SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ----------------------------------------------------------------X In the Matter of the Application of : Motion Seq. No. 2 STEPHEN FREIDUS, Plaintiff, : - against - Index No.: 653897/2014 : AFFIDAVIT IN OPPOSITION TO : PLAINTIFF'S MOTION FOR : SUMMARY JUDGMENT & IN SUPPORT OF DEFENDANTS' LEONARD GERO, ANDOVER EQUITIES, and.. CROSS MOTION ANDOVER EQUITIES, LLC : FOR SUMMARY JUDGMENT Defendants : X STATE OF NEW YORK ) COUNTY OF NEW YORK ) ) ss.: LEONARD GERO, being duly sworn, deposes and says: 1. I am one of the Defendants in the action commenced by Plaintiff Stephen Freidus ("Plaintiff" or "Freidus") to judicially dissolve Defendants Andover Equities (the "General Partnership"), and Andover Equities LLC, ("Equities" or the "Company"). 2. I am one of the Company's two (2) members, with Freidus being the other general member. 3. I submit this affidavit in opposition to Freidus's motion for summary judgment seeking an order that the Company be judicially dissolved pursuant to Section 702 of the Limited Liability Company Law ("LLCL"). 4. Freidus's motion should be denied because material issues of fact exist regarding whether Freidus's desire to sell the Company's real property and a future, potential deadlock 1 1 of 26
over management of the Company's real property located at 3445 Jerome Avenue, Bronx, NY (the "Property") render it not reasonably practicable to carry on the Company's business. 5. Specifically, there is no "the impending management crisis" as Freidus alleges because I will have the right as the Manager of the Company to, well, continue to manage the Company after the expiration of the 2013 Settlement Agreement, which afforded me the "exclusive right to manage" the business of the Company as it pertained to the Property through December 31, 2018. A copy of the 2013 Agreement is attached hereto as Exhibit A. 6. I am the manager of the Company because I have acted as the manager of the Company's business with respect to the Property since Freidus retired from Andover Realty Inc. ("Andover"), the real property management company we operated together for more than thirty years, which provided the management of the Company's business with respect to the Property since we acquired it. 7. Further I have made it known to Freidus that I would be interested in buying his membership interest in light that he wants to sell the Property because I so desire to continue to operate it and improve upon its value. 8. However, Freidus has never formally offered me to purchase his membership interest and, after hearing him testify at his deposition in April 2018, it does not appear that he is so inclined to do so, preventing him from getting the very remedy that he has made clear that he wants, which is to "disentangle" from me completely. A copy of Freidus's 2018 Deposition is attached hereto as Exhibit B. (Freidus 2018 Dep. 203) 9. Further, it appears that Freidus has manufactured the alleged deadlock in an attempt to circumvent the provision(s) of 2013 Agreement, which as I understood it at the time 2 2 of 26
we entered into it, precluded the sale of the Property and any of the other properties that I paid Freidus close to $200,000.00 to get the exclusive right to manage. See Exhibit A. 10. Further, I submit this affidavit in opposition to Freidus's motion for summary judgment seeking to dismiss my counterclaims because they are supported by documentary evidence, sworn testimony, and relevant legal authority. 11. In addition, this affidavit is submitted in support of my Cross Motion for summary judgment pursuant to CPLR 2215 for an order 1) dismissing Freidus's causes of action against me in its entirety. 12. Should the Court determine that judicial dissolution is appropriate under the circumstances my attorneys have told me of a relatively new remedy available to the Court that would permit me to buy out Freidus's interest as an alternative to judicial dissolution. 13. Please understand that I do believe, from the circumstances over the last eight years, that the deadlock alleged by Freidus, even if true, does not by itself make it not reasonably practicable to carry on the business of the Company, which is a real estate holding company that owns and operates the Property. 14. However, I am not a lawyer, but I do know that I want to continue the business of the Company and that I would be willing to buy Freidus's interest out subject to having some form of proceeding in Court that would establish what the value of his interest would be. 15. This alternative to judicial dissolution, seems very fair and equitable because it provides me what I want (to buy his interest) and gets Freidus what he wants (to "get out of each other's hair" ). A copy of Freidus's 2016 Deposition is attached hereto as Exhibit C (Freidus 2016 Dep. 108:24-25) 3 3 of 26
