Preview
FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016
NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020
EXHIBIT A
FILED: KINGS COUNTY CLERK 08/15/2016
10/09/2020 05:28
02:11 PM INDEX NO. 510844/2016
NYSCEF DOC. NO. 30
605 RECEIVED NYSCEF: 08/15/2016
10/09/2020
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF KINGS
CHERRY HILL GOURMET INC., Index No. 510844/2016
Plaintiff, AFFIDAVIT IN OPPOSITION
TO ORDER TO SHOW CAUSE
-against- FOR A YELLOWSTONE
INJUNCTION
LUNDY’S MANAGEMENT CORP.
Defendant.
BRETT B. THEIS, an attorney duly admitted to practice before the Courts of the State
of New York, hereby affirms the following to be true under the penalties of perjury pursuant to
CPLR 2106:
1. I am a member of the law firm Rosenberg & Estis, P.C., attorneys for defendant
Lundy’s Management Corp. (“Lundy’s”). As such, I am familiar with the facts and
circumstances set forth below.
2. I respectfully submit this affirmation in opposition to sublessor Cherry Hill
Gourmet Inc.’s (“Cherry Hill”) order to show cause seeking a Yellowstone injunction with
respect to three Notices to Cure for three subleased premises, each dated June 20, 2016 (the
“Default Notices”). Pursuant to the Default Notices, Lundy’s demanded payment of over
$200,000.00 in rent and additional rent in arrears. The Default Notices also required Cherry Hill
to cure several long-standing non-monetary defaults, including three New York City Landmarks
Preservation Commission (“LPC”) violations that were issued seven years ago, which caused
Lundy’s landlord to issue default notices threatening termination of the net lease, and which
caused Lundy’s to incur almost $2,000,000.00 in additional rent and damages in order to prevent
a forfeiture of Lundy’s multi-million dollar investment in the net lease.
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3. In support of its Yellowstone application, Cherry Hill offers bogus excuses and
hollow explanations why it has not removed the violations, obtained DOB signoffs, or paid the
rent and additional rent unquestionably due to Lundy’s. Lundy’s disputes all of Cherry Hill’s
excuses for their current defaults, all of which will be proved false at trial in this action. For
example, Cherry Hill argues that a March, 18 2015 stipulation of settlement in a non-payment
proceeding provides that Lundy’s waived its right to collect real estate taxes that were not even
billed until June 3, 2015. Cherry Hill’s claim is absurd on its face and evidence of its bad faith
gamesmanship, as found by United States District Court Judge Brian J. Cogan (as set forth in
Section G below).
4. However, the focus of Lundy’s opposition papers is not to respond to all of
Cherry Hills feigned excuses; rather it is to (i) provide the Court with a history of Cherry Hill’s
chronic bad faith, chronic non-payment of rent, and chronic failure to cure violations that remain
outstanding after seven years; and (ii) show the Court how Cherry Hill has cost Lundy’s, and
continues to cost Lundy’s, millions of dollars in additional rent and damages; so that Cherry Hill
can be ordered to secure an appropriately sized bond in the event this Court is inclined to grant
Cherry Hill further Yellowstone relief.
A. The Parties and The Lease
5. The subject property contains two commercial buildings; a two-story “main”
building (the “Main Building”) and a three-story “annex” building (the “Annex”; collectively,
the “Lundy’s Property”). Cherry Hill rents space within the Main Building and operates a
Russian themed specialty grocery store and deli in said space (the “Premises”).
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6. Cherry Hill subleases the Premises pursuant to three subleases for three separate
spaces in the Main Building dated (i) August 1, 2007 (the “2007 Sublease”), (ii) July 2011, (iii)
and October 2013 (collectively, the “Subleases”; Exhibits A through C). The 2007 Sublease is
incorporated into the two later subleases. The 2007 Sublease incorporates the Net Lease
between Lundy’s, as tenant, and Sheepshead Restaurant Associates, Inc. (“Owner”), as owner (as
defined below).
B. The Renovation and Rehabilition of the Lundy’s Property
7. Starting in 1935, the Lundy’s Property was home to the Lundy’s Restaurant, an
historic American seafood restaurant in the Sheepshead Bay. The original Lundy's Restaurant
closed in or around 1977, following founder Irving Lundy's death.
8. The Lundy’s Property thereafter lay abandoned until approximately May 1988
when Owner purchased the Buildings.
9. On March 3, 1992, the Lundy’s Property was designated as a Landmark by the
LPC.
10. After holding the property for several years without improving the dilapidated and
boarded up structures, Owner turned to Steve Pappas, who incorporated Lundy’s and established
plans to develop the buildings in exchange for entering into a 49-year net lease dated March 9,
1994 with Owner (the “Net Lease”; Exhibit D).
11. Lundy’s substantially rehabilitated and developed the Lundy’s Property after
taking possession in 1994. In total, Lundy’s advises that it has invested north of 10 million
dollars in improvements to the Lundy’s Property, as is evident by the before and after photos
below, and has helped “rejuvenate” the Sheepshead Bay neighborhood, as reported by the New
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York Times article, If You’re Thinking of Living In/Sheepshead Bay, Brooklyn: Where Water is
Big Part of Community. March 30,2003. (Exhibit E).
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c. Cherry Hill’s Bad Faith and Chronic Lease Defaults
12. In summary, since Cherry Hill began subleasing the Premises from Lundy’s in
2007, Cherry Hill has repeatedly failed to comply with its monetary and non-monetary
obligations under the Subleases. Specifically, Cherry Hill’s illegal use and violation of the
Zoning Resolution caused Owner to default Lundy’s under the Net Lease, thus jeopardizing
Lundy’s substantial investment in the Lundy’s Property and causing Lundy’s to expend
substantial time, effort, and expenses saving its net lease from a forfeiture. In addition to its
prior illegal use (for which Judge Demarest previously denied Cherry Hill’s Yellowstone motion
in a prior Yellowstone Action), Cherry Hill’s chronic failure to comply with its obligations under
the Subleases has resulted in multiple notices to cure, rent demands, summary proceedings and a
criminal court enforcement action concerning zoning violations.
13. Cherry Hill’s noncompliance with the Subleases has created serious problems for
Lundy's because Cherry Hill's defaults, particularly the LPC Violations (defined below), have led
to the issuance of notices of default and termination to Lundy's pursuant to the Net Lease.
