Robert Smerling, being duly sworn, deposes and says: 1. As the President of Plaintiff City Cinemas, LLC ("Cinemas"), I submit this

Transcription

1 SUPREME COURT OF THE ST ATE OF NEW YORK COUNTY OF NEW YORK x CITY CINEMAS, LLC Index No. -against- Plaintiff, SOLOW BUILDING COMP ANY, L.L.C., Defendant. ST A TE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) x AFFIDAVIT IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION Robert Smerling, being duly sworn, deposes and says: 1. As the President of Plaintiff City Cinemas, LLC ("Cinemas"), I submit this affidavit, on personal knowledge, in support of Cinemas' motion for a Yellowstone 1 injunction with respect to a February 16, 2017 Thirty (30) Day Notice To Cure [Exhibit A] issued by Defendant Solow Building Company, L.L.C. ("Solow"). 2. As I will explain, the Notice is the most recent step in a continuing campaign of Sheldon Solow to harass and abuse Cinemas, not on the basis of any merit, but simply because Mr. Solow appears to enjoy making baseless accusations and commencing frivolous litigation. 1 First Nat. Stores. Inc. v. Yellowstone Shopping Center, Inc., 21 N.Y.2d 630, 290 N.Y.S.2d 721 (1968). 1 of 13

2 Background 3. The Paris Theater is the last remaining single screen movie theater in Manhattan, originally opened on September 13, 1948, when Marlene Dietrich cut the inaugural ribbon. [Exhibit B]. 4. The Paris Theater original was operated by Pathe Cinema [Exhibit B] and, then, by Sony Theatre Management Corporation, later known as Loews Theater Management Corporation, through its subsidiary, Loews Fine Arts Cinema, Inc. [See the 36 page decision of United States District Judge Loretta A. Preska in Six West Retail Acquisition, Inc. v. Sony Theatre Mgmt. Com., 2004 U.S. Dist. LEXIS 5411 (S.D.N.Y. 2004) ("Loews Case" Exhibit C). 5. In 1994, Sheldon H. Solow, through his wholly-owned company, Six West Retail Acquisition, Inc., purchased the Paris Theater and, in 1997, commenced the Loews Case, accusing Sony Corporation of America, Sony Theatre Management Corporation (subsequently renamed as Loews Theatre Management Corporation) and its subsidiary Loews Fine Arts Cinema, Inc. (together, "Loews") of engaging in: unreasonable restraint of trade in violation of Section 1 of the Sherman Act, 15 U.S.C. 1; attempted monopolization, in violation of Section 2 of the Sherman Act, 16 U.S.C. 2; breaches of leases; failure of proper maintenance; and unjust enrichment, all with respect to the Paris Theater and two other movie theaters leased from entities owned by Mr. Solow. 6. As to the Paris Theater, Mr. Solow admitted that a final lease or other agreement had not been executed, but claimed that certain letters exchanged by the parties set forth the obligations of Loews allegedly had breached [Six West, supra]. 7. Even without an executed agreement, Loews operated the Paris Theater, booking all films and paying Mr. Solow 60% of the profits. [Id]. 2 of 13

3 8. Despite the lack of an executed agreement, Mr. Solow claimed that Loews had undertaken the responsibility of maintaining and improving the Paris Theater and, even, booking films on an exclusive basis at the Paris Theater. [Id.] 9. When Loews finally told Mr. Solow that it no longer would manage the Paris Theater, he asserted that Loews had: breached the terms of a never-executed agreement; mismanaged the Paris Theater; violated the implied covenant of good faith and fair dealing; and violated claimed fiduciary duties to Mr. Solow. [Id.] I 0. Mr. Solow also asserted that Loews had diverted films to other theaters that it operated and tortuously interfered with his ability to attract better films to the Paris Theater [Id]. 11. After almost seven years of litigation, Judge Preska dismissed all of Mr. Solow's claims in an opinion unanimously affirmed by the Second Circuit "[s]ubstantially for the reasons stated in [Judge Preska's] orders and opinions... " Id.; Six W. Retail Acguisition. Inc. v. Sony Pictures Emtm't Com., 2005 U.S. App LEXIS 5258 (2005). 12. Mr. Solow then attempted, unsuccessfully, to self-manage the Paris Theater, but failed miserably. 13. Finally, in 2009, Mr. Solow, who was well-acquainted with my background and experience (including my prior service as President of Loews Theater Management Corporation and my present position as President, Domestic Cinemas, of Reading International, Inc. ("Reading")) agreed to have Cinemas, a Reading affiliate, lease and operate the Paris Theater, pursuant to a written lease dated August 14, 2009 (the "Lease", Exhibit D). 14. Well aware of Mr. Solow's penchant for being a difficult, meddlesome and litigious landlord, we insisted that the Cinemas Lease provide adequate protection, including the following provisions to which Mr. Solow agreed [Exhibit D]: 3 of 13

