New York Law Journal: Second Circuit Decision
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New York Law Journal: Marc Held, Partner at Held & Hines, LLP quoted Re: Second Circuit Decision
Condo Buyers Win Round in 2nd Circuit in Bid to Exploit Law Firm Typo
Mark Hamblett
Condominium buyers who seized on what has been described as a typo in offering documents by a Stroock & Stroock & Lavan lawyer Thursday won a round in the fight to recoup their deposits.
But the litigation is not over, despite the decision by the 2nd U.S. Circuit Court of Appeals, which upheld a lower court’s refusal to grant an injunction that would have blocked the release of some $16 million in buyer deposits from an escrow account maintained by the project developer and Stroock client CRP/Extell Parcel I.
The mistake in the offering documents that triggered the dispute said the buyers could get their deposits back if the first closing in the condominium, The Rushmore, did not occur by Sept. 1, 2008, when, in fact, the year was supposed to read Sept. 1, 2009. The first closing did not occur until February 2009.
Attorney General Andrew Cuomo sued the developers to force them to release the money to proposed buyers of units in the 41-story luxury condominium at 64th Street and Riverside Boulevard on the Upper West Side.
Judge George Daniels denied a motion by CRP/Extell for preliminary injunctive relief on May 19.
The circuit stayed that ruling until Thursday, when it upheld the lower court in a summary order issued by 2nd Circuit Judges Rosemary Pooler and Peter Hall and, sitting by designation, Judge Mark Kravitz of the U.S. District Court for the District of Connecticut.
The panel said it had no reason to disturb Daniels’ conclusion that the developers had failed to show they would suffer irreparable injury should the money be released.
“Here, plaintiff-appellant has failed to make the required showing because it has adduced nothing more than conclusory assertions in support of its claim that one or more [buyers] might ‘spend’ the escrow monies and later become insolvent,” the court said in CRP/Extell v. Cuomo, 10-1929-cv. “To award relief based upon these purely speculative allegations would push the standard for injunctive relief beyond its reasonable limit.”
Without a finding of error on the issue of irreparable harm, the court said it did not need to reach the issue of CRP/Extell’s likelihood of success on the merits.
Edward Normand of Boies, Schiller & Flexner, represented CRP/Extell. He had argued Stroock’s error was harmless and that Daniels should order the reformation of the Rushmore’s offering plan to reflect the actual intent of the parties. Normand did not return a call for comment.
John A. Coleman Jr. of Friedberg Cohen Coleman & Pinkas represents buyers of 33 of the 41 units in the project. He said there is no indication the sponsors are ready to instruct Stroock, which maintains the escrow account, to release the monies.
Boies Schiller has indicated it will seek a rehearing en banc, Coleman said, and it was possible the firm could seek a petition for a writ of certiorari from the U.S. Supreme Court.
“I think their chances of getting either are rather small,” he said.
Coleman also said the attorney general has made a motion to dismiss, arguing that the case before Daniels should be heard in state court. He said Boies Schiller is arguing it has an Article 78 claim that should be heard by Daniels and that, therefore, an automatic stay applies that should prevent the money from being released, a position Coleman contests.
Stroock, he added, has filed an interpleader action in federal court seeking the court’s direction on what to do with the monies.
Marc Held of [HELD & HINES] represents two buyers, one in the case before Daniels and a second in a state case in which he named Stroock as a co-defendant, charging fraud and third-party malpractice. The firm also was named for its role as escrow agent in the case, Coffey v. CRP/Extell I and Stroock & Stroock & Levan, 114073-2009.
“The Second Circuit got it right, there was no basis for an injunction and hopefully, the developers will do the right thing and return all the money to those who were under contract,” Held said.
Barry Ostrager of Simpson Thacher represents CRP/Extell in the Coffey matter.
Bruce Schneider of Stroock represents the firm. A spokesperson for Stroock declined comment, citing ongoing litigation.
Assistant Solicitor General Sudarsana Srinivasan appeared for the attorney general.