Indeed, Cherry Hill’s chronic defaults led to Judge Demerast ordering Lundy’s to post a
$1,050,000.00 Yellowstone bond which pushed Lundy’s into bankruptcy to save its Net Lease
from forfeiture. Adding insult to injury, Cherry Hill withheld over $400,000.00 in rent during
Lundy’s bankruptcy, intentionally interfering with Lundy’s efforts to reorganize and/or emerge
from bankruptcy.
14. On March 26, 2009, Cherry Hill caused three violations to be issued by the LPC
with the violation numbers: 032609LANDMK09-0980, 032609LANDMK09-0981, and
032609LANDMK09-0982 (the “LPC Violations”).
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15. The LPC Violations were issued because of Cherry Hill’s installation of awnings.
window signage, and an HVAC without permits and because of Cherry Hill’s alternation of the
rear facade of the Premises without permits.
16. Seven years later, these violations are still active. See Exhibit F.
17. As set forth in the November 2, 2015 affidavit of architect John Haskopoulos
(Exhibit G), the LPC Violations continue to prevent Lundy’s from obtaining a temporary and
permanent certificate of occupancy (“TCO”) for the Main Building and a permanent certificate
of occupancy (“CO”) for the Annex. As a result, Lundy’s is required to pay substantial sums
under its Net Lease to owner pursuant to the bankruptcy settlement (discussed in Section G
below) that Lundy’s entered into to salvage its Net Lease and avoid forfeiture.
18. A seven year LPC violation is simply disgraceful.
19. We will turn to some of the first attempts of Lundy’s to compel Cherry Hill to
cure the LPC Violations and other defaults under the Subleases.
D. Litigation History with Cherry Hill
20. On or about August 2, 2012, Lundy’s issued Notices of Default to Cherry Hill,
giving Cherry Hill five business days to pay the approximately $180,000.00 in rental arrears it
owed to Lundy’s. A copy of the notices are annexed hereto as Exhibit H.
21. On or about August 6, 2012, Lundy’s issued a Notice to Default to Cherry Hill,
giving Cherry Hill 20 days to cure certain zoning violations, the I,PC violations, and several
other violations from the City. A copy of the notice is annexed hereto as Exhibit I.
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22. Several of the violations were related to Cherry Hill’s illegal use of the Premises.
Cherry Hill operated the Premises as a grocery store, however, it was zoned for restaurant use
only.
23. On August 9, 2012, Cherry Hill commenced an action for Yellowstone relief with
the index number 502300/2012 in Kings County Supreme Court (the “2012 Cherry Hill
Yellowstone Action”). Yellowstone relief was thereafter temporarily granted to Cherry Hill and
the matter was ultimately assigned to the Honorable Carolyn E. Demarest, J.S.C.
E. Owner Defaults Lundy’s Due to Cherry
Hill’s Violation of Law and the Sublease
24. After obtaining Yellowstone relief in the 2012 Cherry Hill Yellowstone Action,
Cherry Hill should have begun diligently curing its violations, but it did not.
25. As such, eight months later, on or about April 15, 2013, Owner issued a Notice to
Cure (Exhibit J) alleging that Lundy’s was in default of the Net Lease due to, inter alia, the LPC
Violations and several violations related to Cherry Hill’s illegal use of the Premises.
26. Thus, due to Cherry Hill’s defaults, Lundy’s was forced to commence an action
for Yellowstone relief to protect its Net Lease. Lundy’s motion was granted by the Court under
index number 502226/2013 in Kings County Supreme Court (the “Lundy’s Yellowstone
Action”).
27. The Lundy’s Yellowstone Action was also assigned to the Honorable Carolyn E.
Demarest, J.S.C.
28. On or about November 21, 2013, Owner issued a second Notice to Cure (the
“November 2013 Notice to Cure”; Exhibit K), alleging that Lundy’s was in default of the Net
Lease due to:
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a. A failure to obtain a temporary certificate of occupancy for the main
building;
b. An illegal/non-conforming use by Lundy's subtenant, Cherry Hill;
c. A failure to cure certain additional DOB/ECB Violations (some of which
were related to Cherry Hill’s improper use); and
d. A failure to maintain insurance (which was not the case).
29. Each and every one of these defaults (other than a lack of insurance, which was in
any event a false claim) was due to and caused by Cherry Hill.
30. Thus, on January 2, 2014, Lundy’s was forced to file yet another motion by order
to show cause (“OSC”) in the Lundy’s Yellowstone Action seeking, inter alia, a Yellowstone
Injunction tolling the cure period of the November 2013 Notice to Cure and enjoining Owner
from terminating the Lease due to defaults directly caused by Cherry Hill.
31. Upon Lundy’s demonstrated willingness and ability to cure, the Court signed the
OSC and granted the requested temporary retaining order for temporary Yellowstone injunctive
relief.
F. Lundy’s Defaults Cherry Hill in Order to
Cure Cherry Hill’s Illegal Use
32. In order to cure what had become the critical default alleged by owner in the
Lundy’s Yellowstone Action, Lundy’s served Cherry Hill with a Ten (10) Day Notice To Cure
Default, dated February 18, 2014 (Exhibit L), for failure to abide by the applicable New York
City Zoning Resolution by using the Premises for a use other than its permitted use as an “eating
and drinking place.”
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33. In response, Cherry Hill filed a second Yellowstone motion in the 2012 Cherry
Hill Yellowstone Action.
34. At a joint hearing held on April 7, 2014 for both Lundy’s and Cherry Hill’s
Yellowstone applications, the Court (Demarest, J. presiding) ultimately GRANTED Lundy’s
application and DENIED Cherry Hill’s application for Yellowstone relief. A copy of the
transcript is annexed hereto as Exhibit M. As set forth in the transcript, Judge Demarest was
clear that Lundy’s must evict Cherry Hill in order to cure the illegal use violation alleged by
Owner in order to save its Net Lease from forfeiture:
THE COURT: You have to get them out.
***
THE COURT: Seems to me you have to conclude
your summary proceeding and get rid of your tenant
that is non-conforming in order to get your lease
back.
Exhibit M, p. 30, lines 9; p. 31, lines 23-25.
