Telx-New York LLC v 60 Hudson Owner LLC

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Telx-New York LLC v 60 Hudson Owner LLC 2018 NY Slip Op 31037(U) May 25, 2018 Supreme Court, New York County Docket Number: 650440/2017 Judge: O. Peter Sherwood Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 05/29/2018 12:05 PM 1] INDEX NO. 650440/2017 NYSCEF DOC. NO. 105 RECEIVED NYSCEF: 05/29/2018 SlJPREME COUl{l"f OF THI~ STATE OF Nl£W YORK c:OlJNTY ()f."' N.EW YOR.K: COMMERCIAL DIVISION PART 49 ---------------------------------·---------X TELX-NEW YORK LLC, DE(~ISION AND ORDER Index No.: 650440/2017 Plaintiff, -against. . Mot. Seq. No.: 002 & 003 60 HUDSON <>WNER LLC, Defendant. ~ ~ - - - - - - - - - - ~ ~ - ~ - - ~ - ~ - - ~ - - - - - - - -- - ~ ~ - - - ~ - ~- -X 0. PETER SllERWOOD, .J.: I. Tll.E FAC~rs As this is a n1otion to dismiss, the facts are taken fron1 the Complaint (NYSCEF Doc . No. 1). This case inv·olves ter111s of the electricity charges clause of a lo11g term lease. Defendant 60 Hudso11 ()\\rner LLC (Iludson) <>vlns a building located at 60 Hudson Street, Ne\<\ York, New York. 1 l\ predecessor 1 of plaintifI' Telx-New York LLC (Telx) leased a portio11 of the ninth floor of the bui]ding fron1 defendant's predecessor on July 6, 1999, pursuant to a lease agreem.cnt c-the Lease~'). 'fhere \Vere various amendments to extend the term, lease additional space, and amend other tern1s of the Lease (all Telx leased space, the "Premises'!·). The amendments do not affect the tcrn1s of the Lease related to electricity charges. The l . easc provides that Telx will pay Hudson for electricity used on tl1e Premises on a 'icost plus" basis, 2 and sets forth a formula for calculating \vhat Hudso11 rnay charge (see id,112). Telx clain1s that l1udson is overcharging for electricity on the order of $13 Million before the filing of the complaint in tl1is action and that contint1.ing to use this erroneous for1nula \Vill result in additional tens of millions of dollars of overcharges. 1\rticle 42(B) of the Lease pro·vidcs that lludson tnay charge Telx 107o/o of its costs tor electricit)''. The fonnula provided in that article states that the fee shall be l 07% of the su1n of Hudson's average cost per kilo\vatt times kilowatts of den1and, and Hudson's average cost per kilo\\ att hour times the number of kilowatt hours of consumption.• l . hc Lease also provides a 1 definition of average cost per kilowatt (total a1nount l·ludson \.vas billed for kilo\\lat.t hours of 1 ·rhcrc \Vas an intervening predecessor as \veil. 2 Hudson disputes that the Lease provides fr>r calculation~: ')f electricity on a cost plus basis (see lludson ·Reply, p.2, NYSCEF Doc. No. 58} Page 1of13 2 of 14 [*FILED: NEW YORK COUNTY CLERK 05/29/2018 12:05 PM 2] INDEX NO. 650440/2017 NYSCEF DOC. NO. 105 RECEIVED NYSCEF: 05/29/2018 demand (including associated charges and adjust1nents) djvided by total kilowatt hours of dema11d for the Pren1ises; and the average cost per kilo\vatt hour of consumption (including associated charges and adjust111ents) divided by total kiJO\Vatt hours of consumption for t.hc }>re1niscs (tl1e Old For1nula) (id, 1 14). ~relx argues that Hudson l1as been overc-harging Tclx by double counting consu111ption charges, by including then1 in both portio-ns of the formula in violation of the Lease, rcsultin.g in Iludson charging Telx approximately double its electricity costs, rather than the allo"\vcd 107% (the New Formula) (id, ii ii 19-20). Additionally, Hudson calculates the fee including electricity sales tax., and then charges 'felx additional fees by n1ultiplying the total by the applicable percentage and charging Tclx sales tax t\vice (id ,121). f'rior to September 2010, Hudson had ca.lc~'.lated and billed Telx for tl1e electricity charges correctly (il(, ~ 22). ()n November 23, 2010~ Hudson told Te1x it l1ad bcc.n undercharging for electricity and \Vas going to change its metl1od of calculation. Telx objected (it.i, ~ 23). On ·February 18, 2011, the parties entered into a letter agreen1e11t (the Electricity Side Letter) 'h' hich 1 provided that Telx \.Vould co11tinue to pay for electricity using the old method for 90 days, and then \\'Ould pay using the new inethod, on the condition that payme11ts would not constitute a waiver of Tclx's objections or claims (id, ~ 2.4). The interim period the was e.xtended several times, to Scpte1nber 30, 2011, at which point Hudson returned. to using the New Formula. There are also allegations about the tncrger ·between ·relx Holdings, Telx's indirect parent, and Digital Realty ¥f rust~ Inc. ·Hudson has declined to give its ct1nscnt to an runcndment to the. Lease which \\.'ould recognize the n1erger transaction. ·rclx clai1ns the refusal to consent is unreasonable. Those allegations are not r~levant to this motion. The c.on1plaint alleges the follo\.ving clain1s: 1- Breach of contract- for in1properly charging electricity fees from Sept. 20 I 0- Feb 2011 and fr<)m Oct 2011 t.o present. 