Morrison Cohen Obtains Summary Judgment for Abro Management Corporation in Dispute over Sale of Manhattan Building
November 30, 2017 – Morrison Cohen successfully obtained summary judgment for three entities (Madison 68 Realty, LLC, Madison 68 Realty II, LLC, and Madison 68 III LLC – together “Madison”) owned by Abro Management Corporation (“Abro”) in a pair of intertwined litigations pending in the Commercial Division of the Supreme Court of the State of New York in New York County before Justice O. Peter Sherwood. Abro’s primary adversary in the litigations was 11 East 68th Street LLC (“11 East 68”), a joint venture between HFZ Capital and a Vornado-owned entity. Both actions concerned Madison’s sale of a building located at 11 East 68th Street in Manhattan to 11 East 68 for $170 million. Of that $170 million, $2.5 million was held back in an escrow account, to be disbursed after a certain period of time, assuming certain conditions had not occurred or were satisfied.
In the first action, Madison sought damages in excess of $2.5 million from 11 East 68 and the escrow agent holding the escrow funds based upon 11 East 68’s and the escrow agent’s respective breaches of the parties’ purchase and sale agreement (“PSA”) and escrow agreement. Madison alleged that they breached the agreements by failing to disburse the escrowed funds to Madison upon the expiration of the relevant survival period despite not providing notice of a claim on the funds as required by the terms of the escrow agreement. Madison alleged claims for breach of contract, breach of the covenant of good faith and fair dealing, and for declaratory judgment.
In the second action, 11 East 68 sued Madison, alleging that Madison breached the PSA, breached the covenant of good faith and fair dealing in the PSA, and had committed fraud by allegedly making certain misrepresentations about the occupancy of the units in the property to 11 East 68 both in the PSA and during the parties’ negotiation for the sale of the property.
After discovery, Morrison Cohen moved for summary judgment in both actions, seeking the award of damages in the first action and the dismissal of the second action. In its motion in the first action, Morrison Cohen argued that the escrow agent and 11 East 68 had each breached the escrow agreement by the escrow agent refusing to release the escrow funds and by 11 East 68 causing the escrow agent to not release the funds despite being contractually required to do so. In its motion in the second action, Morrison Cohen argued that Madison had not breached the PSA or the covenant of good faith and fair dealing in the PSA and had not committed fraud.
The Court agreed with Morrison Cohen’s arguments that the escrow agent should have released the escrow funds to Madison when the relevant notice period expired and also that Madison had not breached the PSA or committed any fraud. The Court granted both of Madison’s respective motions for summary judgment in a joint decision on September 29, 2017, thereby awarding Madison in excess of $2.5 million in damages and dismissing the second action commenced by 11 East 68 against it in its entirety.
The Supreme Court’s decision is an important reminder that strict compliance with notice provisions in parties’ agreements, particularly related to escrowed funds, is typically required and that, generally speaking, where specified in an agreement, parties’ representations will be limited to only the explicit representations listed in the agreement.
The cases are Madison 68 Realty LLC, et al. v. 11 East 68th Street LLC, et al., 650752/2014, and 11 East 68th Street LLC v. Madison 68 Realty LLC, et al., No. 650771/2014 (Sup. Ct., N.Y. Cty.). For a copy of the decision, please click here.