35. Ultimately, the Court understood that Cherry Hill’s illegal use was the catalyst for
all of the litigation between Owner and Lundy’s and between Lundy’s and Cherry Hill.
Accordingly, the Court ruled as follows:
THE COURT: Okay, I think what we have to do
here is deal now with the Cherry Hill Yellowstone.
***
THE COURT: Mr. Wagner [Cherry Hill’s
attorney], the problem I have is the law. Is the
law. I can't bend that. If you took occupancy
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with an illegal use you are presumed to have
understood it was an illegal use. So whether they
misled you or not you undertook to do it. There
is a written lease and you are bound to it.
***
THE COURT: So I would be moving to vacate the
Yellowstone that was entered here in this case, is
that right?
MR. HINES [Lundy’s prior counsel]: Yes, Your
Honor.
THE COURT: You are proceeding to commence an
action in landlord tenant court and litigate against
them, is that right?
MR. HINES: Yes, Your Honor.
THE COURT: All right. I am vacating the
Yellowstone with respect to Cherry Hill
Gourmet. I do not find that the plaintiff has carried
his burden to demonstrate that he can achieve a
remedy for this and indeed he created it or it created
the non-conforming use as represented here.
Exhibit M, p. 33, lines 14-15; p. 36, lines 2-7; p. 38, line 21 to p. 39, line 9 (emphasis supplied).
36. The next day, April 8, 2014, the Court issued a Decision and Order on Lundy’s
applications for Yellowstone relief (“April 8,2014 Order”; Exhibit N), stating:
Following argument, the Yellowstone Injunction is
continued to April 29, 2014 on condition plaintiff
Lundy’s makes payment of additional rent due for
taxes in the sum of $308,119.22 and provides a
bond as security for potential losses to defendant in
the sum of $1,050,000 by April 11,2014.
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Plaintiff is now free to commence a summary
proceeding against its sub-tenant Cherry Hill so
as to cure the illegal occupancy which is one of
the allegations of default under the Lease.
The matter is adjourned to April 29, 2014 for
further hearing (emphasis supplied).
37. On the same date, Judge Demarest issued an order in the 2012 Cherry Hill
Yellowstone Action (Exhibit O) stating:
Upon plaintiffs admission that its current use of
the premises is not in conformity with any
certificate of occupancy and undisputed evidence
that, since taking occupancy, plaintiff has
modified its use so as to create a non-conforming
use, the Yellowstone injunction, entered on
February 27, 2014 by my colleague Justice
Steinhardt, is vacated.
38. In order to purchase the $1,050,000 bond required of Lundy’s due to Cherry
Hill’s defaults, Lundy’s needed $1,155,000 in cash on hand because the bonding companies
require 100% cash collateral as security, plus a 10% transaction fee. Unfortunately, Lundy’s did
not have the funds to timely comply with the Court’s bond requirement.
39. Thus, on April 11, 2014, Lundy’s sought relief from the Appellate Division,
Second Department.
40. The Second Department issued a stay of the bond requirement and then, by
Decision & Order on Motion, dated May 1, 2014, the Second Department, inter alia, extended
Lundy’s time to comply with the bond requirement until May 9, 2014.
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G. The Cherry Hill Lease Defaults and Non-
Payment of Rent Pushed Lundy’s into
Bankruptcy to Save its Net Lease
41. Unable to come up with the funds for the $1,050,000 bond requirement caused by
Cherry Hill’s Sublease defaults, on May 8, 2014, Lundy’s made the difficult decision to file a
Chapter 11 Bankruptcy petition in order to protect its Net Lease and multi-million dollar
investment in improvements. The Chapter 11 bankruptcy proceeding was captioned as In re:
Lundy’s Management Corp., Case No. 1-14-42318-ESS (the “Bankruptcy Proceeding”), United
States Bankruptcy Court, Eastern District of New York (the “Bankruptcy Court”).
42. During the course of the eighteen month bankruptcy proceeding, Lundy’s was
fighting for its life while being attacked by an aggressive landlord who saw an opportunity to
cause a forfeiture, and Cherry Hill, who saw an opportunity to baselessly withhold rent and
additional rent, hoping to squeeze Lundy’s out of the picture and enter into a more favorable deal
with Owner.
43. While Owner engaged in a torrent of Bankruptcy litigation, one might expect
Cherry Hill to offer support, having created much of the mess in the first place. After all,the
only remaining violations still outstanding in the Lundy’s Yellowstone Action concerned Cherry
Hill’s illegal use and the LPC Violations, thus the bankruptcy was directly caused by Cherry Hill
(i.e. there would have been no need to post a bond had those violations been cured; the action
would have instead been dismissed).
44. However, the reality was that Cherry Hill took every opportunity to kick Lundy’s
while it was down. Rather than rush to cure the LPC Violations, Cherry Hill supported Owner’s
motion to convert Lundy’s bankruptcy to a Chapter 7 liquidation proceeding and withheld rent
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without any basis and made numerous frivolous filings in state courts and the Eastern District of
New York (“EDNY”).
45. In fact, United States District Court Judge Brian J. Cogan found that Cherry Hill
had acted in “bad faith” in attempting to remove the 2012 Cherry Hill Yellowstone Action and
multiple summary eviction proceedings to the EDNY under the Index No. l:14-cv-06282-BMC
(the “EDNY Action”). Cherry Hill’s filing was a thinly veiled attempt to thwart the adverse
rulings which Cherry Hill had received from this Court.
46. On or around November 7, 2014, Lundy’s filed a motion in the EDNY to remand
the 2012 Cherry Hill Yellowstone Action and various summary eviction proceedings1 back to the
appropriate state courts.
47. Judge Cogan found that Cherry Hill’s tactics “smacks of bad faith” and quickly
issued an order, dated November 13, 2014 (the day after the return date), granting Lundy’s
motion and remanding the actions to the appropriate state courts (the “EDNY Order”; Exhibit
Q). Judge Cogan stated as follows:
The cases have either been litigated in state court
for a number of years, or are on the eve of trial. All
of the cases were commenced prior to Lundy’s’
Chapter 11 filing, yet Cherry Hill waited over five
months to remove these actions. This smacks of bad
faith, (emphasis added)
48. As the Bankruptcy Proceeding continued, Cherry Hill was in attendance for each
and every hearing, always supporting Owner’s attempts to terminate the Net Lease so Cherry
i
Ultimately Cherry Hill and Lundy’s would settle the various summary eviction proceedings with Cherry Hill
agreeing to pay over $130,000.00 in wrongfully withheld rent and additional rent to Lundy’s pursuant to a
stipulation of settlement dated March 18,2015 (“2015 L&T Settlement”; Exhibit P).