2- Declaratory Judg1nent- that Hudson has overcl1argcd Telx, and clarifying the proper forn1ula for calculating electricity fees~ 3- Declaratory Judg1nent that the acquisition of Telx's parent was not an assignment, and, if it was, Hudson's consent to the assignment was being unreasonably withheld, and Telx no longer has any obligations with respect to obtaining Hudson's consent. On this n1otion, defendant moves to dismiss the first clain1. Page 2of13 3 of 14 • [*FILED: NEW YORK COUNTY CLERK 05/29/2018 12:05 PM 3] INDEX NO. 650440/2017 NYSCEF DOC. NO. 105 RECEIVED NYSCEF: 05/29/2018 II. ARGU1\t1EN·~rs A. Arguments of Defendant in Support of Motion to Dismiss Hudson contends that the language of the I.lease is clear and unambigt1ous, and that Article 42(B), V\thich provides the for1nula for calculating what 'Hudson n1ay charge Telx for electricity, specifies the New Forn1ula, as it Hunambiguo:isly defines both "Landlord's Average c:ost Per Kilo,vatt'' and "Landlord•s Average C~ost Per Kilo\\.'att llouru each to include "c.harges for fuel, 'onpcak' and 'off-peak' usage, 'time of day• usage and any .a11d all other relevant adjust1ne11ts and charges.," and cx_pressly provides tor adding together the kilo\vatt andithe kilo\vatt hour categories, including the .foregoing sa1ne components under both categories" (Hudso11 M.emo at 1~ 6-8 NYSCEF Doc. No. 43 lcmphasis in original].) . This allows some items to be counted t\vice (ili at 11). The sarne ten11s (fuel, on-peak,. oft:.peak and tin1e of day usage charges) arc in both bills (for supply and delivery) (id. at 14). 'fhis allo\\'S t.he landlord to n1akci a profit from ll1e electricity charges to 'relx, which ·relx does not dispute is permissible under the 1a\v (id at 9-10). The parties arc sophisticatc(i and well counseled, and should be bound by tl1e terms to \Vhich they have agreed (id. at 10). Hudson al.so clain1s Tclx ratified the L~ease and at this point is estopped fro1n challenging I ludson's calculation method because Telx rented other space from lludson i11 the san1e building (pursuant to an earlier lease [the 1997 Lease]) which had a different (cost plus) te1111 regarding electricity charges, and ·rclx and Hudson entered into an extension agreement in October 19, 2011 (the Extension Agreement), whic11 states that, in exchange for extending the IJcase, Telx agreed to the application of the disputed Lease tern1s to other space Telx lcas,ed from 1-Iudson pursuant to the 1997 I. ease, after the 1997 l__,ease expired on ()ctober 31, 2017. Ht1dson contends that the electricity term of the 1997 l~case does not allo\V the srune double counting of the components that are double-counted in the l"case (id at 16). Since tl1e Lease \Vhic.h is the later agreement., has different tertns, the parties kne\v how to draft a more 'tenant-friendly' vcrsi<)n had they \\ranted to do so. Thtis, it n1ust be concluded that the parties intended the Leasc to allow the. double cc>unting 1 (id.). Additi<lnally, the Exte11sion Agreement disclain1s any default by ll··fudson u11der the l .. ea~e, and moots the Electricity Side Letter (i<i at 3, 16-17). rrhcrc is no reservati'on of rights in that document. As the Extension Agreement has 111erger and ratification clauses, ratifying the tenns of the Lease and representing that •'to Tenant's knowledge L.andlord is not in default in the p~rformance of any Page 3of 13 4 of 14 [*FILED: NEW YORK COUNTY CLERK 05/29/2018 12:05 PM 4] INDEX NO. 650440/2017 NYSCEF DOC. NO. 105 RECEIVED NYSCEF: 05/29/2018 of its ob1igations under the I I . .case] as of the date hereof"' (id at 17, Extension Agree1nent, attached as Exhibit E to Yuzek J\tl~ NYSCEf~ I)oc. No. 30, if 12). As the Extension Agreetnent can1c after the r~lcctricity Side Letter, the side letter is superseded, and is irrelevant (llu.dson Memo at 17-18). 