Polsky v. 145 Hudson St. Assocs. L.P., Index No. 107108/2011

• Decision Date: 14 August 2015
• Docket Number: Index No. 107108/2011
• Parties: JAMES POLSKY and BERNADETTE POLSKY, Plaintiffs v. 145 HUDSON STREET ASSOCIATES L.P., HUDSON SQUARE MANAGEMENT CORPORATION, ROGERS MARVEL ARCHITECTS, PLLC, and JOSEPH PELL LOMBARDI, Defendants
• Court: New York Supreme Court

2015 NY Slip Op 32071(U)

JAMES POLSKY and BERNADETTE POLSKY, Plaintiffs
v.
145 HUDSON STREET ASSOCIATES L.P., HUDSON SQUARE MANAGEMENT CORPORATION,
ROGERS MARVEL ARCHITECTS, PLLC, and JOSEPH PELL LOMBARDI, Defendants

Index No. 107108/2011

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 46

FILED: September 4, 2015
August 14, 2015

DECISION AND ORDER

LUCY BILLINGS, J.S.C.:

I. THE MOTIONS TO BE DETERMINED

The remaining defendants, 145 Hudson Street Associates L.P. and Hudson Square Management Corporation, move for a protective order against disclosure of a confidential settlement agreement, unredacted, between defendants and nonparty Board of Managers of the 145 Hudson Street Condominium. C.P.L.R. § 3103(a). Defendants insist that this settlement agreement is immaterial to any claim or defense in this action and that a privilege applicable to settlement negotiations under C.P.L.R. § 4547 protects the settlement agreement from disclosure. Plaintiffs cross-move to compel disclosure of the settlement agreement, unredacted, and related categories of documents plaintiffs requested from defendants during disclosure. C.P.L.R. § 3124.

Plaintiffs separately move to compel nonparty Board of Managers of the 145 Hudson Street Condominium to produce the same documents. This motion also seeks to compel the Board and Rogers

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Marvel Architects, PLLC (RMA), formerly a defendant, to produce all documents concerning (1) plaintiffs' compliance with alteration agreements entered in 2007 and 2012 between plaintiffs and the Board and (2) efforts to obtain a Certificate of Occupancy (CO) for the building at 145 Hudson Street, New York County, and why a CO was not obtained. C.P.L.R. §§ 2308(b), 3124. Finally, plaintiffs' motion seeks to compel (1) RMA's production of all documents concerning its work or proposals for plaintiffs' condominium unit since 2007 and (2) the deposition of RMA's architect Matthew Peckham, also a nonparty, concerning this subject and the two subjects delineated above. Id. The Board of Managers cross-moves to quash the subpoena served on the Board to produce the documents plaintiffs seek from it, C.P.L.R. § 2304, and for a protective order against the subpoena's enforcement. C.P.L.R. § 3103(a).

When plaintiffs cross-moved against defendants and then moved against the nonparties to compel disclosure, plaintiffs were unaware of defendants' motion for summary judgment that now is pending and has stayed disclosure. C.P.L.R. § 3214(b). As neither defendants nor either nonparty affected by the disclosure sought offers any countervailing reason, the court considers plaintiffs' cross-motion and motion as seeking to lift the stay on disclosure.

II. BACKGROUND FACTS

The City Planning Commission (CPC) issued a Special Permit to defendants permitting them to build loft residential units in

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the building at 145 Hudson Street. Plaintiffs' purchase of one of those units from defendants, the sponsor of the building condominium, closed September 19, 2006, after the parties executed a Purchase Agreement February 17, 2006, and plaintiffs received the condominium's Offering Plan and any amendments to the plan that defendants had filed with the State Attorney General. Plaintiffs claim defendants breached the parties' Purchase Agreement by providing plaintiffs a condominium unit that included less than two entrances to it and a mechanical room, required by the CPC Special Permit, that was not to be used as habitable space.

Defendants counterclaim for damages from plaintiffs' alterations that converted their mechanical room into habitable space, blocked the unit's main entrance, and used the mechanical space as an entrance, in violation of the Special Permit, an alteration agreement, and their plans that were approved by defendants' architect and the New York City Department of Buildings (DOB). Although defendants are not parties to either of plaintiffs' alteration agreements with the Board of Managers of the Condominium, defendants maintain that the condominium's Offering Plan confers on them the right to enforce unit owners' compliance with their alteration agreements. Defendants claim plaintiffs' violations of such an agreement, the Special Permit, and the approved plans have prevented defendants from obtaining a permanent CO as required by the Offering Plan and caused them to incur expenses for legal and architectural services to compel

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plaintiffs to cure their violations. Significantly, defendants have not moved for summary judgment on any counterclaim.

