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May 8, 2009

Snag in AY? Appeals court upholds decision that said Boymelgreen improperly assigned lease of footprint building to Ratner

Atlantic Yards Report

Big news out of New York State's Appellate Division today: the court has upheld — unanimously — a 2007 ruling in favor of Atlantic Yards footprint property owner Henry Weinstein.

In a unanimous decision that may crimp the state’s pursuit of eminent domain on the Atlantic Yards site, a state appeals court has upheld a judge’s March 2007 decision that Henry Weinstein’s tenant, developer Shaya Boymelgreen, improperly assigned leases to a Pacific Street building and adjacent parking lot to an affiliate of Forest City Ratner.

The Appellate Division: Second Judicial Department, in one case, known as 752 PACIFIC, LLC v PACIFIC CARLTON DEVELOPMENT CORP. and argued 11/17/08 stated:
The Supreme Court properly awarded the landlords summary judgment on their third and fourth counterclaims to the extent of declaring that the tenants’ assignment of their respective leases violated the leases and that the leases are terminated.... The terms of the subject leases are clear and unambiguous.

The court further bolstered Weinstein’s case, ruling that the Supreme Court erred in not giving Weinstein back possession of the properties at issue:
Having found that the tenants breached the leases, and the landlords thereafter terminated the leases, the Supreme Court should have granted the landlords such relief.
...

As I wrote in March 2007, the ruling can't stop the state from using eminent domain to take the properties, but it might make it more costly, as Weinstein has contended that Boymelgreen’s deal with Ratner would diminish the value of his property.

Forest City Ratner told the New York Times in 2007 that it did not believe the ruling would have an impact on the project. Because this property is in Phase 2, the eastern portion of the project site, it might be thought that condemnation could begin on the arena block while this case remains in litigation. However, the General Project Plan states (p. 2 of this PDF):
All of the properties within the Project Site would be acquired by ESDC... at the outset of Project implementation.

After all, Weinstein's property is needed for the interim surface parking for construction workers and the arena.
...

In a companion case, which also involved Forest City Ratner along with Boymelgreen, PACIFIC CARLTON DEVELOPMENT CORP v 752 PACIFIC, LLC, the appeals court ruled that it was appropriate for the lower court to grant the portion of the motion in which Forest City Ratner and affiliates argued they were not liable to a breach of contract, because they were not actual parties to the contract alleged to have been breached.

The court also ruled that it was appropriate for the lower court to grant the portion of the motion in which Boymelgreen himself was not personally responsible, because his personal guarantee of the leases had already expired.

Weinstein did win a partial victory, however. The appeals court stated:
However, the court erred in granting those branches of the motions which were to dismiss the second cause of action alleging tortious interference with the leases insofar as asserted against Boymelgreen and the Forest City defendants.

So Weinstein can pursue damages.

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NoLandGrab: We're anxiously awaiting the Forest City press release saying they're now 22-1 in court decisions. Of course, since they lost the original decision, too, they'd have to make it 21-2.

Posted by eric at May 8, 2009 10:37 AM