Adam Leitman Bailey's Blog, page 6
September 7, 2023
Best Lawyers: Perspectives Through the Decades
Since the inaugural issue of Best Lawyers® in 1983, the legal industry has continually evolved to meet the demands of an ever-changing world. New practice areas have formed to protect clients and a society impacted by emerging risks in business and healthcare, for example, while advances in technology have provided opportunities to try cases without physically being in a courtroom.
Furthermore, every lawyer aims to meet and exceed the expectations of clients, which can be challenging when changes in various sectors can outpace the reaction time needed to prepare legal strategies.
To chronicle how different practice areas have changed, along with the profession overall, we spoke with several legal leaders nationwide who were first recognized by The Best Lawyers in America® from each decade since the 1980s, as well as Best Lawyers: Ones to Watch® in America recipients from the last four editions. They revealed how they embraced change and continue to adapt and the role Best Lawyers print publications and online outlets played in their career development, brand and reputation.
WHAT ARE THE MOST SIGNIFICANT CHANGES IN YOUR PRACTICE AREA OR THE LEGAL LANDSCAPE YOU’VE EXPERIENCED SINCE ENTERING THE PROFESSION?
Adam Leitman Bailey
– Adam Leitman Bailey, P.C.
Recognized in The Best Lawyers in America since 2015 in Real Estate Law
New York, New York
When I became a real estate lawyer and litigator [in 1995], I was told that real estate moved very slowly. Since I became a Best Lawyers honoree almost a decade ago, real estate litigation could be compared to an action movie. The COVID-19 pandemic caused the courts to close and laws to be suspended, causing the most creative solutions to be devised by attorneys.
There were also prior challenges. The Great Recession in 2007 required desperate measures to keep America in business. Adam Leitman Bailey, P.C. found the Interstate Land Sales Full Disclosure Act (ILSA) and many other creative ways to help developers and bankers and borrowers to financially survive. ILSA was so effective that Congress repealed the statute when the Great Recession was over. And in 2012, we were hit with Superstorm Sandy, which caused a natural disaster to many buildings in New York where we practice, causing great tests to real estate attorneys while forcing us to plan differently for the future.
Bottom line—maybe it was because we were named to Best Lawyers, but we were sure expected to act like the best lawyers since being recognized as one in the last decade.
HOW NATURALLY DOES CONTRIBUTING TO BEST LAWYERS PUBLICATIONS AND ONLINE OUTLETS COME TO YOU? HOW HAS IT ENHANCED YOUR PROFESSIONAL AND DIGITAL PROFILES?
Adam Leitman Bailey – Adam Leitman Bailey, P.C.
Recognized in The Best Lawyers in America since 2015 in Real Estate Law
New York, New York
I love to write and educate, but when I am able to write and Best Lawyers publishes the article, the reader first gets to read something that I believe is important.
WHAT ADVICE DO YOU HAVE FOR OTHER RISING RISK PROFESSIONALS REGARDING ELIGIBILITY FOR BEST LAWYERS RATINGS AND OTHER ACCOLADES?
Adam Leitman Bailey – Adam Leitman Bailey, P.C.
Recognized in The Best Lawyers in America since 2015 in Real Estate Law
New York, New York
Building your reputation and brand cannot be underestimated, and ignoring Best Lawyers and other reputable ranking award companies should not be an option. We lawyers have very few chances to be awarded and recognized, and Best Lawyers is one of the few platforms.
September 6, 2023
DUCK!!! Adam Leitman Bailey P.C. Secures Preliminary Injunction To Protect Workers and the Public From Dangerous Conditions
Adam Leitman Bailey, P.C. represents one of the largest parking facility companies in New York City. Of the many facilities the company operates, one is an open-air parking lot in Upper Manhattan, not far north of the George Washington Bridge. The lot is abutted by two five-story residential buildings owned by the same landlord.
The lot does not have a barrier or other structure shielding it from objects falling from the adjacent building’s roof. In September 2022, our client learned that unknown individuals were throwing objects off the building’s roof into the lot. This was no mere child’s play. Customer vehicles, including luxury vehicles, were being badly damaged, including a Tesla Model 3 whose window was shattered from a hard blunt object thrown from the roof. For several months the attacks ceased, but in June 2023 they aggressively recommenced. The objects were heaved with considerable force from the neighboring property’s roof (at least 5 stories up) and exploded or burst on impact. Our client’s employees and customers were gravely concerned for their safety, with some employees having requested re-assignment. Our client ultimately determined that the objects were “frozen water balloons”. That may sound amusing, but they posed a dire threat; ziplock-type bags were filled with water and then frozen solid, after which they were aimed and hurled at the lot. The safety and well being of our client’s workers, its customers, and the public at large was in danger.
No one likes litigation other than litigators, and our client made repeated good faith efforts to resolve the problem on its own. Local law enforcement was contacted, and they entered the building and examined the roof, but, unsurprisingly, the perpetrators were nowhere to be found. Efforts to communicate with the building’s owner also proved unhelpful. In fact, the managing agent bizarrely claimed it could do nothing to assist and suggested that our client point a camera at the roof and film any attacks.
