Toys R Us-Delaware, Inc. v. 44-45 Broadway Realty Co., LLC

Toys R Us-Delaware, Inc. v. 44-45 Broadway Realty Co., LLC Dismissal

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Pryor Cashman has won dismissal of all claims brought against it client, 44-45 Broadway, by retail toy giant Toys “R” Us.

The dispute arose from a long-term commercial lease between 44-45 Broadway and Toys “R” Us for a large portion of a building owned by 44-45 Broadway and located in Times Square. Toys “R” Us operates its flagship store at the leased premises.

Under the 15 year lease, which was executed in 2000, Toys “R” Us was required to pay a portion of the building’s real estate tax liability, calculated as a percentage of the increase in taxes over the amount of taxes due during the first year of the lease. For 12 years, 44-45 Broadway sent to Toys “R” Us monthly invoices and biannual statements setting forth in detail the calculation of Toys “R” Us’s proportionate share of the building’s taxes, and for 12 years Toys “R” Us paid those invoices and its tax obligation without objection.

In 2011, for the first time, Toys “R” Us objected to the amount of taxes it was being invoiced, claiming that it should not have to pay its proportionate share of the building’s taxes to the extent that those taxes result from income the building receives from signs that do not belong to Toys “R” Us. Pryor Cashman’s client, 44-45 Broadway, rejected Toys “R” Us’s argument and refused to modify the methodology of calculating Toys “R” Us’s tax obligation.

In April 2012 Toys “R” Us brought suit against 44-45 Broadway in New York State Supreme Court in New York County, seeking damages for breach of contract in the amount of the taxes that Toys “R” Us allegedly had been overcharged during the course of the lease term, as well as a declaratory judgment that Toys “R” Us’s interpretation of the lease was the correct interpretation. In response, Pryor Cashman, on behalf of 44-45, Broadway moved to dismiss Toys “R” Us’s complaint.

On January 2, 2013, N.Y. Supreme Court Justice Ramos granted 44-45 Broadway’s motion in its entirety and dismissed the complaint, rejecting Toys “R” Us’s interpretation of the lease and finding that “the contractual obligation to pay a defined portion of real estate taxes imposed on the building has nothing to do with taxes imposed against signs or the income derived from those signs.”

Representing 44-45 Broadway from Pryor Cashman's Real Estate Litigation Group were Partner Todd Soloway, Chair of the group, Partner Eric Sherman and Litigation Associate Benjamin Akley.

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Published In: General Business Updates, Commercial Real Estate Updates

Reference Info:Decision | State, 2nd Circuit, New York | United States