Georgetown Co., LLC v IAC/Interactive Corp.

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Georgetown Co., LLC v IAC/Interactive Corp. 2018 NY Slip Op 32078(U) August 21, 2018 Supreme Court, New York County Docket Number: 651304/2016 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: 1] NEW YORK COUNTY CLERK 08/24/2018 10:33 AM INDEX NO. 651304/2016 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 08/24/2018 ·rHE S'rATE OF NE\\' \l()ltK NE\V Y<)RK: (~(JlVli\tll~:l{f:lAL l)lVISl<)N PART 49 SlJl>llt~l\ttli~ (_~()lJl{rf {)t.~ (~()lJN~ry <>•~ .... ---~----------------------------------------------------------------------X 'l'HE (; f.()I{(~; f.:T()\\/N (~~()1\'.ll,AN\'', LL~:; <_; 11~()1{(; l~rl'()\\lN 19·ru s·rr{EEl~ l'H~r\SE I, LI.Jc·:; GEO J{G ~~~r(J\\rN 19Tll S'l'l{F:l{'r llf~VEl.1(lP'l\1EN1", LL(~; anti l.t\(:/(;~~<)R(;F:'J'()WN l9T11 S~l,1~1•:1•3rl' 1.#IJC, D.ECISI<>N :\Nl> ()RJ.ll(R Index No.: ll51304/2016 !\·lotion Sequence No. OCJ3 Plaintiffs, -against~· l)cfcndants. -----------------------------------------------------------------.-.___ ___ _x . (). t>l~-]~l~J{ Sl-11•:1~ \\l()()J), . ..,.... .J.: - Plaintiffs co111n1enccd this action seeking a declaration that thcv~ arc cntitlcdrto one half of a $35 rnilli<Jn !ct~ paid t.o <lclcndants f(>r the sale of certain land rights to a third party. Plaintiffs also assert an unjust cnrichn1ent claim. f)cfcndants rnakc this prc~ans\vcr n1otion to disn1iss the con1plaint on the gr(.lUnd that.. pursuant to various agrccrncnts bct\vccn the parties~ plaintiffs arc not cnt.ith:d to a share of the $3 5 n1illion lee. Factual ao(I Procedural 1Jackground 1 ln LL(_' crhc ~002. defendant li\("'/lntcrActivc(~orp (11\C')~ (icorgcto\~vn and plaintit1~·rhc (icorgctov~'n ('.'on1pany. c··on1pany) began \VOrking on a plan to develop L~(~'s ncvv headquarters (the I lcadquart.crs Projct:t ), to be located at I oth .A venue and 18 1h Street Nt:'vv 'i'" ork~ Nc\v York~ zoninglots 12 and 54 (~he Property).. ·r11c lots \Vere o\vned by non-party f{csponsivc Realty~ lJ,(' ( l{~sponsive ). l{esponsi vc also O\\·-r1cd l<.>ls 20 and 29 . \Vhich \Ven.: close h}'. ·r11c ( icorgcltl\Vn (.'ornpany is a privately held real estate investn1cnt and dcvelopn·1cnt co1npany. internet co1npany t<.)cuscd on the areas of search.. ap]Jlications~ L•\(~ is a n1cdia and online dating, n1edia~ and cco1nn1crcc. p·taintiff (lcorgct<)-v"·t1 19th Street Phase I~ LLC" (Cicorgetown Phase I) is an affiliate of . ~- ·rhc (ieorgcto\vn (~01npany., and is the '-- n1anaging n1en1ber and 1OO?t~ econon1ic o\vner of plaintiff I1\(~ /(icorgcto\Vll 19th Street. l. I,(~ ( l;\(:/Cieorgcto\A./n ). IAC~/(Jeorgelo\vn is also O\vncd by dt:fcndanl Lt\(.i 19th Street l lolclings., I ,L(~ (Ii\(~ l 91h Slret:t H·oldings). Plaintiff (icorgcto\vn 19ni this tnotion to disn1iss pursuant to (.~PIJ{ 3211 (a) ( 1) and (7), the J~tcts arc taken arncnded cnn1plaint {see Gildin aftirrnation" e-xl1ibit 2) · 1 ()n fron1 the 2 of 14 [*FILED: 2] NEW YORK COUNTY CLERK 08/24/2018 10:33 AM INDEX NO. 651304/2016 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 08/24/2018 Street l)cvcJoptnenL L..LC. ((jcorgeto\vn 19th Street l)evcloprncnt) is an affili(llt..:. of ·rhc (jcorgelo\vn (~on1pany. l)cfcndant l-lfllF Ventures~ LL,(~ (ll'"rRF) is an affiliate of I;\(~. l n order lo effi:ctuate the l-Icadquarters Project on f\-1arch 9~ 2004., the parties entered intr) several agn:crncnts. li\(.'/(lcorgcto\vn entered into a lease f(>r the Property (the (iround Lease) f{c.:sponsive. 11\(~'/(lcorgcto\vn \Vi th then sublet the Property to Irl'l{F . pursuant to a \.vrittcn lease. (~it. orgcto\vn l <)rh Street l)evelopn1cnt.. as developer of the l-Ieadquartcrs Project and defendant ·f-rrRF . as o\vner of the Headquarters Project f)cvclopn1ent /\grccrncnt). Paragraph 2.10 ··'rhroughout all phases of the enter~d into an agrccn1ent (the or t.hc J)cvclopn1ent 1\grcen1ent provides: Project~ J)cvelopt!r and I)eve loper 'Is 1\ fti Iiatcs shalL any fees to l)e,·cloper or l)cveloper~s 1\ffiJiates in addition to the payn1ents set t()rth in this /\grccn1c11l), provide ()\vncr at ()\\.'ner~s request and expense (but \Vithout \vith such assistance and cooperation as n1ay be reasonably requested by ()wncr lo assist ()\vncr in obtaining (a) financing f()r the construction of the Pr(~jcct and ()\vncr's \~/ork and pcrrnancnt financing \Vith respect to the Building~ on such tern1s and <:onditions as shall be acceptable to ()\vner, ;;1nd (b) any tax abaten1cnts . grants . loans .. tax-cxen1pt bond financing or other incentives and benefits available by the St.ate of Ncvv '{ ork, the C:ity of ncvv '{ ork or any other govcrnrncnt agcn<:y . including financing that 111ay be available under th~ so-called "Nc\+v Yl~f.1' Lihcrtv ({Qnd Ptograrn. ~ ·· (_()cvelopn1cnt. i\.grccrnent, attached as E~xhihit 4 to Gildin aff. ). (.lcorgcto\vn J>hasc I and II\(.' l 91h Street. lloldings also entered into a letter agreen1ent (l.l~ttcr 1\grccn1cnt) \v.hich stated that if either party (or its affiliates) obtained a right to purchase or lease ....other property--~ near the I .A.