In a last-ditch effort to resolve the problem before commencing a lawsuit, our client’s executives entered the building in the hopes of speaking with the superintendent or anyone who might put an end to the attacks. No one was to be found and the building had no observable security measures in place. The executives trudged up to the roof to see if the superintendent was there. While no one was on the roof, our clients discovered and photographed the bags that had been used to create the frozen missiles, as well as what appeared to be drug paraphernalia.
With the July 4 holiday approaching and no relief in sight, our client contacted us for help. After an initial call with managing partner Adam Leitman Bailey, litigation partner Joshua Glatter, and associate Michael Nesheiwat, the team snapped into action. In the span of a few hours, Adam Leitman Bailey P.C. assembled an Order to Show Cause, including detailed attorney and client affidavits, photographic evidence, a legal memorandum, and full complaint, and filed it in New York County Supreme Court before the close of business that Thursday. When the weekend ended, the Court had executed the Order to Show Cause, issued a temporary restraining order, and set a hearing on a preliminary injunction in a few weeks.
Fortunately, no attacks occurred after the TRO’s issuance, but there was little assurance, and the TRO would expire once the hearing occurred absent court action. And while Adam Leitman Bailey P.C. expeditiously and appropriately served the papers on the defendant landlord-owners, no one appeared on their behalf, no answering papers were filed, and it remained unclear whether the defendants would comply with the Court’s order.
One might think in this situation the Court would simply convert the TRO into a preliminary injunction, but its not that simple. Courts are reflexively leering of awarding relief on an “ex parte” basis and are even more hesitant to hold parties in default. At the hearing, with Mr. Glatter appearing on behalf of our client, the Court posed challenging questions concerning notice, vicarious liability, and a neighbor’s rights to exercise self-help. At the hearing’s conclusion, the Court requested further briefing. Over the next several days, the Firm put together a highly detailed letter-memorandum that included additional examples of the landlord’s recalcitrance. The Court had clearly seen enough, and, with some modest modifications, entered Adam Leitman Bailey P.C.’s proposed preliminary injunction order, requiring the landlord to, in accordance with fire and building code obligations, ensure that no access to the roof would be granted outside of permitted uses.
In litigation what may first seem to be a simple “slam dunk” case can reveal nuances and unexpected turns, and even when not facing opposing counsel, New York judges are tough and detail oriented. Adam Leitman Bailey P.C. approaches that reality with a simple philosophy. Be prepared. Move fast. The details matter. Never assume an outcome is assured. Expect the unexpected. And do whatever you have to do within the bounds of the law to protect your client, and, in this case, the public as well.
The client was represented by partners Adam Leitman Bailey and Joshua Glatter, and associate Michael Nesheiwat. Mr. Glatter argued on behalf of the client before the Court.
Adam Leitman Bailey, P.C. Convinces Shareholder Not to Sue By Demonstrating that Leaks Flooding Unit Came from Different Apartment
Adam Leitman Bailey, P.C. was retained by shareholder of an apartment in a prestigious NYC cooperative for help after her apartment allegedly caused leaks into two neighboring units.
A. First Affected Apartment
The first unit was directly below our client’s. That shareholder threatened litigation against our client, claiming that his apartment was suffering from water damage from our client’s apartment (specifically, from a leak in the air conditioning unit in the client’s gym room), which the shareholder claimed significantly affected the market value of his apartment. However, there were two fatal issues to this shareholder’s claim: (1) it was the midst of the Covid-19 pandemic, and market values across the city had plummeted, and (2) the shareholder submitted no evidence whatsoever for his allegations that the water damage to his unit emanated from our client’s unit. It was possible that the shareholder was attempting to use our client as a scapegoat for his unit’s lower market value during the pandemic.
In any event, Adam Leitman Bailey, P.C.’s first step was commissioning its own independent engineering investigation of our client’s apartment, which proved that the air conditioning unit in our client’s gym room was not the cause of any alleged leaks into the apartment below. The engineer noted that the subject air conditioning unit was an all-electric, “through-wall unit” with no plumbing associated with it whatsoever. The report found no evidence of water damage to the unit’s millwork enclosure or the carpet adjacent thereto, which would indicate a leak had occurred from the unit. The report also made clear that the air conditioning unit was properly pitched.
The report did, however, indicate that the three 91 year-old steel windows in the client’s gym room could be a potential source of water infiltration into the Building, given their overall condition and age. Armed with this information, Adam Leitman Bailey, P.C. performed a review of the Board meeting minutes, which revealed a significant history of leaks throughout the Building, including issues with the Building’s windows. In all of those instances, the Board took action to have the leaks addressed. Adam Leitman Bailey, P.C. was therefore able to use this information to hold the Board responsible for all repairs of our client’s windows, as is required under the proprietary lease.
In the end, Adam Leitman Bailey, P.C. successfully avoided a lawsuit from the below shareholder and the client’s windows were repaired.
