2017 04:10 PM - iapps.courts.state.ny.us

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK

-------------------------------------------------------- X GENESIS REOC COMP ANY, LLC, JAZZ REAL TY II, LLC, individually and on behalf of, GENESIS REOC COMP ANY, LLC and JAZZ GENESIS II, LLC, and JAZZ GENESIS II, LLC,

Index No.: 156733/2017

Complaint Plaintiffs,

-against-

STUART D. POPPEL, ESQ., POPPEL LAW LLC, BERMAN INDICTOR & POPPEL LLP, BERMAN INDICTOR LLP, individually and as the successor in interest to BERMAN

. INDICTOR & POPPEL.LLP, CHARLES E. WILLIAMS, III; ESQ., and PECKAR & ABRAMSON PC,

Defendants. ------------------· ------------------------------------- X

Plaintiffs JAZZ REAL TY II, LLC ("Jazz Realty"), individually and derivatively on

behalf of JAZZ GENESIS II LLC ("Jazz Genesis"), and Jazz Genesis (together, "Plaintiffs"), by

and through their attorneys, RESSLER & RESSLER, complaining of the defendants STUART

D. POPPEL, ESQ., POPPEL LAW LLC, BERMAN INDICTOR & POPPEL LLP, BERMAN

INDICTOR LLP, individually and as the successor in interest to BERMAN INDICTOR &

POPPEL LLP, CHARLES E. WILLIAMS, III, ESQ., and PECKAR & ABRAMSON PC

(together, "Defendants"), hereby allege, on information and belief, as follows:

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FILED: NEW YORK COUNTY CLERK 09/29/2017 04:10 PM INDEX NO. 156733/2017

NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 09/29/2017

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NATURE OF THIS ACTION

1. This action involves claims against Plaintiffs' former attorneys, arising from

Defendants' continuous wrongs, actions and/ or series of actions in New York from 2011 through

July 2017, including Defendants' -legal malpractice, negligence, breach of fiduciary duty,

fraudulent concealment, fraudulent misrepresentation, negligent misrepresentation, tortious

interference with contract, and participation in fraud and collusion in the concealment,

misappropriation and diversion of Plaintiffs' funds, and violation of Judiciary Law §487,

culminating in Defendants advancing the interests of Karim Hutson ("Hutson") and companies

owned directly or indirectly by Hutson ("the "Hutson Affiliates''), over the interests of Plaintiffs,

and other acts that have damaged Plaintiffs in the amount of not less than $45 million, · plus

interest thereon, together with attorneys' fees and related costs in excess of $1.6 million.

THE PARTIES

2. Plaintiff Jazz Realty is a limited liability company organized and existing under

the laws of the State of Delaware, with its principal place of business located at 152 West 5?1h

Street, New York, NY 10019. Andrew Stone ("Stone") is the sole member of Jazz Realty.

3. Jazz Realty is a member of Genesis REOC Company LLC, a limited liability

company organized and existing under the laws of the State of Delaware, with its principal place

of business located at 152 West 57th Street, New York, NY 10019 ("Genesis REOC" or the

"Company"). The sole members of Genesis REOC are Jazz Realty and Genesis Member, LLC

("Genesis Member"), an entity wholly owned by Karim Hutson ("Hutson").

4. Plaintiff Jazz Genesis is a limited liability company organized and existing under

the laws of the State of Delaware, with its principal place of business located at 152 West 5?1h

Street, New York, NY 10019. The sole member of Jazz Genesis is Jazz Realty.

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5. Defendant Stuart ·D. Poppel, Esq. ("Poppel") is an individual residing at 1255

June Road Huntingdon Valley, PA 19006. At all relevant times Poppel practiced law in the State

ofNew York in connection with the transactions that are the subject of this action.

6. Defendant Poppel Law LLC is a limited liability company organized under the

laws of the State of Pennsylvania, engaged in the practice of law, whose mailing address is 1657

The Fairway, Suite 124, Jenkintown, PA 19046. Poppel isthe sole member of Poppel Law LLC.

7. Defendant Berman Indictor LLP is a limited liability partnership organized under

the laws of the State of Pennsylvania, engaged in the practice of law, with offices located at 30

North 41 st Street, Suite 450, Philadelphia, PA 19104. It is the successor in interest of defendant

Berman Indictor & Poppel LLP, a limited liability partnership organized under the laws of

Pennsylvania, with offices at the same location. (Berman Indictor LLP and Berman Indictor &

Poppel LLP are referred to collectively as "Berman Indictor"). Poppel was a member of and/or

counsel to Berman Indictor during the period in which the acts complained of occurred.

8. Defendant Charles E. Williams, III, Esq. ("Williams") is an attorney practicing

law in the State of New York, with offices located at Peckar & Abramson PC, 41 Madison

Avenue, New York, NY 10010.

