EXRP 14 Holdings LLC v. LS-14 Ave LLC

2024 NY Slip Op 33568(U)

• Court: New York Supreme Court, New York County
• Decided: October 7, 2024
• Docket: Index No. 652698/2022
• Status: Unpublished

Opinion

EXRP 14 Holdings LLC v LS-14 Ave LLC 2024 NY Slip Op 33568(U) October 7, 2024 Sup Ct, NY County Docket Number: Index No. 652698/2022 Judge: Melissa A. Crane Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. INDEX NO. 652698/2022 NYSCEF DOC. NO. 308 RECEIVED NYSCEF: 10/07/2024

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. MELISSA A. CRANE PART 60M Justice ---------------------------------X INDEX NO. 652698/2022 EXRP 14 HOLDINGS LLC 02/09/2024, Plaintiff, MOTION DATE 02/09/2024

- V - MOTION SEQ. NO. ------ 009 010

LS-14 AVE LLC, DECISION + ORDER ON Defendant. MOTION

--------------------X The following e-filed documents, listed by NYSCEF document number (Motion 009) 192, 193, 194, 195, 196,197,198,199,200,201,202,203,204,205,206,207,208,209,210,211,212,213,214,215,216, 217,218,219,220,221,222,223,224,225,226,227,228,229,230,231,232,233,234,235,236,237, 238,239,240,241,242,243,244,245,246,247,248,249,250,251,252,271,272,273,274,275,276, 277,278,279,280,281,282,299,300,306 were read on this motion to/for PARTIAL SUMMARY JUDGMENT

The following e-filed documents, listed by NYSCEF document number (Motion 010) 253, 254, 255, 256, 257,258,259,260,261,262,269,270,283,284,285 were read on this motion to/for SUMMARY JUDGMENT(AFTER JOINDER

The court consolidates motion sequence numbers 009 and 0 10 for disposition.

Plaintiff EXRP 14 Holdings LLC alleges that defendant LS-14 Ave LLC breached a

purchase and sale agreement (PSA) to construct and convey to plaintiff a completed retail unit.

Defendant moves for partial summary judgment dismissing plaintiffs claims for specific

performance, tortious interference with contract, and unfair competition (motion sequence

number 009). Plaintiff moves for summary judgment on its claim for breach of contract and

dismissing defendant's sole remaining counterclaim, breach of the implied covenant of good

faith and fair dealing (motion sequence number 0 10).

Plaintiff alleges that it entered into a 12-year lease worth more than $20 million with a

prospective tenant for the retail unit. Ultimately, the tenant did not rent the unit. Plaintiff alleges

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that defendant refused to complete renovations on the unit, causing the tenant to terminate the

lease. Plaintiff also claims that defendant sought to keep the unit for itself and rent it to the same

tenant.

The party moving for summary judgment must make a prima facie showing of

entitlement to judgment as a matter of law, through admissible evidence eliminating all material

issues of fact, thus showing that a trial is not required (CPLR 3212 [b]; Smalls v AJI Indus., Inc.,

10 NY3d 733, 735 [2008]). If the moving party satisfies this standard, the opposing party

successfully opposes the motion by producing evidence showing that there are material issues of

fact that can only be resolved at trial (Morales v D & A Food Serv., 10 NY3d 911, 913 [2008];

Hyman v Queens County Bancorp, Inc., 3 NY3d 743, 744 [2004]). In considering the motion,

the court accepts the opponent's version of the facts as true and construes the evidence in the

light most favorable to that party (Cahill v Triborough Bridge & Tunnel Auth., 4 NY3d 35, 37

[2004]). If the moving party fails to make the prima facie showing, the court must deny

summary judgment despite any insufficiency in the opposition (Roman v Hudson Tel. Assoc., 15

AD3d 227,228 [1 st Dept 2005]).

The part of defendant's motion to dismiss plaintiffs specific performance claim and the

part of plaintiffs motion to dismiss defendant's claim for breach of the implied covenant of good

faith and fair dealing have already been resolved. Previously, this court granted defendant's

motion to dismiss plaintiffs claim for specific performance, cancelled plaintiffs notice of

pendency, and ordered defendant to return plaintiffs $2.8 million dollar deposit (EXRP 14

Holdings LLC v LS-14 Ave LLC, 2024 WL 3654028 [Sup Ct, NY County 2024]; NYSCEF 299,

interim order dated 3/12/24). The court ruled that attorneys' fees and statutory interest, if any,

would be determined in the future (id.), and later determined those amounts (see EDOC 305).

