FILED: NEW YORK COUNTY CLERK 05/23/2014 INDEX NO /2014 NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 05/23/2014

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1 FILED: NEW YORK COUNTY CLERK 05/23/2014 INDEX NO /2014 NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 05/23/2014 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK x DAVID LANDES, NAOMI S. LANDES, HOWARD : Index No. N. GILBERT, STEPHEN J. LANDES, RAANANAH KATZ and AVIVAH LITAN, : individually and derivatively on behalf of PROVIDENT REALTY PARTNERS II, L.P., : Plaintiffs, : - against - : COMPLAINT PROVIDENT REALTY PARTNERS II, L.P., : PRP II CORP., BRG GRAMERCY UNITS LLC, DANIEL BENEDICT, IMICO UN RENTAL LLC, : and JOHN DOES 1-50, : Defendants. : x Plaintiffs, by their attorney, Ira Daniel Tokayer, Esq., as and for their Complaint herein, allege as follows: 1. This action arises from the wrongful appropriation and usurpation of an asset and business opportunity of defendant Provident Realty Partners II, L.P. ( PRP II LP ), a limited partnership of which plaintiffs are limited partners, and other misconduct. 2. Specifically, defendant Daniel Benedict, using information obtained as a fiduciary of PRP II LP, secretly used defendant BRG Gramercy Units LLC to purchase 49.9% of defendant IMICO UN Rental LLC s 50% interest in 303 BRG-IMICO LLC at a deep discount. The full value of that interest, whose acquisition constituted an asset and business opportunity of PRP II LP, was quickly realized and parlayed into an interest in an investment

2 in a medical office building at 711 Stewart Avenue, Garden City, New York, that rightfully belongs to PRP II LP. PRP II LP 3. Upon information and belief, PRP II LP is a New York limited partnership with offices in Queens, New York. 4. PRP II LP was formed in or about April 15, 1993 pursuant to a Limited Partnership Agreement attached hereto as Ex. A (the LP Agreement ). 5. The purpose for which PRP II LP was formed was to acquire, own, finance, construct, improve, develop, manage, operate and transfer real property, interests in real property and other property associated therewith. THE PARTIES 6. Plaintiffs are individual limited partners of PRP II LP, whose percentage interest totals over 5%. 7. Upon information and belief, defendant PRP II Corp., a corporation organized and existing under the laws of the State of New York, is and at all relevant times was the General Partner of PRP II LP. 8. Upon information and belief, defendant Daniel Benedict ( Benedict ) is an individual with offices in Great Neck, New York. -2-

3 9. Upon information and belief, Benedict is the President and sole shareholder of PRP II Corp., the General Partner of PRP II LP. 10. Upon information and belief, Benedict is also the Managing Member of defendant BRG Gramercy Units LLC ( BRG Gramercy ), a limited liability company organized and existing under the laws of the State of New York. 11. Upon information and belief, IMICO UN Rental LLC ( IMICO UN ), is a company organized and existing under the laws of the State of Delaware, authorized to do business in the State of New York, and controlled by Gary Barnett and/or one of his Extell companies. 12. Defendants John Does 1-50 are the remaining limited partners of PRP II LP. PRP II LP S INTEREST IN 303 BRG-IMICO 13. Upon information and belief, 303 BRG-IMICO LLC ( 303 BRG-IMICO ) is a limited liability company organized and existing under the laws of the State of New York BRG-IMICO was formed pursuant to an Operating Agreement made as of March 28, 2007 attached hereto as Ex. B which was amended from time to time. 15. The purpose for which 303 BRG-IMICO was formed was to acquire, own, hold, improve, develop, manage, insure and -3-

4 th operate premises known as 303 East 46 Street, New York, New York (the Property ). 16. PRP II LP was, at all relevant times, the Managing Member of 303 BRG-IMICO and held a 50% percentage interest therein. 17. Upon formation, the other 50% interest in 303 BRG- IMICO was held by IMICO UN. DEFENDANTS SELF-DEALING 18. In or about September 2011, BRG Gramercy (a company owned and controlled by Benedict) purchased 49.9% of IMICO UN s 50% interest in 303 BRG-IMICO for approximately $499, (the Transaction ). 19. Benedict, in a blatant act of self-dealing, caused PRP II Corp. to consent on behalf of PRP II LP to the Transaction. 20. The Transaction was effected surreptitiously, without advice to or consultation with the limited partners of PRP II LP and unbeknownst to them, using information obtained in a fiduciary capacity. 21. The Transaction constituted the misappropriation, usurpation and diversion of an asset of and business opportunity belonging to PRP II LP. 22. As a non-majority non-controlling interest, IMICO UN s interest in 303 BRG-IMICO was illiquid and of limited value. -4-