9. Defendant Peckar & Abramson PC ("Pecker Abramson") is a professional

corporation organized under ·the laws of the State of New Jersey, and registered with the NYS

Department of State to conduct business in the State of New York as a foreign professional

corporation, engaged in the practice of law, with its New York offices located at 41 Madison

Avenue, New York, NY 10010. Williams was a member of or counsel to Pecker Abramson

during the period .in which the acts complained of occurred.

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JURISDICTION AND VENUE

10. This Court has jurisdiction under CPLR § 301 because Defendants conducted

business in the State of New York. Alternatively, this Court has jurisdiction under CPLR § 302

because Defendants committed tortious acts in the State of New York or without the State of

New York causing injury to Plaintiffs within the State.

11. Venue is proper in this county because the principal offices ~f the Plaintiffs are

located here, and many of the acts and events complained of occurred in this county

FACTS COMMON TO ALL COUNTS

I. Formation of the Company and the Operating Agreement

12. In late 2010, Hutson informed Stone that he was seeking a partner to invest in the

development and rehabilitation of low and moderate income housing projects backed by tax .

credit equity investors in New York and New Jersey. The stated objective for the venture was to

acquire, develop and profit from such projects by earning developer fees, construction revenues,

property level cash flow and equity appreciation in the value of the underlying real estate, among

other things. Stone agreed to pursue the venture on the terms set forth in the Agreement,

described below.

13. On January 27, 2011, the Company was formed by Stone's member entity, Jazz

Realty, and Hutson's entity, Genesis Member, LLC ("Genesis Member") by executing that

certain Limited Liability Company Agreement, dated as of January 27, 2011 (the "Agreement").

The rights and obligations of the members of the Company are set forth in the Agreement. .

14. Upon creation of the Company, Hutson was appointed Manager of the Company

and was a signatory to the Agreement in his individual capacity. The Agreement specified the

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obligations of the Manager, conferred on Jazz Realty the right to remove Hutson as Manager of

the Company for the reasons specified therein, and to appoint a replacement of the Manager for

the Company.

15. Jazz Realty was the investor partner and contributed capital to fund the

Company's investment activities, making an initial capital contribution of $416,467 and

committing to fund a further $3,000,000, subject to Jazz Realty's approval of the proposed

investment and use of funds. Hutson contributed $100.

16. The Agreement provides that Hutson, as the Manager of the Company, was

responsible for identifying suitable "Investments" for approved "Projects" as defined therein.

Hutson was required to notify Jazz Realty prior to a potential investment in a Project and obtain

his approval before any Company funds were advanced toward that Investment.

17. The Agreement further required that Hutson provide an annual proposed

operating budget and an annual proposed business plan summarizing the Company's proposed

operating expenditure and investments for approval by Jazz Realty. In the absence of an

approved operating budget, Hutson was expressly prohibited from using Company funds for

unapproved operating expenses.

18. The Agreement unambiguously prohibited Hutson from making any Investment,

advancing funds toward any Project, incurring any debt, issuing any loan on behalf ~f the

Company, or entering into any related party transactions absent Jazz Realty's prior consent to

any such transaction.

19. The Agreement expressly prohibited Hutson, as Manager, from engaging in self-

dealing and misappropriation of any of the Company's investment opportunities for himself.

Hutson was required to refer to the Company all investment opportunities in Properties ( as

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defined therein) and not refer such investments to any other party without Jazz Realty's prior

written consent. Hutson was expressly prohibited from forming any entity that would compete

with the Company in making Investments absent Jazz Realty's prior consent.

20. The Agreement required that all revenues and profits generated by the

Investments in the Projects be paid to the Company and distributed first to Jazz Realty until its

capital contributions to the Company were fully returned, and then distributed among the

members of the Company, including Jazz Realty, pursuant to a formulae specified therein. To

date, Jazz Realty has invested approximately $3.128 million in the Company, of which only

$300,000 has been returned. The rest of the revenues and profits have been improperly diverted

away from the Company and Jazz Realty, pursuant to an undisclosed scheme orchestrated by

Defendants.

II. Defendants' Legal Representation of the Company and its Members

21. Between February 2011 and December 2016, Defendants acted as counsel for

the Company and continuously represented the Company and its members, including Jazz Realty

and its affiliate Jazz Genesis, in connection with negotiating, structuring, documenting and

managing the Investments made by the Company in the Projects, and distributing revenues and

profits generated by the Investments to the Company and its inembers in accordance with the

Agreement.

22. Between· February 2011 and December 2016, in reliance on Defendants' legal,

advice, and information provided by Hutson,. Jazz Realty made capital contributions to the

Company totaling $3,128,270 to fund the Company's operations and approved Investments.

