August 24, 2017

I brand my firm as a sophisticated landlord and tenant litigation shop. Branding is a good thing. But, the truth is, we do a fair amount of regular ol’ real estate and commercial litigation. Here’s a recent saga for you. 

Sometimes real estate investments don’t work out as well as planned.(1) Sometimes developers encounter delays, costs rise, extra financing becomes needed. At those times, investors, who anticipated big returns, may become disgruntled and seek to pressure the developer by bringing a lawsuit.

We have such a case, where the disgruntled investor sought to gum up the works by seeking a temporary and preliminary injunction directing the developer to escrow a million dollars from an impending closing. The million just happened to be the amount the investor had invested in the project.

So the investor, unbeknownst the developer’s counsel—us—convinced a Brooklyn Supreme Court that it was entitled to a temporary injunction—without notice to our office—directing the developer to set aside $1M from an impending sale of a $1.4M unit. The only problem was that the mortgage financing on the project required that the closing proceeds be used to pay down the existing mortgage. In other words, if we did not get the injunction quickly vacated, the developer would be in danger of losing its hard-earned sale.

One of our key arguments was that the plaintiff was not likely to prevail because the agreement he claimed entitled him to an injunction was never actually signed by our client. Without our opposition, the plaintiff was able to convince a judge that the unsigned document was the actual agreement, when, in fact, it was only a draft, and the actual agreement gave no ownership interest in the property, only distributive interests, which only come into play at the conclusion of the project!

After approximately 72 harrowing hours, we got in front of the justice and convinced her that the injunction should be vacated. A few days later, the sale occurred, allowing the developer to fulfill its contractual obligation to pay down the loan and no escrow was set aside for the benefit of the plaintiff.

The lesson here for parties and their attorneys is that when your adversary seeks an injunction you need to be quick on your feet and get right to court to oppose.

Respectfully submitted,

Michelle Itkowitz

(1) Details changed to protect the innocent.