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Adam Leitman Bailey, P.C. Obtains Winning Settlement for Commercial Tenant in Litigation to Enforce Right of First Refusal

By Adam Leitman Bailey


Commercial builings

Adam Leitman Bailey, P.C., successfully resolved litigation to enforce a commercial tenant’s right of first refusal, achieving for its client in settlement all the relief that could have been hoped for had victory been obtained at trial.

The Firm’s client was the triple-net tenant of a 3-story, mixed-use building in Manhattan’s Bowery neighborhood since the year 2000, where the client operated a restaurant furniture supply business on the ground floor and resided with family members on the floors above. The client’s lease contained a right of first refusal clause which provided that, if the landlord accepted an offer to sell the building to a purchaser during the lease term, the client had the right to receive notice of the proposed sale and the right to purchase for the gross purchase price and on the same terms and conditions as in the purchaser’s contract or offer.

In 2014, the landlord accepted an offer to sell the building to a subsidiary of Thor Equities, an international real estate development, leasing, and management firm, for the price of $10.2 million. Instead of giving notice of the proposed sale to the client, however, the landlord mistakenly gave notice to the prior building tenant under a lease that had been surrendered back in 2000. When the landlord’s error became known to all parties, Thor refused to recognize the client’s right of first refusal and used its leverage to compel the landlord to close on the sale of the building to Thor and to pay Thor $1 million of damages to settle Thor’s claims that the landlord had breached the purchase and sale agreement by failing to correctly identify the building tenant.

Every case has bad facts, and this case was no exception. In this case, the Court needed to be persuaded that the client’s tenancy was not invalidated by the fact that the client’s corporate entity name had been misidentified in the triple net building lease entered into back in 2000. The Court also needed to be persuaded that the client, in his individual name, became the “replacement Master Tenant” under the triple-net lease when the client permitted his corporate entity to be dissolved for nonpayment of franchise taxes in 2003. Thor vigorously contended that the client had never become the tenant in his individual capacity and therefore had no right of first refusal.

The client engaged Adam Leitman Bailey, P.C., to litigate to enforce its right of first refusal against Thor, which had assumed the duty to defend the landlord. Adam Leitman Bailey, P.C., successfully shepherded the client through document discovery and depositions of more than ten witnesses, and prevailed on a motion to compel the deposition of the global CEO of Thor, Joseph Sitt. The Firm also persuaded the Court to allow the client’s pleading to be amended at the conclusion of discovery to add a cause of action against Thor for tortious interference with contract. In order to defeat Thor’s technical arguments as to why the client supposedly had not become the tenant with a right of first refusal, Adam Leitman Bailey, P.C. developed a narrative demonstrating how the defendants had violated the client’s rights over the past fifteen years; first, when the landlord’s attorney misnamed the tenant under the 2000 lease; second, in late 2014, when the landlord mistakenly disclosed an older, expired lease to Thor instead of the client’s lease under which the parties had operated since 2000 without controversy; third, when the landlord refused to honor the client’s tendered acceptance of a right of first refusal but offered the client a substantial monetary sum to waive the disputed right of first refusal; fourth, after the litigation was commenced, when the landlord continued to insist that the client pay for building and sidewalk repairs pursuant to the triple net provisions of the lease while maintaining in court that the client was not actually the tenant; fifth, when Thor closed on its purchase over the client’s notice of pendency of litigation and extracted a $1 million settlement payment from the landlord; and sixth, when the landlord agreed to give Thor substantial seller financing so that Thor was not required to supply its own cash or financing at closing.

Based on the evidence mustered by Adam Leitman Bailey, P.C., in August 2018, the Court denied Thor’s motion for summary judgment, finding evidence sufficient to raise a triable issue of fact as to whether the landlord had waived any right to strict compliance with the notice provisions of the lease. Facing the prospect of trial against Adam Leitman Bailey, P.C’s trial lawyers, Thor agreed to settle the action by selling the building to the client for $9.2 million, effectively admitting that its $1 million settlement with the landlord had been a not-so-disguised reduction in the purchase price. The client could not have hoped to achieve a better result had the matter proceeded to trial. Also represented by Adam Leitman Bailey, P.C., on the transaction, the client closed the purchase of the building in the spring of 2019 at the reduced purchase price.

Adam Leitman Bailey led the settlement negotiations. Jeffrey R. Metz and Colin E. Kaufman represented the client in the court proceedings. Thomas Furst represented the client in connection with the negotiation of the contract and the closing of sale.

Adam Leitman Bailey PC - New York Real Estate Attorneys

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