A. BACKGROUND 16. Freidus and I met in the 1960s and worked together at Helmsley & Spear, eventually going into business together in 1966 when we formed Andover Realty Inc. ("Andover"), a real estate brokerage firm of our own. 17. Andover had a dual purpose, which was 1) its brokerage activities and 2) to be a real estate management company for real properties that Freidus and I owned together. 18. Over the years, we acquired a number of properties that we jointly owned equal interests in via the various owning entities thereof. 19. All of the properties that we jointly owned were managed by Andover (or its New Jersey affiliate, Andover Realty of New Jersey, Inc. (collectively, the "Andover Entities")) of which is the Property was one. 20. The Property is a ground floor commercial space with a triple net lease tenant in place that currently pays $410,000.00 per annum in rent, but also pays the real estate taxes, and is responsible for may other aspects that owners of commercial property would otherwise be obligated to incur the expenses for, such as paying the water bills for the Property, which further make the Company extremely profitable for both Freidus and I. Formation The Company 21. Freidus and I originally acquired the Property and held it in a general partnership called Andover Equities. However, on the advise of one of the attorneys we employed at the time we created an limited liability by the same name and transferred ownership of the Property to it. 22. We never entered into any sort of operating agreement because I would never think that we would have had to define our respective rights and responsibilities in the Company 4 4 of 26
as at that time Freidus and I had been working together in the successful Andover Enterprise for more than thirty years. 23. Freidus and I always used Andover to manage the business of the Company with respect to the Property, which included leasing, re-financing, capital improvements, repairs, collecting rent, maintain books, paying taxes, etc. 24. One reason, among many others, that we used Andover to manage the Property was because it provided additional insulation from the potential personal liability that can arise when owners (like Freidus and myself) manage the properties they in our individual capacity, or, in this case, as general partners, owned prior to transferring ownership to the an LLC structure. NO DEADLOCK EXISTED WHEN THE COMPLAINT WAS FILED AND THERE IS NO DEADLOCK TODAY Freidus's Retirement & Negotiations Concerning Management 25. In December of 2010, Freidus voluntarily retired from the Andover Entities, leaving me to oversee the day-to-day management and operations of the real properties we jointly owned (the "Andover Enterprise") 26. At the time of his retirement, Freidus and I, in addition to our respective interests in 45th Street, jointly owned six (6) real properties via the owning entities thereof: A) 197 Bleecker Street, New York, NY OWNED BY 197 Bleecker St Associates LLC. Property Type Floor Commercial - Three (3) Story Residential Building with Ground B) 3445 Jerome Avenue Bronx, NY OWNED BY Andover Equities LLC Property Type - One (1) Story Commercial Building 5 5 of 26
C) 29-27 Queens Plaza North, Long Island City, NY OWNED BY H&S Equities LLC and LG 41" Avenue Associates LLC (as tenants in common) Property Type - 8 Story Office Building D) 355 Michele Place Carlstadt, NJ OWNED BY - Park Avenue Associates Property Type - 1 story 33,500ft2 industrial building, net leased by Rosenthal Crystal E) 1955 Paterson Plank Road Secaucus, NJ OWNED BY Towers Associates LP Property Type - Warehouse Retail Store (land) triple net leased by Home Depot. 27. All of the aforesaid owning entities of the aforesaid real properties were profitable, some of which were highly profitable, yielding a combined annual revenue in excess of $4.5 Million dollars at the time of Freidus's retirement. 28. During much of 2011, Freidus (remaining an equal owner in equity with respect to the Andover Entities) and I attempted to negotiate both the manner by which brokerage commissions earned through the Andover Entities' operations would be distributed among us and the manner and amount of compensation I would receive in the form of a salary from Andover in light that Freidus was no longer actively participating in the management and brokerage services, but continued to benefit from the business thereof. Freidus's Actions for the Judicial Dissolution of the Andover Entities 29. Unfortunately, we could not come to an agreement concerning our negotiations specific to the Andover Entities and, without warning, on October 26, 2011, Freidus filed an action pursuant to the Business Corporation Law of the State of New York (NYBCL) for the judicial dissolution of Andover. See Freidus v. Gero et al. Index No. 652949/2011 6 6 of 26
30. Freidus withdrew his initial action for judicial dissolution of Andover, only to then file a second action about a year later seeking the same relief on November 21, 2012. See Freidus v. Andover Realty, Inc. et al., Index No. 654051/2012 31. About six months later, Freidus filed an identical action in the Superior Court of New Jersey for the County of Bergen for the judicial dissolution of Andover NJ, to separate our business interests, or as Freidus reasoned his basis for that action and ones that would follow to be because " [he] didn't want to be associated with [me] anymore". See Exhibit B. (Freidus 2018 Dep. 46:13-19). Impetus for the May 2013 Settlement & Management Agreement 32. After almost a year and a half of litigation with respect to the actions to dissolve the Andover Entities, we came to a settlement with the terms thereof being memorialized in an Agreement entered into on May 6, 2013 (the "2013 Agreement"). 33. The 2013 Agreement provided the mechanism for Freidus to redeem his stock for the amounts owed to him from the Andover Entities, less his liabilities, and granted me the an exclusive right manage the real properties Freidus and I co-owned. See Exhibit A. 34. The 2013 Agreement was not "painstakingly negotiated" as Freidus so contends in his affidavit in support of the instant motion for summary judgment. See (Freidus Aff. 9 Doc. No. 42). Rather, we were able to negotiate and finalize the terms of the May 2013 Agreement in a period of time that was about ten (10) days. Gero's Exclusive Right to Mange 35. According to Article II, Sec. 1(c) of the 2013 Agreement "[I] either personally or through an entity, shall continue to manage the Properties in the same manner as they have been 7 7 of 26
