FILED: NEW YORK COUNTY CLERK 12/06/2016 09:20 AM INDEX NO. 654914/2016 NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 12/06/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK -------------------------------------------------------------- x DHU REALTY CORP., -against- Plaintiff, DECO TOWER ASSOCIATES, LLC a/k/a DECO TOWERS ASSOCIATES LLC a/k/a DECO TOWER ASSOCIATES, : : : : : : : : : : : Index No.: 654914/2016 PROPOSED FIRST AMENDED VERIFIED COMPLAINT Defendant. -------------------------------------------------------------- x Plaintiff, DHU REALTY CORP. ( DHU or Plaintiff ), by its attorneys, NEWMAN FERRARA LLP, as and for its first amended complaint against defendant, DECO TOWER ASSOCIATES, LLC a/k/a DECO TOWERS ASSOCIATES LLC a/k/a DECO TOWER ASSOCIATES ( Defendant or Landlord ), respectfully alleges as follows: THE PARTIES 1. DHU is a domestic not-for-profit corporation with an office located at 310 West 43 rd Street, New York, New York 10036. 2. Upon information and belief, Defendant is a domestic limited liability company with an office located at 330 West 42 nd Street, New York, New York 10036. ( 1199 ). ALLEGATIONS COMMON TO ALL CAUSES OF ACTION 3. Plaintiff is a wholly-owned subsidiary of 1199 SEIU United Healthcare Workers East 4. 1199 is a national affiliate of the Service Employees International Union ( SEIU ) a labor union composed of over two million service workers throughout the United States.
5. 1199 is composed of healthcare workers in New York, Massachusetts, New Jersey, Maryland, District of Columbia and Florida and currently represents the interests of approximately 400,000 members. DHU s Tenancy 6. Pursuant to a Standard Form of Office Lease, dated May 22, 1992 (the Original Lease ), DHU leased the entire 8 th floor and part of the 15 th floor (the Original Premises ) in the building known as and located at 330 West 42 nd Street, New York, New York (the Building ) for the benefit and use of 1199 and its various related but independent funds and pensions. (the Funds ). 7. The Original Lease was amended thirteen (13) times by separate lease modification agreements (together, the Modifications )(the Original Lease and the Modifications, collectively, the Lease ). 8. Pursuant to the Modifications, among other things, the Original Premises were modified multiple times. 9. Ultimately, as a result of the Modifications, DHU is currently in possession of the second floor, the third floor, the fourth floor, the fifth floor, the sixth floor, the seventh floor, the eighth floor, parts of the ninth floor, the tenth floor, parts of the eleventh floor, parts of the twelfth floor, parts of the thirteenth floor, the fifteenth floor, parts of the eighteenth floor, the nineteenth floor, the twentieth floor, the twenty-first floor, the twenty-sixth floor, the twenty-seventh floor, the twenty-eighth floor, the twenty-ninth floor, the thirtieth floor, the thirty-first floor, parts of the thirtysecond floor, the thirty-third floor, and the westerly loading dock in the Building (the Subject 2
Premises ), pursuant to the terms of the Lease. 10. DHU s performance of its obligations pursuant to the Lease is guaranteed by 1199. 11. DHU subleases different areas of the Subject Premises (approximately 87% of the leased space) to various funds and pensions operated by 1199 (the Funds ), for the benefit of its members. 12. Specifically, 1199, by the Funds, administers administer a package of benefits, including health, pension, child care, training, unemployment, and job placement to its members and their spouses and dependents. Defendant s Construction Project 13. Upon information and belief, in or about 2012, Defendant commenced a renovation and/or improvement project on the Building (the Construction Project ). 14. Upon information and belief, the Construction Project involves structural enhancements, including replacement of the Building s exterior façade and windows. 15. Upon information and belief, the Construction Project also involves asbestos and lead abatement associated with replacement of the windows, along with renovation of the lobby of the Building. 16. Upon information and belief, work on the Construction Project commenced on or about 2012 and is ongoing. Operating Expense Escalations 17. Pursuant to the terms of the Lease, DHU is responsible for its pro-rata share of the difference in certain limited allocable operating expenses of the Building between a specified base 3
