In 99th Ave. Holdings, LLC v Schatz 2025 NY Slip Op 30979(U) March 13, 2025 Supreme Court, New York County Docket Number: Index No. 151688/2024 Judge: Emily Morales-Minerva defendant attorney argued that he was the transactional attorney for negotiations by a business owner with the landlord, and that once trial counsel was hired, he was no longer subject to “continuing representation. On this motion, he lost the argument. That may eventually change on summary judgment.

“On or about April 20, 2015, plaintiff, 99TH AVENUE HOLDINGS, LLC (plaintiff), entered into a Lease Agreement (the Lease) with non-party New York Communications Center Associates, LP, (Landlord) for the premises located at 350 West 50th Street, New York, NY, ground-floor, operated as TMPL Gym (the Gym) (see New York State Court Electronic Filing System [NYSCEF] Doc. No. 26, Lease) . Pursuant to Paragraph 78 of the Lease, entitled “Landlord’s Contribution”, Landlord agreed to reimburse plaintiff up to $3,750,000.00 for renovation costs — tenant improvement funds” — incurred by plaintiff within the first year of the lease term (see id. at 1 78 [A]). The Lease further provided as follows:

{C) [Landlord] shall pay t o [plaintiff] the remaining 10% [$375,000.00] of the [$3, 750,000.00] promptly following the later to occur of the date ( i) [plaint iff] opens for business to the general public in the demised premises and ( ii) [plaintiff] shall deliver to Landlord all Building Department Filing document s, permit s, and approvals, or such other evidence reasonably satisfactory to Landlord that the work is i n compliance with the Law [] ” (D) Notwithstanding the foregoing, [plaintiff’ s ] right t o collect Landlord’s Contribution shall exist only with respect to costs actually incurred by Tenant within the first year of the Term [], and to t he extent not utilized within such period, Landlord’ s Contribution shall be deemed waived by Tenant and Landlord shall be under no further obligation to make any further payments to Tenant [] . ” (id.). In October of 2016, plaintiff and non-party TSI Hell ‘s Kitchen, LLC (TSI) entered into discussions to sell the Gym to TSI (see NYSCEF Doc. No . 002, Complaint). Plaintiff retained defendant LARRY H SCHATZ (defendant) to represent plaintiff for t he purposes of this sale (see i d. ) . In accordance with t he sal e, defendant drafted and negotiated an Asset Purchase Agreement (APA) and Assignment and Assumption of Lease {Assignment) on behalf of plaintiff. On or about November 22, 2017, plaintiff, represented by defendant, and TSI entered into t he APA and Assignment (see NYSCEF Doc. No. 003 , APA, dated November 22, 2017; see also NYSCEF Doc. No. 004, Assignment, dated December 11, 2017). Defendant a l so drafted and negotiated a Consent Agreement, entered into between plaintiff and Landlord on December 12, 2017 (see NYSCEF Doc. No. 004, Consent Agreement, dated December 12,2017}. The Consent Agreement required plaintiff to “obtain a temporary certificate of occupancy (TCO} in connection with certain alterations performed by tenant [plaintiff] in the premises in respect of the permitted use” (id. at~ 3[a]}. It also provided that, “failure of [plaintiff] to have obtained the TCO as of the date of this Consent . . shall not be deemed to be a default under the Lease, provided and on the condition, that [plaintiff] shall promptly undertake and proceed with diligence to obtain such TCO” (id.). Pursuant to the same, plaintiff was required to give $250,000.00 to Landlord to hold in escrow until plaintiff obtained the TCO (see id. at~ 3 [b)} 2 Thereafter, in accordance with the Consent Agreement, plaintiff deposited $250,000.00 with Landlord, who had also held the $375,000.00, representing ten percent of the $3,750,00.00 owed to plaintiff for renovation expenses (the TI Funds) (see NYSCEF Doc. No. 002, Complaint). In total, Landlord retained $625,000.00. On or about September 22, 2020, the City of New York issued the TCO with an effective date of September 29, 2020 (see NYSCEF Doc. No. 005, TCO, dated September 29, 2020). However, Landlord refused to release the $625,000.00 to plaintiff because TSI had failed to make rent payments pursuant to the Lease, which plaintiff had assigned to TSI (see NYSCEF Doc. No. 002, Complaint) . On October 8, 2020, defendant demanded that Landlord release the TI Funds “of $375,000.00 as a final payment of [the] Tenant Improvement Allowance due to [plaintiff] plus the sum of $250,000.00 as security for the issuance of a TCO [] which has been issued” (NYSCEF Doc. No. 006, Demand Letter, dated October 08 , 2020) . Landl ord refused to release the funds. Consequent ly, on October 26, 2020, plaintiff commenced an action against TSI and Landlord to recover, among other things, the $625,000 .00 in funds all egedly belonging to plaintiff (see 99th Avenue Holdings , LLC v TSI Hell’s Kitchen LLC, New York Communications Center Associates, LP, SL Green Management, LLC a nd RXR Realty LLC, Index No . 655667/ 2020 [A. Engoron, J .S.C.] [Sup Ct, NY Cnty] [TSI Litigation] ) . Plaintiff retained non-party Thomas Shanahan, Esq. (TSI Litigation counsel), to represent it in the TSI Litigation. Throughout the TSI Litigation, TSI Litigation counsel and plaintiff continued to confer with defendant (see NYSCEF Doc. No . 18, Email Exchanges between plaintiff, defendant, and TSI litigation counsel, dated November 5, 2020, through October 5, 2021). Though plaintiff successfully recovered the $250, 000. 00, the court (A . Engoron, J.S.C.) declined to award plaintiff the remaining $375,000.00 (see NYSCEF Doc. No. 12, TSI Litigation Decision and Order, dated September 05, 2023).”