11udson also argues that~ as Telx has failed to reserve its rights, it is equitably estopped fron1 no\v challenging Hudson's calculation method (id. at 19). Hudson then arguc.s that Telx was a sublcasee of another tenant ft1r about half of the relevant ti1ne period, and \Vas neither in _privity of contract \Vith Hudson nor a third party beneficiary of the over-lease. 011e portion of the subleased space, know11 as Suite 900, !it accounts for about 40o/o of the electricity consun1ption at issue (id~ at 20). Bct\veen September 20 l 0, when l·ludson. adopted the Ncvv Ft1r1ntila thro-ugh ~,fay 13, 2013, there was no direct contract bet.\veen the parties concerning the subleased space (id.). There was a lease between I Judson and XO (~ommunication Services, Inc (XO) for a portion of the 9th floor, including Suite 900 (id.). X() subleased aportion of that space to Colo Properties, Inc., which was Telx's predecessor (id at 21 ), and subsequently subleased the re111aindcr of its 9th flc)Of space to Telx (id.)~ Tl1e sttblease expired in May 2013. While I-ludson consented to the stiblcase, tl1e consents disclaimed any obligations of Hudson to Telx or any privity of contract, except f{lrpay1ncnts to be tnade directly by Telx to lludson. pursuant lo those consents (id. at 22). Hudso-n argues that because there is no privily of contract, the portion of the lirst cause of action stating that lludson overcharged Tclx for electricity used in Suite 900 should be dis1nissed. b. J>laintiff's Opposition P1aintifl~ argues that its interpretation of Arti:le 42 (B) is correct. 'l'he intention of tl1e l.ease, an<l the language of tl1e relevant clause to allo\VS lludson to be rei1ll.bursed for electricity fees, it paid plus a 7°1o administrative fee. The clause is not intended as a profit center for the landlord (Opp at 2-5, 8). Telx adds that Hudson's interpretation is gramn1atically incorrect (id. at 10-13). Telex also argues that Hudson has failed to provide docume11tary evidence wl1ich utterly refutes ·relx's clain1s as CPLR 3211 (a)(l) requires(;{}. at 13).. Further it is inappropriate for Hudson to attach expert and attorney affidavits at this stage to support its interpretation or !(Jr this type of motion (id at 14). The attach1ne.nts dl1 not constitute docun1cntary evidence, nor do they utterly refute the allegations . in the complaint (id. at 15). As far as Hudso11 relies on its characterization of tl1e 1997 Lease, Hudson did not attach that docume11t to its papers or quote the relevant provision. Accordingl}r, arguments related to the 1997 I..,case should be ignored (id at 19• Page 4of13 5 of 14 [*FILED: NEW YORK COUNTY CLERK 05/29/2018 12:05 PM 5] INDEX NO. 650440/2017 NYSCEF DOC. NO. 105 RECEIVED NYSCEF: 05/29/2018 20)T Telx argues further that it did not ratify Hudson's calculation method, but objected to it (id. at 20). The Extension Agreetnent n1akes no mention of tl1e method for calculating electricity payn1ents., and the Electricity Side l.1etter explicitly reserved rights on the issue (ill at 20-2 l ). N'or is there a lack of privity rcgardin.g Suite 900 (id at 21) . While Tclx \Vas a subtenant of XO for a time~ Telx had asstimcd the direct tenant's obligations for electricity charges to Suite 900. \1'lhile Hudson's consent to the sublease noted it did not recognize any privily of contrac.t bct\veen Hudson and Tclx, other than for payments to be n1ade by ·relx to lludson, this qualifies, and thus there is privity of contract ~"ith regard to those payments (icl at 21-22)~ Telx seeks discovery lll all()\.V it to develop its claims further, understand what it should have been billed for electricity, and see how Hudson interpreted similar clauses in contracts \vith other tenants (id at 23-24). c•.Defendant's Rc11ly Defendant reiterates its argument that the language of Article 42(B) is unambiguous, and should be interpreted lo s·upport their n1cthod of calculating electricity costs to be billed to Tclx . .t\11y (>ther interpretation requires making the ;.rst parenthetical ''tncre surplusage, "~ instead of giving effect to every portion of the l1case (Repiy at 2-8)~ Defendant also argues that the various atlidavits and attachn1ents to its inotion to dismiss are proper~ and do not require lra11sforrning the 1notion into a tnotion for summary Judgme11t. In any event" the additional