Adam Leitman Bailey, P.C., successfully defended its clients – a condominium Board of Managers, individual residential members of the Board, and the Condominium’s managing agent – against a serial litigant seeking millions of dollars of damages for alleged breach of contract and breach of fiduciary duty. A recent decision by the Supreme Court in New York County, which granted the defendants’ motion to dismiss, is the latest victory for Adam Leitman Bailey, P.C.’s clients in litigation stretching back ten years.
The building is a luxury condominium with ground floor commercial space and nine floor-through residential units located in Manhattan’s fashionable NoMad neighborhood north of Madison Square Park. Plaintiff and her husband jointly purchased the seventh floor residential unit from the sponsor in 2005 for more than three million dollars.
Among other alleged construction defects, it was undisputed that the original flooring installations in the residences were defectively constructed by the sponsor, who proceeded to arrange directly with unit owners to repair and replace the defective flooring. At the sponsor’s expense, during 2006 Plaintiff and her husband relocated to other accommodations while the sponsor’s contractor commenced the flooring reinstallation in the seventh floor unit. Nearly a year later and with the work still unfinished, Plaintiff and her husband became dissatisfied with the pace and quality of the sponsor’s work and sought to take control of the project themselves. That would lead to a dispute with the Board of Managers (“Board”).
Because Plaintiff and her husband sought to perform work upon the concrete substrate underlying the floors, which qualified as a structural repair, the Board insisted that Plaintiff and her husband sign a standard alteration agreement. In accordance with the by-laws, the Board also required that Plaintiff and her husband reimburse the Board for its legal and engineering fees in connection with the review. Plaintiff and her husband, however, insisted on major revisions to which the Board could not agree, and no agreement was reached.
In August 2007, Plaintiff and her husband commenced litigation in New York County Supreme Court. The plaintiffs sued the sponsor-developer of the Condominium and its principal, the sponsor-appointed managing agent, the Board, and the individual residential members of the Board. As against the Board and individual Board members, the plaintiffs alleged that the defendants were liable for negligence and breach of fiduciary duty on account of their alleged failure to maintain and repair the concrete substrate underlying the floor, which had never been properly leveled when originally installed. The plaintiffs further alleged that the Board and its members had refused to authorize the plaintiffs to complete the work for improper purposes. According to the plaintiffs, the Board and its members had sought to make life difficult for the plaintiffs after the plaintiffs refused to accede to certain Board members’ demands that the plaintiffs enter into an agreement to share the benefits of a tax abatement that the sponsor had obtained for purchasers of the newly constructed fourth through ninth floor residential units.
Adam Leitman Bailey, P.C., which had already been advising the Board in its dispute with the plaintiffs, was engaged to represent the Board defendants in the litigation. After assisting the Board in tendering a claim under its Directors and Officers Insurance Policy, the insurance carrier retained Adam Leitman Bailey, P.C., to defend the Board and individual Board members. After more than two years of motion practice, discovery, and appellate practice, in late 2009 the Appellate Division of Supreme Court held that plaintiffs’ case against the Board and individual Board members had to be dismissed. The Appellate Division reasoned that alleged problems with the plaintiffs’ floor installation were indisputably construction defects. Under the Condominium’s Offering Plan, the sponsor bore the sole responsibility to correct construction defects. As for the Board and individual Board members, they had done nothing wrong by insisting that the plaintiffs sign the standard alteration agreement if plaintiffs wished to perform the floor work themselves. The Board was entirely within its rights to require that the plaintiffs abide by all of the standard requirements applicable to unit owners seeking to perform structural work within their units.
More than six years later, with her original action still pending against the sponsor parties, in November 2015 Plaintiff commenced a new action in New York County Supreme Court. In her new action, Plaintiff sued the Condominium, the Board, current and former individual residential Board members, two non-resident Board members appointed by the sponsor, the former sponsor-appointed management company, and the current managing agent employed by the Board.
In her new action, Plaintiff alleged that the ongoing failure of the Board, the individual Board members, and the managing agent to maintain and repair the concrete substrate underlying the floors in the seventh-floor unit had constructively evicted the Plaintiff for the last nine years. Throughout that time, Plaintiff alleged she had paid millions of dollars for a mortgage, common charges, and property taxes for a unit she could not reside in or enjoy. Once again, Plaintiff sought to hold the Board, individual residential Board members, and the Board’s managing agent liable for breach of contract and breach of fiduciary duty. Once again, Plaintiff alleged that the Board’s alleged misconduct was motivated by its desire for retribution on account of Plaintiff’s refusal in the preceding decade to participate in an agreement to share the benefits of a tax abatement. Plaintiff demanded judgment for millions of dollars.