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In addition, on June 18, 2024, the First Department dismissed defendant's counterclaims

for breach of contract and breach of the covenant of good faith and fair dealing (EXRP 14

Holdings LLC v LS-14 Ave LLC, 228 AD3d 498, 498, 499-500 [1 st Dept 2024]).

Defendant's Motion for Summary Judgment

Turning first to the remainder of defendant's motion, a claim of tortious interference with

contract requires the existence of a valid contract between the plaintiff and a third party,

defendant's knowledge of that contract, defendant's intentional procurement of the third party's

breach of contract without justification, actual breach and damages ( Vigoda v DCA Prods. Plus

Inc., 293 AD2d 265, 266 [1 st Dept 2002]).

To support its tortious interference cause of action, plaintiff claims that: ( 1) defendant

knew that plaintiff had a tenant and a lease for the unit once it was completed, (2) that defendant

purposefully delayed the work on the unit so that the lease could not commence, and (3)

defendant tried to cut plaintiff out of the lease deal and negotiate its own lease with the tenant.

The record supports plaintiffs tortious interference claim. On December 19, 2022, the

tenant wrote plaintiff that as the "Commencement Date" of the lease had not occurred, tenant

was electing to terminate the lease per the termination provision (NYSCEF 204). Defendant

argues that the tenant's termination of the lease was not a breach, as a party has an absolute right

to terminate a contract pursuant to an unconditional termination clause (Scheer v Elam Sand &

Gravel Corp., 177 AD3d 1290, 1291 [4 th Dept2019]; Big Apple CarvCityofNew York, 204

AD2d 109, 111 [151 Dept 1994]).

However, Plaintiff correctly points out that a breach by a third party is not necessary.

Causing plaintiff to breach its own contract by preventing its performance constitutes tortious

interference with a contract (Jtalverde Trading, Inc. v Four Bills of Lading, 485 F Supp 2d 187,

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203 [ED NY 2007] [relying on Restatement [Second] of Torts§ 766A Intentional Interference

with Another's Performance of His Own Contract]; S & S Hotel Ventures Ltd. Partnership v 777

SH Corp., l 08 AD2d 351, 354 [1 st Dept 1985] [tortious interference claim stated although party

to contract with plaintiff did not breach contract, but plaintiff did]; Morris v Blume, 55 NYS2d

196, 199 [Sup Ct, NY County], affd 269 AD 832 [1 st Dept 1945]). Here, the record supports that

defendant, by unreasonably and purposely delaying renovations, caused PLAINTIFF to breach

its contract with tenant. The record supports that defendant prevented plaintiff from delivering

the premises on time per its contract with tenant.

Defendant also argues its employees had no knowledge about the lease between plaintiff

and the prospective tenant. However, defendant's representative testified that he had "learned

that EXRP had found a tenant for the space that they were set to acquire" and that plaintiff had

entered into a lease. The representative even knew the identity of the prospective tenant, a bank

(NYSCEF 195, Lowry transcript at 320-322). Emails exchanged in May and June 2022 show

that the tenant and defendant discussed modifications to the space (NYSCEF 273).

In a letter dated July 6, 2022, defendant wrote plaintiff, "[P]lease promptly provide

Purchaser's contact at Prospective Tenant so that Seller may discuss with the Prospective Tenant

possible consummation of a lease therewith" (NYSCEF 40). This could be taken as evidence

that defendant was attempting to rent the unit to the tenant and cut plaintiff out of the picture.

Defendant claims that even if it had knowledge that a lease existed, it did not know the

contents and details of the lease. However, tortious interference only requires actual knowledge

that the specific contract exists. It does not require awareness of the details of the contract

(Medtech Prods. Inc. v Ranir, LLC, 596 F Supp 2d 778, 796 [SD NY 2008]; see Ahluwalia v St.