4 Conditions and Use of Premises. Tenant may use and occupy the Premises for "Cinema Exhibit Purposes," which means for the primary use as a motion picture theater and for usual and customary uses ancillary to the operation of the Premises as a motion picture theater such as, by way of example, the sale of concessions and merchandise, lectures, meetings, video presentations, and live entertaimnent. Tenant shall operate the theater at such times as it may deem appropriate but substantially consistent with the hours of other movie theaters located in the upper West Side of Manhattan. x x x Repairs, Maintenance and Alterations. Tenant, at its own cost and expense, shall take good care of the interior of the Demised Premises and make all necessary or appropriate non-structural repairs thereto to an extent that such repairs are reasonably required in order to conduct theater operations at the Demised Premises. During the first two lease years after the commencement date of this Lease, Tenant shall solely be responsible for the maintenance, repair and replacement of all of the fixtures, furnishings and equipment in the Demised Premises. During the balance of the term (including the renewal option, but not including any other extensions of the Lease), Tenant shall continue to remain solely responsible for such maintenance, repair and replacement, except that, in the event that the projected cost of a replacement project is estimated to exceed $10,000, the cost of such preplacement project shall be borne by Landlord. In connection with a replacement project estimated to cost in excess of$ I 0,000, Tenant shall require (which required shall include all appropriate backup information) the prior written approval of Landlord to undertake the proposed replacement, which approval 4 of 13

5 shall not be unreasonably withheld; Landlord shall have thirty (30) days after receipt of Tenant's written notice in which to respond to Tenant's proposal. If Landlord fails to respond within such thirty (30) day period, Landlord shall be deemed to have consented. If Landlord consents to the replacement project, Tenant shall proceed with the proposed replacement project. For purposes of this provision, "replacement project" shall be defined as a discrete replacement of specific fixtures, furnishings or equipment. Notwithstanding the foregoing provisions, through the entire term of the Lease, Tenant shall be solely responsible for the maintenance, repair and replacement of all projection booth, audio and visual equipment serving the Demised Premises. x x x Cooperation. Landlord will sign applications and otherwise cooperate with Tenant in connection with matters pertaining to the use and occupancy of the premises as Tenant may request from time to time. Tenant shall promptly reimburse to Landlord any reasonable expenses incurred by Landlord in cooperating with Tenant in accordance with the preceding sentence. x x x Tenant Operation of the Premises. The parties acknowledge and agree that Tenant may operate its cinema business on the Premises in the manner and means which it exclusively determines, subject to the terms of this Lease, and with personnel of its own choosing. 5. The Lease requires that Solow: assure that Cinemas "peaceably and quietly have, hold and enjoy the premises"; and "indemnify and hold harmless [Cinemas] from any 5 of 13