B. Second Affected Apartment
Another apartment below our client’s alleged that it was suffering from leaks emanating from our client’s apartment. This shareholder claimed that her master dressing room was destroyed from water damage that occurred over a weekend when the shareholder was away. Adam Leitman Bailey, P.C. investigated the facts and it turned out that a certain pipe associated with our client’s unit may have been the cause, but there was no way to know for sure without performing destructive probes in both the shareholder and our client’s apartments. Ultimately, Adam Leitman Bailey, P.C. was able to achieve a favorable settlement for our client with this shareholder, with our client paying for a portion of the cost to restore the dressing room. Adam Leitman Bailey, P.C. recognized there was a risk that the shareholder discussed above in part “A” could resurrect a claim against our client if he learned that our client reimbursed another shareholder for potential leak damages. To avoid this risk, Adam Leitman Bailey, P.C. held the payment in escrow until this shareholder’s statute of limitations period against our client had expired.
Adam Leitman Bailey and Rachel Sigmund McGinley represented the client in this matter.
September 5, 2023
New York’s LLC Law Might Be Bad for Everyone, Not Just Criminals and Slumlords
The bill’s language is directly aimed at those who bypass sanctions, avoid taxes, fund terrorist organizations and support organized crime. Landlords who use LLCs are more likely to have code violations, higher rents and more evictions attached to their properties compared to “non-corporate” owners, according to the legislation.
“Should we be naming the average person on the street? I think it should be narrowly tailored to where it’s aimed toward those that you want the law to reach,” real estate attorney Adam Leitman Bailey told CO. “People from out of the country with a certain amount of money who do not live in these residences full time, who are using it for the purpose of money laundering. That’s not what this bill achieves; it’s a very dangerous law and is probably going to cause a lot of problems.”
A hypothetical improved version of the law would target only foreign investors and widen the exemptions for people who need to protect their privacy, such as some of Bailey’s more high-profile clients who, due to their fame, are able to live without interference from fans and stalkers because of their current ability to register their New York City apartments under an LLC.
Cash transactions in particular should be flagged as requiring the disclosure of beneficial owners, according to Bailey, as famous people and legit corporations usually don’t buy property that way.
“There are privacy rules that are supposed to be set up, but, based on the acts of the New York State Legislature, I do not expect their regulations to protect the privacy of my wealthy and famous clientele as well as the ability to prevent crimes that will happen in the future,” Bailey added in an email.
As it stands, the bill has exemptions only for people enrolled in an address confidentiality program or companies acting as a “relator” in what’s called a qui tam action, an LLC bringing charges against individuals or entities on behalf of a government.
A Mogul’s 33-Story Luxury Hotel Faces Battle Over 18 Inches
They say football is a game of inches. That is also true of the bruising sport of New York real-estate development.
[…]
New York lawmakers tightened the adverse-possession law in 2008, after the state’s highest court ruled that a couple gained ownership of their neighbors’ land because they tended to the property, including by installing a bird feeder and underground dog fence. But lawyers have continued to bring claims.
“Adverse possession is for the underdog,” said real estate attorney Adam Leitman Bailey. “It’s use it or lose it. Rich people hate it, but I think it’s phenomenal.”
Still, sometimes rich people use it. Bailey is currently litigating an adverse-possession claim on behalf of a Fifth Avenue co-op board suing a rental building owned by former New York Gov. Eliot Spitzer, who is seeking to tear down the building and build luxury condos. At issue is a 340-square-foot depression between the buildings, known as the Pit.
When Is an Attachment Levy Effective?
Trying times call for creative, aggressive lawyering by real estate litigators. Racing to find and attach and garnish a judgment debtor’s assets before they literally disappear is an old sport played, most recently, at a higher level due to the stressful economic real estate times.
This article reflects our war wounds and successes with the most important topical issues using the most relevant and authoritative case law and statutes.
Attachment is one of the provisional remedies provided by CPLR §6001 that is available to temporarily protect a creditor against the loss, dissipation, or diversion of the property of a debtor that might otherwise be used to satisfy a money judgment in the creditor’s favor.
The Attachment ProcessAs provided in CPLR §6201, An order of attachment may be granted in any action, except a matrimonial action, where the plaintiff has demanded and would be entitled, in whole or in part, or in the alternative, to a money judgment against one or more defendants. (Emphasis added).
Attachment is appropriate, among other things, when the defendant is: (a) a non-domiciliary residing out of the state , or is a foreign corporation not qualified to do business in the state [CPLR §6201(a)], (b) a defendant residing or domiciled in the state who cannot be personally served despite diligent efforts to do so [CPLR §6201 (b)], or (3) a defendant who with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff’s favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts” [CPLR §6201(3)].
Further, pursuant to CPLR §6202, in addition to attachments that may be made directly against property of the judgment debtor, money judgments are also enforceable, under CPLR §5201, against third-party garnishees, for debts of the debtor to said third parties or against a debtor’s interest in any property that can be assigned or transferred.
