FILED: NEW YORK COUNTY CLERK 05/18/2016 04:47 PM INDEX NO. 654394/2015 NYSCEF DOC. NO. 8 RECEIVED NYSCEF: 05/18/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK BOARD OF MANAGERS OF THE RESIDENTIAL SECTION OF THE PLAZA CONDOMINIUM, -against Plaintiff, Index No.: 654394/2015 KRISTIN FRANZESE, as President of the Board of Managers of the Plaza Condominium, CPS 1 REALTY, LP, EL-AD PROPERTIES NY LLC, SAHARA DREAMS LLC, SAHARA US CORP, SAHARA PLAZA LLP d/b/a THE PLAZA HOTEL, and JOHN DOE NOS. 1-10, being unknown parties related to, associated with, or responsible for the named parties, COMPLAINT Defendants. Plaintiff Board of Managers of the Residential Section of the Plaza Condominium (the "Residential Board" or "Plaintiff'), by its attorneys, Harris Beach PLLC, as and for its Complaint against the above-named defendants, alleges, as follows: INTRODUCTION 1. This complaint arises out of the gross, negligent, careless, reckless, intentional and fraudulent misallocation of utility charges to the residential unit owners of the Plaza Condominium. Defendants failed and refused to properly construct, install and/or implement the utility metering systems necessary and required under the condominium documents to ensure that the usage and consumption of such utilities were appropriately allocated among the different sections of the mixed use condominium known as The Plaza Condominium (the "Condominium"). Defendants' wrongful, negligent, careless, reckless, intentional and fraudulent actions effectively resulted in the unit owners of the Residential Section of the Plaza Condominium subsidizing the utility charges incurred by the non-residential units within the 1 1 of 39
building, including, for example, the costs associated with the operation of the air conditioning system used essentially entirely by the hotel and commercial units. PARTIES 2. Plaintiff Board of Managers of the Residential Section of the Plaza Condominium (the "Residential Board" or "Plaintiff') is the Board of Managers of the Residential Section of the Condominium and consists of the duly elected members of the board of managers of the Residential Section of the Condominium with a principal place of business, 1 Central Park South, New York, New York 10019. Plaintiff is charged, pursuant to Section 2 of Article 2 of the Residential By-Laws, with governing the affairs of the Residential Section of the Condominium. Attach Bylaws 3. The Condominium is an unincorporated association of the unit owners of the mixed-use condominium building, with a principal place of business 768 Fifth Avenue, New York, New York 10019 (the "Building"), and was formed pursuant to a Declaration of Condominium (the "Declaration") filed and recorded, pursuant to Article 9-B of the Real Property Law, in the New York County Office of the Register of the City of New York on March 13, 2006. 4. Defendant Kristin Franzese, as the President of the Board of Managers of The Plaza Condominium, with a principal place of business 768 Fifth Avenue, New York, New York 10019 (the "Condominium Board"). 5. Defendant CPS 1 Realty LP ("CPS 1"), is a limited partnership organized and existing under the laws of the State of Delaware with its principal place of business care of El- 2 2 of 39
Ad Properties NY LLC, at 575 Madison Avenue, New York, New York 10022. CPS 1 was the original sponsor for the Condominium ("CPS 1" or "Sponsor Defendant"). 6. Defendant El-Ad Properties NY LLC ("El-Ad Entity") is a limited liability company organized and existing under the laws of the State of New York with its principal place of business at 575 Madison Avenue, New York, New York 10022. 7. Upon information and belief, defendant Sahara Dreams LLC ("Sahara Dreams"), is a limited liability company organized and existing under the laws of the State of Delaware with its principal place of business in New York County. 8. Defendant Sahara US Corporation ("Sahara US"), is a corporation organized and existing under the laws of the State of New York with its principal place of business at 768 Fifth Avenue, New York, New York 10019. 9. Upon information and belief, defendant Sahara Plaza LLP ("Sahara LLP" together with "Sahara Dreams" AND "Sahara US", the "Sahara Entities"), is a limited liability partnership organized and existing under the laws of the State of Delaware with its principal place of business in New York County. 10. Defendants John Doe No. 1 through 10, inclusive, are or may be other persons or entities, unknown to Plaintiff related to, associated with or responsible for the named parties, who (a) own in whole or in part, either directly or indirectly, any of the Non-Residential Units; (b) are tenants of any of the Non-Residential Units, including, for example the retail vendors located leasing space in the Accessory Unit;(c) failed or refused to construct, install and/or implement the utility metering systems necessary and required under the condominium 3 3 of 39
documents to ensure that the usage and consumption of such utilities were properly allocated among the different sections of the Plaza Condominium, (d) whose actions substantially damaged the Plaintiff in violation of New York State law. JURISDICTION AND VENUE 11. This Court has personal jurisdiction over Defendants pursuant to CPLR 301 and 302. Defendants are residents of New York and conduct substantial business operations in New York and the actions complained of arose in New York. 12. Venue is proper within this judicial county pursuant to CPLR 503 in that Plaintiff and Defendants are residents of New York County and the causes of action arose in New York County. FACTS COMMON TO ALL CAUSES OF ACTION A. The Development of the Condominium 13. The Plaza Hotel, one of the world's great hotels since it opened in 1907, is located at 768 Fifth Avenue, New York, New York, on a prominent site overlooking Central Park. In 1971, The New York Times architecture critic, Ada Louis Huxtable, called it "New York's most celebrated symbol of cosmopolitan and turn-of-the-century splendor, inside and out." The exterior was designated a New York City Landmark in 1969. 14. In 2004, the El Ad Entity or its affiliate(s) to which it is related to, associated with and responsible for or by acquired the land and building formerly known as The Plaza Hotel for $675,000,000, intending to renovate it and convert it to a luxury mixed-use condominium building comprised of: 4 4 of 39
