SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK -----------------------------------------------------------------X NATIONAL AUDITING SERVICES CONSULTING, LLC, Index No.: 650670/16 -against- Plaintiff, AMENDED VERIFIED ANSWER 511 PROPERTY, LLC, -----------------------------------------------------------------X Defendant. Defendant, 511 Property LLC, by and through its attorney, Joel Scott Ray, Esq., as and for an Answer to the Complaint dated October 30, 2017, herein, respectfully set forth and allege as follows: THE PARTIES 1. Defendant denies upon knowledge and information all the allegations contained in Paragraph No. 1 of the 2. Defendant admits the allegations contained in Paragraph No. 2 of the THE FACTS 3. Defendant denies knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph No. 3 of the Complaint, except to refer to the Agreement referenced therein for the content thereof and to refer all questions of law to the Court to determine. 1 1 of 16
4. Defendant denies the allegations contained in Paragraph No. 4 of the Complaint, except to refer to the Agreement referenced therein for the content thereof and to refer all questions of law to the Court to determine. 5. Defendant denies knowledge or information sufficient to form a belief as to the truth of the allegations contained in Paragraph No. 5 of the Complaint, except to refer to the Agreement referenced therein for the content thereof and to refer all questions of law to the Court to determine. 6. Defendant denies all the allegations contained in Paragraph No. 6 of the 7. Defendant denies all the allegations contained in Paragraph No. 7 of the 8. Defendant denies all the allegations contained in Paragraph No. 8 of the Complaint, except to admit that Defendant received a check. 9. Defendant denies all the allegations contained in Paragraph No. 9 of the AS AND FOR A FIRST CAUSE OF ACTION (BREACH OF CONTRACT) 10. Defendant repeats, realleges and reiterates each and every response to the allegation contained in Paragraphs No. 1 though 9 of the Complaint as if set forth herein in response to Paragraph No. 10 of the 11. Defendant denies all the allegations contained in Paragraph No. 11 of the 2 2 of 16
12. Defendant denies all the allegations contained in Paragraph No. 12 of the AS AND FOR A SECOND CAUSE OF ACTION (ACCOUNT STATED) 13. Defendant repeats, realleges and reiterates each and every response to the allegation contained in Paragraphs No. 1 though 12 of the Complaint as if set forth herein in response to Paragraph No. 13 of the 14. Defendant denies all the allegations contained in Paragraph No. 14 of the 15. Defendant denies all the allegations contained in Paragraph No. 15 of the AS AND FOR A TIIIRD CAUSE OF ACTION (CONVERSION) 16. Defendant repeats, realleges and reiterates each and every response to the allegation contained in Paragraphs No. 1 though 15 of the Complaint as if set forth herein in response to Paragraph No. 16 of the 17. Defendant denies all the allegations contained in Paragraph No. 17 of the 18. Defendant denies all the allegations contained in Paragraph No. 18 of the 19. Defendant denies all the allegations contained in Paragraph No. 19 of the 3 3 of 16
20. Defendant denies all the allegations contained in Paragraph No. 20 of the 21. Defendant denies all the allegations contained in Paragraph No. 21 of the AS AND FOR A FIRST AFFIRMATIVE DEFENSE 22. Plaintiff fails to state a cause of action upon which relief can be sought. AS AND FOR A SECOND AFFIRMATIVE DEFENSE 23. Plaintiff's claims are barred and precluded by the doctrines of waiver or estopple. AS AND FOR A THIRD AFFIRMATIVE DEFENSE 24. Plaintiff's claims are barred in whole or in part by accord and satisfaction. AS AND FOR A FOURTH AFFIRMATIVE DEFENSE 25. Plaintiff's claims are barred by equitable doctrine of unclean hands. AS AND FOR A FIFfH AFFIRMATIVE DEFENSE 26. Plaintiff's claims are barred and precluded by the statute of limitations and/or doctrine of laches. AS AND FOR AN SIXTH AFFIRMATIVE DEFENSE 27. Plaintiffs claims are barred by the statute of frauds. AS AND FOR AN SEVENTH AFFIRMATIVE DEFENSE 28. To the extent that Plaintiff has suffered any loss, such loss could have been avoided by taking measures reasonable under the circumstances to avoid or reduce loss. To 4 4 of 16
