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FILED: NEW YORK COUNTY CLERK 07/13/2018 04:00 PM INDEX NO. 154465/2018
NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 07/13/2018
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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GRENADIER REALTY CORP., : Index No. 154465/2018
:
Plaintiff, :
:
- against - :
DONALD CAPOCCIA, BRANDON BARON, JOSEPH
FERRARA, FRANCINE KELLMAN and BRIAN :
RADDOCK, :
:
Defendants. :
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PLAINTIFF'S MEMORANDUM OF LAW IN FURTHER SUPPORT OF
ITS CPLR 3213 APPLICATION
MEISTER SEELIG & FEIN LLP
7th
125 Park Avenue, FlOOr
New York, New York 10017
Tel: (212) 655-3500
Attorneys for Plaintiff
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TABLEOFCONTENTS
PRELIMINARY STATEMENT 1
....................................................................................................
STATEMENT OF UNDISPUTED FACTS...................................................................................
3
ARGUMENT..................................................................................................................................
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DEFENDANTS'
I. IRREVOCABLE AND UNCONDITIONAL GUARANTY TO PAY
THE BREAK-UP FEE WAS TRIGGERED BY THEIR TERMINATION OF
PLAINTIFF, BECAUSE, BY THEIR OWN NOTICES, THE TERMINATION WAS
NOT BASED ON WILLFUL MISCONDUCT OR GROSS NEGLIGENCE................... 3
CONCLUSION...............................................................................................................................
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("Plaintiff" "Grenadier"
Plaintiff Grenadier Realty Corp. or "Grenadier"), respectfully submits this
Memorandum of Law in further support of itsmotion under CPLR § 3213 for summary judgment
against defendants Donald Capoccia, Brandon Baron, Joseph Ferrara, Francine Kellman and Brian
"Defendants" "Guarantors"
Raddock (collectively, or "Guarantors"):
(a) in the amount of $500,000, plus prejudgment and post-judgment interest, and
attorney's fees, costs and expenses incurred by Plaintiff in enforcing its rights under
the Guaranty Letter and Amendment to Certain Provisions of Purchase and Sale
"Guaranty"
Agreement (the "Guaranty"); and
(b) for such other and further relief as the Court deems just and proper.
PRELIMINARY STATEMENT
Plaintiff, a management company, and its non-party affiliates, owned and managed an
affordable housing project in Staten Island for over 30 years. In 2014, Plaintiff's affiliates sold
(" Shore"
the project to an entity controlled by Defendants ("North Shore"). As part of that deal, Plaintiff's
affiliates insisted and Defendants agreed to retain Plaintiff to continue managing the project for
Defendants following the sale. To ensure that Plaintiff got the benefit of its bargain, the parties
agreed - in their Purchase Agreement - that if North Shore terminated Plaintiff as manager
before the end of the 5-year agreed term, they would have to pay Plaintiff a $500,000 "Break-up
Fee."
The parties further agreed that only if Plaintiff engaged in "willful misconduct or gross
negligence"
would North Shore be able to terminate Plaintiff without owing the Break-up Fee. The
Break-up Fee was such an essential part of the overall consideration received on the sale by
Plaintiff and its affiliates, that Plaintiff insisted and Defendants agreed that all five individual
defendants - being the principals of the buyer - would jointly and severally guaranty the
payment of the Break-up Fee to Plaintiff.
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Before lawyering up, North Shore terminated Plaintiff under two notices which expressly
"deficient,"
state that Plaintiff's performance was merely offering Plaintiff the cure rights the
parties agreed would not be available to Plaintiff if Plaintiff engaged in willful misconduct or gross
negligence. Plaintiff disputed North Shore's contention that its performance was deficient but
accepted the termination - which was permitted even without cause provided the Break-up Fee
was paid, and demanded the Break-up Fee. Defendants at that point refused to pay the Break-up
Fee, lawyered up, and now seek to distract the Court and distance themselves from their own prior
notices, which unequivocally establish Plaintiff's right to an expedited judgment under CPLR 3213
for the Break-up Fee.
Because North Shore's own notices unequivocally establish that that Guaranty
- a money-
only instrument the parties expressly agreed qualified under CPLR 3213 - was triggered,
Defendants try to distract the Court with alleged defaults by Plaintiff under the Management
Agreement. These alleged defaults are red herrings, having no bearing on this 3213 action.
