Itkowitz Obtains Settlement of Fraudulent Inducement Case
April 2012 Settlement of Interest
475 Building Company, LLC v. Nottingham Capital Management LLC, et al.
(United States District Court, Southern District of New York)
(United States District Court, Southern District of New York)
Itkowitz represented 475 Building Company, LLC, the landlord of an office building located at 475 Park Avenue South, New York, New York 10017 (the “Building”) in a federal lawsuit against Nottingham Capital Management, LLC (“Nottingham”), a Delaware limited liability company for the purpose of managing investment funds and a related entity Petroleum Equipment, Inc, a Delaware corporation (“Petroleum”). Nottingham was Plaintiff’s commercial tenant in the Building. 475 also sued the members of the Nottingham LLC. 475 claimed Nottingham, Petroleum and its principals induced 475 to enter into a lease dated August 11, 2010 which provided for the payment of base rent of $201,875.00 per annum (payable at $16,822.92 per month), plus additional rent. As a part of the Lease, Plaintiff was obligated to provide Nottingham with five (5) months of “free rent” following the Commencement Date – i.e., through January 31, 2011 – and required 475 to pay broker’s commissions in the amount of $35,929.30 as well as provide a “build-out” of the Premises at 475’s expense. Following the commencement of the tenancy, and during the final month of free rent, Nottingham, through its counsel informed Plaintiff that Nottingham had discontinued its business; that it had no assets; that it would not be paying any rent going forward; and, that it wished to terminate its Lease early. Nottingham never paid any rent, and ultimately vacated the Premises.
Plaintiff commenced a diversity action by the filing and service of a Summons and Complaint dated February 1, 2011 in the United States District Court, Southern District of New York, for breach of contract as to Nottingham, and various other causes of action, including fraudulent inducement and under the Debtor Creditor Law, against Nottingham, Petroleum, and the individuals defendants Steiner and Pilson.
475 sued Nottingham for unpaid rent totaling $670,787.17, plus 9% prejudgment interest from January 11, 2011, the date of Nottingham’s breach, through present, for a total of $744,325.54. 475 also sought attorney’s fees under the Lease.
Defendants moved to dismiss 475’s other causes of action sounding in fraud and under the Debtor Creditor—although not moving to dismiss the breach of contract cause of action—which 475nvigorously opposed.
In support of its fraud and Debtor-Creditor causes of action, 475 alleged that Pilson fraudulently represented to Plaintiff in August 2010 that Defendants Steiner and/or Petroleum Equipment, acting as “Sponsor” of Nottingham, had “committed $1.5 million dollars to Nottingham Capital” for “operating expenses” providing a bank statement for the operating account of Petroleum, showing a balance of $1,482,350.28 and a Nottingham balance sheet showing $1,500,000, “Total Equity” of $1,033,579.84.
By these representations and documentation, 475 alleged it was induced to believe that Nottingham was a financially viable and secure tenant. Based upon the representations and documentation collectively provided by the Defendants, 475 entered into the, under which 475 provided Nottingham with five (5) months of “free rent” and further required Plaintiff to pay broker’s commissions in the amount of $35,929.30 as well as provide a “build-out” of the Premises at 475’s expense. As the expiration of the free rent period approached Nottingham informed 475 that it had discontinued its business; it had no assets; and it would not be paying any rent.
Believing it simply incredible that Nottingham was suddenly “asset-less” just five months after it purportedly had shareholder’s equity of over $1 million – somehow spending more than $1.5 million on legitimate operating expenses, especially since Nottingham never commenced operating its business during this period., 475 sought relief in Court.
While the motion to dismiss was pending and discovery ongoing, the parties entered into a court sponsored mediation with Magistrate Judge Henry Pittmanon April 4, 2012. The case then settled with the terms of the settlement deemed confidential.