the extent that Plaintiff has suffered any loss, Plaintiff's failure to mitigate such loss deprives it of the right to part or all of the compensation it seeks herein. AS AND FOR A EIGHTH AFFIRMATIVE DEFENSE 29. Plaintiff seeks to be unjustly enriched in this action. AS AND FOR A NINTH AFFIRMATIVE DEFENSE 30. The alleged breaches and acts claimed by Plaintiff, if any, were solely and proximately caused by the acts or omissions of others for whom Defendant is neither liable nor responsible for. AS AND FOR A TENTH AFFIRMATIVE DEFENSE 31. Defendant was not and never has been in privity of contract with Plaintiff. AS AND FOR A TENTH AFFIRMATIVE DEFENSE 32. Plaintiff breached the Agreement first. 33. In breaching the Agreement first, Plaintiff's employees, staff, agents, principals, members and independent contractors did not perform an audit, analysis, examination nor investigation to identify any refunds for real estate taxes that were due Defendant as was required by the Agreement. Instead of an audit, Plaintiff only verified that Defendant was the owner of the property. Such verification is not an audit either by the common definition of an audit or as defined by "generally accepted accounting principles" (or "GAAP") rules or any other acceptable accounting method and as such, Plaintiff breach the Agreement first. In addition, Plaintiff did not perform and has never performed an audit of Defendant's utilities as per the Agreement. 5 5 of 16
AS AND FOR A ELEVENTH AFFIRMATIVE DEFENSE 34. Any refund received by Defendant was not as a direct result of services performed by Plaintiff, but was the result of work done by others. AS AND FOR A TWELFI'H AFFIRMATIVE DEFENSE 35. Plaintiff mischaracterized, deceived, and misrepresented to Defendant the application it submitted to the Department of Finance, including the basis of the application, to hide from Defendant that it did nothing. In furtherance of its deception, Plaintiff sought documents, information and other evidence knowing full well that such documents, information and evidence were not needed nor required and were only sought to deceive and induce Defendant into the belief that Plaintiff was conducting work when in fact Plaintiff had not conducted any audits, examination or any other promised and contractually obligated actions. 36. As part of its mischaracterization, deception, and misrepresentation, Plaintiff represented that the moneys received from the Department of Finance were due to a lot being marked off the tax rolls as a result a several lots being combined into one, Plaintiff referred to this as a "drop lot," when in fact the Department of Finance confirmed that the moneys were due to the awarding of 421-a tax credits, credits that were solely obtained by the work of Seiden & Schein, P.C. Plaintiff even refuted and denied that moneys were due to 421-a tax credits. Plaintiff did not work to obtain, procure or otherwise earn the 421-a tax credits. 37. Plaintiff continued its deception by mischaracterizing, misleading and misrepresenting to Defendant the meaning of Department of Finance codes, even after the Department of Finance disproved Plaintiff's representations. 38. As a result of Plaintiff's mischaracterization, deception and misrepresentations it is not entitled to any fees. 6 6 of 16
AS AND FOR A THIRTEENTH AFFIRMATIVE DEFENSE 39. The moneys received from the Department of Finance were as the result of 421-a tax abatement credits applied for by Defendant through Seiden & Schein, P.C. and not due to any miscalculations, mistakes or errors in assessed real estate taxes discovered by auditing or examination by Plaintiff. 40. The 421-a tax abatement program is a program in which real estate developers of low income and affordable housing obtain tax credits from the City of New York in the form of certificates. Thereafter, they sell the certificates to developers of luxury or at market rate housing. In this way, developers of low income and affordable housing have the money to build and developers of luxury or market rate housing receive a reduction to their property taxes. 