Pursuant to CPLR §5201(a):
A money judgment may be enforced against any debt, which is past due or which is yet to become due, certainly or upon demand of the judgment debtor, whether it was incurred within or without the state, to or from a resident or non-resident, unless it is exempt from application to the satisfaction of the judgment. A debt may consist of a cause of action which could be assigned or transferred accruing within or without the state. (Emphasis added).
Pursuant to CPLR §5201(b):
A money judgment may be enforced against any property which could be assigned or transferred, whether it consists of a present or future right or interest and whether or not it is vested, unless it is exempt from application to the satisfaction of the judgment. (Emphasis added).
Following entry of a money judgment against a debtor or obligor, the creditor usually acts to enforce the judgment by serving restraining notices, under CPLR §5222(a) upon the judgment debtor and/or upon any other person, if, under CPLR §5222(b),
at the time of service, [the other person] owes a debt to the judgment debtor or obligor or [the other person] is in the possession or custody of property in which he or she knows or has reason to believe the judgment debtor or obligor has an interest * * *. (Emphasis added).
As noted in the Practice Commentaries to CPLR §5222 (at C5222:1), the restraining notice is “in effect an injunction that restrains the person served with it from making any transfer of the judgment debtor’s property except to the sheriff,” and, when it is issued by the judgment creditor’s attorney, acting as an officer of the court, “the restraint results without a court order or any other preliminary judicial authorization [and] is a rare example of an injunction, complete with contempt punishment as its sanction, not embodied in a court order or judgment.”
Determining the Proper Use of AttachmentAs noted above, CPLR §5201(a) and CPLR §5201(b), respectively, require that a money judgment be enforceable only against a debt that is “past due or which is yet to become due, certainly or upon demand,” and only against “any property which could be assigned or transferred.”
It is clear, therefore, that a judgment cannot be enforced against “a general category of contingent debts and property rights based on contractual contingencies.” Verizon New England Inc. v. Transcom Enhanced Services, Inc., 98 AD3d 203, 207, 948 NYS2d 245 (1st Dept. 2012).
The following cases provide some examples of how courts decide the difference between (a) debts past due or which are yet to become due, certainly or upon demand, (b) property which could be assigned or transferred, and (c) contingent debts and property rights based on contractual contingencies.
(a) Debts Past Due or Yet To Become Due, Certainly or Upon Demand. The leading case distinguishing the application of CPLR §5201(a) and CPLR §5201(b) to “debts past due” or to “property which could be assigned or transferred” is ABKCO v. Apple Films, Ltd., 39 NY2d 670 (1976).
In ABKCO, the plaintiff sought repayment of a loan made to Apple Films Ltd. (“Apple”), the English debtor-corporation over which it was unable to obtain personal jurisdiction.
To enforce its claim for repayment of the loan, ABKCO sued Apple Films, Inc., a New York corporation (“Apple NY”), by way of attachment against Apple’s rights in a license agreement Apple had granted to Apple NY in which the latter agreed to pay Apple 80% of the net profits received by Apple NY from promotion of the Beetles’ film “Let It Be.”
Apple NY, in turn, had transferred its rights and control to distribute the film to United Artists which agreed to pay Apple NY 50% of the adjusted gross receipts from distribution of the film.
The Court of Appeals explained that an attachment could not be effective unless “there is within the jurisdiction of our courts a debt or property of the debtor, here [Apple], within the meanings of subdivisions (a) or (b) of CPLR §5201.”
Apple and Apple NY argued that Apple’s right could only be classified as a debt within the meaning of CPLR 5201(a), and was therefore not attachable because the debt was then neither “past due” nor yet “to become due” because: (a) Apple NY “had not yet received any substantial sums from United Artists,” and (b) “it could not be known, or even reliably predicted, when if ever gross receipts from the film would reach the point of black balances in favor or [Apple against Apple NY].”
Contrary to such arguments, the court held “we conclude that the interest of [Apple] in the Licensing Agreement was property; it was assignable and hence attachable,” because Apple’s interests under the licensing agreement:
constituted property, composed of the bundle or all its rights under the agreement, of which, of course, the obligation of [Apple NY] to pay under the 80% clause was the principal feature of economic significance. That property was attachable because concededly it was assignable by [Apple NY].
The court further explained that ABKCO’s claim was not against “tangible personal property,” such as real estate, which “can only be attached where it is,” but was instead against the rights contained in the licensing agreement, which was “intangible property,” the situs of which, for purposes of attachment, is “the location of the party of whom performance is required by the terms of the contract.” Therefore, seeking to attach the licensing agreement by suing Apple NY in New York was entirely appropriate.
Finally, regarding whether or not Apple NY had already received “substantial sums” from United Artists, the court also noted that there was “no threshold requirement that the attaching creditor show the value of the attached property or indeed that it has any value,” or that “the garnishee is entitled to a vacatur of the attachment if it can be established that the property in question is valueless.”
(b) Property Which Could Be Assigned or Transferred. The Court of Appeals again addressed the distinction between a judgment debtor’s “debt” or “property” in Verizon New England, Inc. v. Transcom Enhanced Services, Inc., 21 NY3d 66 (2013).