Defendants further their obfuscation by directing the Court to a separate lawsuit they commenced
seeking money damages and declaratory relief related to the alleged defaults by Plaintiff under the
Management Agreement. But those alleged defaults solely relate to that other action (which
Plaintiff will vigorously oppose in that action) because such alleged defaults - even if they
occurred (they did not)
- do not constitute a defense under the Guaranty.
Defendants'
attempt to muddy the waters, arguing that either Plaintiff is not entitled to the
Break-up Fee because the alleged defaults resulted in a with cause termination or because a
question of fact exists as to whether the defaults rose to the level of willful misconduct or gross
negligence, is a newly concocted litigation position which is completely at odds with North Shore's
prior assertions and admissions regarding Plaintiff's managerial conduct.
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The alleged defaults in question do not, as a matter of law, constitute willful misconduct
or gross negligence, which is why, before Defendants lawyered up, they noticed Plaintiff's defaults
under the non-willful misconduct default provision and gave Plaintiff a cure period, something
they were not supposed to do in the case of willful misconduct or gross negligence.
Defendants cannot escape the fact that North Shore did not terminate Plaintiff pursuant to
the willful-misconduct termination provision in the Management Agreement and offered Plaintiff
the cure rights only available for other defaults.
As a result, Defendants have no defense, and must pay Plaintiff the agreed upon Break-up
Fee.
STATEMENT OF FACTS
For the sake of brevity, Plaintiff relies on the recitation of the facts set forth in the moving
Aff.").1
Affidavit of David Goldban ("Goldban
ARGUMENT
DEFENDANTS'
I. IRREVOCABLE AND UNCONDITIONAL GUARANTY TO
PAY THE BREAK-UP FEE WAS TRIGGERED BY THEIR TERMINATION
OF PLAINTIFF, BECAUSE, BY THEIR OWN NOTICES, THE
TERMINATION WAS NOT BASED ON WILLFUL MISCONDUCT OR
GROSS NEGLIGENCE
Defendants, "jointly and severally...irrevocably guarantee[d]...the due and punctual
Fee."
payment of the Break-up The parties agreed that Defendants would be required to pay the
cause,"
Break-up Fee unless Plaintiff was terminated "for which the Guaranty expressly limited to
Plaintiff's "willful misconduct or gross negligence":
Guarantor, jointly and severally, hereby irrevocably guarantees...the due and
punctual payment of the Break-up Fee...as and when required by the terms
of this Letter (the "Break-up Fee Guaranteed Obligation"; and together with
the Excess Management Fee Guaranteed Obligation, collectively the
Terms not otherwise defined herein shallhave themeaning ascribed to them in theGoldban Aff.
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Obligations" break-
"Guaranteed Obligations"). The Purchase Agreement provides for a
up fee in the amount of Five Hundred Thousand and 00/100 Dollars
($500,000.00) (the "Break-up Fee") if Grenadier is terminated as the
managing agent of the Property...without cause within the first five (5) years
after the date [December 18, 2014] hereof...
"cause"
For purposes of this Letter, the term shall mean Grenadier's willful
misconduct or gross negligence as management agent under the Management
Agreement.
Goldban Aff., Exh. C at §1.
one."
The Guaranty "is an absolute, irrevocable, present and continuing Goldban Aff.,
Exh. B at § 6. Defendants further agreed that "[n]o irregularity, unenforceability or invalidity of
any of the documents creating the Guaranteed Obligations or any other document, item, matter,
Guaranty."
action or circumstance shall impair, release or be a defense to th[e] Id. Defendants
also understood and expressly agreed that the Guaranty "is and is intended to be, an instrument for
the payment of money only, as such phrase is used in Section 3213 of the Civil Practice Law and
York,"
Rules of the state of New and that, if the Guaranty required enforcement, Plaintiff would
proceed by a CPLR 3213 summary judgment motion. Isl.at § 7.
cause"
The Guaranty is triggered upon a "without termination by Plaintiff as manager by
North Shore, which the parties agreed meant a termination based on Plaintiff s "willful misconduct
or gross
negligence" - not a mere breach of the Management Agreement. While Defendants now
contend North Shore terminated Plaintiff for "willful misconduct or gross
negligence" - entitling
Defendants to slip their heads from the noose - North Shore's own notices expressly state
otherwise.