George's Univ., LLC, 63 F Supp 3d 251,266 [ED NY 2014), ajfd 626 Fed Appx 297 [2d Cir

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2015]). Thus, the evidence indicates that defendant had actual knowledge that plaintiff and the

prospective tenant had entered into a lease for the unit. Accordingly, defendant has failed to

carry its burden to eliminate all issues of fact that it did not tortiously interfere with the lease.

Regarding the unfair competition claim, plaintiff alleges that, under the PSA, the parties

had a confidential relationship, and that defendant used plaintiffs confidential information to

compete with plaintiff by trying to negotiate its own lease with the tenant. The gravamen of a

claim of unfair competition is the bad faith misappropriation of a commercial advantage

belonging to another by the exploitation of proprietary information or trade secrets, or its skill,

labor, and expenditures (Krinos Foods, Inc. v Vintage Food Corp., 30 AD3d 332, 334 [1 st Dept

2006]; Comprehensive Community Dev. Corp. v Lehach, 223 AD2d 399 [1 st Dept 1996]; Men

Women NY Model Mgt., Inc. v Ford Models, Inc., 32 Misc 3d 1236[A], 2011 NY Slip Op

51595[0], *2 [Sup Ct, NY County 2011]).

Defendant argues that plaintiff has adduced no evidence that defendant usurped or

misappropriated the lease or plaintiffs relationship with the tenant and that no facts exist to

support an argument that LS-14 used any confidential information. Defendant is correct as to the

confidential information. Plaintiff has no proof that defendant used plaintiffs CONFIDENTIAL

information to compete with it. This court's adverse inference imposed for failure to produce

"the handwritten notes, construction progress logs, status checklists and confirmation of

completion documents," that are garden variety construction documents, does not provide

missing proof for unfair competition. Without the use of confidential information (for which

plaintiff has no proof), plaintiffs cause of action for unfair competition is no different than its

cause of action for tortious interference with contract. Accordingly, the court dismisses

plaintiffs claim for unfair competition because it lacks proof and is duplicative.

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2. Plaintiff's Motion for Summary Judgment

Plaintiff seeks summary judgment on its claim that defendant breached the PSA. Under

the PSA, plaintiff was not obligated to close until after the retail unit was completed in

accordance with the plans and specifications and after defendant received a TCO and an

architect's certificate of completion (NYSCEF 258, § 9.4). The PSA originally set a closing date

of March 12, 2022, and expressly provided in all-capital letters that "TIME SHALL BE OF THE

ESSENCE" with respect to LS-14's obligation to deliver the unit and close on the sale (id,§

4.1 ). The parties agreed in writing to extend the closing date five times. The final, time-of-the-

essence closing date was May 27, 2022.

The PSA did not close by the fifth amended closing date. On June 28, 2022, defendant

sent plaintiff a notice that the former "has satisfied all conditions to Closing and hereby notifies

Purchaser that the Closing shall occur on July 6, 2022" (NYSCEF 35, 255, complaint, ex A). Ori

June 30, 2022, plaintiff wrote, rejecting defendant's notice for the reason that the closing date of

May 27, 2022 had passed and defendant had not completed the unit (id., ex B). On July 1,

defendant wrote back that it had completed the unit pursuant to the PSA and that the closing date

was now July 6 (id, ex C). More letters passed and this action ensued.

"[W]here a seller seeks to hold a purchaser in breach of contract, the seller must establish

that it was ready, willing, and able to perform on the time-of-the-essence closing date and that

the purchaser failed to demonstrate a lawful excuse for its failure to close" (Donerail Corp. N. V.

v 405 Park LLC, 100 AD3d 131, 138 [l5t Dept 2012]). A material breach of a contract by one

party excuses the nonbreaching party's performance and prevents the breaching party from

bringing a claim under the contract (EXRP, 228 AD3d at 499; Ward Capital Mgt. LLC v New

Pelham Parkway N. LLC, 165 AD3d 477,478 [1 st Dept 2018]).

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Plaintiff demonstrates entitlement to summary judgment on its breach of contract claim.

As the Appellate Division, First Department stated in the opinion dismissing defendant's

counterclaim for breach of contract, "it is undisputed that defendant did not outfit the storefront

as required under the purchase and sale agreement (PSA) by the time-of-the-essence closing date

on May 27, 2022" (EXRP, 228 AD3d at 498). "Defendant's failure to be prepared to close by

that outside date constituted a material breach excusing performance by plaintiff' (id. at 499).

