Richard Podos Lawsuit regarding proprietary structure for tenant improvement financing by Jgehlmann1

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Breach of contract and duty of loyalty by Richard Podos and Lance LLC regarding proprietary structure for tenant improvement financing

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									SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
------------------------------------x
TI Funding Group LLC.,              :

                                         Plaintiff,                    :   INDEX NO.

         -against-                                                     :
                                                                           COMPLAINT
Richard L. Podos, and Lance LLC,                                       :

                                         Defendant.                    :

- - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - x


                    TI Funding Group LLC ("TIFG"), successor to and formerly known as Polestar

Capital Associates, LLC ("Polestar") (collectively, the "Company" or "Plaintiff'), by its

attorneys Bryan Cave LLP, as and for its Complaint (the "Complaint") in this action, hereby

alleges:


                                                    INTRODUCTION

          1.        This is an action against (a) Richard L. Podos ("Podos"), individually, a former

consultant and employee of the Company, for (i) breach of consulting and employment

agreements ("Agreements") entered into between Podos and the Company, and (ii) breach of

duty of loyalty; and against (b) Podos and Lance LLC ("Lance") (collectively, "Defendants"), of

which Podos is Founder and President, for (i) misappropriation of trade secrets, (ii) unfair

competition, and (iii) tortious interference with prospective business relations. Plaintiff seeks

issuance of a temporary injunction and a permanent injunction enjoining Defendants from further

breaching their duties to the Company and from continuing their wrongful and tortious conduct,

and, additionally, and as a matter of alternative pleading, compensatory and consequential

damages in an amount to be determined at trial, but not less than $2 million, punitive damages of


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not less than $2 million, and such further relief as is necessary to remedy the injuries caused

by Defendants' wrongful conduct.

                                             THE PARTIES

          2.        At all relevant times, TIFG was and is a New York limited liability company,

with its principal place of business currently at 150 East 58th Street, 21st floor, New York, New

York, 10153.

          3.        TIFG is the successor to, and was formerly known as, Polestar Capital

Associates, LLC, a New York limited liability company, whose principal place of business at all

relevant times was 400 Madison Avenue, New York, New York, 10017.

          4.        Upon information and belief, at all relevant times, Podos was and is a resident of

New York, residing at 50 East 96th Street, Apartment 2B, New York, New York 10128.

          5.        Upon information and belief, at all relevant times, Lance was and is a New

York limited liability company with its principal place of business located at 410 Park Avenue,

New York, New York 10022.

          6.        Upon information and belief, Podos is the founder, managing member and

owner of Lance.

          7.        Upon information and belief, Podos is the President of Lance.

                                    JURISDICTION AND VENUE

          8.        Jurisdiction and venue before this Court are proper because Podos resides in New

York, New York, Lance is a New York limited liability company doing business in New York,

and all relevant transactions and events took place in New York, New York.




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                                       BACKGROUND FACTS

                                 THE BUSINESS OPERATIONS AND
                            INTELLECTUAL PROPERTY OF THE COMPANY

          9.       At all relevant times, the Company was and is engaged in the business of

developing, marketing and providing tenant improvement funding solutions. The Company is

and has been in the tenant improvement financing business since 1997.

          10.      Douglas Lowenstein ("Lowenstein") is the Founder, Chairman, CEO, and Senior

Managing Director of the Company. He has worked at the Company since 1997. Lowenstein is

the originator, architect, author, and inventor of the Company's business concepts and proprietary

structuring techniques and their implementation for tenant improvement financing.

          11.      Lowenstein developed new methods, systems, and apparatus for lease financing

tenant improvements for which he filed a patent application, U. S. Patent Application Serial No.

09/611,548, on July 7, 2000. The contents of that application and, in addition, the know-how,

term sheets, models, computer programs, spread sheets, equations, data bases, calculations, and

analyses to implement the subject matter of the patent application in practice (collectively,

"Patent Appin. '548 Information") were and are held in confidence. The patent application was

published on January 13, 2005. It is pending.

          12.      Lowenstein assigned to the Company his entire right, title and interest in and to

the Patent Appin. '548 Information. Accordingly, the Company is the sole owner of the Patent

Appin. '548 Information. The Company operates in a highly competitive field. The Patent

Appin. '548 Information has substantial economic value to the Company, and it provides the

Company with a competitive advantage.