Defendants miss the point when they say that Plaintiff "seemingly believes that itsbreaches
of the Management Agreement (and failure to cure those breaches) cannot constitute 'willful
negligence.'"
misconduct or gross This is not about Plaintiff s belief itis about what actually
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happened. North Shore did not previously assert that Plaintiff engaged in willful misconduct or
gross negligence; to the contrary, and up until their opposition filing, itexpressly noticed defaults
and a termination under the section of the Management Agreement covering curable defaults not
arising from willful misconduct or gross negligence. Though another section of the Management
Agreement provided North Shore the express right to terminate Plaintiff based on willful
misconduct or gross negligence without affording Plaintiff a cure right, North Shore did not -
before lawyering up
- proceed under that section.
(" Notice"
In itsinitial default letter dated February 15, 2018 ("Default Notice"), North Shore stated:
"Grenadier's services as property manager have been deficient and it is in violation of the
Agreement. As such, pursuant to Section 22(c) of the Agreement we write to put you on notice of
violations."
this default and to demand that you cure such Goldban Aff., Exh. D (Emphasis added).
15th
The remainder of the February letter purports to detail the particular alleged breaches of the
Management Agreement but never once states that any of the violations rises to level of willful
misconduct or gross negligence. Id. The letter also expressly provides Plaintiff with the
opportunity to cure the alleged violations, or else "North Shore may terminate the [Management]
Agreement."
North Shore never stated that, absent a cure, the termination would be for cause
based on willful misconduct or gross negligence. Id.
In its March 2, 2018 letter terminating Plaintiff as the Property manager (the "Termination
Letter"
Letter"), North Shore states:
In so far as Grenadier has not (i) cured all of the defaults described in the
Default Letter, or (ii) demonstrated (through the Response Letters or any
other means) to the satisfaction of North Shore that it isdiligently pursuing
all necessary actions to cure such defaults within a reasonable time, the
[Management] Agreement - pursuant to its section 22(c)
- is terminated
effective March 8, 2018.
Goldban Aff., Exh. G (Emphasis added).
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Plaintiff responded in a March 1, 2018 letter that itremained entitled to the Break-up Fee
because North Shore did not accuse Plaintiff of willful misconduct or gross negligence. North
Shore could have, but did not, in itssubsequent Termination Letter, state that Plaintiff was not
entitled to that fee on the ground that North Shore was terminating Plaintiff for cause, which
precludes payment of the Break-up Fee per the Guaranty. . Goldban Aff., Exh. G, F.
Plaintiff is not arguing, as Defendants suggest, that a breach of the Management Agreement
negligence' law;"
"cannot constitute 'willful misconduct or gross as a matter of rather, Plaintiff is
simply pointing out that North Shore never charged Plaintiff with willful misconduct or gross
negligence; to the contrary, North Shore expressly relied on the without cause termination
provision and purported to offer Plaintiff the cure right that solely attaches to defaults supporting
a without cause termination. Defendants are engaged in a blatant revisionism with respect to their
s.~2
company's own writings.
In each of the two letters from North Shore regarding Plaintiff's defaults, North Shore
terminated Plaintiff pursuant to Section 22(c) of the Management Agreement. See Goldban Aff.,
2 In a review ofNorth Shore'sdescription of thethree ways it couldterminate the Management Agreement
fact,
in itsseparate lawsuit supports position
Plaintiff's that ifithad engaged in willfulmisconduct or gross negligence,
North Shore would not have given Plaintiffa cure right:
"In other words, the Management made clear thatNorth Shore could terminate
Grenadier in any one of three ways:
days' notice;'
• First,'with or without cause or penalty upon 30 notice
• Second, 'upon [al finding of willful misconduct or gross negligence
cure;'
without [Grenadier's] rightto cure
• Third, 'intheevent [Grenadier] failstoperform any of its
duties...and such
default isnot cured oris not addressed to the reasonable and continuing
'
satisfactionof [North Shore]
See Affirmation of David Feuerstein dated June 27, 2018, Exh. A at ¶20.(Emphasis
added).
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Exh. D, G. None of the Guaranty trigger words - willful misconduct, gross negligence, or with
cause - appear in Section 22(c), which states (emphasis added):
In addition, in the event Agent failsto perform any of its duties hereunder or
to comply with any of the provisions hereof, Owner shall notify Agent in
writing and Agent shall have ten (10) days thereafter within which to cure
such default to the reasonable satisfaction of Owner, and if such default
cannot be cured within such ten (10) day period, Agent shall have such
additional time as may be necessary to cure the same (but not more than
twenty (20) additional days) provided that Agent demonstrates to the
continuing satisfaction of Owner that itis diligently pursuing all necessary
actions to cure such default and that the same will be cured within a
reasonable time without damage or expense to Owner. If,within said periods,
such default is not cured or is not addressed to the reasonable and continuing
satisfaction of Owner, Owner may terminate this Agreement and terminate
Agent's services upon an additional five (5) day notice.
