Successfully defended private real estate investment trust in complex, multiparty fraud action

In early 2004, the tenant under a long-term ground lease for the midtown office tower located at 380 Madison Avenue, brought a complex fraud claim against the landlord (a private real estate investment trust owned by two prominent pension funds) as well as a number of other entities and individuals who had been involved in the lease since its inception in 1989. The complaint alleged massive fraud in the formation of the lease such that the lease required the tenant to pay “unconscionably high rent”. The complaint also sought to exercise an option to purchase under the lease, which option had expired approximately eight years before the action was brought. The parties (including the landlord, represented by Bruce Paulsen) moved to dismiss the complaint on its face and the landlord also moved to enjoin an attempt to “close” on the expired option. The motions were successful, as was an accompanying motion to sanction the plaintiffs for bringing a frivolous action. The judge sanctioned the tenant and stated that the case was brought in “egregious bad faith.” The amount of sanctions has yet to be determined, but may be one of the largest sanctions awards in the history of New York State.