Hirschfeld, Garrick-Aug have their day in court

Real Estate Weekly, July 18, 2001 by Natalie Keith

Is it a case of the buyer and seller squeezing out the broker in a transaction, or is it a case of a broker seeking payment for services it hasn't provided?

These are questions being posed by Garrick-Aug Store Leasing Inc. and Abraham Hirschfeld to a New York Court State Supreme Court judge. Garrick-Aug is suing Hirschfeld in an attempt to collect $3.6 million in commissions for its role in the Sports Club's decision to move to the Vertical Club, which is owned by Hirschfeld. Hirschfeld, who is serving a prison sentence for plotting to kill his former business partner, claims the firm is not entitled to receive the fee.

In a related, but separate lawsuit, Hirschfeld's son, Elie Hirschfeld, is also suing his father based on the same transaction. At press time last week, those involved in the case were still delivering testimony to the judge, who had not rendered any decision in the case.

The Vertical Club is located at 328-330 E. 61st St. and, up until recently, Hilton Hotel Corp. leased space for the purposes of operating a health club. Hilton had a contract with Bally Total Fitness Holding Corporation to manage the club.

Garrick Aug officials claim they were hired by Elie Hirschfeld in 1997 to find a new tenant for the health club space. Hilton's lease was set to expire in 2001, but had options to renew the lease for an additional 20 years. Garrick-Aug represented the Sports Club, which signed into a letter of intent July 1997 to enter into a lease agreement with the Vertical Club, said attorney Ian Blant, who is representing Garrick-Aug.

Blant said Garrick is entitled to $2.77 million for the lease that the Sports Club eventually signed, plus $360,000 if the club exercises its first option to renew and another $494,000 if it decides to renew the lease a second time.

In his opening statements in the case Robert Feldman, an attorney representing the older Hirschfeld, said the younger Hirschfeld was not authorized to represent the Vertical Club.

"Elie Hirschfeld had no power to sell anything. He's an impostor," Feldman said. "In their arguments, Garrick-Aug says this was a classic case of the buyer and seller squeezing out the broker. This was a classic case of a realtor asking to get paid for doing nothings"

Garrick-Aug officials claimed that, during the time it was representing the Sports Club, the club began negotiating on its own to purchase Hilton's interest in the Vertical Club. Those negotiations included the options of either modifying Hilton's existing lease or entering into a new one, according to court documents.

In October 1997; despite all of its prior dealings, the Sports Club sent a letter to Ganick-Aug saying it was not involved with the club's efforts regarding the Vertical Club.

"The letter was calculated to create the false impression that the Sports Club was at all times pursuing the premises without the involvement of any real estate brokers," according to court documents.

In April, the Sports Club entered into an agreement with Hilton to purchase Hilton's interest in the Vertical Club, including Hilton's lease with the owners. The closing of the sale took place in April 1998 and the lease was modified.