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Documente Profesional
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V.
THE DAKOTA INC.,
BRUCE BARNES, PAMELA
LOVTNGER, PETER NITZE,
JOHN RYDZEWSKI, and ANTHONY R.
SMITH AND GAEL SMITH ARNOLD as
co-executors of THE ESTATE
OF RUTH PROSKAUER SMITH,
SUMMONS
Plaintiff Fletcher resides at: One West
72dStreet, Apt. 5 1, New York, NY
County of New York
Defendants.
To the above named Defendants:
FEE3 0 1 2011
Defendants addresses:
Bruce Barnes
One West 72ndStreet
New York, N.Y. 10023
Pamela Lovin er
One West 72" Street
New York, N.Y. 10023
Peter Nitze
One West 72"d Street
New York, N.Y. 10023
John Rydzewski
One West 72"d Street
New York, N.Y. 10023
Anthony R. Smith and Gael Smith Arnold, as co-executors of the Estate of Ruth
Proskauer Smith
c/o Brill & Meisel
845 Third Avenue, 16" Floor
New York, N.Y. 10022
VERIFIED COMPLAINT
Plaintiffs,
V.
Plaintiffs Alphonse (Buddy) Fletcher, Jr. (Fletcher) and Fletcher Assct Managcmcnt,
Inc. (FA,), by thcir counscl Kornstein Veisz Wexler & Pollard, LLP, for their verified
complaint against defendants, The Dakota Inc. (the Dakota, the Building, or the
Corporation), Bruce Barnes, Peter Nitze, John Rydzcwski and Pnmcla Lovinger (the
Individual Defendants; together with the Dakota, the defendants), as well as the Estate of
Ruth Proskaucr Smith (thc Estate) allege as follows:
fiduciary duty, aiding and abetting breach of fiduciary duty and unlawful discrimination arising
out of deleendants tortious and unlawful mistreatment of their fellow sharcholder and neighbor
Alphonse (Buddy) Fletcher Jr. (Fletcher). As foundcr and CEO of plaintiff FAM, a
philanthropist. This lawsuit seeks relief as a result of the defendants acts and statements in
opposing Fletchers effort to accommodate his growing family by purchasing the apartment next
to his own at the Dakota, a renowned cooperative apartment building located on the Uppcr West
Side of Manhattan, and restoring the two apartments to thcir original size and configuration as
one unit. Thc facts also arise from Fletchers past efforts to defend thc rights of other minority
and femalc shareholders and applicants at the Dakota.
2.
Dakota, thc Individual Defendants and the Dakotas Board of Dircctors (the Board) unlawfully
blocked Fletchers cffort to purchase the adjoining apartment after he had already entered into a
contract for the purchasc with the apartments current owner, the Estate of Ruth Proskauer
Smith. In so doing, the defendants not only breached their fiduciary duty to Fletcher by selfdealing and by failing to treat him in the same manner as other Dakota shareholders, but they
also committed further unlawful acts by spreading demonstrably false, insulting, and inherently
defamatory reports about Fletchers financial condition, his integrity, and the financial condition
of FAM. Thc rcports included, for example, the false, malicious, and harmful rumors that
Fletcher was cithcr unable or unwilling to satisfy commitments that hc had made to various
charities, that Fletcher lacked sufficient asscts to purchase the apartment and that FAMs
financial condition was precarious.
3.
More specifically, last spring Fletcher entered into a contract for thc all-cash
purchase of Apartment 50, with the apartments owner, free of any financing contingency. Ruth
Proskaucr Smith, whose Estate now owns the apartmcnt, was Fletchers next-door neighbor and
friend and had long madc clear to her fdmily and other Dakota shareholders that she wanted
Fletcher to purchasc the apartment after her death. She wantcd this to happen so that Fletcher
could restore the two apartments to their original layout as one unit, and so that he could have a
larger residence in the Dakota for his family. Shortly after cntcring the purchase contract,
Fletcher, following long-established Board procedures, submitted his application for the Board to
approve the proposed transaction.
4.
Dakota shareholdcr and his ownership of a highly profitable investment management firm, the
defendants rejected Fletchers application. In so doing, and in the course of their related
dealings, defendants maliciously and wrongfully impugned Fletchers reputation, financial
condition and that of his company, FAM, to Board members, Dakota shareholders not on the
Board, and othcrs, including current and potential FAM investors. Although such conduct by a
coop board on the Upper West Side of Mailhattan in thc bcginning of the twenty-first century
may seem surprising, this behavior was consistent with the defendants extensive pattern of
hostility toward non-white residents of the Building. Indeed, Fletcher had himself tried to stop
such unequal trcatrnent when he served as Board President scvcral years before and he himself
had been subjected to it as far back as 1992, when hc first sought to purchase an apartment in the
Dakota. This unequal treatment -- which several of the individual defendants have long referred
to as the Buddy Rulc --continues to this day, including through ongoing and highly unusual
restrictions on Fletcher and his mothers use of their own apartments.
5.
After the Board initially indicated its intention to reject his application to purchase
Apartment 50 in April 2010, Fletcher offered numerous times to address any questions or
concerns thc Board might have regarding his finances and those of FAM. In an attempt to reach
an amicable resolution, Fletcher repeatedly attempted to engage in discussions with defendants
over the C O U ~ S Cof many months, to no avail. In addition, Fletcher agreed to submit hundreds of
pagcs of disclosures concerning his own finances and the financial situation of FAM, although
the Dakotas cstablished policies -- specifically designed to protect existing shareholders from
burdensome procedurcs -- clearly did not require this. Thc Board, however, refused even to ask
Fletcher any questions rcgarding his extensive submission and instead presented a series of
purportcd concerns about Fletcher and FAMs financial condition. Yet after Flctcher
indisputably addressed each issue, the Board came up with purportcd new concerns and
threatencd new, unique conditions in connection with its consideration of Flctchers application
to purchase Apartment SO.
6.
defendants would not willingly rclcnt in their determination to block Fletchers purchase of
Apartment 50, notwithstanding his financial qualifications and past service to the Building. Thc
Board President went so far as to thrcaten that the Board would only approve Fletchers
application if Flctcher won the lottery. Presumably based on the theory that thc best defense is
a good offense, the Board also falsely and injuriously accuscd Flctcher of playing the race
card. Indeed, long before Flctcher began to raise concerns about Board misconduct in
connection with the handling of his application, the individual defendants sought to undermine
Fletcher by suggcsting to Board members and others that Fletcher might, in the future, use his
status as an African-Amcrican to persuade the Board to approvc his application. This basclcss
allegation caused further harm to Fletcher by raising hostility toward him and diminishing his
relationship with other shareholders in the Building.
7.
Other Board members actions confirm the Boards breach of fiduciary duty and
own apartment (Apartment 51) jointly for sale with Apartment 50 as an 1l-room aparttnent at a
combincd price of $19.5 million. On information and belief, Mr. Rydzewski instigated this plan
for the joint salc. On information and belief, the other Board rncmbers who are individual
defendants in this action encouraged Ms. Lovinger to enter this arrangcment for a combined
purchase based on their belicf that such a sale would bring financial benefit to them.
Specifically, thc market value of thcir own apartments at thc Dakota -- where priccs have been
significantly deprcsscd, in their view -- would increase substantially if such a large sale were to
occur within the Building. Indeed, should such a sale occur, Ms. Lovinger will have stolen the
cconornic opportunity wrongfully denied to Flctcher, made even worse by her having served on
the Board while it was considering Fletchers application and thus owing him a fiduciary duty of
the highest degree of trust and loyalty. And the othcr Board members who are individual
defendants in this action will have not only aided and abetted her breach of fiduciary duty, but
will also have breached their own fiduciary duties to Fletcher. Further, the apartments current
owner also aided and abetted Lovingers brcach of fiduciary duty by co-listing Apartment 50 for
salc with Lovingers own apartment.
8.
As concerns Fletcher, the Board has abused its discretion, and can no longer be
Accordingly, by this action, Fletcher and FAM seck compensatory and punitive
damages, including damages for the defamatory statements made and repeated by defendants
about Flctcher and his business. Fletcher also seeks interim and final equitable relief. On an
interim basis, to preserve the status quo, Fletcher seeks an order that defendant Dakota notify
him of any offer to purchasc Apartment 50 (either alone or in conjunction with Apartment 5 l),
so that, if necessary, he can enjoin the sale of Apartment 50 to another purchaser. Fletchcr
further seeks perinancnt equitable rclief requiring defendants to approve his application to
purchase Apartment 50. Finally, Fletcher also seeks to put an end to the discrimination hc and
other minority residents have endurcd over the years within one thc Citys most cxpensive and
prcst igious cooperative apartment buildings.
10.
Plaintiffs had no choice but to suc now, because Apartment 50s current owncr,
the Estatc of Ruth Proskauer Smith, purported to cancel its contract with Fletcher last week, and
Plaintiffs
I 1.