          13.      Subsequently, starting in or about December 2007, Lowenstein and Dean Britton

("Britton"), managing principal of Allegiance Partners LLC ("Allegiance"), conceived and


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developed new methods, systems, and apparatus for lease financing tenant improvements for

which they filed a patent application, U. S. Patent Application Serial No. 12/399,764, on March

6, 2009, based upon a provisional U.S. Patent Application 61/034,477 filed on March 6, 2008.

The contents of those applications and, in addition, the know how, term sheets, models,

computer programs, spread sheets, equations, data bases, calculations, and analyses to

implement the subject matter of the patent applications in practice (collectively, "Patent Appin.

'764 Information") were held proprietary and confidential. The patent '764 application was

published on January 21, 2010. It is pending.

           14.      Lowenstein and Britton, individually and on behalf of Allegiance, assigned to

the Company their entire right, title and interest in and to the Patent Appin. '764 Information.

Accordingly, the Company is the sole owner of the Patent Appin. '764 Information. The Patent

Appin. '764 Information has substantial economic value to the Company, and it provides the

Company with a competitive advantage.

           15.      Based on its ownership of its proprietary financing products, the positive

reputation and goodwill it has established with landlords, corporate tenants, service providers,

institutional investors, and finance professionals, and the client relationships the Company has

developed, the Company has a strong ties with the real estate and lending/finance industries.

           16.      Due to the complexity of the financial products that it offers, the Company has

developed extensive and specialized confidential marketing information and strategies

exclusively for its internal business use. In addition, it has developed extensive and specialized

financial models, term sheets, and tenant improvement leases that it shares with clients and

potential clients only upon execution of non-disclosure agreements. The foregoing information

is confidential and proprietary and constitutes trade secrets.


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                            THE COMPANY'S RELATIONSHIP WITH PODOS

          17.       Pursuant to mutual agreement, the Company hired Podos on or about October

30, 2006.

          18.       Under the parties' Agreements, Podos provided various services to the

Company, including preparing analyses and presentations for clients and potential clients.

          19.       In accord with the parties' Agreements, the Company fully compensated

Podos for the services he provided to the Company and fulfilled its obligations to Podos.

          20.       Under the parties' Agreements, Podos agreed not to disclose any confidential

information that Podos received from the Company to third-parties unless expressly authorized

to do so in the performance of his duties on behalf of the Company.

          21.       Podos' responsibilities at the Company while retained by the Company included

assisting the Company in preparing and presenting financial and funding analyses and marketing

presentations to clients and prospective clients.

          22.       Podos reported to Lowenstein, who assigned Podos his work and was responsible

for reviewing Podos' work product. Upon information and belief, at the time Podos was first

retained by the Company, Podos had professional experience as a commercial real estate broker,

but had no knowledge of the Company's financial products, and had not previously handled

tenant financing products or services.

          23.       In the course of Podos' work at the Company, Lowenstein taught Podos about the

Patent Appin. '548 Information and the Patent Appin. '764 Information for the limited purpose of

benefitting the Company's business. The Company revealed to and entrusted Podos with

confidential and proprietary information, including but not limited to sophisticated financial

models that illustrated to commercial landlords and tenants the benefits of the Company's


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financing products, extensive term sheets, pricing information, and tenant leases that were

critical to putting into legal effect the Company's financing products (collectively, along with the

Patent Appin. '548 Information and the Patent Appin. '764 Information, "Confidential

Information"). The Confidential Information constitutes trade secrets. The Confidential

Information was kept secret through, without limitation, the use of non-disclosure agreements,

confidentiality agreements, and password-protected computers and e-mail communications.

          24.       Podos accessed and used this Confidential Information during the course of

his work for the Company. Podos understood and acknowledged the confidential and

proprietary nature of the Confidential Information the Company provided to him and his

continuing obligation to protect the confidential and proprietary nature of this information

from unauthorized disclosure to third-parties.

          25.       Podos ceased working for the Company on or about February 28, 2008.

       PODOS UNFAIRLY COMPETES WITH THE COMPANY THROUGH LANCE

          26.       Upon information and belief, Lance is engaged in the business of marketing

financing products for tenant improvements and directly competes with the Company.

