Kafa Investments v. 2170-2178 Broadway LLC
NEW YORK COUNTY
Justice Barbara Kapnick
In 1997, defendant real estate developers Feldman and Maloney acquired several single occupancy hotels in New York, which they converted into modern transient hotels. They also organized defendant 2170-2178 Broadway LLC to acquire Hotel on the Ave (OTA). In 2004, defendant Broadway LLC, as part of a refinancing, transferred title of OTA to 2170-2178 Broadway Owner LLC. Plaintiffs alleged that defendants later approached them about redeeming their interests in Broadway Owner and that defendants represented to them that Broadway Owner was valued at approximately $125 million. Based on this representation, plaintiffs alleged that they accepted $5.2 million in exchange for their interests in Broadway Owner. Plaintiffs subsequently contended that defendants knew and failed to disclose that OTA was worth more than $125 million and that defendants had already entered into negotiations to sell it to a third party for significantly more than $125 million. The court dismissed the complaint, holding that plaintiffs could not now invalidate the release that they signed by claiming ignorance of the depth of their fiduciary's misconduct.