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SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ALPHONSE FLETCHER, Jr., and FLETCHER ASSET MANAGEMENT, INC. Plaintiffs, 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, Defendants. To the above named Defendants:
Plaintiffs designate New York County as the place of trial. The basis of venue is plaintiff Fletcher’s residence (CPLR 503(a)).
Plaintiff Fletcher resides at: One West 72”dStreet, Apt. 5 1, New York, NY County of New York
FEE3 0 1 2011
YOU ARE HEREBY SUMMONED to answer the complaint in this acw/&riMMK serve a copy of your answer, or, if the complaint is not served with t h i S R K S OFFICE serve a notice of appearance, on the Plaintiffs’ Attorneys within 20 days after the service of this summons, exclusive of the day of service (or within 30 days after the service is complete if this summons is not personally delivered to you within the State of New York); and in case of your failure to appear or answer, judgment will be taken against you by default for the relief demanded in the complaint. Dated: February 1,2011 New York, N.Y.
Attorneys for Plaintiffs:
K&NSTEIN ~ E I S Z WEXLER &
The Dakota, Inc. 675 Third Avenue New York, N.Y. 10017
Ina R. Bod, E& 757 Third Avenue NewYork, N.Y. 10017 (212) 418-8600
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Bruce Barnes One West 72nd Street 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
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SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ALBHONSE FIETCHER, Jr., and FLETCHER ASSET MANAGEMENT, INC . Plaintiffs,
THE DAKOTA INC., BRUCE BARNES, PAMELA LOVINGER, PETER NITZE, JOHN KYDZEWSKI, and ANTHONY R. SMITH AND GAEL SMITH ARNOLD, as co-cxccutors of THE ESTATE OF RUTH PROSKAUER SMITH,
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:
Nature of the Action
This is an action for defamation, tortious intcrfererice with contract, breach of
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
succcssful investment management firm, Fletcher is a prominent African-American investor and
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philanthropist. This lawsuit seeks relief as a result of the defendants’ acts and statements in opposing Fletcher’s 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 Fletcher’s past efforts to defend thc rights of other minority and femalc shareholders and applicants at the Dakota.
Motivated by unlawful animus and engaging in impermissible self-dealing, the
Dakota, thc Individual Defendants and the Dakota’s Board of Dircctors (the “Board”) unlawfully blocked Fletcher’s cffort to purchase the adjoining apartment after he had already entered into a contract for the purchasc with the apartment’s 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 Fletcher’s 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 FAM’s financial condition was precarious.
More specifically, last spring Fletcher entered into a contract for thc all-cash
purchase of Apartment 50, with the apartment’s owner, free of any financing contingency. Ruth Proskaucr Smith, whose Estate now owns the apartmcnt, was Fletcher’s 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
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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.
Yet dcspitc Fletcher’s great wcalth, longstanding responsible behavior as a
Dakota shareholdcr and his ownership of a highly profitable investment management firm, the defendants rejected Fletcher’s application. In so doing, and in the course of their related dealings, defendants maliciously and wrongfully impugned Fletcher’s 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 mother’s use of their own apartments.
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
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pagcs of disclosures concerning his own finances and the financial situation of FAM, although the Dakota’s 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 FAM’s 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 Flctcher’s application to purchase Apartment SO.
Dcspite Fletcher’s numerous efforts, it eventually became clear that thc
defendants would not willingly rclcnt in their determination to block Fletcher’s 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 Fletcher’s 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.
Other Board members’ actions confirm the Board’s breach of fiduciary duty and
othcr impermissible conduct. On or about November 3,2010, then-Board member Pamela Lovinger suddcnly resigned from the Dakota Board arid announced that she would be listing her
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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 Fletcher’s 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 apartment’s current owner also aided and abetted Lovinger’s brcach of fiduciary duty by co-listing Apartment 50 for salc with Lovinger’s own apartment.
As concerns Fletcher, the Board has abused its discretion, and can no longer be
rclicd upon to exercise that discretion in a fair and appropriate way.
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
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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 City’s most cxpensive and prcst igious cooperative apartment buildings.
Plaintiffs had no choice but to suc now, because Apartment 50’s current owncr,
the Estatc of Ruth Proskauer Smith, purported to cancel its contract with Fletcher last week, and
has announced its intention to pursue arrangements with alternative purchasers.
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
permanent member of the Dakota’s Finance Cornmittcc. 12. 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 Court’s dccision in Browrr v. Bourd of Education, Fletcher and entities affiliated with him
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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.
FAM is a successful investment management firm. Founded by Fletcher in 1991,
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.
FAM’s constructive investment approach has led to superior, risk-adjusted, long-
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 firm’s inccption in 1991. Of significancc to the instant lawsuit, several of the Dakota’s shareholders are individuals who have invested in FAM’ s funds or associatcs of individuals who havc invested in FAM’s funds and they, in turn, socializc and do business with other individuals who are past, prcscnt and prospective investors in FAM’s funds.
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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 City’s 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. Dcfcndant Bruce Barnes is a rcsiderit at the Dakota and a sharcholder of the
Corporation, currently servcs on the B o d as President, and is a member 01the Finance Committcc. Prior t o May 2010 when hc became Board President, Barnes served on the Board as Treasurer and as a mcrnber of Finance Committcc. 18. Dcfcndant Peter Nitze is a rcsidcnt at the Dakota, a shareholder of the
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. Dcfendant John Rydzewski is a resident at the Dakota, a shareholder of the
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 Fletcher’s application to purchase Apartmcnt 50. 20. Defendant Pamela Lovinger is a rcsident at the Dakota, a shareholder of the
Corporation and a frequent past mernbcr of the Board. Lovingcr currently resides in Apartment
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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.
