Stuyvesant Town's Senior Lenders Motion for a Injunction

8/8/2019 Stuyvesant Town's Senior Lenders Motion for a Injunction

1/28

SUPREME COURT OF THE STATE OF NEW YORKCOUNTY OF NEW YORK---- ------------------------ -- ---- ------- ------- ---------- ------ --- )C

BANK OF AMERICA, N.A., as Trustee for theRegistered Holders ofWachovia Ban CommercialMortgage Trust 2007-C30, acting by and through itsSpecial Servicer, CWCapital Asset ManagementLLC, BANK OF AMERICA, N.A., as Trustee for theRegistered Holders of COBALT CMBS CommercialMortgage Trust 2007 -C2, acting by and throughCWCapital Asset Management LLC pursuant to theauthority granted under that certain Amended andRestated Co-Lender Agreement dated March 12,2007 and U.S. BANK NATIONAL ASSOCIATION,as Trustee for the Registered Holders ofWachoviaBan Commercial Mortgage Trust 2007 -C31, ML-CFC Commercial Mortgage Trust 2007-5 and ML-CFC Commercial Mortgage Trust 2007-6, acting byand through CWCapital Asset Management LLCpursuant to the authority granted under that certainAmended and Restated Co-Lender Agreement datedMarch 12, 2007,Plaintiffs,

-against-PSWNYCLLC,

Defendant.

---- -------------- ------------ -------------- ---- ------ ---------- --- )C

Inde)C No.: 651293/2010

PLAINTIFFS' MEMORANDUMOF LAW IN SUPPORT OFMOTION FOR

PRELIMINARY INJUNCTION

ILED: NEW YORK COUNTY CLERK 08/18/2010 INDEX NO. 651293/

YSCEF DOC. NO. 5 RECEIVED NYSCEF: 08/18/


2/28

TABLE OF CONTENTSPRELIMINARY STATEMENT...............................................................................................1STATEMENT OF FACTS ........................................................................................................4

The Senior Loan.............................................................................................................4The Mezzanine or Junior Loans.....................................................................................5The Intercreditor Agreement..........................................................................................5The Borrowers' Default................................................................................................. 7PSW's Attempt to Seize Control.....................................................................................9

ARGUMENT ...........................................................................................................................10i. Plaintiffs Are Likely To Succeed In Their Declaratory Judgment Action ..................11

A. PSW Canot Acquire the Equity Collateral Through a Credit Bid WithoutSatisfying the Conditions of Section 6( d)(B) of the IntercreditorAgreement .......................... ........... ................................................................ ..13B. PSW Cannot Solicit, Direct, Cause, or Take Any Action in Furtherance ofBankptcy When the Senior Loan is Outstanding...... ....................................i 6

II. Plaintiffs Have No Adequate Remedy At Law And Wil Be Irreparably HarmedAbsent Injunctive Relief............................................................................................. .17III. A Balancing Of The Equities Tips In Favor Of Plaintiffs....................................... 21CONCLUSION ........................................................................................................................23

-1-


3/28

TABLE OF AUTHORITIES

CASES PAGE511 9th LLC v. Credit Suisse USA. Inc., 69 A.D.3d 497,894 N.Y.S.2d 385

(1st Dep't 2010) .......................................................................................................................15Ale)Candru v. Pappas, 68 A.D.3d 690,890 N.Y.S.2d 593 (2d Dep't 2009)...................................10Anecca Inc. v. Le)Cent, Inc., 307 F. Supp. 2d 999 (N.D. IlL. 2004)..............................................15Audubon Levy Investors, LP v. East West Realty Ventures, LLC,698 F. Supp. 2d 328 (E.D.N.Y. 2010) .....................................................................................19Babcock & Wilco)C Co. v. Control Components, Inc., 161 Misc. 2d 636,614 N.Y.S.2d 678 (Sup. Ct. N.Y. County 1993) ...........................................................................12Bary v. Ready Reference Pub. Co., 25 A.D.2d 827, 269 N.Y.S.2d 665

(1st Dep't 1966) .......................................................................................................................12Bashein v. Landau, 96 A.D.2d 479,465 N.Y.S.2d 178 (1st Dep't 1983) .....................................1 7CanWest Global Commc'ns. Corp. v. Mirkaei Tikshoret Ltd.,9 Misc. 3d 845,804 N.Y.S.2d 549 (Sup. Ct. N.Y. County 2005) ...........................................19Citiban, N.A. v. Nyland (CF8) Ltd., 839 F.2d 93 (2d Cir. 1988) ................................................19Consol. Container Co. v. Waren Unilube, Inc., No. 05-2371 B, 2006 WL 522424(W.D. Tenn. March 3, 2006)....................................................................................................14Cuomo v. Long Island Light Co., 71 N.Y.2d 349,520 N.E.2d 546 (1988) ..................................12Federated Strategic Income Fund v. Mechala Group Jamaica Ltd.,No. 99 Civ. 10517, 1999 WL 993648 (S.D.N.Y. Nov. 2, 1999) .............................................21Ferramosca v. Nelrak, Inc., 250 A.D.2d 807, 673 N.Y.S.2d 712

(2d Dep't 1998)........................................................................................................................15Ginett v. Computer Task Group, 962 F.2d 1085 (2d Cir. 1992)....................................................14Gramercy Co. v. Benenson, 223 A.D.2d 497,637 N.Y.S.2d 383

(1st Dep't 1996).......................................................................................................................21Gusinky v. Gengr, No. 600426/2008,2009 WL 2534670

(Sup. Ct. N. Y. County Aug. 12,2009) ...................................................................................14

-11-


4/28

Highland Park v. Wells Fargo Ban, No. 08 Civ. 5723 (NRB), 2009 WL 1834596(S.D.N.Y. June 16, 2009)...................................................................................................11, 16

Ikon Office Solutions, Inc. v. Usherwood Offce Tech., Inc.,21 Misc. 3d 1144A, 2008 N.Y. Slip Op. 52499(U),(Sup. Ct. Albany County 2008) ............................................................... ...... ........ .......... ..18, 21

In re Suncru Casinos, 298 BR. 833 (Ban. S.D. Fl. 2003) .........................................................11In re Westpoint Stevens, Inc., 600 F.3d 231 (2d Cir. 2010) ..........................................................1 1Ion Media Networks, Inc. v. Cyrus Select Opportunities Master Fund, Ltd. (In re Ion MediaNetworks, Inc.), 419 B.R. 585 (Ban. S.D.N.Y. 2009)..............................................11, 16,22Israel v. Chabra, 537 F.3d 86 (2d Cir. 2008) .................................................................................14Kalisch-Jarcho, Inc. v. City ofN.Y., 72 N.Y.2d 727,533 N.E.2d 258 (1988)..............................12Klosterman v. Cuomo, 61 N.Y.2d 525, 463 N.E.2d 588 (1984) .................................................12Lipsztein v. Mount Sinai Hosp., 170 A.D.2d 285,565 N.Y.S.2d 812

(1st Dep't 1991) .......................................................................................................................21M&A Oasis, Inc. v. MTM Assocs., L.P., 307 A.D.2d 872, 764 N.Y.S.2d 9

(1 st Dep't 2003) .......................................................................................................................12Mr. Natural, Inc. v. Unadulterated Food Prods., Inc.,152 A.D.2d 729,544 N.Y.S.2d 182 (2d Dept. 1989) ..............................................................21N. Atl. Instruents, Inc. v. Haber, 188 F.3d 38 (2d Cir. 1999).....................................................18N.Y. County Lawyers' Ass'n v. State ofN.Y., 294 A.D.2d 69, 742 N.Y.S.2d 16

