SUPREME COURT STATE OF NEW YORK
COUNTY OF NEW YORK
--------------------------------------------------x
350 BLEECKER STREET APARTMENT : Index #: 113271/02
CORPORATION
Plaintiff, : NOTICE OF DEPOSITION
v. :
KENNETH B. NEWMAN, individually and as
managing/general partner of BLEECKER CHARLES :
COMPANY and KENNETH B. NEWMAN
REALTY CORP., :
Defendants.
--------------------------------------------------x
KENNETH B. NEWMAN, :
Defendant and Third-Party Plaintiff, :
v. : Index No. 591057/02
MARK LILIEN AND JAMES D. KAFADAR :
Third-Party Defendants. :
--------------------------------------------------x
PLEASE TAKE NOTICE that, pursuant to Rule 3107 of the Civil Practice Law and Rules, defendant will take the deposition upon oral examination of plaintiff 350 Bleecker Street Apartment Corp., by its officers, directors, employees and agents with knowledge of the subject matter of this action, including but not limited to:
| WITNESS | POSITION | ADDRESS | |
| 1. | Mark Lilien | Officer, Director | 350 Bleecker Street |
| Affiant of verified | New York, NY 10014 | ||
| complaint | |||
| 2. | James Kafadar | Officer, Director | 350 Bleecker Street |
| New York, NY 10014 | |||
| 3. | Susan Kim | Officer, Director | 350 Bleecker Street |
| New York, NY 10014 | |||
| 4. | Alfred De Vecchio | Director | 350 Bleecker Street |
| New York, NY 10014 | |||
| 5. | Mary Lou Moravec | Director | 350 Bleecker Street |
| New York, NY 10014 | |||
| 6. | Laura Herbert | Director | 350 Bleecker Street |
| New York, NY 10014 | |||
| 7. | Robert Fass | Attorney | Friedman, Krauss & Zlotolow |
| 888 Seventh Avenue | |||
| New York, NY 10106-0299 | |||
| 8. | Walter D. Goldsmith | Attorney | Friedman, Krauss & Zlotolow |
| 888 Seventh Avenue | |||
| New York, NY 10106-0299 |
beginning on October 17, 2002 at 10:00 a.m. at the offices of Proskauer Rose LLP, 1585 Broadway, New York, NY 10036. The deposition will be taken before a notary public or other officer authorized by law to administer oaths and will continue from day to day until completed. You are invited to attend and cross-examine.
PLEASE TAKE FURTHER NOTICE that each witness to be deposed is required to produce at his or her deposition all documents and other tangible things (as those terms are defined in Rule 3120 of the Civil Practice Law and Rules), including but not limited to computer lists, tapes and all other storage media, that embody any document or contain any document, entry or data that is relevant to any claim, defense and/or counterclaim in this action.
Dated: New York, NY
September 26, 2002
PROSKAUER ROSE LLP
By: /s/ Dale A. Schreiber
Dale A. Schreiber
Attorneys for Defendants
1585 Broadway
New York, NY 10036
(212) 969-3000
TO:
MITCHELL R. SCHRAGE & ASSOCIATES, PLLC
Attorneys for Plaintiff
126 East 56th Street
New York, NY 10022
(212) 758-9000
MARK LILIEN
350 Bleecker St.
Apartments 3D-3E-3F
New York, NY 10014
JAMES D. KAFADAR
350 Bleecker St.
Apartments 6C-6D-6E
New York, NY 10014
SUPREME COURT STATE OF NEW YORK
COUNTY OF NEW YORK
--------------------------------------------------x
350 BLEECKER STREET APARTMENT : Index #: 113271/02
CORPORATION
Plaintiff, : VERIFIED ANSWER OF
v. : BLEECKER CHARLES COMPANY
KENNETH B. NEWMAN, individually and as
managing/general partner of BLEECKER CHARLES :
COMPANY and KENNETH B. NEWMAN
REALTY CORP., :
Defendants.
--------------------------------------------------x
Defendant Bleecker Charles Company ("the Sponsor"), for its answer to the verified complaint ("the complaint"):
1. Admits that the allegations of paragraphs 1 through 4 of the complaint.
2. Denies the allegations of paragraph 5 of the complaint and avers that Kenneth B. Newman ("Newman") is the liquidating partner of the Sponsor and has been and still is an attorney duly licensed to practice law by New York State.
3. Admits the allegations of paragraph 6 of the complaint.
4. Denies the allegations of paragraph 7 of the complaint, except admits that in 1984 the Sponsor owned in fee the land and building located at 350 Bleecker Street, in the City, County and State of New York ("the Building").
5. Admits the allegations of paragraph 8 of the complaint.
6. Denies the allegations of paragraph 9 of the complaint, except admits that the Sponsor filed an offering plan for converting the Building to cooperative ownership on December 31, 1984 and that the offering plan, as amended, ("the Plan") was declared effective on or about April 5, 1985.
7. Denies the allegations of paragraph 10 of the complaint, except admits that, on July 31, 1985, the Sponsor conveyed fee title to the Building to plaintiff 350 Bleecker Street Apartment Corporation ("the Co-op") and on that date the conversion became effective under applicable New York law.
8. Denies the allegations of paragraph 11 of the complaint, except admits that, upon the date of the conversion, the Building had 138 separate residential dwellings, one of which was reserved for use by the Building's superintendent and was therefore not included in the Plan, and that the Sponsor held proprietary leases and related share certificates for the remaining 137 residential dwelling units in the Building, 28 of which were simultaneously sold to third-parties in arm's length sales.
9. Denies the allegations of paragraph 12 of the complaint, except admits that, upon the conversion and in accordance with the Plan, the Co-op and the Sponsor executed and delivered a so-called Master Lease dated July 31, 1985 ("the Master Lease"), pursuant to which the Co-op, as landlord, leased to the Sponsor, as lessee, two ground-floor commercial stores and the parking garage ("the Garage") in the Building.
10. Denies the allegations of paragraph 13 of the complaint, except respectfully refers to the original or true copy of the Master Lease for its terms and conditions.
11. Denies the allegations of paragraph 14 of the complaint, except admits that, from time to time, but not at all times, since July 31, 1985, the Sponsor has subleased the Garage to a garage operator pursuant to the terms of a written sublease.
12. Denies the allegations of paragraph 15 of the complaint, except admits that various persons since July 31, 1985 have purchased either from the Sponsor or previous owners the proprietary leases and related share certificates for residential dwelling units in the Building that may have been contiguous and, in some cases with the approval of the Co-op's Board of Directors ("the Board"), have made alterations that allowed for access from one such dwelling unit to the contiguous dwelling unit, if any.
13. Denies the allegations of paragraphs 16 through 18 of the complaint.
14. Denies the allegations of paragraphs 19 and 20 ofthe complaint, except admits that Newman has been the liquidating partner of the Sponsor since on or about April 1984 and continues to serve in that capacity, in which he exercises managerial authority.
15. Denies the allegations of paragraphs 21 and 23 ofthe complaint, except admits that Newman has been at all relevant times and still is the sole shareholder, officer and director of defendant Kenneth B. Newman Realty Corp. ("Newman Realty").
16. Denies the allegations of paragraph 22 of the complaint, except admits that Newman has been duly licensed to practice law at all times since at least July 31, 1985.
17. Denies the allegations of paragraph 24 of the complaint, except admits that Newman's law firm and Newman Realty have at all relevant times had offices at 488 Madison Avenue in the City, County and State of New York.
18. Denies the allegations of paragraph 25 of the complaint, except admits that Newman was a member of the Board and President of the Co-op from July 31, 1985 through sometime in November 1999.
19. Denies the allegations of paragraph 26 of the complaint, except admits that the Board has consisted of seven members for most of the period between July 31, 1985 and November 1999.
20. Denies the allegations of paragraphs 27 and 28 of the complaint, except adm~ts that, on January 13, 1998, Mark Lilien ("Lilien"), then a member of the Board, moved for a formal resolution that the Board engage an attorney or law firm to discuss unspecified questions about unspecified conflicts of interest; at that meeting, the Board agreed to meet on January 20, 1998 to discuss the matter further; the Board met on January 20, 1998 for the purpose of discussing whether or not to retain outside counsel to advise the Board on unspecified questions of unspecified potential conflicts of interest and general board member responsibilities toward the Co-op's shareholders; upon a motion for a formal resolution by Lilien to retain counsel for such purpose, the Board voted 4-to-2, with Lilien dissenting, for a determination that outside counsel should be retained only when a specific issue of conflict of interests arose and that, since the proponents of the resolution had failed to identify any such issue, there was no need retain such counsel at that time; James Kafadar ("Kafadar"), then the seventh member of the Board, did not attend the meeting of the Board held on January 20, 1998 and did not vote on the resolution, despite the fact that Kafadar attended the Board meeting held on January 13, 1998, knew that Lilien would offer such a resolution, and could have voted by proxy or through telephone participation in the meeting; and three of the four directors voting against Lilien's resolution and in favor of the determination that prevailed at the January 20, 1998 meeting were shareholders who were independent of the Sponsor, Newman and Newman Realty.
21. Denies knowledge or information sufficient to form a belief as to the truth of the allegations of paragraph 29 of the complaint, except admits that Lilien and Kafadar informed Newman, sometime in June 1999, that Lilien and Kafadar had consulted with counsel about the Condominium and Cooperative Conversion Protection and Abuse Relief Act, 15 U.S.C. § §3601 -3616 ("the Act") in 1998 and had been aware of the existence of the Act and the rights of the holders of proprietary leases and related shares under the Act to terminate the portion of the Master Lease covering the Garage ("the Garage Portion") for more than a year prior to that time.
22. Denies the allegations of paragraph 30 of the complaint and specifically avers that Newman had no knowledge of the existence of the Act until he received a copy of Lilien's notice dated June 1, 1999 calling a meeting of the Co-op's shareholders to vote upon a resolution to terminate the Garage Portion on June 24, 1999.
23. Denies the allegations of paragraphs 31 and 32 of the complaint.
24. Denies the allegations of paragraphs 33, 34 and 35 of the complaint, except respectfully refers to the text of the Act and case law thereunder to obtain an understanding of the basis upon which the Act operates to invalidate leases covered by the Act.
25. Denies the allegations of paragraphs 36, 37 and 38 of the complaint.
26. Denies the allegations of paragraph 39 of the complaint, except admits that, by his notice dated June 1, 1999, Lilien noticed a meeting of the Co-op's shareholders for June 24, 1999 for the purpose of voting upon a resolution to terminate the Garage Portion under the Act; that the resolution was not passed by the holders of proprietary leases and related share certificates eligible to vote under the Act ("eligible units") when the shareholders meeting was held on June 24, 1999; and that the proponents of the resolution claimed that the resolution had failed to pass by three votes of the 71 votes required to pass the resolution.
