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Adam Leitman Bailey, P.C. Rescues Client’s Million Dollar Letter of Credit at the Eleventh Hour, Then Slams the World’s Largest Commercial Real Estate Services Firm, Landlord and Well-Known Fashion Design House in Illegal Kickbacks Case

When the client, a tenant that had subleased a large commercial space from an upscale New York City fashion design house, came to Adam Leitman Bailey, P.C. with only a matter of hours before its landlord would draw down its million-dollar letter of credit, Adam Leitman Bailey, P.C. had absolutely no time to spare. Adam Leitman Bailey, P.C.’s attorneys worked around the clock to craft an emergency order to show cause application to present to the court the very next morning in order to prevent the drawdown. By exposing the landlord’s and property owner’s bribery and illegal construction kickback scheme, Adam Leitman Bailey, P.C. miraculously rescued the collateral at the eleventh hour, and then successfully extinguished the client’s further obligations for millions of dollars under the sublease and personal guaranty.


Under the sublease, the client had a five-month rental concession period to allow the client to perform its build-out of the subject space. However, when the client refused to play ball with the landlord’s managing agent – one of the world’s largest commercial real estate services firm – and the fashion house in their kickback scheme, the owner and sublessor, out of retribution, dissipated the client’s rental concession by unlawfully refusing the client’s contractors access to the client’s space. To make matters worse, through the direction of the managing agent, and without notice or legal process, the landlord even illegally locked the client out of its space for several months by deactivating its remote key access card. It even refused to reactive the card for several months, despite the client’s pleas, falsely alleging that the client was not obeying the sublease’s requirement for union labor for its construction. In reality, these claims were false and asserted solely out of retaliation for having the owner and sublessor’s kickback scheme foiled.

Consequently, the client, who was about to have its million-dollar collateral seized and be on the hook personally for many millions of dollars in future rents, was in dire straits.

The Notice of Default

The relevant sublease documents allowed the fashion house to draw upon the client’s million-dollar letter of credit in the event of any monetary default for the nonpayment of rent after the cure period set forth in the notice to cure.  Since the client’s entire rental concession period was rendered worthless because the defendants maliciously evicted the client from the space, the client stopped paying its rent. Ignoring the fact that it evicted the client unlawfully, the fashion house then proceeded to issue a notice of default alleging that the client was in monetary default of the sublease, and providing the client with five days to cure such default, together with threatening to draw down the entire letter of credit for sums greatly exceeding even the rent that the sublessor claimed was owing.

The Injunction

The client arrived at Adam Leitman Bailey, P.C. after the close of business on the fourth day of the cure period, leaving Adam Leitman Bailey, P.C. only with a few hours to draft and prepare an emergency application for injunctive relief to save the client’s sizable letter of credit. Adam Leitman Bailey, P.C. reviewed the voluminous sublease and securitization documents and found a gem.

Critically, Adam Leitman Bailey, P.C. found that the relevant default provision called for a 15 days’ notice to cure period in the event of a default and not the 5 day cure period that the fashion house relied upon in its notice of default. The Supreme Court of New York County agreed with Adam Leitman Bailey, P.C.’s arguments in holding that the notice to cure was technically defective and thus a nullity, thereby rescuing the client’s letter of credit from the immediate emergency, if not yet for the final victory.

The Litigation and Settlement

Although Adam Leitman Bailey, P.C. rescued the letter of credit just in the nick of time, its work was not yet finished because the fashion house was now poised to issue a new notice of default with the proper cure period. In fact, several days after the parties’ court appearance, the fashion house served a proper notice of default containing the correct cure period, again forcing Adam Leitman Bailey, P.C. to act expeditiously. Shortly thereafter, Adam Leitman Bailey, P.C. combed through hundreds of emails and located the smoking gun emails where the defendants sought bribes, thus giving Adam Leitman Bailey, P.C. the ammunition to go on the offensive. Thereupon, to force the fashion house to relinquish the client’s letter of credit and to terminate the sublease and personal guaranty, Adam Leitman Bailey, P.C. filed an extremely detailed and fact-sensitive complaint pointing out, with great specificity, the dates, times, and instances of the defendants’ wrongful and corrupt conduct. Additionally, Adam Leitman Bailey, P.C. advanced claims against the landlord for unlawful eviction, thus entitling the client to treble damages.

Given Adam Leitman Bailey, P.C.’s explicit allegations regarding the defendants’ illegal conduct, and with the interest of protecting their public images from bad press, the defendants all immediately succumbed. Notably, the defendants agreed to return the client’s letter of credit in full and to terminate the sublease and personal guaranty, along with all of the client’s obligations thereunder, saving the client many millions of dollars.

Adam Leitman Bailey, P.C. attorneys Adam Leitman Bailey, Christopher Halligan, and Dov Treiman represented the client on behalf of the firm.

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