Town Residential founder Andrew Heiberger filed an application for a restraining order and a preliminary injunction today against his investment partner at the firm, Joseph Sitt.
The restraining order request, along with an accompanying injunction petition, is the latest development in the ugly battle between the two partners. Late last month Sitt terminated Heiberger’s contract as CEO. The two each own 50 percent of Town, which launched in 2010 and now has more than 600 brokers and 10 offices.
Today’s development is an attempt by Heiberger to prevent Sitt from making any decisions regarding Town without his consent and to stop Sitt from forcing a sale of Heiberger’s stake in the company. It would also allow Heiberger, who has been shut out of Town’s Irving Place headquarters, back into his office.
Heiberger also claimed that Sitt seized his emails and his assistant’s and removed him as an authorized bank signatory for the company, causing “irreparable harm” to the firm.
“Defendants have not and cannot cite any authority to justify their thuggish tactics,” Heiberger said in his restraining order request, which was filed in New York State Supreme Court.
But the latest court documents also provide the first real look at why Sitt terminated Heiberger. According to Sitt’s termination letter, which was included in today’s court filings, Heiberger failed to repay Thor its investment within the three-year timeframe that the two agreed upon in 2011.
“Thor has made capital contributions of $10.4 million, and has received no distributions or preferred return, let alone a return of all of its investment,” the letter states.
Sitt also said in his termination letter that Town did not meet the financial targets it was required to in order to get its 2014 budget approved by Thor. On a more personal front, Sitt alleged that Heiberger paid for unapproved expenses, including a personal driver he allegedly hired and charged the company for retroactively without permission. In addition, Sitt accused Heiberger of making financial commitments to employees, brokers and vendors without Thor’s approval and making plans to open new offices without informing Sitt.
In today’s court filing, Heiberger denied all of Thor’s accusations, arguing that he made all financial information relating to Town available to Thor.
Among other things, Heiberger’s restraining order is an appeal to deny Sitt the right to buy him out of his stake at Town for its “book value,” the value of the stake minus intangible assets and liabilities. Presumably, the book value of the firm would be substantially less than what the company could sell for on the open market.
Thor also alleged that Heiberger fraudulently induced Thor to made an unprecedented capital call in February 2013 to meet the firm’s payroll, when it turned out that the payroll had already been met. And Thor claimed that when it demanded Heiberger enforce a non-compete agreement for a former employee, Heiberger directed the company’s attorneys to back off.
While the employee was not named in the termination letter, Town filed suit against its former new development chief, Reid Price, last year, claiming he owed the firm nearly $500,000 and breached a non-compete agreement by accepting a job offer from rival Douglas Elliman. That litigation is ongoing.
Heiberger said he only directed the attorneys to back off from the non-compete because they’d advised him that there was very little chance of success.
“Mr. Heiberger knows full well that his agreement provided for his termination in numerous events – many of which occurred — and it is unfortunate that he has chosen to go down this path,” said a spokesperson for Sitt. “Town is a special place full of some of the hardest-working, most talented professionals in the business, and they deserve to be fully supported in all of their efforts. We will not be distracted by Mr. Heiberger’s wrong-headed and selfish litigation, and will stay focused on Town’s ascent to the top of the residential brokerage business.”
Attempts to resolve the dispute between he and Sitt were made as late as today, he claimed.
Heiberger alleges in the restraining order request that Sitt assured him in recent conversations that he would be restored as company CEO and that his termination notice would be rescinded. Based on those assurances, the company issued a press release telling its staff that the dispute would soon be resolved, he said. However, no reasonable settlement has been reached.
In the meantime, Town has already begun to see major agent departures. Earlier this week, Patty LaRocco, one of the firm’s top-producing brokers, decamped to Elliman with her five-person team.
Heiberger did not respond to a request for comment.