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Hill could avoid having to pay the hundreds of thousands of dollars in rent it owed to Lundy’s
and enter into a more favorable deal with Owner.
49. Indeed, in what is the very definition of chutzpah, having caused Lundy’s defaults
and having pushed Lundy’s into bankruptcy, on October 26, 2015, Cherry Hill filed papers in
support of Owner’s application to convert Lundy’s bankruptcy to a Chapter 7 bankruptcy and, in
effect, liquidate Lundy’s (Bankruptcy Case, ECF Docket 181). At the time Cherry Hill filed its
papers:
Cherry Hill had not paid more than $200,000.00 in monthly rent for
August, September and October 2015.
Cherry Hill had not paid over $100,000 in overdue real estate taxes.
Cherry Hill had prevented Lundy’s from replacing roof tiles by physically
blockading a roofer’s access to the Lundy’s Property parking lot to
perform work - a tactic that has cost Lundy’s nearly $300,000.00 due to
increased costs.
Cherry Hill erected an outdoor refrigerated storage unit on Lundy’s
parking lot without permission.
Cherry Hill had incorrectly filed an ALT-2 application with DOB when an
ALT-1 was required due to Cherry Hill’s change in use. (To this day, I
am advised that Cherry Hill has 14 out of 28 items to complete before
DOB will sign-off on Cherry Hill’s ALT-1 application No. 321267847.,
thus preventing the Main Building’s TCO from issuing).
50. The hypocrisy and duplicity of Cherry Hill are astounding here - Cherry Hill
forced Lundy’s into bankruptcy because of its protracted failure to cure the LPC Violations and
2
By this time, although Cherry Hill had finally cured its illegal use by obtaining an amendment to the Zoning
resolution, Cherry Hill still
had not properly filed an Alt-1 application with the DOB or removed the LPC
Violations.
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its illegal use, and then filed papers supporting Lundy’s involuntary liquidation on the basis that
Lundy’s was unable to manage the Lundy’s Property.
51. In Cherry Hill’s November 5, 2015 sur-reply in support of a conversion to
Chapter 7 bankruptcy, Cherry Hill wrote:
“Nothing is ever the Debtor's fault and the Debtor
always (always!) wears the “white hat”. As a result
of this twisted and myopic worldview, and as
acknowledged in the Debtor's Reply, the Debtor has
not been able to resolve a single dispute with
anyone in this case.”
Bankruptcy Case, ECF Docket 191; Exhibit R.
52. One week later, on November 13, 2015, Owner and Lundy’s came to an
agreement on all of the outstanding issues and filed a proposed stipulation of settlement calling
for a dismissal of the Bankruptcy Proceeding (“Bankruptcy Settlement”, ECF Docket 194;
Exhibit S).
53. That same day, Cherry Hill, desperate to keep Lundy’s in bankruptcy and
obviously fearing that it would have to start paying rent again, including back rent, which at that
time totaled more than $400,000.00, and who had criticized Lundy’s for not being able to settle
with Owner just one week before, filed a baseless objection to the Bankruptcy settlement.
(Bankruptcy ECF Docket No. 197; Exhibit T).
54. In support of its objection to the Bankruptcy settlement, Cherry Hill nonsensically
stated in its papers that the Bankruptcy Proceeding should not be dismissed because doing so
would “only result in a continuation of the litigation ‘free for all’ between the Debtor, the
[Owner], and Cherry Hill.” Id.
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55. Cherry Hill’s objection was completely self-serving. The only litigation Cherry
Hill had with Lundy’s concerned Cherry Hill’s failure to (a) pay over $400,000.00 in rent and
taxes, (b) file the appropriate ALT-1 application with the DOB, (c) remove the LPC Violations,
and (d) respect DOB and LPC rules and regulations.
56. Over Cherry Hill’s sad and lone objection, Lundy’s Bankruptcy Proceeding was
dismissed by a stipulation so-ordered by United States Bankruptcy Judge Elizabeth Strong on
December 28,2015 (“Bankruptcy Settlement”; Exhibit U).
H. Terms of the Bankruptcy Settlement
57. In order to save its forty-nine year Net Lease and multi-million dollar investment,
Lundy’s agreed to an expensive but prudent settlement to emerge from the complicated mess
caused by Cherry Hill’s illegal use and LPC Violations, which prevented (and still prevents)
Lundy’s from obtaining the TCO and CO.
58. Pursuant to the terms of the Bankruptcy Settlement (Exhibit U), commencing
April 2016, Lundy’s was (and still is) required to pay Owner $10,000.00 per month in additional
rent for as long as there is no TCO for the Main Building. In addition, that amount increases by
$10,000.00 per month every six months.
59. As shown above and in the affidavit of architect John Haskopoulos (Exhibit G),
Lundy’s is unable to obtain the TCO due to Cherry Hill’s failure to remove the LPC Violations
and failure to properly file an Alt-1 application and obtain DOB signoffs when it changed its use.
60. To date, Lundy’s has paid $50,000.00 in additional rent under the Bankruptcy
Settlement that it entered into to save its Net Lease because Cherry Hill failed to comply with the
law. Starting in October 2016, the penalty will increase by $10,000.00 to $20,000.00 dollars per
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month. Cherry Hill is required to indemnify Lundy’s for these amounts, in addition to the legal
fees incurred by Lundy’s in the protracted Bankruptcy Proceeding, pursuant to Section 6.3 of the
Subleases.
61. The I PC Violations have been outstanding for seven years, and Lundy’s, for good
reason, has little faith in Cherry Hill removing the LPC violations anytime soon.
