FILED: NEW YORK COUNTY CLERK 10/22/2013 INDEX NO /2013 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 10/22/2013

Transcription

1 FILED: NEW YORK COUNTY CLERK 10/22/2013 INDEX NO /2013 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 10/22/2013

2

3

4 PARTIES 1. Plaintiff GCR Entertainment, LLC is a New York Limited Liability Company, with an office and address in Nassau County, at c/o Glen Bernardi, 8 Lounsbury Drive, Baldwin Place, New York, Plaintiff Glen Bernardi is an individual, and a citizen of the United States, and resides in the State of New York, County of Westchester. 3. Plaintiff Rudy Guerrino is an individual, and a citizen of the United States, and resides in the State of New York, County of Westchester. 4. Defendant CDR ACQ, LLC is a New York Limited Liability Company, with an office and address in New York County, at c/o Frank W. Palillo, Esq., 299 Broadway, Suite 1820, New York, New York, Defendant Chris Reda is an individual, and a citizen of the United States, and resides in the State of New York, County of New York. 6. Defendant LF Gramercy Property Co., LLC is a New York Limited Liability Company, with an office and address in New York County, at c/o Jeffrey Frimet, th Ave., 32 nd Floor, New York, New York, Defendant Centaur Properties LLC is a New York Limited Liability Company, with an office and address in New York County, at 35 East 21 st Street, 3 rd Floor, New York, New York Defendant Henry Hay is an individual and a citizen of the United States, and resides in the State of New York, County of New York. 9. Defendant Harlan Berger is an individual and a citizen of the United States, and resides in the State of New York, County of New York. Plaintiffs Verified Complaint Page 2

5 10. Defendant Rattet Pasternak LLP is a limited liability partnership law firm, with an office and address in Westchester County, at 550 Mamaroneck Ave., Suite 510, Harrison, New York Defendant Jonathan S. Pasternak is an attorney and partner at the law firm Rattet Pasternak LLP and is licensed to practice in the State of New York. Pasternak s office and address is in Westchester County, at 550 Mamaroneck Ave., Suite 510, Harrison, New York JURISDICTION AND VENUE 12. The Court has jurisdiction over all parties since the parties are residents of New York State. 13. Venue is proper based on the parties residences. STATEMENT OF FACTS Plaintiffs Negotiations and Purchase of the Club from Reda 14. In or around August 2011, Bernardi began having discussions with Reda, the manager of a gentlemen s club, known as Ten s World Class Cabaret located at E. 21st Street, New York, NY (the Club ), with respect to the purchase of the Club from Reda. Bernardi then brought Guerrino and Charles Conzentino ( Conzentino ) into the discussions. 15. Throughout all of their negotiations, Reda represented to Bernardi, Guerrino and Conzentino that he had the legal authority and ability to transfer his ownership interests in the Club to them, through the transfer of a majority share of CDR, the entity created by Reda for the ownership and operation of the Club. Plaintiffs Verified Complaint Page 3

6 16. In reliance on this representation, on September 22, 2011, Bernardi and Conzentino entered into an agreement with Reda for the exclusive option to purchase an equity interest in the Club (the Option Agreement ). Pursuant to the Option Agreement, Bernardi and Conzentino were required to pay Reda $200, upon the execution of the Option Agreement. Bernardi and Conzentino timely made the payment to Reda. 17. On October 6, 2011, Bernardi, Guerrino and Conzentino formed GCR, a limited liability company, for the purpose of purchasing the Club from Reda. 18. During the month of October, 2011, Bernardi and Conzentino stayed in contact with Reda regarding the proposed sale and Conzentino paid an additional $100, towards the purchase, in order to assist Reda with the payment of back taxes. 19. Thereafter, in November 2011, the parties commenced formal contract negotiations for the purchase of the Club. On November 28, 2011, GCR entered into an agreement with Reda for the purchase of 75% of the Club (the Purchase Agreement ). In accordance with the terms of the agreement, GCR paid Reda an additional $300, upon execution of the Purchase Agreement. Plaintiffs had paid thus Reda a total of $600,000 toward the purchase of the Club. 20. In addition to the Purchase Agreement, on November 28, 2011, Plaintiffs entered into a management agreement with respect to the division of management responsibilities of the Club (the Management Agreement ). Pursuant to the Management Agreement, Reda would continue to be responsible for the day-to-day operations for the months of November and December, In that regard, the Management Agreement specifically required Reda to perform all on-site responsibilities and day-to-day affairs associated with the management, operation and maintenance of the [Club] including, without Plaintiffs Verified Complaint Page 4