evidence is not vital, as the Lease alc>ne, or the Lease and the 1997 I..case attached to the Reply papers are enough (id. at 10-12). Defendant repeats that 'fe.Ix ratified Hudson's interpretation of the formu.la for calculating electricity costs in Article 42(B) (id at 11 ). By entering into the f:xtension Agree1nent., which was to apply the terms of the l.1ease. to the portion of the }Jtemises previously covered by tl1e 1997 l.1case, Telx '"'ratified a11d confirmed'' all of the ''covenants, agreements, terms ai1d conditions~' of tl1e Lease (iti. at 13, quoting Extension Agrcen"lent, if 8). The Extension Agree·mcnt co11tains no reservation of rights, and has a merger clause extinguishing prior agreements, including the t:lectricity Side l.,,ctter, n1aking it barred here by the parol evidence rule (Repl)' at 13). As to wl1etl1er electricity tees related to Suite 900 should be divorced from this action, the consent to the sublease disclai1ns any privity of contract, except as to payrnents to be made by Telx directly to I Iudson which are expressly stated in that document (id. at 14, citing Consent, attached Page 5of13 6 of 14 [*FILED: NEW YORK COUNTY CLERK 05/29/2018 12:05 PM 6] INDEX NO. 650440/2017 NYSCEF DOC. NO. 105 RECEIVED NYSCEF: 05/29/2018 as Exl1ibit G t.o )"uzek Aff: NYSC~EF Doc. No. 32, at 2). Accordingly, the portion oft.he ·first cause of action whicl1 relates to Suite 900 for the period during \Vhich 'l'elx subleased that space, although it is not clear \Vhat portio11 of the claim that is, should be disrnissed. Ill~ DISClJSSION a.. Standard for Motion to llisn1iss- Doctimenta11r Evide.ncc rro succeed on a motion to dismiss pursuant to C~I>LR § 3211 (a) (1 ), the docun1entary evidence submitted that forms the basis of a defense must resolve all !actual issues and definitively dispose of the plaintitTs clain1s (see, 511 J¥. 232nt1 (JJ-1 nets c·orp. v Jennifer Realty l..,o., 98 NY2d 1 144, 152 [2002]; Blonder & (:'o., Inc. v Citibank, N.A., 28 AD3d 180, 182 [1st l)ept 2006]). A motion to disn1iss pursuant to CPl"'fl § 3211 (a) (I) ''may be appropriately grru1tcd only \Vhcrc the docun1entary evidence utterly refutes plaintiff:; factual allegations~ conclusively establishing a defense as a n1atter ofla\v~~ (Mc(~ull;.' v..Jersey I :,1rtners Inc., 60 AOJd 562, 562 [ l st Dept 2009]). 1 'rhe facts as alleged in tl1e con1plaint arc regarded as true, ru1d the plait1tit1~ is afforded the benefit of every favorable inference (see Leon v Alartinez, 84 NY2d 83, 87-88 [1994]). Allegations consisting of bare legal conclusions as well as fi1ctual clain1s flatly contradicted by docun1entary evidence are not entitled to any such consideration (see e.g. Nisari v Ra111john_, 85 AD3d 987, 989 [2nd Dept 2011 ]). b. The. Lease The docun1entary evidence relied upon by the de-tendarit is the Lease. While the defend ant also discusses the 1997 Lease, for comparison, the 1997 l. ..case was not attached to defendant's moving papers. ",;The function of reply papers is to address arguments made in opposition to the position taken by the n1ovant and not to pern1it the movant to introduce ne\iv arguments in support of., o.r new grounds [or evidence.I for the 1notion'' (Kennelly v lvfobizis Realty Holdin«r.s LL(.~, 33 i\.D3d 380, 381 [1st ·oept 2006] quoting Dannasch v B{fulc<J, 184 Al)2d 415, 417 (1st Dept l992J). While the court has discretion on this matter, the court \Vi II not excuse 1--ludson" s failure. ·rhe additional docun1entary c\ridcnce \Nhich is the basis of tl1e motion was subtnittcd only afler plaintifi..,s opp<lrtunity to oppose the motion, and vvill nc>t be considered. A.dditionally, the ter1n in the 1997 Lease for billing electricity is worded diflerently th.an that term in. the t"ease. It does not utterly reii.1te Telx 's clain1s or conclusively establish there is no clai1n as a 1natter of lavv. The disputed portion of the Lease involves the formula '1Vhich I ludson is to use to bill l.clx for electricity, "Kilowatts of demand'' and "kilcwatts of consumption". Alt.hough central to the Page·: of 13 7 of 14 [*FILED: NEW YORK COUNTY CLERK 05/29/2018 12:05 PM 7] INDEX NO. 650440/2017 NYSCEF DOC. NO. 105 RECEIVED NYSCEF: 05/29/2018 dispute, neither party explained the ditTcrence bet\vccn. Based on the courts research, consumers are generaHy only billed for consumption, i.e. ho\v muc.h electricity they use (whet.her they