In Transcom, plaintiff Verizon, judgment creditor of a money judgment awarded against judgment debtor Global Naps, Inc. (“GNAPs”), served a restraining notice, on April 2, 2009, upon garnishee Transcom.
In response to Verizon’s information subpoena, Transcom indicated it had a telephone switch service agreement with GNAPs, under which Transcom agreed to pay GNAPs $281,000 per month, on a week-to-week basis that allowed Transcom to decide weekly whether to engage GNAPs services.
Transcom also indicated that all payments “are made in advance or contemporaneously with service,” and testimony had established that GNAPs monthly invoices were sent for proposed services to be rendered the following month. On the day prior to receiving Verizon’s restraining notice, Transcom had received a $246,000 bill from GNAPs which was paid by four Transcom checks, each $61,500 in amount, issued on four dates in April 2009. Verizon sought a turnover of property and debts of GNAPs held by Transcom, equal to the amount paid by Transcom “in violation of the restraining notice” and a finding of civil contempt.
Transcom defended on the ground that it did not violate the restraining notice because GNAPs invoices were predated services and Transcom was under no obligation to accept any GNAPs services. Therefore, Transcom claimed it did not owe any debt to GNAPs and did not hold any property in which GNAPs had any interest at the time when the payments were made.
The court agreed that Transcom’s agreement was “wholly distinguishable from the agreement in ABKCO, and, thus, [could not] be deemed an attachable or assignable property interest.” It held that the Transcom-GNAPs agreement “was terminable at will, at any time, without prior notice, meaning that Transcom had no obligation after receiving one week’s worth of services.”
Moreover, the court noted (a) “not only could Transcom unilaterally eliminate any possibility of future revenue from the contract, but so could GNAPs,” (b) “the parties had no continuing contractual obligation to each other,” and (c) “there was no debt, and no obligation ‘certain to become due.’”
Therefore, “Transcom neither owed any debt to, nor possessed any property of GNAPs that could be subject to a restraining notice.
Similarly, because Transcom’s payments to GNAPs constitute neither a debt nor a present or future property interest, CPLR 5201(a) and (b) [were] not applicable.”
(c) Debts And Property Rights Based on Contractual Contingencies. The issue of contingency debt and property rights was addressed by In re Thelen, 24 NY3d 16 (2014). The question in Thelen was: who was entitled to the attorney fees generated by the “unfinished business” of a Chapter 7 dissolved law firm or of a law firm in Chapter 11 reorganization—the Chapter 7 trustee of the law firm’s bankruptcy estate, for the benefit of the estate’s creditors, or the Chapter 11 administrator of a law firm filing for protection from its creditors—or the law firm to which attorneys of either the dissolved firm or of the reorganizing firm had moved to finish those firms’ “unfinished business”?
Although Thelen did not require the Court of Appeals to decide a question of attachment, its opinion on what constitutes “property” under New York’s Partnership Law is illustrative of the kind of contractual contingency situations that can arise where the attachment remedy would be precluded.
The court noted that New York’s Partnership Law does not define property and “has nothing to say about whether a law firm’s ‘client matters’ are partnership property.”
It further noted that “clients have always enjoyed the ‘unqualified right to terminate the attorney-client relationship at any time’ without any obligation other than to compensate the attorney for ‘the fair and reasonable value of the completed services,” and, citing Verizon New England, supra, explained that “no law firm has a property interest in future legal fees because they are too ‘too contingent in nature and speculative to create a present or future property interest,’ given the client’s unfettered right to hire and fire counsel.”
Accordingly, the court held that “pending hourly fee matters are not partnership ‘property’ or ‘unfinished business’ within the meaning of New York’s Partnership Law” and that “[a] law firm does not own a client or an engagement, and is only entitled to be paid for services actually rendered.”
Other Issues Involving the Attachment Remedy(d) Letters of Credit. A “letter of credit ‘is an executory contract that conditions performance of the issuer’s obligation (payment) upon performance by the beneficiary (delivery of specified documents).’” Supreme Merchandise Co., Inc. v. Chemical Bank, 70 NY2d 344, 350 (1987). (Citation omitted).
In Supreme Merchandise, the Court of Appeals reconfirmed that an order of attachment, issued under CPLR §6214, was ineffective against the proceeds of a letter of credit (“LOC”), where the draft on the LOC is “accepted” by the issuing bank prior to service of the attachment order. See First Commercial Bank v. Gotham Originals, 64 NY2d 287 (1985) (held: an issuing bank’s obligation to pay in a commercial letter of credit transaction “is fixed upon presentation of drafts and documents specified in the [LOC]. It is not required to resolve disputes or questions of fact concerning the underlying transaction”). Following “acceptance” of the draft, there is “nothing to attach at the time of service of the attachment order.”
However, the court also explained that where the attachment order is served prior to negotiation of the draft for value and “acceptance” of the draft against the LOC, “the LOC was therefore executory at the time the attachment order was served upon Chemical.”
