This legendary landmark is now the subject of a heated battle.

NEW YORK CITY-A court judge Thursday granted preliminary approval of a class-action settlement with the Malkin family and a group of investors, who are seeking to combine the management of the iconic Empire State Building with 18 other properties into a publicly traded REIT. Judge Peter Sherwood, in New York County Supreme Court, was charged with evaluating a previously reached settlement agreement—which would enable the group to pay out $55 million to be distributed among investors—after another investor group raised objections to the agreement, reports the Wall Street Journal. The hearing is only considered preliminary approval however; the Judge ordered a final hearing to be held on May 2nd, according to Judge Sherwood’s decision.

On that occasion it will be determined if the settlement agreement is “fair, reasonable and adequate” and whether the settlement should “finally be certified as a class action,” according to the Judge’s decision. The judge also stipulated that parties to the class action “may opt out to preserve any right to pursue potential claims for money damages.”

Attorney Stephen Meister, of Meister, Seelig & Fein, who represented the investor group that objected to the settlement, tells that a significant premise of the REIT plan—on which the settlement hinges—is “illegal.” The proposed plan, under which the restructured organization would be known as Empire State Realty Trust, with those behind it looking to raise $1 billion in the IPO for their newly formed organization, calls for a vote among all 3,300 investors, he says. If 80% of voters are in favor of the plan and 20% either object or abstain from voting, those in the minority are subject to a buyout for about $100 a share.

By contrast, Meister’s group proposes that any money from the re-organization into a REIT should go to ESB owners and not get spread across investors in other properties. The group is seeking damages of more than $800 million, the Journal says.

Says Meister, “This REIT proposal is all well and good but it’s completely illegal,” Meister says. “A limited liability law says if there’s a “consolidation or a merger, the [buyout] has to be at fair value. Mr. Malkin has said the value of a share is $325-$350. The $100 million is punitive.” He plans to submit a brief outlining his objection within the next 20 days, as is mandated by the court, and then the Malkins have 20 days to respond. If the court agrees with Meister’s claim, it could render the IPO ruling null and void, potentially forcing an entire restart of these proceedings, the Journal notes.

In response, attorney Lawrence Kolker, of Wolf Haldenstein Adler Freeman & Herz LLP, and lead counsel to the plaintiff class, tells in a written statement, “The court denied Mr. Meister’s request for intervention, denied his request for discovery, and denied his request to establish a sub-class represented by him. 

“There are several incorrect factual and legal conclusions in the objectors’ position on this. One thing is clear: if 80% of the ESBA investors approve the deal, all the non-voting or no-voting investors will then be given an opportunity to participate in the consolidation, and if they choose to do so, will receive exactly the same as all the other investors (i.e., stock or units estimated to be worth approximately $330,000 per $10,000 initial investment). If less than 80% approve the deal, then there is no deal.”

In addition, he mused, “If 80% of the investors want the deal, wouldn’t it be fair for the other 20% to go along with it?”