23. During this period, Hutson, with Defendants' legal assistance, induced Jazz

,. Realty's approval of Investments in certain development projects by representing to Jazz Realty

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that the Company would earn developer fees, construction revenues, and profits on the

Company's investment in those projects, to be distributed to Jazz Realty in accordance with the

Agreement,

24. At all relevant times, Defendants were aware of Jazz Realty's understanding and

repeatedly represented to Jazz Realty that each of those projects would be directly or indirectly

owned by the Company and the fees, construction revenues and profits would be paid to the

Company to be distributed to Jazz Realty in accordance with the Agreement.

III. The Y15 Project

25. The Company's largest investment was in the Yl5 Project, which is a low income

housing project in Harlem, involving the rehabilitation of 31 buildings containing more than 350

low income housing units and commercial spa~e.

26. From 2013 through 2015, Defendants represented the Company ~nd its members

in connection with the Y15 Project, negotiated, structured and documented the transaction on

behalf of the Company and its members, and directly advised Jazz Realty and its affiliate Jazz

Genesis in connection therewith.

27. Jazz Realty, in reliance on Defendants' legal advice and Hutson's optimistic

projections and statements, approved the Company's acquisition of an equity stake in the Y15

Project, based on the unequivocal understanding that the Company and its members would profit

through the appreciation of their ownership interest in the underlying properties and would also

receive developer fees and construction revenues.

IV. Jazz Realty Commits Millions to the Y15 Project and Executes Guaranties and Indemnities

28. Poppel and Williams repeatedly represented to Jazz Realty that its interests were

fully protected in the YI 5 Project because beneficial ownership in that Project was held by the

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Company, with any profits, fees and other revenues t9 be distributed to the Company's members,

including Jazz Realty, as mandated by the Agreement.

29. As a condition to closing on -the Yl5 Project the Company was required to

provide a cash infusion of approximately $252,000, as well as a guaranty for the transaction from

an entity with a minimum of $2,500,000 in liquid assets.

30. The Company and Hutson lacked sufficient assets to satisfy these requirements on

its own, and advised that it would be unable to close on the transaction absent a multimillion

dollar cash infusion by Jazz Realty. Defendants and Hutson requested that Jazz Realty make

that cash infusion and provide that guaranty.

31. Based upon assurances from Poppel and Williams that the investment in the YI 5

Project was being made for the benefit of the Company and its members, in June 2015 Jazz

Realty agreed to their requests by making a cash transfer of approximately $252,000, causing its

affiliate Jazz Genesis to provide that guarantee, and by making a further transfer of $2,500,000 to

backstop that Jazz Genesis guaranty.

32. Based on advice from Poppel and Williams, and at the request of Hutson, Jazz

Realty permitted Poppel to set up a new subsidiary, Jazz Genesis, to act as guarantor and

indemnitor to support the Company's investment in the Yl5 Project. Jazz Realty then advanced

more than $2.5 million in funds to support those guaranties and indemnities.

33. Based on Poppel's legal advice that such steps were required to consummate the

transaction, Jazz Realty permitted Poppel to form Jazz Genesis (with Jazz Realty as its sole

member), to act as guarantor and indemnitor of the Y15 Project. Poppel drafted the guaranty and

indemnity agreements, and expressly assured Jazz Realty that its interests were adequately

protected by the Company's beneficial ownership stake in the Y15 Project, and by the

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Company's right to receive developer and construction revenue from the Y15 Project. Williams

gave the same assurances.

34. Having successfully obtained Jazz Realty's funding and guaranty commitments,

the Y15 transaction closed on June 24, 2015.

V. Defendants and Hutson Secretly Set Up the Y15 Owner Entities, Wholly-Owned by Hutson, to Collect the Benefits of the Yl5 Project

35. Incredibly, however-and unknown to Jazz Realty until many months later-

Defendants and Hutson structured ownership of the Y15 project such that the benefits would

flow directly to Hutson' s wholly-owned companies, the Hutson Affiliates, rather than the

Company. In fact, the transaction was structured and documented by Defendants such that no

benefits from the Y15 project would flow to the Company, Jazz Realty or Jazz Genesis

whatsoever. I

36. Defendants had created an elaborate structure to divert the Y15 Project from the

Company and its members, including Jazz Realty and its affiliate Jazz Genesis.

37. At no point in their numerous communications with Stone, in which Poppel and

Williams summarized the structure of the Y15 Project and the benefits to the Company and Jazz

Realty, did they disclose that newly formed entities would be created for Hutson's sole benefit or \

that Hutson's new entities would become the sole beneficial owner of the Y15 Project and the

recipient of all revenues generated from the Yl 5 Project, and that none of those benefits would

go to the Company or Jazz Realty.

VI. Jazz Realty Discovers the Fraudulent Scheme

38. In January 2016, Jazz Realty discovered for the first time that Defendants had

established a fraudulent scheme to divert the benefits of all the Investments made by the

Company to a maze of entities, wholly owned by Hutson.