(a) A "Residential Section", originally including 181 residential apartments (the "Residential Units") located on portions of Floors 2 through 21, together with the entrance and lobby on the First Floor at Central Park South and certain other common elements including, among other things, 126 Storage Bins (collectively, the "Residential Limited Common Elements"); (b) A "Hotel Section", including: (i) a single commercial unit (the "Transient Hotel Unit") located on portions of Floors 4 through 10 of the Building and configured as 130 transient hotel guest rooms; and (ii) 152 individual hotel condominium apartments (the "Condo Hotel Units") located on portions of Floors 11 through 21 of the Building; together with the entrance and lobby on the First Floor at West 58th Street and certain common elements (such as lobbies, hallways, corridors and other service areas) in the Building serving both the Transient Hotel Unit and the Condo Hotel Units (collectively, the "Hotel Limited Common Elements"); (c) A commercial unit designated as an "Accessory Unit", located principally on portions of the Lower Concourse C, Main Concourse A, and Floors 1 through 4 of the Building; containing hotel accessory space, restaurants, banquet and meeting facilities, and retail space, accessed via Central Park South, Fifth Avenue and 58th Street; and (d) A commercial unit designated as a "Club Unit", located principally on portions of Main Concourse A and the First Floor of the Building; initially to be used as a health club and spa center. 5 of 39
15. The conversion, which took place over a period of years, required, among other things, major interior rehabilitation including replacing substantially all of the existing mechanical equipment, plumbing, and electrical systems. 16. On December 7, 2005, defendant CPS 1, as original Sponsor, filed a condominium offering plan for the sale of Residential Units and their appurtenant common elements within the Residential Section of the Condominium, as amended from time to time (the "Offering Plan"). 17. On or about March 13, 2006, defendant CPS 1 filed an Amended and Restated Declaration (the "Amended Declaration") with the Condominium By-Laws, Residential By- Laws, and Hotel By-Laws attached, as amended from time to time (collectively, the "Condominium Documents.") 18. The Offering Plan became effective as of June 2, 2006, when agreements for seventy-eight (78) (representing 43%) of the 181 Residential Units were executed and in effect with Purchasers who are unrelated to Sponsor, Selling Agent or Managing Agent or their principals. 19. The El-Ad Entity and the Sahara Entities have complete control and dominion over the Sponsor Defendant. 20. The Offering Plan has been amended, restated and updated on multiple occasions, and upon information and belief, the most recent amendments, restatements and updates to the Offering Plan took place in 2012. 6 6 of 39
B. Allocation of Utility Charges Under the Offering Plan and Condominium Documents 21. The Offering Plan and the Condominium documents expressly provide for the delivery, distribution and allocation of charges with respect to the utilities supplied to the Building. 22. Importantly, both the Offering Plan and Condominium documents provide for metering and sub-metering systems for the Building's utilities, including, without limitation, electricity, chilled water, and condenser water, to ensure that costs associated with those utilities (except those related to the Common Elements of the Building) are allocated based on usage, not common interest. 23. Part I, Section A(6) of the Offering Plan defines "Plans and Specifications" as "[t]he plans and specifications for the renovation of the Building which (to the extent required by applicable Legal Requirements) have been or will be filed with the Department of Buildings and which may, from time to time, hereafter be amended in accordance with the provisions of the Plan." 24. Part I, Section P(1)(a) of the Offering Plan provides: Sponsor will perform such work and supply such materials, or will cause the same to be performed and supplied, as is necessary to complete the renovation of the Residential Section with a quality of construction comparable to the currently prevailing local standards and substantially in accordance with the Plans and Specifications for the work filed with the Department of Buildings of the City of New York and other appropriate governmental authorities... Sponsor is obligated to complete its renovations and construction in accordance with all applicable codes and filed building plans and specifications... 7 7 of 39
25. Exhibit 4 to the Offering Plan, and incorporated therein, is a Description of Property and Building, (the "Property Description"). Part D of the Description describes the Utilities for the Building, including expressly providing for the metering and sub-metering of electricity: Electricity is provided by Consolidated Edison Company ("Con Edison"), a regulated company, and is direct metered to the Building. The electricity consumed by each Residential Unit (including the electricity required to power water-source heat pumps) is individually sub-metered by the Building. The electricity consumed in the Commercial Units will be separately sub-metered and paid for by the owners of such Units or their tenants. Finally, the electricity consumed in the common areas of the Building will be separately sub-metered and the cost of the same will be borne by the Unit Owners as a common expense and be allocated to each Unit as noted in the budget. 26. Pan L of the Property Description describes the Building's Heating, Ventilation and Air Conditioning systems and expressly provides for the metering and sub-metering of chilled water and condenser water systems: 2. Air Conditioning: Air conditioning is provided for all Residential Units by new water source heat pumps. Air conditioning for common areas will be provided by new chilled water air handling units and associated costs will be borne by all Unit Owners as a common expense. New roof mounted cooling towers and piping, via plate and frame heat exchangers, provide the heat rejection for the heat pump water loop. The associated condenser water will be sub-metered and the associated costs will be borne by all Unit Owners as a common expense. 3. Chilled Water/Condenser Water: Chilled water used in the central air conditioning systems serving Building common areas and Hotel and Club Units is produced by new electric centrifugal chillers having a total rated capacity of 1,140 tons. Chilled water used for the Building common areas and 8 8 of 39