7 limitation, the collection of income, the engagement of service providers and vendors for the [Club], the payment of expenses related to the [Club], and the accounting of the income and expense for the [Club] 21. Indeed, from the outset of negotiations in September 2011, until the transfer of operations and management in January 2012, Reda continued to be responsible for paying the Landlord in a timely manner and adhering to all provisions of the lease between the Landlord and CDR for the Club (the Lease ), signed on December 28, 2010 and running through November 30, Furthermore, Reda represented to Plaintiffs that he was in compliance with all of the Lease provisions. The Negotiations with the Landlord 22. Prior to the purchase of the Club from Reda, in or around September, 2011, Bernardi and Conzentino met with Reda and Berger, at a café. At this meeting, Reda introduced Plaintiffs to Berger as his new partners in the Club. 23. In that connection, several times between September and November 2011, Plaintiffs requested from Reda to meet again with the Landlord in order to ensure that the lease was intact and that no payments on the lease were past due. Reda repeatedly denied Plaintiffs request to meet with Berger because Reda claimed that Berger did not want to communicate or negotiate with anyone other than Reda. 24. Notwithstanding the above, Conzentino, representing GCR, met with Berger in October to inform him that GCR would be taking over an equity interest in the Club. 25. Conzentino also advised the Landlord that monies being paid to him by Reda for back rent owed by Reda were coming directly from Plaintiffs. Moreover, Reda reassured Plaintiffs repeatedly that he had told Berger that he was taking partners in the Club, that GCR Plaintiffs Verified Complaint Page 5

8 would be managing the Club once GCR became his equity partners, and that the Landlord consented to same. 26. Shortly before the closing of the purchase of the Club, Conzentino and Reda met at the offices of the Landlord with Berger, Hay, and Brett Ripka, an associate of Berger and Hay, to discuss the closing. During the meeting, the parties discussed the Lease and Berger and Hay promised that any issues related to the Lease would be straightened out within a few days. Berger and Hay promised to revise the provision in the Lease stating that the Landlord would have to be notified of any change in ownership because, as Berger and Hay were aware, CDR would be owned by GCR. The Precipitous Closure of the Club by the Landlord in January Thereafter, in or around January 2012, the Landlord, suddenly and without notice to Plaintiffs, closed the Club, padlocked the premises, and denied Plaintiffs entry to operate the Club. When Plaintiffs questioned Reda about the reason for the closure, Reda admitted, for the first time, that he had not made rent payments for the months of November and December, Thereafter, between January and March 2012, Reda promised repeatedly to resolve the situation and ensure that the Landlord would accept rent payment and discontinue the eviction. Reda, however, did not do this and the Club remained closed due to the eviction. Plaintiff s Offer to Cure Lease Arrears and the Landlord s Refusal to Accept Same 29. Plaintiffs, in or around March 2012, realizing that they could not rely on Reda to fulfill his management duties, made repeated efforts to pay the Landlord directly for the missed payments. On March 22, 2012, Plaintiffs offered to make any missed rent payments in Plaintiffs Verified Complaint Page 6