have one lightbulb requiring I 00 \.Vatts burning for l 0 hours <}r 10 such lightbulbs burning for one hour. ·rhe saine kilowatts of po\vcr is used). I lowever, the second hypothetical calls for tnore dc111and (as nlore. pov. cr has to com-e through the "pipe"" to simultaneously light the I 0 bulbs for a shorter 1 period). C~on11nercial or industrial custon1crs are often also billed tor their peak dcn1and in addition to their consun1ption~ eftcctively Jor having a ·1argcr ·~pipe" carrying electricity lo them (see thinkenergy.nct). Here, Hess billed Hudson for electricity usage (see Hess ilill, attached as Exhibit A to Ma Affidavit'.! NYS(~l~F as r~xhibit Doc~ No. 34) and (~on Ed billed for delivery (see Con Ed Bill, attached B to Ma Af11davit, NYSCEF Doc. No. 35). The parties agree that the lai1guagc of the Lease is unambiguous, but dispute what it n1eai1s. Para.grapl1 42(B) provides: •'Fron1 and after the Commcnc.en1ent Date, --renant shall purchase all electric current consumed in or in connccticn1 \Vith the demised pre.1nises from. Landlord or Landlord's designated agent and shall pay therefor an amountcc1ua.J to 107°/o or the su1n <?{ Landlord's A vcrage Cost Per Kilowatt and Landlord's Average Cost Per Kilowatt Hour (as such terms are hereinafter defined) applied, respectively, to the kilo\vatts of demand a11d the kilowatt hot.~rs of consu1nption ofall electricity utilized i11 or in connect.ion \Vlth the den1ised premises d.uring the applicable billin.g period, both as measured by the subn1eters for the demised premises. nLandlord's Average Cost Per Kilowatt" shall' be determined by dividing (w) the tot.'ll dollar an1ot1nt. billed to Landlord by the entity ·providing electric current to the Building (the "Electric (:ompany'') for kilowatts of den1and utilized by the Building for the relevant billing period (i11cluding, \vithout li111ilatio11, all charges for fuel, "on-peak,. and "offpeak 0 usage, "ti1ne of day" usage and any and all other relevant adjustn1ents and charges},by (x) the total kilo\\~atts of demand utilized by the .Building tor such bi.I.ling period. ''Lru1dlord's Avcrage Cost Per Kilowatt Hour0 shall be detenni11ed by dividing (y) the total dollar amount billed to I"and:lord by the Electric Company· for kilowatt hours of consumption utilized by the Building tor the relevant billi11g period (including, without limitation; all charges for fuel, tton-peak'' and "off-peak'' usage, "time of day" usage and any and all other relevant adjustments and charges)~ by (z) the total kilowatt hours of consumption utilized by the Building for such billing period . " "''rhe funda111ental rule of contract interpretation is that agreements are construed in accord \~lith the parties' intent . . . and '[t.]he best evidence of \vhat parties to a \Vritten agreen1ent intend is what they say in their writing' .... Thus, a written agreement that is clear and unan1biguous on Page 7of13 8 of 14 [*FILED: NEW YORK COUNTY CLERK 05/29/2018 12:05 PM 8] INDEX NO. 650440/2017 NYSCEF DOC. NO. 105 RECEIVED NYSCEF: 05/29/2018 its face n1ust be enf<.lrccd accordi11g to the plain terms, and extrinsic evidence of the parties' intent may be considered only if the agreen1ent is atnbiguous Lintc,mal citations otnitted]'' (Riversitle i"iouth Planning (~t>rp. v (~. RP/Ex1ell Riverside LP~ 60 AD3d 61, 66 [1 5 ' Dept 2008], qffd 13 NY3d 1 398 [2009]). Whether a contract is an1biguous presents a question of la\V for resolution by the c.ourts (;,/. at 67). In accordance \vith these principles, a court should interpret a contract ''so as to give full n1caning and efiect to the n1aterial provisions'' (Beal Sai'ings Bank v S()n·11ner, 8 N)' 3d 318, 324 f2007]~ quoting Excess Ins. (~"o. Ltd~ v factory li1ul. Ins. (~ 0.'.} 1 3 NY3d 577, 582 [2004J). HA reading of a contract shotdd not render any portion 1neaninglcss .... Further,~ a contract should be read as a whole, and every part \vill be interpreted 'rVit.h reference to the whqle; ru1d if possible it \Vilt be so interpreted as to give effect to its general purpose" (id. at 324-325, quoting Jvfatler o.f Jf'est1norelandCoal (.~o. v Entech. Inc., 100 NY2d 352~ 35812003])- This contract is una1nbiguous. rrelx is required to pay: 1.07 x [(Landlord.'ts Average Cost per Kilovvalt x Kilowatts of Demand)+ (Landlord's Average Cost per· Kilowatt !