27. Denies the allegations of paragraph 40 of the complaint, except admits that, at shareholders meeting held on June 27, 2000, the Board (of which Newman was not then a member) claimed that holders of more than two-thirds of the eligible units had approved a resolution purportedly terminating the Garage Portion pursuant to the Act and that, on July 19, 2000, the Board purported to send a notice ("Termination Notice") to the Sponsor terminating the Garage Portion effective October 18, 2000.
28. Denies the allegations of paragraph 41 ofthe complaint, except admits that, on October 13, 2000, the Sponsor commenced an action in the United States District Court for the Southern District of New York ("the Federal Action") seeking a declaratory judgment that the Termination Notice was ineffective under the Act and that Garage Portion continued in full force and effect, an injunction against interference with the Sponsor's and its subtenant's possession and use of the Garage, damages and statutory attorneys' fees and other costs and that, in its complaint in the Federal Action, the Sponsor asserted that it was entitled to relief on several grounds, including the fact that the Garage Portion was not a contract or lease covered by the Act, the effective date of the Termination Notice was untimely, and that the shareholders' vote taken at the June 24, 2000 meeting violated New York law, the Co-op's By-Laws and the Act.
29. Denies the allegations of paragraph 42 of the complaint, except admits that, on or about October 3, 2001, the Hon. Gerard E. Lynch, presiding in the Federal Action, issued a written decision and order granting the Sponsor's motion for summary judgment and denying the Co-op's cross-motion for summary judgment ("District Court Decision").
30. Denies the allegations of paragraph 43 of the complaint, except admits that, in granting summary judgment for the Sponsor, the District Court Decision relied upon the narrowest ground offered by the Sponsor, namely, that the number of units in the conversion project under the Act was the original 137 units in the Plan, despite the alterations undertaken from time to time by owners of contiguous dwelling units, and that the Sponsor ceased to own more than 25% of such units on October 16, 1997, when its ownership was reduced to 34 units, and that the Termination Notice was ineffective because its effective date of October 18, 2000 occurred almost one year later than the required effective date of October 16, 1999 under the Act and did not rule on the Sponsor's other contentions that the alterations of contiguous dwelling units were legally irrelevant under the Act, the Garage Portion was not a contract or lease covered by the Act, and that the shareholders' vote held on June 27, 2000 was ineffective under New York law, the Co-op's By-Laws and the Act and further avers that the answering defendant believes that the United States Court of Appeals for the Second Circuit Court, to which the Co-op appealed the District Court Decision, will go further and rule that the alterations of contiguous dwelling units were legally irrelevant in determining when a notice of termination could be timely sent under the Act.
31. Denies the allegations of paragraphs 44 through 48 of the complaint.
32. Incorporates by reference its responses to the allegations contained in paragraph 49 of the complaint.
33. Denies the allegations of paragraphs 50 through 58 of the complaint.
34. Incorporates by reference its responses to the allegations contained in paragraph 59 of the complaint.
35. Denies the allegations of paragraph 60 ofthe complaint.
36. Incorporates by reference its responses to the allegations contained in paragraph 61 of the complaint.
37. Denies the allegations of paragraphs 62 through 73 ofthe complaint.
38. Incorporates by reference its responses to the allegations contained in paragraph 74 of the complaint, to the extent that such allegations are deemed applicable to it.
39. Denies the allegations of paragraphs 75 through 88 to the extent deemed applicable to it.
40. Incorporates by reference its responses to the allegations contained in paragraph 89 of the complaint, to the extent such allegations are deemed applicable to it.
41. Denies the allegations of paragraph 90 of the complaint to the extent deemed applicable to it.
42. Incorporates by reference its responses to the allegations contained in paragraph 91 ofthe complaint, to the extent such allegations are deemed applicable to it.
43. Denies the allegations of paragraph 92 of the complaint to the extent deemed applicable to it.
44. Incorporates by reference its responses to the allegations contained in paragraph 93 of the complaint, to the extent such allegations are deemed applicable to it.
45. Denies the allegations of paragraphs 94 through 98 of the complaint to extent deemed applicable to it.
46. Incorporates by reference its responses to the allegations contained in paragraph 99 of the complaint, to the extent such allegations are deemed applicable to it.
47. Denies the allegations of paragraphs 100 through 103 of the complaint to the extent deemed applicable to it.
48. Incorporates by reference its responses to the allegations contained in paragraph 104 of the complaint, to the extent such allegations are deemed applicable to it.
49. Denies the allegations of paragraphs 105 through 114 of the complaint to the extent deemed applicable to it.
50. Incorporates by reference its responses to the allegations contained in paragraph 115 of the complaint, to the extent such allegations are deemed applicable to it.
51. Denies the allegations of paragraph 116 of the complaint to the extent deemed applicable to it.
52. Incorporates by reference its responses to the allegations contained in paragraph 117 of the complaint, to the extent such allegations are deemed applicable to it.
53. Denies the allegations of paragraphs 118 through 135 ofthe complaint.
54. Incorporates by reference its responses to the allegations contained in paragraph 136 of the complaint, to the extent such allegations are deemed applicable to it.
55. Denies the allegations of paragraph 137 ofthe complaint to the extent deemed applicable to it.
56. Incorporates by reference his responses to the allegations contained in paragraph 138 of the complaint, to the extent such allegations are deemed applicable to it.
57. Denies the allegations of paragraphs 139 through 149 ofthe complaint to the extent deemed applicable to it.
FIRST AFFIRMATIVE DEFENSE
58. The complaint and each of its enumerated claims fails to state a cause of action under New York law.
SECOND AFFIRMATIVE DEFENSE
59. Each of the enumerated claims is barred by the applicable statute of limitations, including but not limited to CPLR §§213(1), 214(2) and 214(6).
THIRD AFFIRMATIVE DEFENSE
60. The complaint and each of its enumerated claims is barred by the compulsory counterclaim rule of Rule 1 3(a) of the Federal Rules of Civil Procedure in that the claims asserted in this action relate to the same subject matter and transactions as the claims and counterclaims in the Federal Action, the claims asserted in the Federal Action have been resolved adversely to the Co-op in the Federal Action, and the claims asserted in this action could have been asserted by the Co-op in the Federal Action.
FOURTH AFFIRMATIVE DEFENSE
61. The complaint and each of its enumerated claims is barred by federal and New York doctrines of res judicata and/or collateral estoppel.
FIFTH AFFIRMATIVE DEFENSE
62. The Garage Portion does not constitute a contract or lease covered by the Act. (This affirmative defense is asserted only to the extent required and without waiving the contention that the answering defendant may assert this defense in absence of its assertion by way of an affirmative defense.)
SIXTH AFFIRMATIVE DEFENSE
63. The vote taken at the shareholders' meeting held on June 27, 2000 on the resolution to terminate the Garage Portion under the Act violated New York Business Corporation Law, §605(a) and the Co-op's By-Law, §1(2) in that neither the Sponsor nor the shareholders Lomanto nor Iwanczuk were given notice of the meeting. (This affirmative defense is asserted only to the extent required and without waiving the contention that the answering defendant may assert this defense in absence of its assertion by way of an affirmative defense.)
SEVENTH AFFIRMATIVE DEFENSE
64. The holders of proprietary leases and related shares of the Co-op who organized the vote to terminate the Garage Portion under the Act knew of the existence and requirements of the Act for over a year before they first called a shareholders meeting to take action under the Act. (This affirmative defense is asserted only to the extent required and without waiving the contention that the answering defendant may assert this defense in absence of its assertion by way of an affirrnative defense.)
EIGHTH AFFIRMATIVE DEFENSE
65. The complaint and each of its enumerated claims is barred by waiver, laches and/or estoppel.
Accordingly, answering defendant Bleecker Charles Company prays for judgment dismissing the complaint with prejudice and costs.
Dated: New York, NY
September 26, 2002
PROSKAUER ROSE LLP
By: /s/ Dale A. Schreiber
Dale A. Schreiber
1585 Broadway
New York, NY 10036
(212) 969-3000
Attorneys for Defendant Bleecker Charles Company
TO:
MITCHELL R. SCHRAGE & ASSOCIATES, PLLC
126 East 56th Street
New York, NY 10022
(212) 758-9000
Attorneys for Plaintiff
VERIFICATION
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
KENNETH B. NEWMAN, being duly sworn, states he is the liquidating partner of Bleecker Charles Company, a defendant in the within action; that he has read the foregoing verified answer and knows the contents thereof; and that the same is true to deponent's own knowledge, except as to the matter therein alleged upon information and belief, and those matters deponent believes to be true.
/s/ Kenneth B. Newman
Kenneth B. Newman
Sworn to before
me this 26th day
of September, 2002
/s/ Glessie M. Agrinzoni
Notary Public
GLESSIE M. AGRINZONI
Notary Pulic, State of New York
No 01AG47559429
Qualified in Kings County
Commission Expires Nov. 30, 2002
SUPREME COURT STATE OF NEW YORK
COUNTY OF NEW YORK
--------------------------------------------------x
350 BLEECKER STREET APARTMENT : Index #: 113271/02
CORPORATION
Plaintiff, : VERIFIED ANSWER
AND COUNTERCLAIM
v. : OF KENNETH B. NEWMAN
KENNETH B. NEWMAN, individually and as
managing/general partner of BLEECKER CHARLES :
COMPANY and KENNETH B. NEWMAN
REALTY CORP., :
Defendants.
--------------------------------------------------x
Defendant Kenneth B. Newman ("Newman"), for its answer to the verified complaint ("the complaint"):
1. Admits that the allegations of paragraphs 1 through 4 of the complaint.
2. Denies the allegations of paragraph 5 of the complaint and avers that Newman is the liquidating partner of defendant Bleecker Charles Company ("the Sponsor") and has been and still is an attorney duly licensed to practice law by New York State.
3. Admits the allegations of paragraph 6 of the complaint.
4. Denies the allegations of paragraph 7 of the complaint, except admits that in 1984 the Sponsor owned in fee the land and building located at 350 Bleecker Street, in the City, County and State of New York ("the Building").
5. Admits the allegations of paragraph 8 of the complaint.
6. Denies the allegations of paragraph 9 of the complaint, except admits that the Sponsor filed an offering plan for converting the Building to cooperative ownership on December 31, 1984 and that the offering plan, as amended, ("the Plan") was declared effective on or about April 5, 1985.
7. Denies the allegations of paragraph 10 of the complaint, except admits that, on July 31, 1985, the Sponsor conveyed fee title to the Building to plaintiff 350 Bleecker Street Apartment Corporation ("the Co-op") and on that date the conversion became effective under applicable New York law.
