Judge paves way for $7 million rent suit against Kate’s Paperie’s on 57th Street

By Katherine Clarke | March 26, 2012 02:00PM

In its quest to shave off excesses and shake off a number of inherited leases that were too large and too expensive under its new ownership, Kate’s Paperie may have made one misstep.

The stationery store chain, which recently made a return to Soho, opening a pop-up shop in 2,300 square feet at 435 Broome Street, is struggling to fight a lawsuit from the Feil Organization for allegedly skipping out on a 15-year lease agreement at Feil’s building at 140 West 57th Street.

Last Week A Supreme Court judge denied a motion to dismiss the suit, filed by Feil in July, which states that Kate’s prematurely vacated the building in January 2011 (its lease, signed in 2002, was supposed to run through 2017) and owes up to $7 million — $457,000 in unpaid rent since January 2011and $6.2 million for the total balance of the lease through 2017— to Feil. The retail space at the building appears to be 5,000 square feet, according to PropertyShark.com.

Angelica Berrie, the wife of late toymaker Russell Berrie, purchased Kate’s, which was in financial difficulty, from founder Leonard Flax in 2008, The Real Deal previously reported; Berrie has since been restructuring the company to become more cost effective, terminating leases on Third Avenue, West 13th Street, Greenwich, Conn. and at the aforementioned space on West 57th Street.

“They were in a fortunate position with leverage to get out of those leases in very well-situated locations,” a source previously told The Real Deal.

The judge denied Kate’s motion to dismiss the 57th Street suit, according to court documents, on the basis that the lease does not “conclusively establish that no cause of action exists for future rents,” meaning Kate’s may have to pay up for the remaining five years’ rent on the lease.

Neither the Feil Organization nor Kate’s Paperie was immediately available for comment.