A Co-op's Long Legal Nightmare Is (Finally) Over

Some thought it was an earthquake. Others thought a bomb had gone off. Shortly after 11 p.m. on Friday, Jan. 15, 1999, with a rumble and a roar, a playground and concrete plaza collapsed into the underground parking garage at the Seward Park co-op on the Lower East Side of Manhattan. Dozens of cars were crushed but, miraculously, no one was injured.

On May 12, more than 17 years after that calamitous night, Seward Park’s board of directors announced to shareholders that the co-op’s long legal nightmare had finally come to an end. The board had agreed to pay $950,000 to Public Adjustment Bureau, Inc. (PAB), a public adjusting company, which an earlier board had hired two days after the collapse to expedite the co-op’s claims with its insurer, Greater New York Mutual. When the board hired PAB, it agreed to pay the company 7 percent of any money it recovered.

Now comes the twist. When PAB failed to reach a settlement with the insurance company, the board turned to outside counsel and sued Greater New York Mutual, eventually winning a settlement of $18.4 million. That judgement was reduced on appeal to $11.8 million. A lot less, but hardly chump change.

In 2005, years before that settlement was reached, PAB had sued the co-op, claiming it was entitled to 7 percent of any money recovered from the insurer. At dispute was whether or not the adjusting company had provided “valuable services” that helped the co-op win the judgment. After years of litigation, an appellate court ruled in 2015 that PAB had indeed provided “valuable services.” PAB then argued that its 7 percent fee plus interest entitled it to $1.65 million. After several rounds of negotiations, the co-op board decided to pay $950,000 to make this long nightmare go away.

“While Seward Park is, of course, never happy to have to pay any such amount,” the board wrote in a memo to all shareholders on May 12, “the board and management are pleased to have reached a settlement that finally and fully resolves...a dispute over an agreement that was signed over 17 years ago.”

Darcey Gerstein, the board’s treasurer, said, “Seward Park has sufficient financial resources to pay for this settlement without an appreciable negative effect.”

Actually, one nightmare is over but another might be beginning for this co-op’s parking operation. A group of dissident shareholders is preparing to file an injunction to block the board’s new plan to convert the parking garage and lot from park-and-lock to valet service, a move designed to shorten the waiting list for parking spaces and raise additional revenue.

Read all about it in the upcoming June issue of Habitat.