Court dismisses as 'absurd' Sheldon Solow lawsuit.

The State Supreme Court has booted a $115 million lawsuit launched by Manhattan developer, Sheldon Solow, and has ordered him to pay the defendants' legal fees.

"Solow sets the gold standard for frivolous litigation," said Jerome Katz, a partner at law firm Chadbourne & Parke, who represented Spartan Madison Corporation, a defendant in the suit. "He's an embarrassment to the many honest and ethical real estate developers in Manhattan."

Katz estimated that Solow may have to shell out up to $I million to cover the defendants' legal fees. A lower court will decide the amount Solow may have to pay.

In the lawsuit that was launched in June, Solow accused Spartan Madison Corporation, as well as other defendants, of perpetrating a fraudulent scheme that resulted in Solow having to pay higher than market value rents at 380 Madison Avenue.

Solow had purchased a 13-year leasehold for 380 Madison, an 840K s/f class A building, whose tenants include Sprint and Men's Warehouse, from Spartan for $65 million in 2001. As part of that deal, Solow had to also pay $257 million in total rent to the building's owners, a partnership between RREEF and the New York State Common Retirement Fund called ComMet, over the 13-year period in which he held the leasehold.

One of the central allegations of Solow's suit is that the $257 million rental charge was an artificially high rate supported by an elaborate decade-long price fixing scheme between Spartan, the former leasehold owner Howard Ronson, and, eventually, by ComMet as well, which purchased ownership of the property in 1996. All three parties were named as defendants.

The suit claims that Solow purchased the leasehold interest in the property believing that Spartan had obtained the leasehold and rental agreement in an arms-length transaction with Ronson. In reality, Solow alleges, Ronson is the controller of Spartan and a subterfuge was maintained to eventually deceive a buyer of the leasehold into believing the property was being offered at a price commensurate with what the market would bear.

"We believed that this property had been negotiated between independent parties and towards the goal of achieving the best economic situation for the leaseholder," said Marc Dreier, attorney for Solow. "Obviously, Sheldon is a very sophisticated developer, but it doesn't mean that you can't be deceived. These were very experienced and savvy entities we were dealing with."

The court rejected Solow's claims, slamming not only his allegations against the defendants, but the entire legal premise of his case. The court called Solow's conspiracy theory "absurd" and indicated that it was Solow's own responsibility to enter a deal that would be commercially viable to him. Even if the defendants had committed the fraud that Solow alleged, Solow "cannot be heard to claim that the rent was inflated, or that he was induced to enter into the transaction by fraudulent omissions of fact as to his predecessors' long past acts, even if such acts may have affected the amount of rent he knowingly agreed to pay."

"The causes of action are completely without merit and, in the case of the fraud and unjust enrichment causes of action, not only are premised on an implausible, if not absurd, factual scenario, but also lack any legal basis whatsoever," Judge Marcy S. Friedman stated in a written ruling issued by the court.

"In view of the egregious frivolousness of the complaint, the court will impose the maximum allowable sanctions of $10,000 each upon plaintiff and the law firm.

Katz applauded the decision and said that the sanctions were a fitting punishment for Solow, who Katz claimed has a reputation for launching frivolous lawsuits.

"The court system needs to shut him down," Katz added.

Dreier indicated that Solow would appeal the decision and that his client's claims could have been better substantiated had the courts ordered the defendants to hand over crucial documents.

"A lot of the arguments we were trying to prove hinged on us obtaining documents from the defendants," he said. "The only way we can do that is if the court orders them released. That's what's typically done in a trial alleging a conspiracy."

Dreier expressed confidence that both he and Solow would defeat the sanctions handed down against them by the court.