and which both Freidus and Gero acknowledge they have come to benefit from for the past twenty (20) years." See Exhibit A. 36. I understood Article II, Sec. 1(c) to permit me to negotiate and enter into leases concerning the real properties that Andover managed as set forth in Article III of the 2013 Agreement as well as to unilaterally make decisions concerning the day to day operations of those properties as Freidus admitted he had done when he was overseeing the New York operation. (Freidus. 2016 Dep. 16:17 to 17:4, 62:8-15, 63:13-17). My Request for Freidus to Amend The 2013 Agreement For Clarity and To Avoid Litigation Initiated By Freidus in the Future 37. I did not renege on the terms of the 2013 Agreement as Freidus so alleges in his affidavit in support of the instant motion for summary judgment. See (Freidus Aff. 9 Doc. No. 42). 38. Rather, and as I set forth in my affidavit filed in opposition to Freidus's motion to compel specific performance of the 2013 Agreement to effectuate the settlement regarding the Andover Entities, I merely sought to proactively obtain clarification concerning language set forth in the 2013 Agreement. I did so because I was concerned that, absent clarification, I believed Freidus would file yet another action against me for breach of the 2013 Agreement when I distributed bonuses that Andover historically directed to its employees and the employees of the owning entities. See (Pl. Ex. 7 - July 18, 2013 Gero Affidavit - Doc. No 34 at 36-39). 39. Although Article II of the 2013 Agreement sets forth the manner by which the Properties would be managed by Andover, Article III sets forth conflicting language that did not account for Andover's historical authorization for said bonuses to the employees of the Limited Partnership and those by Andover from the owning entity thereof. See Exhibit A. 8 8 of 26
40. Specifically Article III set forth that "No other fees or costs of any kind shall be charged for the management services". See Exhibits C. (Pl. Ex. 7 - July 18, 2013 Gero Affidavit - Doc. No 34 at $35). 41. My concerns as to Freidus using the aforesaid unclear language pertaining to bonuses as grounds to initiate and/or support further litigation were confirmed years later at his deposition in April of 2018 when he testified under oath that Andover's issuance of bonuses as so previously set forth herein were one of the actions that I engaged in that supported his allegations in the instant action. 42. Specifically, Freidus testified that I "took monies from the [owning entities] that [I] was not entitled to take" and that "partnership or LLC funds...were used to pay [my] unauthorized personal expenses, referring to the issuance of "the bonuses" as an example of both. See Exhibit B (Freidus 2018 Dep. 149:12 to 151:24, 239:2-5). 43. I approached Freidus with a proposal to clarify the 2013 Agreement, but rather than executing the requested amendment, he sought redress by way judicial order to compel finalization of the 2013 Agreement. 44. Oddly enough, Freidus testified under oath at his April 2018 deposition in the affirmative to the very same clarification that I requested of him some five years before. See Exhibit B (Freidus 2018 Dep. 150:16 to 151:2) 45. Further, Freidus never objected to the manner by which Andover directed the owning entities of our jointly held real estate holdings to issue bonuses over the last five (5) years in any of the five (5) actions for the judicial dissolution of the aforesaid owning entities he commenced, nor, as I recall, has he raised the issue to me directly other than at his April 2018 deposition. See Exhibit B (Freidus 2018 Dep. 150:16 to 151:2, 239:2-20.) 9 9 of 26
46. Unfortunately, Freidus, just as he had done concerning the negotiations pertaining to the redemption of his interest in the Andover Entities, remained unwilling to finalize any form of a division of our portfolio among ourselves. A copy of Gero's relevant portion of his April 2018 Deposition is attached hereto as Exhibit D (Gero 2018 Dep. 79:10-15, 81:21 to 82:7, 89:9-15) 47. I wrote Freidus an email (the "November 22"" Email") explaining my feelings and observations at that period of time, encouraging him that we should "separate our business interests once and for all" in an effort to thwart future litigation that I feared would occur and be initiated by Freidus if we could not finalize our efforts to divide our portfolio between one another. See Exhibit D (Id.) See (Pl. Ex. 11- November 22, 2013 Email - Doc. No. 40) 48. Freidus never responded to my November 22nd email, but rather and subsequent to receiving his buyout from the Andover Entities on November 26, 2013, filed an action approximately ten (10) days later on or about December 6, 2013 for the partition of an office building we jointly owned as tenants in common located at 29-27 Queens Plaza North ("LIC"). See H&S Equities LLC v. LG 41 ST Avenue Associates LLC Index. No.:22212/13 Freidus's Action for the Partition of 29-27 Queens Plaza North 49. Prior to Freidus's December 6th Of 1 November of 2013, had been encouraging me to consider and accept an offer from a large and well known real estate family in New York City that was interested in purchasing LIC. 50. As my November 22nd email represents, I believed in the "potential to sell LIC", but desired to finalize the division of our assets among one another as well so as to avoid further disagreements on matters in the future, such as in the case with the 2013 refinancing for 45th Street. 10 10 of 26