-·lour x Kilo\vatt I-lours of Consutnption)l L.andlord"s Ave.rage Cost per Kilovvatt is calculated as. follows: Total $ billed to Hudson for kilowatts of de1nand, including charges related to the kilo,vatts of demand, divided by the total Kilo\vatts of demru1d used. l,Jandlord'$ Average Cost per KiJo\vatt l-lour is calculated as follo\vs: l~otal $ billed to Hudson for kilowatt hours of consumption'.' includi11g charges related to kilo\valts of consumption, divided by: the total kilo\vatt hours of consumption used. /\s far as ~!udson them in the '~total argues it is allo·\V·ed to doubt~ count fees related ~o consumption, a11d include billed to Huds<>n for kilo\vatt hours of den1and" because the demand tem1 includes the pare.ntl1etical H(inc1uding, 'vithout limitation, all charges for fue_l, ' 011-peak" and "otl'"1 peak" usage, "liine of day" usage and any and all other rclc\.rant adjustments and charges),~" v·lhich refers to cllargcs associated '"'ith consumptio11, l1udson is misguided. Whi1c the parenthetical is the san1e. for both 11sagc and delivery, it clearly refers to charges associated with, or appearing on the same bill as, the usage or delivery fees, depending on which elen1ent is being calculated. Charges related to delivery may ·be counted as _part of the total amount billed to J Judson for kilowatts of de111a11d. Charges related to consumption n1ay be counte,d as part of the; total an1ount billed to Hudson for kilowatts hours of consumption. Page 8 ofl3 9 of 14 [*FILED: NEW YORK COUNTY CLERK 05/29/2018 12:05 PM 9] INDEX NO. 650440/2017 NYSCEF DOC. NO. 105 RECEIVED NYSCEF: 05/29/2018 As the language <..lf the l"casc is unambiguous, there is no need to l<.lok oi1tsidc the four comers of this document and examine the text of the 1997 Lease, other docun1ents or affidavits prO\lidcd by 1-ludson in coru1ection with its .efforts to clarify the meaning of Article 42 (B). Accordingly, the portion of the n1otion to disn1iss based on documentary evidence shall be denied. c.. Standard for M.otion to -Dismiss- Failure to State a C_laim On a n1otion to disn1iss a plaintiffs claim pursuant to CPLR § 3211 (a) (7) for failure to state a cause of action, the court is not called upon to determine the truth of the al legations (see. C.~ampaign .for f'i.<;cal Equizv v ~Si,11e, 86 NY2d 307, 317 [19951; 219 BroadM'a}' Corp. v Alexander's, Inc., 46 NY2d 506, 509f1979]). Rather, the court is required to ''af1ord the pleadings a liberal construction~ take the allegations of the complaint as true and provide plaintifI'thc benefit of every possible inference [citati()fl omittedJ~ Whether a plaintiff can ultimately establish its allegations is not part of the calculus in deter1nining a 1notion to dismiss'' (E"'BC Iv Gold1nan. S'achs & (~_~o., 5 ·NY3d 11, I 9 [2005]). l'he co·urt's role is limited lo determining \Vhcther tl1e pleading states a cause of action, not whether there is cvidcntiary support lo establish a meritorious caus~ of action (see Guggenheimer v (1inzburt?, 43 NY2d 268, 275 [ 1977]; L~okol v Leader~ 74 AD3d 1180 [2d Dept 2010]). Defendant n1oves to dismiss 'l'clx.,s brtach of contract clain1 pursuant to 321 l(a)(7) for failure to state a cause of action, but 'vith tl1e inclusion of evidence extrinsic to tl1e complaint, it has 1nade the question ~·\,vhetl1er the· petitioner indeed has a cause of a.ction, not simply whether he or she has stated one in the [] co1nplaint'' (Memo at 5, quoting /~,{titter (~{/.;a Barbera v Tol,vn o.l· T¥oodstock, 29 AD3d l 054, l 055 f3rd lJcpt 2006]). This is eilectively a pre-joindcr motion for summary judgment and is improper. As Profess(>r David Siegel states, "[t]he ut.ilit)' of the CfJIJR 3211 (a)(7) motion was unfortunately reduced by the Court of ..l\._ppeals decision in Rove/lo v <Jrr~fino [ Realty c~o. 40 NY 2d 633 [ 1976]] Rove/lo held that as long as the complai11t states a claim on its face, the plaint.ifl" 11eed not -- in response to t11e defend ant's paragraph 7 objection come forward \vitl1 a1lidavits or other proof unless the court does in fact elect to treat the motion as one for sumn1ary judgn1ent. This has resulted in holdings that the court can.not even consider ~ the defendant's affidavits on a c:Pt,,R 3211 (a)(7) motion unless and until it has elected to exercise its treat-as-sun11nary-judgment power" (Siegel, NY Prac §265 at 462 [51h ed 2011 ], citing Rove/lo). It appears tl1at 1nany courts handle this t:ypc of motit)n