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39. Unbeknownst to Jazz Realty at the time, Williams and Poppel were using their

positions as attorneys for the Company to further Hutson's interest at the expense of the

Company and Jazz Realty. Instead of seeking to protect the interests of the Company and its

members, including Jazz Realty, in the projects at issue, Defendants structured the transaction

and drafted transactional documents that deprived Company and Jazz Realty of any beneficial

interest in the projects and diverted the economic benefits to Hutson. While Poppel and

Williams were structuring these transactions, · they never revealed any conflict of interest to

Plaintiffs or sought a waiver of same.

40. Unbeknownst to Jazz Realty, this fraudulent scheme was not limited to the Y15

Project, and extended to all Investments made by the Company after its formation. Jazz Realty

learned that, from and after 2011, Defendants had structured all qf the Company's transactions

such that all economic benefits from the subject Investments would flow to Hutson's wholly

owned entities, and not to the Company. Defendants effectively made Hutson the owner of all

such benefits, at the expense of the Company and its members.

41. The web of companies created by Defendants for the benefit of Hutson, gave

Hutson complete ownership of all the developer fee rights and other economic benefits that

flowed from the Projects, leaving the Company and Jazz Realty with no protections whatsoever.

Defendants deliberately structured the subject transactions so that the Company would have no

contractual right to receive any economic benefits from the Company's Investments in the

Projects.

42. From and after 2011, Hutson, with Defendants' knowing assistance, induced Jazz

Realty to approve multiple additional projects by representing that the Company would earn

developer fees and construction revenues. Those-Projects include the Company's Yl5 Project,

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Somerset Project, Cornerstone II Project, Ocean Project, and other investments. Unbeknownst to

Jazz Realty, Defendants structured those transactions so as to divert all economic benefits

generated by the Projects to Hutson-. and away from the Company and Jazz Realty.

43. Hutson, with Defendants' knowing assistance, induced Jazz Realty to approve the

Company's investment in those Projects based on fraudulent budgets and business plans, which

failed to disclose that the economic benefits of these transactions would inure solely to Hutson's

benefit and not the Company or its members. Instead, those budgets and business plans falsely

stated that those economic benefits would flow directly to the Company, even though Defendants

had deliberately structured them for Hutson's sole benefit.

44. Hutson, with Defendants' knowing assistance, induced Jazz Realty to approve

budgeted operating expenses based upon fraudulent budgets, which failed to disclose that Jazz

Realty's capital contributions, together with the revenues generated by the Projects, were being

diverted to pay the operating expenses, including employee salaries, rent, and executive benefits,

of Hutson's web of wholly-owned companies. None was being used to pay operating expenses

of the Company. The employees identified on the budgets did not, in fact, work for the

Company. Instead, they worked for Hutson's wholly-owned companies, being paid with funds

advanced by Jazz Realty.

45. Hutson, with Defendants' knowing assistance, also caused the Company to make

undocumented loans to one of Hutson' s companies called Genesis Companies LLC, with no

specified written terms, without Jazz Realty's knowledge or consent. Under this fraudulent

scheme, Hutson's Genesis Companies LLC then used those undocumented loans for investment

in the Projects, with Defendants structuring the transactions such that all economic benefits

flowing from those Projects went solely to Hutson and his web of wholly-owned entities. In

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short, these undocumented loans, orchestrated by Defendants and Hutson, were made by the

~ompany with Jazz Realty's funds, for no consideration at all.

46. The developer fees, other revenues, and equity interests in those Projects, which

have been diverted to Hutson and his companies, total not less than $45 million, plus interest.

Of that amount, at least $2 million in fees and other revenues from the Projects was diverted

between 2011 and 2016, which should have been repaid directly to Jazz Realty under the

Agreement, thus increasing Jazz Realty's invested capital of $2.8 million to approximately $4.8

million. Additional funds have been improperly diverted from the Company in 2017. The

transactions that diverted those assets were orchestrated and structured with Defendants'

knowing assistance, in derogation of the terms of the Agreement and in flagrant disregard of

Defendants' professional obligations to the Company and Jazz Realty.

47. In February 2016, Hutson, with Defendants concurrence, advised Jazz Realty that

none of the diverted funds and none of the profits realized on the equity interests in the Projects

would be paid to the Company and/or distributed to Jazz Realty and, instead, would be used

solely to fund Hutson's wholly-owned web of companies. Defendants advised Jazz Realty that,

notwithstanding their prior assurances to the contrary, the transactions had been structured to

divert everything to Hutson, leaving the Company and Jazz Realty with nothing.