8. Denies the allegations of paragraph 11 of the complaint, except admits that, upon the date of the conversion, the Building had 138 separate residential dwellings, one of which was reserved for use by the Building's superintendent and was therefore not included in the Plan, and that the Sponsor held proprietary leases and related share certificates for the remaining 137 residential dwelling units in the Building, 28 of which were simultaneously sold to third-parties in arm's length sales.
9. Denies the allegations of paragraph 12 ofthe complaint, except admits that, upon the conversion and in accordance with the Plan, the Co-op and the Sponsor executed and delivered a so-called Master Lease dated July 31, 1985 ("the Master Lease"), pursuant to which the Co-op, as landlord, leased to the Sponsor, as lessee, two ground-floor commercial stores and the parking garage ("the Garage") in the Building.
10. Denies the allegations of paragraph 13 of the complaint, except respectfully refers to the original or true copy of the Master Lease for its terms and conditions.
11. Denies the allegations of paragraph 14 of the complaint, except admits that, from time to time, but not at all times, since July 31, 1985, the Sponsor has subleased the Garage to a garage operator pursuant to the terms of a written sublease.
12. Denies the allegations of paragraph 15 of the complaint, except admits that various persons since July 31, 1985 have purchased either from the Sponsor or previous owners the proprietary leases and related share certificates for residential dwelling units in the Building that may have been contiguous and, in some cases with the approval of the Co-op's Board of Directors ("the Board"), have made alterations that allowed for access from one such dwelling unit to the contiguous dwelling unit, if any.
13. Denies the allegations of paragraphs 16 through 18 of the complaint.
14. Denies the allegations of paragraphs 19 and 20 of the complaint, except admits that Newman has been the liquidating partner of the Sponsor since on or about April 1984 and continues to serve in that capacity, in which he exercises managerial authority.
15. Denies the allegations of paragraphs 21 and 23 of the complaint, except admits that Newman has been at all relevant times and still is the sole shareholder, officer and director of defendant Kenneth ~B. Newman Realty Corp. ("Newman Realty").
16. Denies the allegations of paragraph 22 of the complaint, except admits that Newman has been duly licensed to practice law at all times since at least July 31, 1985.
17. Denies the allegations of paragraph 24 of the complaint, except admits that Newman's law firm and Newman Realty have at all relevant times had of fices at 488 Madison Avenue in the City, County and State of New York.
18. Denies the allegations of paragraph 25 of the complaint, except admits that Newman was a member of the Board and was President of the Co-op from July 31, 1985 through sometime in November 1999.
19. Denies the allegations of paragraph 26 of the complaint, except admits that the Board has consisted of seven members for most of the period between July 31, 1985 and November 1999.
20. Denies the allegations of paragraphs 27 and 28 of the complaint, except admits that, on January 13, 1998, Mark Lilien ("Lilien"), then a member of the Board, moved for a formal resolution that the Board engage an attorney or law firm to discuss unspecified questions about unspecified conflicts of interests; at that meeting, the Board agreed to meet on January 20, 1998 to discuss the matter further; the Board met on January 20, 1998 for the purpose of discussing whether or not to retain outside counsel to advise the Board on unspecified questions of unspecified potential conflicts of interest and general board member responsibilities toward the Co-op's shareholders; upon a motion for a formal resolution by Lilien to retain counsel for such purpose, the Board voted 4-to-2, with Lilien dissenting, for a determination that outside counsel should be retained only when a specific issue of conflict of interests arose and that, since the proponents of the resolution had failed to identify any such issue, there was no need retain such counsel at that time; James Kafadar ("Kafadar"), then the seventh member of the Board, did not attend the meeting of the Board held on January 20, 1998 and did not vote on the resolution, despite the fact that Kafadar attended the Board meeting held on January 13, 1998, knew that Lilien would offer such a resolution, and could have voted by proxy or through telephone participation in the meeting; and three of the four directors voting against Lilien's resolution and in favor of the determination that prevailed at the January 20, 1998 meeting were shareholders who were independent of the Sponsor, Newman and Newman Realty.
21. Denies knowledge or information sufficient to form a belief as to the truth of the allegations of paragraph 29 of the complaint, except admits that Lilien and Kafadar informed Newman, sometime in June 1999, that Lilien and Kafadar had consulted with counsel about the Condominium and Cooperative Conversion Protection and Abuse ReliefAct, 15 U.S.C.§§3601-3616 ("the Act") in 1998 and had been aware of the existence of the Act and the rights of the holders of proprietary leases and related shares under the Act to terminate the portion of the Master Lease covering the Garage ("the Garage Portion") for more than a year prior to that time.
22. Denies the allegations of paragraph 30 of the complaint and specifically avers that Newman had no knowledge of the existence of the Act until he received a copy of Lilien's notice dated June I, l 999 calling a meeting of the Co-op's shareholders to vote upon a resolution to terminate the Garage Portion on June 24, 1999.
23. Denies the allegations of paragraphs 31 and 32 of the complaint.
24. Denies the allegations of paragraphs 33,34 and 35 of the complaint, except respectfully refers to the text of the Act and case law thereunder to obtain an understanding of the basis upon which the Act operates to invalidate leases covered by the Act.
25. Denies the allegations of paragraphs 36,37 and 38 ofthe complaint.
26. Denies the allegations of paragraph 39 of the complaint, except admits that, by his notice dated June 1, 1999, Lilien noticed a meeting of the Co-op's shareholders for June 24, 1999 for the purpose of voting upon a resolution to terminate the Garage Portion under the Act; that the resolution was not passed by the holders of proprietary leases and related share certificates eligible to vote under the Act ("eligible units") when the shareholders meeting was held on June 24, 1999; and that the proponents of the resolution claimed that the resolution had failed to pass by three votes of the 71 votes required to pass the resolution.
27. Denies the allegations of paragraph 40 of the complaint, except admits that, at shareholders meeting held on June 27, 2000, the Board (of which Newman was not then a member) claimed that holders of more than two-thirds of the eligible units approved a resolution purportedly terminating the Garage Portion pursuant to the Act and that, on July 19, 2000, the Board purported to send a notice ("Termination Notice") to the Sponsor terminating the Garage Portion effective October 18, 2000.
28. Denies the allegations of paragraph 41 of the complaint, except admits that, on October 13, 2000, the Sponsor commenced an action in the United States District Court for the Southern District of New York ("the Federal Action") seeking a declaratory judgment that the Termination Notice was ineffective under the Act and that the Garage Portion continued in full force and effect, an injunction against interference with the Sponsor's and its subtenant's possession and use of the Garage, damages and statutory attorneys' fees and other costs and that, in its complaint in the Federal Action, the Sponsor asserted that it was entitled to relief on several grounds, including the fact that the Garage Portion was not contract or lease covered by the Act, the effective date of the Termination Notice was untimely, and that the shareholders' vote taken at the June 24, 2000 meeting violated New York law, the Co-op's By-Laws and the Act.
29. Denies the allegations of paragraph 42 of the complaint, except admits that, on or about October 3, 2001, the Hon. Gerard E. Lynch, presiding in the Federal Action, issued a written decision and order granting the Sponsor's motion for summary judgment and denying the Co-op's cross-motion for summary judgment ("District Court Decision").
30. Denies the allegations of paragraph 43 of the complaint, except admits that, in granting summary judgment for the Sponsor, the District Court Decision relied upon the narrowest ground offered by the Sponsor, namely, that the number of units in the conversion project under the Act was the original 137 units in the Plan, despite the alterations undertaken from time to time by owners of contiguous dwelling units, and that the Sponsor ceased to own more than 25% of such units on October 16, 1997, when its ownership was reduced to 34 units, and that the Termination Notice was ineffective because its effective date of October 18, 2000 occurred almost one year later than the required effective date of October 16, 1999 under the Act and did not rule on the Sponsor's other contentions that the alterations of contiguous dwelling units were legally irrelevant under the Act, that the Garage Portion was not a contract or lease covered by the Act, and that the shareholders' vote held on June 27, 2000 was ineffective under New York law, the Co-op's By-Laws and the Act and further avers that the answering defendant believes that the United States Court of Appeals for the Second Circuit, to which the Co-op appealed the District Court Decision, will go further and rule that the alterations of contiguous dwelling units were legally irrelevant in determining when a notice of termination could be timely sent under the Act.
31. Denies the allegations of paragraphs 44 through 48 of the complaint.
32. Incorporates by reference his responses to the allegations contained in paragraph 49 of the complaint, to the extent such allegations are deemed applicable to him.
33. Denies the allegations of paragraphs 50 through 58 to the extent deemed applicable to him.
34. Incorporates by reference his responses to the allegations contained in paragraph 59 of the complaint, to the extent such allegations are deemed applicable to him.
35. Denies the allegations of paragraph 60 ofthe complaint to the extent deemed applicable to him.
36. Incorporates by reference his responses to the allegations contained in paragraph 61 ofthe complaint, to the extent such allegations are deemed applicable to him.
37. Denies the allegations of paragraphs 62 through 73 of the complaint to the extent deemed applicable to him.
38. Incorporates by reference his responses to the allegations contained in paragraph 74 of the complaint, to the extent that such allegations are deemed applicable to him.
39. Denies the allegations of paragraphs 75 through 88 to the extent deemed applicable to him.
40. Incorporates by reference his responses to the allegations contained in paragraph 89 of the complaint, to the extent such allegations are deemed applicable to him.
41. Denies the allegations of paragraph 90 of the complaint to the extent deemed applicable to him.
42. Incorporates by reference his responses to the allegations contained in paragraph 91 of the complaint, to the extent such allegations are deemed applicable to him.
43. Denies the allegations of paragraph 92 of the complaint to the extent deemed applicable to him.
44. Incorporates by reference his responses to the allegations contained in paragraph 93 of the complaint, to the extent such allegations are deemed applicable to him.
45. Denies the allegations of paragraphs 94 through 98 of the complaint to extent deemed applicable to him.
46. Incorporates by reference his responses to the allegations contained in paragraph 99 of the complaint, to the extent such allegations are deemed applicable to him.
47. Denies the allegations of paragraphs 100 through 103 of the complaint to the extent deemed applicable to him.
48. Incorporates reference his responses to the allegations contained in paragraph 104 of the complaint, to the extent such allegations are deemed applicable to him.
49. Denies the allegations of paragraphs 105 through 114 of the complaint to the extent deemed applicable to him.
50. Incorporates by reference his responses to the allegations contained in paragraph 115 of the complaint, to the extent such allegations are deemed applicable to him.
51. Denies the allegations of paragraph 116 of the complaint to the extent deemed applicable to him.
52. Incorporates by reference his responses to the allegations contained in paragraph 117 of the complaint.
53. Denies the allegations of paragraphs 118 through 135 of the complaint.
54. Incorporates by reference his responses to the allegations contained in paragraph 136 of the complaint.
55. Denies the allegations of paragraph 137 ofthe complaint.
56. Incorporates by reference his responses to the allegations contained in paragraph 138 of the complaint.
57. Denies the allegations of paragraphs 139 through 149 ofthe complaint.
FIRST AFFIRMATIVE DEFENSE
58. The complaint and each of its enumerated claims fails to state a cause of action under New York law.
SECOND AFFIRMATIVE DEFENSE
59. Each of the enumerated claims is barred by the applicable statute of limitations, including but not limited to CPLR §§213(1), 214(2) and 214(6).