RMA does not dispute that defendants used RMA to assist in obtaining a CO for 145 Hudson Street and to supervise alterations to plaintiffs' unit pursuant to the alteration agreements, as well as alterations to other residential units in the building, or that Peckham is the RMA architect most knowledgeable about the subjects for which plaintiffs seek his deposition. The Board of Managers of the Condominium has produced documents concerning (1) plaintiffs' compliance with the alteration agreements and (2) efforts to obtain a CO and why it was not obtained, but RMA has not produced any such documents or documents concerning work by RMA for plaintiffs' unit, and Peckham has not appeared for his deposition. Nor have defendants or the Board produced the unredacted settlement agreement or the related documents requested from defendants and the Board, which are emails or other correspondence between defendants and the Board leading up to the settlement.

III. THE SETTLEMENT AGREEMENT

Defendants and the Board of Managers of the Condominium entered a settlement agreement June 8, 2011, regarding the building's construction and the conversion to a condominium, providing that the terms remain confidential. When plaintiffs requested the settlement agreement during disclosure, defendants produced only the term regarding plaintiffs' unit, subject to a stipulation providing that this disclosure remain confidential.

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As publicly presented by defendants, the term regarding plaintiffs' unit provides that the Board would cooperate with defendants in compelling plaintiffs' restoration of their mechanical space to comply with the Special Permit and enable defendants to obtain a permanent CO.

Plaintiffs maintain, and defendants do not dispute, that the settlement agreement's full terms will disclose the Board of Managers' and defendants' (1) understandings of what the Offering Plan promised to purchasers regarding mechanical spaces and (2) responsibilities to each other, including defendants' responsibilities to be carried out for the building to obtain a CO. Parties' or a nonparty's understanding of the Offering Plan's promises is immaterial to this action, unless the plan, at least insofar as it bears on plaintiffs' claims, is ambiguous, such that its plain terms do not evince its meaning. Kolbe v. Tibbetts, 22 N.Y.3d 344, 355 (2013). See Schron v. Troutman Sanders LLP, 20 N.Y.3d 430, 436 (2013). Although nothing in the court's prior decision denying defendants' motion to dismiss plaintiff's breach of contract claims delineated above contemplates resorting to extrinsic evidence to construe an ambiguity, the court has not yet determined this issue. Defendants' understanding, at minimum, of a promise to purchasers in the Offering Plan, may be material and necessary to construction of an ambiguity in that promise, such as for a unit with two entrances or with unrestricted habitable space. Osowski AMEC Constr. Mat., Inc., 69 A.D.3d 99, 106-107 (1st Dep't 2009);

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Mahoney v. Turner Constr. Co., 61 A.D.3d 101, 104 (1st Dep't 2009); American Re-Ins. Co. v. United States Fid. & Guar. Co., 19 A.D.3d 103, 104 (1st Dep't 2005); Masterwear Corp. v. Bernard, 298 A.D.2d 249, 250 (1st Dep't 2002).

Moreover, since defendants claim damages from plaintiffs' breach of their alteration agreement with the Board of Managers, it would have perceived such a breach in the first instance. Plaintiffs point out, and defendants do not dispute, that, when the Board notified defendants in December 2007 of issues it wanted resolved, plaintiffs' alterations were not among those issues. Then, in June 2011, in the settlement agreement, the Board agreed to cooperate with defendants in compelling plaintiffs' restoration of their mechanical space to its pre-alteration condition. See Mahoney v. Turner Constr. Co., 61 A.D.3d at 104.

Insofar as the settlement agreement's terms will disclose evidence of defendants "furnishing, or offering or promising to furnish, . . . any valuable consideration in compromising or attempting to compromise a claim" by the Board of Managers comparable to a claim by.plaintiffs here, those terms may "be inadmissible as proof of liability" on defendants' part for that claim. C.P.L.R. § 4547. This protection against admissibility, however, does not confer a privilege on a settlement, nor a protection against disclosure. Moreover, the Board's liability is not being proved, see Matter of Midland Ins. Co., 87 A.D.3d 487, 491 (1st Dep't 2011); American Re-Ins. Co. v.- United States

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Fid. & Guar. Co., 19 A.D.3d at 104, but Board members may be witnesses regarding the parties' claims, counterclaims, or defenses. Evidence of the Board "accepting, or offering or promising to accept, any valuable consideration in compromising or attempting to compromise a claim," C.P.L.R. § 4547, by the Board comparable to a claim by plaintiffs thus may reveal a bias relevant to Board members' credibility. Therefore, even if the court determines that the Offering Plan is unambiguous, the settlement agreement still may be material and necessary for impeachment purposes. Matter of Midland Ins. Co., 87 A.D.3d at 491; Mahoney v. Turner Constr. Co., 61 A.D.3d at 104; American Re-Ins. Co. v. United States Fid. & Guar. Co., 19 A.D.3d at 104.

To respect and preserve the confidentiality agreement between defendants and the Board of Managers of the Condominium, defendants' disclosure of the settlement...