62. In addition, the Al
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FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 EXHIBIT A FILED: KINGS COUNTY CLERK 08/15/2016 10/09/2020 05:28 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 30 605 RECEIVED NYSCEF: 08/15/2016 10/09/2020 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS CHERRY HILL GOURMET INC., Index No. 510844/2016 Plaintiff, AFFIDAVIT IN OPPOSITION TO ORDER TO SHOW CAUSE -against- FOR A YELLOWSTONE INJUNCTION LUNDY’S MANAGEMENT CORP. Defendant. BRETT B. THEIS, an attorney duly admitted to practice before the Courts of the State of New York, hereby affirms the following to be true under the penalties of perjury pursuant to CPLR 2106: 1. I am a member of the law firm Rosenberg & Estis, P.C., attorneys for defendant Lundy’s Management Corp. (“Lundy’s”). As such, I am familiar with the facts and circumstances set forth below. 2. I respectfully submit this affirmation in opposition to sublessor Cherry Hill Gourmet Inc.’s (“Cherry Hill”) order to show cause seeking a Yellowstone injunction with respect to three Notices to Cure for three subleased premises, each dated June 20, 2016 (the “Default Notices”). Pursuant to the Default Notices, Lundy’s demanded payment of over $200,000.00 in rent and additional rent in arrears. The Default Notices also required Cherry Hill to cure several long-standing non-monetary defaults, including three New York City Landmarks Preservation Commission (“LPC”) violations that were issued seven years ago, which caused Lundy’s landlord to issue default notices threatening termination of the net lease, and which caused Lundy’s to incur almost $2,000,000.00 in additional rent and damages in order to prevent a forfeiture of Lundy’s multi-million dollar investment in the net lease. RE\87804\0002\641128v1 1 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 3. In support of its Yellowstone application, Cherry Hill offers bogus excuses and hollow explanations why it has not removed the violations, obtained DOB signoffs, or paid the rent and additional rent unquestionably due to Lundy’s. Lundy’s disputes all of Cherry Hill’s excuses for their current defaults, all of which will be proved false at trial in this action. For example, Cherry Hill argues that a March, 18 2015 stipulation of settlement in a non-payment proceeding provides that Lundy’s waived its right to collect real estate taxes that were not even billed until June 3, 2015. Cherry Hill’s claim is absurd on its face and evidence of its bad faith gamesmanship, as found by United States District Court Judge Brian J. Cogan (as set forth in Section G below). 4. However, the focus of Lundy’s opposition papers is not to respond to all of Cherry Hills feigned excuses; rather it is to (i) provide the Court with a history of Cherry Hill’s chronic bad faith, chronic non-payment of rent, and chronic failure to cure violations that remain outstanding after seven years; and (ii) show the Court how Cherry Hill has cost Lundy’s, and continues to cost Lundy’s, millions of dollars in additional rent and damages; so that Cherry Hill can be ordered to secure an appropriately sized bond in the event this Court is inclined to grant Cherry Hill further Yellowstone relief. A. The Parties and The Lease 5. The subject property contains two commercial buildings; a two-story “main” building (the “Main Building”) and a three-story “annex” building (the “Annex”; collectively, the “Lundy’s Property”). Cherry Hill rents space within the Main Building and operates a Russian themed specialty grocery store and deli in said space (the “Premises”). 2 RE\87804\0002\641128vl 2 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 6. Cherry Hill subleases the Premises pursuant to three subleases for three separate spaces in the Main Building dated (i) August 1, 2007 (the “2007 Sublease”), (ii) July 2011, (iii) and October 2013 (collectively, the “Subleases”; Exhibits A through C). The 2007 Sublease is incorporated into the two later subleases. The 2007 Sublease incorporates the Net Lease between Lundy’s, as tenant, and Sheepshead Restaurant Associates, Inc. (“Owner”), as owner (as defined below). B. The Renovation and Rehabilition of the Lundy’s Property 7. Starting in 1935, the Lundy’s Property was home to the Lundy’s Restaurant, an historic American seafood restaurant in the Sheepshead Bay. The original Lundy's Restaurant closed in or around 1977, following founder Irving Lundy's death. 8. The Lundy’s Property thereafter lay abandoned until approximately May 1988 when Owner purchased the Buildings. 9. On March 3, 1992, the Lundy’s Property was designated as a Landmark by the LPC. 10. After holding the property for several years without improving the dilapidated and boarded up structures, Owner turned to Steve Pappas, who incorporated Lundy’s and established plans to develop the buildings in exchange for entering into a 49-year net lease dated March 9, 1994 with Owner (the “Net Lease”; Exhibit D). 11. Lundy’s substantially rehabilitated and developed the Lundy’s Property after taking possession in 1994. In total, Lundy’s advises that it has invested north of 10 million dollars in improvements to the Lundy’s Property, as is evident by the before and after photos below, and has helped “rejuvenate” the Sheepshead Bay neighborhood, as reported by the New 3 RE\87804\0002\641128vl 3 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 York Times article, If You’re Thinking of Living In/Sheepshead Bay, Brooklyn: Where Water is Big Part of Community. March 30,2003. (Exhibit E). 'f 4 *■ I n i? “U t t** * - Fi ) I 1/ i"J. it- '1 Af'SCf'. 'X'* IV. 1 tmmmlm* ] re it~ -** SZ7 -- iSt-^ai : -gt-- *—^ _ Ifc ■»:! __ , ‘ 4 RE\87804\0002\641128vl 4 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 c. Cherry Hill’s Bad Faith and Chronic Lease Defaults 12. In summary, since Cherry Hill began subleasing the Premises from Lundy’s in 2007, Cherry Hill has repeatedly failed to comply with its monetary and non-monetary obligations under the Subleases. Specifically, Cherry Hill’s illegal use and violation of the Zoning Resolution caused Owner to default Lundy’s under the Net Lease, thus jeopardizing Lundy’s substantial investment in the Lundy’s Property and causing Lundy’s to expend substantial time, effort, and expenses saving its net lease from a forfeiture. In addition to its prior illegal use (for which Judge Demarest previously denied Cherry Hill’s Yellowstone motion in a prior Yellowstone Action), Cherry Hill’s chronic failure to comply with its obligations under the Subleases has resulted in multiple notices to cure, rent demands, summary proceedings and a criminal court enforcement action concerning zoning violations. 