FILED: NEW YORK COUNTY CLERK 06/25/2015 05:22 PM INDEX NO. 653038/2014 NYSCEF DOC. NO. 186 RECEIVED NYSCEF: 08/01/2015 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK HAMILTON HEIGHTS CLUSTER ASSOCIATES, LP, AFF-PSA BRONX 9-D, INC., PLEASANT AVENUE ASSOCIATES, LP, TAF ALEXANDER AVE., INC., FAM PLEASANT AVENUE,I LLC, - against Plaintiff, URBAN GREEN MANAGEMENT, INC., and ERIC ANDERSON, Defendant. URBAN GREEN MANAGEMENT, INC., And Third-Party Plaintiff, ERIC ANDERSON, derivatively on behalf of AFF-PSA BRONX 9-D, INC., and FAM PLEASANT AVENUE LLC, Third-Party Nominal Plaintiffs, - against Index No. 653038/2014 Hon. Shirley Werner Kornreich SUMMONS Date Index No. Purchased: 10/07/14 JAMES FENDT, ALEX ABREU, AND YASMIN ROSADO, Third-Party Defendants. TO THE ABOVE-NAMED DEFENDANTS, James Fendt, Alex Abreu, and Yasmin Rosado: You are hereby summoned to answer the complaint in this action and to serve a copy of your answer, or, if the complaint is not served with this summons, to serve a notice of appearance, on the Plaintiff's attorney within 20 days after the service of this summons, exclusive of the day of service (or within 30 days after the service is complete if this summons is not personally
delivered to you within the State of New York); and in case of your failure to appear or answer, judgment will be taken against you by default for the relief demanded in the complaint. The basis of venue is the venue set forth in the underlying Complaint. Dated: August 1, 2015 /s/andrew W. Hayes Andrew W. Hayes, Esq. Attorneys for Defendants and Third-Party and Derivative Plaintiffs Eric Anderson and Urban Green Management, Inc., 203 East 94 th St., Suite 303 New York, NY 10128 917-770-0180 ahayes@andrewhayes.net 2
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK HAMILTON HEIGHTS CLUSTER ASSOCIATES, LP, AFF-PSA BRONX 9-D, INC., PLEASANT AVENUE ASSOCIATES, LP, TAF ALEXANDER AVE., INC., FAM PLEASANT AVENUE,I LLC, - against Plaintiff, URBAN GREEN MANAGEMENT, INC., and ERIC ANDERSON, Index No. 653038/2014 Hon. Shirley Werner Kornreich THIRD PARTY COMPLAINT (CORRECTED CAPTION) Defendant. URBAN GREEN MANAGEMENT, INC., Third-Party Plaintiff, and ERIC ANDERSON, derivatively on behalf of AFF-PSA BRONX 9-D, INC., and FAM PLEASANT AVENUE LLC, - against Nominal Plaintiffs, JAMES FENDT, ALEX ABREU, and YASMIN ROSADO, Third-Party Defendants. Third Party Plaintiff URBAN GREEN MANAGEMENT, INC. ( UGM ), and Third- Party Derivative Plaintiff ERIC ANDERSON ( ANDERSON ), on behalf of Nominal Plaintiffs
AFF-PSA BRONX 9D INC. ( AFF-PSA ), and FAM PLEASANT AVENUE LLC ( FAM ), as and for their Third-Party Complaints in this action, avers as follows: 1. Third-Party Defendant James Fendt ( Fendt ) has just submitted a declaration that admits what counsel for the purported plaintiffs had previously denied: that Fendt has possession of business records that are the property of Third-Party Plaintiff UGM. Fendt knows that those documents were taken from UGM s offices by Third-Party Defendants Roman Abreu ( Abreu ) and Yasmin Rosado ( Rosado ) last summer, without the knowledge or consent of UGM or Anderson, at a time when Fendt had no authority to take the documents, and Abreu and Rosado were supposedly working for UGM. UGM therefore brings the first cause of action set forth herein for damages and other relief for the conversion of its property against Fendt, Abreu, and Rosado, jointly and severally. 2. In an entirely distinct claim, Anderson herein also brings three derivative claims: (a) on behalf of AFF-PSA, against Fendt for pocketing over $30,000 that unquestionably belongs to AFF-PSA, and causing AFF-PSA to spend its own funds on an unauthorized lawsuit (notwithstanding Fendt s claim that there is no harm to the company, because he has personally guaranteed the debt); (b) on behalf of FAM Pleasant Avenue, LLC against Rosado, who gave herself a rent-stabilized apartment that was supposed to have been reserved for rent-qualified tenants, which she or members of her family have occupied for the past several years at a rent level below what was legally allowed, which situation Fendt was alerted to months ago, but which he has refused to correct; and (c) on behalf of UGM II, which is 51% owned and controlled by Abreu and Rosado, who have converted corporate opportunities that belonged to UGM II to their own exclusive use. 2