by converting it to a motion for summary judgment and allowing additional briefing. Page 9of13 10 of 14 [*FILED: NEW YORK COUNTY CLERK 05/29/2018 12:05 PM 10] INDEX NO. 650440/2017 NYSCEF DOC. NO. 105 RECEIVED NYSCEF: 05/29/2018 d. Suite 900 While defendant argues that there is no privity bct\vee11 tl1c parties regarding Suite 900 for a portion of the relevant period, because Telx \Vas a sublessee of the Suite 900 space, and the Extension Agreement disclaimed privity. except in certain specific. contexts, defendant does not explain hovv ~ during this period, l"elx \Vas billed t<>r electricity, or pursuant to what agreement. The con1plaint does not distinguish bct\veen Suite 900 and the rest of the premises on that poi11t, and defendants do not provide clarification. lf l·ludson charged Telx accordin·g to the Lease, with Hudson ~s changing interpretation of how the electricity charge should be calculated, it would seem Telx niight have a claim pursuant to the Lease. If l-Iudson charged Telx according to so111e other agreement, Telx may not have. a claim, but Hudson has not mad,e its burder1 on this issue. c. Waiver/Ratification 1-Iudson argues that Tclx ratified lJudson's interpretation of the Lease electricity clause by entering into the Extension Agreen1ent which stated that, in exchange for exte11ding the Lease, Telx would agree to the application of the l.,case's terms to the space Telx leased from H·udson pursuant to the 1997 Lease, after the 1997 1-'ease expired 011 October 31,. 2017. Si11ce, as discussed above, Hudso11 is incorrect about the proper mea11ing of the electricity term of the Lease, the agree1nent to apply the l~case to space previously covered by the 1997 l .. ease, and ratifying the tcrn1s of the t;lcase, does not mean Telx agreed to use Hudso11's interpretation of the clcctricit.y term of the l ..case . Nor docs 'felx's paytncnt. of the higher fee constitute wai\Tcr. As Hudson, itself, argues, paid~~ -~[t]he issue here .is th·e language of Paragrapl1 42(B) of the 1999 l .. ease, n.ot what Tenant (lleply at I 2 n. 7). l.\s far as I-Judson argues that the Extension Agreement disclaims any default by I ludson under the 1.~case~ and n1oots the Electricity Side Letter, which retained Telx's rights to object, I-Iudson mis-quotes the l~xtcnsion Agreement The Extension Agrcc1nent states ·-·renant hereby represents that, to ·rcnant' s k11owlcdge, Landlord is not in default in the perft1r1nance of any of its obligations underthe Current 1.-ease as of the date hereof" (Extension Agreement,~ 12 [en1phasis added]). ..rhc Lease is defined in the Extension Agreement as the ''Existing I.~ease," and the ter111 ~'Existing L,case" is used throughout. The l 997 .Lease is referred tt"> in that document as the"' 1997 Existing f~casc. "' It is not clear vvhat is m.cant by tl1e term '-Curre11t Leascn in the Extension 1\greemcnt. Accordingly, the claim cannot be dismissed on the basis of ivaivcr/ratification. Page :1 O of 13 11 of 14 [*FILED: NEW YORK COUNTY CLERK 05/29/2018 12:05 PM 11] INDEX NO. 650440/2017 NYSCEF DOC. NO. 105 RECEIVED NYSCEF: 05/29/2018 IV. !\'lotion to Consolidate (motion sequence nun1ber 003) ln n1otion seque11ce number 003, ·relx explains that Iludson brought a nonpayme11t proceeding (NPP) in New York City C~ivil Court demanding payment .of the rent which is disputed in this action. 3 As the ~'o actions concem.tl1e same issue~ i.e, \\1hether 'TcJx. is indebted to !Judson for unpaid rent based on l·Iudson 41 S calculations of electrical charges, Telx contends that the NPP should be removed to this court and consolidated ·with this action. Defendant concurs that the NPP sho·uld be rcn1oved and consolidated, on the follo,ving co11ditions: ( 1) ~rclx n1ust pay l-Iudson the $1,484, 707.03 con1menc.ement of this action, ai1d ~relx has wit11held si nee· the any additional \\''ithheld n1oney; (2) "I'elx must reswne payment of 60 l ludson" s n1011thly invoices in full;. and (3) Telx n1ust pay the undispt1ted port.ion of the additional rent owned Hudson related to Suite 1107. Items 1 and 2 are related to calculations of the electricity hills at issue in this action. ltem 3 relates to a separate dispute bet\vccn the parties arising fron1 an allegedly deiec.tive electricity meter in Suite 1107 which, it is alleged, resulted in l'eJx being underbilled. H·udson clain1s that l'elx agrees it \Vas undc.rbilled, but disputes the_ amount o\ved. I-ludson contends Telx o·\ves $2,020,621.10. Telx co.ncedes it owes only $1,246,438~25 . .Hudson argues that, in rcn1oving a C.ivil Court summary proceeding to the Supreme Court, Telx's self-help has to be addressed, to restore the status quo until finaljudg111ent is entered (()_pp at 23, citing Ahr(gl1t v ,)ht1pir<>. 