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NY Judge rules against The Manhattan Club Developer - tightens controls over its operations - a victory for its owners By Jeff Weir
In a stinging ruling that handed a slam-dunk victory to timeshare owners at the Manhattan Club, a New York judge May 26 rejected all of developer Ian Bruce Eichner's motions to get out from under a two-year-old civil and criminal fraud investigation mounted by New York Attorney General Eric Schneiderman.
In her 19-page ruling, New York Supreme Court Justice Eileen Rakower not only denied every one of Eichner's motions to dismiss or curtail the investigation, but issued a new order freezing the bank accounts of an Eichner company, New York Urban Management LLC, that pocketed $6.1 to $6.8 million per year for managing operations at the Manhattan Club. The judge noted that Urban, which collected 20 percent of all owner maintenance fees annually, had no employees until August 2014, one month after Schneiderman secured a court order that shut down the club's timeshare operation and froze all bank accounts.
While not a surprise -- at least to lawyers familiar with New York's civil justice system -- Rakower's rulings reaffirmed conclusions that thousands of Manhattan Club owners have long held as bitter truths: that they were misled and defrauded at time of sale, then denied reservations repeatedly as their maintenance fees soared from hundreds to thousands of dollars per year while the club increased nightly rentals to non-owners through popular travel sites and other vacation clubs.
Eichner's legal team, following a public hearing on March 11, filed supplemental briefs attacking the AG's investigation. They also asked Rakower to lift the injunction upon Eichner and his colleagues, including Urban, on assertions that "there was no allegation that the Eichners personally engaged in any wrongful conduct, or that Urban was engaged in wrongdoing."
In rejecting that motion, Rakower observed that it would be premature to vacate the existing injunction until the under-oath depositions of Eichner and his colleagues are fulfilled pursuant to the July 2014 court order that put the timeshare club, in effect, out of business. Eichner's legal team are simultaneously fighting those depositions on grounds that testimony in a civil proceeding could be used, potentially, against the Eichners in a criminal case. A hearing on those depositions is set for June 14. The court ruling provides a concise recap of the entire case, which has already spawned thousands of pages of court filings, motions and counter-arguments. Here are Rakower's additional rulings:
"The court declines the Eichner respondents' request to modify the order to allow new timeshare purchasers to complete their purchases. The court also declines to issue an order setting discovery and deposition cut-off dates, a termination date for NYAG's investigation, and prohibiting NYAG from sending 'mass mailings' to timeshare owners.
"With respect to NYAG's cross motion, the court finds that additional injunctive relief against Urban is 'proper and expedient' in light of Urban's significant role in managing the timeshare project."
Finally, the judge deferred a ruling on the AG's motion to secure civil contempt fines against Eichner's group for withdrawing $368,738 from the club's bank accounts without court approval. An evidentiary hearing must be held on that issue prior to any ruling, Rakower said.
The only question now, according to lawyers watching the Manhattan Club case, is whether Eichner's team appeals Rakower's decisions to a higher court. If that happens, and the lawyers fully expect it will, Manhattan's longest-running off-Broadway timeshare drama will continue into its third year of legal maneuvers while owners fret over their reservations, maintenance fees and legal options to sell or abandon their timeshares.