(.~ headquarters,, the other party., at. its option~ n1ay "~participate ... in such transaction on an equal econornic and <.:ontrol basis'' ( l,euer 1\green1cnt., attached as l·:xhibit 3 to (1ildin affirn1ation). Paragraph 2 of the Letter i\grecn1ent . .:Each JAC,~ l~ntity and C1corgeto\vn .E~ntity provided~ in relevant part: agrees if it no\v has or hereafter ohtains any right or option to purchase or lease other prop~rty (or any interest in any other property) located \.Vi thin the san1e square block as the I ~and [lhe L\C: Headquarters 1or \vi thin the sa111e five square blocks inuncdiately adjacent to the I .and (any and all such property i~ hcrcafler referred t.o "1\djaccnt Property~}., I/\(' or <1n li\C' Entity designated by L·\C'~ or (leorgcto\vn or a Cicorgeto\vn [~ntity dc,signated by (icorgetnvvn~ as applicable . shall have the right to participate vvilh such I/\(' Lntity· or (icorgclo\v1.1 F~ntity in such transaction on an equal e(;on(H11ic and control basis"'"' ( i ti. ). 3 of 14 [*FILED: 3] NEW YORK COUNTY CLERK 08/24/2018 10:33 AM INDEX NO. 651304/2016 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 08/24/2018 \\1hen the <Jround Lease and Sublease \Vere executed in 2004, the applicable zoning la\vs li1nited the size oftht! buildings that could be built on the Property, and other properties in the area (the 1-Jigh l.-ine area). l"ht:rt:after . pla.intiils \VOrked vvith the C:it):' of Nc\v York to change the zoning r~gulalions. ·rhe zoning changes sought \Vere not needed t("Jr the llcatlquarters Pro_il't:L hut \\ere sought so that both plaintiffs and defendants could increase the n1arkctability of the area'.' and pro tit thcrcfrotn. Plaintitls predicted that once the I Icadquartcrs J>roject \Vas con1plcted . \Vith the building to he dcsil!.ned bv.. \-Vorld farnous architect Frank Cichrv., . it would be a catalvst 1(1r further th:ve·topn1cnt in the lligh •' .· '\,,.... l~ine area. Plaintiffs clain1 they wer~ uniquely situated to create v~tlue fr>r thcn1sclvcs and defendants. because they had expertise and 1:1.n1iliarity \Vith the intricacies of the existing zoning regulations . and had the skill and 1t>resight to craft a zoning proposal J.{>r Jots 12 . 54 . 20 and '9. In June 2005~ plaintiffs successfully lobbied the C~ity of Nc\V York to enact revisions to the applicable zoning regulations. /\s a result. the nc\v zoning regulations included a special provision al lo,ving f(lr certain advantages for lots 20 and ........ ~..... 29~ .· i r thev- 1nerged \vi th lots 12 and 54 . creating a ~· - "-- nc\.v single zoning lot. 1-hc S}Jecial provisions pcrn1ittcd the follov;ing: rncrgcr of lots 12, 54. 20 and 29 into a single zoning lot. thus, allo\ving the purchase or -~ti devetorH11ent. rnetric kno\vs as J.loor area ratio~., ( F1\R) 2 fl·on1 the C:it.y of New )/ ork at a bt:lo\.v 1narkct price: 111crger of the l(>tu· lots into a single lot al1o\ving the size of the developn1ent enveJope 3 t{)r \Vhich a building could be built on lot 20 to substantially increase: and, after the n1crger~ 11cr1nitting the use of the F1\l{ of all 4 lots to he used . collcctivclv., on lots ?O and 29. l-·lo\vever. none of these advantages \Vere available unt i I the lots \Vere actually n1erged. Plain ti rrs state that a1l~r the ne\v zoning regulations \Vere enacted. they und<::rtook other efforts in connection \Vi th lots 20 and ?9. including engaging architects and contract.ors~ developing 2 F. t\fl is the ratio of building floor area con1parcd to the area of the lot. ·r·hc higher the F/\R~ the n1ore floorspace the building can have. For cxanlplc~ if the Jot size is I 0,000 square feet and has a FAR of 1., the building can only have l 0,000 square feel. If the sa1nc lot has a FAI{ of 2 . the hui Iding can have 20~000 square feet of allov~'able lloor area. 3 i\ dcvclopn1ent envelope, also re.ferred to as a building envelope~ is the rnax i1nu1-r1 thrcc- din1ensional spac~ on a zoning lot \Vithin \\"hich a structure can be built. as pern1i11ed by appl icahlc height, setback and yard C<)ntrols. 4 of 14 [*FILED: 4] NEW YORK COUNTY CLERK 08/24/2018 10:33 AM INDEX NO. 651304/2016 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 08/24/2018 collaborating '1vith hotel and restaurant r>ro . (orn1(1s . experts~ n1eet1ng \vith stakeholders~ and conducting cnvironn1ental studies. Plaintiffs state that. defendants did not pay thcn1 f(lr this \vork since it \Vas not required under the l)cvelopn1ent i\grcen1cnt . . and \Vas separate and apa11 fl·on1 the J Icadquarl.ers Project. In 2013-2014., non-party Related C on1panics (l{clatcd) otlered to purchase lots 20 and 29 1 froin. }{csponsive t.the lZelatcd rrransaction), on the condition that these Jots \-\'ere also part of the nc\v rezoning l{clattd schen1c~ ~rransaction . and it <:ould obtain addi~ional F;\f{ rights for those lots. f{csponsive . as O\vncr., IA(~/(icorgcto\vn, as tenant., and 1l'J'l{F'I as subtenant agreed to the n1crger of lot.s ~nd ·ro elfcctuale the 12~ 54~ ?