year and the present year (the Escalation Charges ). 18. To that end, Article 38 of the Original Lease provides in relevant part, as follows: If, during the term of this Lease, the operating expenses (as hereinafter defined, and hereinafter referred to as Expenses ) of the building shall increase, Tenant shall pay, as additional rent, without set-off-or deduction, in the manner and as hereinafter provided, percent [blank in the original] (hereinafter referred to as Tenant s Percentage ) of any increase in such Expenses, as hereinafter set forth.1 A. As used in this Article, the terms of which follow mean and include the following:... 3. Labor shall mean and include (i) the wages actually paid to all employees of the Landlord who work in and about the building and whose duties are connected with the operation, or maintenance or repair of the building, sidewalks and curbs adjacent therefore...... 4. Fees shall mean management fees, bookkeeping and administrative office expenses of the Landlord directly related to the operation of the building. 5. Repairs and supplies shall mean alterations, repairs to, and physical maintenance of, the building, including but not limited to, the maintenance of the (a) lavatories, (b) elevators, (c) windows, (d) heating, ventilating and air conditioning systems, (e) plumbing, and the costs of all supplies and equipment used in connection therewith. 6. Expenses shall be the word used to describe collectively the items of expenses of the Landlord as herein defined. 1 Although the terms operating expenses and Expenses are not actually defined in Article 38, other defined terms within the Article (especially the defined term repairs and supplies ) make clear that operating expenses was intended to have its plain and ordinary meaning, which clearly does not include expenditures for capital improvements: 4
7. Base Year shall mean the calendar year 1993. 8. Comparative Statement shall mean a statement in writing signed by the Landlord, or, on its behalf, by an officer of any corporation so authorized by Landlord to sign such statement, comparing the Expenses for the Base Year and Expenses for an Operation Year. 9. Operation Year shall mean each calendar year falling wholly or partly within the term of the Tenant under the Lease. 10. A. Tenant s Projected Share of Expenses shall mean Tenant s Proportionate Share for the prior Operation Year, due and payable as rent for such current Operation Year within forty-five (45) days after furnishing Tenant with a Comparative Statement. B. After the expiration of the Base Year and any Operation Year, the Landlord will furnish a Comparative Statement to the Tenant. The Comparative Statement to be so furnished in the year 1994, shall show a comparison of the Expenses of the Base Year and those of the Preceding Operation Year, viz: the year 1993. The Comparative Statement to be submitted in any subsequent Operation Year shall show a comparison of the Expenses of the Base Year and of those in the Operation Year next preceding the year in which the Comparative Statement is submitted. C. If the Expenses in any Operation Year shall increase above the Base Year, then Tenant agrees to pay, as additional rent for such Operation Year within forty-five (45) days after furnishing Tenant with a Comparative Statement, an amount equal to Tenant s Proportionate Share of such increase. D. At Landlord s option, commencing with the first Operation Year after Landlord shall be entitled to receive Tenant s Proportionate Share, Tenant shall pay to Landlord as additional rent for the then Operation Year, Tenant s Projected Share of Expenses. However, in the event that Landlord elects for Tenant to pay the Tenant s Projected 5
Share of Expenses, it is agreed that such amount shall not exceed 110% of the Tenant s Proportionate Share for the prior year.... If the Landlord makes its election as provided herein, it shall deliver written notice to the Tenant advising it of its intention to commence billing in the manner set forth in this paragraph.... E. Every Comparative Statement given by Landlord pursuant to this Article shall be conclusive and binding upon Tenant unless, within ninety (90) days after receipt of such statement, Tenant shall notify Landlord that Tenant disputes the correctedness [sic] of the Statement, specifying the particular respects in which the Statement is claimed to be incorrect and, pending the determination of such dispute, Tenant shall pay additional rent in accordance with Landlord s Statement and such payment or acceptance shall be without prejudice to Tenant s position. Tenant shall have the right to audit any of the Landlord s statements and Landlord agrees to provide Tenant access to its books and records in Tenant s conducting of such audit provided Tenant gives ten (10) days prior written notice and the audit is conducted during reasonable business hours. (emphasis added throughout) 19. Notably, the key term operating expenses is not actually defined anywhere in the Lease. The, plain and ordinary meaning of operating expenses clearly does not include expenditures for capital improvements. That this was the parties intent is confirmed by terms that are defined within Article 38 of the Original Lease, especially the defined term repairs and supplies. 19.20. Pursuant to the Modifications, different sections of the Subject Premises have different allocated percentages and base years from which the amounts of the Escalation Charges are calculated. 20.21. In or about 2002, Defendant purported to exercise its option, pursuant to Article 6
