In Kafa Investments LLC v. 2170-2178 Broadway LLC, No. 23034, slip op. (Sup. Ct., N.Y. Co. Jan. 22, 2013), the New York Supreme Court granted a releasee’s motion for summary judgment regarding a claim brought by the releasor that a release should be invalidated. In doing so, the court discussed the manner in which releases should be interpreted and certain circumstances under which releases could be invalidated.
Background of the case
According to the plaintiffs in the case, in the summer of 2006, the defendants approached the plaintiffs about redeeming the plaintiffs’ interests in 2170-2178 Broadway Owner LLC. The plaintiffs alleged that the defendants represented that the company, which owned a hotel known as Hotel on the Ave, was worth approximately $125 million and that, based upon this representation, the plaintiffs sold their interests in the company. The plaintiffs further alleged that, also in 2006 and unbeknownst to the plaintiffs, the defendants entered into an agreement with the Rockpoint Group with respect to the sale of three hotels, one of which was Hotel OTA and two of which were owned by other entities. On March 14, 2007, pursuant to a redemption agreement, the plaintiffs’ interests were redeemed for $5.2 million, which valued Hotel OTA at $125 million. Thereafter, in August 2007, the defendants closed the sale of Hotel OTA to Rockpoint Group for $201 million $76 million more than its alleged represented value. The plaintiffs brought causes of action against the defendants for breach of fiduciary duty, breach of good faith and loyalty, fraudulent inducement, intentional misrepresentation and unjust enrichment. The defendants moved for summary judgment, claiming that the redemption agreement contained a release whereby the plaintiffs had released the defendants of any claims the plaintiffs might have against the defendants.
The Release in the Redemption Agreement
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