(1st Dep't 2002) .......................................................................................................................12Nan Fuel Gas Distrib. Corp. v. Harford Fire Ins. Co., 28 A.D.3d 1169814 N.Y.S.2d 436 (4th Dep't 2006).........................................................................................14Netwolves Corp. v. Sullvan, No. 00 CIV. 8943(AGS), 00 CIV. 9628(AGS),2001 WL 492463 (S.D.N.Y. May 9, 2001) .......................................................................20, 21Oppenheimer & Co. v. Oppenheim, AppeL, Di)Con & Co., 86 N.Y.2d 685,

660 N.E.2d 415, 418 (1995)......................................................................................................15Oracle Real Estate Holdings i, LLC v. Adrian Holdings Co. I LLC582 F. Supp. 2d 616 (S.D.N.Y. 2008)................................................................................19, 20Phelan v. City of Buffalo, 54 A.D.2d 262,388 N.Y.S.2d 469

(4th Dep't 1976).......................................................................................................................12

-11-


5/28

Preferred Mortg. Brokers, Inc. v. Byfield, 282 A.D.2d 589 (2d Dep't 2001) ...............................15Prodell v. State, 211 A.D.2d 966, 621 N.Y.S.2d 712 (3d Dep't 1995) .........................................12Roswell Capital Parners LLC v. Alt. Const. Techs., No. 08 Civ. 10647(DLC),2009 WL 222348 (S.D.N.Y. Jan. 30,2009) ............................................................................18Scudder v. ZeckendorfHotels Corp., 224 N.Y.S.2d 432

(Sup. Ct. N. Y. County 1961) ..................................................................................................13Seitzman v. Hudson River Assocs., 126 A.D.2d 211,513 N.Y.S.2d 148

(1st Dep't 1987).................................................................................................................10,22Swift & Co. v. United States, 276 U.S. 311 (1928).......................................................................14TAG 380 LLC v. ComMet 380, Inc., 10 N.Y.3d 507,890 N.E.2d 195 (2008).............................17Thor Props., LLC v. Chetrit Group, LLC, No. 650514-09, 2010 WL 1740752

(Sup. Ct. N.Y. County 2010) ...................................................................................................14Ticor Title Ins. Co. v. Cohen, 173 F .3d 63 (2d Cir. 1999) ................ ........................................... .18Trustees of the Plumbers Local Union NO.1 Welfare Fund v. Manattan Plumbing Corp.,No. 08 CV 3036(FB)(RML), 2009 WL 5821676 (E.D.N.Y. Oct. 8,2009) ............................20Vt. Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470 (2004).........................................17W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157,566 N.E.2d 639 (1990) ..........................22Wallace v. 600 Parners Co., 86 N.Y.2d 543, 658 N.E.2d 715 (1995)..........................................22Wisdom Import Sales Co., LLC v. Labatt Brewing Co. Ltd.,339 F.3d 101 (2d. Cir. 2003)....................................................................................................19

Statutes and Secondary SourcesN.Y C.P.L.R. 3001......................................................................................................................11N.Y. C.P.L.R. 6313.....................................................................................................................11Restatement (Second) of Contracts 226......... ...... ................................... ................................. ...14

-IV-


6/28

Plaintiff Bank of America, N.A., as Trustee for the Registered Holders of the WachoviaBank Commercial Mortgage Trust 2007-C30 (the "2007-C30 Trust"), acting by and through itsSpecial Servicer, CWCapital Asset Management LLC ("CWCAM"), Plaintiff Ban of America,N.A., as Trustee for the Registered Holders of the COBALT CMBS Commercial Mortgage Trust2007-C2, acting by and through CWCAM pursuant to the authority granted under that certainAmended and Restated Co-Lender Agreement dated March 12, 2007 (the "Co-LenderAgreement") and Plaintiff U.S. Bank National Association, as Trustee for the Registered Holdersof the Wachovia Ban Commercial Mortgage Trust 2007-C31, ML-CFC Commercial MortgageTrust 2007-5 and the ML-CFC Commercial Mortgage Trust 2007-6, acting by and throughCWCAM pursuant to the authority granted under the Co-Lender Agreement, hereby submit thisMemorandum of Law in Support of Motion for Preliminar Injunction against Defendant PSWNYC LLC ("PSW").

PRELIMINARY STATEMENT 1

This dispute poses a simple question. Does a contractual commitment mean anything?The clear answer of Defendant PSW and its principals to this question is no. They characterizeas "ludicrous" any suggestion that they would comply with a contractual obligation to payoff thePlaintiffs' Senior Loan and hold forth in the media about their intent to use banptcy toinvoluntarily restructure the Plaintiffs' Senior Loan and remedies even though they contractuallyagreed to take no action in furtherance of banptcy.

PSW's calculus is simple. There is no economic downside to breaching the IntercreditorAgreement with the Plaintiffs because PSW has no assets to satisfy a billon dollar judgment, butthe potential economic upside is enormous as the Peter Cooper Vilage and Stuyvesant Town

1 Terms not derined in this Memorandum of Law shall have the meaning ascribed to them in the Complaint.


7/28

property ("PCV/ST" or the "Property") that is at stake is worth more than $2 Bilion dollars. Forthe Plaintiffs, the risks are reversed. Enjoining PSW and its principals from these anticipatorybreaches is their only viable remedy. If PSW is not enjoined from conducting its planed UCCforeclosure sale on August 25, the Plaintiffs' abilty to recover the $3.66 Bilion that is owing tothem wil be imperiled and the Property and its 25,000 residents wil be thrown into disaray.

The Plaintiffs are the Senior Lenders to the entities that own the Propert. On June 21,2010, the Senior Lenders were awarded a judgment in the amount of $3,667,000,000 and anorder directing foreclosure by the United States District Cour for the Southern District of NewYork. The PCV 1ST Borrowers consented to the foreclosure, as everyone associated with theProperty assumes that it is currently worth far less than the $3.66 Bilion that is owed to theSenior Lenders. In anticipation of a credit bid, the Senior Lenders and PCV 1ST Borrowers havebeen working cooperatively for the past nine months to facilitate the smooth transition ofmanagement of the Propert's 25,000 residents and 550 employees following foreclosure. With

the management transition virtually complete, the Senior Lenders wil be filing a notice offoreclosure sale with a foreclosure set to occur in the second half of September.

PSW, a recently formed Delaware shell entity, is new to the Property. Less than twoweeks ago, PSW reportedly acquired for appro)Cimately 15 cents on the dollar three tranches ofsubordinated junior mezzanine loans that are secured by pledges of the equity ownership interestin the PCVIST Borrowers. Immediately upon acquiring the junior loans, PSW's joint ventureparners, renowned hedge fund operator Bil Ackman and Michael Ashner, were quotede)Ctensively throughout the New York media regarding their plans to seize control of the Propertyfrom the Senior Lenders through a banptcy. The first step in their plan is a uee sale that iscurrently scheduled/or August 25,2010, which Plaintiffs received notice of just last week.