38(D), to require DHU to pay the projected amount of the current year s Escalation Charges in installments on a monthly basis. 21.22. Commencing on or about 2002, and continuing to date, DHU has paid projected Escalation Charges on a monthly basis. Construction Project Expenses 22.23. For the majority of DHU s tenancy in the Subject Premises and through the 2011 operating year, the amounts of the purported Escalation Charges increased in modest increments, and, upon information and belief, includesincluded only non-structural maintenance and repairs made to the Building. 23.24. By way of example, the purported Escalation Charges rose by approximately 4% between the operating years of 2010 and 2011. 24.25. By way of further example, the amounts of the purported Escalation Charges actually decreased by approximately 0.8% between the operating years of 2011 and 2012. 25.26. However, commencing in the 2013 operating year, the purported Escalation Charges began rising, dramatically. 26.27. The purported Escalation Charge for the 2013 operating year was approximately 30% higher than that demanded for the 2012 operating year. 27.28. The purported Escalation Charge for the 2014 operating year was approximately 40% higher than that demanded for the 2013 operating year. 28.29. Finally, the Escalation Charge amount demanded for the 2015 operating year is approximately 38% higher than that for 2014. 7
29.30. Upon information and belief, the primary reason for these exorbitant increases is Defendant s addition of structural-related renovation and/or improvement costs in connection with Exterior & Sidewalk Repairs which first appeared as part of the Operating Expenses in the 2012 operating year. 30.31. The amount of Operating Expenses for Exterior & Sidewalk Repairs allegedly incurred by Defendant increased from $0.00 in the 2011 operating year (as well as, upon in formationinformation and belief, all years prior) to $67,219.00 in the 2012 operating year. 31.32. The amount of Operating Expenses for Exterior & Sidewalk Repairs allegedly incurred by Defendant further increased to $697,912.00 in the 2013 operating year an increase of over 938%. 32.33. The amount of Operating Expenses for Exterior & Sidewalk Repairs allegedly incurred by Defendant further increased to $3,539,366.00 in the 2014 operating year an increase of over 407%. 33.34. The amount of Operating Expenses for Exterior & Sidewalk Repairs allegedly incurred by Defendant further increased to $6,366,434.00 in the 2015 operating year an increase of approximately 80%. 34.35. Similarly, the Operating Expenses attributable to Professional Fees increased from $279,479.00 for the 2012 operating year to $618,763.00 for the 2013 operating year an increase of approximately 121%. 35.36. The Operating Expenses attributable to Professional Fees increased to $970,217.00 for the 2014 operating year an increase of approximately 57%. 8
36.37. The Operating Expenses attributable to Professional Fees increased to $1,300,187.00 for the 2015 operating year an increase of approximately 34%. 37.38. Upon information and belief, the atypicalthese dramatic increases commencing in the 2012 operating year coincide with commencement of the Construction Project. 38.39. Upon information and belief, Defendant has included monies it has expended in connection with the Construction Project in its Escalation Charges to DHU. 39.40. As set forth above, DHU is responsible for its pro-rata share of the Building s operating expenses. 41. Capital improvements are not operating expenses. 40.42. There is no basis under the Lease for Defendant to bill DHU for any expenses associated with capital improvements, such as structural renovations, replacements, enhancements and/or improvements to the Building, such as the Construction Project. DHU s Objections 41.43. In or about July 2016, Defendant issued a document entitled ACTUAL 2015 OPERATING EXPENSES (the 2015 Purported Expense Statement ). 42.44. The 2015 Purported Expense Statement purported to show the total of the Building s operating expenses for the 2015 operating year (the 2015 Purported Expense Statement ) and a projection of the operating expenses for the 2016 operating year. 43.45. In connection with the 2015 Purported Expense Statement, Defendant issued fifteen (15) versions of a document titled 2015 Operating Expense Escalation True-Up / 2016 Projected Operating Expense Escalation / 326-330 West 42 nd Street, dated July 21, 2016 (together, the 2015 9
