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Adam Leitman Bailey, P.C. Delivers Near Million Dollar Settlement For Pizza Restaurant Despite Client’s Lacking Legal Right to Possession in Foreclosed Building


Client-pizzeria entered into a ten-year commercial lease with the individual/owner for the ground floor space of a building in Williamsburg, to operate a pizzeria restaurant. During the time that the client’s pizzeria was booming, the building in which the restaurant was located began to lean out of plumb by no fewer than ten inches. Such leaning out of plumb, which the client believed was caused by the owner’s negligence in maintaining the building.  Subsequently, with four years left on the lease, the New York City Department of Buildings issued a full vacate order with respect to the building where the pizzeria was located, and the client was vacated from possession. Ultimately, the building was completely demolished, and with it, the client’s prosperous pizza business.

Adam Leitman Bailey, P.C.’s Skillful and Innovative Lawyering

A.    The Specific Performance Action

The tenant immediately started a court action demanding that the individual owner rebuild the structure so that the pizzeria could be back in business. Accordingly, Adam Leitman Bailey, P.C.  filed a complaint against the owner due to its negligence seeking, among other things, specific performance of the underlying lease, an equitable cause of action that is available to litigants where money damages are unable to compensate an aggrieved party. Ultimately, in the complaint, Adam Leitman Bailey, P.C. demanded that the owner restore the client’s restaurant because no amount of money could compensate the client for the loss of its original flagship location.   

Simultaneously with the filing of the complaint, Adam Leitman Bailey, P.C. filed a notice of pendency, and specifically tailored the complaint to assert an encumbrance against the property in order to prevent any sale or refinancing of the building.  

B.     The Foreclosure Action

Shortly after the client commenced its case against the individual owner, the owner’s bank brought a foreclosure action to foreclose on the subject property because the owner defaulted under its mortgage with the lender. Thankfully, in a blunder of epic proportions, the bank somehow failed to name the client in the foreclosure even though it was well known that this was the original location of pizzeria. After the final judgment of foreclosure and sale was issued by the court in the foreclosure action, the property was sold at auction to a developer, who planned to construct a six-story mixed-use building. Had the bank properly named the client in the foreclosure, the client’s lease could have easily been terminated, and all of its claims to be restored to possession along with it. However, the bank and the new owner failed to name the tenant-pizzeria in the action and therefore could not terminate the lease despite many requests to the judge to do so.

Once the note was sold to a developer, its law firm bombarded our client-tenant with numerous motions even making a motion using confidential information from a settlement meeting that our client had no intention of returning the premises once fully restored and that tenant’s only interest was in garnering money. The developer also moved to remove the lis pendens from the case arguing that the tenant-client had no interest in the premises. The court rejected both these assertions confirming that the tenant had an interest in the premises as it had an active lease. For no understandable reason, the builder’s attorneys failed to cancel the lease based on a casualty theory and it failed to simply restart or amend the foreclose proceeding to name the tenant. Eventually, without any short term means of removing the commercial tenant who at this point had little time on its lease left, the developer paid the commercial tenant to give up its lease almost a million dollars.  

C.    The Settlements

Now, however, Adam Leitman Bailey, P.C.’s client, who was claiming a right and interest in the property, was standing directly in the way of the developer’s proposed building causing it to lose substantial money on a daily basis for every day that it could not build. Somehow, the developer’s lawyers were unaware that the developer merely needed to start a new foreclosure action or move to have the lease terminated as a result of a casualty.   

The developer realized it needed to settle the case on the commercial tenant’s terms. During the settlement conference, Adam Leitman Bailey, P.C. clearly demonstrated by way of expert reports that the prior owner’s negligence caused the building to lean like the Tower of Pisa, which lead to its ultimate destruction, and that legally, the developer was required to restore the client because it failed to name the client in the prior foreclosure action.   

With the threat of holding up its proposed development through years of subsequent litigation, Adam Leitman Bailey, P.C. successfully forced the developer to pay the client a healthy monetary settlement. Given the client’s recent opening of another pizzeria only a  distance away from the property, the need for the client to reopen from the subject location was rendered academic.  

Although the client was extremely satisfied with the large payout, Adam Leitman Bailey, P.C. did not stop there. Next, Adam Leitman Bailey, P.C. went on the offensive in the declaratory judgment action against the client’s insurance company. Even though the client’s policy of insurance contained explicit exclusions for damages resulting from earth or soil movement and governmental orders, which were the direct and proximate cause of the damages here according to the client’s own experts, Adam Leitman Bailey, P.C. aggressively charged forward with discovery.  

In order to get around the plain exclusionary language of the policy, Adam Leitman Bailey, P.C. developed a theory that the insurance company, which had performed a physical inspection of the property before it was demolished, knew or should have known about the building’s defects and therefore the specific exclusions in the policy should be vitiated. With the prospect of having an adverse ruling entered against it which could potentially spell disaster for the insurance company in connection with the interpretation of exclusions under its other policies, thereby opening the door for future limitless coverage obligations, the insurance company agreed to settle the matter upon terms that were tremendously favorable to the client. 

Adam Leitman Bailey, P.C. attorney, Adam Leitman Bailey appeared in court and negotiated the settlement while Dov Treiman assisted with his writing abilities.

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