VII. Defendants Represent Hutson and the .Hutson Companies in Litigation Adverse to Plaintiffs

48. In December 2015, Plaintiffs and the Company commenced an action against

Hutson and the Hutson Affiliates in this Court, (i) seeking to recover the Projects for the benefit

of the Company and its members (including ownership interests in the Projects and all fees,

revenues and profits generated by the Projects); and (ii) asserting claims against Hutson for

breach of fiduciary duty, fraud, misappropriation and conversion of corporate assets, fraudulent

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transfer, and fraud. At the same time, Plaintiffs sought an injunction that would preclude Hutson

and the Hutson Affiliates from continuing to divert funds generated by the Projects away from

the Company. That action is entitled Genesis REOC Company, LLC, Jazz Realty II, LLC and

Jazz Genesis II, LLC. v. Genesis Companies LLC, et al. (No. 65670316) (the "Injunction

Action").

49. Without seeking or obtaining a waiver of their conflict of interest from Plaintiffs

or the Company, Wiliiams and his law firm appeared on behalf of Hutson and the Hutson

Affiliates in opposing the relief sought. Without seeking o~ obtaining a waiverof his conflict of

interest from Plaintiffs or the Company, Poppel also assisted Hutson and Williams in opposing

the relief sought.

50. On February 6, 2017, the Court found. that there was a likelihood of success on

the merits of Plaintiffs' claims to an enforceable interest in the Projects, and entered an

injunction against Hutson and the Hutson Affiliates, enjoining them from transferring and/or

disposing of any income or other profits or gains or monies of any kind received from the

Projects at issue, and directing them to preserve all such monies of any kind received from such

projects, provided that Hutson and the Hutson Affiliates were permitted to transfer or dispose of

such monies with Plaintiffs' written consent (the "Injunction").

51. The claims against Hutson were referred to arbitration, and the balance of the

action against the Hutson Affiliates was stayed pending the outcome of that arbitration. ·

52. Without seeking or obtaining a waiver of their conflict from Plaintiffs, Williams

and his law firm were attorneys of record for Hutson in the arbitration, and Poppel also assisted

Hutson and Williams in the arbitration-seeking to establish that Hutson and the Hutson

· Affiliates should obtain the benefits of the Investments, rather than the Company and Jazz

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Realty, and asserting claims against Jazz Realty for the benefit of Hutson and the Hutson

Affiliates.

· VIII. Plaintiffs Legal Malpractice Action

53. This action was commenced by the filing of a Summons with Notice on July 26,

2017.

54. Shortly after the filing of the Summons with Notice, Hutson advised the

Arbitrator that Poppel and Williams had resigned as counsel for Hutson and his affiliated

companies.

FIRST CAUSE OF ACTION LEGAL MALPRACTICE AND/OR NEGLIGENCE

55. Plaintiffs repeat and re-allege the allegations contained m the preceding

paragraphs of this complaint and incorporate such paragraphs by reference.

56. Defendants continuously represented the Company and its members, including

Jazz Realty and its affiliate, Jazz Genesis, in connection with negotiating, structuring,

documenting, and managing the investments made by the Company in the Projects, including the

YI 5 Project, and distributing the proceeds thereof to the Company and its members in

accordance with the Agreement. \

57. Defendants provided direct legal advice to the Company, Jazz ~ealty and its

affiliate, Jazz Genesis regarding the Projects, including the Y15 Project and the financing and

guaranties provided by Jazz Realty and Jazz Genesis to such Projects.

58. Defendants held themselves out to Plaintiffs as representing the Company and its

members,· including Jazz Realty and its affiliate, Jazz Genesis.

59. Defendants negligently performed that representation by, among other things, (i)

structuring the Company's investments, including Y15 Project and the other Projects referenced

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above, so that the benefits would flow to Hutson and the Hutson Affiliates rather than to the

Company, (ii) misrepresenting to Plaintiffs that the benefits of these transactions would flow to

the Company for the benefit of its members, including Jazz Realty and it affiliate, Jazz Genesis,

and (iii) otherwise advancing the interests of Genesis Member LLC, Genesis Companies LLC,

Hutson and/or the Hutson Affiliates over the interests of the Company and its members,

including Jazz Realty and its affiliate, Jazz Genesis.

60. Defendants performed that representation subject to an undisclosed conflict of

interest and never sought nor obtained a waiver of that conflict from the Company or from

Plaintiffs.

61. As set forth above, Defendants failed to exercise that ~egree of care, skill and

diligence commonly exercised by a member of the legal profession.

62. Defendants' legal malpractice and/or negligence in providing legal services

caused Plaintiffs to (i) transfer millions of dollars to the Company to fund Projects that benefitted

Hutson and the Hutson Affiliates, with no benefit accruing to the Company and its members, (ii)

expose itself to millions of dollars in liability on the Y15 Project while its profits flow directly to

Hutson and the Hutson Affiliates, with no benefit accruing to the Company and its members,

and (iii) incur in excess of $1.6 million in legal fees and related costs to protect their interest in

the Company and the Projects.

63. As a result of the foregoing, Plaintiffs have been damaged in an amount not less

than $45 million, plus interest thereon, and attorneys fees and related costs in excess of $1.6

million.

