Clawing Back Free Rent and Suing Guarantor Brings About Settlement (“Catch me if you can!”)
August 2, 2020
In this story Itkowitz PLLC represented another big Manhattan commercial owner. The tenant was a very large company. In this case, we were brought in as litigation counsel by transactional counsel (not in my firm). We work this way often. I do not do transactions, so transactional lawyers feel comfortable referring me work. Sometimes the transactional counsel is the main lawyer in the picture, advising the client and negotiating on their behalf. I advise on litigation options and file (or defend against) the lawsuit if necessary. Here, litigation was necessary. The parties spent months going in circles and could not settle, and the arrears were mounting.
First, I ascertained the proper course for clawing back the $2.6M in free rent that Tenant received at the beginning of the lease, and I did that. Then I prepared a lawsuit for the clawed-back rent and the substantial arrears. I filed the lawsuit against the Guarantor. This Guarantor was not protected by the NYC Admin Code § 22-1005, as amended (the moratorium on personal liability), because:
- Tenant was not required to cease serving patrons food or beverage for on-premises consumption or to cease operation under executive order number 202.3 issued on March 16, 2020;
- Tenant was not a non-essential retail establishment subject to in-person limitations under guidance issued by the New York State Department of Economic Development pursuant to executive order number 202.6 issued on March 18, 2020; and
- Tenant was not required to close to members of the public under executive order number 202.7 issued on March 19, 2020 (barber shops, hair salons, tattoo or piercing parlors etc.).
The Guarantor was a funny character. He decided that it would be a great litigation strategy, as well as great fun apparently, to dodge service of process. First, the server went to the Guarantor’s offices. The employee on duty there refused to accept the papers on Guarantor’s behalf. Fair enough.
Then the server went to the Guarantor’s home address, listed on the guaranty. The Guarantor’s wife told the server that she was not willing to accept the papers on Guarantor’s behalf (again, fair enough). Rather, she said, the Guarantor was at another address…about 60 miles away, quarantining, and would the server please go there. We looked up the address and were satisfied that guarantor had a link to that property, so (at that point anyway) it did not seem like a wild goose chase. The server drove to the other address. It turned out to be a quiet, empty summer home.
The next morning the process server sat in his car, across the street from Guarantor’s home, waiting for Guarantor to emerge. A big truck pulled up in front of the Guarantor’s house just as the server saw the door beginning to open, blocking the server’s view! By the time the server locked his car and ran around the truck, the server could only glimpse the Guarantor escaping down the street.
The server had previously left his phone number with the Guarantor’s wife, and later that day, the Guarantor called the server! He said, “Hey I am done quarantining, and I was actually planning to have dinner in Atlantic City tonight, would you care to join me?” You simply can’t make this stuff up. By that point, the server caught on that he was being played. The server replied, “I am sorry sir, I have dinner plans of my own this evening, and I cannot join you in Atlantic City, as much as I would like to. Is there a convenient time and place for me to deliver these court papers to you?” To that the Guarantor delightedly replied, “Catch me if you can!” and hung up.
The server returned the next day to the Guarantor’s office, where the receptionist took one look at the papers, smiled and said, “Sure, I will make sure Mr. [Guarantor] gets these. Thanks!” Apparently that employee of Guarantor’s had not been briefed on the big game. Thus, Guarantor was served.
It was sort of amusing. The juxtaposition of a very serious commercial lawsuit with the Guarantor’s antics.
Anyway, the case settled on mutually beneficial terms before Guarantor even filed an answer. The lawsuit (possibly coupled with the fun had by Guarantor) got the parties over their stalemate. I am glad they worked it out.
What’s the lesson? There really is none. Every day is a new adventure.