Breakups, bad neighbors and raw sewage: 2019’s juiciest lawsuits
WeWork shareholders, a Grammy-winning songwriter and sex shop neighbor all sued last year
Partnerships gone sour. Predatory recruiting. Fake default notices. A theft.
These were just a handful of the lawsuits filed by — and against — real estate players this year. One particularly rancid category? Toxic water and raw sewage leaks that permeated the swankiest of Manhattan homes.
In addition to run-of-the-mill complaints, a former employee sued WeWork over the co-working firm’s bungled IPO. The proposed class action — which could open the floodgates to future lawsuits — accused the board of breaching its fiduciary responsibilities and self-dealing. And it blamed SoftBank for its $9 billion bailout of WeWork at a “fire sale” price that rewarded co-founder Adam Neumann with a $1.7 billion exit package. Stay tuned for more fallout from that one.
Here’s The Real Deal’s list of the juiciest lawsuits in 2019.
Realogy vs. Compass
After years of bitter rivalry, Realogy slapped Compass with an explosive lawsuit in July accusing the SoftBank-backed firm of “predatory” poaching and unfair business practices. The complaint accused Compass of routinely engaging in “illegal schemes to gain market share at all costs and to damage, or even eliminate, competition.” It also accused CEO Robert Reffkin of personally soliciting Realogy to enter into a price-fixing agreement. The majority of the complaint’s 68 pages, though, detail Compass’ alleged habit of offering agents astronomical splits and advising them on how to circumvent their non-competes. Compass denied those claims and called the lawsuit an act of desperation by Realogy, which has seen its market cap shrink over the past two years. In November, Compass sought arbitration with Realogy.
Fighting Premier Agent… in court
After years of controversy, Zillow Group (and subsidiary Trulia) were slapped with a pair of class-action lawsuits alleging that its Premier Agent advertising program is “unfair” and “deceptive.” According to the suit, the program diverts buyers away from listing agents by allowing other agents to advertise their contact information alongside listings that aren’t their own.
The Trulia suit, filed in November, seeks $5 million in damages on behalf of Andrew Kim, an agent in Queens, and others. It was filed by Long Island attorney Spencer Sheehan, who in 2015 represented former subway vigilante Bernhard Goetz in an eviction proceeding. A few weeks later, Sheehan filed a second (and slightly more expansive) lawsuit against Zillow, comparing Premier Agent to “buying a billboard to advertise another real estate broker’s listing.”
A Chelsea sex shop floods neighbor with feces, condoms
There was nothing particularly sexy about the flood of raw sewage. But Sexy Boutique, located at 155 Eighth Avenue in Chelsea, was slapped with a $2 million suit from its neighbor, claiming the shop was flooding her townhouse with poop. Susan Haar, who owns and lives at 304 West 18th Street, said Sexy Boutique repeatedly flooded her basement and clogged its pipes materials including condoms, diapers and rubber gloves. According to the suit, Haar purchased the house at a foreclosure auction in 2010. She listed it in November 2018 — but 10 days later the basement became flooded with feces and sludge.
Lady Gaga and $300K missing from the oven
The Grammy-winning songwriter who penned Lady Gaga’s “Paparazzi” sued the Brodsky Organization, alleging the landlord stole hundreds of thousands of dollars from a safe hidden in his oven. In the suit, Robert Fusari said he stashed $300,000 in a heavy-duty safe in his apartment at 1 Columbus Place. When Brodsky evicted him from the Lincoln Square rental, $264,700 of the cash went missing. He sued to recover the cash — plus $1 million in damages. Fusari is no stranger to lawsuits. In 2010, he sued Lady Gaga for $30.5 million in unpaid royalties. (The suit was later dropped.) In 2015, he lost a lawsuit filed by a former colleague who said she helped discover Gaga. Fusari was ordered to pay $7.3 million.
The Besen-Doshi drama, continued
Citing “severe dissension and irreconcilable distrust,” investment sales broker Amit Doshi asked a court in 2019 to dissolve his partnership with Besen & Associates founder Michael Besen. The two had been sparring for more than a year, after Besen filed a $10 million lawsuit accusing Doshi of mismanaging the brokerage and several investment properties they owned together. He also alleged his former partner of setting up a secret “Doshi Account” that he used to take almost $1.5 million from the firm. Doshi denied the claims, alleging Besen was focusing on business outside of investment sales that generated “nominal profit, if any.”