Goldban Aff., Exh. C.
Instead, Section 22(b) of the Management Agreement sets forth the only termination
provision that contains the trigger words:
Notwithstanding (c), below, this Agreement may be terminated at any time
by either Agent or by Owner or Owner's affiliates with or without cause or
days'
penalty upon 30 notice to the other party. Owner may, by right,
terminate immediately upon finding of willful misconduct or gross
negligence without Agent's right to cure.
Id. (Emphasis added).
comply"
Plaintiff's mere "failure to perform... or with its obligations does not amount to
negligence."
"willful misconduct or gross Defendants cannot escape the fact that North Shore did
not choose to terminate Plaintiff pursuant to Section 22(b)
- the sole section which mentions
misconduct" negligence"
"willful and "gross and instead repeatedly stated its termination was
pursuant to Section 22(c), and provided Plaintiff with a cure period even though no cure period is
provided in Section 22(b).
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comply,"
Thus, while Plaintiff did not commit the "failures to perform and of which it is
accused, that charge is irrelevant. If Defendants truly believed Plaintiff had committed acts
willful misconduct or gross itwas incumbent upon them — and
constituting negligence, they surely
would have - terminated Plaintiff under Section 22(b), not 22(c), and would not have afforded
Plaintiff a cure right.
Unfortunately for Defendants their litigation counsel entered the picture too late.
Defendants'
blatant attempt to rewrite history should not be countenanced. Their written
correspondence - composed before they lawyered up
- betrays their current litigation position.
Per North Shore's own words, and as such per the Guaranty, Plaintiff was not terminated for cause,
which means Defendants are liable the payment of the Break-up Fee under the Guaranty.
CONCLUSION
The parties agreed that Defendants would retain Plaintiff as a continuing manager as part
of the sale transaction. To assure that Plaintiff and its affiliates got the benefit of the bargain, the
parties agreed to a $500,000 Break-up Fee, and had all five principals of the buyer personally
guaranty the Break-up Fee jointly and severally, in an instrument the parties expressly agreed
qualified as a money only instrument under CPLR 3213.
North Shore, without the advice of litigation counsel, chose to terminate Plaintiff based on
"deficient"
its performance as manager. North Shore could have but did not state that Plaintiff's
conduct amounted to willful misconduct or gross negligence, cited the termination provision not
involving such conduct and afforded Plaintiff the cure rights only available where the offending
conduct did not rise to the level of willful misconduct or gross negligence. When Plaintiff accepted
the termination, which was permitted to be made without cause, and demanded the Break-up Fee,
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North Shore did not state in response that Plaintiff's conduct amounted to willful misconduct or
gross negligence.
Defendants should not now be permitted to deprive Plaintiff of that bargain by litigation
tactics and gamesmanship, and evade their obligations under the Guaranty, especially when their
position."
own prior correspondence betrays their newly minted "litigating
Pursuant to CPLR 3213, the Court should issue an order awarding summary judgment
against Defendants, jointly and severally:
(a) in the sum of $500,000, plus prejudgment and post-judgment interest, and attorney's
fees, costs and expenses incurred by Plaintiffin enforcing itsrights under the Guaranty
Letter and Amendment to Certain Provisions of Purchase and Sale Agreement; and
(b) for such other and further relief as the Court deems just and proper.