51. However, in an apparent attempt force me to accept an offer that I believed to be far lower than what we could achieve from further efforts to market LIC, Freidus filed for the partition of LIC. FREIDUS AND I NEGOTIATED A COMPROMISE - ENSURING NO DEADLOCK 52. Ultimately, Freidus and I agreed to a compromise, which we agreed to market and sell the LIC. 53. The offer that Freidus desired we accept from the aforesaid real estate family was $12.6million. 54. However, through the marketing efforts of Andover's personnel I was able to locate an alternate purchaser and negotiated a sale price of $15 million, which equated to some $1.4 million more than the offer Freidus wanted to accept. 55. Further, and because Andover was the sole broker on that transaction, I was able to negotiate that the purchaser pay Andover's commission, the result of which saved Freidus more than $100,000.00 on what would have been his 50% share of the commission to be paid to Andover, which is customarily paid by the seller. 56. Further, if the purchaser who made the offer of $12.6 million that Freidus strongly desired to take had been represented by their own real estate broker (as was the case with that specific purchaser) we both would have incurred further costs to pay not one, but two brokers. 57. Leading up to our acceptance of the $15 million dollar offer and for the period immediately following our acceptance of the offer and leading up to the closing, Freidus and I regularly communicated with one another concerning the finer points of the deal. 58. Though we each had our own respective attorneys concerning the LIC transaction, our individual attorneys worked together to negotiate a comprehensive purchase agreement with 11 11 of 26
the purchaser, one such joint negotiation effort occurring at Freidus's attorney's office where my attorney, the purchaser and his attorney, and Freidus engaged in more then a seven hour round table negotiation to finalize the purchase and sale agreement. 59. Although I was out of state at the time of the aforesaid round table negotiation, I was kept abreast regularly by my attorney and found the joint effort from all sides refreshing for a change. 60. It actually felt as though for the first time since Freidus retired, he and I were getting back to normal or, at the very least, starting to do so. 61. I communicated with Freidus frequently through the closing date, which occurred in April of 2014. 62. Both Freidus and I, along with our wives, attended the closing. 63. There was a was a pleasant atmosphere at the closing table, with our wives happily conversing and catching up, while Freidus and I commented lightheartedly at all the documents we had to sign. 64. Over the five or so months that followed the LIC closing Freidus and I communicated on matters pertaining to the Andover Enterprise, of which the Property is included in. 65. Although I had the exclusive right to manage the business of the Company as it related to the Property I did continue to keep Freidus informed to the extent that developments came up with the Property. 66. However, because the Property is triple net leased by a bank tenant the functions pretty much remained the same, which were, collecting rent, depositing rent, making sure that the tenant paid the semi annual real estate taxes, billing the tenant for any sort of expense that 12 12 of 26
they were required to pay under the lease, such as the NYC business development tax and water bill, but which I, through Andover, directed the Company to pay, billing the tenant generally the month thereafter for reimbursement to the Company. 67. All in all, the building has remained very profitable as it has been for more than the last ten years, achieving regular and stable distributions of income, of close to $300,000.00 per annum for the last two (2) years, split between Freidus and I as members of the Company. 68. When calculated this yields a profit margin in excess of close to (75%) on the average gross rental income of slightly more than $400,000.00 See (Pl. Ex. 16 - Company's Financial Statement - Doc. No. 44). 69. Although Andover and its staff are not perfect, for the most part, Freidus's requests for information and/or documentation are fulfilled to the extent that they can be and he remains free to come to the Property or its principal office located at Andover's office at 62 West 45th Street, New York, NY whenever he desires and as he is afforded the right, as a member of the Company. 70. As a matter of fact, Freidus, as recently as Friday September 7, 2018, came to the Andover's business address, which like the Property, is also managed by Andover and is another property in the Andover Enterprise that Gero and Freidus own equal parts therein. 71. Freidus arrived with his attorney, Ms. Fran Jacobs, Esq., apparently to tour the areas of the 45th understand, Andover's Executive Vice President, Steve Zang, was able to address. 72. Despite Freidus's allegations to the contrary as set forth in the Complaint and Amended Complaint and as so alleged in the instant motion for summary judgment, based on the previous sworn to statements made therein and as supported by documentary evidence, I have 13 13 of 26