-2-BA2/3985 1 1


8/28

Mr. Ackman's and Mr. Ashner's plans for PSW and the PCVIST Borrowers are in directviolation of PSW's contractual obligations to the Senior Lenders. PSW may pursue a UCC saleof the Equity Collateral pledged to it, but it canot acquire the Equity Collateral through a creditbid without curing all Senior Loan defaults, which in this case requires paying the SeniorLenders $3.66 Bilion. PSW and its principals cast this obligation aside as "ludicrous" and planto simply discharge it in bankptcy. PSW is also contractually bound not to solicit, direct orcause the Borrowers, or any entity which controls the Borrowers, or any other person to take anyaction in fuherance of a Borrowers banptcy while the Senior Loan is outstanding. PSW is

treating this obligation with equal contempt, freely discussing its plans for bankptcy, andactually retaining banptcy counsel for the PCV 1ST Borrowers after it forecloses.

PSW's strategy is not noveL. It has played out before in this and in other jurisdictions,and courts have consistently found in favor of senior lenders, entering orders to enforce the termsof intercreditor agreements. Accordingly, the Senior Lenders here ask this Cour to (i) enjoinPSW and its principals from acquiring or sellng the Equity Collateral, which is scheduled to beforeclosed upon on August 25, unless the Senior Loan default is cured (e.g., $3.66 Bilion ispaid), and (ii) enjoin PSW from taking any action in fuherance of a Borrowers bankptcy untilthe Senior Loan is paid off in full.

Entering the requested injunctive relief poses no prejudice to PSW as it merely requirescompliance with the plain language of the paries' Intercreditor Agreement. On the other hand,failure to enter the requested relief wil irreparably harm the Senior Lenders by jeopardizing thestability and value of their collateral and their abilty to e)Cercise control over both the workoutprocess and the Property.

-3-BA2/3985 I I


9/28

STATEMENT OF FACTSTishman Speyer Development Corp. ("Tishman") entered into a Purchase and Sale

Agreement on October 17, 2006 to purchase Peter Cooper Vilage and Stuyvesant Town fromMetropolitan Tower Life Insurance Company ("MetLife") for $5,400,000,000.00 (the"Purchase"). The sale closed in 2007. Complaint dated August 18, 2010 ("Complaint") ir 8.

The Senior LoanTo finance the Purchase, PCV ST Owner LP ("PCV ST Owner") and ST Owner LP ("ST

Owner" and, collectively with PCV ST Owner, the "Borrowers"), both limited parnershipsaffiliated with Tishman, entered into a senior secured loan in the amount of $3,000,000,000.00(the "Senior Loan"), from the Senior Lenders. Complaint ir 9; Affidavit of Andrew J.Hundermark dated August 17, 2010 (the "Hundertmark Aff.") ir 7. The Senior Loan isevidenced by an Amended and Restated Loan and Security Agreement (the "Loan Agreement")dated as of February 16, 2007. Complaint ir 9; Hundertmark Aff. ir 8. The Senior Loan ismemorialized by si)C notes. See Complaint ir 11; Hundertmark Aff. ir 10. Each of the Notes iscurrently held in a mortgage securitization trust (collectively, the "Trusts" and each, a "Trust")?Complaint ir 14; Hundertmark Aff. ir 13.3

2 Note A-I is held in Wachovia Bank Commercial Mortgage Trust 2007-C30, for which Bank of America, N.A.("BofA"), as successor to Wells Fargo Bank, N.A. ("Wells Fargo"), serves as trstee. Note A-2 is held in COBALTCMBS Commercial Mortgage Trust 2007-CMBS, for which BofA, as successor to Wells Fargo, serves as trstee.Notes A-3 and A-4 are held in Wachovia Bank Commercial Mortgage Trust 2007-C3 i, for which U.S. BankNational Association ("US Bank"), as successor to Wells Fargo, serves as trstee. Note A-5 is held in ML-CFCCommercial Mortgage Trust 2007-5, for which US Bank, as successor to LaSalle Bank, N.A. ("LaSalle"), serves astrstee. Note A-6 is held in ML-CFC Commercial Mortgage Trust 2007-6, for which US Bank, as successor toLaSalle, serves as trstee.3 CWCAM is the Special Servicer for the 2007-C30 Trust and is responsible for administering the Senior Loan onbehalf of the Senior Lenders. Complaint ir 15; Hundertark Aff. ir 15. On March 12, 2007, the Senior Lenders andother parties thereto entered into an Amended and Restated Co-Lender Agreement (the "Co-Lender Agreement").Pursuant to Section 2(t) of the Co-Lender Agreement, CWCAM has the exclusive right and obligation to administer,service and make all decisions and determinations regarding the Senior Loan and to enforce the related Senior Loandocuments, including, but not limited to, the Intercreditor Agreement (derined infra). Complaint ir 16; HundertarkAff. ir 16.

-4-BA2/39851 I


10/28

The Mezzanine or Junior LoansIn order to obtain additional financing for the acquisition, the direct and indirect parents

of the Borrowers (collectively, the "Mezzanine Borrowers") secured an additional$1,400,000,000.00 of mezzanine debt in 2007 when they purchased the Property. Complaint irir17, 24; Hundertmark Aff. irir 17, 24. (The terms "Junior" and "Mezzanine" are usedinterchangeably throughout this Memorandum.) The Mezzanine Borrowers pledged to theJunior Lenders their direct and indirect equity ownership interests in the Borrowers and theirrespective general parners in e)Cchange for eleven Mezzanine loans (the "Mezzanine Loans"),with priority ruing in sequential order from Mezzanine 1 Loan (most senior) to Mezzanine 11

Loan (most junior). Complaint ir 17; Hundertmark Aff. ir 17.Pursuant to separate amended and Restated Pledge and Security Agreements dated

February 16, 2007, each Junior Lender was granted a first priority security interest in thecorresponding Junior Borrower's ownership interest in the respective subsidiar Borrower orJunior Borrower and the respective subsidiary Borrower's or Junior Borrower's general partner(the "Equity Collateral"). Complaint ir 25; Hundertmark Aff. ir 25. The Junior Lenders werenot granted a security interest 0/ any kind in the Property.4 Complaint ir 26; Hundertmark Aff.ir 26.

The Intercreditor AgreementAs a condition to the Mezzanine financing, the Senior Lenders and Junior Lenders,

entered into an Amended and Restated Intercreditor Agreement (the "Intercreditor Agreement")dated February 16, 2007. Complaint ir 27; Hundertmark Aff. ir 27. For purposes of the

4 A chart diagramming the capital strcture of the Senior Loan and Mezzanine Loans is attached as Exhibit A to theAffrmation of David E. Rice.

-5-BA2/398511


11/28

injunction requested here, there are three salient provisions of the Intercreditor Agreement. First,the Junior Loans are subordinate in every relevant respect to the Senior Loan.

Section 9. Subordination. of Junior Loans and Junior LoanDocuments. (a) Each Junior Lender hereby subordinates and makesjunior the Junior Loan held by such Junior Lender, the related Junior LoanDocuments and the liens and security interests created thereby, and allrights, remedies, terms and covenants contained therein to (i) the SeniorLoan and the applicable Senior Junior Loans, (ii) the liens and securityinterests created by the Senior Loan Documents and the applicable SeniorJunior Loan Documents.Complaint ir 28; Hundertmark Aff. ir 28.