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.
The “Buddy Rule”: The Beginning of the Dakota’s Unequal Treatment of Fletcher and His Mother 23. 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.
In the fall of 1992, Fletcher entered into a contract for the all-cash purchase of
Apartmcnt 1 1, a small, one-bedroom apartment located on the Dakota’s first floor. On information and belief, Fletchcr’s purchase of Apartment 11 marked only the second time that the Board had permitted a black applicant to purchase shares in the Corporation and reside at the Dakota. And it did so with great reluctance. Despite submitting information to thc Board conGrming that he had financial resources far in excess of those required to purchase
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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, Fletcher’s 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.
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. In or around May of 2002, Fletcher sought to purchase a sccond apartment at the
Dakota for his mother, Dr. Bcttye R. Fletcher, a noted educator and a Trustee of the Bank Street
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. . .”
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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.”
The Board’s Hostility Toward Other Minority Dakota Shareholders and Prospective Purchascrs
In addition to enduring, and watching his mother endure, this unequal treatment,
Fletcher also witnessed thc Board’s 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
members’ discriminatory statcments regarding the purchase application of a prominent, finaiicially well-qualified white woman and her husband, a Hispanic man. The Board refused to grant thc couple an intervjcw. At the Board rnceting itself, at dcfcndant Nitze’s insistence, no discussion of thc matter was permitted. Instead, thc Board rejected the application outright. At
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.”
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subscquent Board meetings however, Board members made jokes regarding the Hispanic husband’s 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. Similarly, beginning in or around 2006, Fletcher witnessed the Board discrirninatc
against the only other African-American shareholder of the Corporation, a prominent individual
in the arts. In that case, thc Board rejected the shareholdcr’s 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 Board’s conduct, the shareholdcr endured the humiliation of applying multiple times for pcrmission to fix or replace her bathtub.
In addition, Flctcher witnessed the discriminatory enforcement of Building rules
against this same African-Amcrican shareholder. While thc Dakota’s 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 Building’s 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.
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In early 2007, Fletcher again witnessed discrimination by certain Board members
during discussions regarding a Jewish couple’s 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.
When Fletcher becamc Board President, he tricd (unsuccessfully, as it turned out)
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 couplc’s 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 couple’s application.
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The issue of the African-American tcnant’s repeated efforts to gain approval for
her bathtub renovation resurfaced as well during Fletchcr’s tenure as Board President. During a Board meeting on or about March 13,2008, Fletcher observed defendant Rydzewski and the Corporation’s 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 sharcholder’s 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 shareholder’s requests, the Board finally voted to allow the proposed renovation. 35. Despite Fletchcr’s cfforts to stop discriminatory practices during his tenure as
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.
For example, on information and belief, during a Board mceting held on
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
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On information and belief, reinforced by the Board’s past practiccs described
abovc, the defendants were determined to prcvent the Board from approving Fletchcr’s 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 Fletcher’s purchasc and by facilitating the sale of a $19.5 million joint unit in the Building.
Ruth Proskaucr Smith’s Intention for Fletcher to Purchase Apartment 50, and Fletcher’s Purchase Contract with thc Estate
Until her death in January 2010, Fletcher’s next-door neighbor at the Dakota was
Ruth Proskauer Smith, the notcd women’s 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.
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.
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Tony Smith, Mrs. Smith’s son and the executor of her Estate, was well aware of
his mother’s 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. Smith’s longstanding dcsirc and intention to sell Apartment 50 to Fletcher.
Accordingly, shortly after Mrs. Smith’s death on January 21, 2010, Mr. Smith
began negotiations with Fletcher concerning Fletcher’s purchase of Apartment 50.
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. Smith’s Estate, to purchase Apartment SO. It
was well known that the Dakota policy at the time permitted quick approval and closing for long-
time Dakota residents in good standing such as Fletcher.
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.
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 Fletcher’s purchase of Apartment 50 from thc Estate no matter what.
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Dcfcndant’s Efforts to Change the Dakota’s Transfer Disclosure Policy to Impede Fletchcr’s Purchase
Several ycars earlier, the Board had streamlined thc Dakota’s policy for Board
approval regarding purchase applications by existing shareholders (the “Transfer Disclosure Policy’’ or “Policy”). The Policy, which was adopted on March 22, 2007 and was in force in 2010 when Flekher sought approval to purchase Apartment 50, provides in pertinent part: When ; current Dakota shareholder applics to purchase another apartment in the Dakota, 1 and the purchase would materially incrcasc the shareholder’s sharc ownership, the shareholder will only be required to provide a one page balance sheet, indicating the shareholder’s principal assets and liabilities and signed by the shareholder, if the shareholder making such application has (i) resided in the Building for more than four years and (ii) a personal history of timely payment of all financial obligations to the Dakota.
(emphasis added). This Policy remains in effect today. 46. 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 Policy’s limited disclosure provision. 47.