As in the case of the prior action, Adam Leitman Bailey, P.C., assisted the Board in tendering a claim to the Directors and Officers insurance carrier, who re-appointed Adam Leitman Bailey, P.C., to defend the Board, the individual residential Board members, and the Board’s managing agent.
Within weeks of filing suit, Plaintiff sought to obtain what had eluded her in more than seven years of litigation: an order of the Court directing the Board, the individual residential Board members, and the managing agent to make all necessary repairs to the concrete substrate underlying the floors of the seventh-floor unit so that new wooden floors could be installed and Plaintiff could be restored to residency. On behalf of the defendants, Adam Leitman Bailey, P.C., opposed the motion and separately moved to dismiss the action based on the defense of res judicata. Res judicata is a legal doctrine providing that where there has already been a judgment on the merits in a prior action, any claim that was actually litigated or that could have been litigated in the prior action is foreclosed in a new action between the same parties.
In the motion papers, Adam Leitman Bailey, P.C., was able to point out various examples of deceitful conduct by Plaintiff and her attorneys that was undoubtedly calculated to mislead the Court. First, Plaintiff had brought the new action in her own name only, even though both the Plaintiff and her spouse continued to own the seventh floor unit jointly. Thus, the caption of the new action was similar but not identical to the caption of the prior pending action. Second, Plaintiff’s Complaint and motion papers omitted all reference to the prior pending action and the prior decision of the Appellate Division dismissing that action as against the Board and individual residential Board members. Third, Plaintiff failed to disclose on her request for assignment to a Justice of the Court that the new action was related to the prior pending action. In short, Plaintiff and her attorneys took numerous calculated steps to ensure that her new action would be assigned to a new judge who would not be aware of the prior litigation history.
In light of Adam Leitman Bailey, P.C.’s superior advocacy, Plaintiff’s gambit did not work. In January 2016, the Court denied Plaintiff’s motion for injunctive relief, finding that Plaintiff’s action sought a money judgment, not equitable relief, and that Plaintiff was unlikely to succeed on the merits of her claims. Briefing and oral argument of dismissal motions by the Board defendants and the managing agent played out over the next sixth months. Along the way, Adam Leitman Bailey, P.C., defeated a second motion by Plaintiff for injunctive relief.
The Court’s ruling on the merits was handed down in April 2017. Once again, the Board, the individual residential Board members, and the Board’s managing agent were dismissed from the action. The Court was unpersuaded by Plaintiff’s assertion that the two actions were entirely different and unrelated. The Court found undeniable identity of the parties and allegations in the new action and the prior action commenced by Plaintiff and her husband. No reason was apparent or explanation offered for the commencement of the new action by Plaintiff alone without her husband. Although the Board’s managing agent had not been named in the prior action, the issue of whether the Board or the sponsor, from which liability on the part of the managing agent would flow, was before the Court in the prior action.
The Court also found it undeniable that the two actions involved the same subject matter, namely, defects in the concrete substrate slab beneath the floor in the subject unit. The Court found Plaintiff’s efforts to distinguish between the specific complaints regarding the slab in the two actions to be unavailing. The decision on appeal from the prior action made clear that Plaintiff had ample opportunity to adjudicate the claims asserted in the new action. The Appellate Division’s decision noted that the plaintiffs had hired an engineer who advised them about the condition of the slab, and plaintiffs had proposed numerous changes to the alteration agreement in order to fix the flooring. In addition, Plaintiff’s assertion that the prior action concerned only the sponsor’s construction and design defects, and that complaints about cracks in the slab and the alleged failure to maintain could not have been adjudicated in the prior action because they did not exist, were countered by statements contained in Department of Buildings and Environmental Control Board violations that had been issued during 2008 and 2009.
Ultimately, as Adam Leitman Bailey, P.C., argued, and as the Court found: “Concerns for judicial economy and efficiency should serve to disallow plaintiff from advancing different theories based on the same factual allegations in different judicial proceedings, and warrant dismissal of this action in favor of the prior action.”
Adam Leitman Bailey, Colin E. Kaufman, and Scott J. Pashman represented the Condominium defendants on behalf of Adam Leitman Bailey, P.C. Jeffrey R. Metz represented the Condominium defendants on behalf of Adam Leitman Bailey, P.C., before the Appellate Division in the prior action.