During a routine browse of Streeteasy.com to explore available apartments for sale or rent, a surprising discovery caught our attention. Apartment 5N, an intriguing property listed for rent, was available as of March 16, 2024, and was rented as of April 3, 2024. This seemingly innocuous find offers a glimpse into the ongoing litigation between parties involved in the case of Zelmanovich v. Eastmore Owners Corp. (Reference our previous post: Silenced Shareholders: Legal Fees Surge Raises Questions from December 9, 2023)
This litigation began in February 2022…and sadly, continues. The next date on the docket is May 1, 2024 according to #171 STIPULATION – ADJOURNMENT OF MOTION -IN SUBMISSIONS PART -RM 130 (Motion #005) Stipulation to Adjourn Defendant Eastmore Owner Corp.’s MTD
For reference:
New York County Supreme Court – https://iapps.courts.state.ny.us/nyscef/DocumentList?docketId=DPScegZfS0d4DPZYoVm_PLUS_NA==&display=all&courtType=New%20York%20County%20Supreme%20Court&resultsPageNum=1
Appellate Division – 1st Dept – https://iapps.courts.state.ny.us/nyscef/DocumentList?docketId=DdibNXT4HKPOp92HBJuOWg==&display=all&courtType=Appellate%20Division%20-%201st%20Dept&resultsPageNum=1
New York County Civil Court – Landlord And Tenant Division – https://iapps.courts.state.ny.us/nyscef/DocumentList?docketId=GAiuFAX6MiXgqgRUldq/mQ==&display=all&courtType=New%20York%20County%20Civi
That made us think of the costs of this litigation.
We took the 2023 budget of $5,535,180 and divided it by the $92.19 per share amount and learned that there are around 60,041 shares.
Then we looked at the information for 2024: $5,853,453 divided by $97.48 per share results in 60,048 (7 new compared to 2023?) shares. If you recall, on December 3, 2023, the Board announced its 5.7% maintenance fee increase due to “[incurring] unanticipated litigation expenses more than our projection.”
In considering 2023 and 2024, we find that the maintenance fees increased by $318,273 ($5,853,453 minus $5,535,180). While some of this is due to normal increases, we want to know how much of this amount is earmarked for the ongoing litigation. At the Annual Meeting in June 2023, we learned that legal fees were $100,000 (at that point). Almost a year later, have we incurred another $100,000 (or more) in fees?
This process raises questions about the Board’s fiduciary relationship with its shareholders – a relationship they acknowledge…yet don’t seem to uphold. This case has been allowed to be drawn out for too long. Please let the Board know your thoughts.