THIRD AFFIRMATIVE DEFENSE
60. The complaint and each of its enumerated claims is barred by the compulsory counterclaim rule of Rule 13(a) of the Federal Rules of Civil Procedure in that the claims asserted in this action relate to the same subject matter and transactions as the claims and counterclaims in the Federal Action, the claims in the Federal Action have been resolved adversely to the Co-op in the Federal Action, and the claims asserted in this action could have been asserted by the Co-op in the Federal Action.
FOURTH AFFIRMATIVE DEFENSE
61. The complaint and each of its enumerated claims is barred by federal and New York doctrines of res judicata and/or collateral estoppel.
FIFTH AFFIRMATIVE DEFENSE
62. The Garage Portion is not a contract or lease covered by the Act. (This affirmative defense is asserted only to the extent required and without waiving the contention that the answering defendant may assert this defense in absence of its assertion by way of an affirmative defense.)
SIXTH AFFIRMATIVE DEFENSE
63. The vote taken at the shareholders' meeting held on June 27, 2000 on the resolution to terminate the Garage Portion under the Act violated New York Business Corporation Law, §605(a) and the Co-op's By-Law, §1(2) in that neither the Sponsor nor the shareholders Lomanto nor Iwanczuk were given notice of the meeting. (This affirmative defense 10 is asserted only to the extent required and without waiving the contention that the answering defendant may assert this defense in absence of its assertion by way of an affirmative defense.)
SEVENTH AFFIRMATIVE DEFENSE
64. The holders of proprietary leases and related shares of the Co-op who organized the vote to terminate the Garage Portion under the Act knew of the existence and requirements of the Act for over a year before they first called a shareholders meeting to take action under the Act. (This affirmative defense is asserted only to the extent required and without waiving the contention that the answering defendant may assert this defense in absence of its assertion by way of an affirmative defense.)
EIGHTH AFFIRMATIVE DEFENSE
65. The complaint and each of its enumerated claims is barred by waiver, laches and/or estoppel.
COUNTERCLAIMS
66. Defendant and counterclaim plaintiff Kenneth B. Newman ("Newman") was a director and officer of plaintiff and counterclaim defendant 350 Bleecker Street Apartment Corporation ("the Co-op") from July 1, 1985 until some time in November 1999.
67. During Newman's tenure as an of ficer and director of the Co-op, the Co-op's By-Law, Article IV was in effect, providing as follows:
ARTICLE IV
Indemnification of Directors and Officers
Section 1. (a) In Actions by or in the Right of Corporation. Any person made a party to an action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he, his testator or intestate, is or was a director or of ficer of the corporation, shall be indemnified by this corporation against the reasonable expenses, including attorneys' fees, actually and necessarily incurred by him, in connection with the defense of such action, or in connection with an appeal therein, except in relation to matters as to which such director or officer is adjudged to have breached his duty to the corporation under Section 717 of the Business Corporation Law and except with respect to those amounts and expenses referred to in Paragraph (b) of Section 722 of the Business Corporation Law.
(b) In Other Actions or Proceedings. Any person made, a party to an action or proceeding other than one by or in the right of the corporation to procure a judgment in its favor, whether civil or criminal, brought to impose a liability or penalty on such person for an act alleged to have been committed by such person, his testator or intestate, as a director or officer of the corporation, or of any other corporation which he served as such at the request of the corporation, shall be indemnified by this corporation against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees, actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, if such director or officer acted in good faith, for a purpose which he reasonably believed to be in the best interest of the corporation and, in criminal actions or proceedings, in addition, had no reasonable cause to believe this conduct was unlawful.
The termination of any such civil or criminal action or proceeding by judgment, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not in itself create a presumption that any such director or officer did not act in good faith for a purpose which he reasonably believed to be in the best interests of the corporation or that he had reasonable cause to believe that his conduct was unlawful.
(c) Payment. A person who has been wholly successful, on the merits or otherwise, in the defense of a civil or criminal action or proceeding of the character described in Sections 722 or 723 of the Business Corporation Law shall be entitled to indemnification as authorized in said Sections.
Except as provided in Paragraph (a) of Section 724 of the Business Corporation Law, any indemnification under Section 722 or 723 of that Law, unless ordered by a court under Section 725 thereof, shall be made by the corporation only if authorized in the specific case in accordance with provisions of Paragraph (a) of said Section 724.
Expenses incurred in defending a civil or criminal action or proceeding may be paid by the corporation in advance of the final disposition of such action or proceeding if authorized under Paragraph (b) of said Section 724.
(d) Other Provision. Indemnification of directors or officers shall be subject to the other provisions affecting the same as set forth in Section 726 of the Business Corporation Law.
68. New York Business Corporation Law ("BCL"), §724 provides as follows:
(a) Notwithstanding the failure of a corporation to provide indemnification, and despite any contrary resolution of the board or of the shareholder in the specific case under section 723 (Payment of indemnification other than by court award), indemnification shall be awarded by a court to the extent authorized under section 722 (Authorization for indemnification of directors and of ficers), and paragraph (a) of section 723. Application therefor may be made, in every case, either:
( 1 ) In the civil action or proceeding in which the expenses were incurred or other amounts were paid, or
(2) To the supreme court in a separate proceeding, in which case the application shall set forth the disposition of any previous application made to any court for the same or similar relief and also reasonable cause for the failure to make application for such relief in the action or proceeding in which the expenses were incurred or other amounts were paid.
(b) The application shall be made in such manner and form as may be required by the applicable rules of court or, in the absence thereof, by direction of a court to which it is made. Such application shall be upon notice to the corporation. the court may also direct that notice be given at the expense of the corporation to the shareholders and such other persons as it may designate in such manner as it may require.
(c) Where indemnification is sought by judicial action, the court may allow a person such reasonable expenses, including attorneys' fees, during the pendency of the litigation as are necessary in connection with his defense therein, if the court shall find that the defendant has by his pleadings or during the course of the litigation raised genuine issues of fact or law.
69. The Co-op has sued Newman in this action for actions allegedly taken in his capacity as a former director and/or officer of the Co-op.
70. Accordingly, Newman is entitled to indemnification for any liability that he may have on those claims to Co-op under the By-Laws, Article IV, Section (a) and under BCL, §§723, 724, despite the fact that he denies that he has any such liability, and is also entitled to payment of his attorneys' fees and other defense costs as incurred in the defense of those claims pursuant to BCL, §724(c).
71. By letter dated July 12, 2002 from his counsel to counsel for the Co-op, Newman demanded that the Co-op recognize its obligation under BCL, §724(c) to pay his attorneys' fees and other defense costs incurred in the defense of those claims.
72. By letter dated July 17, 2002 from the Co-op's counsel to Newman's counsel, the Co-op refused to recognize such obligations to Newman.
73. Accordingly, Newman is entitled to full indemnification for his liability, if any, to the Co-op for such claims arising out of his alleged actions in his capacity as an of ficer or director of the Co-op and to the payment of attorneys' fees and other defense costs incurred in the defense of those claims.
Accordingly, answering defendant Kenneth B. Newman prays for judgment dismissing the complaint with prejudice and costs and granting him judgment on his counterclaims for indemnification and such other relief as may be just and proper.
Dated: New York, NY
September 26, 2002
PROSKAUER ROSE LLP
By: /s/ Dale A. Schreiber
Dale A. Schreiber
1585 Broadway
New York, NY 10036
(212) 969-3000
Attorneys for Defendant Kenneth B. Newman
TO:
MITCHELL R. SCHRAGE & ASSOCIATES, PLLC
126 East 56th Street
New York, NY 10022
(212) 758-9000
Attorneys for Plaintiff
VERIFICATION
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
KENNETH B. NEWMAN, being duly sworn, states he is a defendant in the within action; that he has read the foregoing verified answer and knows the contents thereof; and that the same is true to deponent's own knowledge, except as to the matter therein alleged upon information and belief, and those matters deponent believes to be true.
/s/ Kenneth B. Newman
Kenneth B. Newman
Sworn to before
me this 26th day
of September, 2002
/s/ Glessie M. Agrinzoni
Notary Public
GLESSIE M. AGRINZONI
Notary Pulic, State of New York
No 01AG47559429
Qualified in Kings County
Commission Expires Nov. 30, 2002
SUPREME COURT STATE OF NEW YORK
COUNTY OF NEW YORK
--------------------------------------------------x
350 BLEECKER STREET APARTMENT : Index #: 113271/02
CORPORATION
Plaintiff, : VERIFIED ANSWER OF
KENNETH B. NEWMAN
v. : REALTY CORP.
KENNETH B. NEWMAN, individually and as
managing/general partner of BLEECKER CHARLES :
COMPANY and KENNETH B. NEWMAN
REALTY CORP., :
Defendants.
--------------------------------------------------x
Defendant Kenneth B. Newman Corp.("Newman Realty"), for its answer to the verified complaint ("the complaint"):
1. Admits that the allegations of paragraphs 1 through 4 of the complaint.
2. Denies the allegations of paragraph 5 of the complaint and avers that Kenneth B. Newman ("Newman") is the liquidating partner of defendant Bleecker Charles Company ("the Sponsor") and has been and still is an attorney duly licensed to practice law by New York State.
3. Admits the allegations of paragraph 6 of the complaint.
4. Denies the allegations of paragraph 7 of the complaint, except admits that in 1984 the Sponsor owned in fee the land and building located at 350 Bleecker Street, in the City, County and State of New York ("the Building").
5. Admits the allegations of paragraph 8 of the complaint.
6. Denies the allegations of paragraph 9 of the complaint, except admits that the Sponsor filed an offering plan for converting the Building to cooperative ownership on December 31, 1984 and that the offering plan, as amended, ("the Plan") was declared effective on or about April 5, l985.
7. Denies the allegations of paragraph 10 of the complaint, except admits that, on July 31, 1985, the Sponsor conveyed fee title to the Building to plaintiff 350 Bleecker Street Apartment Corporation ("the Co-op") and on that date the conversion became effective under applicable New York law.
8. Denies the allegations of paragraph 11 of the complaint, except admits that, upon the date of the conversion, the Building had 138 separate residential dwellings, one of which was reserved for use by the Building's superintendent and was therefore not included in the Plan, and that the Sponsor held proprietary leases and related share certificates for the remaining 137 residential dwelling units in the Building, 28 of which were simultaneously sold to third-parties in arm's length sales.
