SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK PETER ARNOLD, ELI LAZARUS, SEAN ROCHA and MICHAEL SCHILLER, -against- Plaintiffs, 4-6 BLEECKER STREET LLC, 316 BOWERY REALTY CORP., WALSAM 316 LLC, WALSAM 316 BOWERY LLC, WALSAM BLEECKER LLC, LAWBER BOWERY LLC, and 316 BOWERY NEXT GENERATION LLC, Index No. 158541/2013 VERIFIED AMENDED ANSWER TO 4-6 BLEECKER STREET LLC' S AMENDED CROSS-CLAIMS Defendants. Defendants 316 Bowery Realty Corp., Walsam 316 LLC, Walsam 316 Bowery LLC, Walsam Bleecker LLC, Lawber Bowery LLC, and 316 Bowery Next Generation LLC (collectively, the "Bowery Defendants"), by their attorneys, Rosenberg & Estis, P.C., as and for their amended answer to co-defendant 4-6 Bleecker Street LLC's ("4-6 Bleecker") amended cross-claims, dated June 28, 2017 (the "Cross-Claims"), allege the following: 1. The Bowery Defendants deny the allegations set forth in paragraphs 1, 8, 10, 11, 14, 20, 24, 26, 27, 28, 32, 34, 37, 39, 40, 44, 46, 49, 56, 62, 63, 64, 65, 66, 68, 70, 72, 73, 74, 79, 82, 83 and 84 of the Cross-Claims, respectfully refer the Court to any documents referenced in said paragraphs for their terms and legal effect, and respectfully refer any conclusions of law to the Court for determination 2. The Bowery Defendants deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraphs 2, 3, 4, 5, 6, 7, 9, 12, 13, 15, 16, 17, 18, 19, 21, 22, 25, 28, 29, 30, 31, 33, 38, 41, 42, 43, 45, 47, 48, 50, 51, 52, 53, 54, 55, 57, 58, 59, 60, 61, 67, 69, 71, 75, 76, 77, 78, 80 and 81 of the Cross-Claims, respectfully refer the Court to RE\80670\0001 ~2230653v5 1 of 12
any documents referenced in said paragraphs for their terms and legal effect, and respectfully refer any conclusions of law to the Court for determination. 3. The Bowery Defendants admit the allegations set forth in paragraphs 23, 35 and 36 of the Cross-Claims. 4. The Bowery Defendants deny any and all allegations heretofore not controverted. AS AND FOR A FIRST AFFIRMATIVE DEFENSE 5. The Cross-Claims fail to state a cause of action upon which relief may be granted. 6. By reason of the foregoing, the Cross-Claims should be dismissed. AS AND FOR A SECOND AFFIRMATIVE DEFENSE 7. The Cross-Claims are barred by the doctrines of res judicata and/or collateral estoppel. 8. By reason of the foregoing, the Cross-Claims should be dismissed. AS AND FOR A THIRD AFFIRMATIVE DEFENSE 9. There is another action pending between the parties for the same causes of action as in the Cross-Claims. 10. By reason of the foregoing, the Cross-Claims should be dismissed. AS AND FOR A FOURTH AFFIRMATIVE DEFENSE 1 1. The Bowery Defendants have a defense based upon documentary evidence barring the causes of action in the Cross-Claims. 12. By reason of the foregoing, the Cross-Claims should be dismissed. AS AND FOR A FIFTH AFFIRMATIVE DEFENSE 13. The Cross-Claims are barred, in whole or in part, by the Statute of Frauds. 14. By reason of the foregoing, the Cross-Claims should be dismissed. RE\80670\0001~2230653v5-2- 2 of 12
AS AND FOR A SIXTH AFFIRMATIVE DEFENSE 15. The relief 4-6 Bleecker seeks is precluded by virtue of 4-6 Bleecker's unclean hands, inequitable conduct and/or unjust enrichment. 16. By reason of the foregoing, the Cross-Claims should be dismissed. AS AND FOR A SEVENTH AFFIRMATIVE DEFENSE 17. The Cross-Claims' causes of action are barred, in whole or in part, by the doctrines of waiver, estoppel, and laches. 18. By reason of the foregoing, the Cross-Claims should be dismissed. AS AND FOR AN EIGHTH AFFIRMATIVE DEFENSE 19. The underlying order upon which the Cross-Claims are based is currently the subject of an appeal. 20. By reason of the foregoing, the Cross-Claims are not ripe for adjudication and should be dismissed or, alternatively, stayed pending outcome of the appeal. AS AND FOR A NINTH AFFIRMATIVE DEFENSE 21. 4-6 Bleecker breached and failed to perform pursuant to the parties' purchase and sale agreement and/or net lease. 22. By reason of the foregoing, the Cross-Claims should be dismissed. AS AND FOR A TENTH AFFIRMATIVE DEFENSE 23. 4-6 Bleecker lacks the legal capacity to sue. 24. By reason of the foregoing, the Cross-Claims should be dismissed. AS AND FOR A ELEVENTH AFFIRMATIVE DEFENSE 25. 4-6 Bleecker's claims are barred by the statute of limitations. 26. By reason of the foregoing, the Cross-Claims should be dismissed. R E\80670\0001 X2230653 v 5-3- 3 of 12