In 2017, the firm closed $631.1 million in deals, according to an analysis by TRD. Amid the legal wrangling, business dropped to $321.1 million in 2018. Doshi soon left Besen & Associates for Meridian Capital Group.
In a wrinkle, Besen and Doshi’s former business partner Ram Gupta also sued, saying that he had equal ownership at two Bronx properties and wanted to sell the properties — a move Besen resisted.
Sears vs. Eddie Lampert
Sears sued former CEO and Chairman Eddie Lampert in April 2019 — six months after filing for bankruptcy — claiming that he and others made billions off the failing retailer.
According to the suit, Lampert and other shareholders sold off Sears assets and pocketed the proceeds, even as the retailer was sliding into a “death spiral” that ended in bankruptcy in October 2018. In January, a bankruptcy judge approved Lampert’s $5.2 billion takeover bid, which included plans to save 425 stores.
But a key issue in the lawsuit was a 2015 deal for Sears to sell 266 “premier” stores to Seritage Growth Properties, a REIT set up to oversee its real estate holdings. The 2015 deal allowed shareholders to invest in Seritage and for Sears to lease back stores from the REIT. The result, according to the suit, was $399 million transferred from Sears to shareholders, including majority shareholder Lampert. The purchase also undervalued the stores by $649 million, the suit claimed.
Two months after WeWork’s botched IPO, a minority shareholder filed a lawsuit accusing co-founder Adam Neumann, SoftBank’s Masayoshi Son and board members of self-dealing and unjust enrichment. In the suit, former WeWork employee Natalie Sojka lambasted Neumann’s $1.7 billion golden parachute. And it said SoftBank increased its stake in the company through a “fire sale.” The Tokyo-based conglomerate agreed to a $9 billion bailout of WeWork, valuing the co-working giant at $8 billion down from $47 billion earlier this year.
Earlier in the year, Neumann’s former chief of staff sued him for pregnancy discrimination. And a former WeWork executive who oversaw compensation sued the co-working company claiming she faced retaliation after raising evidence of gender pay discrimination. Lisa Bridges claimed WeWork’s co-president, Jennifer Berrent, told her “men take risks and women don’t.”
“You’re finished in New York”
It all started when Select Garages refused to vacate 95 Worth Street, which owner Donald Zucker wanted to sell. Stymied by the tenant, the Manhattan Skyline principal embarked on a “scheme of retribution and harassment,” according to a lawsuit filed by Select Garages principal Aaron Katz. In the suit, Katz claimed that Zucker concocted notices of default to push him out. When confronted, the developer allegedly “flew into a tirade” and promised to ruin him, the suit said. “You little motherf***ing runt. You better return all the leases back to me because you are finished in New York,” Zucker said, according to the lawsuit. “You think you can hold me up? Who the hell do you think you are? You are done here. You are ruined in New York!” Zucker and Manhattan Skyline denied the allegations, chalking them up to “a publicity stunt.” For its part, Zucker said Select Parking illegally installed signage that the landlord did not approve.
A luxury condo leaks “dirty” water
Developers don’t always make good neighbors. At least that’s according to a May lawsuit filed against Jacob Chetrit by the board of 300 East 77th Street. According to the suit, Chetrit’s penthouse is the source of “continuous leaks” into the unit below, whose owner has been forced to use a giant garbage can to collect the “dirty and potentially hazardous water” from Chetrit’s HVAC system. Property records show Chetrit paid $6.7 million for two units at the Robert A.M. Stern-designed building in 2005. Chetrit said that his contractors found no leaks coming from the apartment’s HVAC system. But the lawsuit rejected his defense. “The severity of these leaks is increasing on an almost daily basis and will only increase further with summer approaching and until the HVAC is repaired,” it read. The suit was dismissed in June.
James Cayne vs. Co-op Board
When James “Jimmy” Cayne, the former CEO of Bear Stearns, tried to sell his apartment at 510 Park Avenue, there seemed to be one catch: the building’s co-op board. So after the board rejected three prospective buyers without explanation, Cayne sued, alleging the board was blocking a sale because of a personal conflict between him and various board members. The basis of the suit is Cayne’s attempt to access the board’s records to find out why the buyers were rejected. (He was rebuffed.) Cayne purchased the 5,000-square-foot unit for $1.1 million in 1981. He and his wife moved out in 2013 and listed it for $14.95 million. According to the suit, the board rejected three offers ranging from $6 million to $9 million.