Purported True-Up ) (the 2015 Purported Expense Statement and 2015 Purported True-Up, collectively, the 2015 Purported Comparative Statement ). 44.46. Upon information and belief, the 2015 Purported True-Up purports to show the amounts allegedly due from DHU by calculating the Escalation Charges and applying the monthly payments already made by DHU. 45.47. Upon information and belief, each version of the 2015 Purported True-Up covers a different portion of the Subject Premises and uses that portion s respective base year and percentage allocation to calculate the purported Escalation Charge due from DHU. 46.48. DHU made monthly projected Escalation Charge payments totaling $5,843,120.76 (the Projected 2015 Escalation Payments ) for the 2015 operating year (i.e., 110% of DHU s 2014 Purported Escalation Charge). 47.49. The 2015 Purported Comparative Statement provides that, beyond the Projected 2015 Escalation Payments, DHU owes an additional $2,327,517.60 (the Additional 2015 Purported Escalation Charge ) in Escalation Charges for the 2015 operating year, for a total of $8,170,638.36 (the 2015 Purported Escalation Charge ). 48.50. After reviewing the 2015 Purported Comparative Statement, DHU issued a notice to Defendant, dated August 29, 2016 (the 8/29/16 Notice ). 49.51. By the 8/29/16 Notice, DHU notified Defendant that DHU disputed the correctness of the 2015 Purported Escalation Charge and was thereby exercising its right to audit Defendant s records as provided for in the Lease. 50.52. The 8/29/16 Notice specifically provided that, without waiving any other objections, 10
DHU objected to the amounts of the Exterior and Sidewalk Repairs and Professional Fees alleged in the 2015 Purported Comparative Statement. 51.53. By letter dated September 7, 2016 (the 9/7/16 Letter ) to Defendant, DHU, via counsel, reiterated its objections to the 2015 Purported Escalation Charge. 52.54. The 9/7/16 Letter further notified Defendant that, given the substantial increase between the 2014 and 2015 Escalation Charges (and the fact that the 2015 Purported Escalation Charge included impermissible expenses in connection with structural enhancements and/or replacements, including the Construction Project), DHU would not be making the Additional Escalation Charge payments until the parties reached an understanding regarding the correct amount of the 2015 Escalation Charge due from DHU. 53.55. By letter from counsel dated September 9, 2016 (the 9/9/16 Letter ), Defendant advised that it would not engage in any discussions regarding the 2015 Escalation Charge absent full payment of the Additional 2015 Purported Escalation Charge. 54.56. Accordingly, DHU was compelled to commence this action and seek a preliminary injunction enjoining Defendant from taking steps to terminate, or terminating, DHU s valuable commercial lease, and/or seeking to enforce the 2015 Purported Comparative Statement (and/or any previous Purported Comparative Statements) based on facially improper Escalation Charges. Purported Rent Demand 57. Upon information and belief, after commencement of this action, Defendant issued a certain Rent Demand, dated November 18, 2016 (the Rent Demand ). 58. Without waiving jurisdictional objections, all of which are expressly preserved, 11
provides that DHU owes $4,638,266.63 in Arrears (Representing Operating Expesne [sic] Escalation True-Up from 1/1/16 7/31/16). 59. The 2015 Purported Comparative Statements are attached to the Rent Demand as an exhibit. 60. Upon information and belief, the 2015 Comparative Statement provides that DHU s share of the Projected 2016 Escalations is $9,313,434.32 (the 2016 Purported Projected Escalation Charge ), to be paid in monthly installments. 61. The amount demanded in the Rent Demand as Operating Expesne [sic] Escalation True-Up from 1/1/2016 7/31/2016 exceeds the amount set forth in the 2015 Comparative Statement for that period. 62. Accordingly, the amount demanded in the Rent Demand does not constitute a good faith approximation of the amount Defendant believes is due from DHU. 63. The Rent Demand is also ambiguous and equivocal in that the amount demanded therein exceeds the amount demanded in the 2015 Comparative Statement which is annexed thereto as an exhibit. 64. Additionally, DHU s share of the Projected 2016 Escalation Charges exceeds 110% of DHU s share of the 2015 Operating Expense Escalation, in violation of the Lease. 65. To that end, Article 10(D) of the Original Lease provides, in relevant part, that in the event Landlord elects for the Tenant to pay the Tenant s Projected Share of Expenses, it is agreed that such amount shall not exceed 110% of the Tenant s Proportionate Share for the prior year. 66. DHU s purported share of the 2016 Operating Expense Escalations, as set forth in the 12