Parties, Venue and Jurisdiction 3. Third-Party Plaintiff UGM is a New York corporation. 4. Defendant Fendt is a resident of Bayside, Queens. 5. Defendant Abreu is a resident of Manhattan. 6. Defendant Rosado is a resident of Manhattan. 7. Derivative Plaintiff Anderson is a resident of Manhattan. 8. Nominal Plaintiff AFF-PSA Bronx 9D Inc. is a New York corporation. It is currently under the sole control of Defendant Fendt a control Fendt believes is so complete that he recently condemned a notice of meeting of the company s Board of Directors as a violation of the preliminary injunction that (Fendt claims) gave him sole executive authority over the company. Fendt s threats, made to both Anderson and independent director Robert Marrow, make it futile, as a practical matter, for Anderson to ask the company to pursue the derivative claim set forth herein against Fendt. Indeed, Anderson has already publicly filed the documentary evidence supporting this derivative claim a paper trail that shows Fendt himself pocketed over $30,000 that belonged to the company, after paying someone else over $10,000 yet Fendt has waved off the evidence as something he does not even need to respond to. Anderson is therefore excused from any obligation to make a demand that the company pursue the derivative claim set forth herein. 9. Nominal Plaintiff FAM Pleasant Ave. LLC is a New York limited liability company under the sole control of Defendant Fendt, although the resolution appointing him as manager is invalid as a matter of law. Anderson has already reported the derivative claim set forth herein to the company s management, via the counsel Fendt has retained to represent the company, in February 2015. Counsel have already responded that the have investigated the 3
claim, and found no substance to it. According, having already made a demand upon the company that was rejected, Anderson is free to proceed with this derivative action against Rosado and Fendt. 10. The Court has jurisdiction over this third-party action in that the claims asserted herein arise out of and are directly related to the claims that Fendt has caused to be filed in this Court. AS AND FOR A FIRST CAUSE OF ACTION (Conversion, by UGM against Fendt, Abreu and Rosado) 11. On several occasions to date, Anderson has advised the Court that Abreu and Rosado, acting at the behest of and in conjunction with Fendt, took dozens of boxes of original documents from Urban Green s offices prior to September 15, 2014. 12. In March 2015, the purported plaintiffs in this action (all of which were de facto controlled by Fendt) were ordered by the Court to provide an inventory of the documents that had been taken from UGM s offices in late 2014. 13. Specifically, UGM s counsel raised this issue with the Court at the Preliminary Conference, which entered a compliance conference order directing plaintiffs counsel to identify any files that were taken from Urban Green s offices last fall. message: 14. On March 23, 2015, counsel responded to that order by sending the following Pursuant to Paragraph (1)(d) of the Preliminary Conference Order, attached please find a records request dated September 9, 2014 and the Notice of Termination dated September 12, 2014 that was executed and sent to Mr. Anderson and Urban Green Management. To the best of our knowledge, these documents reflect the records that were removed from Urban Green s offices when management authority over the buildings was transferred to Safeguard Realty Management. 4