Second, consistent with their subordination, the Junior Lenders agreed to cure all defaultsunder the Senior Loan as a condition to acquiring the Equity CollateraL. Section 6( d) provides inrelevant part:

Section 6. Foreclosure of Separate Collateral. To the extent that anyQualifed Transferee5 acquires the Equity eollateral pledged to a JuniorLender pursuant to the Junor Loan Documents in accordance with theprovisions and conditions of this Agreement . . . provided. however, . . .(B) all defaults under (1) the Senior Loan and (2) the applicable SeniorJunior Loans, in each case which remain uncured or un waived as of thedate of such acquisition have been cured by such Qualifed Transfereeor in the case of defaults that can only be cured by the Junior Lenderfollowing its acquisition of the Equity eollateral, the same shall becured by the Junior Lender. . ..

Complaint irir 29-30; Hundertmark Aff. irir 29-30 (emphasis added).Third, the Junior Lenders agreed not to solicit, direct or cause the Borrowers to

commence, or to consent to or acquiesce in the institution of banptcy proceedings while theSenior Loan is outstanding. Section 11 (d)(ii) of the Intercreditor Agreement provides:

Section 11. Rights of Subrogation; Bankruptcy. For as long as theSenior Loan shall remain outstanding, none of the Junior Lenders shallsolicit, direct or cause Borrower or any other entity which Controls5 All Junior Lenders must represent and warrant that they are Qualified Transferees. See Intercreditor Agreement,Section 5(a), Transfer of Junior Loan or Senior Loan, at p. 51, Section l(a), Definition of Qualified Transferee, at p.23, and Section 4(b)(viii), Representations and Waranties, at p. 43, attached as Exhibit E to the Hundertark Aff.

-6-BA2/3985 1 I


12/28

Borrower. . . or any other Person to: . . . (1) commence any Proceedingagainst Borrower or any SPE Constituent Entity . . . (3) consent to, oracquiesce in, the institution of bankruptcy or insolvency proceedingsagainst Borrower or (9) take any action in furtherance of theforegoing.

Complaint ir 33; Hundertmark Aff. ir 33 (emphasis added).In the event of a breach of the Intercreditor Agreement, including the sections cited

above, the Senior Lenders and Junior Lenders agreed that monetary damages would not be anadequate remedy at law and agreed to the issuance of an injunction.

Section 34. Injunction. Each party to this Agreement acknowledges(and waives any defense based on a claim) that monetary damages are notan adequate remedy to redress a breach by the other hereunder and that abreach by any pary hereunder would cause irreparable har to any otherpary to this Agreement. Accordingly, each party to this Agreementagrees that upon a breach of this Agreement by any other party, theremedies of injunction, declaratory judgment and specifc petformanceshall be available to such non-breaching party.

Complaint ir 35; Hundertmark Aff. ir 35 (emphasis added).The Borrowers' Default

The Borrowers have failed to pay the monthly installments required under the Notes forthe period from January 8, 2010 through the date of this filing (the "Default"). Complaint ir 36;Hundertmark Aff. ir 36. The Senior Lenders declared a default on January 8, 2010, and when theBorrowers failed to cure the default, the Senior Lenders accelerated the unpaid debt outstandingunder the Notes on January 29, 2010, making all amounts immediately due and payable (the"Acceleration"). Complaint irir 38-39; Hundertmark Aff. irir 38-39. A copy of the Senior LoanAcceleration Letter is attached to the Hundertmark Aff. as Emibit G.6 Notice of the Default andcopies of the January 8, 2010 and January 29, 2010 letters were sent to all Junior Lenders.6 Pursuant to Section 3.1 of the Notes, Section 6.01 of the Amended Mortgage, and Section 13.01 of the SeniorLoan Agreement, the Default constitutes an Event of Default under the Senior Loan documents, which entitles thePlaintiffs to exercise their rights under the Senior Loan documents, including but not limited to, the right toforeclose upon the Amended Mortgage. Complaint ir 37; Hundertark Aff. ir 37.

-7-BA2/398511


13/28

Complaint irir 40, 42; Hundertmark Aff. ir 43. As a result of the Default and Acceleration, thefull outstanding principal balance of the Senior Loan, all accrued and unpaid interest thereon andall other sums owing under the Senior Loan documents are curently due and payable.

Complaint ir 41.On January 8, 2010, CWCAM provided notice to the Junior Lenders that it had declared

a Default, (Complaint ir 42; Hundertmark Aff. ir 43), and pursuant to Section 12(a) of the parties'Intercreditor Agreement, afforded the Junior Lenders the opportunity to cure the default. Noneof the Junior Lenders exercised their rights to cure the default. Complaint ir 43; HundertmarkAff. ir 44.7

On February 18, 2010, CWCAM, on behalf of the Senior Lenders, fied a complaint inthe United States District Cour for the Southern District of N ew York, seeking foreclosure of theProperty. Complaint ir 45; Hundertmark Aff. ir 41. The Borrowers admitted all relevant facts intheir Answer to the foreclosure complaint, and on June 21, 2010, the District Cour entered aJudgment of Foreclosure and Sale of the Property in the amount of $3,667,00,000 in favor of theSenior Lenders. Complaint ir 47; Hundertmark Aff. ir 41. The amount due and owing to thePlaintiffs under the Notes, the Amended Mortgage and the Senior Loan Documents is in e)Ccessof$3.66 Bilion (the "Indebtedness"). Complaint ir 48; Hundertmark Aff. ir 42.

7 By letters dated January 11, 2010, Wachovia, in its capacity as Administrative Agent for the Mezzanine 1-3Lenders, notified the Senior and Junior Lenders that the Mezzanine 1-3 Borrowers' failure to make the requiredpayments of interest due on January 8, 2010 constituted Events of Default pursuant to their respective Mezzaninenotes and loan agreements and that, if the defaults were not cured within the required cure period, the Mezzanine 1-3Lenders intended to pursue their rights and remedies under their respective loan agreements, including thecommencement of "an Equity Collateral Enforcement Action ((as defined in the Intercreditor Agreement)) through anon-judicial foreclosure sale of the Equity Collateral securing the Mezzanine (1-3) Loan(s) under the UniformCommercial Code" (the "Mezzanine 1-3 Loans Default Notices"). Complaint ir 44; Hundertmark Aff. ir 45.

-8-BA2/398511


14/28

PSW's Attempt to Seize ControlOn or about August 6,2010, the Initial Mezzanine 1-3 Holders purorted to transfer their

ownership interest to PSW, a joint venture formed on July 30, 2010.8 The partners of this jointventure include Winthrop Realty Trust and affiiates of Pershing Square Capital Management.Complaint ir 49; Hundertmark Aff. ir 47. PSW purortedly acquired the Mezzanine 1-3 Loans,which have a combined face value of $300 milion, for appro)Cimately 15 cents on the dollar.Complaint ir 53; Hundertmark Aff. ir 51. As a condition to this acquisition, PSW agreed to bebound by the terms of the Intercreditor Agreement and signed a certification attesting to same.Complaint ir 52; Hundertmark Aff. ir 50. One day later, on August 7, 2010, counsel to PSWnoticed its intent to sell all of the right, title and interest in the Equity Collateral at aUCC publicsale scheduled for August 25, 2010. Complaint irir 54-55, 58-61; Hundertmark Aff. irir 52-57.Since the notice was published, PSW has made it eminently clear that it wil act outside the termsof the Intercreditor Agreement notwithstanding its certification that it would comply.