9 exchange for continuing the Lease. The Landlord refused this offer and Plaintiffs continue to remain out of possession of the Club. 30. In that connection, the reasons given by the Landlord for refusing to accept payment from Plaintiffs were: (1) Reda transferred more than 25% of his ownership interest in the Club without the Landlord s permission; and (2) Reda s late payments resulted in immediate default of the Lease. The Landlord stated further, for the first time, that he did not know that GCR was the new tenant and, therefore, refused to take the moneys owed on the Lease from GCR. 31. Furthermore, the Landlord disclosed, for the first time, that he and Reda had signed a modification of the original lease that stipulated that any non-payment of rent would result in immediate eviction (the Lease Modification ). The Landlord further disclosed, for the first time, that the Lease Modification required that the Landlord consent to any transfer in the equity interest in the Club. 1 The Landlord, therefore, claimed that because he was never informed of the transfer in equity interest from Reda to GCR, he would not accept payment from GCR for the Lease. 32. As detailed above, however, the Landlord s claim that he lacked knowledge of the transfer was patently false because of, among other things, the Landlord s meeting with Conzentino, his meeting with the Plaintiffs at the café, and the meeting at his office. Not 1 The original Lease signed by Reda and Landlord stated that Reda must give the Landlord notice of any transfer of ownership in the Club greater than 25%. No permission from the Landlord was required. Specifically, the Lease stated in Paragraph 77 that: At least sixty (60) days prior to any transfer of more than twenty-five percent (25%) ownership interest in the limited liability company which comprises the Tenant Tenant shall serve a notice to Owner and offer to Owner in such notice Tenant s termination of the Lease and surrender of possession to Owner on a date certain Tenant s transfer of more than twenty five percent (25%) ownership interest in the limited liability company which comprises the Tenant without prior provision of notice to Owner as required by this paragraph shall constitute and uncurable breach of this Lease Plaintiffs Verified Complaint Page 7

10 only was the landlord aware of the transfer, he was also aware that the monies paid to him by Reda came from GCR and he accepted those monies to make up back rent payments owed by Reda and as relayed to him explicitly by Conzentino. 33. Plaintiffs, on their part, were entirely unaware of the Lease Modification since Reda had always represented to them that he had complete authority to transfer his ownership interest in the Club and that he had made timely payments on the Lease. Reda had made no mention of the Lease Modification during the negotiations or at any time thereafter. 34. Moreover, during the several meetings between the Landlord and Plaintiffs, the Landlord had never mentioned the Lease Modification or expressed any objections to Plaintiffs ownership in the Club. Similarly, the Landlord never advised Plaintiffs about the default rent provisions in the Lease Modification. The Lease and Lease Modification Agreements Between Reda and the Landlord 35. As described above, the Landlord purportedly refused to accept payment from Plaintiffs because he claimed that (1) Reda transferred more than 25% of his ownership interest in the Club without the Landlord s permission; and (2) Reda s late payments resulted in immediate default of the Lease. As further stated above, Plaintiffs had no knowledge of the Lease Modification let alone any provisions stating that the Landlord must approve any transfer of ownership or that late payments would automatically result in a default in the Lease, because neither Reda nor the Landlord informed Plaintiffs of the Lease Modification. 36. After further inquiry, Plaintiffs were finally made aware of the existence of the Lease Modification and the circumstances which gave rise to it. Earlier in 2011, prior to the negotiations between Reda and Plaintiffs, Reda had defaulted on several lease payments Plaintiffs Verified Complaint Page 8

11 to the Landlord. As a result, the Landlord briefly closed the Club for non-payment of the Lease until Reda was able to come up with the defaulted amount and pay the Landlord. 37. Thereafter, and purportedly, as a result of these defaults, on October 27, 2011, the Landlord and Reda entered into the Lease Modification mentioned above which contained a new draconian provision in the event of a default on the rent. In that regard, the Lease Modification states in pertinent part as follows: In the event Tenant fails to make any payment of rent, additional rent or other charge required by the Lease, as amended hereby, Owner shall provide Tenant with a 3 day demand for payment of rent. If all outstanding rent is not paid within such 3 day period such failure to make the requirement payment shall be deemed an Event of Default. If an Event of Default occurs, Escrow Agent shall, without further notice, release the Transfer Documents to Owner. If the Transfer Documents are released to Owner after an Event of Default, at Owner s discretion, Owner may, at that time or anytime thereafter, accept one or more, or all, of the Transfer Documents and use them as it deems appropriate in its sole discretion, including but not limited to giving or assigning one or more, or all, of the Transfer Documents to a Third Party. (Paragraph 7). 38. In other words, any prospective default would effectively permit the Landlord to take immediate possession of the Club and assign the Lease, among other documents, to another party. Despite several rounds of meetings and negotiations with Plaintiffs, neither Reda nor the Landlord informed Plaintiffs about the draconian default payment clause in the Lease Modification. 39. Moreover, and more outrageously, in or around October, 2011, the same time period that the Landlord entered into the Lease Modification Agreement, the Landlord accepted moneys for missed lease payments with the full knowledge that the money came directly from Plaintiffs. Specifically, Reda used the $300, he received from GCR for the Plaintiffs Verified Complaint Page 9