()and ~9 for zoning purposes. R.csponsivt:~ Ll\C:/Ci~t>rgcto\vn 1rrr<F then sold their right to pur{;hase 1-:-l\R rights, at a discount, for use on the nc\\··ly-n1erged lot. l{clatc:tl paid $35 rnillion to L\C'/(leorgct<)\Vl1 and 1 H'I'llF~ lt)r those rights (as \Vell as certain other air rights) pursuant to an agrccn1ent (the l{ights Fee Agreen1enf'). ·rhe $35 rnillion. \vhit:h is the subject oft.his litigation., is currently being held in escrow·. In 2016 . plninti ffi; con1n1enced this action seeking a declaration that they arc t:ntitled to 50~.-~ of the $35 n1illi<)ll pursuant to the f._,etler /\grcc111cnt and f{ights r~ee I\grccn1cnL or~ in the alternative, a declaration thal under the principals of equity they are entitled to an equitable an1ount of the $35 n1illion~ \Vith t.he an1ount to be deterrnin~d at triaL PlaintiJ1s filed an an1endcd co1nplaint on June 9'.' 2017, n1aking the equitable clain1 one fiJr unjust cnrich111cnt. Plaintiffs clain1 that they p<:.rf(Jrrncd significant lobbying \Vork on the zoning changes under \Vhich defendants received a benefit. [)cfcndants no\v n1akc this pre-ans\\iCr n1otion to disn1iss pursuant. to ('PI,[{ 1711 (_'-l) ( 1) {docun1entary cvidenc..:) and (a) (7) ( l~1ilurc to state a cause of action). l)cfcndants argu<: that on [\:'furch 9., 2004, 11\C:~ or its affiliates . and ·rhe CleorgehJ\vn (\.ln1pany~ or its affiliates,, entered into four interrelated agrccn1cnts to n1cn1orializc the tern1s for the Headquarters Project. [)cfcndants argue that the parties entered into the l)cvclopn1cnt ;\gree111enl \Vhich designates (ie<)rgettl\Vn l 9 1h Street I)cvclopn1cnt as llli{F~ -,,. <t~~ent, to be responsible for n1anaging and coordinating al 1aspects of the l lcadquarters flrojccl. [)ctcndants note that paragraph 2.10 or the [)evelopn1cnt ,t\grccn1cnt states that (icorgelovvn 19'h Street J)evelopn1ent, as developer'! \Vas required .... vvithout any fees to l_(lcorgctovvn 191h Street l)cvclopn1cnt l or fits l 1\ffi liates in addition to the payn1ents set f()rth in Ithe f)cvclopn1cnt /\grccrncnt I. "~ to provide I l'l'l{F . as o\vncr.. vvith ""'assistance and cooperation .. 4 5 of 14 [*FILED: 5] NEW YORK COUNTY CLERK 08/24/2018 10:33 AM INDEX NO. 651304/2016 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 08/24/2018 . in <)btaininv., ... incentives and henctits 111ade available bv the State of Ne\V '{c•rk . the ~~ ~· ' (~~itv ~ or Ne\\' )'ork or any other goven1n1cnl agency ... .,"' (l)cveJopn1ent 1\grccn1ent., § 2.1 {)). In exchange l(lr all its services~ ll'l"llF paid Cicorgctovvn 19•11 Street l)evel()pn1ent a fee of $4.5 n1illion. [)cfcndants argue~ thcrcf~)re~ that p1ainti1ls arc not entitled to a portion ()f thc $35 n1illion tee~ since all the \York they pcrl(Jrn1cd ,,vas covered., and paid L)c tcndants further note that.. in 2004~ for~ under the l)evcloprncnt 1\grcen1cnt. the parties a.lso entered i nlo an agrcen1ent under \·vhich IJ\l' 19th Street 1-loldings a.nd (jcorgctown Phase I created f,\(:>'()eorgct<.)wn {tenant or the Property) (the ()pcrat.ing i\grccn1ent. attached as t:xhlbit 5 to (Jildin afl). l>t:fenda11ts contcnl the ()pcrating 1\grccrncnt reserved to 11\(' 19th Stn:et I Jol<ling the C(>ntrol of all nlf~jor decisions concerning the I leadquartcrs Project. l"'hcrcl()rc . according to defendants~ (icorgcto\vn Phase I not pcnniu.cd to rnake any n1~jor decisions~ including the transfer of any inl.ercst O\Vncd J1\('/Cieorgct{)\Vn .. \Vith(JUt \VUS by the prior \Vritten cons~nt of 1:-\C.~ I 91h Street l lo1dings. i\ccording to det~ndants~ all the actions taken by plainti1l''s, including the rczoni ng \·Vork.. \Ven: subject to defendants~ approval and \Vere part and parcel of the l-leatiquartcrs Project. 'l'hcrefore . plaintiffs have already been paid f(>r their devclo1Jn1cnt vvork and arc not entitled to an additional payn1cnt fron1 the $35 1r1illior1 fee fro1n f{elatc(l. l)~tendants n<)tc that pursuant to the (iround l .. easc~ IAC~/(ic<)rgcto\vn obtained the right to use up to 150.000 square feet of the 1loor area allo\.