Fletcher has been a resident of the Dakota and a sharcholder of thc Corporation
since 1992. Hc currently livcs in Apartment 52. Fletchcr previously servcd on the Dakota Board
for a number of years, including two terms as Board President during the period 2007-2009. As
a past Board president, Fletcher also servcs, consistent with established Building practice, as a
Fletcher was maxricd in 2007 to Ellen K. Pao and they have a two-year old
daughter. Fletcher owns and operates FAM, an investment maiiagerncnt firm based in New York
City. Nained to the most recent Forbes List of the Wealthiest Black Americans, his success as
an investiment manager is well known.
13.
Fletcher is also a philanthropist and has, over the past two decades, donated tens
of millions of dollars of his own weallh, primarily for initiatives aimed at eradicating racial
inequality through education. In 1994, for example, he cndowed a University Professorship at
his alma mater, Harvard College. Similarly, in 2004, on thc 50th anniversary of the Supreme
Courts dccision in Browrr v. Bourd of Education, Fletcher and entities affiliated with him
launched a $50 million multi-ycar initiative to support those working to create educational
opportunities for all. Fletcher has been gcneroiis in New York City, supporting churches,
museums, schools, and community organizations, including co-sponsoring exhibitions rclated to
African Americans at the New York Historical Society, the Metropolitan Museum of Art, and
The Studio Museum in Harlem. Fletcher has also provided African-American history resources
to thousands of public schools both in and outside New York City.
14.
FAM serves in an advisory capacity with rcspcct to a series of funds that include outside
investors. Since 1991, FAM has completed more than 50 transactions that have providcd
additional capital to companies through thc purchase of newly issued securities. The investments
have helped thesc companies create and prcscrve tens of thousands of quality jobs from upstate
New York to Southern California in industries including affordable and energy-cfficient housing,
alterriativc energy, education services, and environmental services. FAM is currently focuscd on
providing additional capital and other support to community banks aimed at helping to
reinvigoratc the economy and gencratc attractive returns.
15.
tcrm returns for pension funds, philanthropists, foundations, cndowrnents and other investors.
FAM has thrived throughout this most recent and the previous rcccssions, generating profits for
its institutional investors in each year since the firms inccption in 1991. Of significancc to the
instant lawsuit, several of the Dakotas shareholders are individuals who have invested in FAM s
funds or associatcs of individuals who havc invested in FAMs funds and they, in turn, socializc
and do business with other individuals who are past, prcscnt and prospective investors in FAMs
funds.
Defendants
16.
Defendant The Dakota, Inc. is a domestic corporation with its principal exccutive
office at 675 Third Avenue, New York, NY. The Corporation owns and operates the Dakota, a
cooperativc apartment building locatcd at One West 72nd Street, Ncw York, NY. The Dakota
cooperative is one of Ncw York Citys most legendary apartment buildings. Built in 1884, it is
known for its uniquc architecture and for the many high-profile individuals who have resided in
the Building over the years.
17.
Corporation, a member of the Board and a member of the Financc Cotnmittee. Nitze is also a
past President of thc Board, a permanent member of the Finance Committcc and previously
served as Vice Presidcnt of the Board.
19.
Corporation, a past and current rnctnber of the Board and a prcvious President of the Board. By
virtue of bcing a past Board President, Rydzewski is a permanent rncmber of the Finance
Committee. Although Rydzewzki was not a member of the Board during the 2009/2010 term, he
was actively involved in discussions and deliberations conccrning Fletchers application to
purchase Apartmcnt 50.
20.
Corporation and a frequent past mernbcr of the Board. Lovingcr currently resides in Apartment
5 1, which is located on the other side of the apartment (Apartment 50) that Fletcher contracted to
purchasc. On or about November 15, 2010, Lovinger publicly listed her own apartment for sale,
together with Apartment 50, at a price of $19.5 million.
21.
Defcndant the Estatc of Ruth Proskauer Smith is the current owner of Apartment
50. On March 19,2010, the Estate entered into a contract with Fletcher to sell Apartment 50 to
him. That contract would have been fully performed by now and the transaction closed but for
the improper and illegal actions of the defendants.
Factual Backmound
22.
The facts rclcvant to plaintiffs causes of action for breach of fiduciary duty,
aiding and abctting breach of fiduciary duty, tortious interference, declaratory judgment,
defamation and unlawful discritnination in violation of the New York Human Rights Law and
New York City Administrative Code and breach of contract are set lorth below.
Long before thc events involving the rejection of his application to purchase
Apartment 50 that givc rise to this lawsuit, the Dakota Board treated Fletcher differently and less
favorably than white shareholders and residents of the Dakota.
24.
In the fall of 1992, Fletcher entered into a contract for the all-cash purchase of
Apartment 11, Flctcher was subsequently told by a Board member that the Board had felt that
thcre was no way that he would bc approved. Nevertheless, Fletchers purchase was
ultimately approved by the Board after Fletcher was interviewed by scvcral Board members.
Indeed, prior to purchasing Apartment 1 1 , Fletcher submitted bids for threc larger apartments on
higher floors, but those shareholders refused to enter into contracts with him, presumably based
on the assumption that the Board would reject his application.
25.
In 1993, Fletcher entered a contract to purchase Apartment 52, a larger unit within
the Dakota and the unit in which he currently lives. Thc Board raised numerous obstacles to thc
purchase, ultimately explicitly conditioning its approval on two harsh conditions. First, the
Board rcquired Fletcher to immediately sell Apartment 11 and, second, the Board requircd
Fletcher, in the interim, to cease using Apartment 11 for any purpose whatsocver, including
using thc apartment himself or allowing any gucst or f m i l y member to stay there, even for one
night. Fletcher subsequently learned that scvcral other, white residents of the Dakota, by
contrast, owned multiple units within the Building and openly used thein as guest rooms, offices,
gyms and storage units, without any such rcstriction. Indeed, the prohibitions that the Board
arbitrarily imposed on Fletcher at that time with rcspect to Apartment 11 were so unique that
they bccame known within the Building, and Board members mockingly referred to thcm, as
the Buddy Rule.
26.
Dakota for his mother, Dr. Bcttye R. Fletcher, a noted educator and a Trustee of the Bank Street
I
Thus, in connection with his purchase of Apartment 52, the Board imposed the following
condition: You confirm your intent to purchase Apartment 52 for yourself and to promptly
sell Apartrncnt 1 1 . . . You understand that while you own more than one Dwelling Unit or
Apartment, the Board will not entertain any rcquest that any of the spaces owned by you be .
. . occupied by anyone other than you. . .
College of Education. Fletcher entered into an all-cash contract for the purchase of Apartment
92. After much delibcration, the Board permitted Flctcher to purchasc Apartment 92, but
required him to form a special trust to purchase the apartment. In addition, and once again, thc
Board conditioned its approval on an explicit limiting condition - that only Dr. Fletcher and no
one else would be perrnittcd to reside in Apartment 92, even overnight and even including close
relativcs.2 On information and belicf, no Dakota Board ever imposed any similar condition on
any previous owners of Apartment 92, all of whom had been white. Once again, the Board
provided no rationale for the stringent condition it imposed on Flctcher and his mother. In the
years that followed, relatives visiting Fletcher or his mother did not feel comfortable staying
overnight in the Dakota specifically due to concerns regarding the so-called Buddy Rule.
27.
In addition to enduring, and watching his mother endure, this unequal treatment,
Fletcher also witnessed thc Boards discriminatory acts against other nun-white shareholders and
persons seeking to purchase units in the building.
28.
For example, in 2005, while serving on thc Board, Fletcher witnessed Board
Specifically, the Board required the Fletchers to agree that [tlhe Apartment shall be used as
a residence only, and only by Bettye R. Fletcher. . . the Apartment shall not be occupicd at
any time by any other person without the prior written consent of [Thc Dakota Inc.] in each
instance.
subscquent Board meetings however, Board members made jokes regarding the Hispanic
husbands desire to have a first floor apartment so that hc could purchase drugs from people on
the strect. Board members repeated this offensive joke for many years.
29.
against the only other African-American shareholder of the Corporation, a prominent individual
in the arts. In that case, thc Board rejected the shareholdcrs requests to perform much-needed
renovations and rcpairs to her apartment, without explanation. And indeed, when the Board did
rcspond to her inquiries conccrning the repeated rejections, the shareholder was givcn an
cxplanation that either did not make sense or was told that the Board did not know thc reason.
As a result of the Boards conduct, the shareholdcr endured the humiliation of applying multiple
times for pcrmission to fix or replace her bathtub.