Hotel and Club Units will be metered, and costs allocated accordingly The cost of chilled water for Residential Unit public areas (e.g. the main lobby) and allocated share of Building common areas will be borne by all Unit Owners as a common expense. The condenser water to be used by the chillers and the Commercial Units is produced by new cooling towers located on the roof. Condenser water use by the Commercial Units will be metered and associated costs will be borne by the Commercial Units or their tenants. 27. Part N of the Property Description describes the Building's Electrical Systems and expressly provides for the metering and sub-metering for the Commercial and Residential Section of the Condominium: Electric service is provided by Con Edison at 120/208 Volts, 3 phase, 4 wire to an electric Switchboard Room and distributed through various size service and distribution switches for the Residential Units and the Commercial Units...The Commercial Units will be separately sub-metered and all costs will be borne by the Commercial Units or their tenants. There will be sub-metering for common areas of the Building. Electric service will be provided to the Residential Units from new Electrical Closets located on every floor. Individual feeders, which will vary in capacity, will be run to each Residential Unit. Metering for each residential unit is sub-metered by the Condominium Board. 28. Part I, Section P(1)(a) of the Offering Plan prohibits Sponsor, including defendant CPS 1 or its successor, defendant Plaza Residential, from making any material changes to the Plan without disclosing it in a duly filed amendment to the Offering Plan. 29. Upon information and belief, there have been at least fourteen (14) amendments filed to the Offering Plan. In all amendments, the Sponsor Defendant represents that there were no material changes in the Offering Plan other than as set forth in the respective amendment. 9 9 of 39
30. Two of the amendments involved revisions to the Property Description. Both amendments (Ninth and Twelfth) indicated that the revisions to the Property Description reflected changed specifications and/or materials that "are equal to or better than (or which are immaterially different from) those originally specified in the initial Description of Property and Building Condition Report." 31. The Thirteenth Amendment to the Offering Plan included budgets for the first year of operation of the Residential Section and the Condominium overall. The Notes to the Residential Section budget explained how electricity charges, which were estimated at $260,135 for the year were calculated: Electricity for the entire Building will be purchased in bulk by the Condominium Board from Consolidated Edison. Usage of electricity within the Residential Section will be sub-metered by the Condominium Board and will be billed to the Residential Board based on total monthly consumption by the Residential Section as measured by its sub-meter. Each Residential Unit will in turn be separately sub sub-metered through a computerized sub metering system. The Residential Board will bill each Residential Unit for the cost of electricity consumed in such Unit Owner's Unit as reflected on such Unit Owner's sub sub-meter and will pay such charges to the Residential Board. The balance of the charges reflected on the sub meter for the Residential Section will represent the electricity for the Residential Limited Common Elements and the cost thereof will be borne by all Residential Unit Owners as a Residential Common Expense on the basis of each Residential Unit Owner's proportionate Common Interest. Additionally, the Condominium Board will sub-meter separately electricity consumed by the Condominium's central cooling plan. The cooling plant will have a meter measuring but consumption by the Residential Section as well as all other Units of the Condominium served by the central cooling plant. A portion of the electricity costs for the central cooling plan will be allocated to the Residential Section based on its proportionate but consumption as reflected on its cooling plant but meter, and such cost will be born by all Residential Unit Owners as a Residential Common Expense 10 10 of 39
on the basis of each such Unit Owner's proportionate Common Interest. The projected total cost for electricity in this budget includes both electricity consumed to power the Residential Limited Common Elements and electricity allocated to the Residential Section from the central cooling plan of the Building. 32. Upon information and belief, the actual electrical charges paid by the Residential Section for the period of time set forth in the Notes of the Thirteenth Amendment were approximately $1,120,439.15. 33. The Condominium By-Laws also expressly provides that charges related to electricity as well as chilled water and condenser water are based on usage and allocated among Residential Section, Hotel Section, Accessory Unit and Club Unit using meters and sub-meters. 34. Article 6, Section 6.4 of the Condominium By-Laws provides: "Utilities are provided and supplied to the Property and are distributed within the Building to each Utility Service Area and to the General Common Elements, and shall be paid for, as hereinafter set forth. For the purposes of this Section 6.4, a "Utility Service Area" means the Accessory Unit, the Club Unit, the Hotel Section and the Residential Section." part: 35. Section 6.4 of the Condominium By-Laws, as amended, also provides, in relevant 6.4.1 Electricity. Electricity service for the Building will be provided by Consolidated Edison Company of New York, Inc. ("Con Ed") or other utility company/ies or supplier(s) from time to time serving the Property and distributed to and for each Utility Service Area. The Accessory Unit has its own direct Con Ed electricity meter and will be responsible for paying directly to Con Ed or the utility supplying such electricity for the usage therein. To the extent any portion of the Accessory Unit is not so directly metered, usage therein will be submetered or otherwise 11 11 of 39