64. But for the Defendants' legal malpractice and/or negligence, Plaintiffs would not

have suffered said damages.

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SECOND CAUSE OF ACTION BREACH OF FIDUCIARY DUTY



66. As counsel to the Company, Defendants owed the highest duties of loyalty, good

faith and fair .dealing to the Company and its members, including Jazz Realty and its affiliate

Jazz Genesis. In directly providing legal advice to Jazz Realty, as counsel to Jazz Realty,

Defendants owed the highest duties of loyalty, good faith and fair dealing to Jazz Realty.

67. Defendants breached their fiduciary duties to the Company and Jazz Realty by

structuring the Company's investments, without Plaintiffs knowledge or consent, so that the

benefits accrued solely to Hutson and the Hutson Affiliates, and not to the Company and its

members, including Jazz Realty and its affiliate Jazz Genesis, in contravention of the Agreement,

and by failing to disclose to Plaintiffs their conflicts of interest.

68. Defendants breached their fiduciary duty by representing Hutson and his wholly-

owned Hutson Affiliates in litigation adverse to the Company and the Plaintiffs. Defendants ) .

undertook this adverse representation without seeking or obtaining a waiver of their flagrant

conflict of interest from the Company or the Plaintiffs.

69. As a result of Defendants' flagrant breach of fiduciary duty, Plaintiffs have (i)

been deprived of millions of dollars in capital and revenues from the Projects, in an amount to be

proved at trial, (ii) induced to transfer millions of dollars to the Company to fund Projects that

benefitted Hutson and the Hutson Affiliates, with no benefit accruing to the Company and its

members, (iii) exposed Plaintiffs to millions of dollars in liability on the Yl 5 Project, even

though the benefits from the Y15 Project now flow directly to Hutson and the Hutson Affiliates,

with no benefit accruing to the Company and its members, and (iv) been compelled to incur in

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excess of $1.6 million in legal fees and related costs to protect their interest in the Company and

the Projects.

70. As a result of the foregoing, Plaintiffs have been damaged in an amount not less

than $45 million, plus interest thereon, and attorneys fees and related costs in excess of $ L6

million.

THIRD CAUSE OF ACTION FRAUDULENT CONCEALMENT

71. Plaintiffs repeat and re-allege the allegations contained in the preceding


72. Defendants owed Plaintiffs a duty to disclose the material facts concerning the

Company, the Projects and the use of funds, including the fact that: (i) the Projects, including

the Y15 Project, had been structured so that the equity, fees and other benefits generated from

the Project accrued solely to Hutson and the Hutson Affiliates, and not to the Company and its

members, including Jazz Realty and its affiliate Jazz Genesis; (ii) Jazz Realty's capital

contributions were being siphoned off by Hutson to the Hutson Affiliates and the Projects under

the .guise of undocumented, unauthorized purported loans, and to pay for the operations of the

Hutson Affiliates; (iii) the various business plans and proj_ections presented to Jazz Realty were

misleading and concealed the fact that the Projects had been structured so as to divert the

benefits of the Projects, including the YI 5 Project, to Hutson and the Hutson Affiliates, and

away from the Company and· its members, including Jazz Realty; (iv) Jazz Genesis's guarantees

and indemnities, supported by Jazz Realty's funding, would inure to the benefit of Hutson and

the Hutson affiliates and not the Company, Jazz Realty or Jazz Genesis; and (v) the

representations made to Jazz Realty and Jazz Genesis that the Company held a beneficial

ownership interest in the YI 5 Project were false.

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73. Defendants owed Plaintiffs a duty to disclose the material fact, that they were

advancing the interests of Hutson and the Hutson Affiliates over the interests of the Company

and its members, including Jazz Realty and its affiliate Jazz Genesis.

74. Defendants had knowledge of these material facts and failed to disclose them,

with the intent that Jazz Realty would continue to approve the Projects and their operating

budgets, continue to advance funds to support the Projects, form Jazz Genesis to guarantee the

Y15 Project, fund that guarantee, and expose itself to liability in connection with the Y15

Project.

75. Plaintiffs acted in justifiable reliance on Defendants' concealment and were

damaged as a result, in an amount not less than $ 45 million, plus interest thereon, and attorneys

fees and related costs in excess of $1.6 million.

FOURTH CAUSE OF ACTION FRAUDULENT MISREPRESENTATION



77. Defendants made misrepresentations of material fact, with knowledge of the

falsity of those representations, assuring Jazz Realty via Mr. Stone that (i) the equity in the

Projects, including the Yl 5 Project, were beneficially owned by the Company; (ii) the Company

had the right to receive the fees and other revenues generated by the Projects, including the Y15

Project; and (iii) the interests of Jazz Realty and Jazz Genesis were protected because the

Company's Investments in the Projects, including the Y15 Project, were structured to protect the

Company's beneficial ownership of the Projects.and preserve the Company's right to receipt of

fees and other revenues from the Projects.