6 claim, liability, damage or expense, without limitation, (including reasonable attorneys' fees)" arising from a breach by Solow: Quiet Enjoyment. Landlord covenants that Tenant shall peaceably and quietly have, hold and enjoy the Premises and all rights, easements, appurtenances and privileges belonging or in anywise appertaining thereto during the full term of this Lease and any extension thereof. Landlord shall indemnify and hold harmless Tenant from any claim, liability, damage or expense (including, without limitation, reasonable attorneys' fees) arising in the event of a breach of the covenant set forth in the preceding sentence arising from Landlord's willful or intentional acts or grossly negligent actions or omissions. 6. The Lease further provides for the recovery of attorneys fees by prevailing party in any litigation between Solow and Cinemas: Dispute Resolution. The parties agree that any dispute arising under or related to this Lease will be resolved in the state or federal courts located in the City of Manhattan exclusively and not in any other court in any other jurisdiction, and the parties agree to the jurisdiction of such court. The prevailing party in any litigation or proceeding will be entitled to recover its reasonable attorneys fees. 7. When Cinemas took over the operation of the Paris Theater, the condition was, to put it politely, "well worn", with much of the furnishing and fixtures showing the signs of six decades of use. 8. Before we even had an opportunity to assess the conditions and arrange for repairs and refurbishment, Mr. Solow started his campaign of harassment and abuse. 9. On December JO, 2009,just four months after the Paris Theater Lease was executed, Mr. Solow issued his first attack letter (Exhibit E), complaining that we had not 6 of 13

7 booked a film called A Single Man for an opening and one month exclusive showing at the Paris Theater. In his letter, Mr. Solow claimed that such "unauthorized conduct advocates any understanding in contrast with the operation of the Paris Theater... ", adding: "Any film shown thereafter will have to get the prior approval of the undersigned." [Exhibit E]. 10. Four months later, Mr. Solow sent an April 13, 2010 letter complaining that we were showing a film called The Greatest at the Paris Theater in spite of the fact that it had received less than stellar reviews. [Exhibit F]. 11. Two months later, Mr. Solow sent a June 10, 2010 letter complaining that "putting the "Babies" move in the Paris Theater is disrespectful to the theatre." [Exhibit G]. 12. Then, Mr. Solow had his then Vice President, Amir Kornblum, send us a February 3, 2011 letter complaining that the upkeep of the theater was "absolutely unacceptable", including photographs taken only 10 months after we began operating it (obviously part of a campaign planned much earlier). [Ex. H]. 13. The February 3, 2011 letter [Exhibit H] also complained about "the quality of the films... The Paris in particular is now showing inferior films... you are using the esteemed reputation of the Paris Theater to improve your box office receipts at [another Reading affiliate theater], a theater which does not have the reputation of the Paris Theater." 14. The February 3, 2011 letter [Exhibit H] continued: Such an action is not fair and does not fulfill the obligation under New York State law of "good faith and fair dealing''. This was clearly not our intention when we entered into a lease with you. We intended for the Paris to be run at the high levels it had been run beforehand. When a film premiers at the Paris, it should have a full run at the theater. If a film is good enough to premier there, it is surely good enough to have a full run there. You preview many films at the Paris that do not run there. It the particular film is not available at the time of the premiere, when it is subsequently available, it should be shown for a full run at the 7 of 13

8 Jetter [Exhibit I] which stated: Paris. Any film that is previewed at the Paris should play there for a full theatrical run. Any special showing at the Paris Theater should remain at the Paris Theater from Friday to Monday... Moreover, you are not permitted to place red carpets on the sidewalks during premiers. x x x If the above listed concerns are not remedied promptly, we reserve the right to take all actions available to us in order to remedy the current unsatisfactory conditions at the Paris Theater... restore the reputations of both stored institutions. The Paris must be returned to the condition and status that it previously enjoyed"... Going forward, we must be advised at least four weeks in advance of any film that is scheduled to be played at the Paris Theater, including, but not limited to, information as to special openings, the identity of the company that is opening the film there and the amount that they are paying. 15. Ten days later, Mr. Solow had his Vice President send a February 23, 2011 This is a follow up to the Jetter which I sent to you on February 3, The matters and issues outlined in the February 3rd Letter and evidenced in the photographs are quite serious and such conditions could be violations of applicable city, state or federal Jaw. Our inspection of the theaters today indicates that no real effort was made to ameliorate the conditions described in the February 3rd Letter. I have enclosed photographs taken today by a member of our staff evidencing the continuing unacceptable conditions of the theaters. Moreover, there is a recurring problem with the quality of the films that you put in our theaters. While you place first rate films in your City Cinemas 1, 2, 3, the films being exhibited at the Paris Theatre are not of the quality that belongs in such an important cultural institution. Such movies are more appropriate to be shown in your Angelica Theater. The above raised concerns only add to people's concern that we are intentionally running down the Paris Theater in order that it can be transformed to other commercial purposes. I can adamantly state that this is not our plan. Unfortunately your 8 of 13