On August 10,2010, counsel for the Senior Lenders wrote PSW to confirm that: (1) PSWwas a Qualified Transferee given its brief corporate e)Cistence, and (ii) PSW had an obligation tocure the Senior Loan default by paying the $3.66 Billon due under the loan as a condition to anyacquisition/transfer of the Equity Collatera1.9 Complaint ir 67; Hundertmark Aff. ir 60. Thefollowing day, on August 11, 2010, PSW e)Ccoriated counsel for CWCAM and flat-outchallenged the plain and unambiguous language of Section 6(d):8 The Mezzanine 1 -3 Loans were owned by AlB Debt Management Limited, Deutsche Genossenschafts-Hypothekenbank AG, Harford Fire Insurance Company, Hartford Life Insurance Company, Concord Real EstateCDO 2006-1 LTD, and Wachovia, (collectively, the "Initial Mezzanine 1-3 Holders") (Certification Documents).complaint ir 22; Hundertark Aff. ir 22.9 Specifically, CWCAM wrote: "Section 6( d) of the Intercreditor Agreement requires that to the extent the EquityCollateral is acquired by a transferee, all defaults under (i) the Senior Loan and (2) the applicable Senior JuniorLoans must be cured by such transferee as of the date of acquisition. This requirement applies equally to a credit bidby PSW. As a result of the acceleration of the unpaid debt outstanding under the Senior Loan, Section 6( d) of theIntercreditor Agreement requires the full payment of the unpaid debt as a condition to any transferee acquiring theEquity Collateral that PSW is proposing to selL."

-9-BA2/3985 1 I


15/28

Lastly, your statements about Section 6(d) of the Intercreditor Agreement are,as you must know, ludicrous. You are entitled to no such assurances in anyevent. Your cited provision o(the Intercreditor Agreement does not require thepayment o(the Senior Loan as a condition to a transferee acquiring the Equityeollateral. Your contrary interpretation is totally without merit or foundationand a poor and ultimately unsuccessful effort to intimidate my client.

Complaint ir 68; Hundertmark Aff. ir 61 (emphasis added).PSW has also made clear its intention to violate and render moot material provisions of

the Intercreditor Agreement by improperly soliciting a banptcy fiing. Myriad press reports,including reports based upon interviews with the principals ofPSW's joint ventue partners, haveconsistently indicated that PSW intends to acquire the Equity Collateral on August 25 through acredit bid without paying off the Senior Loan and place the Borrowers into banptcy todischarge the obligation. See I1aina Jonas, "Ackman on Path to Own NYC's Stuyvesant Town,"REUTERS (Aug. 9, 2010); Charles V. Bagli, "Defaults Fail to Scare Suitors for 2 East Side

Comple)Ces," N.Y. TIMES (Aug. 9, 2010); Danielle Reed, et. aI., "Stuyvesant Town mezz lendersPershing and Winthrop plot Chapter 11," DEBTWlRE (Aug. 10, 2010); Lingling Wei, "Buyers

Jockey for Stuyvesant," WALL ST. JOURNAL (Aug. 10,2010). Indeed, PSW, and its hedge fud

parners, are curently represented by bankptcy counsel and have informed counsel for theSenior Lenders that Kirkland & Ells has been hired as banptcy counsel for the PCV 1ST

Borrowers once the UCC foreclosure sale is complete. Complaint ir 66; Hundertmark Aff. ir 65.ARGUMENT

In order to obtain a preliminar injunction, Plaintiffs must demonstrate: (1) the likelihood

of success on the merits; (2) that irreparable injur wil result without a preliminar injunction;and (3) that a balancing of the equities, which includes the public's interest, favors the Plaintiffs'position. Seitzman v. Hudson River Assocs., 126 A.D.2d 211, 213, 513 N.Y.S.2d 148, 149 (lstDep't 1987). See also Ale)Candru v. Pappas, 68 A.D.3d 690, 690, 890 N.Y.S.2d 593, 594 (2d

-10-BA2/39851l


16/28

Dep't 2009) (e)Cplaining that Plaintiffs need only make a prima facie showing of their right torelief). 10

I. Plaintiffs Are Likely To Succeed In Their Declaratory Judgment Action

New York cours have consistently held that Junior Lenders must comply with the termsof loan documents and specifically intercreditor agreements. See In re Westpoint Stevens, Inc.,600 F.3d 231, 254 (2d Cir. 2010) (holding that junior lenders are bound by terms of theintercreditor agreement, and that the original distribution of securities to the junior lendersviolated the agreement because the senior lenders had the right to be satisfied in full and in cashbefore the junior lenders received a distribution of securities); Highland Park v. Wells FargoBan, No. 08 Civ. 5723 (NRB), 2009 WL 1834596, at ** 3, 5 (S.D.N.Y. June 16,2009) (holdingthat mezzanine lender bound by the terms of the intercreditor agreement and dismissing themezzanine lender's claim because it did not comply with its terms); Ion Media Networks, Inc. v.Cyrus Select Opportities Master Fund, Ltd. (In re Ion Media Networks, Inc.), 419 B.R. 585,594 (Ban. S.D.N.Y. 2009) (holding that the language in the intercreditor agreement was "plainand puroseful" and that the second lien lender was bound by the agreement and violated it).See also In re Suncruz Casinos, 298 BR. 833, 846 (Bank. S.D. Fl. 2003) (holding that juniorholders were contractually prohibited from asserting a claim until the senior lenders were paid infull). As a Junior Lender itself, PSW is indisputably bound by the terms of the IntercreditorAgreement.

This Cour is authorized to enter a declaratory judgment, declaring the rights andobligations of the paries to a justiciable controversy. See C.P.L.R. 3001. "The primarypurpose of declaratory judgments is to adjudicate the paries' rights before a 'wrong' actually

10 To obtain a temporary restraining order, the Plaintiffs must demonstrate that immediate and ireparable harm wilresult unless the defendant is restrained before a hearing can be held. See N.Y. C.P.L.R. 6313 (McKiney 2010).

-11-BA2/3985 1 1


17/28

occurs in the hope that later litigation wil be unnecessary." N.Y. County Lawyers' Ass'n v.State ofN.Y., 294 A.D.2d 69, 74, 742 N.Y.S.2d 16,20 (1st Dep't 2002) (quoting Klosterman v.Cuomo, 61 N.Y.2d 525, 538, 463 N.E.2d 588, 595 (1984)). The purose of making therequested declaration is to stabilize the legal relations and eliminate uncertainty as to the scopeand content of present or prospective obligations. See Bar v. Ready Reference Pub. Co., 25A.D.2d 827, 269 N.Y.S.2d 665 (1st Dep't 1966).

To succeed on a cause of action for declaratory judgment, Plaintiffs must show that thereis a valid interest in securing a declaration and a present, in an adversary context, controversywith the defendant concerning that interest. See Phelan v. City of Buffalo, 54 A.D.2d 262, 264-5, 388 N.Y.S.2d 469, 471-472 (4th Dep't 1976). Declaratory judgment actions are appropriatewhere "the practical likelihood is that the future contingency wil occur. . . ." Prodell v. State,

211 A.D.2d 966, 967-68, 621 N.Y.S.2d 712, 713 (3d Dep't 1995) (citing Cuomo v. Long IslandLight Co., 71 N.Y.2d 349, 354, 520 N.E.2d 546 (1988)). Of utmost importance here, "(a)declaratory judgment action may be an appropriate vehicle for settling justiciable disputes as tocontract rights and obligations." Kalisch-Jarcho, Inc. v. City ofN.Y., 72 N.Y.2d 727,731,533N.E.2d 258, 260 (1988); see also Babcock & Wilco)C Co. v. Control Components, Inc., 161 Misc.2d 636, 614 N.Y.S.2d 678, 683 (Sup. Ct. N.Y. County 1993). A preliminar injunction isappropriate to preserve the status quo to "assure the efficacy of any declaratory judgment."M&A Oasis, Inc. v. MTM Assocs., L.P., 307 A.D.2d 872, 872-73, 764 N.Y.S.2d 9 (1st Dep't2003).

