A judge has dismissed a lawsuit brought by independent broker Chaim Katzap against the former owners of Lower East Side housing development Knickerbocker Village, commercial real estate services firm Studley and Studley executive managing director Woody Heller over a commission relating to the 2007 sale of the complex to Apollo Real Estate Advisors.
The litigation, which has been ongoing since 2007, came to a close Sept. 22 when a judge tossed out the suit by Katzap, who had been hired to find a buyer for Knickerbocker Village, which up two whole city blocks and bounded by Catherine Street, Monroe Street, Market Street and Cherry Street, on a non-exclusive basis by Irene Pletka, partial owner of Cherry Green, a holding company that owns all shares of Knickerbocker. The case was dismissed on the basis that Katzap “never introduced Cherry Green to Apollo, the ultimate purchaser,” and had been acting as a “dual agent” for both the seller and Taconic Investment Partners, a bidder for the property, without fully disclosing his relationship with Taconic to Knickerbocker, according to the decision. Katzap was seeking $20 million in fines and damages.
“The decision underscored the importance of making full disclosure in real estate brokerage,” Henry Bergman, the attorney with law firm Moses & Singer, which represented the defendants in the suit, told The Real Deal.
In the suit, Katzap claimed he was hired by Knickerbocker to find a buyer in 2006. By September 2007, however, past the expiration of his non-exclusive contract with Knickerbocker, the complex was sold to Apollo, which was identified as a potential purchaser by Studley, which had also been brought on by Knickerbocker to help analyze strategic alternatives to a sale and identify potential purchasers, the decision said.
As The Real Deal previously reported, Apollo bought a controlling interest in KVI Mezz Corp., the company that owns the 1,590-unit complex, for $150 million in 2007, according to city Department of Finance records, but later brought on Taconic, who lost to Apollo in a bidding war over the property, as a minority investment partner. Taconic’s part ownership of Knickerbocker after the fact was used by Katzap in an attempt to prove he was owed a commission, suing the former owners for the commission and Heller and Studley for allegedly interfering in his deal.
“He didn’t bring the buyer and he didn’t have a contract, much less an exclusive, with the seller,” Heller told The Real Deal. “This sort of frivolous lawsuit hurts the entire brokerage community.”
In her decision, the judge took issue with Katzap’s allegedly purposeful lack of transparency in his dealings with Knickerbocker.
“During the facilitating of a real estate transaction, a broker owes a duty of undivided loyalty to its principal. If the duty is breached, the broker forfeits his right to a commission, regardless of whether damages have been incurred,” she wrote.
Katzap confirmed that he would appeal the decision, but declined to comment further as litigation is ongoing.
“We are appealing the stupid decision by a stupid judge,” Katzap told The Real Deal before hanging up abruptly.
Pletka did not respond to requests for comment.