June 21, 2020

In this story Itkowitz PLLC represented a big Manhattan commercial owner. The Owner’s building was largely sublet to a multi-floor co-working company. One of the co-working company’s subtenants, a very small company with a very small space, sued everybody for everything. The Sub sued the tenant (sub-landlord) and my client, the Owner. The Sub sued for:

• All the rent paid during the Pandemic back;
• Moving expenses to go to another space;
• Lost profits; 
• Compensation it claimed to be entitled to for a private cause of action it invented pursuant to the Governor’s Executive Orders; and
• Specific performance…for…something…I could never figure out for what.

It was unhinged. It was way too much. Instead of simply not paying the sub-rent and negotiating to break the sublease (which tenant would have allowed), Subtenant instead paid all its sub-rent and then made a global thermal nuclear war lawsuit against tenant and the building’s owner (my client).

It was also not my client’s problem because the Sub had zero privity of contract with Owner. So, I had to answer the lawsuit. While doing so, among many other things, I noted that the Sub was a Connecticut company[fn1], not authorized to do business in New York State, and thus not even allowed to sue in a New York court. I e-filed a very scathing answer on behalf of Owner. Then I sent a courtesy copy to the Sub’s attorney and asked nicely (really) to be let out of the case. My point was that not only was the lawsuit purposeless and crazy, but the Sub had kicked a sleeping giant by suing the Owner. 

The first court appearance was a routine thing where the court was trying to get the parties to mediate. The clerk in charge of the mediation was ready to give up after about five minutes. But I was not having it. I was not getting off that zoom conference until the Subtenant set the Owner free. The Subtenant let us go; he discontinued the lawsuit against the Owner. The story ended as well for my client as could possibly be expected. 

I asked the Sub’s attorney, why didn’t your client simply stop paying the rent and break the sublease early, like a billion other co-working subtenants during the Pandemic? The lawyer pointed out that his client was a good guy and liked to pay his debts. But then why do a huge lawsuit? Anyway, I wish the remaining parties in the lawsuit luck, hopefully they can settle it.

What’s the lesson? Less is often more for small commercial tenants trying to survive the Pandemic.

Respectfully submitted, 

Michelle Itkowitz

fn1. Some details changed to protect the innocent