As an “executory” LOC, if the judgment debtor’s interest was a “debt” (under CPLR §5201(a)), it “was plainly contingent and would not be subject to attachment,” but neither was the judgment debtor’s interest “property” (under CPLR §5201(b)). The Court noted that “property” is not defined in CPLR §5201(b), and the fact that the LOC was assignable did not make the judgment debtor’s interest less contingent than that of the judgment debtor in ABKCO, supra, but the contingency was “in a relevant sense even greater…than in ABKCO.”
The judgment debtor’s interest in the LOC is “dependent upon its own future performance,” and because “a beneficiary of a letter of credit retains the option to defeat the interest and render it worthless,” the court was “mindful that allowing attachment in this could serve as a disincentive to a beneficiary’s performance of the underlying contract as well as the terms of the letter of credit.”
In addition, “for policy reasons,” the Court said that the ABKCO rationale did not extend this far, and that the judgment debtor’s interest “for present purposes must be considered a contingent, non-attachable “debt” under CPLR §5201(a) rather than attachable “property” under CPLR §5201(b).”
Resting its decision “on the nature of [the Judgment debtor’s interest coupled with the policy considerations involved in negotiable letters of credit concerned with international sales transactions,” the court concluded “for the purposes of attachment, this interest is not “property” within the meaning of §5201(b).” Under the court’s analysis, finding the judgment debtor’s interest neither a “debt” nor “property,” it is not clear whether letters of credit are ever attachable.
(e) Fraud on Creditors. In Arzu v. Arzu, 1909 AD2d 87, 597 NYS2d 322 (1st Dept. 1993), the plaintiff was permanently paralyzed in an operation performed when he was 14 years old. Through his legal representative, he sued for malpractice and entered into a structured settlement. When he was 18 years old, his guardian turned over and deposited the remaining balance of the settlement ($161,718.33) into an account specified in the settlement. He then gave the funds to his father and stepmother. They represented that they would deposit the total amount and all future payments into an account for his sole use and benefit.
Ultimately, in 1984, a total of $618,891.33 was deposited in a joint account in the names of plaintiff and his father. In 1989, plaintiff learned that his father had withdrawn all but $45,000 from the account. Plaintiff sued his father and stepmother, alleging misrepresentation and fraud, seeking $573,891.33 in damages. At the same time, he obtained an ex parte order of attachment against the father’s personal property and three parcels of real property in the Bronx.
The defendants contended that they had spent $461,507.30 of the funds on plaintiff’s behalf and with his consent, allegedly for food, clothing, local transportation, credit cards, and other expenses. However, the Court noted “defendants’ claim that the money was used for plaintiff is entirely unpersuasive.”
Except for certain American Express checks, totaling approximately $10,000, “there [was] no documentation to substantiate any of these claimed expenditures or any credible explanation for the absence of such documentation,” even though “the father was able to set forth certain expenses in precise amounts.”
There was also evidence that the father had opened a cable television business in Belize, his native country, and admitted to using approximately $50,000 to $60,000 for that purpose.
On these facts, The First Department determined (a) that “as soon as the father withdrew funds from the account he held with plaintiff for an unauthorized purpose, the latter became his creditor within the meaning of CPLR §6201(3),” (b) it was “reasonable to infer that the defendants, in breach of their fiduciary duty, “disposed of or secreted at least some of plaintiff’s property,” and (c) defendants’ “failure to provide plaintiff with a contemporaneous record of the disposition of plaintiff’s funds entitle[d] [the court] to conclude that [defendants] acted with an intent to defraud plaintiff, their creditor.” (Emphasis added).
The court further concluded that “the inference that defendants are ‘about to do’ one of the acts specified in CPLR §6201(3) is warranted and that an attachment can therefore be justified on that ground as well.”
In Eaton Factors Co., Inc. v. Double Eagle Corp., 17 AD2d 135, 232 NYS2d 901 (1st Dept. 1962), it was alleged that individual sole stockholders and officers of the corporate defendant “caused or participated in the secreting, removal or disposal of corporate assets and its trucking business, including certain trucks and trailers or other assets owned by it and mortgaged to plaintiff,” and “that it was accomplished with the intent to defraud plaintiff.”
The First Department determined that an order denying a motion to vacate an attachment should be reversed. The court explained that “the property removed or secreted must be property of the defendant, and plaintiff’s allegations here of a disposal of corporate assets [and not personal assets of the individual named defendants] will not sustain a warrant of attachment.”
In addition, the court further explained that “[t]he mere removal or assignment or other disposition of property is not ground for attachment. There must coexist an intent of the debtor to defraud his creditors,” and “[f]rom disposition of the property no presumption of intent to defraud arises.” Moreover, “that the affidavits in support of attachment contain allegations raising a suspicion of an intent to defraud is not enough; it must appear ‘that such fraudulent intent really existed in the mind of the defendants, and not merely in the ingenuity of the plaintiffs.” Finally, “fraud is never presumed by a mere showing of the liquidation or disposal by a debtor of its business assets.”
