Philadelphia Skyline

Fraudulent Inducement and Alter Ego

May 2012 Settlement of Interest

We represented the owner of a Manhattan office building in the United States District Court, for the Southern District of New York, where the tenant had signed a four year lease that included a five month free rent concession. Despite representing to the landlord with balance statements, bank accounts, and other indicia that sufficient funds existed for the operating funds of the business, immediately following the five month free rent period the tenant informed landlord that there were "no assets" available in the business and that it would be breaking the lease. The tenant business had no assets remaining, and no personal guaranty had been signed by the tenant's principals. We filed a federal suit on behalf of the owner in the Southern District against the tenant's principals alleging fraudulent inducement, alter ego, and various claims under the New York Debtor Creditor Laws. Following collection of e-discovery, the tenant's principals agreed to settle the case with the landlord for a favorable sum to compensate it for the loss of rental income, including full repayment of the five month free rent concession as well as rental payments for the period of time during which landlord was not able to re-let the premises.

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