2015 Comparative Statement, exceeds 110% of DHU s purported share of the 2015 Operating Expense Escalations. 67. Finally, the Rent Demand improperly seeks a true-up of the Projected 2016 Operating Expense Escalations made in or about July 2016. 68. The Original Lease provides, in relevant part, that: If the Landlord makes its election as provided herein (to require DHU to pay its projected share of expenses for any operation year on an ongoing basis),it shall deliver written notice to the Tenant advising it of its intention to commence billing in the manner set forth in this paragraph. If the statement furnished by Landlord to Tenant, pursuant to this Article, at the end of the then Operation Year, shall indicate that... the Tenant s Proportionate Share exceeded Tenant s Projected Share of Increase for the then Operational Year, Tenant shall pay, within thirty (30) days after receipt of written notice, the amount of such excess to Landlord. (emphasis added) 69. Accordingly, there is no authorization under the Lease to perform a true-up adjustment in the middle of an operating year. AS AND FOR A FIRST CAUSE OF ACTION (Declaratory Relief) 55.70. DHU respectfully repeats and realleges each and every allegation contained in paragraphs 1 through and including 5469 above, with the same force and effect as if fully set forth herein. 56.71. An actual case and controversy exists in that Plaintiff disputes the amount of the Escalation Charges alleged by Defendant. 57.72. Specifically, DHU disputes that it is responsible for any portion of Defendant s expenses in connection with the Construction Project and/or any other structural renovations, 13
improvements and/or replacements, as those expenses fall outside of the scope of the operating expenses included under Article 38 of the Original Lease. 58.73. As evidenced by the 9/9/16 Letter, Defendant has taken the position that DHU is liable for the full amount of the 2015 Purported Escalation Charge. 74. As evidenced by the disputed Rent Demand, Defendant has taken the position that DHU is liable for the full amount of the 2016 Purported Projected Escalation Charge. 59.75. DHU lacks an adequate remedy at law. 60.76. By reason of the foregoing, DHU is entitled to a judgment: (a) (b) (c) declaring that the 2015 Purported Comparative Statement unlawfully includes expenses for which DHU is not responsible, and is therefore null and void and of no force and effect; declaring that DHU does not have to make any Escalation Charge payments in connection with any structural-related improvements or replacements and/or the Construction Project; and declaring that DHU does not have to make any further payments in connection with the 2015 Purported Escalation Charge, and/or any prior Escalation Charge statements issued by Defendant to DHU and/or any 2016 Purported Projected Escalation Charge, until the correct amount of such charges have been determined following a full and complete audit of Defendant s operating expense records. AS AND FOR A SECOND CAUSE OF ACTION (Declaratory Relief) 77. DHU respectfully repeats and realleges each and every allegation contained in paragraphs 1 through and including 76 above, with the same force and effect as if fully set forth herein. 14
78. As set forth above, the Rent Demand is ambiguous, equivocal, and not a good faith approximation of the amount allegedly owed by DHU. parties Lease. 79. Additionally, the Rent Demand seeks monies in excess of those authorized by the 80. Accordingly, DHU is entitled to a judgment declaring the Rent Demand to be null and void and of no force and effect. AS AND FOR A THIRD CAUSE OF ACTION (Injunctive Relief) 61.81. DHU respectfully repeats and realleges each and every allegation contained in paragraphs 1 through and including 6080 above, with the same force and effect as if fully set forth herein. 62.82. Defendant has unlawfully demanded immediate full payment of the Additional 2015 Purported Escalation Charge. 63.83. Defendant has unlawfully demanded and received payments pursuant to prior Escalation Charge statements. 64.84. Upon information and belief, Defendant will deempurports that DHU s failure to make full payment of the Additional 2015 Purported Escalation Charge constitutes a default under the Lease. 85. Because Defendant has further unlawfully demanded immediate payment of certain Purported 2016 Projected Escalation Charges. 86. By issuing the imminent dangerrent Demand, Defendant has declared DHU s failure to make full payment of forfeiturethe unlawfully demanded 2016 Projected Escalation Charges a 15