92 1\D 2d 452, 453 f 1st Dept 1983] ["Balancing the equities, defendants arc entitled to the montl1ly payments for rents or use and occupancy, if only to maintain the status quo until rcnditic>n of a fi11al judgn1ent:J). Hudson also rcljes on a Second Department decision modifying a Supre1ne Cclurt decision conso_lidating cases to require the tenant party to pay rent (j\1arsh,1l/ v MoneJ;.ro Inv 'rs~ 132 AD 2d 651, 653 [2d Dept 1987] ri.we condition our 1nodilication of the order appealed form upon the plaintifl's continued payment of a sum denominated as hrenf' as it becomes due. Whetl1er we accept the plaintiff's contention that the tnonthly payments were in the nature of mortgage payments or Monegro Investors' contention that such payn1ents constituted rent, the plaintifl~s obligation to make such monthl}' paytncnt d·oes not abate. ·rhc precise nature of the money ordered to be paid by the plaintiff hereunder will be determined at tria.L '']). If it turns out tl1at Telx b~~s overpaid, it n1ay receive a refund or rent credit (Opp at 4). I-Judson argues that, by withholding r~nt, ~rclx is effectively holding Hudso11's property 3 The NPP was filed in the Manhattan Division of the Ne\.v York City Civil Court and is styled 60 Hudson ()~vner LL(' v Tel.t.·~NeH, York, LL(~, Index No. 727()5/2017. Page 11of13 12 of 14 [*FILED: NEW YORK COUNTY CLERK 05/29/2018 12:05 PM 12] INDEX NO. 650440/2017 NYSCEF DOC. NO. 105 RECEIVED NYSCEF: 05/29/2018 for security purposes~ and cannot satisfy the requirements of CPLR. 6201 for obtaining an order of .. attachment. ·relx disagrees, rcpeatit1g several arguments made as to the merits of the motion to dis1niss. l~clx also argues that the cases cited by f~udson dll not 'require payment, but instead~ require the court to the bala11ce the equities, \Vhich in tl1is case tall in Telx~s favor . Further, the facts of the cases cited are distinguishable. Unlike Marshall~ it is disputed w.hether l"elx owns Hudson money., and whether Hudson owes '].clx a refi.1nd lor.past overbillings . lJnlike ..4bright, ~relx is still 1naking payments to I ludson. ~rclx does not concede tl1at it o~'es lludson any money with respect to the purportedly defective 1neter for Suite 1107 (Reply at 7). "fclx also argues that any amount O\ved to lludson is eclipsed by the $13 n1illion Hudscln O\VCS it in overcharges for electricity. Nonetheless, Telx offers to provide appropriate security by placing funds into escro~1 , ifand in an amount required by the court (Rely at 7-8). ·raking the issues involved on the t\VO 1notions together, the relative size of tl1c amowits involved a11d balancing the equities (as it appears Hudson may h.ave used the incorrect formula for calculating the electricity bill) the NPP shall be removed i11 the interest of judicial economy and consolidated vvit.h this action withottt any requirement for Telx to tender payments or oiler security to Hudson. Accordingly, it is hereby ORDERl~D that l ludso11's n1otion to dismiss the first cause of .action (1notion sequence number 002) is DENIEI); a11d it is further O.RDEllED that the papers heretofore filed in the said Civil Court action and in this action shall stand as the papers in the consolidated action; and it is further ()RDEREI) that a copy of this order \Vith ·notice of entry shall be served on the County Clerk (Iloom 14113) and the Clerk of the ,rrial Support (Jffice (lloom 158), who shall mark their records to reflect this consolidation; and it is Page 12of13 13 of 14 [*FILED: NEW YORK COUNTY CLERK 05/29/2018 12:05 PM 13] INDEX NO. 650440/2017 NYSCEF DOC. NO. 105 RECEIVED NYSCEF: 05/29/2018 ORDERED that counsel for the parties shall appear at a status co111ercnce to discuss possible revision of the discovery scl1edulc in light of this Decision and ()rder on June 12, 2018 at 9:30 am, J>art 49, f{oon1 252, 60 C~entrc Street, Nevl Y<Jrk, Nc\V York~ ·1 ·his constitutes the decision and order of the c<>urt. DATED: May 25, 2018 Page 13of13 14 of 14

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