AS AND FOR A TWELFTH AFFIRMATIVE DEFENSE 27. The Bowery Defendants have a defense founded upon payment and/or release. 28. By reason of the foregoing, the Cross-Claims should be dismissed. AS AND FOR AN THIRTEENTH AFFIRMATIVE DEFENSE 29. Any purported damages suffered by 4-6 Bleecker were caused, in whole or in part, by 4-6 Bleecker's own actions) or inaction(s). 30. By reason of the foregoing, the Cross-Claims should be dismissed and/or 4-6 Bleecker's recovery must be barred and/or diminished in proportion to that part of its damages attributable to 4-6 Bleecker's actions) or inaction(s). FACTS COMMON TO ALL CROSS-CLAIMS 31. The Bowery Defendants repeat and reallege the allegations contained in paragraphs 1 through 30, as if fully set forth herein. 32. On or about August 10, 2012, 316 Bowery Realty Corp. ("316 Bowery"), as seller, and 4-6 Bleecker, as purchaser, entered into a purchase and sale agreement (the "2012 PSA") for the residential portion of the building known as and located at 4-6 Bleecker Street, New York, New York (the "Building"). 33. Pursuant to Section 10.3 of the 2012 PSA, 4-6 Bleecker "shall not assign this Agreement without the prior written consent of Seller in each instance. Any attempted assignment without the prior written consent of Seller shall be null and void." 34. On or about April 16, 2013, 316 Bowery, as landlord, and 4-6 Bleecker, as tenant, entered into a lease agreement (the"net Lease") for the residential portion of the Building. 35. Pursuant to Section 11.1 of the Net Lease, 4-6 Bleecker, as the only party in privity with the residential tenants of the Building, assumed the legal obligation of providing the Bowery RE\80670\0001~2230653v5-4- 4 of 12
Defendants with the requisite access needed in order for the Bowery Defendants to comply with its obligations under the 2012 PSA. 36. Pursuant to Section 21.2 of the Net Lease, 4-6 Bleecker agreed to "indemnify and hold harmless Landlord from and against any and all liability, fines, suits, claims, demands and actions, and costs and expenses of any kind or nature of anyone whomsoever, whether or not caused by negligence of Tenant." 37. On or about April 16, 2013, 316 Bowery, as assignor, and 4-6 Bleecker, as assignee, entered into an assignment and assumption of lease agreement (the "Assignment of Leases") for all the residential leases in the Building. 38. Pursuant to paragraph 2 of the Assignment of Leases, 4-6 Bleecker "assume[d] and shall be liable for any and all liabilities, claims, obligations, losses and expenses, including reasonable attorneys' fees arising in connection with the Lease which are actually incurred, and which arise by virtue of the acts or omissions occurring thereunder, on or after [April 16, 2013]." 39. Pursuant to paragraph 3 of the Assignment of Leases, 4-6 Bleecker "shall indemnify and hold Assignor harmless from any and all liabilities, claims, obligations, loss and expense, including reasonable attorney's fees, arising in connection with the Lease." AS AND FOR A FIRST CROSS-CLAIM (Breach of Contract) 40. The Bowery Defendants repeat and reallege the allegations contained in paragraphs 1 through 39, as if fully set forth herein. 41. The 2012 PSA is a valid and binding agreement setting forth the obligations and duties of both the Bowery Defendants and 4-6 Bleecker. 42. Pursuant to Section 10.3, one such obligation of 4-6 Bleecker was not to assign its interest in the 2012 PSA without the prior written consent of the Bowery Defendants. RE\80670\0001 ~2230653v5-5- 5 of 12
43. Upon information and belief, Douglas Ballinger, the principal of 4-6 Bleecker, transferred his interest in 4-6 Bleecker to GRJ, LLC ("GRJ"), without the written consent of the Bowery Defendants. 44. The foregoing transfer was akin to an assignment under the 2012 PSA. 45. The foregoing transfer was done in an attempt to circumvent the express provision of the 2012 PSA barring any such assignment without the written consent of the Bowery Defendants. 46. The Net Lease is a valid and binding agreement setting forth the obligations and duties of both the Bowery Defendants and 4-6 Bleecker. 47. Pursuant to Section 11.1 of the Net Lease, 4-6 Bleecker assumed the legal obligation of providing the Bowery Defendants with the requisite access needed in order for the Bowery Defendants to fulfill their obligations under the 2012 PSA. 48. 4-6 Bleecker has failed to provide the required access the Bowery Defendants need in order to comply with the 2012 PSA. 49. As a result of the foregoing breaches, the Bowery Defendants have been damaged and are entitled to a money judgment against 4-6 Bleecker, in an amount to be determined by the Court. AS AND FOR A SECOND CROSS-CLAIM (Declaratory Judgment) 50. The Bowery Defendants repeat and reallege the allegations contained in paragraphs 1 through 49, as if fully set forth herein. 51. Upon information and belief, GRJ's unauthorized purchase/assignment of interests in 4-6 Bleecker was at a severely discounted rate. RE\80670\0001~2230653v5-6- 6 of 12