default under the Lease. 87. The Rent Demand provides that if DHU does not make a payment of $4,638,266.63 on or before December 7, 2016, Defendant will commence summary proceedings to recover possession of the Subject Premises. 65.88. Because DHU s valuable commercial interestinterests in the Subject Premises are in jeopardy, DHU will be irreparably harmed absent an injunction. 66.89. DHU has no adequate remedy at law. 67.90. By reason of the foregoing, DHU is entitled to judgment: (a) (b) temporarily, preliminarily and permanently enjoining Defendant and/or its affiliates, agents, attorneys, employees and anyone acting on its behalf or under its control from taking any steps to terminate or purport to terminate DHU s tenancy or the tenancy of DHU s subtenant, commencecommencing an action or a summary proceeding, or otherwise regainregaining possession of the Subject Premises, based upon DHU s failure to make certain payments demanded in the 2015 Purported Comparative Statement and/or, any prior purported Comparative Statements and/or the Rent Demand; enjoining Defendant, its agents, attorneys, employees, and anyone acting on its behalf or under its control from taking any steps to regain or wrongfully interfere with DHU s possession of the Subject Premises. AS AND FOR A FOURTH CAUSE OF ACTION AS AND FOR A THIRD CAUSE OF ACTION (Declaratory Relief) DHU respectfully repeats and realleges each and every allegation contained in paragraphs 1 through and including 67(Declaratory Relief) 68.91. DHU respectfully repeats and realleges each and every allegation contained in 16
paragraphs 1 through and including 91 above, with the same force and effect as if fully set forth herein. 69.92. The 2015 Purported Comparative Statement does not satisfy the requirements of the Lease and is thus is of no force and effect. Specifically, the 2015 Purported Comparative Statement is not signed by an authorized signatory of Defendant or an agent authorized to sign on Defendant s behalf. 70.93. Additionally, upon information and belief, the 2015 Purported Comparative Statement was not served in the manner required by the Lease. 71.94. Specifically, upon information and belief, copies of the 2015 Purported Comparative Statement were not served on 1199 and Finder Novick Kerrigan LLP, as required by Article 10 of the Thirteenth Modification to the Original Lease. 72.95. Accordingly, as the 2015 Purported Comparative Statement does not comply with the requirements of the Lease and was improperly served, it is insufficient to form a basis for holding DHU in default of the Lease and/or to form a basis for: (a) holding DHU in default under the Lease; and/or (b) collecting any monies purportedly due. 73.96. Upon information and belief, Defendant disputes that the 2015 Purported Comparative Statement does not satisfy the requirements of the Lease and is thus ineffective. 74.97. DHU lacks an adequate remedy at law. 75.98. By reason of the foregoing, DHU is entitled to an order and judgment declaring that the 2015 Purported Comparative Statement is null and void and of no force and effect. AS AND FOR A FIFTH CAUSE OF ACTION 17
AS AND FOR A FOURTH CAUSE OF ACTION (Breach of Contract) 76.99. DHU repeats and realleges each and every allegation set forth in paragraphs 1 through and including 7698 above, with the same force and effect as if fully set forth herein at length. 77.100. The Lease provides, among other things, that DHU is responsible only for its pro-rata share of operating expense escalations. 78.101. Defendant breached the Lease by, among other things, charging and collecting from DHU the Projected 2015 Purported Escalation Charge, which projection substantially exceeded the Escalation Charge for which DHU is liable pursuant to the Lease. 79.102. Defendant further breached the Lease by, among other things, charging and collecting from DHU Purported Escalation Charges for the operating years of 2012, 2013 and 2014, which Defendant knew were substantially higher than the amount authorized by the Lease. 103. Upon information and belief, the 2016 Purported Projected Escalation Charge also includes charges not authorized under the Lease. 104. Defendant further breached the Lease by purporting to charge DHU 2016 Purported Projected Escalation Charges that exceed 110% of the 2015 Purported Escalation Charge. 80.105. Defendant s breach of the Lease has damaged DHU and is expected to cause DHU additional damages that cannot yet be ascertained. 81.106. By reason of the foregoing, DHU is entitled to a money judgment as against Defendant in an amount to be determined at trial, together with statutory interest. AS AND FOR A SIXTH CAUSE OF ACTION AS AND FOR A FIFTH CAUSE OF ACTION 18