15. Counsel s response references a letter sent by Fendt on September 9, 2014 to Abreu and Rosado that requested copies not originals of all documents related to the five plaintiff entities. If Abreu and Rosado had only taken the documents described in Fendt s letter, then no originals would have been removed from UGM s offices, and there would be no issue. 16. To avoid any uncertainty, UGM s counsel noted in response to the above email that the Court s order required counsel to inventory documents taken not just as part of the transition to Safeguard, but also in the weeks preceding the actual installation of Safeguard as manager. In reply, purported plaintiffs counsel wrote on March 24, 2015: Other than the documents requested, we are not aware of any boxes of documents taken by Abreu and Rosado from Urban Green s offices in the days or weeks prior to the transition other than those described in what we provided to you [i.e., the documents described in Fendt s request for copies, quoted above]. You are free, of course, to explore this issue in discovery when you depose Mr. Abreu and Ms. Rosado. However, we are in compliance with the order to provide you with an inventory of documents taken by Plaintiffs from August 14, 2014 to the present. 17. Since that message, purported plaintiffs counsel have further confused the issue, claiming that Abreu and Rosado were permitted to take originals, since UGM had (Fendt claims) been replaced as manager of the plaintiff entities yet they have still not provided any inventory of documents, whether originals or copies. 18. Moreover, to be clear, Abreu and Rosado took the documents in advance of Fendt s self-appointment as manager of the plaintiff entities, so while Fendt was entitled to copies of corporate records, he had no authority to take any original documents. 19. It is also now clear that Fendt never had legal authority to control either Hamilton Heights or AFF-PSA Bronx 9D, the two largest entities, so he never had any authority to take their original documents. Fendt also had no authority to appoint himself as sole manager of the 5
two entities that he and Anderson owned 50/50, and thus no right to take their original documents from UGM s offices. 20. Most importantly for present purposes, Fendt (through purported plaintiffs counsel) has flatly denied taking any of UGM s own files, except files that were the property of the five purported plaintiff entities. 21. To be clear, even before the issue was raised with the Court, Anderson s counsel had raised this issue with purported plaintiffs counsel, and requested return of UGM s documents. 22. Purported plaintiffs counsel responded at that time that there had been no wholesale removal of files from UGM s offices. They later explained that Abreu and Rosado had, nevertheless, taken that corporate records relating to the five plaintiff entities were taken. 23. When Anderson s counsel raised this issue again in early June 2015, in the context of planning discovery, purported plaintiffs counsel unleashed a volley of rhetoric, insisting (inter alia) that the issue had already been fully addressed. 24. Counsel thus refused to identify a records custodian of the plaintiffs who would testify about what documents were taken from Urban Green s offices, and where they are now located. Counsel even ignored an offer to avoid a deposition by providing an affidavit stating what documents were taken (the inventory they were ordered to produce three months ago) and where they now are. 25. In contrast to counsel s blanket denials, however, Fendt himself had a moment of candor in his own Affidavit in this action, sworn to on June 5, 2015, in which he actually complained that he was unable to find certain documents in UGM s business records: I have 6
yet to find a current agreement of limited partnership for PAA in Urban Green Management s records (Affidavit of James Fendt, June 5, 2015, Dkt. 154, at Par. 17.) 26. Fendt may now try to explain his statement as some shorthand reference to the company files taken from UGM s offices, but the fact remains that he has failed to comply with a Court order on this topic, and refused to identify a witness or furnish an affidavit on this topic. At a minimum, UGM is entitled to sworn testimony as to what happened to its property. 27. Fendt s complaint that he is unable to find certain documents in UGM s files is also ironic, because it begs the question of how Fendt has kept his own corporate records. Fendt also overlooks the fact that this is actually the second time that Fendt abruptly took boxes of Anderson s business records for himself. 