Dated: New York, New York
July 13, 2018 MEIS(ER E IG & FEIN LLP
By:
Stephen B. Meister
Stacey M. Ashby
7th
125 Park Avenue, Floor
New York, NY 10017
Telephone: (212) 655-3500
Attorneys for Plaintiff
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Preview
FILED: NEW YORK COUNTY CLERK 07/13/2018 04:00 PM INDEX NO. 154465/2018 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 07/13/2018 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ------------------------------------------------------------------------- X GRENADIER REALTY CORP., : Index No. 154465/2018 : Plaintiff, : : - against - : DONALD CAPOCCIA, BRANDON BARON, JOSEPH FERRARA, FRANCINE KELLMAN and BRIAN : RADDOCK, : : Defendants. : ------------------------------------------------------------------------- X PLAINTIFF'S MEMORANDUM OF LAW IN FURTHER SUPPORT OF ITS CPLR 3213 APPLICATION MEISTER SEELIG & FEIN LLP 7th 125 Park Avenue, FlOOr New York, New York 10017 Tel: (212) 655-3500 Attorneys for Plaintiff 1 of 11 FILED: NEW YORK COUNTY CLERK 07/13/2018 04:00 PM INDEX NO. 154465/2018 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 07/13/2018 TABLEOFCONTENTS PRELIMINARY STATEMENT 1 .................................................................................................... STATEMENT OF UNDISPUTED FACTS................................................................................... 3 ARGUMENT.................................................................................................................................. 3 DEFENDANTS' I. IRREVOCABLE AND UNCONDITIONAL GUARANTY TO PAY THE BREAK-UP FEE WAS TRIGGERED BY THEIR TERMINATION OF PLAINTIFF, BECAUSE, BY THEIR OWN NOTICES, THE TERMINATION WAS NOT BASED ON WILLFUL MISCONDUCT OR GROSS NEGLIGENCE................... 3 CONCLUSION............................................................................................................................... 8 1 2 of 11 FILED: NEW YORK COUNTY CLERK 07/13/2018 04:00 PM INDEX NO. 154465/2018 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 07/13/2018 ("Plaintiff" "Grenadier" Plaintiff Grenadier Realty Corp. or "Grenadier"), respectfully submits this Memorandum of Law in further support of itsmotion under CPLR § 3213 for summary judgment against defendants Donald Capoccia, Brandon Baron, Joseph Ferrara, Francine Kellman and Brian "Defendants" "Guarantors" Raddock (collectively, or "Guarantors"): (a) in the amount of $500,000, plus prejudgment and post-judgment interest, and attorney's fees, costs and expenses incurred by Plaintiff in enforcing its rights under the Guaranty Letter and Amendment to Certain Provisions of Purchase and Sale "Guaranty" Agreement (the "Guaranty"); and (b) for such other and further relief as the Court deems just and proper. PRELIMINARY STATEMENT Plaintiff, a management company, and its non-party affiliates, owned and managed an affordable housing project in Staten Island for over 30 years. In 2014, Plaintiff's affiliates sold (" Shore" the project to an entity controlled by Defendants ("North Shore"). As part of that deal, Plaintiff's affiliates insisted and Defendants agreed to retain Plaintiff to continue managing the project for Defendants following the sale. To ensure that Plaintiff got the benefit of its bargain, the parties agreed - in their Purchase Agreement - that if North Shore terminated Plaintiff as manager before the end of the 5-year agreed term, they would have to pay Plaintiff a $500,000 "Break-up Fee." The parties further agreed that only if Plaintiff engaged in "willful misconduct or gross negligence" would North Shore be able to terminate Plaintiff without owing the Break-up Fee. The Break-up Fee was such an essential part of the overall consideration received on the sale by Plaintiff and its affiliates, that Plaintiff insisted and Defendants agreed that all five individual defendants - being the principals of the buyer - would jointly and severally guaranty the payment of the Break-up Fee to Plaintiff. 3 of 11 FILED: NEW YORK COUNTY CLERK 07/13/2018 04:00 PM INDEX NO. 154465/2018 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 07/13/2018 Before lawyering up, North Shore terminated Plaintiff under two notices which expressly "deficient," state that Plaintiff's performance was merely offering Plaintiff the cure rights the parties agreed would not be available to Plaintiff if Plaintiff engaged in willful misconduct or gross negligence. Plaintiff disputed North Shore's contention that its performance was deficient but accepted the termination - which was permitted even without cause provided the Break-up Fee was paid, and demanded the Break-up Fee. Defendants at that point refused to pay the Break-up Fee, lawyered up, and now seek to distract the Court and distance themselves from their own prior notices, which unequivocally establish Plaintiff's right to an expedited judgment under CPLR 3213 for the Break-up Fee. Because North Shore's own notices unequivocally establish that that Guaranty - a money- only instrument the parties expressly agreed