(Breach of the Covenant of Good Faith and Fair Dealing) 82.107. DHU repeats and realleges each and every allegation set forth in paragraphs 1 through and including 82106 above, with the same force and effect as if fully set forth herein at length. 83.108. Implied in the Lease is a duty upon Defendant to act in good faith and deal fairly with DHU. 84.109. Upon information and belief, Defendant breached that implied covenant of good faith and fair dealing by, among other things, charging DHU and collecting the Projected 2015 Escalation Payments and issuing the 2015 Purported Comparative Statement and Rent Demand with knowledge that DHU was not responsible for any expenses in connection with the Construction Project. 85.110. Defendant further breached the implied covenant of good faith and fair dealing by, among other things, charging and collecting from Purported Escalation Charges for the operating years of 2012, 2013 and 2014, which Defendant knew were substantially higher than the amountamounts authorized by the Lease. 86.111. Upon information and belief, Defendant s actions were willful, malicious, and solely intended to harm DHU to Defendants benefit. 87.112. By reason of the foregoing, DHU is entitled to a money judgment as against Defendant in an amount to be determined at trial, and an award of punitive and exemplary damages. AS AND FOR A SEVENTH CAUSE OF ACTION AS AND FOR A SIXTH CAUSE OF ACTION (Expenses and Attorneys Fees) 19
88.113. DHU repeats and realleges each and every allegation set forth in paragraphs 1 through and including 88112 above, with the same force and effect as if fully set forth herein at length. 89.114. Pursuant to Article 5(n) of the Eighth Lease Modification Agreement between the parties, dated May 2003 (the Eighth Modification ), Article 38(A)(10)(D) of the Original Lease was amended to read as follows: If the Tenant s Proportionate Share for any Operation Year charged to an collected from Tenant shall exceed the correct Tenant proportionate share for that Operation Year by seven (7%) percent or more, Landlord shall repay the excess amount collected to Tenant with interest based on LIBOR calculated from the time of Tenant s payment, and Landlord shall pay to Tenant all reasonable costs and expenses (including reasonable auditor s and attorneys fees) which Tenant incurs in conducting any audit regarding such Operation Year and in obtaining a refund of such overpayment. (emphasis added) 90.115. Upon information and belief, the overcharge of the Subject Escalation Charges exceeded seven percent of the amount lawfully due by DHU. Accordingly, DHU is entitled to a judgment as against Defendant for its reasonable auditors and attorneys fees in connection with this action. follows: PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully demands entry of judgment, as against Defendant, as (1) On the First Cause of Action, a judgment: a. declaring that the 2015 Purported Comparative Statement unlawfully includes expenses for which DHU is not 20
responsible, and is therefore null and void and of no force and effect; b. declaring that DHU does not have to make any Escalation Charge payments in connection with any structural-related improvements or replacements and/or the Construction Project; and c. declaring that DHU does not have to make any further payments in connection with the 2015 Purported Escalation Charge, and/or any prior Escalation Charge statements issued by Defendant to DHU and/or any 2016 Purported Projected Escalation Charge, until the correct amount of such charges have been determined following a full and complete audit of Defendant s operating expense records. (2) On the Second Cause of Action, a judgment: declaring the Rent Demand to be null and void and of no force and effect; (3) On the Third Cause of Action: a. temporarily, preliminarily and permanently enjoining Defendant and/or its affiliates, agents, attorneys, employees and anyone acting on its behalf or under its control from taking any steps to terminate or purport to terminate DHU s tenancy or the tenancy of DHU s subtenant, commencecommencing an action or a summary proceeding, or otherwise regainregaining possession of the Subject Premises, based upon DHU s failure to make certain payments demanded in the 2015 Purported Comparative Statement and/or any prior purported Comparative Statements; b. enjoining Defendant, its agents, attorneys, employees, and anyone acting on its behalf or under its control from taking any steps to regain or wrongfully interfere with DHU s possession of the Subject Premises; (3)(4) On the ThirdFourth Cause of Action, a judgment declaring that the 2015 Purported Comparative Statement is null and void and of no force and effect; (4) On the Fourth Cause of Action, a money judgment as against 21
Defendant in an amount to be determined at trial together with statutory interest; (5) On the Fifth Cause of Action, a money judgment as against Defendant in an amount to be determined at trial together with statutory interest; (5)(6) On the Sixth Cause of Action, a money judgment as against Defendant in an amount to be determined at trial, and an award of punitive and exemplary damages; and (6)(7) On the SixthSeventh Cause of Action, a judgment as against Defendant for Plaintiff s reasonable auditors and attorneys fees in connection with this action. Dated: New York, New York September 15December 6, 2016 NEWMAN FERRARA LLP Attorneys for Plaintiff 1250 Broadway, 27th Floor New York, New York 10001 (212) 619-5400 By: Lucas A. Ferrara Jarred I. Kassenoff 22