          27.       Upon information and belief, subsequent to Podos' work with the Company,

Podos, individually and through Lance, has and continues to, directly compete with the Company

in the tenant improvement funding marketplace.

          28.       Upon information and belief, the financial products that Lance is marketing are

essentially identical to the tenant improvement financing products that the Company developed,

for which patent applications are pending in the United States Patent and Trademark Office. In

the tenant improvement financing business, a head start in product development provides a

competitive advantage. As a result of the Company's development and ownership of its

Confidential Information, the Company held a competitive advantage. However, Defendants, by

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misappropriating and marketing the Confidential Information, unfairly gained a competitive

advantage. Among other things, Podos and Lance used the Patent Appin. '764 Information prior

to its publication by the Company in order to start Lance's business and market tenant

improvement financing products sooner than it otherwise would have if it developed its products

on its own. As a result, Defendants gained, and continue to benefit from, an unfair competitive

advantage over the Company, and have unfairly eliminated the Company's head start.

          29.       Upon information and belief, Podos, through Lance, used and continues to use

the Company's Confidential Information in its efforts to market and compete in the tenant

improvement funding marketplace.

          30.       The Confidential Information belonging to the Company was collected by Podos

while Podos was employed by the Company and provided by the Company to Podos solely

because of his working relationship with the Company. Among other things, Lance's website,

www.lance-11c.com, presently and in the past, includes extensive marketing materials that were

purloined from the Company and copied virtually verbatim onto the Lance website. Defendants

have continued to use the Confidential Information in order to compete unfairly against the

Company.

          31.       Most recently, in or about September 2010, a representative of the City of New

York ("NYC"), a prospective tenant at a property located at 470 Vanderbilt Avenue, Brooklyn,

New York ("Vanderbilt Property"), contacted the Company and requested a quote with respect to

a potential $40 million tenant improvement financing transaction. Subsequently, upon NYC's

introduction, the Company entered into discussions with the landlord of the Vanderbilt Property,

GFI Capital Resources Group, Inc. ("GFI"), with respect to the Company's providing tenant

improvement financing at the property.



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          32.       Upon information and belief, at about this same time, Defendants were also

engaged in discussions with NYC and GFI to provide tenant improvement financing for the

Vanderbilt Property.

          33.       Upon information and belief, Defendants improperly (a) used and disclosed to

NYC and GFI the Confidential Information that Podos had received from the Company in

Defendants' marketing efforts for Lance's benefit; (b) marketed to NYC and GFI the tenant

improvement financing product that the Company had developed and had submitted to the U.S.

Patent and Trademark Office for patent approval, of which Podos gained knowledge during the

time that he worked for the Company; and (c) fraudulently stated to NYC and GFI that Podos

had invented the product and that Lance owned the product, even though Podos knew these

statements were false.

          34.       On or about January 7, 2011, GFI requested that the Company provide to GFI its

best and final offer with respect to tenant improvement funding for the Vanderbilt Property. GFI

advised the Company that the only other company being considered to provide tenant

improvement financing was Lance. Upon information and belief, the tenant improvement

financing product being offered by Lance is substantially similar to and is based on the Patent

Appin. '548 Information that Podos purloined from the Company during the time that he worked

for the Company.

          35.       In accord with GFI's request, on January 9, 2011, the Company provided its best

and final offer, which included a quote with respect to the cost of financing $20 million of tenant

improvements. Upon information and belief, Lance also provided its best and final offer at about

this time.




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         36.       On or about January 19, 2011, a representative of NYC advised the Company that

the Company's bid was significantly more competitive than Lance's, and would have provided a

savings of approximately $250,000 for NYC on tenant improvement funding compared to the offer

made by Lance.

         37.       Subsequently, the Company was advised by representatives of GFI that Lance,

through Podos, disparaged the Company's bid and had told GFI that the Company did not have

the ability to deliver the financing at the low cost provided in its bid. Upon information belief,

Podos through Lance held out that he had special knowledge of the Company's business due to

his prior close relationship with the Company. Defendants made the disparaging statements for a

wrongful purpose, using dishonest and improper means to secure the Vanderbilt Property

transaction for themselves.

         38.       Upon information and belief, the wrongful statements made by Defendants

ultimately interfered with the business relationship the Company had developed with GFI and

NYC with respect to the Vanderbilt Property.

