Judge orders release of Rushmore escrow funds

By David Jones | May 18, 2010 06:30PM

The Rushmore and Gary Barnett

A Manhattan federal judge today ordered the immediate release of $16 million in escrow deposits at the Upper West Side’s Rushmore condominium at 80 Riverside Boulevard, after rejecting a temporary restraining order request by Extell Development and Carlyle Realty Partners.

The developers, operating under the name CRP/Extell, filed suit earlier this month to overturn an April ruling by state Attorney General Andrew Cuomo, arguing that they were denied due process rights because they were not allowed to cross-examine the 41 buyers, who are seeking their money back, under oath.

U.S. District Court Judge George Daniels rejected CRP/Extell’s argument after more than two hours of presentations during which he repeatedly questioned the developer’s lawyers as to what specific evidence they didn’t have that would require depositions or additional discovery in court.

“You have to establish for me that there is something out there that you did not already have in your hand,” Daniels said.

CRP/Extell has maintained for months that a “scrivenor’s error,” or typo, led it to mistakenly offer rescission to the buyers if they failed to close the first contract by Sept. 1, 2008, instead of 12 months later on Sept. 1, 2009, which is what they say they really intended.

Lawyers for the development group argued that they wanted to question whether the buyers relied on a Sept. 1, 2008 deadline in the Rushmore offering plan before invoking the missed deadline in order to get their deposits back.

Lawyers for the AG argued that they asked CRP/Extell for evidence of an actual typo, and no evidence was provided. The judge asked lawyers for CRP/Extell whether the original authors of the offering plan, Stroock & Stroock & Lavan, would come forward with evidence that a typo did occur, and they said that Stroock was in a “bad position” because of the error and would likely require a subpoena to turn over any evidence.

The judge disputed the contention that there was a “scrivenor’s error” but said if there was any error it was a unilateral error, because the lawyers did not negotiate the offering plan with anyone before it was presented.

The judge also asked assistant AG Andrew Meier whether any drafts were submitted during the 14-month review, and he replied that there was an earlier draft with a Feb. 1, 2008 first closing and rescission date, with no 12-month window included.

Lawyers for the buyers said they were pleased with the judge’s ruling, and argued that CRP/Extell’s claims were less than credible.

“We’re pleased that the judge saw through the plaintiff’s dubious arguments to bring them to the federal court and dismissed all of the claims and ordered the immediate release of the escrow funds,” said Richard Cohen, attorney for 33 of the 41 buyers.

Lawyers for the AG declined to comment, and referred questions to the AG’s press office.

Lawyers for CRP/Extell declined to comment on the case, as they rushed to either appeal the ruling to The Second Circuit Court of Appeals or go back to The State Supreme Court for an Article 78 proceeding, which is the usual path of appealing an AG escrow dispute. An Extell spokesperson said the company had no comment.

Attorney Andrew Weltchek, who was not involved in the case, said the likelihood of CRP/Extell winning the case on appeal was slim.

“Sometimes even a good lawyer has a bad case,” he said. “It’s not going to get any less difficult in the Second Circuit [Court].”