12 Exclusivity Agreement and the $300, he received for the purchase of the Club to pay back rent for the payments he had missed in the past year. The Landlord, on his part, accepted these payments with full knowledge that they came from Plaintiffs. 40. Thereafter, Reda failed to make payments on the Lease for November and December As a result, Reda defaulted on the Lease and triggered the default provision in the Lease Modification allowing the Landlord to evict Plaintiffs from the Club. 41. In truth the whole Lease Modification Provision was nothing more than a fraudulent scheme and artifice concocted between the Landlord and Reda, whereby after swindling GCR out of their money, they could then deny GCR the benefit of its bargain through Reda s manufactured default. 42. The proof was in the pudding as notwithstanding the substantial investment made in the Club by GCR, whose money was taken with full knowledge by the Landlord to make themselves whole, the Landlord and Reda carefully and intentionally, omitted any mention of the default provision to GCR. Clearly, had GCR been made aware of the default provision, given their substantial investment in the Club, they would have supplemented those payments as well. 43. Moreover, the Landlord s irrational refusal to allow GCR to make up the missed November and December payments by Reda clearly showed that its real intent was to unlawfully and fraudulently terminate GCR s rights as opposed to being made whole. 44. In furtherance of the fraudulent scheme to defraud GCR, another provision was added which gave the Landlord, for the first time, the unusual power to decide who would be the equity holders of the Club. In that regard the Lease Modification Agreement states as follows: Plaintiffs Verified Complaint Page 10

13 Owner, at its sole discretion, may reject any particular person or entity from having any ownership interest in Tenant or having any security interest in the Lease. In such case, if Tenant permits that rejected person or entity to have affiliation to the demised premises, such act shall be an Event of Default and Owner shall have such remedies as denied in this Agreement due to an Event of Default. Other than as approved in writing by Owner in accordance with this paragraph, there shall be no change in ownership of Tenant as set for in Article 77 of the Lease. (Paragraph 4). 45. Clearly, this provision was added at that time for the sole purpose of blocking GCR. Indeed, as stated previously, Plaintiffs met several times with both the Landlord and Reda prior to purchasing the club. At no point during the negotiations did either the Landlord or Reda inform Plaintiffs that they could not purchase the Club without the Landlord s approval. In fact, Reda represented to Plaintiffs that he had full authority to transfer his ownership interest in the Club and the Landlord never objected at any of the various meetings to Reda s transfer of ownership to Plaintiffs. 46. Thus, while taking Plaintiff s money, and approving their purchase, Landlord and Reda were, at the same time, colluding and conspiring, through the undisclosed Lease Modification, to use Reda s transfer of ownership and subsequent non-payment of the Lease to evict Plaintiffs and destroy their investment. Pasternak s Malpractice and Breach of Fiduciary Duty in Representing the Plaintiffs in Signing the Purchase Agreement 47. To represent them in the formal contractual negotiations for the purchase of equity interest in the Club (via CDR), in or around November 2011, Plaintiffs retained Jonathan Pasternak ( Pasternak ), of Rattet Pasternak, LLP. Pasternak is an equity partner in Pasternak Rattet and the Plaintiffs, per the retainer agreement, were represented both by Plaintiffs Verified Complaint Page 11

