Kirkland Subtenants Point Fingers at Each Other in Manhattan Rent Spat
Less than half-a-million dollars in unpaid rent may seem like barely a rounding error for Kirkland & Ellis, which generated $3.165 billion last year. But the firm isn't giving up.
May 07, 2018 at 05:08 PM
4 minute read
The original version of this story was published on New York Law Journal
Being a landlord means headaches—and sometimes litigation—even for the country's richest law firm.
Kirkland & Ellis, the highest-grossing law firm in the United States, is entangled in long-running litigation with subtenants in Manhattan. The law firm has accused the subtenants of not paying up on a delinquent rent after their private jet brokerage company, Blue Star Jets, went defunct.
Kirkland's lawsuit, filed in 2016, doesn't appear as if it will end anytime soon. Both executives of the defunct company, Richard Sitomer and Todd Rome, have filed cross-claims this year, blaming the other for the $344,495 in rent arrears.
According to court documents, Kirkland, whose primary New York office is located at 601 Lexington Ave., also leases two floors a few blocks away at 880 Third Ave. In a brief interview, Sitomer said Kirkland was using the space for file rooms.
Under the law firm's lease with Vandergrand Properties starting in 2006 and ending in February 2019, Kirkland's rent has been $699,114 a year at 880 Third Ave., subject to increases in the fourth and eighth years.
Starting in 2012, Kirkland began subletting the 10th floor to Blue Star Jets, then in the business of renting private jets. (The company name was a homage to the airline business in the movie “Wall Street.”) The sublease, which expired in 2019, obligated Blue Star to pay Kirkland about $21,548 per month, plus thousands of additional dollars for taxes, operating expenses and utilities costs. The sublease was personally guaranteed by Blue Star's principals, Rome and Sitomer, Kirkland claims.
Blue Star began failing to pay all of its rent in 2014, and about two years later, the jet business sent Kirkland a letter stating it was ceasing operating on May 31, 2016. “When we entered into the sublease it was our intention to fully perform our obligations, but the extreme decline in our business operations prevents us from doing so,” said the letter, filed in court. According to press reports, a competitor bought Blue Star.
With no attorney appearing on behalf of Blue Star Jets, the firm quickly obtained a default judgment against the defunct entity for $357,197 last year.
Meanwhile, the defunct company's executives have moved on. Rome is now in a business of selling collectible electric-powered Moke buggies, the British vehicles from the 1950s and 1960s, in the United States. Sitomer leads Star Jets International, another private jets business firm that says it grossed $5.9 million last year.
But Kirkland, which generated $3.165 billion in 2017, hasn't forgotten about the sublease. The firm said in an amended filing that neither the company nor its guarantors have paid the delinquent rent subject to the judgment, and past-due damages and attorney fees continue to accumulate.
Meanwhile, Sitomer and Rome, once partners in the Blue Star business, have turned on each other.
In cross-claims filed this year, each alleges there were sufficient assets of Blue Star Jets to pay the rent, but such assets were improperly “taken” and “used by” the other. To the extent Kirkland recovers anything, each claimed he is entitled to indemnification from the other.
In a brief statement to ALM, Sitomer, echoing his cross-claims, blamed Rome, alleging Rome was “paid monies to settle the outstanding rent issue and chose not to and pocketed the money.” Sitomer is represented by Gregory Galterio, managing partner at Jaffe & Asher.
Yitzchak Cohen, an attorney who runs his own practice and represents Rome, did not return email messages seeking comment on the lawsuit and Sitomer's allegations.
The parties have discovery deadlines this summer. The case is before Acting Manhattan Supreme Court Justice Jennifer Schecter.
Jay Lefkowitz, a Kirkland partner representing the law firm in the suit, said Kirkland had no comment.
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