Judge dismisses CRP/Extell case, orders release of Rushmore deposits

A federal District Court judge dismissed a lawsuit by Carlyle Realty Partners and Extell Development against Attorney General Andrew Cuomo and ordered the release of $16 million in escrow deposits to buyers at the Rushmore condominium.

The combined entity, CRP/Extell, filed suit against Cuomo in May after he allowed 41 buyers to back out of their contracts at the condo, at 80 Riverside Boulevard. CRP/Extell argued that Cuomo deprived them of their 14th amendment rights when he ordered the rescission of the contracts.

Judge George Daniels sided with the AG, who contended that the proper forum for an appeal was a so-called Article 78 lawsuit in New York State Supreme Court, and that federal court had no jurisdiction over the matter.

“Under Article 78, CRP/Extell has the right to Have A State Court determine that the New York AG’s determination ‘was made in violation of lawful procedure, was affected by an error of law or was arbitrary or capricious,” Daniels wrote in the order. “If a material issue of fact is raised, CRP/Extell would be entitled to a full trial of the disputed issues.”

An Extell executive, who asked not to be named, noted that Daniels ordered the escrow agent, Stroock, Stroock & Lavan, to refund the deposits within 30 days, unless a New York State court grants a stay on the release of the funds. The executive would not comment on whether the company plans to Ask The Supreme Court for such a stay.

Within the past month, a federal appeals court denied a request by CRP/Extell to block the release of the funds, leading to a behind-the-scenes effort by the AG to urge Daniels to order the release of the money. Stroock asked the federal court to tell it what to do because CRP/Extell officials instructed it not to release the funds last month based on the assumption there was an automatic stay.

CRP/Extell has claimed all along that the buyers took advantage of a “scrivener’s error” in the offering plan, which stated the buyers must be granted rescission of their purchases if the first unit sale did not close by Sept. 1, 2008. CRP/Extell claimed that the true deadline was Sept. 1, 2009, but lawyers for the buyers have disputed the claim that there was a scrivener’s error and claim that CRP/Extell intentionally set a September 2008 deadline to encourage sales at the condo. Carlyle wasn’t immediately available for comment and nor were Gary Barnett, president of Extell and lawyers for the buyers and Stroock.