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In Multipronged Landlord-‘Holdover’ Tenant Fight, $25M Suit Against Tenant Remains Stayed

A state appeals court has ruled that a $25 million lawsuit leveled against an alleged “holdover” tenant represented by real estate attorney Adam Leitman Bailey will continue to be stayed in deference to the building owner’s related holdover proceeding against the tenant in housing court.

The ruling from the Appellate Division, First Department, while an incremental one, is another piece of a heated, multilayered legal war that’s been raging for months between the tenant and building owner. And it involves Bailey, who is representing his client on contingency, more personally than is typically seen. In May, Bailey and his law firm were sued by the building owner in a separate $25 million action that’s now been dismissed by the trial court but that is being appealed.

The owner, 215 West 84th St. Owner LLC, and the well-known condominium developer with whom it’s affiliated, the Naftali Group, have been fighting in various courts since early this year as they try to force out the 84th Street building’s lone remaining tenant, Ahmet Ozsu. The owner and Naftali intend to overhaul the entire building and redevelop it. But they allege that Ozsu is “maliciously” holding out in his “penthouse apartment solely to financially harm the [building owner] by delaying its lawful multi-million-dollar condominium development and conversion project,” according to a complaint lodged by the owner in Manhattan Supreme Court.

The same Feb. 7-filed complaint claims that it “duly terminated Defendant’s [Ozsu’s] month-to-month tenancy effective December 31, 2021.” And it lays out five causes of action, including breach of lease and prima facie tort, while demanding $25 million or more from Ozsu, along with attorney fees estimated to be at least $100,000.

What’s more, Naftali Group and the owner have said they offered $30,000 to Ozsu to vacate his apartment, but that he turned down that offer and has demanded a seven-figure payout instead, a demand the Naftali Group considers to be egregious and has rejected, according to court filings.

Meanwhile, Ozsu has been able to stay as the only remaining tenant out of those who had occupied some 128 apartments, because he applied in January to a state program created to help tenants pay overdue rent during the COVID-19 pandemic called the Emergency Rental Assistance Program, or ERAP.

Under ERAP, a tenant who is granted emergency rent aid is protected from eviction for up to a year. But just last month, New York state ended up rejecting an Ozsu application, and it appears he may be forced to leave the building, called Eagle Court, sooner than he’d like, according to a news report.

Still, Bailey, the prominent and aggressive real estate lawyer, said Thursday in a phone interview that his client is appealing the ERAP determination, and that the state’s decision was a mistake.

Meanwhile, in another piece of litigation, the building owner, feeling aggrieved after Bailey spoke out about his client’s case to the press and at one point tried to have an 84th Street employee arrested, sued Bailey and his 29-lawyer Manhattan-based firm. In that $25 million suit against the lawyer, the building owner levied claims against Bailey for tortious interference and abuse of process, and it claimed that Bailey, on behalf of Ozsu, was waging a “malicious media campaign” aimed at “shaking down” the Naftali Group for a seven-figure payment to his contingency-fee client.

“Unable to quickly extract the seven-figure payout he expects, [Ozsu’s] lawyers … have turned what should be a dispute settled according to the law into a multi-national media circus,” the owner’s complaint said as it pointed to news coverage, such as an April article in the New York Post.

“Defendants [Bailey and his law firm] have taken the disreputable practice of holding out for payouts to new lows” while resorting to “extra-judicial channels,” the suit further claimed.

But last month, Manhattan Supreme Court Justice Sabrina Kraus dismissed the action against Bailey handily, while taking apart the alleged legal claims for abuse of process and tortious interference with economic advantage.

“In the case at bar, defendants [Bailey and his firm] were acting to zealously represent their client and not solely to harm plaintiff, and plaintiff has failed to allege any business relationship that was interfered with,” Kraus wrote in her decision.

In turn, though, Y. David Scharf, the well-respected Morrison Cohen litigator and chair of the firm, who’s represented the building owner in the litigation, quickly filed an appeal of Kraus’ decision.

Then Bailey, always primed for a fight, soon cross-appealed in the action, which he has called “deplorable.” In his cross-appeal, he cited New York state’s anti-SLAPP statute and asked for attorney fees and sanctions.

And while those actions and battles have been pushing forward, the original holdover eviction action lodged against Ozsu in housing court has been proceeding, too.

And it appears the housing action has been leading the way, as other courts sit tight and wait for its result.

In its stay-ruling issued on Tuesday in the $25 million action levied against Ozsu, the Appellate Division, First Department court affirmed that Kraus had been right to act sua sponte, or on her own initiative, when she stayed that lawsuit earlier this year.

“We find that Supreme Court did not abuse its discretion in granting a stay of the Supreme Court action based upon its determination that the resolution of the parties’ holdover proceeding will limit the issues to be resolved in this action,” a five-justice panel of the First Department wrote.

“As the Supreme Court found,” the panel said, “the first-in-time holdover proceeding involves the same parties and both proceedings require the resolution of questions arising from defendant’s occupancy of the apartment, such that a stay was appropriate.”

Scharf declined to comment on the litigation and legal battles involving his client and Ozsu and Bailey.

Bailey on Thursday continued to blast away at all the legal actions that have been taken by the Naftali Group and the 84th Street building owner against his client and him.

“All these claims are pure bullying and harassment that causes us to spend an incredible number of hours in legal services, and worry and sweat by our client,” he complained as his voice rose.

Then he added, in a calmer tone, “We are happy with the decision” to continue the stay in the $25 million suit against Ozsu.

“And for everyday that our client gets to be in possession without harassment and while having peaceful habitability,” he said, “our firm is very happy.”

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