ROSELAND, NJ-A verdict was recently entered in a dispute arisingfrom the September 2007 sale of the largest multifamily portfolioof properties in New Jersey.

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In the case of Westminster Management v. East Coast ResidentialAssociates, Judge Sebastian Lombardi denied a claim by owners EastCoast Residential Associates LP, a partnership of Morgan Propertiesand AIG Global Real Estate Investment Corp., that they wereentitled to receive a $25-million escrow that was established atthe closing of the transaction with sellers Kushner Cos.

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Essentially, East Coast Residential asserted that they wereentitled to the escrow--which has accumulated an additional $2million in interest--because the sellers failed to discloseinformation concerning the expenses and personnel involved inoperating the portfolio and that, if known, they would have offeredless than the $1.91-billion contract price to acquire theproperties, explains Charles X. Gormally, co-trial counsel anddirector of litigation at locally based law firm Brach Eichler LLC.Two previous pretrial motions for summary judgment were denied,which led to the Superior Court trial.

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“This case was a basic breach of contract,” says JoshuaS. Bratsbies, an associate at Riker Danzig, Scherer, Hylandand Perretti LLP in Morristown, NJ, which represented East CoastResidential, “The legal issues were straightforward,” he relates.“Kushner did not include 11 members on the contract at the time ofthe sale, which was part of the agreement.”

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The plaintiffs, however, contended that “all of the informationthat was provided through their broker was accurate and thatregardless, the language of the purchase and sales agreement barredthe claims that were asserted,” Gormally tells GlobeSt.com. And, infact, he adds, the plaintiff's produced evidence that thepurchasers were actually prepared to bid even higher than thecontract price and had internally valued the property at least $50million more than their offer because of the comprehensive scope ofthe portfolio. The transaction, which consisted of some 16,800residential units, also included assets in New York, Delaware andPennsylvania.

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“The court’s verdict was a complete vindication of the positionasserted by the plaintiff since the inception of the case,”Gormally tells GlobeSt.com. “Each and every substantive positionthat we asserted on behalf of Westminster was found to beestablished by Judge Lombardi. Of particular importance is the ideathat sophisticated real estate players like the defendant, evenwhen represented by highly skilled transactional counsel, cannotsuccessfully claim they were mislead under the circumstances ofthis case.”

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Still, Bratsbies says that East Coast Residential doesnot agree with the outcome and is still trying to decide whether ornot it wants to appeal. “It wouldn’t surprise me if they tried tomake an appeal because this money is sitting in escrow and theyknow that they can delay the ultimate disposition of it,” Gormallysays.

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Along with Gormally, the plaintiff was represented by DavidKlein, counsel at Brach Eichler, and Barry Felder and Akiva Cohenof Foley Lardner in New York City. In addition to Bratsbies,the defendants were represented by Gerald Liloia, also of RikerDanzig.

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