not engaged in conduct that makes it not reasonably practicable to carry on the business of the Company. A copy of the Amended Answer & Counter Claims is attached hereto as Exhibit E. B. THERE IS NO PRESENT MANAGEMENT IMPASSE AND NONE ON THE HORIZON AS FREIDUS SO PURPORTS The 2013 Agreement Makes Gero the Manager of the Company 73. Subsequent to Freidus's retirement from the Andover Enterprise he dramatically became less and less involved with the day to day operation's of the Andover Enterprise. 74. Now, I will admit that the Property is, out of three properties that remain in that make up the Andover Enterprise, the least labor intensive to manage, that is until something arises which would not generally be expected, such as a necessary major capital improvement or repair that is not the responsibility of the tenant. 75. However, Freidus's withdrawal from the day to day operations of the Property needs to truly be examined in the context in the entire portfolio of the Andover Enterprise where, in the last five years, I am aware of only one other time than the recent September 7th visit that Freidus came to the 45th 76. I, by way of the authority conferred upon me by the 2013 Agreement, have handled all aspects of the Company's business, informing Freidus as I believe I am obligated to under the LLCL, when there is a major development at the Property, such as when negotiating the lease renewal in the summer of 2016, which resulted in an increase in net rent from $345,000.00 to $410,000 triple net. A copy of the Email Correspondence Concerning Updates In The Lease Negotiations In 2016 is attached hereto as Exhibit F. 77. Despite Freidus request to "handle the negotiations" I spearheaded them as it was my right to do so pursuant to the 2013 Agreement, but did keep him informed as to the 14 14 of 26
developments pertaining thereto, ultimately culminating with an initial increase in rent close to 19%! See Exhibit F. 78. Further, any request he made to me or Andover's staff for information were complied with. A copy of Responses to Freidus's Requests are attached hereto as Exhibit G. 79. As such, I was quite surprised when receiving Freidus's letter dated April 11, 2018 which advised that he would not elect to renew my exclusive right to manage the Property and the other real properties that make up the Andover Enterprise and further requested that we agree to appoint an independent management company to manage the Property until such time as it may be sold is something by the Agreement. See Freidus Aff. 11, (Pl. Ex. 10 - April 11th Letter - Doc. No. 37.) Gero's Right to Manage The Company After the Expiration of the 2013 Agreement 80. Further, although my "exclusive right to manage the [Property]" ends on December 31, 2018, my right to manage the Property does not. See Exhibit A Article II(1)(c). 81. Being a Member, I have the right to manage the Property as so explicitly conferred in the powers set forth in Sec. 4.1(a) of the LLCL. 82. However, because I currently have the exclusive right to manage by way of the 2013 Agreement and because I acted in the same fashion in managing the business of the Company with respect to the Property the close to three years that Freidus and I went with out a formal agreement in place, I am, by way of my conduct the manager of the Company as so permitted and conferred upon me by LLCL 401(b)(i). The Expiration of the 2013 Agreement is NOT Going to Cause an Inevitable Crisis 15 15 of 26
83. Freidus's assertions in his affidavit that a deadlock will occur on January 1, 2019, after expiration of the 2013 Agreement, are completely without merit and devoid of reality. See (Freidus. Aff. 12. Doc. No. 42) 84. Specifically, and as so previously set forth herein, as a manager of the Company I not only have the explicit right to perform all the acts of management that were conferred upon me by my actions and Freidus's inactions, but will continue to have that right after December 31, 2018. 85. I never gave any sort of waiver consenting to such action being taken with out a meeting by way of Freidus April 11* Letter, nor have he an I met and discussed his request. 86. To stand idly by on the "side lines" and do nothing would be a breach of my fiduciary duties as a the Manager that I must act for the best interest of the Company and its members, such as Freidus. 87. Thus, I am explicitly obligated to "not do any act detrimental to the best interests of the Partnership", which would include failing to collect rent, authorize and schedule repairs, pay the Property's bills, etc. See (Freidus. Aff. 12. Doc. No. 62). 88. While I have admitted that my exclusive right to manage the Property will expire, the "manner" by which I manage the property through Andover in accordance with Article II(1)(c) of the 2013 Agreement does not change as I have and will continue to manage the Property in the "same manner that Freidus and I have come to enjoy for the last twenty years" as the Company's manager as Freidus election to hire an independent management company only further demonstrates his unwillingness to materially participate as a member of the Company, or perhaps more appropriately defer his responsibilities to some one else, which given my position as manager, is by default me. 16 16 of 26