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78. Defendants rnade those misrepresentations of material fact with the intent that

Plaintiffs rely on them so that Jazz Realty would continue to approve the Projects and operating

budgets, continue to advance funds to support the Projects, cause Jazz Genesis to guarantee the

Y15 Project, and fund that guarantee.

79. Plaintiffs justifiably relied on those misrepresentations in approving the Projects

and operating budgets, advancing funds to the support the Projects, guaranteeing the Y15

Project, and were damaged as a result, in an amount not less than $45 million, plus interest

thereon, and attorneys fees and related costs in excess of $1.6 million.

FIFTH CAUSE OF ACTION NEGLIGENT MISREPRESENTATON



81. Defendants acted with negligence and/or gross negligence m making the

misrepresentations of material fact to Plaintiffs identified above.

82. Defendants advised Plaintiffs to rely on those statements, and knew or reasonably

should have known that Plaintiffs would rely on those statements in approving the Projects and

operating budgets, advancing funds to support the Projects, guarantying the Y15 Project, funding

that guaranty, and exposing themselves to liability in connection with the Y15 Project.

83. Defendants knew or should have known that, when those statements were made,

Plaintiffs reasonably believed the Defendants were acting in the best interest of the Company and

its members, including Jazz Realty and its affiliate Jazz Genesis, and were not advancing the

interests of Hutson and the Hutson Affiliates over the interests of the Company and its members.

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84. Plaintiffs justifiably relied on those misrepresentations in approving the Projects

and operating budgets, advancing funds to the support the Projects, guaranteeing the Yl 5

Project, and were damaged as a result, in an amount not less than $45 million, plus interest

thereon, and attorneys fees and related costs in excess· of $1. 6 million.

SIXTH CAUSE OF ACTION UNJUST ENRICHMENT

85. Plaintiffs repeat and re-allege · the allegations contained m the preceding


86. Plaintiffs conferred numerous benefits on Defendants in the form of directly and

indirectly funding legal fees paid to them by the Company, Hutson, Genesis Member, Genesis

Companies LLC, and/or the other Hutson Affiliates, as described in the preceding paragraphs.

87. Defendants knew Plaintiffs' funds were used to pay Defendants' legal fees

incurred in connection with the transactions that are the subject of this action, which advanced

the interests of Hutson, Genesis Member, Genesis Companies LLC, and/or the other Hutson

Affiliates over the interests of Plaintiffs.

88. Defendants knew that. Plaintiffs understood and expected that any funding

provided from Plaintiffs for the payment of legal fees would be used for legal services rendered

on behalf of the Company and its members, including Jazz Realty, and not used to advance

interests adverse to Plaintiffs.

89. Defendants never sought or obtained from Plaintiffs a waiver of their conflicts,

nor did Defendants obtain Plaintiffs' consent to funding Defendants' legal fees incurred in

connection with advancing the interests of Hutson, Genesis Member, Genesis Companies LLC,

and/or the other Hutson Affiliates over the interests of Plaintiffs.

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90. Defendants retained those legal fees funded by Plaintiffs without rendering

services for Plaintiffs' benefit.

91. Defendants have been unjustly enriched, at Plaintiffs' expense, from Defendants'

receipt of such legal fees, and it would be against equity and good conscience to permit

Defendants to retain that unjust enrichment.

92. By reason of the foregoing, Plaintiffs are entitled to recover damages measured by

the full value of all fees and other benefits paid to Defendants by Hutson, Genesis Member, the

Genesis Companies LLC, and/or the other Hutson Affiliates

SEVENTH CAUSE OF ACTION TORTIOUS INTERFERENCE WITH CONTRACT



94. The Agreement constitutes a valid contract among the Company, Jazz Realty as a

member of the Company, Genesis Member as a member of the Company, and Hutson

individually as the Manager of the Company. .

95. Defendants had knowledge of the Agreement.

96. Defendants intentionally procured Hutson's breach of the Agreement without

justification.

97. Hutson breached the Agreement, with Defendants' active assistance.

98. As a result, Plaintiffs suffered damages in an amount not less than $45 million,

plus interest thereon, and attorneys fees and related costs in excess of $1.6 million.

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EIGHTH CAUSE OF ACTION VIOLATION OF JUDICIARY LAW §487



100. As set forth above, on February 6, 2017, this Court entered the Injunction against

Hutson and the Hutson Affiliates, enjoining them from transferring and/or disposing of any

income or other profits or gains or monies of any kind received from the Projects at issue, and

directing them to preserve all such monies of any kind received from such projects, provided that

Hutson and the Hutson Affiliates were permitted to transfer or dispose of such monies with

Plaintiffs'. written consent.

101. The purpose of the Injunction was to maintain the status quo, and protect

Plaintiffs' interests in those funds, pending the resolution of Plaintiffs' claims against Hutson and

the Hutson Affiliates.