(f) The Situs of Bank Accounts. In National Union Fire Insurance Company of Pittsburgh v. Advanced Employment Concepts, Inc., 269 AD2d 101, 703 NYS2d 3 (1st Dept. 2000), the issue concerned the proper bank branch upon which an attachment order may be served. A restraining order had been issued in New York against two bank accounts maintained by respondent (“AEC”) in the State of Florida. AEC had moved to vacate the order of attachment on the ground that the New York court was without authority to attach bank accounts outside of New York.
The First Department noted, to be subject to attachment, the property must be within the court’s jurisdiction (citing ABKCO, supra). “The mere fact that a bank may have a branch within New York is insufficient to render accounts outside of New York subject to attachment merely by serving a New York branch.”
The court noted “the long-standing general rule in New York that each bank is a separate entity and that in order to reach a particular bank account, the branch of the bank where the account is maintained must be served.” Although, “due to the advent of high-speed computers and sophisticated communications equipment, service of a restraining order upon a bank’s main branch is adequate,” but “only where the restraining notice is served on the bank’s main office; the main office and the branches where the accounts in question are maintained are within the same jurisdiction; and the back branches are connected to the main office by high-speed computers and are under its centralized control.” (Italics in original).
ConclusionAttachment is a useful tool to enforce a monetary judgment, but, as shown in this article, attorneys need to be very careful in alleging the “debt” and/or “property” interest of the judgment debtor in drafting restraining orders or motions seeking orders of attachment.
It is important to consider whether the circumstances in any given situation will support attachment under both CPLR 5201(a) and CPLR 5201(b), because as shown above, courts may disagree with the choice selected by the attorney and reject either, or even both, of the statutory options, leaving the client without the means of securing the benefit of its monetary judgment.
Adam Leitman Bailey is the founding partner of Adam Leitman Bailey, P.C., and John M. Desiderio is a partner and Chair of the firm’s Real Estate Litigation Group. Mikaela Mahaney, a New York Law School summer extern, assisted in the preparation of this article.
June 20, 2023
The Mystery Behind Real Estate’s Most Successful Law Firm, Adam Leitman Bailey
I first became intrigued with Adam Leitman Bailey while reading the 250th issue of The Real Deal. In it, the publisher and editor discussed a series of cases where Bailey used an “ingenious” legal weapon that caused Congress to intervene and change the law. They further noted that The Real Deal’s largest advertisers asked the publication not to cover Adam Leitman Bailey and his law firm so his legal theories would not be exposed.
A search of The Real Deal’s articles supports that point. Although many of Bailey’s cases have been covered, The Real Deal has never published a flattering feature on Adam Leitman Bailey or his firm (Adam Leitman Bailey, P.C.) despite covering many of the other leading lawyers of his generation with glowing profiles.
The more I dug, the more intriguing the story became.
In 2011, Adam Leitman Bailey was asked to participate in a major industry debate hosted by The Real Deal at Lincoln Center. Every debater that night was featured prominently in profiles in The Real Deal — except for Mr. Bailey.
A search through other New York periodicals reveals the same story. All of the major heavyweights — including The New York Times, The New York Post, The Daily News — had covered Adam Leitman Bailey’s cases and victories as front page news but never profiled or interviewed the firm. Even more mysterious was the fact that various other real estate attorneys in many of these cases had been profiled, some several times during the 20-year life of Bailey’s firm.
As I combed through the records and court documents during the 20 years the firm had been in existence, I found that in almost every facet of real estate law, Adam Leitman Bailey, P.C. has not only directly inspired new laws, but also changed the very way New York practices real estate law.
And yet, this point had never been celebrated. For the legal profession, this was unheard of.
Now I was more than intrigued. I was determined to find out Adam Leitman Bailey’s secrets to quietly becoming one of the most successful attorneys of our generation and why he had fallen under the radar — or had been shunned.
The Inner Workings of Adam Leitman Bailey, P.C.Over the last 20 years, Bailey has built the largest real estate law firm owned by one person and its 20-plus attorneys have grown organically — two thirds of the firm have been with it since law school or for over a decade.
Attorneys chosen from law school are hand-picked by a “Hunger Games” type competition where externs compete for the coveted summer associate selections and the best summer associates receive offers to join the firm.
The firm has openly shunned hiring “rich” people and desired to hire lawyers that were “hungry,” “smart,” and who were “street lawyers.” Although the firm does maintain hires from graduates of ivy-league law schools, it is far better known for recruiting from the top of the classes at local New York and New Jersey-based law schools.
Unlike most law firms, there is no requirement to bring in business. No attorney at the firm could remember an attorney ever being fired and certainly no employee or attorney had ever been fired due to an economic downturn or budget cuts. Meanwhile, attorneys are generally paid more than other law firms depending on how many hours they work, as they receive one third of the pay from the hours billed that is collected.
At the time of this writing, nearly 50 percent of the firm were females and the firm spoke several languages and represented many races, ethnicities and countries. All over their website, the firm claims to want the best lawyers, regardless of background, who will do anything to win and close the deal for their clients.