30.
against this same African-Amcrican shareholder. While thc Dakotas rules require sharcholders
to use a scrvice elevator, rather than thc main elevators, to transport thcir pet dogs, the Board
strictly enforced this rulc onl-y against this African-American shareholder and not against white
shareholders. Moreovcr, because her apartment was not accessible via the servicc clcvator, this
shareholder was rcquired to wait, often for long periods of time, at an operator-dependent freight
elevator until a staff mcrnbcr was available to transport her and her dog to the appropriate floor.
Indeed, dcfendant Rydzewski - opcnly at Board meetings - insistcd that the Buildings
managing agcnt make sure that the Building keep careful track of every time this same
shareholder violated the Building rule by not using thc service elevator with hcr dog. Further,
defendant Rydzewski went so far as to send a series of offcnsive and threatening lettcrs to this
shareholder about this issue and others and dircctcd counsel to the Board to do the same.
3 1.
during discussions regarding a Jewish couples application to purchase a unit in the Dakota.
Although the couple was financially well-qualified to make the purchase, thc Board quickly
rejected the couplc, without even an intcrview, after one Board member had described them as
members of the Jewish mafia. Flctcher and one other Board member had voted to grant the
hmily an interview, but they were outvoted.
32.
In May of 2007, Fletcher was electcd Board President after an internal power
struggle on thc Board. Just prior to his clection, several Board members (including defendant
Rydzewski) were accused of having conflicts of interest that were previously unknown to the rest
of the Board, and most other Board members took sides in the disputc. Although Fletcher had
been critical of the substaiitivc conflicts, he had remaincd neutral with respect to personality
conflicts. As a result, Fletcher becamc one of the few candidates who was still acccptable to a
majority of Board members, and they elected him Board President.
33.
to put an end to the discriminatory behavior of certain Board members. For example, in advance
of the Scptember 12,2007 Board meeting, Fletcher conveyed his view to defendant Nitze that
the Jewish mafia comments and the process and general tenor of the discussion surrounding
the Jcwish applicants ethiiicity and religion were not appropriate. Although defendant Nitze
tried to persuade Flctcher not to raise the issuc again, Fletcher urged the Board to reconsider the
couplcs application on tlic record and the Board voted to grant the couple an interview.
Following that interview, the Board changed its earlicr position and approved the couples
application.
34.
The issue of the African-American tcnants repeated efforts to gain approval for
her bathtub renovation resurfaced as well during Fletchcrs tenure as Board President. During a
Board meeting on or about March 13,2008, Fletcher observed defendant Rydzewski and the
Corporations counsel, Eric Balber, whispering and snickering with each other. When Fletcher
askcd them what they were discussing, Rydzewski explained, with obvious amusement in his
voice, that they had been speculating about how many times that shareholdcr would have to
apply to fix her bathroom. Fletcher made it clear to them and to the rest of the Board that such
jokes at that sharcholders expense were not appropriatc and that the shareholder understandably
ticcded to have the issue resolved. Shortly after Fletcher challenged those Board members
conduct, and years of rcjecting the shareholders requests, the Board finally voted to allow the
proposed renovation.
35.
Prcsident, the hostility of certain Board members toward non-white shareholders and Fletcher in
particular persistcd both during and after his term as Board Prcsidcnt ended in May 2009.
36.
October 7,2009, the Board discussed three shareholders rcqucsts to have guests reside in their
respective apartments for limitcd periods of time. The Board quickly approved the two requests
from white shareholders after little discussion and with no restrictions. The Board rcfused,
however, to approve the request of the third shareholdcr, a South-Asian woman, unless she
agreed to subject her proposed guests, mernbcrs of her own family, to background ~ h c c k s . ~
At one point during his communications with the dcfendants concerning his application to
purchase Apartment 50, the Board cvcn insisted that Fletcher, who by that time had lived in
the Building for ncarly two decades, consent to a background check. Fletcher initially
agreed. The Board, however, appeared to have rejected his application to purchase
14
37.
abovc, the defendants were determined to prcvent the Board from approving Fletchcrs purchase
of Apartment 50 at any cost. This agenda arosc from longstanding hostility toward Flctcher due
to his race, from thc defendants similarly longstanding dcsire to retaliate against Fletcher for
exposing and challenging thc defendants past acts of racially-motivatcd hostility, and from the
defendants desire to increase the value of their own balance sheets by blocking Fletchers
purchasc and by facilitating the sale of a $19.5 million joint unit in the Building.
Until her death in January 2010, Fletchers next-door neighbor at the Dakota was
Ruth Proskauer Smith, the notcd womens rights activist and the daughtcr of Judge Joseph M.
Proskauer, who was a justice of thc New York State Suprcme Court before becoming a partner in
thc law firm that bears his name, Proskauer Rose. Mrs. Smith, who lived in Apartment SO for
inany years prior to her death, had become good friends with Fletcher ovcr many years of living
next door to him.
39.
As a result, on many occasions, Mrs. Smith exprcssed to Fletcher and others her
intention that Fletcher purchase Apartment SO after her death, so that he could re-combine and
restore the two apartments into the single residence they had once bcen. Mrs. Smith also
expressed that she wanted Fletcher to purchase the apartmcnt so that he could havc a home at the
Dakota for his growing family.
Apartrncnt 50 so quickly that Fletcher had not yet undergone the check. At that point, he
withdrew his consent.
15
40.
Tony Smith, Mrs. Smiths son and the executor of her Estate, was well aware of
his mothers wishes in this regard. On January 20, 2010, while his mother was quitc ill and near
death, Mr. Smith crnailed Fletcher asking to speak with him by phonc. When they spoke
Mr. Smith inforrncd Fletcher that the Smith family wished to fulfill Mrs. Smiths longstanding
dcsirc and intention to sell Apartment 50 to Fletcher.
41.
Accordingly, shortly after Mrs. Smiths death on January 21, 2010, Mr. Smith
42.
Those negotiations were rcsolved quickly since there was little haggling ovcr
price and both parties were clcar about the objective. On March 19, 2010, Fletcher cntered into a
contract with Mr. Smith, as the executor of Mrs. Smiths Estate, to purchase Apartment SO. It
was well known that the Dakota policy at the time permitted quick approval and closing for long-
The contract betwccn Fletcher and the Estate providcd for an all-cash transaction
of the apartment for $5.7 million, without any financing. In other words, Fletcher was to pay for
thc apartment out of his own funds, without a mortgage or any other type of loan in connection
with thc purchase.
44.
On inlormation and belief, the defendants had long known that Mrs. Smith
intendcd for her Estate to sell Apartmcnt 50 to Fletcher and were aware that Fletcher was
negotiating a contract of sale with the Estate. Accordingly, on or around March 10,2010, the
individual defendants hcgan discussing ways to prevcnt Fletchers purchase of Apartment 50
from thc Estate no matter what.
16
Several ycars earlier, the Board had streamlined thc Dakotas policy for Board
When he applicd to the Board to purchase Apartment 50, Fletcher qualified for
this limited disclosure provision and he remains qualified to this day. Fletcher has been a
shareholder of thc Corporation and a rcsident of the Dakota sincc 1992 (considerably more than
the four years required by the policy) and he has timely fulfilled all of his financial obligations
(including monthly maintenance charges) to the Dakota. Indeed, the defendants have never
asserted that Fletcher did not meet the requirements for the Transfer Disclosure Policys limited
disclosure provision.
47.
meeting, at a time when these defcndants knew that Fletcher was in negotiations to buy
Aparttnent S O .
48.
Fletcher learned of the Boards effort lo change the Policy just days after hc had
signed a contract with the Estatc. Robert McFarland of Douglas Elliman, the Dakotas managing
agent, informed Fletcher by phonc that the Board was considering making the application
process for cxisting shareholders seeking to purchase additional units within the Building more
onerous. Although Mr. McFarland also informed Fletcher that the Board had formed a Special
Committee to consider this issue and make recomrncndations, the Board, at its March 10
meeting, had actually delegated the issue to the Finance Committee to consider.
49.
rccotnmendations to the Board regarding the Transfcr Disclosure Policy and the Board has not
formally acted to amend the Policy. Indeed, Fletcher, as a permanent member of the Finance
Committee, has not becn given notice of any report or action from the Financc Committee
regarding the Transfer Disclosure Policy and has never been asked to consider any amendment to
thc Transfer Disclosure Policy.
50.
In addition to thc Transfer Disclosure Policy described above, at the same time it
adopted the Transfer Disclosure Policy, thc Corporation also adopted a policy in 2007 entitled
Apartment Ownership Guidelines: Combining Apartments (the Recombination Policy).
This policy expressed the Dakotas approval of apartment recombinations under the following
conditions: (i) the apartments were originally configured as one apartment; (ii) the combination
furthers a building objcctive; (iii) the combination can be accornplishcd without risk of damage
18
to the buildings structurcs; and (iv) the rcsulting numbcr of shares held by the purchasing
sharcholder will bc less than the number of sharcs held by the Dakota shareholdcr holding the
largest number of sharcs at the time of the request.
