. Defendant included a notice to quit and demanded possession within seven days. 52. The electric bill for July was $ and was invoiced with a due date of August 13, Page 8 of 14

9 53. On August 2, 2013, 11 days before it was due, Plaintiff paid the bill but inadvertently made the check for payment of $ (inverting the 9 and 6) instead of $596, Defendant cashed the check but did not notify Plaintiff of the $27.00 mistake. 55. On August 21, 2013, Defendant sent Plaintiff the August electric bill, which also did not list any unpaid balance or underpayment. 56. The first time Plaintiff learned of the mistake was when Defendant s lawyer claimed that the $27 short pay constituted a second event of default (which would trigger the ability of Defendant to file a consent judgment for possession), even though Defendant was apparently aware of the short pay and did not inform Plaintiff of this obvious oversight. 57. Upon receiving notice of the $27 underpayment on the electric bill, Plaintiff mailed a check to cover the underage. th 58. Thereafter, Plaintiff filed a claim for declaratory judgment in 36 District Court seeking a declaration that the terms of the Fourth lease amendment were unconscionable and that Plaintiff was not in default. 59. Thereafter the parties began negotiations to resolve the CAM issue. 60. On or about August 11, 2014, the parties reached an agreement that Plaintiff would pay monthly CAM in the amount of $2, and Defendant agreed to reduce the alleged past due cam to $ This agreement was memorialized in s between the parties that were subscribed by Jim Ketai, managing partner of Defendant. (Exhibit 2, s.) 62. Despite this written agreement, Defendant did not reduce the disputed CAM to $0.00. Page 9 of 14

10 63. On February 4, 2015, Plaintiff ed Defendant to inquire why the disputed CAM was still being placed on Plaintiff s monthly bill. (Exhibit 3, February 2015 invoice.) 64. On February 4, 2015, Mr. Ketai responded and wrote, I may lose my mind. I thought that was taken care of. I guess I may have to do it myself. I am very sorry Tom. (Exhibit 2, February 4, 2015 Ketai .) 65. The disputed CAM was reduced to $0.00 on the next invoice. (Exhibit 4, March 2015 invoice.) 66. Since that time, Plaintiff has timely paid each invoice for CAM and rent as agreed to by Mr. Ketai, Defendant s managing partner. 67. Defendant also sent a monthly electric bill each month which Plaintiff paid. 68. On June 30, 2015, Defendant sent an that stated, I have looked at the electric usage for various restaurant tenants, and your historic bills were significantly lower than all others. With this adjustment, they are in line with the balance of our portfolio. 69. Thereafter, Defendant arbitrarily tripled the monthly electric bill without any evidence that Plaintiff was using additional electricity. 70. Plaintiff has refused to pay this additional bill as there is no evidence to support the tripling of the monthly payment and instead has continued to pay the actual amount of the monthly metered electric bill. 71. The lease also contains an option to renew for an additional seven years at fair market value. (Ex. 1, 3c.) Page 10 of 14

11 72. The lease requires that the tenant provide notice at least six months prior to the expiration that it is exercising the option. (Ex. 1, 3(c)(ii).) 73. The lease provides: That the annual base rent for the renewal term shall be determined by mutual agreement between landlord and tenant based upon that then fair market rental rate for comparable space in buildings of like quality in the same rental market as the premises as of the date the renewal term is to commence. (Ex. 1, 3(c)(iii).) 74. The lease also provides: In the event Landlord and Tenant are unable to agree upon the rental rate per square foot for the renewal term within 30 days after delivery of the renewal notice, the rental rate shall be determined as follows: two qualified appraisers (each a member of the American Institute of Real Estate Appraisers (each, an " MAI"), one chosen by Landlord and one chosen by Tenant, shall mutually agree thereupon, provided that if either party shall fail to choose an MAI within 20 days after notifying the other party of the selection of its MAI, then the appraisal by such appointed MAI shall be binding on the landlord and the tenant. If the two MAIs cannot agree within 20 days after both have been appointed, then a third MAI shall be selected by the two MAIs or failing agreement as to such third MAI within 30 days after both have been appointed, by the American Arbitration Association. The third MAI shall select one of the two appraisals, which appraisal show them be binding on the Landlord and Tenant. (Ex. 1, 3(c)(iv).) 75. On April 20, 2016, Plaintiff notified Defendant of its intent to exercise the option for seven additional years. 76. Thereafter, the parties discussed rental rates but were unable to come to terms. 77. On June 29, 2016, Plaintiff notified Defendant that it selected an MAI appraiser, as required by the lease. Page 11 of 14

12 78. The appraisal was conducted and Plaintiff s MAI determined that the fair market value of the premises is $19.00 per square foot plus CAM, and Plaintiff provided Defendant a copy of the appraisal. 79. Defendants failed to respond within the 20 day period and waived their right to contest Plaintiff s appraisal pursuant to the plain language of the lease. 80. On the 21 day, Defendant provided invalid notice that it would hire an appraiser. 81. Defendant subsequently informed Plaintiff that it obtained an appraisal that set the fair market value at $37 per square foot plus CAM. 82. This is almost double the appraisal that Plaintiff obtained. 83. When questioned about this grossly inflated number, Defendant refused to provide a copy of its appraisal. 84. Defendant then refused to acknowledge that Plaintiff exercised the option and that the new annual rate was $19 per square foot. 85. Plaintiff paid the December rent at the rate of $19 a square foot. 86. In response, on December 7, 2016, Plaintiff was informed that it now owed $145, in past due CAM charges dating back to 2012, $16, in electric bills, and $ for a glass repair. 87. In other words, Defendant unilaterally disavowed the written amendment regarding past due CAM and manufactured $145, in past due CAM charges going back to On December 8, 2016, Defendant served Plaintiff with a seven day Notice to Quit citing $162, in past due rent. ( Exhibit 5, Notice to Quit and letter.) Page 12 of 14

13 89. The past due rent contained in the notice to quit is not grounded in fact and is a complete fabrication. 90. Notably, the November 1, 2016 invoice, the last invoice before the lease option began, lists the overdue electric at $0.00 and the overdue CAM at $0.00. (Exhibit 6, November 2016 invoice.) COUNT I DECLARATORY RELIEF REQUESTED 91. The Plaintiff realleges and incorporates by reference the preceding paragraphs. 92. Plaintiff requests a declaratory judgment providing the following judicial declarations: a. That Plaintiff does not owe $145, in past due CAM charges dating back to 2012; b. That Plaintiff does not owe$16, in past due electric bills; c. That there has been no event of default regarding any unpaid rent; d. That Plaintiff exercised the option; e. That Defendant failed to respond to Plaintiff s notice of selection of appraiser; f. That the new rental rate for the seven year term is $19.00 per square feet; g. That Plaintiff s monthly CAM charge is $ or less; Page 13 of 14

14 WHEREFORE, Plaintiff respectfully requests that the Court: a. Enter a declaratory judgment in favor of Plaintiff as set forth in 92; b. Award Plaintiff reasonable attorneys fees; and c. Award any other relief that this court deems just and appropriate in this case. Respectfully Submitted, /s/dean Elliott (P-60608) December 15, 2016 Page 14 of 14