On information and belief. some or all of the individual defendants recominendcd
changing the Transfer Disclosure Policy to preemptively impede Fletcher’s forthcoming application to purchase Apartment SO. This efort began during a March 10, 2010 Board
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meeting, at a time when these defcndants knew that Fletcher was in negotiations to buy Aparttnent S O . 48. Fletcher learned of the Board’s effort lo change the Policy just days after hc had
signed a contract with the Estatc. Robert McFarland of Douglas Elliman, the Dakota’s 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.
To date, on information and belief, the Financc Committee has made no
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.
Flctcher Also Satisfies the Dakota Policy in Favor of Recombining Apartments
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 Dakota’s 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
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to the building’s 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.
Once again, Fletcher’s application to recombine Apartment 50 with his own
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 Dakota’s 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, Fletcher’s total share ownership will remain bclow that of the Dakota’s 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.
Flctcher’s April 5 Submission to the Board 53.
On April 5 , 2010, Fletcher submitted to the Board his application to purchasc
Apartment 50 (thc “April 5 Submission”). The contcnts were precisely those required by the Transfer Disclosurc Policy described above. That is, Fletcher’s 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 Building’s 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 Fletchcr’s 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
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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.
In his covcr letter, Fletcher explained the transaction as follows:
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 . . .
The April 5 Submission fully satisfied the terms of the Transfer Disclosure
Policy. It clearly confirmed Fletcher’s ability to incur all costs associated with his proposed purchase of Apartment 50. It also dcmonstrated that Fletcher’s proposed purchase satisficd thc Dakota’s 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
rcquiring the following information from all prospective purchasers, regardless of whether the prospcctive purchaser is currently a shareholder-resident of the Dakota:
Copy of the executed contract of sale; Cuwcnt financial statement (see attached), with current bank and broker statements; Three most rcccnt ycars of income tax returns (2007,2008,2009). In addition, the Dakota now requires a background check on all prospective purchasers, including current residents.
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On April 14,2010, in response to this letter, Fletcher emailed defendant Barnes to
ask when this “new policy” had been adoptcd. Barnes replicd vaguely that it had been adopted
“a few months ago.”
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 Fletcher’s application.
The Defcndants Reject Fletcher’s Application and Defame Fletcher and FAM
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 Fletcher’s 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 Goldsmith’s 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 Flctcher’s assets wcrc all illiquid and difficult to value, and that FAM’s 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 Board’s consideration of Fletcher’s application to purchase Apartment SO and to damage Fletcher and FAM’s reputation within the Dakota and the broader investment community.
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The very next day, April 15, 2010, Mrs. Smith’s son, Anthony Smith, emailed
Fletcher, stating that Mr. Nitze had informed him that the Board had not approved Fletcher’s purchase application because it had “questions.” Smith has never been a shareholder or resident of the Dakota.
Rcmarkably, the Board had not communicated any concerns or updates on the
purchase application’s 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.
‘The April 21 Tclcphone Call 62. 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.
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.”
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 Fletchcr’s 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.”
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Finally, they said that Fletcher’s “business loans” had left him “over-extcnded and
at risk.” Thcy incorrectly asserted that the FAM loans had call provisions and thus were not
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 Goldsmith’s allegations werc not actually relevant to the Board’s 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 Fletcher’s 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 FAM’s finances.
Fletchcr was troubled by all of defendant Barnes’s and Goldsmith’s unfounded
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 Fletcher’s plan that he would give $50 million over the coursc of his lifetime for individuals and institutions working to
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improve racc relations. Fletchcr had formulatcd this plan to honor the fiftieth anniversary of the
Unitcd States Supremc Court’s decision in Brown v. Board o Education. Barnes and Goldsmith f
claimed that ‘‘someone said that you haven’t 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.’’
This six-year old articlc concerning Fletcher’s 2004 plan could hardly havc led to
reasonable concerns among Board members regarding Fletcher’s financial condition. If anything, the vcry fact that Fletcher was able to commit so much of his personal wealth to charity commends his financial success and stability. Neither the refercnced New York Times article nor any other articlc regarding Fletcher published sincc that time has questioned in any way Fletcher’s sincerity. Indeed, Fletcher explained to Barnes and Goldsmith on the April 21 call that he did not owe any amounts to any charity. 70. Neither Barnes nor Goldsmith provided a legitimatc explanation in response to
Fletcher’s questions regarding the basis of the Board’s supposed concerns and the Board’s 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.
Fletcher Submits Additional Financial Information in an Effort to Move Ahead with the Purchase (the April 24 Submission)
Given his practical nature and his desire to move forward amicably with
purchasing Apartincnt 50, Fletcher opted not to argue ovcr the Board’s unjustified requests for additional financial disclosures. He instead agreed to providc the additional information that the
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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. The April 24 submission included a completed financial disclosure form;
Fletchcr’s checking account statements for the period ending March 3 1, 2010; Fletcher’s tax retuiiis for 2007 and 2008: financial condition statcrnents and income statcrnents for Fletcher’s 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 Fletcher’s existing Dakota shares. 73. In a lcttcr accompanying this submission, counsel for Fletcher, Denis Kiely,
summarized the strength of Fletcher’s financial condition in pertinent part as follows: Liquidity, Income and Net Worth: Mr. Fletcher’s current and projected liquidity, income, and net worth greatly cxceed the $5.7 million needed to consummate his cash purchase (i.e. without financing) of Apartment 50, any associated purchasing expenses, the $5,236.40 monthly maintenance, and his aggregate financial commitments. Bcyond his history of fulfillment of his obligations, Mr. Fletcher’s ability to satisfy all of these commitments is evidenced by the fact that his net worth excecds $80 million, his avcrage income has exceeded $3 million for two decades, and he could comfortable pre-pay several years of the additional maintenance should that be a concern. Valuation: Mr. Fletchcr is the sole owner of an investment managemcnt business and a natural resources investment company. All of his securities and investments arc made through his firm which holds stakes in its funds managed by his firms. In addition to the previous balance shcct presented, which valued assets at a Cost Basis/Book Value, we have completed the Dakota’s required financial disclosure form which requests “actual valuc.” To this end, we quickly commissioned an independent valuation firm, Quantal International Inc., to providc a valuation report, which is attached hereto. Charitable Giving: Mr. Fletcher has alrcady given to charity a substantial portion of his camings. Though Mr. Fletcher intends to continue both his substantial annual charitable giving and, from timc to time, award capital gifts, 1 can confirm that as of this writing, hc has no binding commitments to fund any charitable gifts. Mr. Kiely concludcd: “I trust that this package of information, coupled with Mr. Fletcher’s long history, record and service as a shareholder, provides amplc support for this transaction.”