\ied under the then current zoning regulation to construct the 11\(~ headquarters. In addition . lhe (}round l.;easc also pr(lVidcd that the leased property . . includes the right (hut not the ohligation) or·rcnant to utilize ... additional floor 1\rca~~., not exceeding t \VO tin1cs the ~'I "ot Arca·· of the leased prelnisc.:s (as defined in the zoning regul.alion) that n1ight later be obtained ~"pursuant to zoning change or other\vise~ at any tin1e during the ·rern1"~ of the (]round Lease f (.lround J .cas~ . attached as .Exhibit 6 l<> (lildin aft:~ 5.1 _). [)cfcndan.ts argue this provision rnakes clear that any enhanced development rights that n1ight 1atcr arise frtnn a changt· in the zoning h,1\v,, e.g., enhanced F1\lt. belonged to 11\(_"'/(.Jcorgctown .. as tenant \Vht:n it entered into the (}round Lease with l{esponsive. Defendants note that~ pursuant to the Sublease~ I tTRll,~ as subtenant~ assun1cd all the rights and obligations rtf' IA(~/(icorgclo\\ll under the C:lround Lease., including the right to utilize any F'i\f( rights l1clonging to I/\C,/Clcorgeto\.vn under the (1round t~casc (Sublease, attached as Exhibit 7 to Ciildin afl~ ~1 2[1)1). l)efi:.ndants argue they \Vere the <lVlners of any and all ·FAI{ rights \\.rhich 5 6 of 14 [*FILED: 6] NEW YORK COUNTY CLERK 08/24/2018 10:33 AM INDEX NO. 651304/2016 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 08/24/2018 hound to lots 12 and 54 as of 2004. 'fherct<)re. in 2014 . \Vhen IA(:/C.lcorgcto\vn and l·ITRF ...... \Vere . relinquish~d their rights to F/\I{ HJr lots 12 and 54. they \.V{~rc relinquishing a pre-existing right. not a nc,,vly obtained right to '"\,other property,"" as contcrnplated by the J.;cttcr i\grcc1nenL [lctcndants argue the Sublease also gave H''l'J{ F unilateral control and decision-n1aking po\.vcr over actions allecting t11e J lcadquartcrs .f>roj_cct~ including \Vhcther to allo\v the J>roperty to be n1crged \·vith an adjacent parcel l(.)r zoning purposes . an<l \Vhcthcr to dispose of any future FAI{ rights. 'fhercforc~ according to defendants . although ]A(~/(]eorgctt)\Vll \Vas a party to the fZelatcd ·rransaction~ it \Vas ITtcrcly consenting to the transaction in [t rninistcrial f~tshion., as agent for l·ff'l{I:, since Jfl"l{F had exclusive dccision-n1akinu authoritv... over the l{clated 'l'ransaction. · ~· In sun1, dcJ<:ndanls argu~ the F:\1{ rights \\'hich \Vere that pursuant to the lcrn1s of the f()Uf do~tn11~1Hs d~Sl>rib~d ahovL\ ~Ol~vcycd as part or the ({elatccl ·rransa.ctinn \Vere not llC\vly acquired rights to '"·other property'\' as conte111plated by the L.,t:ller /-\green1cnt. \Vere th~ l{ather~ as of2()04 . dctendants sole ovvners of all pres~nt and future FJ\R for lots }'J and 54_ 'l'hcrcforc., plaintiffs \verc not entitled to an.Y proceeds fron1 the sale of the F1\l{. Fut1her, plaintifis' unjust ~nrichn1ent clain1 n1ust h~ disn1isscd bt·cn paid l~)r because~ pursuant to the tcnns of the l)evelopn1ent 1\grcen1ent, pJaintit1s have their work. IA(.~ In oppos1tion'I plaintitls argue that'I beginning in 2002. plaintiffs antic:ipatcd the ne\v headquarters \Vould be a catalyst f(lr other devclopn1ent in the High l..inc area. ln that spirit, plaintiffs and defcn<iants agreed to share in vicinity that \VOtlld th~ benefit of any dcvctopn1ent in the in1111cdiatc be triggered by the nc\v headquarters. Plaintiffs note that . as initially conceived . both sides plannl:d to invest in the I lcadquart.ers Project as equal partners._ co-o\vning the headquarters building and equally sharing in the profits. l lo\vever. in '003. different deal structure to avail itself of several tax bcnc~tits L·\{~ rcqu~sti:J and tax-cxen1pt J ,ibcrty or the l lcadquartcrs (icora.cto,vn Phase I as its I 0<){}·1> CC{)l1on1ic "-·' Proj~ct.. IA(~' 111c1nbcr.. . agreed that would lease the land llond ~arncd as an l1\(~/Cic.orgcto\VI1, \.vith financing. In order lo ensure 11\.(.'/(·;corgcloYvn \·vould receive the funds it \.vould have e<.1ual partner as ·the 0\Vner a fr(lll1 f{csponsivc~ and then suhlcase it t<.) I rrl{F. Plaintiffs note that they and defendants agreed that the difference ht:t\\'Cen tht: rent .11\C)/(}eorgcto\vn \vould receive fron1 I l'rllF~ ancl the rent L1$-~/(icorgetovvn paid to l{esptH1si v~ \vould equal the profits that the parties projected (}c<)rgeto\Vll Phase l would have 6 7 of 14 [*FILED: 7] NEW YORK COUNTY CLERK 08/24/2018 10:33 AM INDEX NO. 651304/2016 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 08/24/2018 n1ade as )()<~/(.> O\Vncr of the buil(ling.q "rhcse agreeincnts \Vere n1~1norialiicd in the l)cvelopn1ent l\grccn1cnt~ the (iround [,case and the Sul)lease docun1cnls. Plainti lls argue that these docurncnts concern only the lleadl~ttrartcrs Project on lots 12 and 54 . and had no effect on the plaintiffs . or defendants~ rights with respect to a.dja\:.ent lots/properties, l\ccording to plaintiffs~ the L,cttcr /\green1cnt addressed the rights and obligations or ·rh~ (1corgcto,vn ($n1pany~ lA('~ and their affiliates~ including the right t(> participate equally in any transaction no,.ving fron1 the rights that either 'T'he (~icorgeto\vn (:on1pany or Lt.