5 IMICO UN s interest had unique value to PRP II LP, however, for an acquisition of that interest would have given it 100% ownership of 303 BRG-IMICO and the unfettered ability to control 303 BRG-IMICO and sell the Property at full market value. PRP II LP was thus uniquely positioned to profit from a purchase of IMICO UN s illiquid interest. 23. By virtue of his status as the President of the General Partner of PRP II LP, his control of PRP II LP and his attendant power to cause the sale of the Property, Benedict was able to usurp this profitable opportunity and divert it to himself by purchasing IMICO UN s interest through BRG Gramercy, a new entity under his ownership and control created for this misappropriation. 24. Indeed, the discounted value of IMICO UN s interest to non-controlling third-parties was reflected in the price for which Benedict purchased it from IMICO UN which was based upon a below-market valuation of the Property at $2,800, Less than a year later, Benedict listed the Property for sale for $4,350, Incredibly, on November 6, 2012, Benedict made a fraudulent offer to buy-out the limited partners of PRP II LP based upon the same valuation of $2,800,000, even though by that -5-

6 time - unbeknownst and undisclosed to the limited partners - the Property had been listed for sale at no less than $4,350, Upon information and belief, on or about December 12, 2012, 303 BRG-IMICO sold the Property for $4,100, By virtue of BRG Gramercy s purchase of IMICO UN s 49.9% percentage interest in 303 BRG-IMICO at a below-marker price, Benedict and/or his company profited no less than $1,000,000, netting no less than $600,000. DEFENDANTS PARLAY THE TRANSACTION INTO ANOTHER LUCRATIVE INVESTMENT 29. Upon information and belief, 303 BRG-IMICO invested the proceeds from the sale of the Property into BRG Office LLC ( BRG Office ) in a 1031 Tax Exchange Transaction involving the purchase of a 118,000 square foot medical office building located at 711 Stewart Avenue, Garden City, New York. 30. Defendants have never disclosed to the limited partners of PRP II LP the ownership structure of BRG Office, even though a percentage thereof is owned by 303 BRG-IMICO, and PRP LP II continues to own at least 50% of 303 BRG-IMICO. 31. Further, defendants have not provided the limited partners of PRP II LP with any information or documentation regarding the terms of PRP II LP s investment in BRG Office. DEMAND FUTILITY 32. The consent of PRP II Corp. is required to bring the claims herein on behalf of PRP II LP. Given that the claims -6-

7 name and are against PRP II Corp., its President, Benedict, and a company in which its President, Benedict, is a Managing Member, such consent would not be given. Thus, any demand upon PRP II LP that it bring such claims would be futile. AS AND FOR A FIRST COUNTERCLAIM (Breach of Contract) 33. Plaintiffs repeat and reallege the allegations set Agreement. 34. Plaintiffs and PRP II Corp. entered into the LP 35. The LP Agreement placed limitations on the powers of defendant PRP II Corp., the General Partner of PRP II LP. 36. The limitations included that defendant PRP II Corp. had a fiduciary responsibility for the safekeeping and use of all assets of PRP II LP and that it would not take or permit another to take any action with respect to the assets of PRP II LP which action is not for the benefit of PRP II LP. 37. Defendant PRP II Corp. breached the LP Agreement by virtue of, inter alia, the Transaction. 38. As a result of the foregoing, PRP II LP has been damaged in an amount to be determined at trial but in all events not less than $1,000,

8 AS AND FOR A SECOND CAUSE OF ACTION (Breach of Fiduciary Duty) 39. Plaintiffs repeat and reallege the allegations set 40. Defendant PRP II Corp. and its principal, defendant Benedict, owe a fiduciary duty to PRP II LP. 41. A fiduciary s duty requires honesty and the punctilio of an honor the most sensitive, with undivided and undiluted loyalty to those whose interests the fiduciary is to protect. 42. By virtue of, inter alia, the Transaction, defendants PRP II Corp. and Benedict breached their fiduciary duty to PRP II LP. damaged. 43. As a result of the foregoing, PRP II LP has been 44. Defendants PRP II Corp. and Benedict s conduct was wilful, wanton, and performed recklessly and in conscious disregard of PRP II LP s rights. 45. Accordingly, PRP II LP is entitled to damages in an amount to be determined at trial, but in all events not less than $1,000,000, plus punitive damages in an amount to be determined at trial, but in all events not less than $5,000,