89. Just as I have done during the term of my right to exclusively manage the Property, I will consult Freidus on leasing, renewals, major repairs and improvements, and other relevant matters that we involved each other with when we were not only both owners of Andover, but as active members in the day to day business of the Company with respect to the Property. Freidus and I Do Not Have Completely Irreconcilable Views About The Company 90. There have never been any matters with respect to the Company that I can recall Freidus and I disagreeing on in the last ten (10) years. 91. Freidus and I do not have irreconcilable views about what should happen to the Company as he so purports in his affidavit. See (Freidus Aff. 10-12. Doc. No. 42). 92. However, where Freidus and I differ is in the method and manner that he has elected to employ to achieve his primary goal, which, according to his own deposition testimony is to "disentangle" from me entirely because he "didn't want to be associated with [me] anymore." See Exhibit B (Freidus 2018 Dep. 46:18-19, 203:2-5). 93. What Freidus fails to acknowledge in his own affidavit is that the I made it abundantly clear that I am interested in purchasing his membership interest because I want to continue the Business. 94. As such, I cannot understand why Freidus seeks judicial dissolution of the Company, when there really is no disagreement as to business of the Company other than that Freidus will not even entertain discussing me acquiring his membership interest. 95. However, Freidus's motivation for electing the course of judicially dissolving the Company to achieve his "ultimate goal and objective" to "disentangle" from me became evident at his April 2018 deposition where it became clear that it was nothing more than his own 17 17 of 26
personal greed to achieve the highest value for his Member Interest by way of the liquidation of the Property that motivated him to seek judicial solely to avoid what he considered would be applicable discounts that would be placed on his membership interest because has he testified to "nobody is going to give me full market value for a partial interest in the property". See Exhibit B (Freidus 2018 Dep. 201:12-23, 203:2-5.) 96. I can only assume that Freidus referred to those "past experiences" of having his interest in an owning entity of a real property being purchased at an "enormous discount" to relate to the two instances that I purchased his interest in owning entities that he and I had equal joint ownership interest in. 97. Specifically and almost two years ago, I purchased Freidus's interest in Towers Associates LP and Park Avenue Associates. 98. Towers Associates LP ("Towers") is a limited partnership that was organized under the laws of the State of New Jersey that owns a valuable triple net leased property as set forth previously in more detail in paragraph 26 herein. 99. Freidus and I were co-general partners in Towers up until February 2017 when, to resolve the civil action he commenced for the judicial dissolution of that entity in the Superior Court of New Jersey, negotiated the terms for a buyout of his interest. 100. After witnessing Freidus's testimony at his April 2018 deposition I can only conclude that he was not happy with the $4 Million dollar value that he agreed to be paid for his interest in Towers. See Exhibit B (Freidus 2018 Dep. 54:6-9). C. I Have NOT Used My Management of the Property to My Personal Advantage 101. First and foremost the assertions that Freidus's sets forth that I "have taken advantage of [my] management position...[where], as a triple net lease, there is little for [me] to 18 18 of 26
do as manager except collect the Bank's rent checks" are not only insulting, but within accordance with the historical operation of the Property for more then the last twenty years with Ridgewood as the Company's tenant (in one form or another as I recall the previous bank tenant either merged with or was acquired by Ridgewood). 102. Yes, the management of the business of the Company with respect to the Property is, right now, not that labor intensive. 103. However, when Freidus was still an equal owner in Andover before he retired and prior to entering into the 2013 Agreement, Andover assessed a five percent (5%) management fee on the gross rent collected from the Property. 104. That right, the very same management fee that Andover continues to assess on the gross rent collected from the Property, the only difference being is that Freidus no longer receives his share of the proceeds therefrom as he is no longer an owner of Andover. 105. However, in consideration thereof and as previously set forth herein, I did pay him close to $200,000.00 for the exclusive management term set forth in the Agreement. Thus, assuming the current of $410,000 had been in effect all five years of the 2013 Agreement (which it had not as only came into effect two years ago) the approximate total of management fees collected on the $410,000 over a five year period would be $102,500.00 or $20,500.00 per year, not included the 5% fee assessed on the taxes that the tenant pays, which Andover has done since managing the Property first when Gero and Freidus acquired it and assessed the same on all of the properties in the Andover Enterprise. 106. Compared to the $199,095.00 that I paid Freidus to redeem his shares in the Andover Entities, he still nets out by the better of $96,595.00! 107. However, that is the deal we made and I have honored it. 19 19 of 26
108. Unfortunately, I cannot say the same for Freidus who has filed the instant action as a way to circumvent the provisions of the 2013 Agreement that only permit and contemplate the partial sale of Freidus's membership interest as so previously set forth herein. See Exhibit A. I Have NOT Charged the Company More In Management Fees Than Andover is Entitled to Collect Under the 2013 Agreement 109. Andover, did not over charge the Company and 197 Bleecker Street Associates LLC, another owning entity of a property in the Andover Enterprise, $7,704.34.00 in excess management fees in 2017 as Freidus so alleges in his affidavit filed in support of the instant motion. See (Freidus Aff. 10-12. Doc. No. 42). 110. After reviewing Freidus's allegations pertaining to such an overcharge in 2017 I coordinated with Jeanette and uncovered that Freidus did not account for the management fee as so assessed on the total gross rent collected under the lease, which included the tenants' portion of the real estate taxes. 