The Real Deal New York

Rushmore legal fight nears finale

September 27, 2011 02:20PM
By David Jones

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Clockwise from top left: Extell Development President Gary Barnett, the Rushmore and Carlyle Group co-founder William Conway
Attorney General Eric Schneiderman’s office faced off with lawyers
representing Extell Development and Carlyle Realty Partners yesterday as
a Manhattan Supreme Court judge heard what may be the final arguments
in a long-running effort to overturn a $16 million escrow dispute at the
Rushmore condominium.

Judge Anil Singh was urged to overturn the April 2010 ruling by former
AG Andrew Cuomo, who ordered the developers to refund $16 million
in deposits to 41 buyers
at the luxury condo building at 80 Riverside
Boulevard close to 64th Street.

The case centers on whether the developers missed a Sept. 1, 2008 deadline
to close the first sale at the 289-unit building, or whether a scrivener’s
error in the offering plan mistakenly included the wrong date, which the
developers insist should have been Sept. 1, 2009, giving them a one-year
window to finish construction and close the first deal.

Lawyers for the developers insist that the AG exceeded his authority by
ordering the refunds on an obvious typographical error, adding that the
true intent of the buyers was to negotiate better deals months after the
market collapse of September 2008. In addition they say if the AG allowed
them to cross examine the buyers under oath, they would expose their true
motivation.

“What if they say we had no intent at all [to close by Sept. 1, 2008]?,” Boeis
Schiller & Flexner attorney Edward Normand, representing the developers,
asked the court. “They never thought about the rescission date at all.”
The Rushmore legal fight has become a centerpiece of the New York
condominium market since the collapse of Lehman Brothers, as hundreds
if not thousands of buyers have filed complaints with the AG or in state
and federal courts, demanding they be released from their contracts. Extell,
considered one of the top developers in the city, has argued that the buyers
would have never demanded refunds if the market remained strong.

Assistant AG Lewis Polishook, representing Schneiderman’s office, told
the judge that this was not a scrivener’s error, because the offering plan was
unilaterally drafted by the developers and their lawyers, and not mutually
negotiated with the buyers. In addition, the AG asked the developers to
provide some evidence during the AG’s review for evidence as to when
and how the alleged scrivener’s error occurred and they failed to provide
any affidavits, or any other documented evidence
.

Lawyers for the buyers said the hearing was another example of Extell using
the court system to forestall the rights of the buyers and noting that the
developers has refused several court orders to refund the deposits.

“We were disappointed that after years of defeat at the attorney general’s
office and in front of four other judges over a two-year period,
Extell continues its bad faith, by arguing to a new judge that the buyers
would be getting a windfall if they were to get back their down payments,”
attorney Richard Cohen, representing more than 30 of the buyers, told The
Real Deal.

He added that “the down payments are and continue to be the property of the
buyers, and by all accounts, Extell has already sold most of the apartments
that were in dispute.”

Carlyle Group declined to comment, through a spokesperson, as did the
AG’s office. In addition, Extell declined to comment.

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