13. Cherry Hill’s noncompliance with the Subleases has created serious problems for Lundy's because Cherry Hill's defaults, particularly the LPC Violations (defined below), have led to the issuance of notices of default and termination to Lundy's pursuant to the Net Lease. Indeed, Cherry Hill’s chronic defaults led to Judge Demerast ordering Lundy’s to post a $1,050,000.00 Yellowstone bond which pushed Lundy’s into bankruptcy to save its Net Lease from forfeiture. Adding insult to injury, Cherry Hill withheld over $400,000.00 in rent during Lundy’s bankruptcy, intentionally interfering with Lundy’s efforts to reorganize and/or emerge from bankruptcy. 14. On March 26, 2009, Cherry Hill caused three violations to be issued by the LPC with the violation numbers: 032609LANDMK09-0980, 032609LANDMK09-0981, and 032609LANDMK09-0982 (the “LPC Violations”). 5 RE\87804\0002\641128v 1 5 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 15. The LPC Violations were issued because of Cherry Hill’s installation of awnings. window signage, and an HVAC without permits and because of Cherry Hill’s alternation of the rear facade of the Premises without permits. 16. Seven years later, these violations are still active. See Exhibit F. 17. As set forth in the November 2, 2015 affidavit of architect John Haskopoulos (Exhibit G), the LPC Violations continue to prevent Lundy’s from obtaining a temporary and permanent certificate of occupancy (“TCO”) for the Main Building and a permanent certificate of occupancy (“CO”) for the Annex. As a result, Lundy’s is required to pay substantial sums under its Net Lease to owner pursuant to the bankruptcy settlement (discussed in Section G below) that Lundy’s entered into to salvage its Net Lease and avoid forfeiture. 18. A seven year LPC violation is simply disgraceful. 19. We will turn to some of the first attempts of Lundy’s to compel Cherry Hill to cure the LPC Violations and other defaults under the Subleases. D. Litigation History with Cherry Hill 20. On or about August 2, 2012, Lundy’s issued Notices of Default to Cherry Hill, giving Cherry Hill five business days to pay the approximately $180,000.00 in rental arrears it owed to Lundy’s. A copy of the notices are annexed hereto as Exhibit H. 21. On or about August 6, 2012, Lundy’s issued a Notice to Default to Cherry Hill, giving Cherry Hill 20 days to cure certain zoning violations, the I,PC violations, and several other violations from the City. A copy of the notice is annexed hereto as Exhibit I. 6 RE\87804\0002\641128vl 6 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 22. Several of the violations were related to Cherry Hill’s illegal use of the Premises. Cherry Hill operated the Premises as a grocery store, however, it was zoned for restaurant use only. 23. On August 9, 2012, Cherry Hill commenced an action for Yellowstone relief with the index number 502300/2012 in Kings County Supreme Court (the “2012 Cherry Hill Yellowstone Action”). Yellowstone relief was thereafter temporarily granted to Cherry Hill and the matter was ultimately assigned to the Honorable Carolyn E. Demarest, J.S.C. E. Owner Defaults Lundy’s Due to Cherry Hill’s Violation of Law and the Sublease 24. After obtaining Yellowstone relief in the 2012 Cherry Hill Yellowstone Action, Cherry Hill should have begun diligently curing its violations, but it did not. 25. As such, eight months later, on or about April 15, 2013, Owner issued a Notice to Cure (Exhibit J) alleging that Lundy’s was in default of the Net Lease due to, inter alia, the LPC Violations and several violations related to Cherry Hill’s illegal use of the Premises. 26. Thus, due to Cherry Hill’s defaults, Lundy’s was forced to commence an action for Yellowstone relief to protect its Net Lease. Lundy’s motion was granted by the Court under index number 502226/2013 in Kings County Supreme Court (the “Lundy’s Yellowstone Action”). 27. The Lundy’s Yellowstone Action was also assigned to the Honorable Carolyn E. Demarest, J.S.C. 28. On or about November 21, 2013, Owner issued a second Notice to Cure (the “November 2013 Notice to Cure”; Exhibit K), alleging that Lundy’s was in default of the Net Lease due to: 7 RE\87804\0002\641128vl 7 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 a. A failure to obtain a temporary certificate of occupancy for the main building; b. An illegal/non-conforming use by Lundy's subtenant, Cherry Hill; c. A failure to cure certain additional DOB/ECB Violations (some of which were related to Cherry Hill’s improper use); and d. A failure to maintain insurance (which was not the case). 29. Each and every one of these defaults (other than a lack of insurance, which was in any event a false claim) was due to and caused by Cherry Hill. 30. Thus, on January 2, 2014, Lundy’s was forced to file yet another motion by order to show cause (“OSC”) in the Lundy’s Yellowstone Action seeking, inter alia, a Yellowstone Injunction tolling the cure period of the November 2013 Notice to Cure and enjoining Owner from terminating the Lease due to defaults directly caused by Cherry Hill. 31. Upon Lundy’s demonstrated willingness and ability to cure, the Court signed the OSC and granted the requested temporary retaining order for temporary Yellowstone injunctive relief. F. Lundy’s Defaults Cherry Hill in Order to Cure Cherry Hill’s Illegal Use 32. In order to cure what had become the critical default alleged by owner in the Lundy’s Yellowstone Action, Lundy’s served Cherry Hill with a Ten (10) Day Notice To Cure Default, dated February 18, 2014 (Exhibit L), for failure to abide by the applicable New York City Zoning Resolution by using the Premises for a use other than its permitted use as an “eating and drinking place.” 8 RJE\87804\0002\641128vl 8 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 33. In response, Cherry Hill filed a second Yellowstone motion in the 2012 Cherry Hill Yellowstone Action. 34. At a joint hearing held on April 7, 2014 for both Lundy’s and Cherry Hill’s Yellowstone applications, the Court (Demarest, J. presiding) ultimately GRANTED Lundy’s application and DENIED Cherry Hill’s application for Yellowstone relief. A copy of the transcript is annexed hereto as Exhibit M. As set forth in the transcript, Judge Demarest was clear that Lundy’s must evict Cherry Hill in order to cure the illegal use violation alleged by Owner in order to save its Net Lease from forfeiture: THE COURT: You have to get them out. *** THE COURT: Seems to me you have to conclude your summary proceeding and get rid of your tenant that is non-conforming in order to get your lease back. Exhibit M, p. 30, lines 9; p. 31, lines 23-25. 