\(~ rnight havt: to obtain or purchase any interest in "~other property."!~ t>Iainti (Ts argue that prior to the 2005 change in the zoning regulations~ neither they nor dc.:lcndants had the right to purchase Fi\I{. for use on adjacent JJropcrtics. 'fhus, the nc\v zoning . regulations created a right. to purchase an int.crest in "~other property ....... spcci fically the F;-\ll rights f()r use on lots 10 and 29. }>fainlifls are.uc that even under the ~-· advantagL:~ \Vere HC\V zoning regulations~ none of the L· .,__. availahlc . unless and untiL the four lots n1ergcd into a single. lot. P1aintilTs contend defendants did not have any rights prior to the lols' tnergcr. n1uch less the ability to convey rights . pursuant to the nc\v zoning rcgulat1ons. 'l l1cre1()re~ in 2014 . \Vhen llelalcd purchased the adjacent lots, and (;Onditi<)ncd its purchase on acquiring the F1\R rights fron1 lots 12 and 54, that transaction triggered the right lo purchase an interest in ""other property~': nan1e1y the right created by the ne\v zoning regulations to buy hclo\V n1a.rket Fl\..R to be used in the dcvclop111cnt of lots 20 and 29. Plaintiffs argue fut1hcr that . contrary to ''other defendants~ argun1ent that the F1\R rights \Vere not property'" because the (]round L.casc and Sublease gave defendants the exclusive right to use, retain or othcr\vise dispose of the F1\J{ rights .. the (I round l..)case and Sublease did not give defendants unilateral control over the F1\.I~ defendants the unilateral right to utilize the rights. leas~d llathcr~ the <3round l,case and Sublease gave property \vitb the then-existing l:Al<. connected to lots 12 and 54, but not the right l<-l transfer the nc\vly-crcated bclo\A/-n1arket FAI{ connected the nc\vlv ... n1t~rgcd L· lot. Plaintiff's coni~nct t(l that ·if dcten<lants .. clain1s \vcrc true _ there \VOuld have been no need to n1crgc the l(rur l<Jts into one . and defend.ants CL>uld have 1ncrcly transferred the 4 ln addition to,.tl1e fixed rent and additiorial rent 'H'fl{r is obligated to 1-1ay directly to the l~esp<Jnsive . ::1s landlord., l rrRF is also oblig4tted to pay '11\(~/(}corgeto\vn $60 1·nillion in additional rents, <.)vcr the tern1 ()f the (1round Lease and Sublease (Sublease § 3 ). i'"1 I 8 of 14 [*FILED: 8] NEW YORK COUNTY CLERK 08/24/2018 10:33 AM INDEX NO. 651304/2016 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 08/24/2018 F1\I{ connct:tcd to lots 12 and 54 lo J{clatcd. llo\vever~ stf1cc that is ll(lt. \,vhat happened . it is clear that the nC\·V zoning regulations required a trlerger of the lots to trigger the right to purchase the bcl()\V rnarkct value Fl\l{ f{)r use on lots 20 and 29. J>laintitls 'ilso argue that vvhilc the [)evclopn1ent 1\green1cnt obligated thcn1 to dt~velo].) the I/$~ ht::adquart~rs building~ the 1,oning \vork and their effi)rt to obtain enh.anccd F1\I{ rights \Vere separate fron1 the l lcadquarters Project. and not cont.crnplated under the l)evelop1ncnt Agreen1cnt. ·rhe J)cvclopn1ent 1\grccn1cnt requires (J-corgeto\vn 19th Street f)cvclopn1enl to ~~assist ... in uhtaini ng all necessary zoning and other approvals ... req uircd tclr the Projccf, (: Developr1·1cnt 1\grccn1cnL or the ii 2.6). llovvcver . their \Vork in obtaining the zoning regulations cha11gc \Vas not parl l lcadquartcrs Project.. so., \Vas not covered under the l)evelopn1ent 1\grccn1enl. Plaintiffs argue that at the very Ieast the language of the J)cvclopn1ent it\.grcc111ent is an1 biguous and discovery is required. Plaintiffs content their clai1n survives because of the t,;ett~r 1\grccn1cnt., \vhich allo\vS that. t.; pon the n1ergcr of the four lots_ l-ffJ{.F', 11\C.i/(J-corgcto\vn'I and Responsive ohtained the right to purchase the ne\vly-cn:atcd Fl\I{~ \vhich is an interest in any "$lher is not ~ovcn:d under the I..ettcr i\grecn1cnL plaintiffs argue prt)perty~~. l~vcn if their \vork they are entitled to pursue their unjust cnrichn1cnt clain1 because defendants have hccn unj ust.ly enriched by plain ti rrs ~ rezoning \vork resulting in the enhanced l·'/\I( rights. -rhercf()rc . they are entitled to an equitable share of the $35 n1illion· fee. In reply~ detendants argue the l..cltcr i\grccn1(;11l docs not conten1platc the J<clated ·rransaction~ and thcrcf()rc. plaintiffs do not have the right t.o participate \-vith ""equa·l cconon1i<: and ~ontrol basis"" in /\green1cnt ~ls that transaction (I ~Ctler l\grecn1ent). r\ccording to defendants~ the L.cttcr does not a.ddrcss . this scenario - \Vherc lots 12 and 54 \\-'ere rncrgcd \Vith adjacent lots a result of a zoning change . or where 11\C~/(]eorgeto\Vtl and l rf'l{F relinquished sonic of their property rights as part of that n1ergcr. l)cfcndants also argue the L.etter i\grcc1ncnt contcn1plates a ··purchase or lease~'~ not a relinquishing, or sale" of its right to belo"v-1narkct l·'l\R as part of a rncrgcr of four adjacent lots. IJelendants cont.end that the \\'Ord the Letter 1\grecn1cnt . n1eans or property ~'"lo ~i.participatc~~~ as conten1plated by take part in''; or " cngagc in';' real estate dcvelopn1t:nL not the sale 4 rights. f)ct(:ndants assert the l..ctter Agrcen1ent should be en l{lrccd pursuant to its 8 9 of 14 [*FILED: 9] NEW YORK COUNTY CLERK 08/24/2018 10:33 AM INDEX NO. 651304/2016 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 08/24/2018 tcrn1s . and not be re\vritten to create a 11C\V right fi)r plainti fls to share in the econon1ic proceeds of a sale of properly rights. f)cfcndants argue the nc\v zoning regulations and nicrger of the f{)ur l(ltS did not gi vc thcn1 the right to purchase F1\ I{ frlr use tln lots 20 anti 29. l{athcr, the t1C\V zoning regulations n1erc1y pern1ittcd lhen·) to purchase F1\R on their property and. transft"'r those Fi\R to another subarea of the n1crgcd lots. ·rhus.~ defendants did not obtain or sell an interest in ....other properly~-~ bul their O\Vll. l ''inally ~ 1 det~ndants argue that since plainti rrs ~lre clain1i11g the parties arc bound by the tcrn1s of the L,cttcr /\grcen1cnt~ their clain1 for u1~just enrichn1cnt n1ust be disn1isscd as duplicative of their ~ontract clain1. l)iscussic)n In considering a C~PLll 3211 (a) (7) prc-ans\.vcr n1tltion t.o disn1iss a cot11plaint t(>r failure to slat~ a cause ()faction., a ~1.court n1ust accept all of the al legations in the con1plaint as true~ and . dra\ving all infcrenc-es fron1 th<)SC allegations in the light n1ost faV()rable to the plaintitl~ dctcnnine 'vhcthcr a cognizable cause of acti<)n can be discerned thci·ein., not \\··hcthcr one has been properly stated"" (see A1Lttlinl)llllf!rson "~11>1 lloldinKS l)cpt 2011] citing LI~(.; J(ovello v ()r<?/ino I?ealt;} r \.:' f/ecleral E:r1Jress (, 0t/)., 87 AD3d 836'.' 839 1~t 1 (."o.'.' 40 NY..2d 633~ 634 . 636 [19761). Ho,vever . ""allegations consisting of bare le.gal conclusions~ as \vell as factual clain1s inherently incredible or flatly t:ontradicled by docun1cntary evidence arc not entitled to such (.hico~l!;o . T'rihut1e-i.\r. l''. l\!e\vs ~s: r1u.fic,1le~ 204 i\l.)2d 233~ 1 ~onsidcration"~ (( anif~lio \' 233-234 [I" 1 f)cpl l<.>94J). 1\lthotu1h defendants label their tlllJtion to disn1iss one ftlf disn1issal f{)r both failure to state "'-· a l:ausc of action and based on docun1cntary evidence (see (~l)Ll\. 321 l [al 11 J [7l)- defendants do not argue that plaintiffs hav<}llol properly plead a cause of action sounding in declaratory judgn1cnt (br~ach of contract) <)r unjust cnrichn1c11t (see to th~ lerlns (~Pl~R 3211 faJ f7]). Rather'.' they argue that pursuant or the various agrec1ncnts bct\vcen the parties~ plaintifTs are not entitled to the relief sought. 'l"l1erefiJre .. the court \Vi ll analyze the n1otion as {)Ile based upon (~Pl J{ 3211 (a) ( 1 ), docun1entarv-· evidence. To prevail on a pre-ans\ver n1otion to disn1iss pursuant l(J (~.Pl.J~ 3211 (a) ( l >~ defendant n1ust allege that its det~nsc is fully f(lundcd upo11 docun1e11tary evidcnc.c. 1V1orcovcr~ tl1c <locun1eniary cvidenc.c ottered in that defense ,.;.n1usl ... rcsolve(_J all f'~1ctual issues as a 1natter 9 10 of 14 or [*FILED: 10] NEW YORK COUNTY CLERK 08/24/2018 10:33 AM INDEX NO. 651304/2016 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 08/24/2018 la.\\='~ and conclusively disJJOscf I {)f the plaintift~s c.lairn"~ ('leitler v f>o/l1.1ck c~ ..\~ons~ 288 l\l)2d 302~ 302 f_2nJ Dl~pt 200 I]). ··rhe facts alleged in the cn111plaint arc regarded as true.~ and the plaintifr is afforded the benefit of every fi1vorriblc inJerence (see !.eone v A4ttrtine=~ 84 NY2d 83., 87-88 [l 994]). l)o(;un1entary evidence \vithin the n1caning of (~l>LR 3211 (a) ( 1). r11ust be ;.;.una111biguous and of undisputed authenticity'\' ( J'(n1tt.u1ell<1 "[)oe I. 73 J\D3d 78~ 86 [2d l)cpt 20 I OJ. citing f)avid [). SicgcL Pra<:ticc ~- (~(ln1111entarics .. tv.1cKinncv's ~ C~ons . l..a\vs ofN'{.. 13ook 7B. . (~P-LR ( 321 l:lO, at 1 . 'l 12). ""A C'PLI{ 3211 (a)(J) 111otion 1nay be granted .;only \.vhere the doculnentary evidence utterly refutes plaintiff's fiu.:tual allegations~ conclusively establishing a defense as a n1attcr la\\."'.'" (1Valoli 't 1\IJ'(, l'ttrlnershiJJ /!Uus. quoting (ioshen v .A4ul llftl L(fi} !11s. [Jev. l:'unc/(,~o_, Inc_~ 103 /\l)3d 611~ ()12 l2d l)cpt (·~o. t~{J'./. or 2011). Y ... 98 N \'2d 3 14~ 326 [2.0(J2 IJ. I•irst <~:a use of 1\ct:ii>11 - l)eclaratory \Judgment on l~ights to the Escro\\' .... unds 1--Icrc~ plain ti f'fs seek a declaratory judgn1ent declaring that pursuant lo the l.,ctter i\green1cnt~ they are entitled to share equally in the $35 n1Hlion fee paid to ll\(~/(ieorgctowl1 and lffRF by l{elatcd. ·rhc c:ourt. n1ay render a declaral(>ry judg1nent having the ~fleet of a final judg1ncnt as to the rights and otl1er legal relations of tht: parties to a justiciable controversy \vhether or not further relief is or could be clairncd (see (~Pf~R 300 l). 