Plaintiffs' declaratory judgment action seeks nothing more than to ensure that PSW, aJunior Lender, complies with the plain and ordinary meaning of clearly delineated provisions inthe Intercreditor Agreement. Specifically, Plaintiffs ask the Cour to declare that: (i) Section

-12-BA2/3985II


18/28

6(d)(B)(1) and (2) require PSW, or any purchaser of the auctioned Equity Collateral, to cure allSenior Loan defaults prior to acquiring the Equity Collateral; and (ii) Section 11 (d)(ii) prohibitsPSW from orchestrating a Borrowers bankptcy unless the Senior Loan is paid off in fulL.

A. PSW Canot Acquire the Equity Collateral Through a Credit Bid Without Satisfyingthe Conditions of Section 6(d)(B) of the Intercreditor Agreement

Sections 6(d)(B)(1) and (2) of the Intercreditor Agreement unambiguously obligate PSWto cure all defaults under the Senior Loan in connection with PSW's acquisition of the EquityCollateral:

To the extent that any Qualifed Transfereell acquires the Equityeollateral pledged to a Junior Lender pursuant to the Junior LoanDocuments in accordance with the provisions and conditions ofthis Agreement. . . . provided, however, . . . . (B) all defaultsunder (1) the Senior Loan and (2) the applicable Senior JuniorLoans, in each case which remain uncured or un waived as of thedate of such acquisition have been cured by such QualifedTransferee. . . . .

Complaint ir 30; Hundertmark Aff. ir 30. In this case, that means PSW is required to pay the$3.66 Bilion that is due and owing under the Senior Loan in the event PSW acquires the EquityCollateraL. Yet, PSW has renounced any intent to pay these monies to the Senior Lenders.PSW's August 11 letter characterizes the Senior Lenders' assertion that these amounts wereowing as "ludicrous," and in the same letter, flatly rejects any obligation to make assurances thatthey would be paid. Complaint ir 68; Hundertmark Aff. ir 61. PSW's obvious intent is todischarge any obligation that arises in banptcy. Injunctions are routinely entered in the faceof this type of anticipatory breach. See,~, Scudder v. Zeckendorf Hotels Corp., 224 N.Y.S.2d432,432-33 (Sup. Ct. N.Y. County 1961) (holding that plaintiffs motion for injunction againstanticipatory breach was proper because money damages obtainable after the breach would not11 A Junior Lender is a Qualified Transferee under the Intercreditor Agreement. See Intercreditor Agreement,Section l(a), Derinition of Qualified Transferee, at p. 23, attched as Exhibit E to the Hundertark Aff.

-13-BA2/3985 1 I


19/28

suffice to make plaintiff whole); Gusinky v. Genger, No. 600426/2008,2009 WL 2534670, at **3, 5-6 (Sup. Ct. N.Y. County, Aug. 12, 2009) (granting plaintiffs motion for a preliminaryinjunction which was brought as a result of defendant's anticipatory breach of a contract.); Swift& Co. v. United States, 276 U.S. 311, 326 (1928) (finding that a "suit for an injunction dealsprimarily, not with past violations, but with threatened future ones; and that an injunction mayissue to prevent future wrong, although no right has yet been violated"); Consol. Container Co.v. Warren Unilube, Inc., No. 05-2371 B, 2006 WL 522424, at **1, 3, 9 (W.D. Tenn. March 3,2006) (granting plaintiff a preliminar injunction to enjoin the defendant from terminating anagreement after defendant stated his intent to terminate the contract in advance of the end date).

In fact, New York goes fuher finding that Section 6( d)(B)(1) and (2) create an e)Cpresscondition precedent to any sale of the Equity CollateraL. When the word "provided" precedes aclause in question, it creates an e)Cpress condition precedent. See Nat'l Fuel Gas Distrib. Corp. v.Harford Fire Ins. Co., 28 A.D.3d 1169, 1169, 814 N.Y.S.2d 436,437 (4th Dep't 2006) (holdingthat where clause "follows the word PROVIDED' it) indicates the creation of a condition")(citing Restatement (Second) of Contracts 226, Comment a)) (emphasis added). Accord Israelv. Chabra, 537 F.3d 86, 93 (2d Cir. 2008) (noting that "the word provided' placed immediatelybefore a contractual requirement indicates the creation of a condition"') (quoting Nat'l FuelGas, 28 A.D.3d at 1170) (emphasis added); see also Ginett v. Computer Task Group, 962 F.2d1085, 1100 (2d Cir. 1992) ("Parties often use language such as . . . 1Jrovided that' . . . to makean event a condition. . . .") (emphasis added). "A condition precedent is an act or an uncertain

event that must occur before the agreement of the parties becomes operative." Thor Props.,LLC v. Chetrit Group, LLC, No. 650514-09, 2010 WL 1740752, at *4 (Sup. Ct. N.Y. County

-14-BA2/398511


20/28

2010) (emphasis added).12 As a result, PSW canot proceed with its planed UCC foreclosuresale unless any acquisition of the Equity Collateral is conditioned on payment to the SeniorLenders of the $3.66 Bilion that is curently owed to them. See 511 9th LLC v. Credit SuisseUSA, Inc., 69 A.D.3d 497, 498, 894 N.Y.S.2d 385, 385 (1st Dep't 2010) (holding pary had noright under financing agreement because they could not show that conditions precedent weresatisfied); Ferramosca v. Nelrak, Inc., 250 A.D.2d 807, 808, 673 N.Y.S.2d 712, 713 (2d Dep't1998) (holding in foreclosure action that part's rights under note did not accrue because thecondition precedent in note was not fulfilled); see also Anecca Inc. v. Le)Cent, Inc., 307 F. Supp.2d 999, 1005 (N.D. Il. 2004) (applying New York law in holding that "courts should be wary ofreorganizing or e)Ccusing e)Cpress conditions precedent and thereby upsetting the wil of the

. ")aries. . .. .As fuher evidence that Section 6( d) constitutes a condition precedent, the language

therein e)Cpressly limits which defaults can be cured following the acquisition of the EquityCollateral: "or in the case of defaults that can only be cured by the Junior Lender following itsacquisition of the Equity Collateral. . . ." Complaint ir 30; Hundertmark Aff. ir 30. Here, thedefault e)Cisting under the Senior Loan (e.g., the total outstanding indebtedness of the SeniorLoan) is not a default that can only be cured by the Junior Lender following its acquisition of theEquity Collateral; rather, it is a default that can and must be cured as a condition to acquiring theEquity CollateraL.

12 Preferred Mortg. Brokers, Inc. v. Byfield, 282 A.D.2d 589,590 (2d Dep't 2001) ("Express conditions precedent,which are those agreed to and imposed by the parties themselves, 'must be performed literally."') (quotingOppenheimer & Co. v. Oppenheim, AppeL, Dixon & Co., 86 N.Y.2d 685, 690, 660 N.E.2d 415,418 (1995) ("Acondition precedent is an act or event, other than a lapse of time, which . . . must occur before a duty to perform apromise in the agreement arises.").

