Slifka v Paul, Weiss, Rifkind, Wharton & Garrison, LLP 2024 NY Slip Op 32788(U) August 9, 2024 Supreme Court, New York County Docket Number: Index No. 155742/2023 Judge: Melissa A. Crane is yet another in the vast universe of legal malpractice cases associated with real estate, and in this case in a big way. Joseph Slifka constructed a building at 477 Madison Avenue and in 1954 made provisions for his wife and children through trusts. Today, the trusts and the individuals are mired in litigation over the sale of that building and the ground lease associated with it.
The details are too involved to set forth in this blog post, but here is a short portion of them. “Joseph constructed a commercial office building on land at 4 77 Madison A venue (the Property), and in 1954, he divided the property interests in two – the Fee, comprised of the land and the building, and the Leasehold, which is the ground lease (id.,~ 45). Prior to June 2019, nominal defendant 477 Madave Holdings, LLC (Madave Holdings), a New York limited liability company, held title to the Fee (id., 10, 40 and 48; NYSCEF Doc No. 19, Bardavid affirmation, exhibit 10). 4 77 Madave Management Corp. (Madave Management), a Delaware corporation (NYSCEF Doc No. 20, Bardavid affirmation, exhibit 11), owns a 0.5% membership interest in Madave Holdings (NYSCEF Doc No. 1, ~ 10). Nominal defendant 477 Madave Associates (Madave Associates) (together with Madave Holdings, the Nominal Defendants) (the Nominal Defendants with Madave Management, collectively, the Madave Entities), a New York general partnership, owns a 99.5% interest in Madave Holdings and was the ground lessor for the Property (id., 39 and 49). Joseph, Sylvia, Alan and Barbara were Madave Associates’ original partners (id.,~ 74). Upon his death, Alan’s partnership interest transferred to his children’s trusts and to Alan’s Trust (id.,~ 76). Madave Associates’ present partners and their ownership interests are as follows: Barbara, individually (33.5%); Barbara’s Trust (16.5%); Alan’s Trust (16.5%); Randy’s Trust (11.1667%); Michael’s Trust (11.1667%); and, David’s Trust (11.1667%)1 (id.,~ 50). The partnership agreement dated November 5, 1984, provides that the managing partner shall make the decisions affecting the partnership, including the sale of any assets, the proceeds of which would be distributed in accordance with each partner’s proportionate share (id., 39, 69 and 77). Barbara is Madave Associates’ sole managing partner (id., 2-3 and 70).”
“Defendants contend that plaintiffs are not proper derivative plaintiffs for three reasons. First, defendants assert that Randy is motivated by personal animus. Randy has repeatedly sued, or threatened to sue, Barbara related to the sale of the Property and the allocation of the proceeds. After having recovered the Arbitration A ward, Randy has now sued Hecht with respect to the allocation (NYSCEF Doc No. 12 at 40-45). As recently as July 14, 2023, Randy, through counsel, demanded that Barbara transfer $19,307,649.58 to Barbara’s Trust and $12,871,766.10 to Alan’s Trust to make them “whole” and urged her to “retain counsel . . . so that we can resolve this amicably without the need for further proceedings” (NYSCEF Doc No. 18, Bardavid affirmation, exhibit 9 at 2). Second, defendants contend that plaintiffs are situated differently from the Nominal Defendants’ other owners because Randy’s Trust has been made whole, and therefore, plaintiffs lack an incentive to pursue claims on behalf of the other owners. Third, those other owners have settled their claims with respect to the allocation and have released defendants from liability.”
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