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BARNAN ASSOCS. v. 196 OWNER'S CORP.

July 10, 1992

BARNAN ASSOCIATES, Plaintiff, against 196 OWNER'S CORP., Defendant.

Conner


The opinion of the court was delivered by: WILLIAM C. CONNER

CONNER, D.J.:

 Plaintiff Barnan Associates brings this claim pursuant to Section 3607 of the Condominium and Cooperative Protection and Abuse Relief Act of 1980 (the "Abuse Relief Act"), 15 U.S.C. § 3601 et seq, seeking equitable relief against defendant 196 Owner's Corp. Defendant counterclaims pursuant to the Abuse Relief Act and under several state law theories of recovery. This action is presently before the Court on plaintiff's motion, and defendant's cross-motion, for summary judgment pursuant to Rule 56(c), Fed. R. Civ. P.

 BACKGROUND

 On May 25, 1979, the principals of Robert Olnick Associates (the "Sponsor") acquired fee title to 196 East 75th Street, New York, New York (the "Building"). Plaintiff Barnan Associates acquired its leasehold interest as tenant from the Sponsor by a written lease, dated August 31, 1979 (the "Master Commercial Lease"). The property subject to the lease is currently used as a parking garage and as retail space. The retail space is subleased to a tanning salon, a shoe repair shop, a ladies' fashion store, and a store selling pictures and frames. At all relevant times, the Sponsor and plaintiff have been under common control.

 Because the Sponsor owned a majority of the shares in the cooperative, it retained voting control of the board until the annual shareholders' meeting held on September 14, 1989. On that date, the shareholders voted for a majority of directors not affiliated with the Sponsor, and have done so at each subsequent annual meeting.

 At a special shareholders' meeting held on September 13, 1991, 28,754 shares were voted in favor of terminating the Master Commercial Lease, said shares constituting 88% of those owned by shareholders, as distinguished from those owned by the Sponsor and plaintiff. Also on September 13, 1991, and pursuant to 15 U.S.C. § 3607(d), a notice of termination of the Master Commercial Lease was mailed to plaintiff, with a copy to the Sponsor. Assuming that the other requirements of Section 3607 were satisfied, that notice was effective on December 12, 1991.

 Plaintiff commenced this lawsuit shortly after service of the notice seeking a declaration that defendant's termination of the Master Commercial Lease was of no force and effect. Specifically, plaintiff contends that: (1) the shareholders terminated the wrong contract, one that predated the Abuse Relief Act, and (2) the notice of termination was untimely in any event. Arguing that the notice of termination was timely given, defendant asks that summary judgment be granted in its favor terminating the Master Commercial Lease, subject to equitable apportionment rights. In the alternative, defendant asks that the action be dismissed because the notice of termination was premature.

 DISCUSSION

 The Standard for Summary Judgment

 A party seeking summary judgment must demonstrate that "there is no genuine issue as to any material fact." Fed. R. Civ. P. 56(c); Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), cert. denied, 480 U.S. 932, 94 L. Ed. 2d 762, 107 S. Ct. 1570 (1987). "When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). It must establish that there is a "genuine issue for trial." Id. at 587. "In considering the motion, the court's responsibility is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight, 804 F.2d at 11. The inquiry under a motion for summary judgment is thus the same as that under a motion for a directed verdict: "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).

 The Abuse Relief Act

 The Abuse Relief Act was promulgated to abate specific abusive practices occurring in the cooperative and condominium conversion process. See H.R. Conf. Rep. No. 1420, 96th Cong., 2d Sess. 4, reported in 1980 U.S. Code Cong. & Admin. News 3506, at 3707. Section 3607 of the Act, in particular, was a response to the activities of many developers in the 1970's who created "sweetheart" lease arrangements and self-dealing contracts as a condition of sale. See West 14th Street Commercial Corp. v. 5 West 14th Owners Corp., 815 F.2d 188, 198 (2d Cir.), cert. denied, 484 U.S. 850, 98 L. Ed. 2d 107, 108 S. Ct. 151, and cert. denied, 484 U.S. 871, 98 L. Ed. 2d 151, 108 S. Ct. 200 (1987).

 The Act permits the unit owners or an association of unit owners to terminate without penalty certain long-term self-dealing ...


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