51.
Apartrncnt 52 satisfied all of these criteria: Apartments 50 and 52 were originally one unit; they
can bc restored to thcir original configuration without any risk of damaging the Dakotas
structurcs. Important Building objectives would be achievcd because the recombination would
provide Apartrncnt 50 with emergency egress, a scrvice entrance, and independent wiring, all of
which it currently lacks. And, upon purchase, Fletchers total share ownership will remain
bclow that of the Dakotas largest shareholder.
52.
Moreovcr, as with the Transfer Disclosurc Policy, there has been no noticc given
to thc shareholders or members of the Finance Committee to amend or altcr this policy in any
way.
Apartment 50 (thc April 5 Submission). The contcnts were precisely those required by the
Transfer Disclosurc Policy described above. That is, Fletchers application included a copy of
his contract with the Estate, which showed the $5.7 million purchase price to be paid in cash
without financing, and, as dirccted by the Buildings policy, a onc-page balance sheet presenting
his principal assets and liabilities, the cost of those assets, and the amount of those liabilities.
That docurncnt showed Fletchcrs principal assets and their cost basis of $29,475,998 (their
market value, a multiple of cost basis, was not required and was not included) and his principal
liabilities (non-callable business loans each maturing after 2031) at $20,814,251. Thus, the A ~ 1 I
19
5 presentation demonstrated that Fletcher had more than sufficient mcans to purchase Apartment
50 and to pay any associated futurc maintenance or other charges, still leaving a multi-million
dollar asset cushion.
54.
The estatc of Mrs. Smith has offered to sell me Apartment 50 and we have signed a
purchase contract. There would be no financing associated with this cash purchase.
Apartment 50 has less than half thc quantity of shares that 1 currently hold and our two
apartments wcrc originally one. As with my past transactions, I havc cnclosed a current
balancc shcet (prepared by Duhallow Financial Services, LLC valuing assets at the lower
of cost or market value) and a letter from my attorney . . .
55.
The April 5 Submission fully satisfied the terms of the Transfer Disclosure
Policy. It clearly confirmed Fletchers ability to incur all costs associated with his proposed
purchase of Apartment 50. It also dcmonstrated that Fletchers proposed purchase satisficd thc
Dakotas Recombination Policy described above. In blatant disregard of thc Transfer Disclosure
Policy, then-President Goldsmith and thcn-treasurer defendant Barnes jointly wrote to Fletcher
on April 10, 2010 and demanded that he satisfy a new Board policy rcgarding prospective
purchasers. Their lcttcr, in pertinent part, states as follows:
In the wake of the recent financial crisis, thc Board of Directors has adopted a policy of
2.
Cuwcnt financial statement (see attached), with current bank and broker
statements;
3.
56.
ask when this new policy had been adoptcd. Barnes replicd vaguely that it had been adopted
a few months ago.
57.
On information and belief, no such policy was ever adopted by the Board. This
purported policy does not appear in the minutes of the Board; nor was it mentioned, much less
approved, at any shareholders meeting. Instead, thc representation that such a policy existed
or cxists was false and was known to be false by Barnes and Goldsmith. To the contrary,
defendants couched their ncvcr-ending list of demands as policy rcquirements in an effort to
create a pretext for denying Fletchers application.
On information and belief, at a Board meeting held on April 14, 2010, one or
more of the Individual Defendants repcatedly made false and misleading statements to other
Board members rcgarding Fletchers financial condition. This occurred on the same day that
Fletchcr questioned the new policy and before he could provide the new information
demanded by Barnes and Goldsmiths April 10 letter.
59.
In particular, one or more of the Individual Defendants told the other members of
the Board that Fletcher had not fulfilled binding charitable commitments arid pledges, that
Flctchers assets wcrc all illiquid and difficult to value, and that FAMs business loans left it
over-cxtended and at risk of collapse. The defendants made thcse false statements maliciously
and with the intent both to taint thc Boards consideration of Fletchers application to purchase
Apartment SO and to damage Fletcher and FAMs reputation within the Dakota and the broader
investment community.
60.
The very next day, April 15, 2010, Mrs. Smiths son, Anthony Smith, emailed
Fletcher, stating that Mr. Nitze had informed him that the Board had not approved Fletchers
purchase application because it had questions. Smith has never been a shareholder or resident
of the Dakota.
6 1.
Rcmarkably, the Board had not communicated any concerns or updates on the
purchase applications status to Fletcher, even after it conveyed both concerns and the status
update to Smith, a non-resident of the building. Later that day, Fletcher emailcd Goldsmith to
inquirc about the status of his application.
Fletchcr spoke with Barnes and Goldsmith by phone on or about April 21,2010.
During that call, these Board members raised scvcral completely unfounded conccrns regarding
his ability to afford Apartmcrit 50. These alleged concerns presumably arose from the false
statements made during the April 14 Board mccting, at the prior Finance Committee meetings, as
well as discussions among individual Board members, including the Individual Dcfcndants.
63.
More specifically, defendant Barnes and Goldsmith said on the April 21 call that
there were three issues. First, they said that Fletcher had not honored binding charitable
commitmcnts that amounted to undisclosed liabilities that should have been on his balance
sheet and that require an investigation by a privatc investigator.
64.
As for the second issue, dcfendant Barnes and Goldsmith told Fletcher that they
believed that his assets were illiquid and difficult to value. They elaborated that Fletcher
needed to prove that hc had liquid assets. They negatively contrasted Fletchcrs interest in
FAM with AT&T stock, which can be sold. They acknowledged, however, that a fair valuation
of FAM could be done, and that there are plcnty of people who can valuc the business.
22
65.
Finally, they said that Fletchers business loans had left him over-extcnded and
at risk. Thcy incorrectly asserted that the FAM loans had call provisions and thus were not
long-term capital.
66.
In responsc, Fletcher made it clear that he had substantial liquidity and that the
FAM business loans were, in contrast to their accusations, very attractive financing because they
do not mature for 20 years, had low interest rates, were tax deductible, and were not callable.
Fletcher further pointed out that most of Barnes and Goldsmiths allegations werc not actually
relevant to the Boards evaluation of his application given that his proposed purchase of
Apartment 50 was an all cash transaction, without any financing. He further noted that thc
balance shcet submitted listed his principal assets and liabilities, as required by Dakota policy,
and that the market value of the assets far exceeded the assets, as listed on a cost basis.
67.
The Board could not have derived these concerns about Fletchers finances from
any of the material provided by Fletchcr since his application at this point coiisistcd only of the
one-page balance sheet that was part of thc April 5 submission which contained limited financial
detail. Rather, on information and bclief, these concerns stemmed from the Individual
Defendants deliberate concoction of false and defamatory statements regarding Fletcher and
FAMs finances.
68.
concerns cxpressed during the April 21 call. But he was particularly insulted and appalled by
their false allcgation that he had failed to satisfy binding commitments he had made to charities.
Fletcher qucstioned Barnes and Goldsmith as to the basis for this claim. In response, thcy
referred to a 2004 article in The New York Times that describcd Fletchers plan that he would
give $50 million over the coursc of his lifetime for individuals and institutions working to
improve racc relations. Fletchcr had formulatcd this plan to honor the fiftieth anniversary of the
Unitcd States Supremc Courts decision in Brown v. Board of Education. Barnes and Goldsmith
claimed that someone said that you havent paid those charities and we need a private
investigator to call each one to determine how much you owe arid what claims they have on
you.
69.
This six-year old articlc concerning Fletchers 2004 plan could hardly havc led to
Fletchers questions regarding the basis of the Boards supposed concerns and the Boards
demands for additional financial disclosures during the April 21 call. Instead, they simply stated
that the Board can do whatever it wants and does not have to give a reason - a statement that
the Board has made to Fletcher or his represcntatives many timcs before and since concerning
his application to purchase Apartment 50.
71.
Given his practical nature and his desire to move forward amicably with
purchasing Apartincnt 50, Fletcher opted not to argue ovcr the Boards unjustified requests for
additional financial disclosures. He instead agreed to providc the additional information that the
24
Board said was necessary and, on April 24, 2010, submitted a supplemental application package
to the Board totaling over 300 pages (the April 24 Submission).
72.
Fletchcrs checking account statements for the period ending March 3 1, 2010; Fletchers tax
retuiiis for 2007 and 2008: financial condition statcrnents and income statcrnents for Fletchers
private businesses from 2007 - March 2010; an independent valuation of FAM by Quantal
Inteimational, a global service provider to financial institutions and advisors, and a business loan
security agreement pcrtaining to Fletchers existing Dakota shares.
73.
25
74.