52. Because 4-6 Bleecker's interest was purchased at a severely discounted rate, 4-6 Bleecker cannot recover anything more than the amount GRJ paid to purchase its interest in 4-6 Bleecker. 53. Pursuant to paragraph 2 of the Assignment of Leases, 4-6 Bleecker assumed any and all liabilities, claims, obligations, losses and expenses, including reasonable attorneys' fees arising in connection with the residential leases of the Building on or after April 16, 2013. 54. GRJ purchased its interest in 4-6 Bleecker with full knowledge of the pending litigation including, but not limited to, 4-6 Bleecker's alleged claim of deceit and/or fraud in this Action. 55. Therefore, any claims 4-6 Bleecker has with respect to alleged deceit and/or fraud must be rejected. 56. As a result of the foregoing, the Bowery Defendants are entitled to a declaration that: (i) 4-6 Bleecker's alleged damages, if any, cannot exceed the severely discounted amount paid by GRJ; and (ii) any claims for deceit and/or fraud must be rejected based on the parties' agreements and/or GRJ's knowledge of the pending litigation in this Action. AS AND FOR A THIRD CROSS-CLAIM (Declaratory Judgment) 57. The Bowery Defendants repeat and reallege the allegations contained in paragraphs 1 through 56, as if fully set forth herein. 58. 4-6 Bleecker continues to use and occupy the Building and continues to collect rent from the residential tenants of the Building. 59. 4-6 Bleecker continues to use and occupy the Building without paying any rent to the Bowery Defendants. RE\80670\0001~2230653v5-7- 7 of 12
60. 4-6 Bleecker has engaged in inequitable conduct including, but not limited to, refusing to permit the Bowery Defendants access to the residential units of the Building. 61. The foregoing inequitable conduct is calculated to impede the Bowery Defendants from complying with their obligations under the parties' agreements. 62. As a result of the foregoing, the Bowery Defendants are entitled to a declaration that: (i) 4-6 Bleecker has been unjustly enriched to the extent that it has profited from the residential tenants of the Building; (ii) 4-6 Bleecker shall be disgorged from any profits it may have made including, but not limited to, any profits made from the alleged overcharge claims of the plaintiffs in this Action; and (iii) as a result of 4-6 Bleecker's inequitable conduct and/or unclean hands, any damages to be awarded to the plaintiffs in this Action shall be borne by 4-6 Bleecker and not the Bowery Defendants. AS AND FOR A FOURTH CROSS-CLAIM (Indemnity) 63. The Bowery Defendants repeat and reallege the allegations contained in paragraphs 1 through 62, as if fully set forth herein. 64. Pursuant to Section 21.2 of the Net Lease, 4-6 Bleecker agreed to indemnify and hold the Bowery Defendants harmless from and against any and all liabilities, suits, claims, and of any kind or nature arising in relation to the Net Lease. 65. Pursuant to paragraph 3 of the Assignment of Leases, 4-6 Bleecker agreed to indemnify and hold the Bowery Defendants harmless from any and all liabilities, claims, obligations, loss and expense arising in connection with any of the residential leases for the Building. Action. 66. The effective dates of the parties' agreements pre-date the commencement of this RE\80670\0001 ~2230653v5-8- 8 of 12