'fhe fundan1t:ntal rule intcrpretat ion is that agrcen1cnts arc to be· construed in uccord \.vith the parties~ or contract intent .and ;.~[t]he best evidence of \vhat. parties to a written agrccn1t!nt intend is \Vhat they say in their \\-'Ti ting . ~ (5;/,111u1u= \' [)e/ ('of .. 79 ·N'\'2d 1016, 1018 [19921). \\/hether a contract is an1biguous is a question of la,.v fl)r re.solution hy the court (see l?i"versille ~)_ f'/(innir1'"t; (.'!or11. v 1 ( RP./f\~1ell l?iversi<}e~ I.Jl., 60 i\l)3d 6 l., 6() [1st [)cpt 2008 I._ afta 13 NY3d 398 [20091). ln accordance with these principles" a court should interpret a contract ....so as to give full 111ean and effect to the 1natcria.I provisions... {ilea! ,S'av_ /Jt1nk I 11 ,\... (.. 0... 1 _J Ny~ _) ...., l-lerc~ F ~Sonuner~ d -·") 7 7.. J,_ 8._7 8 NY 3d 31 ~t 324 l 20071 quoting E~\ces.\· Ins. C·o Lill. v f (1clorr A.fut. I,._I f}.()4' ·1I). . giving the plaintiffs the benefit of every f~1vorablc inference of the allegations in the an1endcd cornplaint, plaintiffs htrve sufficiently alleged that pursuant to the tcrn1s of the 1.}ctter .t\gn;c1nenL in 2005 \\:'h<:.n the ('ity of Ne\v York agreed to a1ncnd its zoning regulations to pcrn1it the n1crger of lots 12 . 54" 20 and 20~ and . upon that n1ergcr~ JA<.~~ {or its atliliatc I rrRF) . obtained a -~right or option to purchase ... any other property· (or any interest in any other real property·) located vvithin the san1c square block as the l.;and" .. (Letter .1\grccn1ent). fV1<)rcover, ll\C.''s (or its JO 11 of 14 [*FILED: 11] NEW YORK COUNTY CLERK 08/24/2018 10:33 AM INDEX NO. 651304/2016 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 08/24/2018 affiliate I l"l'l{l·~·s) transfer of its newly (Jt:quircd right lo purchase hchJ\V n1arkct F/\R. triggered plaintiffs"' ... right to participate \Vi th Idct~ndants I in such transaction on an equal et:onon1ic and control basis ........ (ili.) In opposition~ Jcfcndants 111crcly raise issues of fact regarding the intent _of parties at the tin1c they entered into various agrccn1cnts. With respect to cnf<Jrcing the I ~ctter J\grccn1ent defendants argue that~ pursuant. to the clear n1eaning of the Ciround J,case and Sublease., any potential nc\v FAil rights \Vere bound to lots 12 and 54 at the ti1ne the parties entered into the Ciround Lease and the Sublease., and thercl()re,, not a nc\vly-acquircd right lo '""other property'.'- as l:Ontcn1plated by the l,etlcr /\greelncnt. I lo\vcvcr. it does appt:ar that the right to purchase the belo\v n1arkct Fi\l{ zoning purposes. used_ \Vas. not triggered until lots 12 and 54 Vv'crc 1ncrgcd \Vith lots 20 and 29 [(>r Further~ co1Jcctiv~ly., on the cith~r r Al{ rights availab.1~ for purchase on the 111crged lot <.:ould only be lot 20 or 29. 'll1ercfore, there is a question of applicability of the tenn ··other property"' as used in the 1~1ct regarding the l,;~Ucr 1\grccn1ent. ·rhus~ al this stage of litigation. defendants~ rclianl:c on the (jround Lease~ Sublease~ and l~ctter /\gn:.erncnt docs not conclusi vcly refute })laintiffs' opposing l~1ctual allegations. /\t the very least" there is a question or fr1l:t regarding the parties~ intent in using the tern1s of the I .ctter ,1-\gree1l1cnl.. '"(.a right or option to purchase ... _ any other property (or interest in any other real property) located \Vithin the san1c square block as the l.,and"" (Letter ;\green1cnt). Interestingly" detendants also raise an issue of fact regarding the intent of the parlit:s regarding the 1.elter .t-\grecrncnt 's use of the an1biguous tcn11 '·participatt.~' ()n a n1otion to dis1niss., the court cannot dctcrn1ine \vhcthcr the parties intended -~engage ~~participate .... to n1can in"' rea] estate developn1ent.. as argued by defendants., or ;,"to share ·~to in~· take part in"~ or the proceeds of a sale . as argued by plainti1ls. f:urthcr . . dclcndants have not dcn1onsl.ratcd~ as a lllattcr of la\V .. that lhc tCl'l11S of the (lround [,case and Suhleasc granted then1 the sole right to transl~r the FJ\I~ that. belonged th a nc\vlyn1ergcd lot. NotabJy. ~ the ne\vly-n1ergcd loL and its associated Fl\l{ . did not exist in "'004~ \vl1~~n the (1round Lease and Sublease \\='ere executed. f urthcr. thcrl! is nothing in the (jround I J.~·ase and Sublease \Vhi<.:h expressly gave dcl't!ndants the unilateral right to use . retain,, or <>ther\vise dispose of the tlC\\.