In this second presentation, Flctchers assets and liabilities were valued based on
thcir conservative market value, as opposed to the cost basis on April 5 , and the submission
showed Fletchers net worth to be $80 million. Fletcher knew and understood that his April 21
presentation contained complicated financial information. Accordingly, after submitting the
package and on multiplc occasions thereafter, Flctcher repeatedly asked that the Individual
Dcfendants meet with him in order to allow him to answcr thcir questions and said that he would
be happy to make his accountants or other cxpcrts available to answer their questions as well.
Each tirnc, however, the defendants either ignored his requests to rncct, or quickly rejected his
offer with the statement cither that nothing would change the defendants mind or that the
Board did not need to meet with Fletcher because it had its own experts. Revealingly, the
Board offered that speaking to Fletcher, even to ask a single question about Fletchers cxtensive
financial submissions, was dangerous because he would surely accusc the Dakota of racial
discrimination.
75.
Whilc Flctchers application was pending, the Dakota Board also received two
purchasc applications from white applicants. Consistent with its general practice, the Dakota
Board refcrrcd these applications to the Finance Committee, as it had referred Fletchers, to
make recommendations for approval or denial based upon the financials supplied by the
prospective purchaser.
76.
On information and belief, thc Finance Committee and the Board subjected thosc
applications to different rcview practices and less burdensome standards than it imposed on
26
Fletcher's application. In addition, during this time, the defendants impermissibly excludcd
Fletcher, a permanent member of the Finance Committee, from the Committees deliberations
regarding the white shareholders applications.
77.
seriously considcred Fletchers April 24 Submission, despite having requested and received
hundreds of pages of detailed financial disclosures addressing the concerns raised by Barnes and
Goldsmith. By contrast, days later, the Finance Committee considered and recommended for
approval two pending purchase applications submitted by whitc applicants. One application,
most comparable to Fletchers, because submitted by existing shareholdcrs, had financial
qualifications clearly not as strong as Fletchers, despite the applicants proposal to purchase an
apartment twice as expensive as Apartment SO.
78.
Fletcher had received copies of these two other applications in his capacity as a
Finance Committee member and, in that capacity, was obligated to evaluate thcm in accordance
with the Corporations best interests. In April 20 10, Fletcher evaluated these applications, with
the cxpectation that the Finance Committee would follow its customary practice and discuss the
applications prior to conveying a Committee rccomrnendation to the Board. The Finance
Committcc improperly excluded Flctcher from discussions regarding these applications,
however, revcaling the defendants intcnt to conceal their uncqual treatment of Fletcher in
comparison to the white applicants.
79.
scheduled a Financc Committee conferencc call via email for April 26 at 8:30 a.m. to discuss the
two pending applications. As a Committee rncmber, Fletcher was included on the scheduling
email. Howevcr, on April 26, only a few minutes past the scheduled call start time, Barnes sent
27
an email to Committee membcrs, including Flctcher, indicating that he could not activate the call
because he did not have the chairmans code. Barnes indicated in this email that he would
circulatc a new time for thc call.
80.
The following day, in the course of an email exchangc regarding his April 24
Submission, Fletcher asked Ms. Kaswaree Narine of Douglas Elliman whether a new time had
been set for the Finance Committcc call. Narine responded that the call had not yet becn
reschedulcd. Later that day, Narine emailed Barnes conveying Fletchers inquiry regarding the
call. Barnes emailcd Fletcher shortly thereafter, stating that the consensus among Financc
Committcc members was that they were satisficd with the financial packages submitted by these
applicants. When Fletcher responded, asking whether he had overlookcd an email rescheduling
the call, Barnes did not reply.
81.
One day later, on April 28, 2010, thc Finance Committcc held its meeting.
During this meeting, they voted unanimously to recommend the other two pending applications
from the whitc applicants to the Board for approval, including the existing shareholder couple
who could not alford to purchase the new apartment without financing and who had a
questionablc financial history. At the same time, thcy voted unanimously not to recornmend
Fletchcrs application to purchase Apartment 50. Fletcher received no notice of this meeting.
Although Flctcher could not havc participated in the Committees discussions regarding his own
application, thc defendants impermissibly excluded him from discussions rcgarding the other two
applications. Given his exclusion from the meeting, Fletcher was not permitted to ask any
questions concerning the other applicants and was told nothing about the deliberations, othcr
than the decision was unanimous.
82.
The minutes from the April 28 meeting rcport the Finance Committees reason for
its decision regarding Fletchers application: the risk of thc applicants inability to meet his
futurc financial obligations. Fletcher later learned that the defendants took the position that
while Fletcher might today have sufficient liquidity and net worth, he may, bccause he works in
the financial industry, encounter financial distress at some undetermined point in the future. Of
course, the Dakota has many shareholders who likewise work in the financial industry, including
the shareholders whosc application the Finance Committee recommended for approval at its
April 28 mccting.
83.
As discussed above, the Financc Committee had no basis for this determination.
Yet, if Committee members had questions regarding Fletchers extensive submission, they never
asked him. At no tirnc prior to the April 28,2010 mceting did any Finance Committce member
pose a single question or solicit any clarification regarding the hundreds of pages of financial
information in the April 24 Submission. In othcr words, as discussed above, they refused to
permit Fletcher to address any questions they might have, provide any clarifications, or
othcrwise attempt to bridge the unexplainable gap between what the third-party experts had
concluded and what thc Finance Committee seemed to be concluding. On information and
belief, the Committee recorded its decision in this way to disguise the Individual Defendants
disregard of their fiduciary duty, as motivated by their unlawful animus and discriminatory
intent.
84.
At that same meeting, the minutes rcport that the Finance Committee decided,
unanimously, to rccomrnend that the Board approve the application from the white shareholders,
a married couple, to purchase another apartment in the Building. The Finance Committee made
this recommendation despite numerous facts related to the couples finances, including their
29
limited liquidity post-purchase and thc debt that the couple required in order to make the
purchase. In addition, a background check regarding the couple shows bad debt judgments,
evictions, and a number of UCC liens.
85.
submission included a financial statement calculating Fletchers net worth in excess of $80
million and an independent valuation of FAM, which valued the company conservatively at $45
million. In addition, it showed approximately $14 million of liquid assets, and $8 million after
the proposed all-cash purchase of Apartment 50.
86.
On May 2, 2010, the day before the shareholders annual meeting which would
include the election of a new Board, the Board held a hastily-called meeting and voted to
approve the whitc shareholders purchase application. The Board also referred the application by
a white non-shareholder to the Interview Committee, indicating that the Board had been
sufficiently satisfied about that applicants financial status.
87.
At the same time, on information and belief, Goldsmith informed the Board that
thc Finance Comrnittce recommended that the Board deny Fletchers application.
88.
Shortly thereaftcr, the Board voted to withhold its consent to the transfer of
Apartment 50 to Flctcher. On information and belief, the Individual Defendants again, during
this mceting, made falsc and misleading statements regarding Flctchers fulfillment of his
charitable commitments as well as his finances and those of FAM.
89.
On May 3, 2010, the Corporation held its annual shareholders meeting and
elected a new slate of directors for the 2010-201 1 term. Defendants Barnes and Nitze, and
30
Dr. Fletcher, were all re-elected to the Board. Defendant Rydzewski was also elected to serve as
a director for the new term. A week later, Barnes was electcd Board president.
90.
On May 14,2010, Fletchcr spoke with defendant Barnes by phone regarding the
Boards rejection of his application. During this call, Fletcher followed up with Barnes, again,
about his exclusion from the Finance Committee discussions and the April 28 meeting regarding
the other pcridiiig applications.
91.
Barnes informed Fletcher that hc was not invited to that meeting because the
Committcc members had already agreed to approve the other two applications and because the
exclusive purpose of the meeting was to discuss his application to purchase Apartment 50. Yet
the April 28 meeting minutes specifically state that the other transfers were discussed and voted
upon by the Committee.
92.
Mr. Barnes also, and remarkably, in light of the submissions and history to that
point, told Fletcher that, No additional information regarding your application will result in a
different decision by the board.
93.
throughout the larger community of successful, philanthropic New Yorkers. On or about May 7,
2010, for example, Flctcher had conversations with a Dakota sharcholder, Craig Hatkoff, On
information and belief, Hatkoff, along with others, had becn informed of the Boards decision to
deny Fletchers application from one or more of the Individual Defendants. These dcfendants
had told Hatkoff the same kinds of lies regarding Fletchers financial condition and that of his
company, FAM, as had been discussed during Board meetings.
94.
to Fletcher that Fletcher have his wife, Ellen, purchase the apartment, because, Myers speculated,
her financials must be clean, implying that Fletchers wcrc not.
95.
directors, including, on information and belief, defendant Nitze. During this conversation,
Hatkoff asked about the status of Fletchers application. After being told that the Board was
concerned about Fletchers finances, Hatkoff asked how thc Board could havc that concern,
given the amount of money he givcs to charity. On information and bclief, Nitze replicd that
Fletcher had not actually given the money he had promised to give and he owes it.