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In this second presentation, Flctcher’s assets and liabilities were valued based on
thcir conservative market value, as opposed to the “cost basis” on April 5 , and the submission showed Fletcher’s 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 Fletcher’s cxtensive financial submissions, was dangerous because he would surely accusc the Dakota of racial discrimination.
The Board’s Approval of Two Purchase Applications, One from a White Shareholder and Another from an Outside Purchaser, at thc Same Time as it Refused to Approve Fletchcr’s Application
Whilc Flctcher’s 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 Fletcher’s, 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
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Fletcher's application. In addition, during this time, the defendants impermissibly excludcd
Fletcher, a permanent member of the Finance Committee, from the Committee’s deliberations regarding the white shareholders’ applications.
More specifically, on information and belief, the Financc Committee never
seriously considcred Fletcher’s 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 Fletcher’s, because submitted by existing shareholdcrs, had financial qualifications clearly not as strong as Fletcher’s, despite the applicants’ proposal to purchase an apartment twice as expensive as Apartment SO.
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 Corporation’s 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. This exclusion of Fletcher began on April 20,2010, when defendant Barnes
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
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an email to Committee membcrs, including Flctcher, indicating that he could not activate the call because he did not have the chairman’s code. Barnes indicated in this email that he would circulatc a new time for thc call.
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 Fletcher’s 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 Fletchcr’s application to purchase Apartment 50. Fletcher received no notice of this meeting. Although Flctcher could not havc participated in the Committee’s 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.
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The minutes from the April 28 meeting rcport the Finance Committee’s reason for
its decision regarding Fletcher’s application: “the risk of thc applicant’s 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.
As discussed above, the Financc Committee had no basis for this determination.
Yet, if Committee members had questions regarding Fletcher’s 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 couple’s finances, including their
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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. By contrast, Fletcher’s application had none of these issues. His April 24
submission included a financial statement calculating Fletcher’s 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.
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 applicant’s financial status. 87. At the same time, on information and belief, Goldsmith informed the Board that
thc Finance Comrnittce recommended that the Board deny Fletcher’s application.
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 Flctcher’s fulfillment of his charitable commitments as well as his finances and those of FAM.
Defendants’ Continued Unlawful Conduct Following the Board’s Rejeclion of Flctcher’s Application
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
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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
Board’s 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.
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.
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.”
Word of Fletcher’s rejection spread quickly throughout the Building and
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 Board’s decision to deny Fletcher’s application from one or more of the Individual Defendants. These dcfendants had told Hatkoff the same kinds of lies regarding Fletcher’s financial condition and that of his company, FAM, as had been discussed during Board meetings.
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In a conversation with anothcr Dakota shareholder, Mark Myers, Myers suggested
to Fletcher that Fletcher have his wife, Ellen, purchase the apartment, because, Myers speculated, “her financials must be clean,” implying that Fletcher’s wcrc not. 95. Hatkoff similarly reported to Flctcher a recent convcrsation he had with two
directors, including, on information and belief, defendant Nitze. During this conversation, Hatkoff asked about the status of Fletcher’s application. After being told that the Board was concerned about Fletcher’s 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.”
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. Sosnoff‘s 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
otherwise harmed Fletcher’s rcputation as an investment advisor and philanthropist, which he earned after working for years to build.
Coercion of the Estate/Self-Dealing
Causing evcn more harm, thc defendants also acted tortiously to interfere with
Flctcher’s 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.
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On May 19, 2010, Smith emailed Fletcher to say that he had learned of the
“absurd, unfair and inexplicable” rejection of Fletcher’s application through a call from the Dakota’s 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 Fletcher’s 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 Estatc’s request. The minutes indicate that approval was conditioned upon satisfaction of Barnes’ “inquiries” on the Board’s behalf. The naturc of these “inquiries” is nowhere specified. 102. On June 14, 2010, Kiely, Fletcher’s counscl, spoke with counscl to the Estate,
Elliott Meisel. Meisel conveyed that the Estate did not believe that the Board’s decision regarding Fletcher’s 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,
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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 Rydzcwski’s. 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.
On information and belief, the Board cncouraged defendant Lovinger to do so
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, Lovinger’s 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
5 1. That broker again, is a friend of defendant Rydzewski’s.