9. Denies the allegations of paragraph 12 of the complaint, except admits that, upon the conversion and in accordance with the Plan, the Co-op and the Sponsor executed and delivered a so-called Master Lease dated July 31, 1985 ("the Master Lease"), pursuant to which the Co-op, as landlord, leased to the Sponsor, as lessee, two ground-floor commercial stores and the parking garage ("the Garage") in the Building.
10. Denies the allegations of paragraph 13 of the complaint, except respectfully refers to the original or true copy of the Master Lease for its terms and conditions.
11. Denies the allegations of paragraph 14 of the complaint, except admits that, from time to time, but not at all times, since July 31, 1985, the Sponsor has subleased the Garage to a garage operator pursuant to the terms of a written sublease.
12. Denies the allegations of paragraph 15 of the complaint, except admits that various persons since July 31, 1985 have purchased either from the Sponsor or previous owners the proprietary leases and related share certificates for residential dwelling units in the Building that may have been contiguous and, in some cases with the approval of the Co-op's Board of Directors ("the Board"), have made alterations that allowed for access from one such dwelling unit to the contiguous dwelling unit, if any.
13. Denies the allegations of paragraphs 16 through 18 of the complaint.
14. Denies the allegations of paragraphs 19 and 20 of the complaint, except admits that Newman has been the liquidating partner of the Sponsor since on or about April 1984 and continues to serve in that capacity, in which he exercises managerial authority.
15. Denies the allegations of paragraphs 21 and 23 of the complaint, except admits that Newman has been at all relevant times and still is the sole shareholder, officer and director of Newman Realty.
16. Denies the allegations of paragraph 22 of the complaint, except admits that Newman has been duly licensed to practice law at all times since at least July 31, 1985.
17. Denies the allegations of paragraph 24 of the complaint, except admits that Newman's law firm and Newman Realty have at all relevant times had offices at 488 Madison Avenue in the City, County and State of New York.
18. Denies the allegations of paragraph 25 of the complaint, except admits that Newman was a member of the Board and President of the Co-op from July 31, 1985 through sometime in November 1999.
19. Denies the allegations of paragraph 26 of the complaint, except admits that the Board has consisted of seven members for most of the period between July 31, 1985 and November 1999.
20. Denies the allegations of paragraphs 27 and 28 of the complaint, except admits that, on January 13, 1998, Mark Lilien ("Lilien"), then a member of the Board, moved for a formal resolution that the Board engage an attorney or law firm to discuss unspecified questions about unspecified conflicts of interest; at that meeting, the Board agreed to meet on January 20, 1998 to discuss the matter further; the Board met on January 20, 1998 for the purpose of discussing whether or not to retain outside counsel to advise the Board on unspecified questions of unspecified potential conflicts of interest and general board member responsibilities toward the Co-op's shareholders; upon a motion for a formal resolution by Lilien to retain counsel for such purpose, the Board voted 4-to-2, with Lilien dissenting, for a determination that outside counsel should be retained only when a specific issue of conflict of interests arose and that, since the proponents of the resolution had failed to identify any such issue, there was no need retain such counsel at that time; James Kafadar ("Kafadar"), then the seventh member of the Board, did not attend the meeting of the Board held on January 20, 1998 and did not vote on the resolution, despite the fact that Kafadar attended the Board meeting held on January 13, 1998, knew that Lilien would offer such a resolution, and could have voted by proxy or through telephone participation in the meeting; and three of the four directors voting against Lilien's resolution and in favor of the determination that prevailed at the January 20, 1998 meeting were shareholders who were independent of the Sponsor, Newman and Newman Realty.
21. Denies knowledge or information sufficient to form a belief as to the truth of the allegations of paragraph 29 of the complaint, except admits that Lilien and Kafadar informed Newman, sometime in June 1999, that Lilien and Kafadar had consulted with counsel about the Condominium and Cooperative Conversion Protection and Abuse Relief Act, 15 U.S.C. §§3601 -3616 ("the Act") in 1998 and had been aware of the existence of the Act and the rights of the holders of proprietary leases and related shares under the Act to terminate the portion of the Master Lease covering the Garage ("the Garage Portion") for more than a year prior to that time.
22. Denies the allegations of paragraph 30 of the complaint and specifically avers that Newman had no knowledge of the existence of the Act until he received a copy of Lilien's notice dated June 1, 1999 calling a meeting of the Co-op's shareholders to vote upon a resolution to terminate the Garage Portion on June 24, 1999.
23. Denies the allegations of paragraphs 31 and 32 of the complaint.
24. Denies the allegations of paragraphs 33, 34 and 35 ofthe complaint, except respectfully refers to the text of the Act and case law thereunder to obtain an understanding of the basis upon which the Act operates to invalidate leases covered by the Act.
25. Denies the allegations of paragraphs 36, 37 and 38 ofthe complaint.
26. Denies the allegations of paragraph 39 of the complaint, except admits that, by his notice dated June 1, 1999, Lilien noticed a meeting of the Co-op's shareholders for June 24, 1999 for the purpose of voting upon a resolution to terminate the Garage Portion under the Act; that the resolution was not passed by the holders of proprietary leases and related share certificates eligible to vote under the Act ("eligible units") when the shareholders meeting was held on June 24, 1999; and that the proponents of the resolution claimed that the resolution had failed to pass by three votes of the 71 votes required to pass the resolution.
27. Denies the allegations of paragraph 40 of the complaint, except admits that, at shareholders meeting held on June 27, 2000, the Board (of which Newman was not then a member) claimed that holders of more than two-thirds of the eligible units had approved a resolution purportedly terminating the Garage Portion pursuant to the Act and that, on July 19, 2000, the Board purported to send a notice ("Termination Notice") to the Sponsor terminating the Garage Portion effective October 18, 2000.
28. Denies the allegations of paragraph 41 of the complaint, except admits that, on October 13, 2000, the Sponsor commenced an action in the United States District Court for the Southern District of New York ("the Federal Action") seeking a declaratory that the Termination Notice was ineffective under the Act and that Garage Portion continued in full force and effect, an injunction against interference with the Sponsor's and its subtenant's possession and use of the Garage, damages and statutory attorneys' fees and other costs and that, in its complaint in the Federal Action, the Sponsor asserted that it was entitled to relief on several grounds, including the fact that the Garage Portion was not a contract or lease covered by the Act, the effective date of the Termination Notice was untimely, and that the shareholders' vote taken at the June 24, 2000 meeting violated New York law, the Co-op's By-Laws and the Act.
29. Denies the allegations of paragraph 42 of the complaint, except admits that, on or about October 3, 2001, the Hon. Gerard E. Lynch, presiding in the Federal Action, issued a written decision and order granting the Sponsor's motion for summary judgment and denying the Co-op's cross-motion for summary judgment ("District Court Decision").
30. Denies the allegations of paragraph 43 of the complaint, except admits that, in granting summary judgment for the Sponsor, the District Court Decision relied upon the narrowest ground offered by the Sponsor, namely, that the number of units in the conversion project under the Act was the original 137 units in the Plan, despite the alterations undertaken from time to time by owners of contiguous dwelling units, and that the Sponsor ceased to own more than 25% of such units on October 16, 1997, when its ownership was reduced to 34 units, and that the Termination Notice was ineffective because its effective date of October 18, 2000 occurred almost one year later than the required effective date of October 16, 1999 under the Act and did not rule on the Sponsor's other contentions that the alterations of contiguous dwelling units were legally irrelevant under the Act, the Garage Portion was not a contract or lease covered by the Act, and that the shareholders' vote held on June 27, 2000 was ineffective under New York law, the Co-op's By-Laws and the Act and further avers that the answering defendant believes that the United States Court of Appeals for the Second Circuit Court, to which the Co-op appealed the District Court Decision, will go further and rule that the alterations of contiguous dwelling units were legally irrelevant in determining when a notice of termination could be timely sent under the Act.
31. Denies the allegations of paragraphs 44 through 48 of the complaint.
32. Incorporates by reference its responses to the allegations contained in paragraph 49 of the complaint, to the extent such allegations are deemed applicable to it
33. Denies the allegations of paragraphs 50 through 58 to the extent deemed applicable to it.
34. Incorporates by reference its responses to the allegations contained in paragraph 59 of the complaint, to the extent such allegations are deemed applicable to it.
35. Denies the allegations of paragraph 60 of the complaint to the extent deemed applicable to it.
36. Incorporates by reference its responses to the allegations contained in paragraph 61 of the complaint, to the extent such allegations are deemed applicable to it.
37. Denies the allegations of paragraphs 62 through 73 of the complaint to the extent deemed applicable to it.
38. Incorporates by reference its responses to the allegations contained in paragraph 74 of the complaint.
39. Denies the allegations of paragraphs 75 through 88.
40. Incorporates by reference its responses to the allegations contained in paragraph 89 of the complaint.
41. Denies the allegations of paragraph 90 of the complaint to the extent deemed applicable to him.
42. Incorporates by reference its responses to the allegations contained in paragraph 91 of the complaint, to the extent such allegations are deemed applicable to it.
43. Denies the allegations of paragraph 92 of the complaint.
44. Incorporates by reference its responses to the allegations contained in paragraph 93 of the complaint.
45. Denies the allegations of paragraphs 94 through 98 of the complaint.
46. Incorporates by reference its responses to the allegations contained in paragraph 99 of the complaint.
47. Denies the allegations of paragraphs 100 through 103 of the complaint.
48. Incorporates by reference its responses to the allegations contained in paragraph 104 of the complaint.
49. Denies the allegations of paragraphs 105 through 114 of the complaint.
50. Incorporates by reference its responses to the allegations contained in paragraph 115 of the complaint.
51. Denies the allegations of paragraph 116 of the complaint.
52. Incorporates by reference his responses to the allegations contained in paragraph 117 of the complaint, to the extent such allegations are deemed applicable to it.
53. Denies the allegations of paragraphs 118 through 135 of the complaint to the extent deemed applicable to it.
54. Incorporates by reference its responses to the allegations contained in paragraph 136 of the complaint, to the extent such allegations are deemed applicable to it.
55. Denies the allegations of paragraph 137 of the complaint to the extent deemed applicable to it.
56. Incorporates by reference its responses to the allegations contained in paragraph 138 of the complaint, to the extent such allegations are deemed applicable to it.
57. Denies the allegations of paragraphs 139 through 149 of the complaint to the extent deemed applicable to it.
FIRST AFFIRMATIVE DEFENSE
58. The complaint and each of its enumerated claims fails to state a cause of action under New York law.
SECOND AFFIRMATIVE DEFENSE
59. Each of the enumerated claims is barred by the applicable statute of limitations, including but not limited to CPLR §§213(1), 214(2) and 214(6).