In opposition, defendant argues the following. Prior to the closing date of May 27, 2022,

the parties attempted to negotiate a sixth amendment to the PSA. The sixth amendment was

intended to extend the closing date and to memorialize the agreements which the parties had

reached concerning the renovations requested by the tenant. While these negotiations were

ongoing, unbeknownst to LS-14, EXRP entered into a lease with the tenant on June 3, 2022. On

June 10, 2022, plaintiff informed defendant that plaintiff had sent the sixth amendment to the

authorized signatory on its side for final execution. Days later, however, plaintiff abruptly

changed course and refused to execute the sixth amendment or reimburse LS-14 for the expenses

it incurred accommodating the changes EXRP expressly requested for its tenant. Defendant

notified plaintiff of another closing date. Plaintiff refused to close. Defendant alleges that

plaintiff had no intention of ever closing absent a significant reduction in the purchase price.

Assuming that all this is true, it does not present an issue of fact to counter plaintiffs

showing of entitlement to summary judgment. Plaintiff was not under an obligation to

accommodate defendant's failure to finish construction by the closing dates in the PSA or in the

five amendments. Thus, plaintiff is entitled to summary judgment on its breach of contract claim.

Plaintiff seeks to be awarded contract damages and attorneys' fees. Plaintiff submits an

expert's damages report in support of its motion (NYSCEF 261). Previously, per the court's

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order, the parties stipulated to exchange opening and rebuttal expert reports (NYSCEF 152).

Plaintiff served its independent expert's damages report on September 1, 2023, as agreed

(NYSCEF 261). Defendant did not submit a report in rebuttal and did not take the deposition of

plaintiff's expert. Accordingly, plaintiff argues, the court should grant it summary judgment on

its umebutted damages calculation.

Plaintiff's expert identifies $11 million in damages. This sum includes plaintiffs $2.8

million deposit that the court ordered defendant to repay. Section 10 of the PSA governs the

damages available to plaintiff. If Seller (defendant) defaults in the performance of its obligations

and the closing does not occur as a result, "Purchaser (plaintiff) shall be entitled to either" (a),

(b), or (c) (NYSCEF 79, 110.4 at pg. 19).

Section (a) enables Purchaser to terminate the PSA and be reimbursed the downpayment,

"upon which Seller shall be released from any further liability to Purchaser hereunder for any

other damages of any kind whatsoever, except for the provisions hereof intended to survive the

termination of this Agreement" (NYSCEF 79, 110.4 (a]).

Section (a) continues "provided, however, in the event of Seller Willful Default (as

defined below), then, in addition to the downpayment, Seller shall reimburse Purchaser for all of

Purchaser's third party out-of-pocket costs and expenses, including attorneys' fees, in an amount

not to exceed $250,000.00 in the aggregate in addition to any damages which Purchaser may be

entitled to under" section (c) (NYSCEF 79, 110.4 (a]).

Section (b) is not relevant to this discussion.

Section (c) entitles Purchaser to seek specific performance of Seller' obligations and to

commence an action to recover a fair and reasonable amount as damages for a default by Seller

"in an amount not to exceed 200% of the Downpayment (unless such default is a Seller Willful

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Default and in such case, there is no limit on recoverable damages so long as such damages are

fair and reasonable" and exclude consequential damages (NYSCEF 79, ,r 10.4 [c]).

The PSA also states:

"Seller and Purchaser further agree that this Section 10.2 is intended to and does limit the amount of damages due Purchaser and the remedies available to Purchaser, and shall be Purchaser's exclusive remedy against Seller, both at law and in equity arising from or related to a breach by Seller of its covenants or its obligation to consummate the transactions contemplated by this Agreement"

(NYSCEF 79, ,r 10.4 at 19).

The reference to Section 10.2 must mean Section 10.4, as "this" section is 10.4 and 10.2 does not

exist.

Section (a) contains a reference to section (c). Section (a) means that, if Seller engages in

a Seller Willful Default and Purchaser opts for relief under section (a), Purchaser shall recover

damages under section (a) and damages under section (c). This is what the PSA provides, even

if the Purchaser does not opt for specific performance under section (c) and opts for section (a)

instead.