Fletcher’s Continued Efforts to Purchase Apartment 50 106. On June 24, 2010, counsel for Fletcher wrote to ihe Board. He outlined the
Board’s unfair and unlawful treatment of Fletcher and urged the, Board to work with Fletcher amicably to reach a solution.
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 Board’s behalf.
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Rather than discuss the Board’s supposed concerns regarding Fletcher’s finances,
howcver, Barnes reiteratcd at that meeting that nothing would cause thc Board to approve Fletcher’s application, except if Flctcher “won the lottcry.” 109. Barnes’ staterncnt revealed far morc than Barnes intended, as it revealed that the
Board’s decision did not rest on a rational or fair review of Fletchcr or FAM’s assets, liabilities
or balance sheet but instead dcrived from underlying, impermissible animus and self-interest.
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 Fletcher’s application to purchase Apartment 50. The Board comprised this Committee primarily of the very same people who had rejccted Fletcher’s original application, including defendant Nitze, whom Barncs described as a leader in the decision to deny Fletcher’s application. Notwithstanding the committee’s composition, Fletcher had at least some confidencc in this process since Mallow was a long-time investor in FAM’s 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 Board’s 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 Fletcher’s 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 Fletcher’s
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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. 112. On August 27, 2010, Barnes sent a lctter to Fletcher on the Board’s behalf, finally
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.
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 Fletcher’s 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 Board’s 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. On September 14, 2010, in purported response to a letter from Fletcher’s counsel
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 Fletcher’s 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
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Finance Committee did not follow the Transfer Disclosure Policy for existing shareholders. Even after Fletcher’s 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 Fletcher’s 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.”
The September 14 letter also contained the false and misleading statement that
Fletcher had declined the Board’s request to provide additional financial information. As discusscd above, he had provided extensive financial information in response to the Board’s 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.”
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On October 18,2010, Fletcher sent a follow-up email to the entire Board, in an
effort to correct thc false and misleading statements that defendant Barnes and other Individual Defendants had madc regarding Fletcher’s 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 Fletcher’s 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 FAM’s 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.
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 Board’s purported concerns despite the defendant’s 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
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family. Among other h a r m , Fletchcr has been diagnoscd with stress-induced shingles and prescribed treatment for that condition.
Although Fletcher would have much prefcrrcd to resolve this conflict amicably, as
shown by his extcnsive efforts to satisfy the Board’s 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.
Thc Estate Purports to Canccl, and Breaches, Its Contract with Fletcher
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
it was canceling the contract.
The Estate bascd its purported cancellation of the contract with Flctcher solely on
the Board’s purported refusal to consent to the transaction: “in view of the Board’s 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.”
In its lcttcr, the Smith Estate acknowledged its agreement with Fletcher to keep
Apartment SO off the rnarkct pending Fletcher’s efforts to persuade the Board to reconsider his
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application. 128. Enclosed with the January 24, 201 1 letter was a chcck for $250,261.00,
rcpresenting the return of Fletcher’s down payment on Apartment SO, plus accrued intcrcst. 129. 130. Fletcher has not dcposited the Estate’s chcck. The Estatc’s 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 Fletchcr’s opportunity to makc that purchase, consistent with Ms. Smith’s intentions as well as the Dakota’s combination policy, will be destroyed.
But even bcfore its purported cancellation with Fletcher, the Estate breached its
contract with Fletcher.
It did so, on infortnation and belief, by listing Apartment 50 for sale both
indepcndcntly and as a joint listing with defendant Lovingcr’s 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 Lovinger’s breach of the
fiduciary duty that she owed to Fletcher as a mcmber of the Dakota Board. 134.
To date, Apartment 50 remains unsold and is still owned by the Estate.
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FIRST CAUSE OF ACTION BREACH OF FIDUCIARY DUTY - UNEQUAL TREATMENT (By Fletcher Against thc Dakota and the Individual Defendants) 135.
Fletcher repeats the foregoing allegations. Each member of the Board and each member of the Finance Committee owes a
fiduciary du y to each of the Corporation’s shareholders, including Fletcher, to treat all shareholders equally and to evaluate in good faith shareholder applications to purchase additional units. 137. Each member of the Board and cach member of the Finance Committee also owes
to Fletcher a duty of loyalty not to damage Fletcher’s reputation by spreading false and misleading rumors in a recklcss or malicious manncr.
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 Fletcher’s 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 Fletcher’s financial disclosurcs; (e) knowingly and maliciously spreading false rumors concerning Flctcher’s financial condition; (f) tendering and/or accepting the recommendation to reject Fletcher’s 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 Fletcher’s 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.
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animus; (h) conspiring with other Individual Defendants to devise a prctext for rejecting Fletcher’s application.
As a result of the foregoing, plaintiff Fletcher has been damaged.
SECOND CAUSE OF ACTION
BREACH OF FIDUCIARY DUTY - SELF-DEALING (By Flctcher Against the Dakota and the Individual Defendants)
Fletcher repeats the foregoing allegations.
Thc Dakota and the Individual Defendants owed a fiduciary duty to Fletcher.
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 Fletcher’s application to purchase Apartment 50; (c) failing to take reasonable steps to inform themselves of the meaning and significance of Flctcher’s financial disclosures; (d) knowingly and maliciously spreading false rumors concerning Fletchcr’s financial condition; (e) conspiring with other Individual Defendants to devise a pretext for rejecting Fletcher’s application; and (f, engaging in or allowing othcr Board members to engage in sclf-dealing by denying Fletcher’s 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.