THIRD AFFIRMATIVE DEFENSE
60. The complaint and each of its enumerated claims is barred by the compulsory counterclaim rule of Rule 13(a) of the Federal Rules of Civil Procedure in that the claims asserted in this action relate to the same subject matter and transactions as the claims and counterclaims in the Federal Action, the claims in the Federal Action have been resolved adversely to the Co-op in the Federal Action, and the claims asserted in this action could have been asserted by the Co-op in the Federal Action.
FOURTH AFFIRMATIVE DEFENSE
61. The complaint and each of its enumerated claims is barred by federal and New York doctrines of res judicata and/or collateral estoppel.
FIFTH AFFIRMATIVE DEFENSE
62. The Garage Portion does not constitute a contract or lease covered by the Act. (This affirmative defense is asserted only to the extent required and without waiving the contention that the answering defendant may assert this defense in absence of its assertion by way of an affirmative defense.)
SIXTH AFFIRMATIVE DEFENSE
63. The vote taken at the shareholders' meeting held on June 27, 2000 on the resolution to terminate the Garage Portion under the Act violated New York Business Corporation Law, §605(a) and the Co-op's By-Law, §1(2) in that neither the Sponsor nor the shareholders Lomanto nor Iwanczuk were given notice of the meeting. (This affirmative defense is asserted only to the extent required and without waiving the contention that the answering defendant may assert this defense in absence of its assertion by way of an affirmative defense.)
SEVENTH AFFIRMATIVE DEFENSE
64. The holders of proprietary leases and related shares of the Co-op who organized the vote to terminate the Garage Portion under the Act knew of the existence and requirements of the Act for over a year before they first called a shareholders meeting to take action under the Act. (This affirmative defense is asserted only to the extent required and without waiving the contention that the answering defendant may assert this defense in absence of its assertion by way of an affirmative defense.)
EIGHTH AFFIRMATIVE DEFENSE
65. The complaint and each of its enumerated claims is barred by waiver, laches and/or estoppel.
Accordingly, answering defendant Kenneth B. Newman Realty Corp. prays for judgment dismissing the complaint with prejudice and costs.
Dated: New York, NY
September 26, 2002
PROSKAUER ROSE LLP
By: /s/ Dale A. Schreiber
Dale A. Schreiber
1585 Broadway
New York, NY 10036
(212) 969-3000
Attorneys for Defendant Kenneth B. Newman Realty Corp.
TO:
MITCHELL R. SCHRAGE & ASSOCIATES, PLLC
126 East 56th Street
New York, NY 10022
(212) 758-9000
Attorneys for Plaintiff
VERIFICATION
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
KENNETH B. NEWMAN, being duly sworn, states that he is an officer of Kenneth B. Newman Realty Corp., a defendant in the within action; that he has read the foregoing verified answer and knows the contents thereof; and that the same is true to deponent's own knowledge, except as to the matter therein alleged upon information and belief, and those matters deponent believes to be true.
/s/ Kenneth B. Newman
Kenneth B. Newman
Sworn to before
me this 26th day
of September, 2002
/s/ Glessie M. Agrinzoni
Notary Public
GLESSIE M. AGRINZONI
Notary Pulic, State of New York
No 01AG47559429
Qualified in Kings County
Commission Expires Nov. 30, 2002
SUPREME COURT STATE OF NEW YORK
COUNTY OF NEW YORK
--------------------------------------------------x
350 BLEECKER STREET APARTMENT : Index #: 113271/02
CORPORATION Filing Date:June 18, 2002
Plaintiff, : Third-party Plaintiff designates
New York County as place of trial.
v. :
The basis of venue:
KENNETH B. NEWMAN, individually and as Plaintiff's and Third-Party Plaintiff's
managing/general partner of BLEECKER CHARLES : place of business
COMPANY and KENNETH B. NEWMAN
REALTY CORP., : THIRD PARTY SUMMONS
Defendants.
--------------------------------------------------x
KENNETH B. NEWMAN, :
Defendant and Third-Party Plaintiff, :
v. : Index No. 591057/02
Filing Date: September 26, 2002
MARK LILIEN AND JAMES D. KAFADAR :
Third-Party Defendants. :
--------------------------------------------------x
TO THE ABOVE NAMED THIRD-PARTY DEFENDANTS:
You are hereby summoned to answer the third-party complaint in this action (a copy of which is attached) and to serve a copy of your answer, or, if the third-party complaint is not served with this summons, to serve a notice of appearance, on the undersigned attorneys for the third-party plaintiff within twenty (20) days after the service of this summons, exclusive of the day of service (or within 30 days after the service is complete if this summons is not personally delivered to you within the State of New York); and in case of your failure to appear or answer, judgment will be taken against you by default for the relief demanded in the third-party complaint.
Dated: New York, NY
September 26, 2002
PROSKAUER ROSE LLP
By: /s/ Dale A. Schreiber
Dale A. Schreiber
Attorneys for Third-Party Plaintiff
1585 Broadway
New York, NY 10036
(212) 969-3000
TO:
MARK LILIEN
350 Bleecker Street
Apartments 3D-3E-3F
New York, NY 10014
JAMES D. KAFADAR
350 Bleecker Street
Apartments 6C-6D-6E
New York, NY 10014
MITCHELL R. SCHRAGE & ASSOCIATES, PLLC
126 East 56th Street
New York, NY 10022
(212) 758-9000
Attorneys for Plaintiff
SUPREME COURT STATE OF NEW YORK
COUNTY OF NEW YORK
--------------------------------------------------x
350 BLEECKER STREET APARTMENT : Index #: 11327/02
CORPORATION
Plaintiff, :
v. :
VERIFIED
KENNETH B. NEWMAN, individually and as THIRD-PARTY COMPLAINT
managing/general partner of BLEECKER CHARLES :
COMPANY and KENNETH B. NEWMAN
REALTY CORP., :
Defendants. :
--------------------------------------------------x
KENNETH B. NEWMAN, :
Defendant and Third-Party Plaintiff, :
v. : Index No. 113271/02
MARK LILIEN AND JAMES D. KAFADAR :
Third-Party Defendants. :
--------------------------------------------------x
Defendant and third-party plaintiff Kenneth B. Newman ("Newman"), for his third-party complaint, alleges as follows:
1. Newman served as director and officer of plaintiff 350 Bleecker Street Apartment Corp. ("the Co-op") from 1985 through some time in November 1999. During this period, Newman was also the liquidating partner of Bleecker Charles Company ("the Sponsor"), which converted to cooperative ownership of the land and apartment building located at 350 Bleecker Street in the City, County and State of New York ("the Building") under applicable New York law effective July 31, 1985 when the Co-op took fee title to the Building.
2. Third-party defendants Mark Lilien ("Lilien") and James D. Kafadar ("Kafadar") are currently serving as directors of the C-op. Lilien has served as a director at all times from October 1987 and Kafadar at all times from November 1995, in both case to the present. Their service as directors has overlapped with Newman's service as a director. Thus, Lilien, Kafadar and Newman served as directors of the Co-op, along with others, from October 16, 1997 through October 16, 1999 ("the Window Period").
3. In the underlying action (Index No. 11327/02), the C-op has filed a complaint (a copy of which is annexed as Exhibit A and which is verified by Lilien) against, among others, Newman asserting that Newman allegedly breached his fiduciary duties to the Co-op and/or its shareholders, in his capacity as a director and/or officer of the Co-op. The principal claim is that Newman allegedly breached his fiduciary duties to the Co-op by failing to disclose to the Co-op's board of directors ("the Board") and/or the holders of proprietary leases for apartments in the Building and related share certificates ("unit owners") that the unit owners, by a two-thirds vote among them, had an alleged limited option, under the federal Condominium and Cooperative Conversion Protection and Abuse Relief Act, 15 U.S.C., §§3601-3616 ("the Act"), to terminate the portion of the Master Lease dated July 31, 1985 between the Co-op, as landlord, and the Sponsor, as lessee, for the parking garage in the Building ("the Garage Portion") and that this limited option had to be exercised by such unit owners and effectuated by notice to the Sponsor during the Window Period.
4. The Co-op's complaint in the underlying action alleges that directors other than Newman knew about the Act during the Window Period and the alleged limited option of the unit owners under the Act to terminate the Garage Portion.
5. Upon information and belief, Lilien and Kafadar had knowledge of the existence of the Act and the unit owners' alleged limited termination option thereunder as early as January 1998, if not months before. Lilien and Kafadar deliberately withheld their knowledge from the rest of the Board, including Newman, and most of the Co-op's shareholders, until on or about June 1, 1999 when Lilien and some other shareholders sent a notice dated June 1, 1999 to the Co-op's shareholders ("the 1999 Notice") calling for a meeting on June 24, 1999 to vote on a resolution to terminate the Garage Portion under the Act.
6. Newman denies that he knew of the existence of the Act prior to receiving the 1999 Notice, although the complaint in the underlying action asserts-without any basis -that he had such knowledge. In his verified answer to the complaint in the underlying action (a copy of which is annexed as Exhibit B), Newman asserts his lack of knowledge of the Act prior to his receiving the 1999 Notice.
7. If, as the complaint in the underlying action alleges, Newman could, in his capacity as an officer or director of the Co-op, have had an obligation to disclose to the Board and/or the Co-op's shareholders his alleged knowledge of the existence of the Act and the alleged limited option thereunder to terminate the Garage Portion during the Window Period, so did Lilien and Kafadar, both of whom had such knowledge and acted on that knowledge long before Newman had any knowledge of the Act. In the underlying action, Newman asserts that Lilien's and Kafadar's earlier knowledge of the Act and the alleged limited option of the unit owners thereunder is a complete defense to the claims against him in this action.
8. If Lilien and Kafadar's knowledge of the Act and the alleged limited option of the unit owners thereunder long before Newman does not constitute a complete defense for Newman to the claims asserted against him in the complaint in the underlying action against Newman and if Newman is found liable for any alleged failure to disclose to the Board and/or the unit owners his alleged knowledge of the existence of the Act and the alleged limited option of the unit holders thereunder, then Lilien and Kafadar are jointly and severally liable to Newman for contribution. Moreover, in light of their earlier knowledge of these matters and deliberate refusal to disclose them to the Board and/or the unit owners and consequent materially greater fault, Lilien and Kafadar should each be adjudged so liable for a larger proportion of the total liability than Newman, if not all such liability.
Accordingly, in the event that Newman is found liable under the complaint in the underlying action, Newman is entitled to a judgment for contribution against Lilien and Kafadar jointly and severally in such proportions as may be just and proper in the circumstances and granting such other relief as may be just and proper.