appropriately allocated and the Accessory Unit Owner will pay the costs thereof. Electricity usage in the remainder of the Building will be measured through one or more direct electric meters; and then submetered to each of the Hotel Section, Residential Section, and Club Unit. Each of the Hotel Board, Residential Board and Club Unit Owner shall be required to make payment for electricity usage in its applicable portion of the Property in accordance with such meters or submeters to the Condominium Board which shall be responsible for paying the utility company/ies or supplier(s) supplying such electricity. 6.4.4. Chilled Water. Chilled water (for air conditioning) will be provided by the Condominium Board throughout the Building. Chilled water supplied to each Utility Service Area for the benefit of the applicable General Common Charge Obligor will be submetered by the Condominium Board; and each General Common Charge Obligor shall be required to make payment to the Condominium Board in respect of the allocated costs and charges therefor. 6.4.6. Utilities for General Common Elements. The usage and consumption of electricity, gas, domestic water, sewer service, chilled water, steam and any other utility by, for or in respect of the General Common Elements will be separately metered, submetered or otherwise determined and the costs and charges therefor will be allocated among the General Common Charge Obligors as a General Common Expense on the basis of Common Interest. C. The Marketing and Sale of the Residential Units 36. With the Offering Plan as a promotion tool, the Sponsor Defendant commenced selling Residential Units of the Condominium, after the Offering Plan became effective, and continued through the completion of the Building's construction and thereafter, with the first closing on the sale of a Residential Unit occurred on or about June 12, 2007. Upon information and belief, the Sponsor Defendant is still continuing with sales for the Condominium through the date of this Complaint. 12 12 of 39
37. Upon information and belief, the Sponsor Defendant and the Condominium Board controlled by the Sponsor Defendant knowingly concealed the defect in the design, installation, and/or implementation of the Building's metering and sub-metering systems. 38. Despite the foregoing, the Sponsor Defendant did not amend the Offering Plan to reflect the defects in the Building's metering and sub-metering systems or otherwise disclose these conditions to persons purchasing units in the building. Thus, after the Building was completed, the Offering Plan came to contain material misrepresentations and significant and substantial misleading statements as to the Building's true condition. D. The Condominium Board Improperly Allocates Utility Usage Based on Common Interest 39. Upon information and belief, the Condominium Board is controlled by the owners of the Hotel Section, Accessory Unit and Club Unit. The El-Ad Entity and the Sahara Entities have complete control and dominion over the Condominium Board. 40. Upon information and belief, defendant Condominium Board failed to properly utilize the Building's metering and sub-metering systems to ensure that the utility charges incurred by the Hotel Section, Accessory Unit, and Club Unit are allocated based their respective usage. 41. Upon information and belief, defendant Condominium Board improperly included utility charges incurred by the Non-Resident Units, including electricity, chilled water, and condenser water, as a Common Expense and grossly, negligently, carelessly, recklessly, intentionally and fraudulently misallocated those costs to the Residential Section based on percentage common interest. 13 13 of 39
42. Defendants' wrongful, negligent, careless, reckless, intentional and fraudulent actions resulted in the Plaintiff subsidizing the utility charges incurred by the Non-Residential Units within the Building, including, for example, the costs associated with the operation of the chilled water air conditioning system used by the Hotel Section and Commercial Units and their tenants. FIRST CAUSE OF ACTION (Permanent Injunction Against the Condominium Board) 43. Plaintiff repeats and realleges each and every allegation contained heretofore as if fully set forth at length herein. 44. Pursuant to the Offering Plan and Condominium Documents, the Condominium Board is required to allocate utility charges based on usage as calculated by the Building's metering and sub-metering systems. 45. Defendant Condominium Board has failed and refused to properly install and/or implement all of the metering and sub-metering systems required under the Offering Plan and Condominium Documents, including BTU meters for the Building's central cooling system, to ensure that the utility charges incurred by the Hotel Section, Accessory Unit, and Club Unit are allocated based their respective usage. 46. Defendant Condominium Board, instead, continues to grossly, negligently, carelessly, recklessly, intentionally and fraudulently misallocate utility costs incurred by the Non-Residential Unit owners to the Residential Section based on percentage common interest. 47. Defendant Condominium Board must be (i) directed to properly install and/or implement the Building's metering and sub-metering systems, including but meters for the 14 14 of 39
Building's central cooling system, and (ii) enjoined from allocating the Non-Residential Unit utility charges to the Residential Section based on percentage common interest. 48. The balance of the equities tips decidedly in Plaintiffs' favor because, upon information and belief, most if not all of the metering and sub-metering systems (including the BTU meters for the Building's central cooling system) have been installed but are not being monitored by the Condominium Board. not granted. 49. Plaintiff will continue to sustain serious and irreparable injury if the injunction is 50. By reason of the foregoing, Plaintiff is entitled to a permanent injunction (i) directing and requiring the Condominium Board to properly install and implement the Building's metering and sub-metering systems, including but meters for the Building's central cooling system, and (ii) enjoined from allocating the Non-Resident Unit utility costs to the Residential Section based on percentage common interest. SECOND CAUSE OF ACTION (Against the Condominium Board for Conversion) 51. Plaintiff repeats and realleges each and every allegation contained heretofore as if fully set forth at length herein. 52. Pursuant to the Condominium Documents, all funds collected from the Residential Section for utility services were for utility services actually used by the Residential Section. 15 15 of 39
