The Real Deal New York

Former Pier 17 tenants sue Howard Hughes over allegedly fake membership dues

Nathan’s, other retailers claim landlord billed them for defunct group for 15 years

May 05, 2015 12:30PM
By Rich Bockmann

From left: Sandeep Mathrani, Pier 17 at the South Street Seaport and David Weinreb

From left: Sandeep Mathrani, Pier 17 at the South Street Seaport and David Weinreb

A group of former tenants at the South Street Seaport’s Pier 17 is suing General Growth Properties and the Howard Hughes Corp., claiming the landlords intentionally squeezed the retail shops dry so they could throw them overboard in an attempt to redevelop the pier.

About a dozen businesses, including the pier’s Nathan’s Famous hot dog restaurant and the Simply Seafood eatery, filed a lawsuit in New York State Supreme Court late last week alleging that GGP and Howard Hughes collected member dues for a defunct merchants association for 15 years, then took the businesses to court when they stopped making payments.

According to the lawsuit, pier operator the Rouse Company, which GGP acquired in 2004, established a merchant association for the pier in 1986 and collected dues that were to go toward advertising, promotions and special events meant to enhance business at the pier.

But when the association expired in 1998, Rouse continued to collect dues, the suit claims. The plaintiffs claimed the landlords even went so far as to hold phony officers elections and have the tenants endorse checks ostensibly paying for the association’s programs.

The former tenants claim the ruse was an attempt to force them out so the landlords could redevelop the pier.

“In fact, the landlord entered into hundreds of lease and/or license agreements with other tenants on Pier 17 pursuant to which no Association contributions were required at the same time it was pursuing the plaintiffs in court seeking termination of their leases alleging their failure to pay association dues,” the complaint reads.

“The landlord did this to enhance its own rent collections at the expense of the Association and/or in furtherance of defendants’ redevelopment plans,” it continued.

GGP spun Howard Hughes off as a standalone company in 2010.

A spokesperson for Howard Hughes said the courts have already heard and dismissed the merchants’ claims in a prior action.

“The Plaintiffs’ attempt to recycle their losing claims in this new action is both frivolous and legally baseless, and the Howard Hughes Corporation will be moving to dismiss them,” the spokesperson wrote in an email.

The tenants became aware that the merchants association had for years been defunct when they filed a lawsuit in 2013 fighting their evictions.

They are seeking unnamed amounts in damages, including the funds they paid into the association, lost profits and punitive damages.

In return for not requiring dues from certain tenants, the landlord benefited by obtaining a greater rent from those tenants from which it did not require dues, the businesses claim.

Howard Hughes is currently planning an overhaul of the Seaport, which includes redeveloping the Hurricane Sandy-damaged pier and a controversial residential tower on the waterfront.