The Real Deal New York

Cuomo asks judge to dismiss Rushmore suit

May 17, 2010 11:43AM
By David Jones

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alternate textThe Rushmore and Gary Barnett

New York State Attorney General Andrew Cuomo filed a motion Friday to dismiss a last-minute lawsuit to block the return of $16 million in escrow funds at the Rushmore condominium, arguing that developers Carlyle Realty Partners and Extell Development cannot use federal courts to resolve a local dispute. The judge added that they failed to appeal the ruling in state Supreme Court, which is the normal procedure to appeal an AG ruling.

Cuomo’s office noted that lawyers for Carlyle and Extell, operating under the name CRP/Extell at the Upper West Side project, never challenged the AG’s authority to handle such matters during the 14-month investigation and never once complained about a lack of due process, during multiple face-to-face meetings with the AG’s office.

The move by CRP/Extell, wrote assistant AG Andrew Meier, who is representing Cuomo in the case, was done merely to deny the purchasers “rights of rescission and the return of their deposits to which they are entitled based upon the plain language of the plan that the plaintiff itself created and promulgated, simply because it is unhappy with the results of the process — not because the process was unfair.”

In April, the AG ordered that CRP/Extell refund deposits to 41 buyers at the Rushmore, a 289-unit condo at 80 Riverside Boulevard at 66th Street. The AG agreed with buyers that the developer missed a Sept. 1, 2008 deadline to close its first unit, however the developer argued that it planned to offer refunds based on a Sept. 1, 2009 rescission date that would have allowed a one-year window for late construction.

Lawyers for CRP/Extell filed suit in U.S. District Court last Monday asking a federal judge to block the release of the escrow funds and asked the court to overturn the rescission order by Cuomo as a violation of the developer’s 14th Amendment rights. They argue that the 14-month review by the AG did not allow CRP/Extell to cross examine the buyers to reveal their motives behind seeking refunds for their deposits. CRP/Extell has argued that the buyers are using an erroneous rescission date to back out of their condo contracts amid a credit crunch and panic in the real estate market.

In a memorandum issued Friday, lawyers for the developers argued that the buyers failed to ask for immediate rescission in September 2008, but waited until 2009 to see how the market would recover from the credit crisis.

“The determinations thus permitted the purchasers to do precisely what the 15-day window is designed to prevent them from doing — namely, wait to decide whether to exercise a rescission based on unfolding market conditions, how those conditions might affect the market value of a unit at issue and whether the passage of time was making it less advantageous to the purchaser to follow through with the promises it made in the purchase agreement,” wrote attorney Edward Normand, who represents the developers.

Individual spokespeople for the Carlyle Group and Extell were checking on a response, but officials were not immediately available for comment. A spokesperson for Stroock & Stroock & Lavan, the escrow agent and author of the Rushmore offering plan, declined to comment.

Attorney Richard Cohen, who represents 33 of the 41 buyers that filed complaints, agreed that the developers never complained about the process and noted that Extell never corrected the alleged “typo” despite amending the original offering plan 15 times over a two-year period.

A hearing on the preliminary injunction request is scheduled for tomorrow in Manhattan federal court.

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