53. The Condominium Board had dominion and control over all funds collected by the Condominium Board for utility services from the Residential Section, for the purpose of paying the utility costs actually incurred by the Residential Section. 54. The Condominium Board used such dominion and control over all funds collected from the Residential Section for utility services, not for the purpose of paying the utility costs actually incurred by the Residential Section, but instead for the purpose of benefitting the interests of the Non-Residential Unit owners. 55. By reason of the foregoing, the Condominium Board is liable to Plaintiff for the amount of such conversion, which amount shall be determined at trial but in no event is less than $6,700,000.00, together with interest thereon. THIRD CAUSE OF ACTION (Against the Condominium Board for Money Had and Received) 56. Plaintiff repeats and realleges each and every allegation contained heretofore as if fully set forth at length herein. 57. Upon information and belief, through the wrongful diversion of the Residential Section's payments for utility costs, the Condominium Board received monies belonging to the Residential Unit owners. 58. The Condominium Board benefitted from their receipt of such monies by not having to use the Condominium Board's own funds to pay for the Condominium and Non- Residential Unit's expenses. 16 16 of 39
59. Under principles of equity and good conscience, the Condominium Board should not be allowed to retain such funds because they were obtained and appropriated as the result of a wrongful and fraudulent scheme to bilk the Residential Unit owners out of funds they paid that should have properly gone to the utility costs actually incurred by the Residential Section. 60. By reason of the foregoing, the Condominium Board is liable to the Plaintiff for an amount of such monies had and received which amount shall be determined at trial but is in no event less than $6,700,000.00, together with interest thereon. FOURTH CAUSE OF ACTION (Against the Defendants Non-Residential Unit Owners and John Does 1-10 for Unjust Enrichment) 61. Plaintiff repeats and realleges each and every allegation contained heretofore as if fully set forth at length herein. 62. Plaintiff made payment to the Condominium Board intending those payments to cover the utility costs actually incurred by the Residential Section of the Condominium. 63. Upon information and belief, the payments made by the Residential Section to the Condominium were used, in whole or in part, to pay for utility costs actually incurred by the Non-Residential Unit Defendants and their tenants. expense. 64. The Non-Residential Unit Owner Defendants were, thusly, enriched at Plaintiff's 65. Under the circumstances, it would be unfair and would unjustly enrich the Non- Residential Unit Owner Defendants to retain the benefit of the utility costs paid for by the Residential Section. 17 17 of 39
66. Accordingly, Plaintiff respectfully requests that the Non-Residential Unit Owners be required to reimburse Plaintiffs for the utility costs incurred by the Non-Residential Unit Owners yet paid for by the Plaintiff in an amount to be determined at trial but in no event less than $6,700,000.00. FIFTH CAUSE OF ACTION (Accounting Against the Condominium Board) 67. Plaintiff repeats and realleges each and every allegation contained heretofore as if fully set forth at length herein. 68. The Condominium Board owes a fiduciary duty with respect to the funds entrusted to it by the Residential Section for utility costs and general common expenses. 69. The Condominium Board has not properly accounted for the use of the funds entrusted to it by Plaintiff. 70. Plaintiff has no adequate remedy at law. 71. Accordingly, Plaintiff respectfully request that the Condominium Board be required to provide an accounting for all of the funds entrusted to it by the Residential Section to be used towards paying the Residential Section's utility costs and general common expenses. SIXTH CAUSE OF ACTION (Against the Condominium Board, El-Ad Entity and Sahara Entities for Breach of Fiduciary Duty) 72. Plaintiff repeats and realleges each and every allegation contained heretofore as if fully set forth at length herein. 18 18 of 39
73. The Condominium Board owes Plaintiff (a) a fiduciary duty of care which required that they perform their duties in good faith and with that degree of care and skill which an ordinary prudent person in a like position would use under similar circumstances and (b) a fiduciary duty of loyalty which required that they act in the best interests of the Condominium (including its Unit Owners) at all times and prohibited them from engaging in self-dealing by causing themselves, the Non-Resident Unit Owner Defendants, the Sponsor Defendant, and/or their related entities to benefit at the expense of the Plaintiff. 74. The El-Ad Entity had, and the Sahara Entities have, complete dominion and control over the Condominium Board and the El-Ad Entity had, and the Sahara Entities have, control over all funds collected by the Condominium Board for the purpose of paying utility costs actually incurred by the Residential Section. 75. The Condominium Board, El-Ad Entity and Sahara Entities breached their fiduciary duties to Plaintiff by using their control over the Board to further the interests of the Non-Residential Unit Owners at the expense of and to the detriment of the Plaintiff 76. As set forth above, upon information and belief, the Condominium Board, El-Ad Entity and Sahara Entities breached their fiduciary duties to the Plaintiff by, among other things: a. Failing to disclose that Plaintiffs' utility payments were being used to subsidize the Non-Residential Unit Owner Defendants utility usage; b. Failing to investigate, object to, or challenge known misuse of Condominium funds used to pay for the Non-Residential Unit Owner Defendants' utility costs; c. Conspiring with the Non-Residential Unit Owner Defendants to conceal the misuse of Plaintiffs' utility payments and to facilitate the continued use of 19 19 of 39