96.
Mr. Hatkoff later reported to Fletcher that he had a coilversation with another
shareholder and forrncr Board president, Toni Sosnoff, in which she stated that she had heard
that Fletcher was not financially qualified to purchase Apartment 50. On information and belief,
Mrs. Sosnoffs erroneous impression originated from the false rumors maliciously spread by the
dcfendants.
97.
In short, the defamatory lics of the Individual Defendants havc tarnished and
Causing evcn more harm, thc defendants also acted tortiously to interfere with
Flctchers contract to purchase Apartment 50 from the Estate. In so doing, they also breached
their fiduciary duty to thc Dakota by acting to give the cconomic opportunity posed by thc sale to
defendant Lovinger a fellow Board member.
32
99.
On May 19, 2010, Smith emailed Fletcher to say that he had learned of the
absurd, unfair and inexplicable rejection of Fletchers application through a call from the
Dakotas managing agent. On May 21, Fletcher replicd that he was preparing a response to the
Board in an attempt to understand and resolve their concerns and offered to pay to the Estate the
rnaintcnance charges and other out-of-pocket expenses associated with Apartment 50 while
discussions with the Board were on-going.
100.
On May 24, 2010, counsel for the Estate negotiated with Fletchers counsel to
hold Apartment 50 off of the market in exchange for monthly payments by Fletcher. On
information and belief, one or more of the Individual Defendants sought to coerce the Estate not
to enter into any such agreement with Fletcher.
101.
On June 2, 2010, the Board held a meeting at which it discussed a request by the
Estate to apply for a bridge loan to pay the estate taxes on Apartment 50. Though Board
approval is not required for this type of financing, the Board granted conditional approval to thc
Estatcs request. The minutes indicate that approval was conditioned upon satisfaction of
Barnes inquiries on the Boards behalf. The naturc of these inquiries is nowhere specified.
102.
On June 14, 2010, Kiely, Fletchers counscl, spoke with counscl to the Estate,
Elliott Meisel. Meisel conveyed that the Estate did not believe that the Boards decision
regarding Fletchers application would change. He also indicated that the Estate did not want to
be seen as supporting a litigation against the Board for fear that the directors would exact
revenge upon the Smiths. Still, he said that the Estate would give Fletchcr time to resolve the
dispute because Mrs. Smith had so clearly wanted Fletcher to purchase the apartment.
103.
As Fletcher sought to have the Board remove its block on his purchase, Board
member defendant Pamela Lovinger suddenly resigned from the Board on or about November 3,
33
2010. Shortly thereafter, at the instigation of defendant Kydzewski, she listed her own apartment
for sale with a real estate broker who, on information and belief, is a friend of defendant
Rydzcwskis. The listing indicatcd that the sale would bc in conjunction with Apartmcnt 50 as
part of a 5 bedroom, 4 bathroom, 11-room combined unit. Thc price for this joint listing was
posted at $19.5 million.
104.
because the Individual Defendants had concluded that the values of the apartments at the Dakota
wcrc too depressed, that the valuc of their own apartments wobld be significantly higher if
Apartments SO and 51 were sold together for $19.5 million, and that the value of their own
apartments would certainly be higher than if Fletcher were to buy Apartment SO for $5.7 million.
Morcover, Lovingers apartment alone is worth substantially lcss than $6 million so she stands to
gain a huge windfall if the apartments are sold together.
105.
Prior to the joint listing, the Estate broke its tcntative deal with Fletcher not to list
Apartment 50 and listed it with the same broker who listed the joint sale of Apartments 50 and
On June 24, 2010, counsel for Fletcher wrote to ihe Board. He outlined the
Boards unfair and unlawful treatment of Fletcher and urged the, Board to work with Fletcher
amicably to reach a solution.
107.
On July 21,2010, Fletcher, along with his counsId, attcnded a meeting proposed
by counsel for the Board, who along withdeferidant Barnes, attended on the Boards behalf.
108.
Rather than discuss the Boards supposed concerns regarding Fletchers finances,
howcver, Barnes reiteratcd at that meeting that nothing would cause thc Board to approve
Fletchers application, except if Flctcher won the lottcry.
109.
Barnes staterncnt revealed far morc than Barnes intended, as it revealed that the
Boards decision did not rest on a rational or fair review of Fletchcr or FAMs assets, liabilities
or balance sheet but instead dcrived from underlying, impermissible animus and self-interest.
110.
Later that day, Barnes informed Fletcher that it had appointed Board member
Matthcw Mallow as the chair of a Special Sub-Committee to consider thc issue of Fletchers
application to purchase Apartment 50. The Board comprised this Committee primarily of the
very same people who had rejccted Fletchers original application, including defendant Nitze,
whom Barncs described as a leader in the decision to deny Fletchers application.
Notwithstanding the committees composition, Fletcher had at least some confidencc in this
process since Mallow was a long-time investor in FAMs funds and was or had recently becn a
partner at the law firm of Skadden, Arps LLP, the primary law firm that Flctcher and FAM had
uscd for more than ninctccn years.
I 1 1.
Beginning in July, Fletcher and his counsel had a series of convcrsations with
Mallow in an attempt to understand and bring to an end the Boards opposition to his application.
On August 5 , 2010, Flctchcr and Mallow had lunch at the Harvard Club in New York. At that
lunch, Mallow said that he wanted to find something that Flctcher could give thc Board in
exchange for its approval, even if it was not terribly real. Mallow suggested a letter-of-credit
for two years maintenance; or having Fletchers wifc purchase the apartment instead of Fletcher.
In rcsponse, Fletcher told Mallow that he did not know if he could accept either of these
demeaning demands and that Barncs had indicated that thc Board would not acccpt Fletchers
application no matter what Fletcher did or said. Mallow then commcntcd that defendant Barnes
comments about Fletcher winning the lottery was the dumbest f****** comment he had
ever heard.
On August 27, 2010, Barnes sent a lctter to Fletcher on the Boards behalf, finally
112.
offering to meet with Fletcher if therc was any information Fletcher wanted to provide.
Following a series of exchanges between Barnes and Fletcher, Barnes told Flctcher on
Septernbcr 8, 2010 that the Board would like him to submit documents relating to the FAM
business loans. The Board indicated that it wanted the Special Sub-committee to review the
business loans.
1 13.
While these discussions were ongoing, on information and belief, one or more of
the Individual Defendants communicated with several Dakota shareholders and maliciously
made False and misleading statements regarding the state of Fletchers finances and those of
FAM, as well as statements that Flctchcr had not fulfilled his charitablc commitments. By
September 2010, for example, before Fletcher had a chancc to respond to the Boards most
rcccnt request regarding the business loans, m e or more of the Individual Defendants falsely and
maliciously statcd to IIatkoff that Fletcher had checked out of his business and was living on
borrowed money.
114.
to the Board which Fletcher had shared with a fcw concerned neighbors, the Board sent a letter
to certain Dakota shareholders that contained several false and defamatory statements about
Fletchcr. First, the Board claimed that [iln reviewing Fletchers application, the Board and its
Finance Committee . . . followed the procedures and applied the standards applicable to all
existing shareholders. This statement is false in at least thrcc respects. First, the Board and
36
Finance Committee did not follow the Transfer Disclosure Policy for existing shareholders.
Even after Fletchers compliance with the morc demanding financial disclosures, the Board did
not rcvicw his application under thc same standards as it applicd to the white shareholders whose
application was approved.
115.
Second, the September 14 letter falsely implies that Fletchers application was
kept in confidencc and that the Board prefcrl red] not to discuss publicly the details of his
application. These statements arc patently untrue. As indicatcd above, Fletcher heard dircctly
from scvcral Dakota shareholders not on the Board -- as well as others who do not even live in
the Dakota -- that the Board did not approve the sale because of the fdse allegations that his
financial situation was in disarray and becausc he had reneged on financial commitments to
charitable organizations.
116.
Third and most importantly, while disclaiming any motive based on improper
motivation and noting that it held Flctcher in high regard, the Board repeated, publicly, the
defamatory statement that [blased on thc financial information subrnittcd by Fletcher, the Board
concluded that approving such a purchase would not be in the best interest of the Dakota.
117.
The September 14 letter also contained the false and misleading statement that
Fletcher had declined the Boards request to provide additional financial information. As
discusscd above, he had provided extensive financial information in response to the Boards
requests. In addition, Flctcher was in the process of gathering the additional documents
requested by the Board for review. He wrote specifically to defendant Barnes by email on
Scptcrnber 17, 2010, confirming this and stating that our documcnt collection for your latest
request continues with a current estimate of 500.
118.
effort to correct thc false and misleading statements that defendant Barnes and other Individual
Defendants had madc regarding Fletchers finances. In addition, Flctcher stated that he had
collected the documents requested and was, along with his advisors, completing an initial review.