-15-BA2/398511


21/28

Given the unambiguous language of Section 6( d), Plaintiffs are likely to succeed on themerits of their declaratory judgment action as it pertains to this provision of the IntercreditorAgreement.

B. . PSW Canot Solicit, Direct, Cause, or Take Any Action in Furtherance ofBanptcy When the Senior Loan is OutstandingThe restraints against banptcy in the Intercreditor Agreement are absolutely clear.

Section 11 (d)(ii) of the Intercreditor Agreement provides:(ii) For as long as the Senior Loan shall remain outstanding, none ofthe Junior Lenders shall solicit, direct or cause Borrower or any otherentity which eontrols Borrower (the "Borrower Group'~ or any otherPerson to: (1) commence any Proceeding against Borrower or any SPEConstituent Entity; (2) institute proceedings to have Borrower or any SPEConstituent Entity adjudicated a banpt or insolvent; (3) consent to, oracquiesce in, the institution of bankruptcy or insolvency proceedingsagainst Borrower or any SPE eonstituent Entity; (4) file a petition orconsent to the fiing of a petition seeking reorganization, arrangement,adjustment, wind-up, dissolution, composition, liquidation or other reliefby or on behalf of Borrower or any SPE Constituent Entity. . . or (9) takeany action in furtherance of any of the foregoing.

Complaint ir 33; Hundertmark Aff. ir 33 (emphasis added). Despite this clear prohibitorylanguage, there are press reports of conversations with the principals of PSW openly discussingplans to fie bankptcy while the Senior Loan is outstanding. Complaint ir 65; Hundertmark

Aff. ir 59. Indeed, PSW has freely admitted that it has contacted and retained Kirkland & Ellis torepresent the Borrowers in a nonconsensual banptcy. Complaint ir 66; Hundertmark Aff. ir65.

Courts have enjoined junior mezzanIne lenders from acting outside the terms ofintercreditor agreements. See,~, Highland Park, 2009 WL 1834596, at *3-5 (granting seniorlender's application for injunctive relief against the junior mezzanine holder and holding that thejunior mezzanine holder was bared by the intercreditor agreement from enforcing the guarantyon the mezzanine loan until the senior loan was repaid in full); In re Ionmedia Networks, Inc.,

-16-BA2/398511


22/28

419 B.R. 585, 594-7 (Bank. S.D.N.Y. 2009) (holding that the junior lender was e)Cpresslyprohibited from challenging the priority or the validity of the senior lenders' claims). As withSection 6( d) of the Intercreditor Agreement, Plaintiffs are likely to succeed on the merits of theirdeclaratory judgment action as it pertains to the requirements of Section 11 (d)(ii) of theIntercreditor Agreement.II. Plaintiffs Have No Adequate Remedy At Law And Wil Be Irreparably HarmedAbsent Injunctive Relief.

The cour has fle)Cibility to apply the standards for a preliminary injunction, includingirreparable har, based on the underlying realties of each individual situation. Bashein v.Landau, 96 A.D.2d 479, 479, 465 N.Y.S.2d 178, 179 (1st Dep't 1983) (granting a preliminaryinjunction to restrain attorney from distributing escrow fuds because the mere possibility formonetary recovery was not a sufficient reason to disturb the status quo). In this instance, theabsence of an adequate remedy at law was acknowledged between the Senior Lenders and theJunior Lenders at the inception of the loan. Section 34 of the Intercreditor Agreement e)Cpressly

states that "monetary damages are not an adequate remedy to redress a breach by the otherhereunder and that a breach by any party hereunder would cause irreparable harm."

Complaint ir 35; Hundertmark Aff. ir 35.The plain language of Section 34 should be honored by this Court:It is a basic contract principle that 'when the paries set down their agreement in aclear, complete document, their writing should. . . be enforced according to itsterms. We have also emphasized this rule's special import in the context of realproperty transactions, where commercial certainty is a paramount concern, andwhere the instrument was negotiated between sophisticated, counseled businesspeople negotiating at ar's length.'

TAG 380 LLC v. ComMet 380, Inc., 10 N.Y.3d 507, 512-13, 890 N.E.2d 195 (2008) (quotingVt. Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470, 475 (2004) (internal citations

-17-BA2/398511


23/28

omitted)). See also Ikon Office Solutions, Inc. v. Usherwood Office Tech., Inc., 21 Misc. 3d1144A, 2008 N.Y. Slip Op. 52499(U), * 17 (Sup. Ct. Albany County 2008); Ticor Title Ins. Co. v.Cohen, 173 F.3d 63, 69 (2d Cir. 1999) (stating that contractual provision that non-breachingpart would be entitled to injunctive relief because the breach would cause irreparable harcould be viewed as an admission that plaintiff wil suffer irreparable har); Roswell CapitalParners LLC v. Alt. Const. Techs., No. 08 Civ. 10647(DLC), 2009 WL 222348, at * 17

(S.D.N.Y. Jan. 30, 2009) (finding irreparable har based on the contractual admission ofirreparable harm and other factors) (citing N. Atl. Instruents, Inc. v. Haber, 188 F.3d 38, 49 (2dCir. 1999) (affirming preliminar injunction based in par on acknowledgment in agreement thata breach would cause irreparable injur). Here, the Senior Lenders and Junior Lenders

specifically contemplated the irreparable harm that would result from a breach of theIntercreditor Agreement and agreed that monetary damages would not serve as an adequateremedy at law. As this agreement constitutes a clear and complete statement of their intent,Section 34 should be enforced according to its terms.

The Intercreditor Agreement reflects the reality of the situation. The Property in questionis owned by a single purpose entity that owns no other assets. The Trust can only look to thevalue of the Property to recover the more than $3.66 Bilion that it is owed. With more than11,000 units, 25,000 residents, and roughly 550 employees, transferring control of the Propertmust be done deliberately and without the destruction and uncertainty caused by intercreditordisputes. Indeed, it has taken the Senior Lenders and the Borrowers more than nine months tosimply prepare for an ordinar transfer of management of the Property following foreclosure.For precisely these reasons, the parties agreed to a specific mechanism for the enforcement of

-18-BA2/398511


24/28

remedies and an ordering of priorities. There is no preferable remedy short of an injunction thatwil protect the Senior Lenders from a wilful violation of the Intercreditor Agreement.

New York cours have also routinely recognized that the loss of the bargained-forcontractual right of control constitutes irreparable har. CanWest Global Commc'ns. Corp. v.Mirkaei Tikshoret Ltd., 9 Misc. 3d 845, 872, 804 N.Y.S.2d 549, 570-71 (Sup. Ct. N.Y. County2005); Wisdom Import Sales Co., LLC v. Labatt Brewing Co. Ltd., 339 F.3d 101, 114-115 (2d.Cir. 2003) (holding that the denial of plaintiffs minority rights of corporate governance cannotbe remedied monetarily); Citibank, N.A. v. Nyland (CF8) Ltd., 839 F.2d 93, 97 (2d Cir. 1988)

(holding the ban would be irreparably harmed should it not be able to appoint a receiver tocontrol and manage the subject property after the default of a mortgage loan and grantingpreliminary injunction); Audubon Levy Investors, LP v. East West Realty Ventures, LLC, 698 F.Supp. 2d 328, 332-33 (E.D.N.Y. 2010) (agreeing that a loss of bargained-for managerial controlover an entity constitutes irreparable harm).