111. Further, and in accordance with Article III of the 2013 Agreement, Freidus and I were each to contribute and additional $50,000.00 towards the management services rendered by Andover, taken out of any of the owning entities that we each owned an equal 50% interest therein, for a combined total of 100% ownership of the entity. See Exhibit A. 112. We were to allocate the $8,333.33 among those entities that we jointly owned 100% of outright as so "determined by the accountants of the Properties", which came to be that Jeanette, as the COO and Blaine, as our accountant for more than twenty-five years, allocated as they saw fit. 113. As I reviewed the figures with Jeanette it became evident that Freidus had forgotten when reviewing the accounting statement from Blaine that, whereas Andover has always assessed a management fee on the gross rent received, including a tenant's portion of real 20 20 of 26
estate taxes paid, Blaine does not allocate the payment for taxes under the rental income for the entity. 114. Examining 197 Bleecker Street's 2017 financial statement for it become readily apparent where the first oversight from Freidus's review on the statement and inability to recall how Andover assessed its management fee arose, specifically where the statement shows that 197 Bleecker had $313,594.00 in "rental income" for 2017. However, in addition to the aforesaid amount classified as "rental income" Andover actually collected $340,550.00 in gross rental income, which included taxes paid by the ground floor commercial tenant of 197 Bleecker, the sum of which is $26,956.00 (the portion of taxes paid by the ground floor tenant). 115. When assessing the 12.4% management fee that was agreed to by Gero and Freidus when negotiating the 2013 Agreement on 197 Bleecker Street's aforesaid gross rent collected for 2017 and not the "rental income" per Blaine's financial statement, the management fee for 2017 is $42,228.20 for 197 Bleecker Street. 116. The difference between the actual management fee assessed on 197 Bleecker Street, being $42,228.20, and that which when 12.4% is assessed on the aforesaid "rental income" of $313,594, being $38,856.66, is $3,371.54. 117. When subtracting the $3,371.54 difference in 197 Bleecker Street from the purported total overpayment to Andover in 2017, specifically $7,704.34 the amount that Andover has been "allegedly" over paid at this point in the examination of Freidus's findings is $4,332.80 or, if rounding up $4,333.00 118. Moving on to 2017 Andover Equities "rental income" of $410,000, does accurately reflect the base amount and that which is included therein for taxes because Equities 21 21 of 26
is unique in that it is a triple net lease. Assessing the 5% management on the $410,000.00 yields a payment to Andover in the amount of $20,500.00 119. However, and as Freidus's notes in his own calculation the additional $100,00.00 management fee must now be assessed on the aforesaid properties. 120. Using the 2017 financial statement for Andover Equities we know that Equities was assessed a "Management Fee" of $59,833.00, which when you subtract the $20,500.00 5% management fee to Andover, yields an additional management fee paid to Andover by Equities in the amount of $39,333.00 (Equities Excess Fee Towards the $100k additional fee). 121. Using the 2017 financial statement for 197 Bleecker Street ("Bleecker") we know that Bleecker paid $107,228.00 in total to Andover in management fees (using the correct gross rent collected, not "rental income" not included amounts collected in real estate taxes). 122. Subtracting the actual 12.4% management fee of $42,228.20 paid to Andover on the $340,550.00 collected (inclusive of taxes paid by commercial tenant) yields and additional amount paid to Andover towards the aforesaid Gero and Freidus combined additional $100,000 management fee of $64,999.80. 123. Upon adding the $64,999.80 (additional Bleecker toward $100K) and the $39,333.00 (additional Equities toward the $100K) the sum paid by those two entities towards the additional $100k Gero and Freidus extra management fee yields $104,332.8 or, a $4,332.8 overpayment, or perhaps not? 124. Blaine has been classified part of Steve Zang's compensation (a bonus) that has paid to him through an entity he has and uses when effectuating services to the Andover Enterprise as a "management fee", which he assessed to Bleecker's management fee in the amount of $15,000.00. 22 22 of 26
125. Thus upon reducing Bleecker's $64,999.80 (additional Bleecker toward $100K) by the $15,000 bonus paid to Zang yields $49,999.80, which when added to Equities' $39,333.00 (additional Equity toward $100K) yields a sum of $89,332.8, which when assessed towards the additional $100K Gero and Freidus management fee comes up short by $10,667.00 (rounded to the nearest dollar). 126. Now, where is this may look like some creative accounting I assure you that is most assuredly not. 127. Andover had historically fixed bonuses and directed that owning entities of the properties in the Andover Enterprise pay them. See Exhibit B (Freidus 2018 Dep. 239) 128. As Jeanette and I tried to figure out why now Andover was owed money and where it was from I remembered that in November of 2016 I settled an action for judicial dissolution that Freidus filed against Park Avenue Associates in Bergen County New Jersey. 129. Just like Bleecker, and Equities, we owned Park Avenue Associates in equal 50/50 parts for a total of 100% and because of that Park Avenue Associates did prior to Freidus and I agreeing to settle where I purchased his interest in Park Avenue, becoming the owner of that entity and the commercial property it owned and leased to Rosenthal Crystal, stopped making contributions from that entity at that time because I wholly owned it, leaving the only two other entities from which Freidus and I could contribute from towards the additional $100K management fee to be derived from Equities and Bleecker. 130. Sure enough as Jeanette searched the books of the entities further, she discovered that, just as I had remembered, that because I had stopped making payments from all three aforesaid entities, no longer making payment from Park Avenue as of November 2016. 23 23 of 26