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.
As a result of the foregoing, plain1 ff Fletcher has bcen damaged.
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THIRD CAUSE OF ACTION
BREACH OF FIDUCIARY DUTY - INJUNCTION (By Fletcher Against the Dakota and the Individual Dcfcndants)
Fletcher repeats the foregoing allegations. Fletcher has been irreparably harmed as a result of the Dakota’s 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.
Only if he is allowed to go forward with the purchase of Apartment 50 and the
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 Fletcher’s 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.
Fletcher’s purchase of Apartment SO is, moreover, in keeping with the dying
wishes of its former owner, and with the Dakota’s 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
no adequate remedy at law.
FOURTH CAUSE OF ACTlON AIDING AND ABETTING BREACH OF FIDUCIARY DUTY (By Fletcher Against the Dakota and the Individual Defendants)
150. Fletcher repeats the foregoing allcgations. I5 1.
As a member of the Dakota Board, dcfcndant Lovinger owed Fletcher, a Dakota
resident, a fiduciary duty.
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Defendant Lovinger breached her fiduciary duty to Fletcher by engaging in
financial self-dealing for her own benefit and to Fletcher’s detrimcnt. 153.
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 Board’s 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.
Rathcr than evaluate Fletcher’s submissions in a fair and appropriate way,the
Dakota and the Individual Defendants intentionally provided substantial assistance to one another to unlawfully block the Board from approving Fletcher’s 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.
155. As a result of the foregoing, plaintiff Fletcher has been damaged.
FIFTH CAUSE OF ACTION TORTIOUS INTERFERENCE WITH CONTRACTUAL RELATIONS (By Fletcher Against the Dakota and the Individual Defendants) 156. Fletcher repeats the foregoing allegations. 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.
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The Dakota and the Individual Defendants intentionally prcvcntcd the
performance of the contract, and their wrongful acts have resulted in the Estate’s purported cancellation of the contract with Fletcher.. 160. The Dakota’s and thc Individual Defendants’ actions in this regard have been
wanton, willful, malicious, and without justification at law. 161. contract. Fletcher has been damaged as a result of defendant’s interference with the
SIXTH CAUSE OF ACTION DEFAMATION (By Fletcher and FAM Against the Dakota and the Individual Dcfendants 162. 163. Plaintiffs rcpeat the foregoing allegations. Beginning in April 2010, the Individual Defendants knowingly made false
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
purpose of preventing Fletcher’s purchase of Apartment 50.
165. 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 Fletchcr’s rcputation as an investinent professional and FAM’s reputation as an investment firm. 166. None of the defendants’ statements is privileged bccausc the statements were
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.
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None of thc defendants’ false statements is privileged because defendants made
them with knowledge that they were false, or with reckless disregard for whether the statcmcnts were true or false.
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.
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 (Fletcher’ss Compliance With, and Defendant’s 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.
Fletcher repeats the foregoing allegations. There are genuine, existent controversies between the parties as to the adequacy
of Fletcher’s application for the purchase of Apartment 50, and the propriety of the Board’s failure to approve that application.
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The controvcrsy concerning the adequacy of Fletchcr’s application for the
purchase of Apartment SO, and concerning the propriety of the Board’s failure to approve that application, is justiciable.
If this controversy is not resolved through declaratory judgment, adequate relief
will not be obtainable through other existing causes of action. 175.
Fletchcr is therefore entitled to a declaration that (a) his April 5 , 2010 application
for thc purchase of Apartment SO satisfies thc Dakota’s Transfer Disclosure Policy and Policy in Favor of Rccoinbining Apartments; and (b) the Board is required to approve Plaintiff‘s application for the purchase of Apartment 50. EIGHTH CAUSE OF ACTION DECLARATORY JUDGMENT (By Fletcher Against the Dakota and the Individual Defendants)
176. Fletcher repeats the foregoing allegations.
There is a genuine, existcnt controversy between the parties as to the legality of
the Board’s purported refusal to approve Fletcher’s application to purchase Apartment SO given that such refusal was the outgrowth of discrimination by the Board on the basis of Flctchcr’s race and/or otherwise impermissible differential treatment, and of financial self-dealing on the part of
at least OIK Board member.
The controversy concerning the legality of the Board’s purported refusal to
approve Fletcher’s purchasc application is justiciable.
If this controversy is not rcsolvcd through declaratory judgment, adequate relief
will not be obtainable through other existing causes of action.
Flctcher is therefore entitled to a declaration that the Board’s purported refusal to
approvc Fletcher’s application to purchasc Apartmcnt 50 is null, void, and of no effect.
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NINTH CAUSE OF ACTION UNLAWFUL DISCRIMINATION IN VIOLATION OF NEW YORK HUMAN RIGHTS LAW 4 290 ET SEQ. (By Fletcher Against the Dakota and the Individual Defendants)
Flctchcr repeats the foregoing allegations. Fletcher is an African-American man who sought to purchase Apartmcnt SO. Fletcher is financially wcll-qualified to purchase Apartment SO and pay the
monthly financial obligations associated with Apartment SO.
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.
Apartment SO remains available for sale. 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 Fletcher’s application; and (iv) rnadc that rccommcndation based upon Flctchcr’s race and in retaliation [or his prior efforts to defend other victims of racial discrimination.