119.
Fletcher submitted these documents to the law firm of Skadden Arps, where
Mallow is a retired partner, for review. allow told Fletcher that he believcd this review would
succccd in convincing the Board to approve Fletchers application to purchase Apartment 50.
Both the attorneys at Skadden and Mallow confirmed that the FAM loan covenants were plain
vanilla and that there was nothing unusual or of concern regarding the FAM loans. Indced, the
FAM loans had becn made on extremely attractive terms that were economically advantageous
to FAMs business, particularly during a period of low liquidity in the rest of the market.
120.
Remarkably, on November 4,2010, Mallow informed Fletcher that the Board had
yet anothcr series of unprecedented and insulting demands beforc it would consider approving
his application to purchasc Apartment 50. These dcmands included, among others, that Fletcher
give thc Board a release, that he purchase from the Building interior hallway space betwcen the
two apartments at the same price per square foot as he had agreed to pay for Apartment 5 1, and
that he agree to sell $6 million of real estate that he owns in California and further agree to sell
Apartment 51 in the cvent that the California rcal estate was not sold within 12 months.
121.
By this point, Fletcher had had enough. He had already spent months of his time
and more than one hundred thousand dollars as he tricd to assuage the Boards purported
concerns despite the defendants unlawful self-dealing and hostility toward him. In addition, as a
direct result of the defendants conduct. Fletcher suffered extreme stress, as have his wife and
38
Supreme Court Records OnLine Library - page 40 of 60
family. Among other h a r m , Fletchcr has been diagnoscd with stress-induced shingles and
prescribed treatment for that condition.
122.
Although Fletcher would have much prefcrrcd to resolve this conflict amicably, as
shown by his extcnsive efforts to satisfy the Boards increasingly unreasonable requests and by
his ycars of turning the other cheek in the face of disparate treatment, it had bccorne apparent
that deIendant Barnes meant his threat that Fletcher would literally have to win the lottery
before he would be permitted by the defendants to purchasc Apartment 50. The defendants
actions have thus lcft him and FAM with no choice but to bring thc instant lawsuit.
Indeed, plaintiffs had no choice but to sue now because the Estate has purported
to cancel its contract with Fletcher and has announced its intention to pursue arrangements with
alternativc purchasers.
124.
By letter dated January 24,201 1, the Estate wrote to Fletcher informing him that
125.
The Estate bascd its purported cancellation of the contract with Flctcher solely on
the Boards purported refusal to consent to the transaction: in view of the Boards refusal to
consent to thc transaction, the Seller is hcreby canceling the Contract. . . . (emphasis added).
126.
The Estate concluded the letter by stating that it does not appear that there is any
likelihood that Fletcher will be able to buy Apartment 50, and that thc Estate accordingly
must pursuc other alternatives.
127.
In its lcttcr, the Smith Estate acknowledged its agreement with Fletcher to keep
Apartment SO off the rnarkct pending Fletchers efforts to persuade the Board to reconsider his
39
application.
128.
Enclosed with the January 24, 201 1 letter was a chcck for $250,261.00,
rcpresenting the return of Fletchers down payment on Apartment SO, plus accrued intcrcst.
129.
130.
The Estatcs action has created an urgent situation. Now that the Estate has
purported to canccl its contract with Flctcher and has announced its intention to put Apartment
50 on the market, Fletcher faces imrnincnt risk or irreparable harm. The great desirability of
apartments at The Dakota and thc rarity with which those apartments become available mean that
there is now a significant risk that Apartment 50 will promptly bc purchased by somconc other
than Fletcher, and Fletchcrs opportunity to makc that purchase, consistent with Ms. Smiths
intentions as well as the Dakotas combination policy, will be destroyed.
13 1.
But even bcfore its purported cancellation with Fletcher, the Estate breached its
132.
It did so, on infortnation and belief, by listing Apartment 50 for sale both
indepcndcntly and as a joint listing with defendant Lovingcrs apartment, even whilc having
already contracted to scll that apartment to Fletcher. The Estate thus marketed to the public an
apartment that it had already promised to sell to Fletcher.
133.
In so doing, the Estate also aided and abetted defendant Lovingers breach of the
fiduciary duty that she owed to Fletcher as a mcmber of the Dakota Board.
134.
136.
Each member of the Board and each member of the Finance Committee owes a
Each member of the Board and cach member of the Finance Committee also owes
to Fletcher a duty of loyalty not to damage Fletchers reputation by spreading false and
misleading rumors in a recklcss or malicious manncr.
138.
The Dakota and the Individual Defendants brcached its, his or her fiduciary duty
to Fletcher by (a) refusing to adhere to the Transfer Disclosure Policy; (b) imposing arbitrary and
unreasonable conditions upon Fletchers application to purchase Apartment 50; (c) subjecting
Flctcher to racial discrimination and/or otherwise impermissible treatment and retaliating against
him for his efforts to assure unbiascd treatment of minority residcnts of the Dakota; (d) failing to
take reasonable stcps to inform themselves of the meaning and significance of Fletchers
financial disclosurcs; (e) knowingly and maliciously spreading false rumors concerning
Flctchers financial condition; (f) tendering and/or accepting the recommendation to reject
Fletchers application while at the same time approving an application from white shareholders
who were far less qualified financially; (g) tendering and/or accepting the recommendation to
rcjcct Fletchers application with knowledge that the recommendation was based upon racial
To reiterate, the Individual Defendants for purposes of this Complaint do not include the
Estate.
41
animus; (h) conspiring with other Individual Defendants to devise a prctext for rejecting
Fletchers application.
139.
141.
Thc Dakota and the Individual Defendants owed a fiduciary duty to Fletcher.
142.
The Dakota and the Individual Defendants breached its, his or her fiduciary duty
to Fletcher by (a) refusing to adhere to the Transfer Disclosure Policy; (b) imposing arbitrary and
unreasonable conditions upon Fletchers application to purchase Apartment 50; (c) failing to take
reasonable steps to inform themselves of the meaning and significance of Flctchers financial
disclosures; (d) knowingly and maliciously spreading false rumors concerning Fletchcrs
financial condition; (e) conspiring with other Individual Defendants to devise a pretext for
rejecting Fletchers application; and (f, engaging in or allowing othcr Board members to engage
in sclf-dealing by denying Fletchers application to purchase Apartment 50 so that one of the
Board members could list it on thc market with her own apartment at a combined purchase price
of $19.5 million.
143.
In so doing, the Dakota and thc Individual Defendants believed that the value of
the Individual Defendants and all other Dakota apartmcnts would be maximized if Apartments
50 and 51 were sold together as one unit for $19.5 million and that value would certainly be
greater than if Fletcher wcre to purchase Apartment 50 for $5.7 million.
144.
42
145.
146.
Fletcher has been irreparably harmed as a result of the Dakotas and the
Individual Defendants conduct outlined above, in that he has bcen deprived of the ability to
purchase Apartment SO and combinc it with his existing apartment at the Dakota.
147.
combination of that apartment with his current apartment can the harms that Flctcher has
suffered be remedicd. Apartment 50 is uniquely situated, as it is next to Fletchers apartment in
the building in which he has lived for ncarly two decades and in which he and his wife wish to
deepen their roots and raise thcir growing family.
148.
wishes of its former owner, and with the Dakotas original, historic layout.
149.
If thc Dakota and the Individual Defendants are not enjoined from continuing to
breach thcir fiduciary duty by refusing to allow Fletchcr to purchase Apartment 50 and combinc
it with his existing apartment, Fletcher will continue to suffer irreparable harm for which he has
4.
152.
The Dakota and the Individual Defendants aided and abetted that breach and
knowingly participated in that breach. They were aware that Fletcher had contracted to purchase
Apartment 50, that he had made two submissions to the Board seeking the Boards approval of
his purchase of Apartment 50, and that he was engaged in on-going discussions with the Board
regarding approval of his purchase of Apartment 50.
154.
Dakota and the Individual Defendants intentionally provided substantial assistance to one
another to unlawfully block the Board from approving Fletchers application to purchase
Apartment 50, and to enable and allow defendant Lovinger to list hcr apartment in conjunction
with Apartmcnt SO for a substantial profit, and thus breach the fiduciary duty that she owed to
Fletcher.
157.
Fletcher had a valid contract with the Estate, a third-party, for the purchase of
Apartrncrit 50.
158.
Thc Dakota and the Individual Defendants knew about the existence of the
contract and imposed unjustified preconditions on the approval of the sale to Fletcher.
44
159.
performance of the contract, and their wrongful acts have resulted in the Estates purported
cancellation of the contract with Fletcher..
160.
The Dakotas and thc Individual Defendants actions in this regard have been
contract.
163.
statements, or made such statements in rcckless disregard of their truth or falsity, about Fletcher
and FAM to the Board, Dakota shareholdcrs and to other third parties, as set forth above.