35. Ultimately, the Court understood that Cherry Hill’s illegal use was the catalyst for all of the litigation between Owner and Lundy’s and between Lundy’s and Cherry Hill. Accordingly, the Court ruled as follows: THE COURT: Okay, I think what we have to do here is deal now with the Cherry Hill Yellowstone. *** THE COURT: Mr. Wagner [Cherry Hill’s attorney], the problem I have is the law. Is the law. I can't bend that. If you took occupancy 9 RE\87804\0002\641128vl 9 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 with an illegal use you are presumed to have understood it was an illegal use. So whether they misled you or not you undertook to do it. There is a written lease and you are bound to it. *** THE COURT: So I would be moving to vacate the Yellowstone that was entered here in this case, is that right? MR. HINES [Lundy’s prior counsel]: Yes, Your Honor. THE COURT: You are proceeding to commence an action in landlord tenant court and litigate against them, is that right? MR. HINES: Yes, Your Honor. THE COURT: All right. I am vacating the Yellowstone with respect to Cherry Hill Gourmet. I do not find that the plaintiff has carried his burden to demonstrate that he can achieve a remedy for this and indeed he created it or it created the non-conforming use as represented here. Exhibit M, p. 33, lines 14-15; p. 36, lines 2-7; p. 38, line 21 to p. 39, line 9 (emphasis supplied). 36. The next day, April 8, 2014, the Court issued a Decision and Order on Lundy’s applications for Yellowstone relief (“April 8,2014 Order”; Exhibit N), stating: Following argument, the Yellowstone Injunction is continued to April 29, 2014 on condition plaintiff Lundy’s makes payment of additional rent due for taxes in the sum of $308,119.22 and provides a bond as security for potential losses to defendant in the sum of $1,050,000 by April 11,2014. 10 RE\87804\0002\641128vl 10 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 Plaintiff is now free to commence a summary proceeding against its sub-tenant Cherry Hill so as to cure the illegal occupancy which is one of the allegations of default under the Lease. The matter is adjourned to April 29, 2014 for further hearing (emphasis supplied). 37. On the same date, Judge Demarest issued an order in the 2012 Cherry Hill Yellowstone Action (Exhibit O) stating: Upon plaintiffs admission that its current use of the premises is not in conformity with any certificate of occupancy and undisputed evidence that, since taking occupancy, plaintiff has modified its use so as to create a non-conforming use, the Yellowstone injunction, entered on February 27, 2014 by my colleague Justice Steinhardt, is vacated. 38. In order to purchase the $1,050,000 bond required of Lundy’s due to Cherry Hill’s defaults, Lundy’s needed $1,155,000 in cash on hand because the bonding companies require 100% cash collateral as security, plus a 10% transaction fee. Unfortunately, Lundy’s did not have the funds to timely comply with the Court’s bond requirement. 39. Thus, on April 11, 2014, Lundy’s sought relief from the Appellate Division, Second Department. 40. The Second Department issued a stay of the bond requirement and then, by Decision & Order on Motion, dated May 1, 2014, the Second Department, inter alia, extended Lundy’s time to comply with the bond requirement until May 9, 2014. 11 RE\87804\0002\641128vl 11 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 G. The Cherry Hill Lease Defaults and Non- Payment of Rent Pushed Lundy’s into Bankruptcy to Save its Net Lease 41. Unable to come up with the funds for the $1,050,000 bond requirement caused by Cherry Hill’s Sublease defaults, on May 8, 2014, Lundy’s made the difficult decision to file a Chapter 11 Bankruptcy petition in order to protect its Net Lease and multi-million dollar investment in improvements. The Chapter 11 bankruptcy proceeding was captioned as In re: Lundy’s Management Corp., Case No. 1-14-42318-ESS (the “Bankruptcy Proceeding”), United States Bankruptcy Court, Eastern District of New York (the “Bankruptcy Court”). 42. During the course of the eighteen month bankruptcy proceeding, Lundy’s was fighting for its life while being attacked by an aggressive landlord who saw an opportunity to cause a forfeiture, and Cherry Hill, who saw an opportunity to baselessly withhold rent and additional rent, hoping to squeeze Lundy’s out of the picture and enter into a more favorable deal with Owner. 43. While Owner engaged in a torrent of Bankruptcy litigation, one might expect Cherry Hill to offer support, having created much of the mess in the first place. After all,the only remaining violations still outstanding in the Lundy’s Yellowstone Action concerned Cherry Hill’s illegal use and the LPC Violations, thus the bankruptcy was directly caused by Cherry Hill (i.e. there would have been no need to post a bond had those violations been cured; the action would have instead been dismissed). 44. However, the reality was that Cherry Hill took every opportunity to kick Lundy’s while it was down. Rather than rush to cure the LPC Violations, Cherry Hill supported Owner’s motion to convert Lundy’s bankruptcy to a Chapter 7 liquidation proceeding and withheld rent 12 RE\87804\0002\641128vl 12 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 without any basis and made numerous frivolous filings in state courts and the Eastern District of New York (“EDNY”). 45. In fact, United States District Court Judge Brian J. Cogan found that Cherry Hill had acted in “bad faith” in attempting to remove the 2012 Cherry Hill Yellowstone Action and multiple summary eviction proceedings to the EDNY under the Index No. l:14-cv-06282-BMC (the “EDNY Action”). Cherry Hill’s filing was a thinly veiled attempt to thwart the adverse rulings which Cherry Hill had received from this Court. 46. On or around November 7, 2014, Lundy’s filed a motion in the EDNY to remand the 2012 Cherry Hill Yellowstone Action and various summary eviction proceedings1 back to the appropriate state courts. 