Fortis Battles its Own Lawyers Over Seaport Fiasco

Fortis Property Group has yet another problem at its stalled Seaport Residences project in Lower Manhattan: a nasty dispute with its lawyers.

The developer first took issue with its contractor at 161 Maiden Lane. Next, it was the lender. Now, the firm is at war with its former legal team.

Fortis has been waging legal battles for several years over the unfinished luxury condo, which garnered the nickname “the leaning tower of FiDi” because it tilts three inches to the north.

A state court last month ruled that the project’s lender can foreclose on the Financial District property. Since then, Fortis has railed against its legal counsel, Olshan Frome Wolosky, which quit in early November after its invoices went unpaid.

“Throughout our relationship, I have been extremely disappointed by both your firm’s poor showing in court, as well as your individual conduct,” Fortis’ chair Louis Kestenbaum wrote in a Nov. 6 email to Olshan’s Thomas Fleming, according to a lawsuit. “We have already paid you over $400,000, but the results have certainly not justified the expense.”

But Olshan alleges Fortis’ gripes stem from its unwillingness to pay its legal bills. In a new lawsuit, Olshan claims Fortis stopped paying in May and owes over $1 million.

Olshan was hired to work on Fortis’ Seaport Residences lawsuits, including one brought by the project’s mezzanine lender, Mack Real Estate Group. Olshan’s suit alleges Fortis didn’t pay its legal bills for months while continuing to use the firm’s services.

In July, Olshan complained to Fortis that the developer owed the law firm hundreds of thousands of dollars. The firm told Fortis it would withdraw as counsel unless assured it would be paid. Fortis and Olshan then agreed to a payment plan.

“Timely compliance is critical to our willingness to continue with the representation,” Fleming wrote to Fortis’ founder and chairman, Louis Kestenbaum. “Any delay or slippage will force us to seek to withdraw. It was not easy to get my billing committee to agree to this arrangement.”

But Olshan alleges Fortis never honored the agreement.

August was a busy month for the lawyers, who prepared opposition papers on three summary judgment motions, two motions to preserve a jury trial right, and demands related to the Mack Real Estate lawsuit.

In early October, Olshan reached out to Fortis for payment, only to get the “runaround.”

Louis Kestenbaum finally offered to meet on Nov. 1, but one day before the meeting, canceled and proposed new dates, according to Olshan.

The next day Olshan told Fortis it would file a motion to withdraw.

Louis Kestenbaum responded, “I have considered your most recent messages very carefully, and I want to make myself perfectly clear. We do not want to continue working with you. Please consider your firm terminated.”

Olshan says this was the first time Fortis mentioned any problems with its work.

“Louis Kestenbaum encouraged and accepted Olshan’s legal services rendered to date, so long as he could obtain them without payment,” Olshan wrote in its complaint.

In a statement, Fortis CEO Joel Kestenbaum, Louis’ son, said Fortis is preparing its own lawsuit against Olshan and Fleming. He called Olshan’s lawsuit “a preemptive scheme to disguise what we believe constitutes malfeasance and malpractice which Fortis will allege in court.”

Fortis alleges Fleming “engaged in a consistent pattern of gross overbilling and rate manipulation as well as inadequate and ineffective representation.” The developer said it had hired the law firm at the discretion of Fortis’ former counsel, Michael Regan, who is no longer with the company.

Fortis has also had issues with Regan, who is now with Meister Seelig and represented Fortis in Seaport Residences actions. Joel Kestenbaum wrote to the judge in the Mack Real Estate lawsuit that “disputes have indeed arisen between us which undermine our confidence in Mr. Regan’s and by extension Meister Seelig’s, ability to serve as counsel in this case.”

Judge Barry Ostrager allowed Regan to withdraw as counsel, but denied Fortis’ attempt to postpone the case to obtain new counsel.

“Fortis parties are extremely sophisticated litigants,” said Ostrager. “And I should say they’ve been extraordinarily well represented by Meister Seelig, in my opinion.”

Fortis, led by the two Kestenbaums, has had a series of highs and lows over the past few years. In addition to troubles in Lower Manhattan, Fortis was forced to sell some of its parcels at the former Long Island College Hospital site in Cobble Hill after its lender Madison Realty Capital initiated a foreclosure.

Its Olympia Dumbo tower, however, is on pace to be the borough’s priciest condo project per square foot.