The owners of a Hell’s Kitchen building that counts LeBron James and Arnold Schwarzenegger as investors are off the hook in a messy lawsuit that revealed a contractor’s sneaky scheme.
A state appeals court ruled unanimously in favor of Georgetown 11th Avenue Owners and voided $11 million of mechanic’s liens placed against 787 11th Avenue.
The Appellate Division also ruled that the contractor, J.T. Magen, committed fraud by falsifying records “as part of an undisclosed side-deal scheme designed to obtain Georgetown’s release of certain funds” to auto dealership company BICOM, a tenant, according to the ruling from Justice Joel Cohen.
Georgetown Company had been renovating the building when BICOM filed for bankruptcy in 2017. The move led to litigation between contractors and the ownership group, which also includes hedge fund billionaire Bill Ackman. Ackman’s Pershing Capital Management occupies two upper floors of the building.
The contractors placed the mechanic’s liens against the building and falsified documents in an effort to recover money they claimed to be owed for the construction of the dealerships, the court found.
But Georgetown and Nissan — the leaseholder of one of the dealerships — countersued, saying the contractors were “engaged in a coordinated scheme to execute a fraudulent lien waiver to obtain millions of dollars.”
A state Supreme Court judge ruled in favor of Georgetown and Nissan in 2022 and the appellate panel upheld the ruling 5-0 this week.
Because the ruling was unanimous, the losers do not have an automatic right to appeal to the state Court of Appeals, meaning their case is highly unlikely to reach the high court. Instead, a jury will decide how much J.T. Magen must pay Georgetown in damages.
Mark Ressler and Joshua Hollander, attorneys with Kasowitz Benson Torres who represented Georgetown, declined to comment. Y. David Scharf, the attorney for J.T. Magen, did not immediately respond to a request for comment.
Ackman and Georgetown were looking to unload the building, which they bought in 2015 for more than $255 million.
The building has since received more than $100 million in improvements. A group of celebrities in 2018 jumped in. James, Schwarzenegger, Jimmy Iovine and Boston Red Sox chairman Tom Werner were all identified as investors in the building, though the values of their investments were not clear.