Plaintiff's specific performance claim was dismissed. The court's order has resulted in

plaintiff seeking relief under section (a).

Under section (a), plaintiff is entitled to recover the downpayment. The court already ( ordered that defendant should pay plaintiff that sum with interest. Under section (c), plaintiff

may recover an amount not exceeding 200% of the downpayment. The $1 7 million sought by

plaintiff exceeds 200% of the downpayment.

To recover the other damages provided for in section (a), that includes attorneys' fees and

damages in section (c), which may exceed 200% of the downpayment, plaintiff must show that

defendant committed a Seller Willful Default. This is defined as a "willful refusal" to close in

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accordance with the terms of the PSA, provided that the refusal is not due to conditions beyond

the Seller's control or unmarketability of title; and Purchaser has satisfied all conditions under

the Agreement, is not otherwise in default, and is ready, willing and able to perform all of its

obligations under this Agreement (NYSCEF 79, Section 10.4). That plaintiff was excused from

performance under the PSA, the First Department has already determined (EXRP, 228 AD3d at

499).

Whether defendant engaged in a willful refusal is an issue of fact. Plaintiff brings up the

issue for the first time in its reply memorandum of law. The court will not consider arguments

raised only in a reply to a summary judgment motion.

Plaintiff also seeks to recover attorneys' fees under section 2 7.15 of the PSA. This

section provides that if either party brings any action against the other in connection with the

agreement or related transactions, the prevailing party is entitled to recover from the other party

reasonable attorneys' fees and expenses incurred in connection with the prosecution or defense

of such action (NYSCEF 79,127.15).

Section 10.4 (a) provides that, if the Seller's default constitutes a Seller Willful Default,

the defendant must reimburse plaintiff for attorneys' fees. This action is based on defendant's

default. Therefore, section 10 (a) governs attorneys' fees in this case. Presumably, section 27.15

would apply where the action was based on something else besides a default.

Moreover, when a contract includes a general provision and a specific provision

governing the same subject, the specific provision controls (Aramony v United Way ofAm., 254

F3d 403,413 [2d Cir 2001]). This guiding principle of contractual interpretation applies where

there is an inconsistency between the general and the specific, or "even where there is no 'true

conflict"' between each provision (id. at 413-414 [internal citation omitted]; McGraw-Hill Educ.,

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Inc. v Illinois Natl. Ins. Co., 178 AD3d 532, 532 [1 st Dept 2019]). Thus, until there is a

determination as to whether defendant's default is a Seller Willful Default under the PSA, it is

not possible to determine the amount of plaintiffs damages.

The court has considered the parties' remaining contentions and finds them unavailing.

Accordingly, it is

ORDERED that defendant's motion for partial summary judgment [MS 09] is granted in

part and denied in part; and it is further

ORDERD that the court denies as moot defendant's motion as to plaintiff's claim for

specific performance because the court already dismissed this claim in a prior order; and it is

further

ORDERED that the court denies that part of defendant's motion seeking dismissal of

plaintiff's claims for tortious interference; and it is further

ORDERED that the court grants that part of defendant's motion seeking dismissal of

plaintiff's claim for unfair competition; and it is further

ORDERED that plaintiffs motion for summary judgment [MS 10] is granted in part and

denied in part; and it is further

ORDERED that the court grants that part of plaintiffs motion on its breach of contract

claim; and it is further

ORDERED that the court denies summary judgment on plaintiffs claim for damages and

attorneys' fees because the amount of damages depends on whether or not defendant engaged in

a willful default; and it is further

ORDERED that the part of plaintiffs motion to dismiss defendant's third counterclaim

for breach of the implied covenant of good faith and fair dealing is denied as moot, as that

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counterclaim was already dismissed by order of the Appellate Division, First Department; and it

is further

ORDERED that the parties shall appear for a pre-trial conference on October 31, 2024 at

Noon over Microsoft teams.

10/7/2024 DATE MELISSA A. CRANE, J.S.C.

~ CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

GRANTED □ DENIED GRANTED IN PART □ OTHER . APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

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