28. In 2005, when Anderson and Fendt were in the midst of negotiating their separation of businesses (after Anderson refused Fendt s encouragement to destroy evidence in a pending federal investigation), Fendt himself, with help from then A & F employee Mike Nikolai (who is now Fendt s business partner and who voted in support of his takeover), removed dozens of boxes of business records from the office that, up to that point, Fendt had shared with Anderson. Fendt did that without notice or warning, and without making any effort to leave (or later give) Anderson any copies of any of the companies documents. 29. Thus what Fendt did in September 2014 was a repeat of what he had done a decade before, except that in 2014 he acted through and in concert with Abreu and Rosado. 30. In sum, a. Fendt encouraged and acted in concert with Abreu and Rosado in removing dozens of boxes of original documents from UGM s offices last fall (the Taken Boxes ). b. The Taken Boxes are now under Fendt s de facto control. 7
c. The Taken Boxes include many boxes of original documents that belonged to UGM, including both its corporate records and records relating to other projects. d. Even if Fendt had legal authority to take documents relating to the plaintiffs in this action (which is disputed), he had no authority nor has he ever claimed any authority to take UGM s own records. Instead, he has denied that he did so. e. Fendt, Abreu and Rosado have been on notice for months that the Taken Boxes included UGM s own property. f. Instead of admitting what they did, and returning the files, they have refused to comply with Court orders and aggressively derided Anderson s counsel for raising this issue and seeking the documents return. 31. For all these reasons, Fendt, Abreu and Rosado are jointly and severally liable for the conversion of UGM s files that were taken from its offices in the summer of 2014. AS AND FOR A SECOND CAUSE OF ACTION (Conversion and Unjust Enrichment, Derivatively by AFF-PSA Against Fendt) Fendt Has Failed Even to Dispute the Documentary Evidence that he Diverted over $40,000 that Belongs to AFF-PSA, and Personally Pocketed over $30,000 of those Funds 32. As detailed in Anderson s April 30, 2015 Affidavit in support of his motion to dismiss the Amended Complaint (Dkt. No. 93 ( Anderson Aff. )), in 2012 Fendt somehow managed to insert himself into AFF-PSA s operations in such a way as to arrange for a $40,000 tax refund money that is unquestionably the property of the company to be paid to him. (Anderson Aff., Par. 20-21) 33. Confronted by Anderson about the funds, Fendt responded by sending a contract which showed that slightly over $10,000 of the funds was payable, as a contingency fee, to some third party though how even this party came to be involved was never explained. As Anderson 8
detailed, Fendt then kept the rest of the money - $30,631.04 instead of turning it over to the Company. (Anderson Aff., Par. 21) 34. Fendt did this because he figured that Anderson would have to incur as much in legal fees, or more, simply to compel Fendt to pay over the funds. And indeed, even now confronted with the contemporaneous documents Fendt avoids admitting the simple truth that he simply kept the money, without excuse or justification. 35. Fendt s responding affidavit to Anderson s affidavit did not deny any part of this incident. Instead, Fendt simply dismissed it in a footnote, along with almost the entirety of Anderson s affidavit, as something Fendt did not even have to bother to respond to. 36. Fendt has thus reiterated his refusal to return the funds that belong to AFF-PSA. 37. However, Fendt is now in sole control of the company - a power he interprets so broadly that he deems even a notice of a board meeting as a violation of the preliminary injunction, while his counsel dismiss routine case management messages from opposing counsel lies and insanity that are routinely ignored. 38. Fendt has therefore wrongfully converted the funds that belonged to AFF-PSA to his personal use. 39. In the alternative, Fendt has been unjustly enriched in connection with his handling of the tax refund belonging to AFF-PSA. 40. Since Anderson has now demanded that Fendt turn over the tax refund to the company, and Fendt has not only refused, but threatened to seek contempt remedies against Anderson for seeking to exercise his rights as a director of the company, Anderson therefore brings this claim derivatively on behalf of the company, to compel Fendt to pay over all of the 9