47. Judge Cogan found that Cherry Hill’s tactics “smacks of bad faith” and quickly issued an order, dated November 13, 2014 (the day after the return date), granting Lundy’s motion and remanding the actions to the appropriate state courts (the “EDNY Order”; Exhibit Q). Judge Cogan stated as follows: The cases have either been litigated in state court for a number of years, or are on the eve of trial. All of the cases were commenced prior to Lundy’s’ Chapter 11 filing, yet Cherry Hill waited over five months to remove these actions. This smacks of bad faith, (emphasis added) 48. As the Bankruptcy Proceeding continued, Cherry Hill was in attendance for each and every hearing, always supporting Owner’s attempts to terminate the Net Lease so Cherry i Ultimately Cherry Hill and Lundy’s would settle the various summary eviction proceedings with Cherry Hill agreeing to pay over $130,000.00 in wrongfully withheld rent and additional rent to Lundy’s pursuant to a stipulation of settlement dated March 18,2015 (“2015 L&T Settlement”; Exhibit P). 13 RE\87804\0002\641128vl 13 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 Hill could avoid having to pay the hundreds of thousands of dollars in rent it owed to Lundy’s and enter into a more favorable deal with Owner. 49. Indeed, in what is the very definition of chutzpah, having caused Lundy’s defaults and having pushed Lundy’s into bankruptcy, on October 26, 2015, Cherry Hill filed papers in support of Owner’s application to convert Lundy’s bankruptcy to a Chapter 7 bankruptcy and, in effect, liquidate Lundy’s (Bankruptcy Case, ECF Docket 181). At the time Cherry Hill filed its papers: Cherry Hill had not paid more than $200,000.00 in monthly rent for August, September and October 2015. Cherry Hill had not paid over $100,000 in overdue real estate taxes. Cherry Hill had prevented Lundy’s from replacing roof tiles by physically blockading a roofer’s access to the Lundy’s Property parking lot to perform work - a tactic that has cost Lundy’s nearly $300,000.00 due to increased costs. Cherry Hill erected an outdoor refrigerated storage unit on Lundy’s parking lot without permission. Cherry Hill had incorrectly filed an ALT-2 application with DOB when an ALT-1 was required due to Cherry Hill’s change in use. (To this day, I am advised that Cherry Hill has 14 out of 28 items to complete before DOB will sign-off on Cherry Hill’s ALT-1 application No. 321267847., thus preventing the Main Building’s TCO from issuing). 50. The hypocrisy and duplicity of Cherry Hill are astounding here - Cherry Hill forced Lundy’s into bankruptcy because of its protracted failure to cure the LPC Violations and 2 By this time, although Cherry Hill had finally cured its illegal use by obtaining an amendment to the Zoning resolution, Cherry Hill still had not properly filed an Alt-1 application with the DOB or removed the LPC Violations. 14 RE\87804\0002\641128vl 14 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 its illegal use, and then filed papers supporting Lundy’s involuntary liquidation on the basis that Lundy’s was unable to manage the Lundy’s Property. 51. In Cherry Hill’s November 5, 2015 sur-reply in support of a conversion to Chapter 7 bankruptcy, Cherry Hill wrote: “Nothing is ever the Debtor's fault and the Debtor always (always!) wears the “white hat”. As a result of this twisted and myopic worldview, and as acknowledged in the Debtor's Reply, the Debtor has not been able to resolve a single dispute with anyone in this case.” Bankruptcy Case, ECF Docket 191; Exhibit R. 52. One week later, on November 13, 2015, Owner and Lundy’s came to an agreement on all of the outstanding issues and filed a proposed stipulation of settlement calling for a dismissal of the Bankruptcy Proceeding (“Bankruptcy Settlement”, ECF Docket 194; Exhibit S). 53. That same day, Cherry Hill, desperate to keep Lundy’s in bankruptcy and obviously fearing that it would have to start paying rent again, including back rent, which at that time totaled more than $400,000.00, and who had criticized Lundy’s for not being able to settle with Owner just one week before, filed a baseless objection to the Bankruptcy settlement. (Bankruptcy ECF Docket No. 197; Exhibit T). 54. In support of its objection to the Bankruptcy settlement, Cherry Hill nonsensically stated in its papers that the Bankruptcy Proceeding should not be dismissed because doing so would “only result in a continuation of the litigation ‘free for all’ between the Debtor, the [Owner], and Cherry Hill.” Id. 15 RE\87804\0002\641128vl 15 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 55. Cherry Hill’s objection was completely self-serving. The only litigation Cherry Hill had with Lundy’s concerned Cherry Hill’s failure to (a) pay over $400,000.00 in rent and taxes, (b) file the appropriate ALT-1 application with the DOB, (c) remove the LPC Violations, and (d) respect DOB and LPC rules and regulations. 56. Over Cherry Hill’s sad and lone objection, Lundy’s Bankruptcy Proceeding was dismissed by a stipulation so-ordered by United States Bankruptcy Judge Elizabeth Strong on December 28,2015 (“Bankruptcy Settlement”; Exhibit U). H. Terms of the Bankruptcy Settlement 57. In order to save its forty-nine year Net Lease and multi-million dollar investment, Lundy’s agreed to an expensive but prudent settlement to emerge from the complicated mess caused by Cherry Hill’s illegal use and LPC Violations, which prevented (and still prevents) Lundy’s from obtaining the TCO and CO. 58. Pursuant to the terms of the Bankruptcy Settlement (Exhibit U), commencing April 2016, Lundy’s was (and still is) required to pay Owner $10,000.00 per month in additional rent for as long as there is no TCO for the Main Building. In addition, that amount increases by $10,000.00 per month every six months. 59. As shown above and in the affidavit of architect John Haskopoulos (Exhibit G), Lundy’s is unable to obtain the TCO due to Cherry Hill’s failure to remove the LPC Violations and failure to properly file an Alt-1 application and obtain DOB signoffs when it changed its use. 60. To date, Lundy’s has paid $50,000.00 in additional rent under the Bankruptcy Settlement that it entered into to save its Net Lease because Cherry Hill failed to comply with the law. Starting in October 2016, the penalty will increase by $10,000.00 to $20,000.00 dollars per 16 RB87804\0002\641128vI 16 of 26 FILED: KINGS COUNTY CLERK 10/09/2020 02:11 PM INDEX NO. 510844/2016 NYSCEF DOC. NO. 605 RECEIVED NYSCEF: 10/09/2020 month. Cherry Hill is required to indemnify Lundy’s for these amounts, in addition to the legal fees incurred by Lundy’s in the protracted Bankruptcy Proceeding, pursuant to Section 6.3 of the Subleases. 61. The I PC Violations have been outstanding for seven years, and Lundy’s, for good reason, has little faith in Cherry Hill removing the LPC violations anytime soon. 62. In addition, the Al