9 AS AND FOR A THIRD CAUSE OF ACTION (Aiding and Abetting A Breach of Fiduciary Duty) 46. Plaintiffs repeat and reallege the allegations set 47. Defendant BRG Gramercy and IMICO UN knowingly provided substantial assistance to PRP II Corp. by entering into the Transaction, enabling defendants PRP II Corp. and Benedict to breach their fiduciary duties to PRP II LP. damaged. 48. As a result of the foregoing, PRP II LP has been 49. Defendants BRG Gramercy and IMICO UN s conduct was wilful, wanton, and performed recklessly and in conscious disregard of PRP II LP s rights. 50. Accordingly, PRP II LP is entitled to damages in an amount to be determined at trial but in all events not less than $1,000,000, plus punitive damages in an amount to be determined at trial but in all events not less than $5,000,000. AS AND FOR A FOURTH CAUSE OF ACTION (Misappropriation of a Business Opportunity) 51. Plaintiffs repeat and reallege the allegations set 52. By virtue of, inter alia, the Transaction, defendants misappropriated the assets of PRP II LP and a business opportunity belonging to PRP II LP for the benefit of defendants. -9-

10 53. As a result of the foregoing, PRP II LP has been damaged. 54. Defendants conduct was wilful, wanton, and performed recklessly and in conscious disregard of PRP II LP s rights. 55. Accordingly, PRP II LP is entitled to damages in an amount to be determined at trial but in all events not less than $1,000,000, plus punitive damages in an amount to be determined at trial but in all events not less than $5,000,000. AS AND FOR A FIFTH CAUSE OF ACTION (Unjust Enrichment and Disgorgement) 56. Plaintiffs repeat and reallege the allegations set 57. By virtue of the Transaction, defendants PRP II Corp. and Benedict have been unjustly enriched and obtained property which in equity and just conscience defendants should not retain. 58. Accordingly, PRP II LP is entitled to damages in an amount to be determined at trial but in all events not less than $1,000,000, plus punitive damages in an amount to be determined at trial but in all events not less than $5,000,000, plus the disgorgement of any benefits wrongfully obtained. -10-

11 AS AND FOR A SIXTH CAUSE OF ACTION (Constructive Trust) 59. Plaintiffs repeat and reallege the allegations set 60. PRP II LP is entitled to the imposition of a constructive trust upon so much of IMICO UN s interest in 303 BRG-IMICO acquired by BRG Gramercy, the proceeds and profits received from the purchase of such interest and anything derived therefrom, including but not limited to any interest in BRG Office. AS AND FOR A SEVENTH CAUSE OF ACTION (Accounting) 61. Plaintiffs repeat and reallege the allegations set 62. Plaintiffs are entitled to a just and full accounting of all monies and property received and/or usurped by defendants belonging to PRP II LP and all defendants accounts and doings in connection with PRP II LP. WHEREFORE, plaintiffs respectfully requests that the Court enter Judgment in favor of plaintiffs and against defendants, jointly and severally, for: I. monetary damages in an amount to be determined at trial but in all events not less than $1,000,000; II. punitive damages in an amount to be determined at trial but in all events not less than $5,000,000; -11-

12 III. an order declaring that IMICO UN s interest in 303 BRG- IMICO, the proceeds and profits received from the purchase of such interest and anything derived therefrom are assets of PRP II LP and that title thereto is held in constructive trust for the benefit of PRP II LP; IV. an order directing that defendants render a just and full accounting to plaintiffs of all monies and property received and/or usurped by defendants belonging to PRP II LP and of all their accounts and doings in connection with PRP II LP; V. the costs and disbursements of this action, including reasonable attorneys fees as permitted by law; and VI. such other and further relief as to this Court may seem just and proper. Dated: New York, New York May 23, 2014 /s/ IRA DANIEL TOKAYER, ESQ. Attorney for Plaintiffs th 405 Lexington Avenue, 7 Fl. New York, New York (212) Complaint 01A.wpd -12-