9 mismanagement of the Paris Theater raises the public's suspicions as to what your ultimate goal is. Mr. Solow would like to attend the opening night film on March 3, 2011 at Rendez-Vous at the Paris Theater but is embarrassed to do so given the run down state of the theater. 16. Clearly, Mr. Solow was determined to follow the same path that he had taken with Loews even though the Lease provided that Cinemas had the express right to "operate its cinemas business... in the manner and means which it exclusively determines... " [Exhibit C, 17. On March I, 2011, Ellen M. Cotter, the Chief Operating Officer of the Reading domestic theaters, sent Solow a letter [Exhibit J] stating that "we take very seriously the comments in your recent letters", requesting a "walk through" of the Paris Theater to identify specific concerns so that they might be addressed. 18. Cinemas then engaged a company to start work on the repairs and, by March 21, 2011, the first two rows of seats had been renovated and reupholstered, and various seat arms and set springs had been replaced, where needed, and any loose seats were tightly bolted to the floor. 19. Over the succeeding years, Cinemas has spent time, effort and significant expense attempting to maintain and improve the Paris Theater. 20. Shortly after noon on February 15, 2017, I sent Steven Weymouth, Solow's Chief Financial Officer, a proposal to repair, refurbish, improve and reupholster the seats in the Paris Theater. [Exhibit K]. 9 of 13

10 21. Paragraph 5 of the Lease expressly permits Cinemas to make repairs (as opposed to replacement) of fixtures and furnishings, in any amount, without Solow's consent. However, since we were proposing to spend more than $150,000, and recognizing Mr. Solow's "sensitivity" to all matters relating to the Paris Theater, I sent a quote that we had received for the work, requesting that Mr. Weymouth call me to discuss the alternatives in the proposal, including whether we might save some cost by permitting the company doing the work to employ non-union labor. 22. Rather than calling me, Mr. Weymouth issued the Notice [Exhibit A], threatening to terminate the Lease unless Cinemas immediately made the repairs which we, ourselves, had proposed to make. 23. After receiving the Notice, and recognizing Mr. Solow's propensity to take outrageous actions, we initially planned to seek a Yellowstone injunction. 24. After giving the matter further thought, and considering our continuing desire to maintain the Paris Theater as a proper venue, we decided to make the repairs. 25. When Mr. Weymouth refused to take or return my calls, our attorney, David Rosenberg, sent an to Mr. Solow' s attorney, Warren Estes, reiterating the undertaking of Cinemas to perform the repairs. [Exhibit 1 to the March 20, 2017 affirmation of David Rosenberg]. 26. Instead of enjoying his "victory" Mr. Solow had his attorneys respond that he intended "to move forward and... pursue his rights under the notice to cure." [Id.] 10 of 13

11 27. Under the circumstances, we have been advised that Cinemas has no alternative but to seek a temporary restraining order and preliminary injunction from this Court. 28. No prior request has been made for this or similar relief. Sworn to me this 20 1 h day of March 2017 Robert Smerling Notary Public O:IAFFINSUPPMOTNOJ 1720 I 7 / I 0 11 of 13

12 ILED: NEW YORK COUNTY CLERK 03/20/ :17 PM YSCEF DOC. NO. 4 RECEIVED NYSCEF: 03/20/2017 r. l no.c':' alternative but to seek a temporary restraining order and prelimiruu),...:.1~~... :: :.C'~ :...~ C 28. No prior request has been made for this or similar relief. Sworn to me this 2oth day of March 2017 O:\AFFINSUPPMOTN / IO

13 Index No. ----/2017 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK CITY CINEMAS, LLC., - against - Plaintiff, SOLOW BUILDING COMPANY. L.L.C., Defendant. AFFIDAVIT IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING 0RDER AND PRELIMINARY INJUNCTION Certified pursuant to l(a) Of the Rules of the Chief Administrator MARCUS ROSENBERG & DIAMOND LLP Attorneys for Plaintiff 488 Matlison Avenue 17th Floor New York, New York (212) of 13