         39.       Upon information and belief, Defendants knew that the Company had presented a

bid to GFI and NYC and sought to provide tenant improvement funding with respect to the

Vanderbilt Property.

         40.       Notwithstanding that, upon information and belief, the Company's bid was

significantly more competitive than Lance's bid, on or about February 2-7, 2011, GFI and NYC

accepted Lance's higher bid to provide tenant improvement funding at the Vanderbilt Property,

                                                  and rejected the Company's lower bid.




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         41.       Defendants' conduct constitutes an intentional and deliberate wrongdoing and

creates an aggravating and outrageous circumstance with a fraudulent or evil motive, willfully

and wantonly disregarding the rights of the Company.

                            AS AND FOR A FIRST CAUSE OF ACTION

                                  (Breach of Contract against Podos)

         42.       Plaintiff repeats and realleges each of the allegations contained in paragraphs 1

through 41 of this Complaint as if fully set forth hereat.

         43.       The Company and Podos were parties to the Agreements.

         44.       Podos willfully breached his material and implied obligations under the

Agreements.

         45.       Plaintiff fully performed its obligations under the Agreements prior to the

breaches by Podos.

         46.       As a result of the actions of Podos, the Company has been damaged in an amount

             to be proven at trial, which amount is believed to be not less than $2,000,000, plus

             interest. AS AND FOR A SECOND CAUSE OF ACTION

                              (Breach of Duty of Loyalty against Podos)

         47.       Plaintiff repeats and realleges each of the allegations contained in paragraphs 1

through 46 of this Complaint as if fully set forth hereat.

         48.       As an employee and consultant of the Company, Podos owed a duty of loyalty not

to use or disclose the Company's Confidential Information, which was entrusted to him in the

course of his employment with the Company, to the Company's detriment.

         49.       By misappropriating, using, and disclosing the Company's Confidential

Information, Podos has breached and will continue to breach his duty of loyalty to the Company

by engaging in the above acts.

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         50.       The foregoing acts were undertaken solely to further the individual interests of

Podos and the Company's direct competitor, Lance, disregarding the interests of the Company.

         51.       The Company lacks an adequate remedy at law and will suffer substantial and

irreparable harm unless a temporary injunction and a permanent injunction are issued

enjoining Podos' continued breach of his duty of loyalty to the Company.

         52.       Additionally, and as a matter of alternative pleading, as a result of Defendants'

wrongful actions, the Company has been damaged in an amount to be proven at trial which

amount is believed to be not less than $2,000,000, plus interest.

         53.       In addition, the Company is entitled to punitive damages of not less than

$2,000,000.

                            AS AND FOR A THIRD CAUSE OF ACTION

                   (Misappropriation of Trade Secrets against Podos and Lance)

         54.       Plaintiff repeats and realleges the allegations contained in paragraphs 1 through

53 of this Complaint as if fully set forth hereat.

         55.       Podos used his relationship of trust at the Company to learn the Company's

confidential, proprietary and trade secret information regarding, among other things, marketing

and pricing information and strategies, and methods, systems and apparatus for financing tenant

improvements and the know how, term sheets, models, computer programs, spread sheets,

equations, data bases, calculations, and analyses to implement the same. This information is not

generally known in the field of financing and gives the Company a competitive advantage over

competitors who do not know it.

         56.       By misappropriating the Company's confidential, proprietary and trade secret

information, Defendants have unfairly competed and continue to unfairly compete with the

Company.

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         57.      Defendants have used this information in bad faith without approval or

authorization from the Company for Podos' own benefit and for the benefit of Lance, the

Company's direct competitor, and to the detriment of the Company.

         58.      Defendants were and are aware that they were and are not entitled to review, use

or obtain the benefit of the Confidential Information.

         59.      Nevertheless, Defendants misappropriated and continue to misappropriate the

Company's Confidential Information willfully and in bad faith, for their own benefit, and to the

detriment of the Company.

         60.      The Company lacks an adequate remedy at law and will suffer substantial and

irreparable harm unless a temporary injunction and a permanent injunction are issued enjoining

Defendants' continued misappropriation and unfair competition.

         61.      Additionally, and as a matter of alternative pleading, as a result of Defendants'

wrongful actions, the Company has been damaged in an amount to be proven at trial which

amount is believed to be not less than $2,000,000, plus interest.