164.
Defendants disscminatcd false statements regarding Fletcher and FAM for the
Defendants falsc statcmcnts are defamatory per se. They expose Fletcher and
FAM to contempt, ridicule and disgrace because they charge Fletcher with being dishonest in
pledging millions of dollars to charity without the ability to follow through, and because they
allege that Fletcher and FAM are in poor and unstable financial condition, thereby harming
Fletchcrs rcputation as an investinent professional and FAMs reputation as an investment firm.
166.
made by defendants with malice and ill will toward Flctcher and FAM and with the desire to
injure, disgrace and dehme Fletcher and his company.
45
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a.
167.
them with knowledge that they were false, or with reckless disregard for whether the statcmcnts
were true or false.
168.
Fletcher has suffered injury in that defendants false statements have prevented
him from rcalizing the premium valuc associated with his proposed acquisition of Apartment 50
and rccornbination with his existing residence, Apartment 52. In addition, Fletcher has suffered
damages to his reputation as a trusted and successful invcstrncnt advisor, which has interfered
with his business dealings.
169.
FAM has suffered injury in that defendants false statements have damaged its
reputation as a successful investment firm, and this reputational injury has had a further
damaging effect on relationship with currcnt and prospective investors, and on resulting profits.
170.
Defendants false statements were made with malice and willful and wanton
disrcgard of the rights of Fletcher and FAM, thus entitling plaintiffs to punitive damages.
Further, punitive damages are necessary to deter such misconduct by the individual defendants in
the future.
SEVENTH CAUSE OF ACTION
DECLARATORY JUDGMENT
(Fletcherss Compliance With, and Defendants Breach of, Transfer Disclosure Policy and
Dakota Policy in Favor of Recombining Apartments - Declaratory Relief)
(By Fletcher Against thc Dakota and the Individual Defendants)
171.
172.
There are genuine, existent controversies between the parties as to the adequacy
of Fletchers application for the purchase of Apartment 50, and the propriety of the Boards
failure to approve that application.
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173.
purchase of Apartment SO, and concerning the propriety of the Boards failure to approve that
application, is justiciable.
174.
Fletchcr is therefore entitled to a declaration that (a) his April 5 , 2010 application
for thc purchase of Apartment SO satisfies thc Dakotas Transfer Disclosure Policy and Policy in
Favor of Rccoinbining Apartments; and (b) the Board is required to approve Plaintiffs
application for the purchase of Apartment 50.
EIGHTH CAUSE OF ACTION
DECLARATORY JUDGMENT
(By Fletcher Against the Dakota and the Individual Defendants)
the Boards purported refusal to approve Fletchers application to purchase Apartment SO given
that such refusal was the outgrowth of discrimination by the Board on the basis of Flctchcrs race
and/or otherwise impermissible differential treatment, and of financial self-dealing on the part of
at least OIK Board member.
178.
182.
183.
The Dakota and the Individual Defendants have not identified any objective
standard against which Mr. Fletcher could be deemed financial unqualified to purchasc
Apartment SO.
185.
186.
The Dakota and the Individual Defendants (i) denied Fletcher the benefit of
having thc Transfer Disclosure Policy govern his application to purchasc Apartmcnt 50;
(ii) denied Fletcher the impartial, fair, and unbiased review of his financial disclosures;
(iii) rccommended rejection of Fletchers application; and (iv) rnadc that rccommcndation based
upon Flctchcrs race and in retaliation [or his prior efforts to defend other victims of racial
discrimination.
187.
Thc Dakotas and the Individual Defendants conduct with respect to Flctchcrs
discriminatory acts, as defined by the New York Human Rights Law, N.Y. Executive Law 8 290,
et seq.
48
189.
The Dakota and each of the Individual Dcfendants actively participated in and
attorneys fees, from thc Dakota and each of thc Individual Defendants, jointly and severally, in
amounts to be determined at trial.
The Dakota and the Individual Defendants have retaliated against Fletchcr in
violation of New York Human Rights Law, N.Y. Executive Law 8 290, et seq. by (i) denying
Fletcher the benefit of having the Transfer Disclosure Policy govern his application to purchasc
Apartment 50; (ii) denying Fletcher the impartial, fair, and unbiased review of his financial
disclosures; (iii) recommending rejection of Fletchers application; (iv) spreading false and
defamatory rumors about the statc of Fletchers financcs and those of FAM.
192.
result of Fletchers crigagement in the protected activity of opposing the Dakotas and the
Individual Dcfcndants discriminatory treatment of other shareholdcrs and non-shareholdcrs
seeking to purchase units in the Dakota.
193.
Fletcher has been injured as a result of the Dakotas and the Individual
194.
195.
discriminatory practices, as defined by New York City Administrative Law 8 8-107 et seq.
196.
The Dakota and each of the Individual Defendants actively participated in and
attorneys fees, from the Dakota and each of the Individual Defcndants, jointly and severally, in
amounts to be determined at trial.
199.
The Dakota and the Individual Defendants have rctaliated against Fletcher in
violation of New York Human Rights Law, N.Y. Executive Law 9 8-107, et sey. by (i) denying
Fletcher the benefit of having thc Transfer Disclosure Policy govern his application to purchase
Apartment 50; (ii) denying Fletcher the impartial, fair, and unbiased review of his financial
disclosures; (iii) recommending rejection of Fletchers application; (iv) spreading false and
defamatory rumors about the state of Fletchers finances and thosc of FAM.
200.
result of Fletchers cngagement in the protected activity of opposing the Dakotas and the
50
201.
Flctcher has been injured as a result of the Dakotas and the Individual
203.
the Estatcs purported cancellation, on or about January 24, 201 1, of its contract with Fletcher for
the sale and purchase of Apartment 50, givcri that: (a) such cancellation was premised solely on
the Boards purported refusal to consent to Fletchers purchase application for Apartrncnt SO;
and (b) the Boards purported refusal was thc product of illegal race discrimination and/or
otherwisc impermissible differential treatment, and of financial self-dealing on the part of at least
one Board mcmbcr.
204.
205.
51
207.
208.
On or about March 19,2010, Flctcher and the Estate entered into a valid, signcd
Pursuant to the tcrms of that contract, the Estate promised to sell Apartment 50 to
Fletcher fully performed all of his obligations under the contract with the Estatc.
21 1.
individuals other than Fletcher; specifically, by listing Apartment 50 as available for sale, along
with defcndant Lovingcrs Apartment 51, in a co-listing that was circulated to the public, even
before it purported to cancel its contract with Fletcher.
212.
purchasers other than Fletcher, Fletcher will continuc to suffcr harm for which he has no
adequate remedy at law.
214.
215.
216.
that breach. On information arid belief, it knew that Lovinger had been on the Dakota Board and
had suddenly resigned from the Board, and it coordinated with Lovingcr to enable her to co-list
her apartment for sale along with Apartment SO and, thereby, thwarted Fletchers efforts to
purchase Apartment 50.
2 17.
If the Estate is not enjoined from continuing to aid and abet defendant Lovingers
breach of fiduciary duty to Fletcher, Fletcher will continue to suffer harm for which he has no
adequate remedy at law.
the Individual Defendants, prclirninarily and permanently, from taking any action to approve any
53
application for the purchase of Apartment 50; (iii) regardless of whether any other application to
purchase Apartment SO is submitted by any potential purchaser, requiring thc Dakota and the
Individual Defendants to approve Fletchers purchase application of Apartment 50; and (iv)
preliminarily and permanently enjoining the Dakota and thc Individual Defendants from
interfering with or impeding in any way plaintiffs purchase of Apartment 50;
d. on the Fourth Cuuse qjAction, an award of compensatory and punitivc
damages to Plaintiff Flctchcr jointly and severally against the Dakota and the Individual
Defendants, in an amount to be determined at trial, but in any event not less than $15 million;
h. on the Eighth Cuuse of Action,, a declaration that the Dakotas and the
Individual Defendants purported rcfusal to consent to Fletchers purchase of Apartment 50 is
null, void, and of no effect;
55
(either alone or in conjunction with any other apartment), such notice to be provided no more
than one business day after such application is submitted to the Board; and (ii) enjoining the
Estate, prclirninarily and permancntly, from taking any further action of any kind to sell
Apartment 50 to any purchaser other than Fletchcr; and
0.
Daniel J.
Kor$steih
h a . R. Bort
757 Third Avenue
New York, New York 10017
(212) 418-8600
~
Of Counscl:
Suzanne B. Goldberg, Esq.
*.
VERIFICATION
STATE OF CALIFORNIA
1.
I am onc of the Plaintiffs in the within action. I am also the
founder, Chairman and Chief Executive Officer of Plaintiff Fletcher Asset Management,
hC.
Index No.:
FEB 0 1 2019
NEW YOHK
COUNTY CERKS OFFICE