funds, including the fee paid to the third party, plus accumulated interest, to the company s bank account. 2014. AS AND FOR A THIRD CAUSE OF ACTION (Unjust Enrichment, derivatively by FAM against Fendt and Rosado) Fendt Is Protecting Rosado s Continued Occupancy of A Rent-Stabilized Apartment at Below the Registered Rent 41. Fendt is also in sole control of the management of FAM, and has been since Sept 42. After Rosado and Abreu carried out their conversion of the UGM s property, UGM began to review their actions in the months prior to Fendt s takeover. Among their findings was that Rosado had been living in an apartment that was protected under the rent stabilization laws. Moreover, Rosado was charging herself less in rent than was FAM was permitted to charge to a tenant of that apartment under the rent stabilization laws, and had not increased the rent annually as allowed under rent stabilization. In fact, beginning with the July 30, 2008 filings with NYS DHCR an annual requirement for rent stabilized apartments the apartment occupied by Rosado is filed as Owner Occupied/Employee with a rent of $766.65. In the 2009 filing this rent grows to $831.82 and in the 2011 filing no rent is ascribed to Apartment #1, which continues to be true through the September 2014 filing. UGM. 43. Rosado had neither disclosed nor sought permission for this self-dealing from 44. Rosado thus has no right to the apartment (she is not protected by the rent control laws), and that apartment needs to be re-rented at whatever is the highest, allowable rent. 45. Rosado should also be required to pay an amount equal to the rent that would have been paid had the apartment been rented in an arms -length transaction. 10
46. In February 2015, Anderson s counsel brought this self-dealing to the attention of counsel who had been retained by Fendt to purportedly represent the interests of FAM. Counsel demanded that the company take appropriate action to remedy the effects of Rosado s selfdealing. 47. FAM s purported counsel responded that they had looked into the issue extensively, they claimed and found no basis to allege any self-dealing by Rosado. 48. Accordingly, Anderson brings this action derivatively on behalf of FAM, against Rosado, to recover the rent subsidy she had been giving herself since she moved into the apartment. 49. Anderson also seeks to hold Fendt jointly and severally responsible for Rosado s unpaid rent, inasmuch as he has protected her misuse of this apartment, presumably in exchange for her assistance in carrying out Fendt s misappropriation of UGM s property. WHEREFORE, Third-Party Plaintiff UGM and Derivative Plaintiff Anderson request that the Court enter judgment as follows: A. On the first claim, for conversion, in favor of UGM and against Fendt, Abreu and Rosado, jointly and severally, for the return of UGM s business records and property that was converted from UGM s offices in 2014, and all consequential damages arising from that conversion, including the time and expense of re-creating the company s business records; B. On the second claim, for the derivative action on behalf of AFF-PSA, in favor of AFF-PSA and against Fendt, personally, ordering him to account for all of the above-identified tax refund funds that he diverted, over $30,000 of which he personally 11
received and pocketed, and pay over said funds to the Company, plus interest thereon, from the date of Fendt s conversion (or, in the alternative, his unjust enrichment); and C. On the third claim, for the derivative action on behalf of FAM, in favor of FAM and against Rosado and Fendt, jointly and severally, for the difference between the rent that should have been charged to a tenant renting the apartment at arms -length, and the amount of rent actually paid to date by Rosado, plus interest thereon, and for any other or consequential liabilities or damages incurred by the company as a result of Rosado s occupancy of the apartment in question. Dated: New York, NY June 25, 2015 /s/andrew W. Hayes Andrew W. Hayes, Esq. Attorneys for Defendants and Third-Party and Derivative Plaintiffs Eric Anderson and Urban Green Management, Inc., 203 East 94 th St., Suite 303 New York, NY 10128 917-770-0180 ahayes@andrewhayes.net 12