67. By virtue of the foregoing, the Court should enter an indemnity judgment declaring that 4-6 Bleecker pay any and all damages that may be awarded to the plaintiffs in this Action. AS AND FOR A FIFTH CROSS-CLAIM (Declaratory Judgment) 68. The Bowery Defendants repeat and reallege the allegations contained in paragraphs 1 through 67, as if fully set forth herein. 69. Section 10.8 of the 2012 PSA provides that 4-6 Bleecker "agrees to look solely to Seller's interest in the Property and/or proceeds arising therefrom (including all payments made with respect to the proceeds from the Purchase Price) for satisfaction of any liability of Seller under or in respect of this Agreement." 70. In the event the Court permits a rescission of the parties' agreements, including the 2012 PSA, and finds the Bowery Defendants at fault, the Bowery Defendants are entitled to a declaration that 4-6 Bleecker's damages shall be no greater than the amount paid to acquire its interest in the Building. AS AND FOR A SIXTH CROSS-CLAIM (Attorneys' Fees) 71. The Bowery Defendants repeat and reallege the allegations contained in paragraphs 1 through 70, as if fully set forth herein. 72. As a result of 4-6 Bleecker's multiple breaches, inequitable conduct and/or unclean hands, the Bowery Defendants have incurred and continues to incur attorneys' fees and costs. 73. Section 10.9 of the 2012 PSA provides that the Bowery Defendants may recover their reasonable attorneys' fees and costs from 4-6 Bleecker. RE\80670\0001 ~2230653v5-9- 9 of 12
74. By reason of the foregoing, the Bowery Defendants are entitled to a judgment against 4-6 Bleecker for the amount of their attorneys' fees and costs, in an amount to be determined by the Court. Bleecker: WHEREFORE, the Bowery Defendants request the following relief against 4-6 On the First Cross-Claim: A money judgment against 4-6 Bleecker for its multiple breaches of the parties' agreements, in an amount to be determined by the Court; On the Second Cross-Claim: A judgment declaring that: (i) 4-6 Bleecker's alleged damages, if any, cannot exceed the severely discounted amount paid by GRJ; and (ii) any claims for deceit and/or fraud must be rejected based on the parties' agreements and/or GRJ's knowledge of the pending litigation in this Action; On the Third Cross-Claim: A judgment declaring that: (i) 4-6 Bleecker has been unjustly enriched to the extent that it has profited from the residential tenants of the Building; (ii) 4-6 Bleecker shall be disgorged from any profits it may have made including, but not limited to, any profits made from the alleged overcharge claims of the plaintiffs in this Action; and (iii) as a result of 4-6 Bleecker's inequitable conduct and/or unclean hands, any damages to be awarded to the plaintiffs in this Action shall be borne by 4-6 Bleecker and not the Bowery Defendants; On the Fourth Cross-Claim: An indemnity judgment declaring that 4-6 Bleecker pay any and all damages that may be awarded to the plaintiffs in this Action; and On the Fifth Cross-Claim: A judgment declaring that in the event the Court permits a rescission of the parties' agreements, including the 2012 PSA, and finds the Bowery Defendants at fault, that 4-6 Bleecker's damages shall be no greater than the amount paid to acquire its interest in the Building; and On the Sixth Cross-Claim: A money judgment against 4-6 Bleecker for the amount of their attorneys' fees and costs, in an amount to be determined by the Court; and Granting the Bowery Defendants such other and further relief as the Court may deem just, RE\80670\0001~2230653v5-10- 10 of 12
proper, and equitable. Dated: New York, New York ROSENBERG & ESTIS, P.C. August 15, 2017 Attorneys for the Bowery De an s By: Bradley S. Silverbush 733 T ird Avenue New York, New York 10017 (212) 867-6000 RE\80670\0001 ~2230653v 5-11- 11 of 12
VERIFICATION STATE OF NEW YORK ) COUNTY OF NEW YORK ) ss.. Peter B. Weiss, being duly sworn, deposes and says: 1. I am the Senior Executive Managing Director of Walter &Samuels, Inc., the managing agent for the Bowery Defendants. 2. I have read the Verified Amended Answer to 4-6 Bleecker Street LLC's Amended Cross-Claims, and know the contents thereof; and the same is true to my own knowledge, except as to the matters alleged upon information and belief, and as to those matters, I believe them to be true. The sources of my information and belief are the books and records of the Bowery Defendants. 3. This verification is made by deponent because the Bowery Defendants are limited liability companies and I am the Senior Executive Managing Director of their managing agent. ~~. PETER B. EISS Sworn to before me this /*S ~' day of August 2017 C. FOREST IC, State of w York NOTAR~~i 6278998 C ommission Expl et Ap II 08, 2pn~ RE\80670\0001\2230653x5-12- 12 of 12