substantial amounts of Plaintiffs' utility payments to subsidize the Non- Residential Unit Owner Defendant's utility usage; and d. Refusing to cause (or even attempt to cause) the Sponsor Defendants to properly install or implement the Building's metering and sub-metering systems, including BTU meters for the Building's central cooling system, which the Sponsor promised in the Offering Plan but failed to install or implement. 77. In doing so, the Condominium Board, El-Ad Entity and Sahara Entities acted in bad faith and in their own and/or the Non-Residential Unit Owners' best interests, not the Residential Unit Owners'. 78. Plaintiff was directly injured by the Condominium Board, El-Ad Entity and Sahara Entities' breaches of their fiduciary duties in that, among other things, Plaintiff (i) has been and continues to be denied the Building features to which they are entitled under the Offering Plan and (ii) have been defrauded out of millions of dollars in utility charges incurred by the Non-Residential Unit Defendants and not the Residential Section. 79. By reason of the Condominium Board, El-Ad Entity and Sahara Entities breaches of their fiduciary duties, the Plaintiff has been injured in a sum to be determined at trial but in no event less than $6,700,000.00, together with interest therefrom, for which sum the Condominium Board Defendants are liable to Plaintiff. 20 20 of 39
SEVENTH CAUSE OF ACTION (As Against Sponsor Defendants, El-Ad Entity, and Sahara Entities for Breach of Contract) 80. Plaintiff repeats and realleges each and every allegation contained heretofore as if fully set forth at length herein. 81. Plaintiff Residential Unit Owners have complied with their obligations under the Purchase Agreements. 82. The Sponsor Defendant has committed numerous breaches of Part I, Section P(1)(a) of the Agreements. 83. The Sponsor Defendant is completely controlled by the El-Ad Entity and the Sahara Entities and the El-Ad Entity and the Sahara Entities have complete control and dominion over the Sponsor Defendant. The El-Ad Entity and the Sahara Entities have completely abused the privilege of doing business in their respective corporate forms under New York State law. 84. The Sponsor Defendant failed to properly design, install and/or implement the Building's metering and sub-metering systems, which is a materially adverse change to the Offering Plan. 85. In connection with any materially adverse changes that were permitted pursuant to Part I, Section P(1)(a) of the Agreements, the Sponsor Defendant breached such sections by failing to disclose the materially adverse changes in the amendments to the Offering Plan. 86. As a result of the Sponsor Defendant's failure to property design, install, and/or implement the Building's metering and sub-metering systems, the Condominium's utility charges have been grossly misallocated to the Plaintiff Residential Unit Owners. 21 21 of 39
87. By reason of the foregoing, Plaintiff is entitled to compensatory damages in an amount to be determined at trial but in no event less than $30,000.00. EIGHTH CAUSE OF ACTION (Against Sponsor Defendants, El-Ad Entities, and Sahara Entities) 88. Plaintiff repeats and reallege each and every allegation contained heretofore as if fully set forth at length herein. 89. At all times mentioned herein, Sponsor Defendant knew that the information it had concerning the construction of the Building and its units (including concerning the improperly designed, constructed, and/or implemented metering and submetering systems) was and would be desired by prospective purchasers, including the Residential Unit owners, for a serious purpose, to wit: that they would rely upon the representations of the Sponsor Defendant before committing to spend large sums of money to purchase the Residential Units of the Condominium. 90. The El-Ad Entity had, and the Sahara Entities have, complete dominion and control over the Sponsor Defendant and had control over the representations made to the Plaintiff and relied upon by the Plaintiff to the Plaintiff's detriment. 91. The Sponsor Defendant, El-Ad Entity and Sahara Entities owed a duty to the Residential Unit owners to use reasonable care to impart correct information to them because of a special relationship existing between the Sponsor Defendant, El-Ad Entity and Sahara Entities and prospective purchasers of the Condominium, such as and including the Residential Unit owners. 22 22 of 39
92. The special relationship existed because the Residential Unit Owners, prior to signing purchase agreements, were prospective purchasers of Residential Units of the Condominium and the Sponsor Defendant, El-Ad Entity and Sahara Entities possessed, and possess, unique and specialized expertise in the sale of real estate and, specifically, newly constructed condominium units. As such, they were, and are, in a special position of confidence and trust upon which reliance by the Residential Unit Owners was justified. 93. The Sponsor Defendant, El-Ad Entity and Sahara Entities owed a duty to the Residential Unit Owners to use reasonable care to impart correct information to them because the Sponsor Defendants were in privity with the Residential Unit Owners. 94. The Sponsor Defendant, El-Ad Entity and Sahara Entities wowed a duty to the Residential Unit owners to use reasonable care to impart correct information to them because such other Sponsor Defendant, as members, principals, and/or representatives of the Sponsor Defendant, were in a relationship akin to privity with the Residential Unit Owners. 95. In addition, the Sponsor Defendant, El-Ad Entity and Sahara Entities knew and intended, at the time of the issuance of the Offering Plan and of the sales and promotional materials that they prepared and circulated in promoting sales of units of the Condominium, and at all times thereafter, that the Offering Plan and those sales and promotional materials, including the misrepresentations contained therein, would be, and are, disseminated to and or shown to prospective purchasers such as the Unit Owners, and that prospective purchasers like the Residential Unit Owners would rely upon their truth and accuracy. 96. Upon information and belief, at the time the Sponsor Defendant, El-Ad Entity and Sahara Entities circulated the Offering Plan and or promoted sales of units of the Condominium 23 23 of 39