41. Defendant retained special tax credit counsel, the law firm of Seiden 4 Schein, P.C., for the work involved with obtaining the 421-a tax credits. The relationship with Seiden 4 Schein, P.C., goes back to at least 2008, when Seiden 4 Schein, P.C. prepared an opinion letter regarding obtaining 421-a tax credit certificates. Seiden 4 Schein, P.C. prepared a second opinion letter in 2013. 42. In 2012, Defendant obtained the 421-a tax certificates for its real estate development project located at 511 9"' 9 "Project" Avenue, NY, NY (the "Project") at considerable cost, paying approximately $4.3 Million. Thereafter, Seiden 4 Schein, P.C. submitted an application with the NYC Department of Housing Preservation 4 Development ("HPD") to obtain the 421-a tax abatement credits so as to reduce the Project's property taxes. 43. As part of the application, Seiden 4 Schein, P.C. prepared, drafted and filed all necessary and required paper work, documents, and supporting documents with HPD, 7 7 of 16
including, but not limited to, application forms, certificates, opinion letters, consultations, and resolving disputes with the City. In all, Defendant paid Sieden 4 Schein, P.C. over $150,000.00. 44. In July, 2014, Seiden 4 Schein, P.C. obtained a Preliminary Certificate of Eligibility for Defendant from the City of New York. Thereafter, and after additional work, Seiden 4 Schein, P.C. obtained a Final Certificate of Eligibility in February, 2015 on behalf of Defendant. 45. The 421-a tax documents, certificates and applications had already been filed with the City of New York by Seiden & Schein, P.C. and the 421-a tax credits had already been awarded and applied to the property and filed in the public records for the property, and Defendant was notified by Seiden 4 Schein, P.C, of the approval of the 421-a tax credit applications and file and award of the 421-a tax credits, even before Plaintiff approached Defendant. 46. Plaintiff did no work in obtaining the 421-a tax credits and did not in any way assist or work with Seiden 4 Schein, P.C. to obtain the credits. AS AND FOR A FOURTEENTH AFFIRMATIVE DEFENSE 47. Plaintiff fraudulently induced Defendant into entering the Agreement. 48. Plaintiff knew prior to and all during negotiation with Defendant that the amount of the refund was $1,500,447.16. 49. During negotiations Plaintiff concealed, omitted and willfully refused to tell or advise Defendant the amount of the refund or that Defendant was already entitled to a potential refund of $1,500,447.16. 8 8 of 16
50. During negotiations Plaintiff misstated, misrepresented and mislead Defendant as to the amount of the refund, specifically stating in writing that they would "recoup thousands of dollars" and that the refund was worth "thousands of dollars." 51. Prior to and during negotiations Plaintiff misstated, misrepresented and mislead Defendant that the refund was obtained through Plaintiff's "proprietary database." Plaintiff's "proprietary database" is not a database, but consists of a computer program that monitors public databases of New York City to find properties which already have tax credits on them. Plaintiff omitted, concealed and willfully refused to tell Defendant that such information as to the refund was public information. Defendant was deceived by Plaintiff into believing Plaintiff had some special proprietary method of obtaining the refund due solely by Plaintiff's special proprietary method, when such information was actually public information. As such, Defendant did not know that such information was public and that it had access to such information. 52. During negotiations Plaintiff misstated, misrepresented and mislead Defendant that it conducts an audit. Plaintiff's audit is not an audit that follows GAAP or any other acceptable account practices, but consists of only verifying that Defendant is the owner of the property for which there are credits on the property. Plaintiff omitted, concealed and willfully refused to tell Defendant that its work consisted only of conducting a verification of ownership and filing a refund application, and its work did not consist of an audit that follows GAAP or any other acceptable account practices. 53. As part of its plan to deceive Defendant, Plaintiff during negotiations discussed, promoted and advocated its work to obtain savings through utility audits and audits of water and sewer bills, and refunds from those utility, water and sewer audits. Plaintiff concealed, 9 9 of 16