qualified under CPLR 3213 - was triggered, Defendants try to distract the Court with alleged defaults by Plaintiff under the Management Agreement. These alleged defaults are red herrings, having no bearing on this 3213 action. Defendants further their obfuscation by directing the Court to a separate lawsuit they commenced seeking money damages and declaratory relief related to the alleged defaults by Plaintiff under the Management Agreement. But those alleged defaults solely relate to that other action (which Plaintiff will vigorously oppose in that action) because such alleged defaults - even if they occurred (they did not) - do not constitute a defense under the Guaranty. Defendants' attempt to muddy the waters, arguing that either Plaintiff is not entitled to the Break-up Fee because the alleged defaults resulted in a with cause termination or because a question of fact exists as to whether the defaults rose to the level of willful misconduct or gross negligence, is a newly concocted litigation position which is completely at odds with North Shore's prior assertions and admissions regarding Plaintiff's managerial conduct. 2 4 of 11 FILED: NEW YORK COUNTY CLERK 07/13/2018 04:00 PM INDEX NO. 154465/2018 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 07/13/2018 The alleged defaults in question do not, as a matter of law, constitute willful misconduct or gross negligence, which is why, before Defendants lawyered up, they noticed Plaintiff's defaults under the non-willful misconduct default provision and gave Plaintiff a cure period, something they were not supposed to do in the case of willful misconduct or gross negligence. Defendants cannot escape the fact that North Shore did not terminate Plaintiff pursuant to the willful-misconduct termination provision in the Management Agreement and offered Plaintiff the cure rights only available for other defaults. As a result, Defendants have no defense, and must pay Plaintiff the agreed upon Break-up Fee. STATEMENT OF FACTS For the sake of brevity, Plaintiff relies on the recitation of the facts set forth in the moving Aff.").1 Affidavit of David Goldban ("Goldban ARGUMENT DEFENDANTS' I. IRREVOCABLE AND UNCONDITIONAL GUARANTY TO PAY THE BREAK-UP FEE WAS TRIGGERED BY THEIR TERMINATION OF PLAINTIFF, BECAUSE, BY THEIR OWN NOTICES, THE TERMINATION WAS NOT BASED ON WILLFUL MISCONDUCT OR GROSS NEGLIGENCE Defendants, "jointly and severally...irrevocably guarantee[d]...the due and punctual Fee." payment of the Break-up The parties agreed that Defendants would be required to pay the cause," Break-up Fee unless Plaintiff was terminated "for which the Guaranty expressly limited to Plaintiff's "willful misconduct or gross negligence": Guarantor, jointly and severally, hereby irrevocably guarantees...the due and punctual payment of the Break-up Fee...as and when required by the terms of this Letter (the "Break-up Fee Guaranteed Obligation"; and together with the Excess Management Fee Guaranteed Obligation, collectively the Terms not otherwise defined herein shallhave themeaning ascribed to them in theGoldban Aff. 3 5 of 11 FILED: NEW YORK COUNTY CLERK 07/13/2018 04:00 PM INDEX NO. 154465/2018 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 07/13/2018 Obligations" break- "Guaranteed Obligations"). The Purchase Agreement provides for a up fee in the amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the "Break-up Fee") if Grenadier is terminated as the managing agent of the Property...without cause within the first five (5) years after the date [December 18, 2014] hereof... "cause" For purposes of this Letter, the term shall mean Grenadier's willful misconduct or gross negligence as management agent under the Management Agreement. Goldban Aff., Exh. C at §1. one." The Guaranty "is an absolute, irrevocable, present and continuing Goldban Aff., Exh. B at § 6. Defendants further agreed that "[n]o irregularity, unenforceability or invalidity of any of the documents creating the Guaranteed Obligations or any other document, item, matter, Guaranty." action or circumstance shall impair, release or be a defense to th[e] Id. Defendants also understood and expressly agreed that the Guaranty "is and is intended to be, an instrument for the payment of money only, as such phrase is used in Section 3213 of the Civil Practice Law and York," Rules of the state of New and that, if the Guaranty required enforcement, Plaintiff would proceed by a CPLR 3213 summary judgment motion. Isl.at § 7. cause" The Guaranty is triggered upon a "without termination by Plaintiff as manager by North Shore, which the parties agreed meant a termination based on Plaintiff s "willful misconduct or gross negligence" - not a mere breach of the Management Agreement. While Defendants now contend North Shore terminated Plaintiff for "willful misconduct or gross negligence" - entitling Defendants to slip their heads from the noose - North Shore's own notices expressly state otherwise. Defendants miss the point when they say that Plaintiff "seemingly believes that