Never break the contract: Lawsuit points to “No Stevie Nicks” clause
Building owner pulls plug on intercom work by GateGuard
Lawsuits, they will come and they will go.
A wacky “no Stevie Nicks” clause figures in a suit by landlords claiming they never broke a contract (never broke a contract) with a proptech startup.
The landlords allege that GateGuard, an automated doorman and intercom service, began replacing intercoms with its own systems at several of their multifamily buildings without permission.
The landlords — entities associated with Kobi Zamir — assert that they never entered into an “enforceable” contract to install GateGuard’s intercoms at 22 properties. Their lawsuit, filed in Manhattan Supreme Court, cites terms in the agreement that range “from untenable to simply preposterous,” including one about the Fleetwood Mac singer.
“You agree to never play any Stevie Nicks song in, near, for, or around any member of our team, or on any of our devices or networks,” the clause read. “She really ruined that band.”
The startup’s terms and conditions also bar canceling agreements with GateGuard for 10 years.
The lawsuit details heated exchanges between GateGuard founder Ari Teman and Big City Realty, the properties’ manager. In one email, Teman allegedly called the landlords’ attorney a “stupid clown” and “a tool” and stated, “It’s always the scummy Israelis.”
The complaint maintains that a Big City Realty employee was merely price shopping when he communicated with GateGuard, but that the startup, without authorization, sent a receipt to BCR and then commenced work on several properties, including 408 West 129th Street. A copy of the receipt, detailing the pricing for the work and the BCR employee who filled out the order form, is an exhibit in the lawsuit.
GateGuard counters that the BCR employee placed the order online in February and even expressed excitement about it at a trade show in April, and acknowledged as much in an affidavit. The startup argues that the landlords demanded in July that installation cease. Teman charged that they are trying to get out of the deal because the rent stabilization law enacted in June severely limited how much landlords can raise regulated rents to pay for improvements.
Ariel Reinitz, an attorney for GateGuard, said his client had not yet been served with the lawsuit and that the complaint was merely an attempt to intimidate Teman. He said that the reference to Nicks was merely an “easter egg” meant to break up a long, legal document. He compared it to Van Halen’s ban on brown-colored M&Ms backstage, a well-known condition in the rock band’s tour rider.
Reinitz said GateGuard includes many clauses aimed to protect it — based on past experience — against clients looking to skip out on their obligations.
“Ari put together a set of terms that were necessary to keep his company running,” he said.
Reinitz also pointed to the timing of the lawsuit, which was filed July 18, a little over a month after the passage of the Housing Stability and Tenant Protection Act of 2019. He said the complaint was likely motivated in part by the landlords’ attempts to make up revenue they can no longer get under the new law by flipping rent-stabilized units to market-rate.
Teman wouldn’t comment on the case specifically, but noted that while his company has many great clients, some slumlords “play games when it comes to paying the bills.” He also pointed to changes to the rent-stabilization law.
“Now that landlords can’t raise rents, they are turning around and screwing their vendors at a whole new level,” he said. “New York is going to see severe harm to the vendors and laborers in New York.”
An attorney for the landlord, Simcha Schonfeld, said the rent law played no role in the episode.
“That’s nothing more than a wild fantasy,” he said. “They came into our properties and literally started ripping out our existing intercoms.”
He expected Teman to be served with the lawsuit soon.
Teman has previously complained about owners evading paying up. In July he was arrested on federal bank fraud charges, stemming from accusations that he deposited 27 counterfeit checks totaling $297,000 at a bank in South Florida. At the time, Teman blamed the charges on “notorious” landlords who owed GateGuard money and made “false accusations and used fraudulent chargebacks” on “remotely created checks (RCCs, aka ‘pre-approved drafts’) which they had authorized prior to the transactions — the same terms of service agreed to by hundreds of other satisfied customers.”
GateGuard has tried to appeal to landlords struggling with the new rent law. Last month it blasted out an email highlighting how its technology could help building owners identify illegal Airbnbs and sublets as well as opportunities for vacating and then combining adjacent rent-stabilized apartments to set a new rent.
“GateGuard AI Doorman Intercom will help you identify which units are most-likely open to moving out (or being evicted!),” the email stated.
On Wednesday, Tamen noted that some landlords are paring down their management staff to cut costs.
He also doubled down on his feelings about the first woman to be inducted into the Rock and Roll Hall of Fame twice.
“If you look at Fleetwood Mac, they were a much better band before,” Teman said. “Then she came, and it became your mother’s light FM station.”