         62.      In addition, the Company is entitled to punitive damages of not less than

$2,000,000.

                            AS AND FOR A FOURTH CAUSE OF ACTION

                            (Unfair Competition against Podos and Lance)

         63.      Plaintiff repeats and realleges the allegations contained in paragraphs 1 through

62 of this Complaint as if fully set forth hereat.

         64.      Podos used his relationship of trust with the Company to learn the Company's

confidential, proprietary and trade secret information regarding, among other things, marketing

and pricing information and strategies, and methods for financing tenant improvements.


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         65.       Defendants have misappropriated the Company's Confidential Information.

         66.       Defendants have used this information in bad faith without approval from the

Company for Podos' own benefit and for the benefit of the Company's direct competitor, Lance,

and to the detriment of the Company.

         67.       Defendants were and are aware that they were and are not entitled to review, use

and obtain the benefit of the Confidential Information.

         68.       Nevertheless, Defendants misappropriated and continue to misappropriate the

Company's Confidential Information for their own benefit, and to the detriment of the Company.

         69.       The Company lacks an adequate remedy at law and will suffer substantial and

irreparable harm unless a temporary injunction and a permanent injunction are issued enjoining

Defendants' continued misappropriation and unfair competition.

         70.       Additionally, and as a matter of alternative pleading, as a result of Defendants'

wrongful actions, the Company has been damaged in an amount to be proven at trial which

amount is believed to be not less than $2,000,000, plus interest.

         71.       In addition, the Company is entitled to punitive damages of not less than

$2,000,000.

                            AS AND FOR A FIFTH CAUSE OF ACTION

    (Tortious Interference with Prospective Business Relations against Podos and Lance)

         72.       Plaintiff repeats and realleges the allegations contained in paragraphs 1

through 71 of this Complaint as if fully set forth hereat.

         73.       Defendants knew that the Company had submitted a bid and were in negotiations

with GFI and NYC with respect to providing tenant financing in connection with the Vanderbilt

Property.


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         74.       Defendants wrongfully interfered with these negotiations by engaging in the

above acts.

         75.       Defendants' acts were for a wrongful purpose and were dishonest, unfair, and

improper.

         76.       As a result of Defendants' above acts, the Company's business relationship with

GFI and NYC has been injured.

         77.       The Company lacks an adequate remedy at law and will suffer substantial and

irreparable harm unless a temporary injunction and a permanent injunction are issued enjoining

Defendants' continued tortious interference with the Company's prospective business relations.

         78.       Additionally, and as a matter of alternative pleading, as a result of Defendants'

wrongful actions, the Company has been damaged in an amount to be proven at trial which

amount is believed to be not less than $2,000,000, plus interest.

         79.       In addition, the Company is entitled to punitive damages of not less than

$2,000,000.

                                   PRAYER FOR RELIEF

                   WHEREFORE, Plaintiff respectfully requests judgment as follows:

                   1.       On the Second, Third, Fourth, and Fifth Causes of Action, issuance of a

                            preliminary and permanent injunction enjoining Defendants from further

                            breaching their duties to the Company and from continuing their

                            wrongful and tortious conduct; and

                   2.       On the First, Second, Third, Fourth, and Fifth Causes of Action, awarding

                            to Plaintiff compensatory and consequential damages in an amount to be

                            proven at trial, in an amount not less than $2,000,000, plus interest; and


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                    3.      On the Second, Third, Fourth, and Fifth Causes of Action, awarding to
                            Plaintiff punitive damages in an amount not less than $2,000,000; and

                    4.      On the First, Second, Third, Fourth, and Fifth Causes of Action, awarding

                            to Plaintiff reasonable attorneys' fees and costs of this action; and further

                    5.      On the First, Second, Third, Fourth, and Fifth Causes of Action, awarding

                            to Plaintiff such other relief as the Court may deem just and proper.



Dated: New Y4, New York
       March __, 2011


                                                                      BRYAN CAVE LLP



                                                       By: ________________________________
                                                                      David P. Kasakove
                                                       Attorneys for TI Funding Group LLC
                                                       1290 Avenue of the Americas
                                                       New York, NY 10104
                                                       212-541-2000
                                                       dpkasakove@bryancave.corn




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