itsbreaches of the Management Agreement (and failure to cure those breaches) cannot constitute 'willful negligence.'" misconduct or gross This is not about Plaintiff s belief itis about what actually 4 6 of 11 FILED: NEW YORK COUNTY CLERK 07/13/2018 04:00 PM INDEX NO. 154465/2018 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 07/13/2018 happened. North Shore did not previously assert that Plaintiff engaged in willful misconduct or gross negligence; to the contrary, and up until their opposition filing, itexpressly noticed defaults and a termination under the section of the Management Agreement covering curable defaults not arising from willful misconduct or gross negligence. Though another section of the Management Agreement provided North Shore the express right to terminate Plaintiff based on willful misconduct or gross negligence without affording Plaintiff a cure right, North Shore did not - before lawyering up - proceed under that section. (" Notice" In itsinitial default letter dated February 15, 2018 ("Default Notice"), North Shore stated: "Grenadier's services as property manager have been deficient and it is in violation of the Agreement. As such, pursuant to Section 22(c) of the Agreement we write to put you on notice of violations." this default and to demand that you cure such Goldban Aff., Exh. D (Emphasis added). 15th The remainder of the February letter purports to detail the particular alleged breaches of the Management Agreement but never once states that any of the violations rises to level of willful misconduct or gross negligence. Id. The letter also expressly provides Plaintiff with the opportunity to cure the alleged violations, or else "North Shore may terminate the [Management] Agreement." North Shore never stated that, absent a cure, the termination would be for cause based on willful misconduct or gross negligence. Id. In its March 2, 2018 letter terminating Plaintiff as the Property manager (the "Termination Letter" Letter"), North Shore states: In so far as Grenadier has not (i) cured all of the defaults described in the Default Letter, or (ii) demonstrated (through the Response Letters or any other means) to the satisfaction of North Shore that it isdiligently pursuing all necessary actions to cure such defaults within a reasonable time, the [Management] Agreement - pursuant to its section 22(c) - is terminated effective March 8, 2018. Goldban Aff., Exh. G (Emphasis added). 5 7 of 11 FILED: NEW YORK COUNTY CLERK 07/13/2018 04:00 PM INDEX NO. 154465/2018 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 07/13/2018 Plaintiff responded in a March 1, 2018 letter that itremained entitled to the Break-up Fee because North Shore did not accuse Plaintiff of willful misconduct or gross negligence. North Shore could have, but did not, in itssubsequent Termination Letter, state that Plaintiff was not entitled to that fee on the ground that North Shore was terminating Plaintiff for cause, which precludes payment of the Break-up Fee per the Guaranty. . Goldban Aff., Exh. G, F. Plaintiff is not arguing, as Defendants suggest, that a breach of the Management Agreement negligence' law;" "cannot constitute 'willful misconduct or gross as a matter of rather, Plaintiff is simply pointing out that North Shore never charged Plaintiff with willful misconduct or gross negligence; to the contrary, North Shore expressly relied on the without cause termination provision and purported to offer Plaintiff the cure right that solely attaches to defaults supporting a without cause termination. Defendants are engaged in a blatant revisionism with respect to their s.~2 company's own writings. In each of the two letters from North Shore regarding Plaintiff's defaults, North Shore terminated Plaintiff pursuant to Section 22(c) of the Management Agreement. See Goldban Aff., 2 In a review ofNorth Shore'sdescription of thethree ways it couldterminate the Management Agreement fact, in itsseparate lawsuit supports position Plaintiff's that ifithad engaged in willfulmisconduct or gross negligence, North Shore would not have given Plaintiffa cure right: "In other words, the Management made clear thatNorth Shore could terminate Grenadier in any one of three ways: days' notice;' • First,'with or without cause or penalty upon 30 notice • Second, 'upon [al finding of willful misconduct or gross negligence cure;' without [Grenadier's] rightto cure • Third, 'intheevent [Grenadier] failstoperform any of its duties...and such default isnot cured oris not addressed to the reasonable and continuing ' satisfactionof [North Shore] See Affirmation of David Feuerstein dated June 27, 2018, Exh. A at ¶20.(Emphasis added). 