102. Plaintiffs have a financial interest in the funds protected by the Injunction.

103. In derogation of that Injunction, Hutson, with the assistance of Williams and

Poppel, has continued to expend Project related monies on operations of the Hutson Affiliates,

which are unnecessary to completing the approved Projects-without Plaintiffs consent-and to

conceal the full extent of.that diversion from Plaintiffs.

104. Plaintiffs advised Williams and Poppel of their objection to such unauthorized

expenditures, and urged them to cause Hutson to cease and desist. Defendants refused, and

Hutson has continued to siphon monies from the Projects to pay his expenses and the expenses of

the Hutson Affiliates (unrelated to the completion of the Projects at issue), without Plaintiffs'

consent, and to conceal the full extent of that diversion from Plaintiffs.

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105.. Williams and Poppel, with actual knowledge of the Injunction, assisted, colluded

and/or consented to Hutson's diversion of funds from the Projects to pay the expenses of the

Hutson Affiliates (unrelated to the completion of the Projects at issue), without Plaintiffs'

consent, and to conceal the full extent of that diversion of funds from Plaintiffs.

106. Williams and Poppel engaged in the foregoing conduct with the intent to deceive

Plaintiffs, who are parties to the pending !~junction Action. This intentional and egregious

conduct by Williams and Poppel is part of a pattern of their deceptive conduct set forth above in

this complaint.

107. Williams has admitted that, after entry of the Injunction, funds from the Projects

at issue have been diverted to pay for Hutson' s operations and the operations of the Hutson

Affiliates, however, Williams has concealed the full extent of that diversion of funds from

Plaintiffs.

108. Approximately $4.686 million in developer fees and construction r~venue have

been generated from the subject Projects from and after entry of the Injunction.

109. A substantial portion of the funds received has been improperly diverted, and

expended on Hutson's operations and the operations of the Hutson Affiliates, without Plaintiffs'

consent and in derogation of the Injunction (the "Diverted Funds"), damaging Plaintiffs as a

result.

110. Under New York Judiciary Law §487, Plaintiffs are entitled to recover from

Williams and Poppel, and their respective law firms, the total amount of Diverted Funds, to be

determined at trial, plus interest, costs and attorneys' fees, and that total trebled.

WHEREFORE, Plaintiffs respectfully request this Court to enter judgment against

Defendants, and that:

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(i) Compensatory, general and consequential damages, including the return of all

invested capital and all profits earned in connection with the investments and all equity value

associated therewith, in an amount to be determined at trial, not less than Forty Three Million

Dollars ($45,000,000), plus interest thereon, and attorneys' fees and related costs incurred in

connection with Plaintiffs' efforts to recover the diverted assets, in an amount to· be determined

at trial, not less than One Million Six Hundred Thousand ($1,600,000).

~. (ii) Damages pursuant to Judiciary Law §487 equal to the total amount of the

Diverted Funds, to be determined at trial, plus interest, costs and attorneys' fees, and that total

trebled;

(iii) Punitive damages in an amount to be determined at trial;

(iv) An Order directing Defendants to disgorge all amounts by which they have been

and will be unjustly enriched, directly or indirectly, including all compensation and/or other

financial benefits that have been paid to them, and/or will be paid to them, by Genesis

Companies LLC, Hutson and/or the Hutson Affiliates, in connection with the transactions that

are the subject of this action; and

(v) An Order granting to Plaintiffs such other and further relief as this Court shall

deem just, together with the costs and disbursements of this action.

Dated: September 29, 2017

Bruce J. 48 Wall Street New York, NY 10005 (212) 695-6446 Attorneys for Plaintiffs Jazz Realty II, LLC and Jazz Genesis II LLC

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SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK

---------------------------------------------------- -------------X GENESIS REOC COMP ANY, LLC, JAZZ REAL TY II, LLC, INDIVIDUALLY AND ON BEHALF OF, GENESIS REOC COMP ANY, LLC AND JAZZ GENESIS II, LLC, AND JAZZ GENESIS H, LLC,

Plaintiffs,

-against-

STUART D. POPPEL, ESQ., POPPEL LAW, LLC, BERMAN INDICTOR & POPPEL, LLP, BERMAN INDICTOR LLP, INDIVIDUALLY AND AS THE SUCCESSOR IN INTEREST TO BERMAN INDICTOR & POPPEL LLP, CHARLES E. WILLIAMS, III, ESQ. AND PECKAR & ABRAMSON PC,

Defendants. ________________________________________________________________ (_x

Index No.: 156733/2017

COMPLAINT

RESSLER & RESSLER Attorneys for Plaintiffs

48 Wall Street New York, NY 10005 Phone: (212) 695-6446 Fax: (212) 268-0287

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Documents

2017 04:10 PM - iapps.courts.state.ny.us