Andrew Cuomo, Real Estate, Screw-Ups, Stroock & Stroock & Lavan

Stroock Strikes Back? The Firm’s Client Sues Andrew Cuomo in Federal Court

We’ve previously covered a sticky situation involving an alleged drafting error by real estate lawyers at Stroock & Stroock & Lavan. The dispute pits the buyers of luxury condos at the Rushmore, on Manhattan’s Upper West Side, against the development company Extell, Stroock’s client. (Our prior coverage appears here, here, and here.)

When we last checked in, the New York Attorney General, Andrew Cuomo, had sided with the buyers and ruled against Extell. But instead of just rolling over, which is what most folks do when attacked by the New York AG, Extell is fighting back. From the Real Deal (via Am Law Daily):

In a last minute and stunning move, the developers of the Upper West Side’s Rushmore condominium filed a federal lawsuit [on Monday] against state Attorney General Andrew Cuomo seeking to reverse his April rescission order to refund more than $16 million in escrow funds to buyers.

The developers, Extell Development and Carlyle Realty Partners, operating under the name CRP/Extell, also filed a motion in U.S. District Court seeking a temporary restraining order that would block the release of the funds, which include down payments for more than $110 million worth of apartments.

In its moving papers, Extell kind of throws Stroock under the proverbial bus — but just a little bit….

Extell admits that Stroock struck out, but essentially argues that (1) the drafting error should not be given effect, and (2) Cuomo didn’t give Extell a fair shake, with a procedural ambush of sorts:

The developers expanded on their previous claims by arguing that a drafting attorney committed a typo or “scrivener’s error,” and claimed that Cuomo’s office failed to allow them to collect evidence or cross-examine the condo buyers on their true motivations for filing the claims, which CRP/Extell claims were to negotiate lower prices in a down market.

“CRP/Extell reasonably understood, including from the attorney general’s failure to issue subpoenas or otherwise seek extrinsic evidence, that the office was planning to limit its consideration of the issues to the text in the offering plan,” wrote Boies Schiller & Flexner attorney Edward Normand, who is representing CRP/Extell. Extell officials were not immediately available for comment nor were lawyers for CRP/Extell.

Ah, so now Boies is involved. Isn’t the practice of law just grand? Mistakes by one law firm generate more work for others. (In addition to BSF, Simpson Thacher has been retained to represent Extell in state court proceedings, according to Am Law Daily.)

So how does Stroock feel about all this? Zach Lowe of Am Law Daily reports:

Right in the middle of all this is Stroock, the firm that drafted the initial condo offering documents on behalf of Carlyle/Extell. In a statement released to The Am Law Daily via a spokesperson, the firm says it still has “a good, cooperative relationship” with Extell.

Right. And the Stroock associates who worked on this deal have left the firm to spend more time with their families.

Stroock is likely rooting hard for Extell to win its case against Cuomo. Why? Because according to Marc Held, a Brooklyn-based lawyer for a key buyer, Extell might turn around and sue Stroock for malpractice, if the developer loses its case against Cuomo and has to fork over all that money.

I have some sympathy for the Stroock attorneys who worked on this deal. The document in question was 732 pages long, and the alleged error involves a single digit — a “2008” that was supposed to be a “2009,” according to Extell. It’s quite possible that a Stroock lawyer was working from a precedent or template and simply forgot to make a conforming change, or a secretary or word processor failed to enter an attorney’s edit. These things happen, especially if you’re working on a huge deal, for a demanding client, on very little sleep.

What would be more troubling is if a Stroock lawyer was working from a precedent or boilerplate language, failed to apprehend the substantive reason that “2008” needed to be changed to “2009,” and therefore didn’t make the change. It’s understandable, insofar as attorneys, especially young corporate associates, often don’t comprehend the work being done by every provision and every word in every document (and their senior colleagues are usually too busy to stop and explain everything).

Understandable, yes. But a viable defense in a future malpractice action brought by Extell? We shall see.

P.S. Shameless plug for past ATL advertiser: This is what Practical Law Company is here for — to help transactional lawyers understand all the gobbledygook they throw into their documents, so they don’t just mindlessly “cut and paste” or “find and replace” from other documents.

Extell, Carlyle challenge Rushmore ruling [The Real Deal]
Stroock’s Alleged $16 Million Typo [Am Law Daily]

Earlier: A Strike Against Stroock: New York AG Rules Against Extell
A Very Expensive Typo? Stroock Isn’t Sweating It
A Very Expensive Typo?

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