131. Thus, Andover is actually owed $10,667.00 and has not overpaid itself in the amount that Freidus calculated, the analysis of which I would have much rather had Jeanette explain to Steve over the phone had he just reached out to discuss the discrepancy with her as he has done when requesting other particulars with respect to the financial matter of the properties. 132. While Jeanette and I searched diligently for a copy of the check paid to Steve Zang, we have not been able to find it as of date because she was consolidating files during the summer and may have inadvertently got shuffled into a file or cabinet that it was not suppose. 133. If I or Jeanette are able to locate a copy of the check payable to Zang and/or the Park Avenue 2016 ledger I intend to forward to the relevant supporting documentation to Freidus to assure him that I did not intentionally overcharge the entities here and I own 50/50. COUNTER CLAIMS AND AFFIRMATIVE DEFENSES Freidus Breach of His Fiduciary Duty 134. Freidus failed to act in accordance with his duty to me as a member of the Company when he "shot from the hip" and as opposed to at least first offering me the opportunity to purchase his membership interest filed the instant action for judicial dissolution. 135. Now, even if he and I were able to market the Property as we did concerning LIC, any astute buyer will know from a mere search of the public record that we, by way of Freidus claims, and not by way of realty, appear to such a buyer to be the optimal types of owners alleged by Freidus to be in dispute to take advantage of and to use the alleged situation that Freidus depicts as leverage to purchase the Property at a significant discount. Freidus Breached the 2013 Agreement 136. Freidus, upon filing the instant action and the conduct that he has persisted to exhibit by way keeping the operation of Andover in a state of constant turmoil with respect to the 24 24 of 26
use of the instant action to circumvent the limitations on the sale of the Property during the term of the 2013 Agreement is in Breach of Article II(d) thereof. 137. Specifically, the instant action, if granted, will deprive the benefit that I bargained for with respect the management fees I intended to receive as per the 2013 Agreement and were material to the 2013 Agreement as the financial benefit thereof were why I entered into the 2013 and tendered the sum of close to $200,000 for Freidus in consideration thereof. 138. Now, Freidus, a party to the 2013 Contract, seeks to side step the terms he is bound by, by fabricating the instant deadlock to circumvent those provisions in violation and in material breach thereof. Equitable Remedy of Dissociation Is Available In New York 139. As I set forth in detail previously herein, I am inclined to and would like to purchase Freidus's membership interest, but he, as opposed to even offering it to me for sale, has sought to force the sale of the Property by was of judicial dissolution. 140. To me, it seems more equitable for both myself and Freidus that, if the Court does find that the alleged deadlock makes it not reasonably practicable to carry on the business of the Company with respect to the Property and, as such, is so inclined to order the statutory remedy of judicial dissolution, I believe that circumstances at bar, make the remedy of a court ordered buy out of Freidus's membership interest the more equitable remedy between the two, upon that is, some form of finding of fact to determine the value of Freidus's membership interest. 141. Thus, disassociation of Freidus's membership interest upon a court ordered buy out achieves both of our objectives if judicial dissolution is found to be appropriate under the circumstances. 25 25 of 26
142. In short, I get the opportunity to purchase Freidus's interest and he gets to sell his interest and "disentangle" from me entirely. CONCLUSION 143. For the reasons set forth in the herein and in the accompanying memorandum of law, I respectfully submit that there are not grounds for the dissolution of the Company. The Company functions in accordance to its purpose to operate the Property, with the sale thereof being just one of many other factors of the Companies purpose. Freidus and I are not deadlocked, but rather Freidus, as he has acknowledged, desires to disentangle from me completely, with a remedy to do so available to him that is not only more equitable than the dissolution of the Company, but which he may avail himself of, that is to sell his membership interest to me. His refusal to do so under the circumstances further evidences that should the Court find, contrary to Defendants arguments, that it is no longer reasonably practicable to carry on the business of the Company, that when deciding between judicial dissolution of the Company that I (as a member) want to continue and disassociation of Freidus by way of a compelled buy out of his interest in a company that he has no interest in continuing, makes the latter remedy the most equitable under the circumstances. 26 26 of 26