14 Pasternak and by Pasternak Rattet. The retainer agreement signed by Plaintiffs (as GCR) and Pasternak stated that Pasternak s legal duties included: a. Representing Client (GCR) as a purchaser of certain membership interest in CDR, and attendance at closing, if required. b. Review, preparation and/or negotiation of all documentation, sale contracts, related transactional and closing documents, and all other related documents in connection with the Sale (emphasis added). c. Investigating facts and researching relevant law with respect to the above (emphasis added). d. Preparing correspondence and Sale related documents. 48. In reliance on Pasternak s advice and assistance with respect to Reda s ability to freely transfer equity in the CDR, on November 28, 2011, Plaintiffs signed the Purchase Agreement with Reda. The Purchase Agreement contained, in pertinent part, the following terms: a. Plaintiffs would purchase 75% of CDR, with the other 25% maintained by Reda. b. At the closing, Plaintiffs would pay Reda an additional $300, In that connection, Pasternak, negligently failed to perform reasonable due diligence to discover the existence of the Lease Modification, or to discover whether Reda was current on the Lease and/or to obtain appropriate representations that the existing lease had not been modified. Plaintiffs Verified Complaint Page 12

15 FIRST CAUSE OF ACTION (By Plaintiffs Against Reda for Breach of Contract) 50. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 49 of the complaint as if fully set forth herein. 51. As set forth above, Plaintiffs entered into the Purchase Agreement with Reda whereby they would pay Reda $300, in exchange for 75% equity in the Club. Plaintiffs also entered into a Management Agreement with Reda whereby Reda would manage the Club for the months of November and December This management included making monthly payment to the Landlord in a timely manner so as to avoid eviction. 52. Plaintiffs paid Reda $600, total and further invested monies into the Club by making capital improvements on the Club. 53. Reda, however, breached the Management Agreement by failing to make lease payments to the Landlord, thereby causing Plaintiffs to be evicted from the Club. 54. Moreover, Reda breached the Management Agreement by improperly managing the Club, in the ways set forth above. 55. As a result of Reda s breach of contract, Plaintiffs have been damaged in an amount to be determined at trial, at least in the amount of $5,000, SECOND CAUSE OF ACTION (By Plaintiffs Against Reda and the Landlord for Fraud and Misrepresentation) 56. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 55 of the complaint as if fully set forth herein. 58. As set forth above, Plaintiffs met with the Landlord and Reda on several occasions. 59. At no point during any meetings did the Landlord object to Plaintiff s purchase of the Club from Reda, nor did the Landlord or Reda inform Plaintiffs about the existence of a Plaintiffs Verified Complaint Page 13

16 Lease Modification which required the permission of the Landlord prior to any change in Club ownership. Moreover, neither Reda nor the Landlord informed Plaintiffs that any delay in payment of the Lease would result in immediate default and therefore immediate eviction from the Club. 60. Reda represented that he would make timely Lease payments for the months of November and December Reda intended for Plaintiffs to rely on the representations made in the Management Agreement. 62. The Landlord intended that Plaintiffs rely on the Landlord s acquiescence to the Purchase Agreement. In order to induce Plaintiffs to give money to Reda to fund his rental arrears. 63. Indeed, the Landlord took $600,000 of GCR s money from Reda with the full knowledge that the funds were from GCR. 64. Plaintiffs reasonably and justifiably relied on the Landlord s silence regarding any lease modification to mean that the only documents governing lease payments and transfers of ownership were the Lease and the Management Agreement. 65. Plaintiffs reasonably and justifiably relied on Reda s representations that the only documents governing lease payments and transfers of ownership were the Lease and the Management Agreement and therefore Plaintiffs took no steps to make monthly lease payments to the Landlord for the months of November and December As a result of Reda and the Landlord s fraudulent actions, misrepresentations and material omissions, Plaintiffs were evicted from the Club and have been damaged in an amount to be determined at trial, at least in the amount of $5,000, Plaintiffs Verified Complaint Page 14