omitted and willfully refused to discuss with Defendant that as part of its employment, Plaintiff's work would include auditing Defendant's real estate and property taxes with New York City and that Plaintiff would file a refund application to obtain any credits as a result of such an audit. 54. Such facts were materially relevant to the Agreement and were solely within the knowledge of Plaintiff and were not peculiarly within the knowledge of Defendant. 55. Plaintiff knew such facts were false prior to, during and after negotiation the Agreement and made them with the intention of inducing reliance on them by Defendant. 56. Plaintiff used the withheld facts and knowledge to gain unfair advantage over Defendant during negotiations of the Agreement. 57. By concealing and withholding such facts and knowledge, and as a further inducement, Plaintiff agreed to reduce its standard fee of 33% to 25% of the refund without the loss of any significant amount to its fee. Such agreement to reduce its fee was illusory. 58. By concealing and withholding such facts and knowledge, and as a further inducement, Plaintiff offered to conduct an analysis of energy consumption at an afñliated property of Defendant at no charge with full knowledge of the amount of fee it would receive. 59. Defendant justifiably relied on the misleading, misstated and misrepresented statements of Plaintiff to enter in to the contact. 60. As a result of Plaintiff's acts, deceptions and omissions to fraudulently induce Defendant into the Agreement, the Agreement should be rescinded or voided, and Defendant should not pay any fee to Plaintiff. AS AND FOR A FIFTEENTH AFFIRMATIVE DEFENSE 61. The Agreement is unconscionable and therefore is unenforceable as to Plaintiff's fees. 10 10 of 16
62. Plaintiff's work amounted to nothing more than verifying the Defendant was the owner of the property located at 511 Ninth Avenue, New York, NY and completing a three page refund application. 63. In return for doing work that amounts to ade minimis, Plaintiff demands payment of 25% of the refund which amounts to $375,111.79. 64. Plaintiff's contingency fee of 25% or $375,111.79 in light of its de minimis work is so monstrous and extravagant that it is a reproach to the administration ofjustice and therefore is unconscionable and unenforceable. AS AND FOR A SIXTEENTH AFFIRMATIVE DEFENSE 65. Rescission of the Agreement based on mutual mistake of fact by both parties. AS AND FOR A SEVENTEENTH AFFIRMATIVE DEFENSE 66. Plaintiff breached its fiduciary duty. 67. The agreement made Plaintiff an agent for and a fiduciary to Defendant. 68. Plaintiff breached its fiduciary duties. 69. The misconduct by Plaintiff in breaching its fiduciary duties, includes, but is not limited to, not advising Plaintiff of the amount of the refund it was receiving prior to filing the refund application, not advising Plaintiff of the potential or possible amount of the refund it was receiving prior to filing the refund request, failing to reveal the basis of the refund, deceiving Defendant as to the basis of the refund, requesting documents and other information to support the refund application when such documentation and information was not need, deceiving Defendant into the belief that additional documentation and information was necessary to expedite the refund application when NYC has no expediting process, and deceiving Defendant 11 11 of 16