PROSKAUER ROSE LLP
By:
Dale A. Schreiber
585 Broadway
New York, NY 10036
(212) 969-3000
TO:
MITCHELL R. SCHRAGE & ASSOCIATES, PLLC
126 East 56th Street
New York, NY 10022
(212) 758-9000
Attorneys for Plaintiff
MARK LILIEN
JAMES D. KAFADAR
VERIFICATION
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
KENNETH B. NEWMAN, being duly sworn, states that he is a defendant and third-party plaintiff in the within action; that he has read the foregoing verified answer and knows the contents thereof; and that the same is true to deponent's own knowledge, except as to the matter therein alleged upon information and belief, and those matters deponent believes to be true.
/s/ Kenneth B. Newman
Kenneth B. Newman
Sworn to before
me this 26th day
of September, 2002
/s/ Glessie M. Agrinzoni
Notary Public
GLESSIE M. AGRINZONI
Notary Pulic, State of New York
No 01AG47559429
Qualified in Kings County
Commission Expires Nov. 30, 2002
Exhibit A
The verified complaint filed by the co-op in New York State Supreme Court dated 06/17/02.
Exhibit B
SUPREME COURT STATE OF NEW YORK
COUNTY OF NEW YORK
--------------------------------------------------x
350 BLEECKER STREET APARTMENT : Index #: 11327/02
CORPORATION
Plaintiff, :
v. :
VERIFIED ANSWER
KENNETH B. NEWMAN, individually and as AND COUNTERCLAIM
managing/general partner of BLEECKER CHARLES : OF KENNETH B. NEWMAN
COMPANY and KENNETH B. NEWMAN
REALTY CORP., :
Defendants. :
--------------------------------------------------x
Defendant Kenneth B. Newman ("Newman"), for his answer to the verified complaint ("the complaint"):
1. Admits that the allegations of paragraphs 1 through 4 of the complaint.
2. Denies the allegations of paragraph 5 of the complaint and avers that Newman is the liquidating partner of defendant Bleecker Charles Company ("the Sponsor") and has been and still is an attorney duly licensed to practice law by New York State.
3. Admits the allegations of paragraph 6 of the complaint.
4. Denies the allegations of paragraph 7 of the complaint, except admits that in 1984 the Sponsor owned in fee the land and building located at 350 Bleecker Street, in the City, County and State of New York ("the Building").
5. Admits the allegations of paragraph 8 of the complaint.
6. Denies the allegations of paragraph 9 of the complaint, except admits that the Sponsor filed an offering plan for converting the Building to cooperative ownership on December 31, 1984 and that the offering plan, as amended, ("the Plan") was declared effective on or about April 5, 1985.
7. Denies the allegations of paragraph 10 of the complaint, except admits that, on July 31, 1985, the Sponsor conveyed fee title to the Building to plaintiff 350 Bleecker Street Apartment Corporation ("the Co-op") and on that date the conversion became effective under applicable New York law.
8. Denies the allegations of paragraph 11 of the complaint, except admits that, upon the date of the conversion, the Building had 138 separate residential dwellings, one of which was reserved for use by the Building's superintendent and was therefore not included in the Plan, and that the Sponsor held proprietary leases and related share certificates for the remaining 137 residential dwelling units in the Building, 28 of which were simultaneously sold to third-parties in arm's length sales.
9. Denies the allegations of paragraph 12 of the complaint, except admits that, upon the conversion and in accordance with the Plan, the Co-op and the Sponsor executed and delivered a so-called Master Lease dated July 31, 1985 ("the Master Lease"), pursuant to which the Co-op, as landlord, leased to the Sponsor, as lessee, two ground-floor commercial stores and the parking garage ("the Garage") in the Building.
10. Denies the allegations of paragraph 13 of the complaint, except respectfully refers to the original or true copy of the Master Lease for its terms and conditions.
11. Denies the allegations of paragraph 14 of the complaint, except admits that, *om time to time, but not at all times, since July 31, 1985, the Sponsor has subleased the Garage to a garage operator pursuant to the terms of a written sublease.
12. Denies the allegations of paragraph 15 of the complaint, except admits that various persons since July 31, 1985 have purchased either from the Sponsor or previous owners the proprietary leases and related share certificates for residential dwelling units in the Building that may have been contiguous and, in some cases with the approval of the Co-op's Board of Directors ("the Board"), have made alterations that allowed for access from one such dwelling unit to the contiguous dwelling unit, if any.
13. Denies the allegations of paragraphs 16 through 18 of the complaint.
14. Denies the allegations of paragraphs 19 and 20 of the complaint, except admits that Newman has been the liquidating partner of the Sponsor since on or about April 1984 and continues to serve in that capacity, in which he exercises managerial authority.
15. Denies the allegations of paragraphs 21 and 23 of the complaint, except admits that Newman has been at all relevant times and still is the sole shareholder, officer and director of defendant Kenneth B. Newman Realty Corp. ("Newman Realty").
16. Denies the allegations of paragraph 22 of the complaint, except admits that Newman has been duly licensed to practice law at all times since at least July 31, 1985.
17. Denies the allegations of paragraph 24 of the complaint, except admits that Newman's law firm and Newman Realty have at all relevant times had offices at 488 Madison Avenue in the City, County and State of New York.
18. Denies the allegations of paragraph 25 of the complaint, except admits that Newman was a member of the Board and was President of the Co-op from July 31, 1985 through sometime in November 1999.
19. Denies the allegations of paragraph 26 of the complaint, except admits that the Board has consisted of seven members for most of the period between July 31, 1985 and November 1999.
20. Denies the allegations of paragraphs 27 and 28 of the complaint, except admits that, on January 13, 1998, Mark Lilien ("Lilien"), then a member of the Board, moved for a formal resolution that the Board engage an attorney or law firm to discuss unspecified questions about unspecified conflicts of interests; at that meeting, the Board agreed to meet on January 20, 1998 to discuss the matter further; the Board met on January 20, 1998 for the purpose of discussing whether or not to retain outside counsel to advise the Board on unspecified questions of unspecified potential conflicts of interest and general board member responsibilities toward the Co-op's shareholders; upon a motion for a formal resolution by Lilien to retain counsel for such purpose, the Board voted 4-to-2, with Lilien dissenting, for a determination that outside counsel should be retained only when a specific issue of conflict of interests arose and that, since the proponents of the resolution had failed to identify any such issue, there was no need retain such counsel at that time; James Kafadar ("Kafadar"), then the seventh member of the Board, did not attend the meeting of the Board held on January 20, 1998 and did not vote on the resolution, despite the fact that Kafadar attended the Board meeting held on January 13, 1998, knew that Lilien would offer such a resolution, and could have voted by proxy or through telephone participation in the meeting; and three of the four directors voting against Lilien's resolution and in favor of the determination that prevailed at the January 20, 1998 meeting were shareholders who were independent of the Sponsor, Newman and Newman Realty.
21. Denies knowledge or information sufficient to form a belief as to the truth of the allegations of paragraph 29 of the complaint, except admits that Lilien and Kafadar informed Newman, sometime in June 1999, that Lilien and Kafadar had consulted with counsel about the Condominium and Cooperative Conversion Protection and Abuse Relief Act, 15 U.S.C. § §3601 -3616 ("the Act") in 1998 and had been aware of the existence of the Act and the rights of the holders of proprietary leases and related shares under the Act to terminate the portion of the Master Lease covering the Garage ("the Garage Portion") for more than a year prior to that time.
22. Denies the allegations of paragraph 30 of the complaint and specifically avers that Newman had no knowledge of the existence of the Act until he received a copy of Lilien's notice dated June 1, 1999 calling a meeting of the Co-op's shareholders to vote upon a resolution to terminate the Garage Portion on June 24, 1999.
23. Denies the allegations of paragraphs 31 and 32 of the complaint.
24. Denies the allegations of paragraphs 33,34 and 35 of the complaint, except respectfully refers to the text of the Act and case law thereunder to obtain an understanding of the basis upon which the Act operates to invalidate leases covered by the Act.
25. Denies the allegations of paragraphs 36,37 and 38 of the complaint.
26. Denies the allegations of paragraph 39 of the complaint, except admits that, by his notice dated June 1, 1999, Lilien noticed a meeting of the Co-op's shareholders for June 24, 1999 for the purpose of voting upon a resolution to terminate the Garage Portion under the Act; that the resolution was not passed by the holders of proprietary leases and related share certificates eligible to vote under the Act ("eligible units") when the shareholders meeting was held on June 24, 1999; and that the proponents of the resolution claimed that the resolution had failed to pass by three votes of the 71 votes required to pass the resolution.
27. Denies the allegations of paragraph 40 of the complaint, except admits that, at shareholders meeting held on June 27,2000, the Board (of which Newman was not then a member) claimed that holders of more than two-thirds of the eligible units approved a resolution purportedly terminating the Garage Portion pursuant to the Act and that, on July 19, 2000, the Board purported to send a notice ("Termination Notice") to the Sponsor terminating the Garage Portion effective October 18, 2000.
28. Denies the allegations of paragraph 41 of the complaint, except admits that, on October 13, 2000, the Sponsor commenced an action in the United States District Court for the Southern District of New York ("the Federal Action") seeking a declaratory judgment that the Termination Notice was ineffective under the Act and that the Garage Portion continued in full force and effect, an injunction against interference with the Sponsor's and its subtenant's possession and use of the Garage, damages and statutory attorneys' fees and other costs and that, in its complaint in the Federal Action, the Sponsor asserted that it was entitled to relief on several grounds, including the fact that the Garage Portion was not contract or lease covered by the Act, the effective date of the Termination Notice was untimely, and that the shareholders' vote taken at the June 24, 2000 meeting violated New York law, the Co-op's By-Laws and the Act.
29. Denies the allegations of paragraph 42 of the complaint, except admits that, on or about October 3, 200], the Hon. Gerard E. Lynch, presiding in the Federal Action, issued a written decision and order granting the Sponsor's motion for summary judgment and denying the Co-op's cross-motion for summary judgment ("District Court Decision").
30. Denies the allegations of paragraph 43 of the complaint, except admits that, in granting summary judgment for the Sponsor, the District Court Decision relied upon the narrowest ground offered by the Sponsor, namely, that the number of units in the conversion project under the Act was the original 137 units in the Plan, despite the alterations undertaken from time to time by owners of contiguous dwelling units, and that the Sponsor ceased to own more than 25% of such units on October 16, 1997, when its ownership was reduced to 32 units, and that the Termination Notice was ineffective because its effective date of October 18, 2000 occurred almost one year later than the required effective date of October 16, 1999 under the Act and did not rule on the Sponsor's other contentions that the alterations of contiguous dwelling units were legally irrelevant under the Act, that the Garage Portion was not a contract or lease covered by the Act, and that the shareholders' vote held on June 27, 2000 was ineffective under New York law, the Co-op's By-Laws and the Act and further avers that the answering defendant believes that the United States Court of Appeals for the Second Circuit, to which the Co-op appealed the District Court Decision, will go further and rule that the alterations of contiguous dwelling units were legally irrelevant in determining when a notice of termination could be timely sent under the Act.