17 THIRD CAUSE OF ACTION (By Plaintiffs Against Reda for Breach of Fiduciary Duty) 67. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 66 of the complaint as if fully set forth herein. 68. As set forth above, Plaintiffs entered into a Management Agreement with Reda, whereby Reda would manage operations for the Club for the months of November and December As such, Reda owed a fiduciary duty to Plaintiffs. 70. Reda breached his fiduciary duties to Plaintiffs by not making the monthly payments on the Lease and not obtaining permission from the Landlord for the transfer of ownership of the Club to Plaintiffs, despite his contractual obligation to do so under the Management Agreement. 71. As a result of Reda s misconduct, Plaintiffs were evicted by the Landlord and lost both the $600, they paid to Reda to manage the Club and the investment capital they made in the Club. 72. As a result of Reda s breach of fiduciary duty to Plaintiffs, Plaintiffs have been damaged in an amount to be determined at trial, at least in the amount of $5,000, FOURTH CAUSE OF ACTION (By Plaintiffs Against Landlord for Equitable Estoppel and Breach of Fiduciary Duty) 73. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 72 of the complaint as if fully set forth herein. 74. The Landlord met with Plaintiffs on several occasions. At no point did the Landlord object to Plaintiffs purchase of a majority percentage of the Club. Moreover, the Landlord accepted payment from Reda for rent arrears with full knowledge that the Plaintiffs Verified Complaint Page 15

18 payments came directly from Plaintiffs. By failing to object to Plaintiffs purchase of the Club, the Landlord represented that he did not object to Plaintiffs purchase of the Club and that Reda had the authority to convey Reda s interest in the Club to Plaintiffs. Moreover, by meeting with Plaintiffs and accepting their monies, the Landlord established a fiduciary relationship with Plaintiffs. 75. This fiduciary relationship was directly violated when the Landlord entered into a Lease Modification with Reda which stated that Reda s transfer of interest in the Club would result in a default of the Lease and subsequent eviction from the premises. The Landlord intended that Plaintiffs rely on his silence as to the Lease Modification so that he could usurp their funds and then evict them from the Club. 76. Plaintiffs, on their part, did rely on the Landlord s silence as to the Lease Modification as acquiescence of their purchase of the Club. Based on this reliance, Plaintiffs purchased the Club for $600,000 and made capital improvements on the Club. 77. The Landlord unjustly benefitted from Plaintiffs investment in the Club and their payment of rent arrears. 78. As a result, the Landlord is estopped from claiming that no relationship exists between the Landlord and Plaintiffs. Further, the Landlord is estopped from claiming that the Lease Modification clause relating to the Landlord s approval prior to any change in ownership in the Club has been triggered. The Landlord knew and acquiesced to Plaintiffs partnership with Reda when he said nothing about the Lease Modification during his several meetings with Plaintiffs, or at any time thereafter. Plaintiffs Verified Complaint Page 16

19 79. The Landlord accepted payment from Plaintiffs with knowledge that the payment came from Plaintiff s purchase of interest in the Club. The Landlord cannot now deny Plaintiffs right to remedy Reda s default on payment of the Lease. 80. As a result of the Landlord s breach of fiduciary duty to Plaintiffs, Plaintiffs have been damaged in an amount to be determined at trial, at least in the amount of $5,000, FIFTH CAUSE OF ACTION (By Plaintiffs Against the Landlord for Unjust Enrichment) 81. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 80 of the complaint as if fully set forth herein. 82. The Landlord had met with Conzentino, knowing that he represented Plaintiffs and had also met with Plaintiffs at the café. The Landlord was fully aware that the Plaintiffs joined Reda as equity partners in CDR and had an ownership interest in the Club. 83. As set forth above, the Landlord accepted payment for back rent from Reda with full knowledge that the funds came from Reda s new partners, the Plaintiffs. 84. Despite accepting Plaintiffs moneys as payment for Reda s missed back rent, the Landlord refused to accept payment from the Plaintiffs for Reda s missed lease payments for the months of November and December After refusing to accept payment from the Plaintiffs, the Landlord padlocked the premises of the Club and thereby caused Plaintiffs to suffer financial losses on their investment in the Club. 86. The Landlord has been unjustly enriched by at least $600,000 by defrauding Plaintiffs in concert with Reda. 87. The Plaintiff does not have an adequate remedy at law. Plaintiffs Verified Complaint Page 17