Thc Dakota’s and the Individual Defendants’ conduct with respect to Flctchcr’s
application to purchasc Apartment 50 resulted in Fletcher being treated differently by the Corporation than other similarly-situated white applicants. 188. The differential treatment and rejection of Fletcher’s application were unlawful
discriminatory acts, as defined by the New York Human Rights Law, N.Y. Executive Law 8 290, et seq.
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The Dakota and each of the Individual Dcfendants actively participated in and
causcd the unlawful discriminatory acts. 190. Fletcher is entitled to an award of compensatory and punitive damages, and
attorneys’ fees, from thc Dakota and each of thc Individual Defendants, jointly and severally, in amounts to be determined at trial.
TENTH CAUSE OF ACTION RETALIATION IN VIOLATION OF NEW YORK HUMAN RIGHTS LAW 6 290 ET SEQ. (By Flctchcr Against the Dakota and the Individual Defendants) 191.
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 Fletcher’s application; (iv) spreading false and defamatory rumors about the statc of Fletcher’s financcs and those of FAM. 192.
The Dakota’s and the Individual Defendants’ retaliatory conduct occurred as a
result of Fletcher’s crigagement in the protected activity of opposing the Dakota’s and the Individual Dcfcndants’ discriminatory treatment of other shareholdcrs and non-shareholdcrs seeking to purchase units in the Dakota.
Fletcher has been injured as a result of the Dakota’s and the Individual
Defendants’ discriminatory conduct and is entitled to an award of compensatory and punitive damages, and attorneys’ fees, from the Dakota and each of the Individual Defendants, jointly and scverally, in amounts to bc determined at trial.
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ELEVENTH CAUSE OF ACTION UNLAWFUL DISCRIMINATION IN VIOLATION OF NEW YORK CITY ADMINISTRATIVE LAW ff 8-107 ET SEQ. (By Fletcher Against the Dakota and the Individual Defendants)
Fletcher repeats thc foregoing allegations. Thc differential treatment and rcjcction of Fletcher’s application were unlawful
discriminatory practices, as defined by New York City Administrative Law 8 8-107 et seq.
The Dakota and each of the Individual Defendants actively participated in and
caused the unlawful discriminatory practice.
Fletcher is entitlcd to an award of compensatory and punitive damages, and
attorneys’ fees, from the Dakota and each of the Individual Defcndants, jointly and severally, in amounts to be determined at trial.
TWELFTH CAUSE OF ACTION RETALIATION IN VIOLATION OF NEW YORK CITY ADMINISTRATIVE LAW $8-107 ET SEO. (By Fletcher Against the Dakota and the Individual Defendants) 198. 199. Flctcher repeats the foregoing allegations. 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 Fletcher’s application; (iv) spreading false and defamatory rumors about the state of Fletcher’s finances and thosc of FAM. 200. Thc Dakota’s and the Individual Defendants’ retaliatory conduct occurred as a
result of Fletcher’s cngagement in the protected activity of opposing the Dakota’s and the
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Individual Dcfcndants’ discriminatory treatrncnt of other shareholders and non-sharcholders secking to purchase units in the Dakota.
Flctcher has been injured as a result of the Dakota’s and the Individual
Dcfcndants’ discriminatory conduct and is entitled to an award of cornpcnsatory and punitive damages, and attorneys’ fees, from the Dakota arid cach of the Individual Defendants, jointly and scvcrally, in amouiits to be determined at trial.
THIRTEENTH CAUSE OF ACTION DECLARATORY JUDGMENT (By Flctcher Against the Estate) 202. Fletcher repeats thc foregoing allegations. There is a genuine, existent controversy between the parties as to the validity of
the Estatc’s 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 Board’s purported refusal to consent to Fletcher’s purchase application for Apartrncnt SO;
and (b) the Board’s 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.
The controversy surrounding the validity of the Estate’s purported cancellation of
its contract with Fletcher is justiciable.
If this controversy is not resolved through dcclaratory judgment, adequate relief
will not be obtainable through other causes of action. 206. Fletchcr is therefore entitled to a declaration that the Estate’s purported
cancellation of its contract with Fletcher is null, void, and of no effect
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FOURTEENTH CAUSE OF ACTION BREACH OF CONTRACT (By Fletcher Against the Estate)
Fletcher repeats the foregoing allegations. On or about March 19,2010, Flctcher and the Estate entered into a valid, signcd
contract for Flctcher’s purchase of Apartment SO. 209. Pursuant to the tcrms of that contract, the Estate promised to sell Apartment 50 to
Fletcher, and to no one else. 210.
Fletcher fully performed all of his obligations under the contract with the Estatc. The Estate breached the contract by making efforts to scll Apartment 50 to
individuals other than Fletcher; specifically, by listing Apartment 50 as available for sale, along with defcndant Lovingcr’s Apartment 51, in a co-listing that was circulated to the public, even before it purported to cancel its contract with Fletcher. 212. If thc Estatc is not enjoined from continued efforts to sell Apartment 50 to
purchasers other than Fletcher, Fletcher will continuc to suffcr harm for which he has no adequate remedy at law.
FIFTEENTH CAUSE OF ACTION AIDING AND ABETTING BREACH OF FIDUCIARY DUTY (By Fletchcr Against the Estate) 213. 214. Flctchcr rcpcats the foregoing allegations. Defendant Lovingcr, as a member of the Dakota Board, owed a fiduciary duty to
Fletcher, a resident of The Dakota.
