May 11, 2010 4:59 PM
Stroock's Alleged $16 Million Typo
Posted by Zach Lowe
Stroock & Stroock & Lavan is in a curious position in a dispute between buyers and developers of a 41-story condo project along the Hudson River in Manhattan. Condo buyers who have about $16 million in a Stroock-controlled escrow account want that money returned and claim a one-digit typo in the condo offering documents authored by an attorney at Stroock allows them to get out of their contracts and take back their deposits. The New York state attorney general's office agrees. In April, AG Andrew Cuomo ordered the developers, a combination of Carlyle Realty Partners and Extell Development, to return the money.
To date, they have not done so, and the buyers have no idea where their money is, according to one buyer's lawyer. Instead, the developers did something unexpected on Monday: they sued the NY AG, saying he should not have ordered them to fork over the $16 million because Stroock's error is meaningless and should carry no legal weight, according to The Real Deal, a real estate publication.
Right in the middle of all this is Stroock, the firm that drafted the initial condo offering documents on behalf of Carlyle/Extell. In a statement released to The Am Law Daily via a spokesperson, the firm says it still has "a good, cooperative relationship" with Extell. And yet Extell has sued the attorney general and is arguing that an innocent error by Stroock in the paperwork could cost the developers big-time cash. Stroock is likely rooting hard for Extell to win its case against Cuomo. Why? Because according to Marc Held, a Brooklyn-based lawyer for a key buyer, Extell might turn around and sue Stroock for malpractice, if the developer loses its case against Cuomo and has to fork over all that money.
The background: In the 732-page offering document for the Rushmore (not just a great movie, apparently!), Carlyle/Extell included a clause that said buyers could get their deposits back if the first closing in the building did not occur by Sept. 1, 2008. Problem: That date was supposed to read Sept. 1, 2009, according to Carlyle/Extell. The first closing didn't take place until February 2009--after the botched date but before the one the developer says it intended to include in the offering document. A buyer (or, more likely, a buyer's lawyer) noticed the error, and suddenly several buyers rushed to get their deposits back. Some wanted out of the building, but others simply wanted to renegotiate a better price given the collapse in the housing market. Certain buyers have argued that the 2008 date was the one the developers intended, or, if it actually was a mistake, it is a meaningful one the developers should not be able to get out of, according this piece in The New York Times.
Last month, Cuomo's office issued its ruling that the buyers were entitled to reimbursement of their deposits. And Monday, the developers sued Cuomo in federal district court in New York to get that ruling overturned. The developers have retained Boies, Schiller & Flexner for the federal case. Edward Normand, a partner at Boies Schiller, did not return messages seeking comment. A Simpson Thacher & Bartlett team is advising Carlyle/Extell in a separate state court proceeding, court records show. Barry Ostrager, the lead Simpson partner on that matter, did not return a message seeking comment.Make a comment