In Oracle Real Estate Holdings i, LLC v. Adrian Holdings Co. I LLC, the paries enteredinto a contract for purposes of developing real estate, and shortly thereafter the defendantdefaulted on its loan obligations. 582 F. Supp. 2d 616, 624 (S.D.N.Y. 2008). The cour granteda preliminary injunction to enforce plaintiffs' bargained-for right of corporate control at theoccurrence of the default and to prevent defendant from taking any action in regard to the equitythat could har its rights of recovery, including liquidating, reorganizing or transferring the

assets. Id. at 624. As the court in Oracle Real Estate reasoned, the bargained-for right to

corporate control is a valuable asset that could be meaningless at the end of litigation absentinjunctive relief. Id. at 626. (noting that the skil and resources of people e)Cercising control in

real estate transactions affects the value and prospects of the land) (emphasis added).

-19-BA2/398511


25/28

The Senior Lenders seek to preserve their contractually bargained-for rights andobligations under the Intercreditor Agreement. In e)Ctending the Senior Loan, the Senior Lenderse)Cpressly bargained with the Junior Lenders that the Junior Lenders would be prohibited fromacquiring ownership and control of the Equity Collateral unless and until any and all outstandingIndebtedness under the Senior Loan was fully paid. This is a material term in the IntercreditorAgreement, which was negotiated by sophisticated, counseled business people. The purose of

these bargained-for provisions was to ensure that ownership of and control over the EquityCollateral was not transferred from the Junior Borrowers (controlled by Tishman) to the JuniorLenders at a time when the Senior Loan was in default. If PSW is permitted to, in effect, seizeownership and control of the unique real propert known as Stuyvesant Town and Peter CooperVilage in contravention of the e)Cpressly bargained-for provisions of the Intercreditor

Agreement, the Plaintiffs wil be irreparably hared.As in Oracle Real Estate, the control of the PCV 1ST property is a specifically bargained

for and valuable contractual right. Oracle Real Estate, 582 F. Supp. 2d at 626. Plaintiffsbargained for and contracted for the Junior Borrowers to control the Equity Collateral while thedefault under the Senior Loan is outstading. As such, any loss of this control is in violation ofthe Intercreditor Agreement and would constitute irreparable harm to Plaintiffs.

Finally, Plaintiffs will suffer additional irreparable har if an injunction is not grantedbecause PSW, given its brief corporate e)Cistence, is likely not capable of compensating Plaintiffsin.money damages equivalent to the $3.66 Bilion that is at risk. See Trustees of the PlumbersLocal Union NO.1 Welfare Fund v. Manattan Plumbing Corp., No. 08 CV 3036(FB)(RML),2009 WL 5821676, at *12 (E.D.N.Y. Oct. 8, 2009); (noting that injunctive relief has beengranted where the collection of money damages is unlikely); see also Netwolves Corp. v.

-20-BA2/3985 1 I


26/28

Sullivan, No. 00 CIV. 8943(AGS), 00 CIV. 9628(AGS), 2001 WL 492463, at *11 (S.D.N.Y.May 9, 2001) (holding that were defendant may become insolvent "monetar injur is deemedirreparable because the plaintiff may never be able to recover damages") (citing FederatedStrategic Income Fund v. Mechala Group Jamaica Ltd., No. 99 Civ. 10517, 1999 WL 993648, at*8 (S.D.N.Y. Nov. 2, 1999) (e)Cplaining that, in situations where the defendant is insolvent orinsolvency is threatened, "preliminary injunctive relief may be necessary because, whilemonetary damages may be theoretically available, 'as a practical matter, the defendant would notor could not respond fully for those damages."'). As with PSW's refusal to offer any assurancesthat it wil cure the Senior Loan default by paying it off in full, PSW has no assets to offer anyassurances that it is even capable of satisfying a billon dollar judgment.III. A Balancing Of The Equities Tips In Favor Of Plaintiffs.

When balancing the equities, a cour weighs the harm each side wil suffer in the absenceor face of injunctive relief. See Lipsztein v. Mount Sinai Hosp., 170 A.D.2d 285, 286, 565N.Y.S.2d 812 (1st Dep't 1991); Mr. Natual, Inc. v. Unadulterated Food Prods., Inc., 152 A.D.2d729, 730, 544 N.Y.S.2d 182, 182 (2d Dept. 1989) (holding that the balance of the equities tips infavor of plaintiff since there is no assurance plaintiff wil stay in business absent the injunctionwhile defendant likely wil not be inconvenienced). The balance of equities tips in favor of thepary trying to maintain the status quo. Gramercy Co. v. Benenson, 223 A.D.2d 497, 498, 637N.Y.S.2d 383,384 (1st Dep't 1996).

Here, the balance of the equities tips decidedly in favor of the Plaintiffs. The SeniorLenders seek to do nothing more than to hold PSW, as a Junior Lender, to its contractuallybargained-for obligations under the Intercreditor Agreement. See~, Ikon Office Solutions,Inc., No. 9202-08, 2008 N.Y. Slip Op. 52499U, at * 17 (holding that the balance of equities tips

-21-BA2/398511


27/28

in favor of plaintiff merely seeking to enforce provisions of employment contracts against formeremployees). Should the injunction not be granted, Plaintiffs wil lose what they contractuallybargained for and wil likely be left to the vagaries of the banptcy process with a breach ofcontract action against a shell entity in PSW. In contrast, PSW's position wil not be changed. Itwil simply remain bound by the terms of the Intercreditor Agreement into which it freelyentered.

In balancing the equities, the court also considers the public interest involved. Seitzmanv. Hudson River Assocs., 126 A.D.2d 211, 214-15, 513 N.Y.S.2d 148, 150 (1st Dept. 1987).This policy advances predictable and more efficient commercial outcomes and minimizes thepotential for wasteful litigation. The cour in In re Ion Media Networks, Inc., 419 B.R. 585, 595(Bank. S.D.N.Y. 2009) observed that the plain language of the intercreditor agreement"reinforces general principles of public policy," including the principle that "(t)he sophisticatedparies who entered into the Intercreditor Agreement were certainly aware" of the agreement'sprovisions placing the junior lenders, including PSW, in an indisputably subordinate position.As such, "clear and complete writings should generally be enforced according to their terms" toimpar stability in commercial transactions. W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d157, 162, 566 N.E.2d 639, 645 (1990); Wallace v. 600 Parners Co., 86 N.Y.2d 543, 548, 658N.E.2d 715, 720 (1995). This rule applies equally here, and the public interest tips in favor ofPlaintiffs.

-22-BA2/398511


28/28

CONCLUSIONF or the reasons set forth herein, Plaintiffs respectfully request that this Cour grant their

motion for a preliminary injunction and award Plaintiffs such other and fuher relief that thisCourt deems just and proper.

Dated: New York, New YorkAugust 18, 2010Respectfully submitted,

VENABLELLPBy: slDavid E. RiceGregory A. Cross (pro hac vice pending)David E. Rice750 East Pratt Street, Suite 900Baltimore, Maryland 21202Telephone: (410) 244-7400

Michael K. MaddenRockefeller Center1270 Avenue of the Americas, 25th FloorNew York, New York 10020Telephone: (212) 307-5500Attorneys for CWCapital Asset ManagementLLC, Solely in Its Capacity as SpecialServicer

Stuyvesant Town's Senior Lenders Motion for a Injunction

Documents

Transcript of Stuyvesant Town's Senior Lenders Motion for a Injunction