20 88. As a result of the Landlord s unjust enrichment, Plaintiffs have been damaged in an amount to be determined at trial, at least in the amount of $5,000, SIXTH CAUSE OF ACTION (By Plaintiffs Against Reda and the Landlord for Constructive Trust) 89. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 88 of the complaint as if fully set forth herein. 90. As set forth above, Plaintiffs and the Landlord had a fiduciary relationship with Plaintiffs based on the Landlord s acceptance of rent payments using money acquired from Plaintiffs. 91. The Landlord accepted rent payments from Reda with full knowledge that the moneys came from Plaintiffs. 92. Nonetheless, the Landlord later refused to accept rent payments from Plaintiffs for November and December 2011 despite his earlier acceptance of rent payments from the Plaintiffs. 93. The Landlord was unjustly enriched by the Plaintiffs when he padlocked the door to the Club and evicted the Plaintiffs from it, while at the same time keeping the moneys the Plaintiffs had given him for rent. 94. The Landlord has been unjustly enriched by at least $600,000 by defrauding Plaintiffs in concert with Reda. 95. The Plaintiff does not have an adequate remedy at law. 96. Accordingly, the Court should enter judgment imposing a constructive trust for the benefit of the Plaintiffs on the membership interests of CDR, and on all moneys received Plaintiffs Verified Complaint Page 18

21 by Reda and the Landlord, as a result of the Purchase Agreement and Plaintiff s capital contributions to the Club. SEVENTH CAUSE OF ACTION (By Plaintiffs Against Pasternak and Pasternak Rattet for Malpractice and Breach of Fiduciary Duty) 97. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 96 of the complaint as if fully set forth herein. 98. Plaintiffs retained Pasternak and Pasternak Rattet as counsel in connection with the negotiations between Plaintiffs, the Landlord and Reda for purchase of the Club. 99. At no point during the negotiations did Pasternak ever inform the Plaintiffs that the Lease Modification included a clause whereby any deviation from the exact due date of a lease payment would result in eviction. Furthermore, Pasternak never informed the Plaintiffs that the Landlord would not accept payment from Plaintiffs because Landlord needed to acquiesce to any transfer in ownership interest in the Club. Finally, Pasternak significantly fell short of his duty to zealously advocate on behalf of his clients, the Plaintiffs, by failing to negotiate for a better position for Plaintiffs in the Purchase Agreement Had it not been for Pasternak and Pasternak Rattet s shoddy representation, Plaintiffs would have ensured that Reda made timely payments and would not have been evicted from the Club Furthermore, had it not been for Pasternak and Pasternak Rattet s malpractice, Plaintiffs would not have signed the Purchase Agreement without first obtaining the Landlord s approval. Plaintiffs Verified Complaint Page 19

22 102. As a result of Pasternak and Pasternak Rattet s malpractice, Plaintiffs were damaged in an amount to be determined at trial, at least in the amount of $5,000, WHEREFORE, this Court should grant judgment in favor of the Plaintiffs as follows: a. For the First Cause of Action, judgment for damages in favor of Plaintiffs and against Reda in an amount to be determined at trial, at least in the amount of $5,000,000.00; b. For the Second Cause of Action, judgment for damages in favor of Plaintiffs and against Reda and Landlord in an amount to be determined at trial, at least in the amount of $5,000,000.00; c. For the Third Cause of Action, judgment for damages in favor of Plaintiffs and against Reda in an amount to be determined at trial, at least in the amount of $5,000,000.00; d. For the Fourth Cause of Action, judgment for damages in favor of Plaintiffs against the Landlord in an amount to be determined at trial, at least in the amount of $5,000,000.00; e. For the Fifth Cause of Action, judgment for damages in favor of Plaintiffs against Landlord in an amount to be determined at trial, at least in the amount of $5,000,000.00; f. For the Sixth Cause of Action, judgment for damages in favor of Plaintiffs against Reda and Landlord in an amount to be determined at trial, at least in the amount of $5,000,000.00; g. For the Seventh Cause of Action, judgment for damages in favor of Plaintiffs against Pasternak and Pasternak Rattet in an amount to be determined at trial, at least in the amount of $5,000,000.00; Plaintiffs Verified Complaint Page 20

23

24