based on the Offering Plan's representations, the Sponsor Defendant, El-Ad Entity and Sahara Entities knew or could with reasonable effort have known that the misrepresentations set forth above, including the Sponsor Defendant's Certification, were false. 97. Upon information and belief, at the time they concealed the facts set forth above, the Sponsor Defendant knew or could with reasonable effort have known that they thereby rendered other representations in the Offering Plan misleading or false. 98. For example, the Sponsor Defendant knew or should have known at the time they signed the Sponsor Defendant's Certification in the Offering Plan (in which they swore that they had no reason to know that the Offering Plan contained any material misrepresentation) that the metering and submetering system was not properly designed, installed, and/or implemented. 99. As is detailed at length above, the Sponsor Defendant made numerous other misrepresentations to the Residential Unit Owners and prospective Residential Unit Owners, including but not limited to the misrepresentations regarding the metering and submetering systems. 100. The Sponsor Defendant, El-Ad Entity and Sahara Entities had, and have, actual knowledge of such defects by virtue of their interaction with the governmental agencies, communications with architects, engineers, and various other professionals involved in the construction of the Building, and direct observation of construction defects throughout the course of construction, but which defects the Sponsor Defendant negligently failed to disclose to the Residential Unit Owners. 24 24 of 39
101. By making these misrepresentations, the Sponsor Defendant, El-Ad Entity and Sahara Entities failed to exercise ordinary care, were negligent and accordingly breached the duty of care they owed to the Residential Unit Owners. 102. The Residential Unit Owners reasonably relied upon said representations by the Sponsor Defendant, El-Ad Entity and Sahara Entities sand were thereby induced to purchase units of the Condominium. 103. By reason of such negligent misrepresentations by the Sponsor Defendant, El-Ad Entity and Sahara Entities the Plaintiff has been injured in a sum to be determined at trial but in no event less than $6,700,000.00 together with interest thereon, for which sum the Sponsor Defendants are liable to Plaintiff. NINTH CAUSE OF ACTION (Against Sponsor Defendant, El-Ad Entity, and Sahara Entities) 104. Plaintiff repeats and realleges each and every allegation contained heretofore as if fully set forth at length herein. 105. The Sponsor Defendant, El-Ad Entity and Sahara Entities disseminated advertising and promotional information that was directed to and had an impact on consumers at large because such information was broadly disseminated via the intemet and other media to the general public, including to those members of the general public who were also potential home buyers. 106. The Sponsor Defendant, El-Ad Entity and Sahara Entities each disseminated advertising and promotional information that was false in material ways, including without limitation by misrepresenting the quality of construction of the Building (including the common 25 25 of 39
areas and units of the Condominium) and many of its principal features, including the metering and submetering system. 107. The Residential Unit Owners have been injured as a direct result of the actions of the Sponsor Defendant, El-Ad Entity and Sahara Entities by being misled into purchasing units of the Condominium that were of a different and substandard character and quality from, and substantially less valuable then, what they reasonably believed they were purchasing. 108. The El-Ad Entity had, and the Sahara Entities have, complete dominion and control over the Sponsor Defendant and had control over the representations made to the Plaintiff and relied upon by the Plaintiff to the Plaintiff's detriment. 109. By reason of such violations of New York General Business Law 349 and 350 by the Sponsor Defendant, (a) the Residential Unit Owners have been deprived of the homes they were promised, (b) the Residential Unit Owners have been unable fully to use or enjoy their units for the purposes for which they were purchased, (c) the Residential Unit Owners' investment in their units (including the purchase price, closing fees, and associated costs that they paid) have been wholly or partially lost, and (d) the Residential Unit Owners and/or the Condominium have incurred and must necessarily incur additional monetary costs to remediate the defective conditions. 110. Accordingly, the Sponsor Defendant, El-Ad Entity and Sahara Entities are liable to the Plaintiff for their violations of General Business Law 349 and 350, in an amount, including treble damages and attorneys' fees, to be determined at trial but in no event less than $30,000,000. 26 26 of 39
TENTH CAUSE OF ACTION (Against El-Ad Entity for Conversion) 111. Plaintiff repeats and realleges each and every allegation contained heretofore as if fully set forth at length herein. 112. Pursuant to the Condominium Documents, all funds collected from the Residential Section for utility services were for utility services actually used by the Residential Section. 113. The Condominium Board had dominion and control over all funds collected by the Condominium Board for utility services from the Residential Section, for the purpose of paying the utility costs actually incurred by the Residential Section. 114. The El-Ad Entity had complete dominion and control over the Condominium Board and had control over all funds collected by the Condominium Board for the purpose of paying utility costs actually incurred by the Residential Section. 115. The El-Ad Entity used such dominion and control over all funds collected from the Residential Section for utility services, not for the purpose of paying the utility costs actually incurred by the Residential Section, but instead for their own benefits and interests in the Condominium. 116. By reason of the foregoing the El-Ad Entity is liable to Plaintiff for the amount of such conversion, which amount shall be determined at trial but in no event is less than $6,700,000.00, together with interest thereon. 27 27 of 39
