SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK

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In the Matter of the Application of BLEECKER CHARLES CO.,          : Index No.: 110835/02
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                              Petitioner,                          :
                                                                   :
For the Inspection of the Minutes of Meetings of the               : Hon. Joan A. Madden
Directors and Shareholders and Record of Shareholders of           :    
350 Bleecker Street Apartment Corp.                             :    
                                                                   :  REPLY AFFIRMATION   
                -against-                                          :  
                                                                   : 
350 BLEECKR STREET APARTMENT CORP.,                                :
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                              Respondent.                          :
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          DALE J. DEGENSHEIN, an attorney duly admitted to practice law in the State of New York, affirms the following under penalties of perjury:

          1.           I am a member of Cantor, Epstein & Degenshein, LLP, attorneys for the Coop. [1] I make this reply affidavit in further support of the Coop's cross-motion to dismiss the proceeding and for sanctions. [2] Simply put, the sponsor is not entitled to review unredacted minutes and is not entitled to receive copies of the documents. The Coop - offering more than is required under law - invited the sponsor to review board minutes, redacted as to litigations concerning the sponsor. This sponsor is entitled to nothing more.

          2.           The sponsor's June 12, 2002 affidavit demonstrates sponsor's bad faith in wanting to review unredacted board minutes. Indeed, it demonstrates the patently disingenuous nature of its demands. Beginning at approximately ¶9 of Kenneth Newman's affidavit, the sponsor sets forth its "justifications" as to why it should be entitled to review the board minutes notwithstanding the on-going Garage Lease Litigation and future impending litigation. None of these justifications were set forth prior to the submission of this affidavit, nor could they have been - the reasons proffered concern incidents which took place after the sponsor last requested copies of the documents more than six months ago.

          3.           Moreover, if the sponsor were concerned about these issues, they could have been investigated had the sponsor reviewed the redacted board minutes as all but one concern issues other than the Garage Lease Litigation. With respect to that one issue, it was fully reported in a newsletter.

          4.           In addition, the December 21, 2001 and May 31, 2002 newsletters put the world (and the sponsor) on notice that the Coop had retained counsel to commence an action against Newman, in one or more of his capacities, i.e., board member, officer, managing agent, general counsel, mortgagee, etc. for, among other reasons, Newman's failure (as managing agent) to properly bill himself as commercial tenant (see exhibit B to the Lilien Aff. and Exhibit A hereto under the heading "Mitchell Schrage").

          5.           Thus, the tone and tenor of Newman's affidavit smacks of bad faith and shows that the sponsor is on a fishing expedition, looking for some way to accuse the board of wrongdoing or gain an advantage in the Garage Lease Litigation or the impending suit.

          6.           At ¶¶9 and 11 of his June 12, 2002 affidavit, Newman accuses the board of not promptly reporting and budgeting for the legal fee award in the Garage Lease Litigation in a financial statement. However, the May 31, 2002 newsletter (which contains the financial statement) specifically states under the heading "Financials Through March" that the figures "do not include the payment of the legal fees to the sponsor (Ken Newman) or the temporary interest-free loan made to the co-op by the board members, since those actions occurred in May".

          7.           Moreover, that newsletter specifically refers to the award of attorneys' fees in the Garage Lease Litigation and an increase in the award made upon motion practice by the sponsor (see section entitled "Payment of Legal Fee Judgment"). At ¶10, the sponsor criticizes the Coop because its board members made an interest free loan to the Coop in order to pay the judgment. It seems that this decision falls well within the board's business judgment and, more to the point, is not something for which the sponsor needs to review unredacted board minutes (see section entitled "Payment of Legal Fee Judgment").

          8.           At ¶12, the sponsor appears to complain that the board told the shareholders that there was a vacancy on the board. While I do not understand the complaint, the fact is that a review of redacted minutes will give the sponsor all of the information he requests on this point. Further, while the sponsor asserts that he does not know who the board members are (at ¶29), that information is maintained and available on the 350 Website.

          9.           The assertion at ¶13 that this litigation has not been disclosed is absurd - a review of Exhibit C to the Coop's moving papers (the 350 Website lawsuit index) shows, as the first document, the order to show cause and affidavit in this proceeding. The fact that the board has not announced the suit in a newsletter between May 31 and today is certainly not a basis to permit the sponsor to receive unredacted minutes.

          10.           Further, the sponsor complains that the board did not disclose that a disciplinary action had been commenced against the Coop's accountant by a shareholder (¶14). While a board is not required to disclose each piece of information to its shareholders (and often should not do so), the fact is that the letter commencing the proceeding was distributed to all shareholders by its author (Exhibit B).

          11.           Finally with regard to the sponsor's purported reasons for being entitled to unredacted minutes, the assertion that it was required to review all relevant information prior to filing with the Attorney General is of course disingenuous. First, it had the newsletters. Second, it was offered redacted minutes. Third, my review of 13 NYCRR §18.5 (relied upon by the sponsor in ¶28) does not show that the sponsor is required to make any representation concerning board minutes (a copy of the section is annexed as Exhibit C).

          12.           The caselaw cited by the sponsor in its memorandum of law also does not support the sponsor's position and forms the basis to support the Coop's claim for sanctions. In In the Matter of Lopez, 71 AD2d 976, 420 NYS2d 225 (1st Dept., 1979), cited for the proposition that litigation alone does not demonstrate bad faith (at p. 4), the petitioner sought only a shareholders' list. In Tatko v. Tatko Brothers Slate Company, Inc., 173 AD2d 917, 569 NYS2d 783 (3rd Dept., 1991) (cited for the same proposition), the Court permitted a shareholder in a closely held corporation to review certain books and records in order to permit him to determine "book value" after he announced he intended to sell. Indeed, the Court specifically held that the lower court granted a scope of inspection which was too broad and "limited [petitioner's review] to those documents which in the trial court's exercise of reasonable discretion the situation requires be reviewed", 173 AD2d at 919.

          13.           At bar, we respectfully submit that the Court limit any review to redacted board minutes as there can be absolutely no basis for review of items concerning the Garage Lease Litigation or discussions of other impending litigation concerning Newman in any of his capacities.

          WHEREFORE, the Coop respectfully requests that the Court deny petitioner's application, grant the Coop's cross-motion dismissing this proceeding and for sanctions in the form of attorneys' fees and grant such other and further relief as to this court seems just proper and equitable.

Dated: New York, New York
          June 13, 2002

/s/ Dale J. Degenshein
DALE J. DEGENSHEIN