The Real Deal New York

Small victory for Extell, Carlyle as judge blocks release of Rushmore funds

May 21, 2010 04:45PM
By David Jones

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Gary Barnett and the Rushmore

A federal appeals court has blocked the release of $16 million in escrow funds to buyers at the Rushmore condominium on the Upper West Side, allowing the developers to further argue their case against Attorney General Andrew Cuomo before a three-judge panel.

Lawyers familiar with the case said the panel review may not happen until July.

Judge Richard Wesley ordered a temporary stay on the release of funds, which include the down payments of up to 41 buyers that were awarded refunds after a 14-month escrow dispute with Carlyle Realty Partners and Extell Development, operating under the name CRP/Extell, at the site.

Cuomo’s office ruled last month that the developers failed to hold a first closing of an apartment contract by Sept. 1, 2008, and were therefore required to offer rescission to buyers who wanted out of their contracts.

Nearly a month after the ruling, CRP/Extell filed suit against Cuomo in U.S. District Court, arguing that Cuomo’s review violated their constitutional rights by not allowing them the chance to cross-examine the buyers.  

CRP/Extell previously argued that the true rescission deadline was Sept. 1, 2009, and that a single-digit typo led to the wrong date being entered into the Rushmore offering plan. But Judge George Daniels rejected that argument earlier this week, saying that CRP/Extell committed a unilateral error and failed to correct the date until after buyers filed complaints.

Lawyers for CRP/Extell told the appeals court that Daniels failed to ask them what impact releasing the funds would have on the developers, according to court documents. Lawyers for Cuomo argued that existing case law does did not allow an injunction if monetary damages were the only harm, and that CRP/Extell failed to demonstrate any further potential harm if the funds were released.

Lawyers for 33 of the buyers told The Real Deal developers are still trying to use the courts to delay the release of funds.

“After almost three hours before Judge Daniels, the judge properly lifted the stay, commenting that he thought the sponsor’s case was “weak, but imaginative,” said Richard Cohen, attorney for the buyers, in an e-mailed statement. “By going to the Court of Appeals, we feel that the sponsor is only delaying the inevitable, which is to properly return the purchasers’ down payments, in accordance with the well reasoned decision of the Attorney General’s office.”

Extell, Carlyle Group and lawyers for CRP/Extell declined to comment.

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