“Here, on October 8, 2020, defendant demanded that Landlord release the $625,000.00 to plaintiff, which Landlord refused to do (see NYSCEF Doc. No. 006, Demand Letter, dated October 8, 2020). Thereafter, on October 26, 2020, plaintiff commenced the TSI Litigation against Landlord to recover the $625,000.00, and retained new counsel to represent it in that proceeding. As a general rule, the retention of the TSI Litigati on counsel ended the attorney-client relationship between plainti ff and defendant (see Steinberg v Schnapp, 73 AD3d 171, 176 [1st Dept 2010]; see also Cohen v Grainer, Tesoriero & Bell , 81 NY2d 655, 658 [1993] Cerio v Koldin, 289 AD2d 1080 [4th Dept 2001) [finding that attorney-client relationship ceased to exist when plaintiff retained new counsel). Therefore, defendant avers that the l egal malpractice cause of action accrued on or before October 26, 2020, and this action, commenced on February 25, 2024, is barred as untimely. However, plaintiff alleges that defendant conti nued to confer with plaintiff and TSI Litigation counsel, as well as provide legal advice and defense strategies, throughout the entirety of the TSI Litigation, thereby tolling the statute of limitations pursuant to the continuous representation doctrine. “The continuous representation doctrine tolls the statute of limitations . where there is a mutual understanding of the need for further representation on the specific subject underlying the malpractice claim” (Zorn v Gilbert, 8 NY3d 933, 934 [2007] quoting McCoy , 99 NY2d at 306). “For the continuous representation doctrine t o apply t o an action sounding in legal malpractice, there must be clear indicia of an ongoing, continuous, developing and dependent relationship between the client and the attorney, which often includes an attempt by the attorney to rectify the alleged act of malpractice” (LavelleTomko v Aswad & Ingraham, 191 AD3d 1142, 1145 [3d Dept 2021] quoting Intl. Electron Devices (USA) LLC v Menter, Rudin & Trivelpiece, P.C., 71 AD3d 1512, 1513 [4th Dept 2010]).”

“At this juncture, particularly because plaintiff retained new counsel in the TSI Litigation, the court can not determine whether the continuous representation doctrine tolled the statute of limitations. There are issues of fact as to whether defendant’s conferral with plaintiff and TSI Litigation counsel from October 22, 2020, through October 5, 2021, constitutes an attempt to rectify the alleged malpractice; whether there was a clear delineation of an ongoing and continuous relationship between plaintiff and defendant, and mutual understanding of the same; and whether the sale of the Gym and the TSI litigation were part of a continuing, interconnected representation (see Red Zone LLC v Cadwalader, Wickersham & Taft LLP, 27 NY3d 1048, 1050 [2016] [finding that questions of fact exist regarding whether the statute of limitations was tolled by the continuous representation doctrine in light of “the absence of any clear delineation of the period of such representation and “the changed nature of the alleged legal representation”]; see also Berger & Assoc. Attorneys, P.C. v Reich, Reich, & Reich, P.C., 144 AD3d 543 [1st Dept 2016]; Davis, 160 AD3d at 486).”