into a belief that Plaintiff has a proprietary method or trade secret in determining or auditing records when all Plaintiff does is review public records accessible on-line that show such moneys are already due and owing to Defendant. 70. Defendant's damages directly caused by Plaintiff breaching its fiduciary duty include being obligated to pay Plaintiff an exorbitant and unconscionable fee for work that others, notably Seiden & Schein, P.C, performed and completed, not having a proper audit of the property taxes and credits, prevented from rolling over the tax credits to pay future tax bills, and by having to pay tax bills out of pocket instead of applying the credits to tax bills. 71. As a result of Plaintiff's breaching its fiduciary duty, the Agreement should be rescinded or voided, and Defendant should not pay any fee to Plaintiff. AS AND FOR A SEVENTEENTH AFFIRMATIVE DEFENSE 72. The provisions for 18 %interest for late fees and/or the unilateral award of attorneys' fees in the Agreement are either individually or collectively penalties and are not liquidated damages and are unenforceable. AS AND FOR A EIGHTHTEENTH AFFIRMATIVE DEFENSE 73. The Agreement contains no limitations clauses as to the representations and warrants and there is no merger clause, thus bringing into question the intent of the parties. Defendant believed, understood and was represented to it that the agreement included that Plaintiff's work was to find mistakes, errors and miscalculations and that Plaintiff's work did not include the credits or refunds that were as a result of the completed and filed 421-a tax abatement credits which work was done by Seiden 4 Schein, PC. Further, Plaintiff is the draftsman of the Agreement and the Agreement was a pre-printed form or was specifically prepared for Plaintiff 12 12 of 16
for its use. Accordingly, any doubts, questions or disputes in terms should be read in favor of Defendant and against Plaintiff. AS AND FOR A NINETEENTH AFFIRMATIVE DEFENSE 74. The Agreement violates the rule against perpetuities. WHEREFORE, the answering Defendant demands an Order of this Court: a) Dismissing the Complaint as against Defendant in all respects; b) Rescinding or voiding the Agreement so as to release Defendant from paying any fee or any part of a fee to Plaintiff; c) Awarding Defendant legal fees and costs; and d) For such other and further relief as this Court deems just and proper. Dated: New York, New York February 6, 2018 Yours, etc., JOEL SCOTT RAY, ESQ. Isl fod fco# blay By: Joel Scott Ray, Esq. Attorney for Defendant 410 Park Avenue, Ste. 1630 New York, NY 10022 (212) 239-9900 ext. 15 isray@ioelscottrayesq.com.com TO: COHEN 4 WOLF, P.C. 1115 Broad Street Bridgeport, CT 06604 Tel: 203-368-0211 13 13 of 16
CORPORATE VERIFICATION STATE OF NEW YORK } COUNTY OF NEW YORK } }ss.: Salim Assa, hereby affirms, deposes and says, pursuant to CPLR 2309: 1. I am the President of the Managing Member of 511 Property LLC. 2. I have read the foregoing Verified Answer and know the contents thereof; and the same is true to my own knowledge, except as to those matters therein stated to be alleged upon information and belief and, as to those matters, I believe them to be true. 3. This Verification is made by me because I am the President of the Managing Member of 511 Property LLC and an authorized person. Dated: New York, New York February 8, 2018 Salim Assa Title: President of the Managing Member of 511 Property LLC Affirmed before me this the 861 day of February, 2018 NOTARY PUBLIC RICHARD J. MIGUACCIO Notary Public, NY State No. 02Ml4974109 Q 'EENS COIY'iiii. ~vireo 7 QpQ 6740117'.i 14 of 16
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK -----------------------------------------------------------------X NATIONAL AUDITING SERVICES Index No.: 650670/16 CONSULTING, LLC, Plaintiff, AFFIRMATION OF SERVICE -against- 511 PROPERTY, LLC, Defendant. -----------------------------------------------------------------X I, JOEL SCOTT RAY, an attorney duly admitted to practice in the State of New York, hereby certify under penalty of perjury, that on February 8, 2018, a true and correct copy of the AMENDED VERIFIED ANSWER was filed electronically through the NYSCEF system and accordingly served upon all parties that have appeared in the action through such system. Dated: New York, New York February 8, 2018 Is/foef escott blay Joel Scott Ray, Esq. 15 of 16
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK INDEX NO.: 650670/16 NATIONAL AUDITING SERVICES CONSULTING, LLC, Plaintiff, -against- 511 PROPERTY, LLC, Defendant AMENDED VERIFIED ANSWER JOEL SCOTT RAY, ESQ. Attorney for Defendant 511 PROPERTY, LLC 410 Park Avenue, Ste. 1630 NEW YORK, NEW YORK 11360 Tel: (212) 239-9900 ext. 15 16 of 16