ELEVENTH CAUSE OF ACTION (Against Sahara Entities for Conversioni 117. Plaintiff repeats and reallege each and every allegation contained heretofore as if fully set forth at length herein. 118. Pursuant to the Condominium Documents, all funds collected from the Residential Section for utility services were for utility services actually used by the Residential Section. 119. The Condominium Board had dominion and control over all funds collected by the Condominium Board for utility services from the Residential Section, for the purpose of paying the utility costs actually incurred by the Residential Section. 120. The Sahara Entities had complete dominion and control over the Condominium Board and had control over all funds collected by the Condominium Board for the purpose of paying utility costs actually incurred by the Residential Section. 121. The Sahara Entities used such dominion and control over all funds collected from the Residential Section for utility services, not for the purpose of paying the utility costs actually incurred by the Residential Section, but instead for their own benefits and interests in the Condominium. 122. By reason of the foregoing the Sahara Entities are liable to Plaintiff for the amount of such conversion, which amount shall be determined at trial but in no event is less than $6,700,000.00, together with interest thereon. 28 28 of 39
TWELFTH CAUSE OF ACTION (Against the El-Ad Entity for Money Had and Received) 123. Plaintiff repeats and realleges each and every allegation contained heretofore as if fully set forth at length herein. 124. Upon information and belief, through the wrongful diversion of the Residential Section's payments for utility costs, the Sahara Entities received monies belonging to the Residential Unit owners. 125. The El-Ad Entity benefitted from their receipt of such monies by not having to use their own funds to pay for the Condominium and Non-Residential Unit's expenses and by recouping the increased profits derived from overcharging the Residential Section. 126. Under principles of equity and good conscience, the El-Ad Entity should not be allowed to retain such funds because they were obtained and appropriated as the result of a wrongful and fraudulent scheme to bilk the Residential Unit owners out of funds they paid that should have properly gone to the utility costs actually incurred by the Residential Section. 127. By reason of the foregoing, the El-Ad Entity is liable to the Plaintiff for an amount of such monies had and received which amount shall be determined at trial but is in no event less than $6,700,000.00, together with interest thereon. THIRTEENTH CAUSE OF ACTION (Against the Sahara Entities for Money Had and Received) 128. Plaintiff repeats and realleges each and every allegation contained heretofore as if fully set forth at length herein. 29 29 of 39
129. Upon information and belief, through the wrongful diversion of the Residential Section's payments for utility costs, the Sahara Entities received monies belonging to the Residential Unit owners. 130. The Sahara Entities benefitted from their receipt of such monies by not having to use their own funds to pay for the Condominium and Non-Residential Unit's expenses and by recouping the increased profits derived from overcharging the Residential Section. 131. Under principles of equity and good conscience, the Sahar Entities should not be allowed to retain such funds because they were obtained and appropriated as the result of a wrongful and fraudulent scheme to bilk the Residential Unit owners out of funds they paid that should have properly gone to the utility costs actually incurred by the Residential Section. 132. By reason of the foregoing, the Sahara Entities are liable to the Plaintiff for an amount of such monies had and received which amount shall be determined at trial but is in no event less than $6,700,000.00, together with interest thereon. FOURTEENTH CAUSE OF ACTION (Against the Sponsor Defendants, EL-Ad Entity and Sahara Entities for Breach of Fiduciary Duty) 133. Plaintiff repeats and realleges each and every allegation contained heretofore as if fully set forth at length herein. 134. The Sponsor Defendant had a duty and obligation to ensure that the requirements and obligations set forth in the Offering Plan, Declarations and Condominium documents were met and fulfilled The El-Ad Entity had, and the Sahara Entities have, complete dominion and control over the Condominium Sponsor Defendant and had control over the fulfillment of all 30 30 of 39
requirements and obligations set forth in the Offering Plan, Declarations and Condominium documents. 135. The Sponsor Defendant, the El-Ad Entity and Sahara Entities owed Plaintiff (a) a fiduciary duty of care which required that they perform their duties in good faith and with that degree of care and skill which an ordinary prudent person in a like position would use under similar circumstances and (b) a fiduciary duty of loyalty which required that they act in the best interests of the Condominium (including its Unit Owners) at all times and prohibited them from engaging in self-dealing by causing themselves, the Non-Resident Unit Owner Defendants, the Sponsor Defendant, and/or their related, associated or responsible for entities to benefit at the expense of the Plaintiff 136. The Sponsor Defendant, El-Ad Entity and Sahara Entities breached their fiduciary duties to Plaintiff by using refusing to comply with the requirements and obligations set forth in the Offering Plan, Declarations and Condominium documents to further their own interests to the detriment of the Plaintiff. 137. As set forth above, upon information and belief, the Sponsor Defendant, El-Ad Entity and Sahara Entities breached their fiduciary duties to the Plaintiff by, among other things: a. Failing to ensure that Plaintiffs' utility payments were being used and calculated pursuant to the Offering Plan, Declaration and Condominium documents; b. Failing to fulfill their obligations and requirements set forth in the Offering Plan, Declarations and Condominium documents by overcharging the Plaintiff for utility payments 31 31 of 39