Discipline Beyond Mere MortalsWhen it came to building the best real estate law firm, Adam Leitman Bailey focused on that, and only that. He put everything else to the side.
Bailey did not have his first child until he was 44 years old; he has no vices or extravaganzas, and maintains a humble lifestyle comparable to that of a professional athlete. He exercises 7 days a week and keeps a perfect diet — and expects his attorneys to follow his example.
He loads the office with healthy food, pays for employee gym memberships and covers expenses to allow employees to work from home while raising children. During vacations he reads books on great leaders overcoming great strife to learn from their mistakes and apply it to the law.
In many ways, Adam Leitman Bailey looks at the law as conducting or preventing a war. He rises at 6am with a 4-mile run in Central Park and arrives home usually between 9–10 pm. He does not network and disdains “events” despite being social. He does not use curse words as he worries that he will slip in front of a judge.
The Art of LawyeringBailey’s high school teachers say he has been self-motivated since he was a child. His law school professors kept in touch with him as soon as he left law school expecting great things. The attorneys at Adam Leitman Bailey, P.C. give glowing remarks:
The Record
“He lives his life as if he always has something to prove to himself or someone else, which makes him reach for more every day.”
“In 19 years, I have never seen him give less than 100 percent.”
“His mind can think faster than yours or mine. He can also predict the future or steps into the future which allows him to think strategically.”
“He is a student of negotiating and takes the art very seriously and all of this together makes him a very dangerous attorney to have as an adversary.”
Adam Leitman Bailey’s intense, creative, investigative, must-win, lawyering would travel the earth to make sure his clients prevailed.
There was the case where Bailey proved that 75% of an entire building had been substantially rehabilitated without any checks or receipts — by using pictures. Or the Deutsche Bank case where Adam Leitman Bailey’s investigative lawyering team debunked a forged signature claim, forcing the Defendant’s son to recant his story and plead the fifth Amendment.
Then there was the miraculous win where Bailey defeated a claim of adverse possession by good faith purchasers, despite its client, a convicted felon, forgetting that he owned the property and abandoned it for 13 years.
In a battle that resulted in Adam Leitman Bailey having a pitchfork wielded at him by the adversary, Bailey prevailed at having a new statute applied for the first time to decide who owns a strip of land where applying the old or new statute would win or lose the case. In Hartman v. Goldman, the Hartmans had planted new foliage and claimed to have legally stolen the land as they had landscaped and moved the lawn and maintained a large piece of the property for more than 20 years.
Then there were the cases that inspired completely new laws. In the cooperative and condominium housing field, Adam Leitman Bailey won a decision where for the first time a judge forced a cooperative to conduct repairs despite a shareholder’s alleged responsibility. In another case, a New York Appellate Court represented by Adam Leitman Bailey found that the Sponsor — and not the condominium board — was obligated to cure construction defects.
As Bailey has done for most of its career, he and his firm made new law for the underdog as the Appellate Division granted standing to a non-shareholder suing a cooperative board for the first time for self-dealing and religious discrimination for illegally rejecting a Holocaust survivor.
Taking away a tenant’s right to a post-judgment ability to cure a nuisance, Adam Leitman Bailey made new law at the Appellate Division where the evidence was so overwhelming of the tenant’s nuisance conduct, post-judgment cure was deemed inappropriate because the tenant could not cure what the tenant cannot appreciate.
Further expanding the law and rent regulation rights, for the first time, the Appellate Division allowed a minor to live alone and retain the family’s rent-regulated apartment while her mother moved to California to care for her ailing parents.
In new construction cases, the firm set a new record monetarily per square foot in a settlement in the largest crane accident in New York City history. In United States Bankruptcy Court, Adam Leitman Bailey once again received a landmark decision that its client would allow the new sponsor to avoid fixing the defects left behind by the original builder — the first case of its kind.
In an otherwise ordinary case, Adam Leitman Bailey called the developer “cowboys” during oral argument for violating building protocols and damaging clients protocols, and the judge agreed, refusing to give the developer a license to access the defendant’s property.
, Adam Leitman Bailey entered pizza lore when his client, Patsy’s of Harlem, forced Patsy’s under the Brooklyn Bridge to change its restaurant’s name to Grimaldi’s.
Very few things are more famous than the Beatles. Bailey’s client, a landlord, was unable to collect a significant sum of rent debt from a tenant. When it was discovered that the tenant was selling the suit John Lennon wore on the cover of the Beatles’ “Abbey Road” album, Bailey fought for his client to collect the proceeds of the sale to pay off the judgement owed to him.
Maybe another firm could post the above results during a 20-year record — it would be hard to accomplish, but possible. But it would be impossible for another law firm to be so successful and handle such interesting and bet-the-company cases and still stay out of the public eye for 20 years.
Is Adam Leitman Bailey hated? Ignored? Boring? Or is there another reason why the media has failed to feature one of the nation’s leading law firms?
The answer is not abundantly clear. The secrets to Bailey’s success are available to those who dig, but his relationship with the media remains shrouded in mystery.