31. Denies the allegations of paragraphs 44 through 48 of the complaint.
32. Incorporates by reference his responses to the allegations contained in paragraph 49 of the complaint, to the extent such allegations are deemed applicable to him.
33. Denies the allegations of paragraphs 50 through 58 to the extent deemed applicable to him.
34. Incorporates by reference his responses to the allegations contained in paragraph 59 of the complaint, to the extent such allegations are deemed applicable to him.
35. Denies the allegations of paragraph 60 of the complaint to the extent deemed applicable to him.
36. Incorporates by reference his responses to the allegations contained in paragraph 61 of the complaint, to the extent such allegations are deemed applicable to him.
37. Denies the allegations of paragraphs 62 through 73 ofthe complaint to the extent deemed applicable to him.
38. Incorporates by reference his responses to the allegations contained in paragraph 74 of the complaint, to the extent that such allegations are deemed applicable to him.
39. Denies the allegations of paragraphs 75 through 88 to the extent deemed applicable to him.
40. Incorporates by reference his responses to the allegations contained in paragraph 89 of the complaint, to the extent such allegations are deemed applicable to him.
41. Denies the allegations of paragraph 90 of the complaint to the extent deemed applicable to him.
42. Incorporates by reference his responses to the allegations contained in paragraph 91 of the complaint, to the extent such allegations are deemed applicable to him.
43. Denies the allegations of paragraph 92 of the complaint to the extent deemed applicable to him.
44. Incorporates by reference his responses to the allegations contained in paragraph 93 of the complaint, to the extent such allegations are deemed applicable to him.
45. Denies the allegations of paragraphs 94 through 98 of the complaint to extent deemed applicable to him.
46. Incorporates by reference his responses to the allegations contained in paragraph 99 of the complaint, to the extent such allegations are deemed applicable to him.
47. Denies the allegations of paragraphs 100 through 103 of the complaint to the extent deemed applicable to him.
48. Incorporates reference his responses to the allegations contained in paragraph 104 of the complaint, to the extent such allegations are deemed applicable to him.
49. Denies the allegations of paragraphs 105 through 114 of the complaint to the extent deemed applicable to him.
50. Incorporates by reference his responses to the allegations contained in paragraph 115 of the complaint, to the extent such allegations are deemed applicable to him.
51. Denies the allegations of paragraph 116 of the complaint to the extent deemed applicable to him.
52. Incorporates by reference his responses to the allegations contained in paragraph 117 of the complaint.
53. Denies the allegations of paragraphs 118 through 135 of the complaint.
54. Incorporates by reference his responses to the allegations contained in paragraph 136 of the complaint.
55. Denies the allegations of paragraph 137 ofthe complaint.
56. Incorporates by reference his responses to the allegations contained in paragraph 138 of the complaint.
57. Denies the allegations of paragraphs 139 through 149 ofthe complaint.
FIRST AFFIRMATIVE DEFENSE
58. The complaint and each of its enumerated claims fails to state a cause of action under New York law.
SECOND AFFIRMATIVE DEFENSE
59. Each of the enumerated claims is barred by the applicable statute of limitations, including but not limited to CPLR §§213(1), 214(2) and 214(6).
THIRD AFFIRMATIVE DEFENSE
60. The complaint and each of its enumerated claims is barred by the compulsory counterclaim rule of Rule 1 3(a) of the Federal Rules of Civil Procedure in that the claims asserted in this action relate to the same subject matter and transactions as the claims and counterclaims in the Federal Action, the claims in the Federal Action have been resolved adversely to the Co-op in the Federal Action, and the claims asserted in this action could have been asserted by the Co-op in the Federal Action.
FOURTH AFFIRMATIVE DEFENSE
61. The complaint and each of its enumerated claims is barred by federal and New York doctrines of res judicata and/or collateral estoppel.
FIFTH AFFIRMATIVE DEFENSE
62. The Garage Portion is not a contract or lease covered by the Act. (This affirmative defense is asserted only to the extent required and without waiving the contention that the answering defendant may assert this defense in absence of its assertion by way of an affirmative defense.)
SIXTH AFFIRMATIVE DEFENSE
63. The vote taken at the shareholders' meeting held on June 27, 2000 on the resolution to terminate the Garage Portion under the Act violated New York Business Corporation Law, §605(a) and the Co-op's By-Law, §1(2) in that neither the Sponsor nor the shareholders Lomanto nor Iwanczuk were given notice of the meeting. (This affirmative defense is asserted only to the extent required and without waiving the contention that the answering defendant may assert this defense in absence of its assertion by way of an affirmative defense.)
SEVENTH AFFIRMATIVE DEFENSE
64. The holders of proprietary leases and related shares of the Co-op who organized the vote to terminate the Garage Portion under the Act knew of the existence and requirements of the Act for over a year before they first called a shareholders meeting to take action under the Act. (This affirmative defense is asserted only to the extent required and without waiving the contention that the answering defendant may assert this defense in absence of its assertion by way of an affirmative defense.)
EIGHTH AFFIRMATIVE DEFENSE
65. The complaint and each of its enumerated claims is barred by waiver, laches and/or estoppel.
COUNTERCLAIMS
66. Defendant and counterclaim plaintiff Kenneth B. Newman ("Newman") was a director and of ficer of plaintiff and counterclaim defendant 350 Bleecker Street Apartment Corporation ("the Co-op") from July 1, 1985 until some time in November 1999.
67. During Newman's tenure as an of ficer and director of the Co-op, the Co-op's By-Law, Article IV was in effect, providing as follows:
ARTICLE IV
Indemnification of Directors and Officers
Section 1. (a) In Actions by or in the Right of Corporation. Any person made a party to an action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he, his testator or intestate, is or was a director or of ficer of the corporation, shall be indemnified by this corporation against the reasonable expenses, including attorneys' fees, actually and necessarily incurred by him, in connection with the defense of such action, or in connection with an appeal therein, except in relation to matters as to which such director or officer is adjudged to have breached his duty to the corporation under Section 717 of the Business Corporation Law and except with respect to those amounts and expenses referred to in Paragraph (b) of Section 722 of the Business Corporation Law.
(b) In Other Actions or Proceedings. Any person made, a party to an action or proceeding other than one by or in the right of the corporation to procure a judgment in its favor, whether civil or criminal, brought to impose a liability or penalty on such person for an act alleged to have been committed by such person, his testator or intestate, as a director or officer of the corporation, or of any other corporation which he served as such at the request of the corporation, shall be indemnified by this corporation against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees, actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, if such director or officer acted in good faith, for a purpose which he reasonably believed to be in the best interest of the corporation and, in criminal actions or proceedings, in addition, had no reasonable cause to believe this conduct was unlawful.
The termination of any such civil or criminal action or proceeding by judgment, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not in itself create a presumption that any such director or officer did not act in good faith for a purpose which he reasonably believed to be in the best interests of the corporation or that he had reasonable cause to believe that his conduct was unlawful.
(c) Payment. A person who has been wholly successful, on the merits or otherwise, in the defense of a civil or criminal action or proceeding of the character described in Sections 722 or 723 of the Business Corporation Law shall be entitled to indemnification as authorized in said Sections.
Except as provided in Paragraph (a) of Section 724 of the Business Corporation Law, any indemnification under Section 722 or 723 of that Law, unless ordered by a court under Section 725 thereof, shall be made by the corporation only if authorized in the specific case in accordance with provisions of Paragraph (a) of said Section 724.
Expenses incurred in defending a civil or criminal action or proceeding may be paid by the corporation in advance of the final disposition of such action or proceeding if authorized under Paragraph (b) of said Section 724.
(d) Other Provision. Indemnification of directors or officers shall be subject to the other provisions affecting the same as set forth in Section 726 of the Business Corporation Law.
68. New York Business Corporation Law ("BCL"), §724 provides as follows:
(a) Notwithstanding the failure of a corporation to provide indemnification, and despite any contrary resolution of the board or of the shareholder in the specific case under section 723 (Payment of indemnification other than by court award), indemnification shall be awarded by a court to the extent authorized under section 722 (Authorization for indemnification of directors and of ficers), and paragraph (a) of section 723. Application therefor may be made, in every case, either:
( 1 ) In the civil action or proceeding in which the expenses were incurred or other amounts were paid, or
(2) To the supreme court in a separate proceeding, in which case the application shall set forth the disposition of any previous application made to any court for the same or similar relief and also reasonable cause for the failure to make application for such relief in the action or proceeding in which the expenses were incurred or other amounts were paid.
(b) The application shall be made in such manner and form as may be required by the applicable rules of court or, in the absence thereof, by direction of a court to which it is made. Such application shall be upon notice to the corporation. the court may also direct that notice be given at the expense of the corporation to the shareholders and such other persons as it may designate in such manner as it may require.
(c) Where indemnification is sought by judicial action, the court may allow a person such reasonable expenses, including attorneys' fees, during the pendency of the litigation as are necessary in connection with his defense therein, if the court shall find that the defendant has by his pleadings or during the course of the litigation raised genuine issues of fact or law.
69. The Co-op has sued Newman in this action for actions allegedly taken in his capacity as a former director and/or officer of the Co-op.
70. Accordingly, Newman is entitled to indemnification for any liability that he may have on those claims to Co-op under the By-Laws, Article IV, Section (a) and under BCL, §§723, 724, despite the fact that he denies that he has any such liability, and is also entitled to payment of his attorneys' fees and other defense costs as incurred in the defense of those claims pursuant to BCL, §724(c).
71. By letter dated July 12, 2002 from his counsel to counsel for the Co-op, Newman demanded that the Co-op recognize its obligation under BCL, §724(c) to pay his attorneys' fees and other defense costs incurred in the defense of those claims.
72. By letter dated July 17, 2002 from the Co-op's counsel to Newman's counsel, the Co-op refused to recognize such obligations to Newman.
73. Accordingly, Newman is entitled to full indemnification for his liability, if any, to the Co-op for such claims arising out of his alleged actions in his capacity as an of ficer or director of the Co-op and to the payment of attorneys' fees and other defense costs incurred in the defense of those claims.
Accordingly, answering defendant Kenneth B. Newman prays for judgment dismissing the complaint with prejudice and costs and granting him judgment on his counterclaims for indemnification and such other relief as may be just and proper.
Dated: New York, NY
September 26, 2002
PROSKAUER ROSE LLP
By: /s/ Dale A. Schreiber
Dale A. Schreiber
1585 Broadway
New York, NY 10036
(212) 969-3000
Attorneys for Defendant Kenneth B. Newman
TO:
MITCHELL R. SCHRAGE & ASSOCIATES, PLLC
126 East 56th Street
New York, NY 10022
(212) 758-9000
Attorneys for Plaintiff
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