6 8 of 11 FILED: NEW YORK COUNTY CLERK 07/13/2018 04:00 PM INDEX NO. 154465/2018 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 07/13/2018 Exh. D, G. None of the Guaranty trigger words - willful misconduct, gross negligence, or with cause - appear in Section 22(c), which states (emphasis added): In addition, in the event Agent failsto perform any of its duties hereunder or to comply with any of the provisions hereof, Owner shall notify Agent in writing and Agent shall have ten (10) days thereafter within which to cure such default to the reasonable satisfaction of Owner, and if such default cannot be cured within such ten (10) day period, Agent shall have such additional time as may be necessary to cure the same (but not more than twenty (20) additional days) provided that Agent demonstrates to the continuing satisfaction of Owner that itis diligently pursuing all necessary actions to cure such default and that the same will be cured within a reasonable time without damage or expense to Owner. If,within said periods, such default is not cured or is not addressed to the reasonable and continuing satisfaction of Owner, Owner may terminate this Agreement and terminate Agent's services upon an additional five (5) day notice. Goldban Aff., Exh. C. Instead, Section 22(b) of the Management Agreement sets forth the only termination provision that contains the trigger words: Notwithstanding (c), below, this Agreement may be terminated at any time by either Agent or by Owner or Owner's affiliates with or without cause or days' penalty upon 30 notice to the other party. Owner may, by right, terminate immediately upon finding of willful misconduct or gross negligence without Agent's right to cure. Id. (Emphasis added). comply" Plaintiff's mere "failure to perform... or with its obligations does not amount to negligence." "willful misconduct or gross Defendants cannot escape the fact that North Shore did not choose to terminate Plaintiff pursuant to Section 22(b) - the sole section which mentions misconduct" negligence" "willful and "gross and instead repeatedly stated its termination was pursuant to Section 22(c), and provided Plaintiff with a cure period even though no cure period is provided in Section 22(b). 7 9 of 11 FILED: NEW YORK COUNTY CLERK 07/13/2018 04:00 PM INDEX NO. 154465/2018 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 07/13/2018 comply," Thus, while Plaintiff did not commit the "failures to perform and of which it is accused, that charge is irrelevant. If Defendants truly believed Plaintiff had committed acts willful misconduct or gross itwas incumbent upon them — and constituting negligence, they surely would have - terminated Plaintiff under Section 22(b), not 22(c), and would not have afforded Plaintiff a cure right. Unfortunately for Defendants their litigation counsel entered the picture too late. Defendants' blatant attempt to rewrite history should not be countenanced. Their written correspondence - composed before they lawyered up - betrays their current litigation position. Per North Shore's own words, and as such per the Guaranty, Plaintiff was not terminated for cause, which means Defendants are liable the payment of the Break-up Fee under the Guaranty. CONCLUSION The parties agreed that Defendants would retain Plaintiff as a continuing manager as part of the sale transaction. To assure that Plaintiff and its affiliates got the benefit of the bargain, the parties agreed to a $500,000 Break-up Fee, and had all five principals of the buyer personally guaranty the Break-up Fee jointly and severally, in an instrument the parties expressly agreed qualified as a money only instrument under CPLR 3213. North Shore, without the advice of litigation counsel, chose to terminate Plaintiff based on "deficient" its performance as manager. North Shore could have but did not state that Plaintiff's conduct amounted to willful misconduct or gross negligence, cited the termination provision not involving such conduct and afforded Plaintiff the cure rights only available where the offending conduct did not rise to the level of willful misconduct or gross negligence. When Plaintiff accepted the termination, which was permitted to be made without cause, and demanded the Break-up Fee, 8 10 of 11 FILED: NEW YORK COUNTY CLERK 07/13/2018 04:00 PM INDEX NO. 154465/2018 NYSCEF DOC. NO. 24 RECEIVED NYSCEF: 07/13/2018 North Shore did not state in response that Plaintiff's conduct amounted to willful misconduct or gross negligence. Defendants should not now be permitted to deprive Plaintiff of that bargain by litigation tactics and gamesmanship, and evade their obligations under the Guaranty, especially when their position." own prior correspondence betrays their newly minted "litigating Pursuant to CPLR 3213, the Court should issue an order awarding summary judgment against Defendants, jointly and severally: (a) in the sum of $500,000, plus prejudgment and post-judgment interest, and attorney's fees, costs and expenses incurred by Plaintiffin enforcing itsrights under the Guaranty Letter and Amendment to Certain Provisions of Purchase and Sale Agreement; and (b) for such other and further relief as the Court deems just and proper. Dated: New York, New York July 13, 2018 MEIS(ER E IG & FEIN LLP By: Stephen B. Meister Stacey M. Ashby 7th 125 Park Avenue, Floor New York, NY 10017 Telephone: (212) 655-3500 Attorneys for Plaintiff 9 11 of 11