•ly-acquired 1:f\ll. ll 12 of 14 [*FILED: 12] NEW YORK COUNTY CLERK 08/24/2018 10:33 AM INDEX NO. 651304/2016 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 08/24/2018 Finally, dctcndants~ contention that plaintitTs 1ncrcly acted as their agent in the ({elated ·rransaction has not been dcn1onstrated as a n1attcr of law·. f>Iaintills suhn1it the ailirrnation of their counsel., Jcf(i·cy I ,cnobc L \\. ho states he \Vas acti vcly in vol vcd in negotiating the Related ·rransaction and plaintiffs \Vere never directed to consent to the transaction . in a n1inistcrial frishion nor_ bv.,. dclcndants . /\ccordingly., delcndanls.. d<>cun1cntary evidence docs not utterly refute plaint.itls~ allegations regarding its rights under the L-etter ,1\green1cnt conclusively as a n1aller of la\v (see A-le( 'ul(F v .ler...,·e.l· l)arlners. Inc . ., 60 1\[)Jd 562 . 562 [1st f)cpl 20091: see general~v Ale( 'arth.r v J·'oung. 57 i\JJ]d 955~ 955 r2ml [)cpt 2008} l\Vhether the C(Hnplaint \Vilt later survive a 1notion for su1n1nary judgn1ent.. or \Vhcthcr the plaintiff will ultin1ately analysis of a pre-discovery Second (~ausc (~J>LJ( prov~ its clain1 is not part of the 3211 1notion to disn1iss_I). of At\ction -- [)ccb:Jr4ttory .Judgnicnt as to lJnJust Enrich1ncnt ·rhc clcn1cnts of a cause of action to recover for unjust cnrich1ncnl are ~;.(I) the defendant \Vas enriched .. (2) at the plaintifrs expense. and (3) that it is against equity and go<><l conscience lo perrnit the defendant to retain \\'hat is sought to berccovcrecf'' (,lfolu1rt1k v A4olvad. 117 1\f)3d 998 . 1001 [2°d J)cpt 2014(). 'fhe ·~"essential it~quiry in any action for unjust enrichn1cnt or restitution is \vhcthcr 1t is against equity and good conscience to pern1it the delendanl lo retain \.vhat is sought to be recovered"" (Sjn.'r1J v (tJ·o1111JltJ11 1 /)istrih~ c··OJ]J. v ~S'Jttle q/'1\lea· }·'ork~ C'otfJ .. 8 N'{Jd 204~ 215 f2007J quoting J>ar£11nounl f'il!n 30 N"'{2d 415, 421 [ 19721). Notably, all hough the existence or a valid and c11l(Jrceable co-ntract generally precludes quasi-contractual recovery'! \Vhcrc a bona f1dc dispute exists as to the existence . or applicabihty . of a ~ontract the plaintiff n1ay proceed on both breach of contra~t and quasi-contract theories (see 1\tak(onurlI v b'1_,~f iL 253 1\02d 387 . 390 (1st l)ept 1998j)-. f)~fendants argue that this clairn n1ust he disn1issed because all the \-vork perf()rnH.~d by plaintiffs was done pursuant to paragraph 2. l 0 of the l)evelopn1cnt 1\grcc111ent., in \vhich (icorgeto,vn 19th Street [)evclopn1ent agreed . at l·-l'fRF"s request and expense, to provide it \vith assistance obtaining finan<.:ing., and in securing any tax abatcn1cnts or incentives~- f()r the l·tcadquarters Project. f-lo,vcvcr . it is not clear ho\\>' the [)evclopn1ent /\_grccn1enl.. \Vhich \Vas entered into fi)r the purposes of constructing 11\L~-~s headquarters~ covers the \vork pcrforn1ed by plainli ffs on the zoning changes. l""hcrc is no dispute the zoning changes \Vere not necessary f()r 12 13 of 14 [*FILED: 13] NEW YORK COUNTY CLERK 08/24/2018 10:33 AM INDEX NO. 651304/2016 NYSCEF DOC. NO. 134 RECEIVED NYSCEF: 08/24/2018 th~ J··-Ie.adq uartcrs Project. /\s plaintiffs note~ the tcrn1s of the J)evclt>pn1ent Agrccnlcnt spec i ti call y rctcr to the ""Project. ~~ n1caning the. construction of the I/\(~ headquarters. Notably~ recital l~ of the J)evclopn1cnt /\grccrncnt defines the \\/Ord '"'Proje.cf" ~is the "·den1olition of the 1-:xisting Building:-"" and the ~·planning and Ct)nstruction'I' of the L.t\C headquarters (sec l)evelopn1c11t 1 /\ccordingly, defendants"' docun1entary evidence does nc)t utterly refute cnrichn1cnt allegations con<.:Jusi vclv or as a lnatlcr of law w· 'loi.... /\J)3d al - i\gr~en1ent). plaintiffs~ unjust (see :tfc("'ullv v .lerser J)ar111ers. lr1c ... 60 . .. ..,·-. 562). I\1orcovcr., \vhilc there is no dispute regarding the validity of the L.ettcr i\grcerncnt or the oth~r various doctu11c11ts executed by the parties., there is a bona fi-dc dispute regarding the applicahility of the l . cttcr i\grecn1cnt to t:l1cts of this case. Should it be dc1crn1incd that the Letter /\grcerncnt docs 110t apply~ that docs not neces~arily preclude plaintiffs fron1 seeking to r~cover darnagcs under the theory ·of unjustcnrichn1cnt (see /\lltka1nut1r v f '1!ji, 253 J\[)2d at 390). 1\c(.;ordinul ...... ,,v. 11 is ORl>El{•:I) that dclendants' n1t)tion ()l~l>f~l{f!:l) t() d-is1niss is denied~ and it is further that defendants arc directed to serve an a1ncndcd ans\vcr to the an1endcd con1plaint \V1thin 20 days after service of a COJJY of this order v\.:ith notice of e.ntry and it is further (JI{ I) E RF.:D that counsel arc directed to appear for a pre Ii1n i nary co11.fcrt!ncc on ·ruesday . ()ctobcr 2. :2018 at 9:30 J\~1 in Part 49 . C~ourtroo111252 . 60 (:entrc 'f'his C{H1stitules the decision and order of the court. 1'3 14 of 14 Street~ Nc\.v y·ork_ Nevi 'lork.

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