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Defcndant Lovinger breached her fiduciary duty to Fletcher by engaging in
financial self-dealing for hcr own bencfit and to Fletcher’s dctrirncnt.
Thc Estate had knowledgc of Lovingcr’s breach and knowingly participated in
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 Fletcher’s efforts to purchase Apartment 50.
If the Estate is not enjoined from continuing to aid and abet defendant Lovinger’s
breach of fiduciary duty to Fletcher, Fletcher will continue to suffer harm for which he has no adequate remedy at law.
WHEREFORE Plaintiffs demand judgment as follows:
a. on the First Cuuse ojAction, an award of compensatory and punitive
damages to Plaintiff Fletcher jointly and severally against the Dakota and the Individual Defendants, in an amount to be dctermined at trial, but in any event not less than $15 million;
b. on lhe Second Cuuse qf Action, an award of compensatory and punitive
damages to Plaintiff Fletchcr 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; c. on the Third Cuusc of Action, an order (i) directing the Dakota and thc Individual Defendants to provide immediate notice to plaintiffs’ counsel of any application to purchase Apartment 50 (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; (ii) enjoining, in the event of such notice of an application to purchase Apartment 50, the Dakota and
the Individual Defendants, prclirninarily and permanently, from taking any action to approve any
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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 Fletcher’s 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 plaintiff‘s purchase of Apartment 50; d. on the Fourth Cuuse qj‘Action, 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;
c. on the Flfth Cuuse ofAction, an award of compensatory and punitive
damages to Plaintiff Fletcher, 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; f. on zhe Sixth Cause ofAction, an award o compensatory and punitive P damages to Plaintiffs jointly and sevcrally against the Dakota and the Individual Defendants, in an amount to be determined at trial, but in any event not less than $15 million; g. on the Seventh Cuuse QfActinn, a declaration that (i) Plaintiff‘s application for thc purchase of Apartment SO satisfies the Dakota’s Transfer Disclosure Policy and Policy in Favor of Recombining Apartments; and (ii) the Board is required to approve Plaintiff‘s application for thc purchase of Apartment 50;
h. on the Eighth Cuuse of Action,, a declaration that the Dakota’s and the
Individual Defendants’ purported rcfusal to consent to Fletcher’s purchase of Apartment 50 is null, void, and of no effect;
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i. on the Ninth Cuust‘ ofAction, an award of compensatory and punitivc damages and reasonable attorneys’ fees to Plaintiff Fletcher 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;
j. on the Tenth Cuuse qfActinn, an award of compensatory arid punitivc
damages and rcasonable attorncys’ fees to Plaintiff Fletcher jointly and severally against the Dakota and the Individual Defendants, in an amount to hc determined at trial, but in any cvcnt not less than $15 million;
k. on the Eleventh Cause qfAction, an award of compensatory and
punitive damages and reasonable attorneys’ fees to Plaintiff Fletcher jointly and severally against the Dakota and thc Individual Defendants, in an amount to be determined at trial, but in any event not lcss than $15 million;
I. on the Twelflh Cause ojActiori, an award of”compensatory and punitive
damages and rcasonable attorneys’ fees to Plaintiff Fletcher 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 $1 5 million; m. on the Thirteenth Cuuse ofAction, a declaration that the Estatc’s purported cancellation of the contract with Fletcher for the purchase of Apartment 50 is null, void, and of no effect; n. on the Fourteenth Cuuse ofAction, an order (i) directing the Estate to providc immediate notice to plaintiffs’ counscl of any application to purchase Apartment SO
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(either alone or in conjunction with any other apartment), such notice to be provided no more than one business day after such application is submitted to the Board; and (ii) enjoining the Estate, prclirninarily and permancntly, from taking any further action of any kind to sell Apartment 50 to any purchaser other than Fletchcr; and
on the Fifteenth Cause qj’Aczion, an order (i) directing the Estate to
provide imrnediatc notice tu plaintiffs’ counsel of any application to purchase Apartment 50 (cither alone or in conjunction with any other apartment), such notice to bc provided no more than one business day after such application is submittcd to the Board; and (ii) cnjoining the Estatc, preliminarily and permanently, from taking any further action of any kind to scll Apartment 50 to any purchaser other than Fletcher; and p. Such other and further relief as to the Court may deem just and proper, including rcasonable attorney’s fees, together with the costs and disbursements of this action. Dated: New York, New York January 3 1, 201 1 KORNSTPIN VETSZ WEXLER & POLVARD, LLP
Kor$steih h a . R. Bort ‘ 757 Third Avenue New York, New York 10017 (212) 418-8600
’ Daniel J.
Attorneys for Plaintiffs
Of Counscl: Suzanne B. Goldberg, Esq.
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STATE OF CALIFORNIA
ALPHONSE FIETCHER, JR., being duly sworn, dcposes and states:
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,
I have read the foregoing Complaint and know the contents 2. thereof, and the same is true to my own knowledge, except as to those matters alleged upon information and belief, and as to those matters, I believe them to bF true.
A1,PHONS’E FLETC ER, JR
Sworn to beforenme this
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SUMMONS AND VERIFIED COMPLAINT
FEB 0 1 2019
NEW YOHK COUNTY CERKS OFFICE
KORNSTEIN VEISZ WEXLER & POLLARD, LLP 757 Third Avenuc New York, New York 10017 (212) 418-8600 Attorneys for Plaintiffs
Supreme Court Records OnLine Library - page 60 of 60
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