SUPREME COURT OF THE STATE OF NEW YORK" COUNTY OF NEW YORK * - ALPHONSE FLETCHER, Jr., and IndexNo. H'lOll^ FLETCHER ASSET MANAGEMENT, Date purchased: F^ j 'J_QI\ INC. Plaintiffs designate New York Plaintiffs, County as the place of trial. The basis of venue is plaintiff Fletcher's residence (CPLR 503(a)). v. THE DAKOTA INC., SUMMONS BRUCE BARNES, PAMELA LO V I N G E R , PETER NITZE, Plaintiff Fletcher resides at: One West JOHN RYDZEWSKI, and ANTHONY R. 72'n d Street, Apt. 51, New York, NY SMITH AND GAEL SMITH ARNOLD as County of New York co-executors of THE ESTATE OF RUTH PROSKAUER SMITH, Defendants. To the above named Defendants: YOU ARE HEREBY SUMMONED to answer the complaint in this action and to serve a copy of your answer, or, if the complaint is not served with this summons, to serve a notice of appearance, on the Plaintiffs' Attorneys within 20 days after the service of this summons, exclusive of the day of service (or within 30 days after the service is complete if this summons is not personally delivered to you within the State of New York); and in case of your failure to appear or answer, judgment will be taken against you by default for the relief demanded in the complaint. Dated: February 1,2011 New York, N.Y. Attorneys for Plaintiffs: KCBNSTEIN VEISZ WEXLER & PqifLARD, LM 5 OiAiui ' Daniel J. Komsteiii/Esq.A Defendants' addresses: Ina R. BortBort, ESQ/ 1 757 Third Avenue NEWYOUK The Dakota, Inc. New York, N.Y. 10017 COfJNTY OUffiMB OFFICE 675 Third Avenue (212)418-8600 New York, N.Y. 10017 FEB - 1 2011 MIWOOPYPfLE Bruce Barnes One West 72ndt Street New York, N.Y. 10023 Pamela Lovinger One West 72"^ Street New York, N.Y. 10023 Peter Nitze One West 727 nd Street New York, N.Y. 10023 John Rydzewski One West 72nd Street New York, N.Y. 10023 Anthony R. Smith and Gael Smith Arnold, as co-executors of the Estate of Ruth Proskauer Smith c/o Brill & Meisel 845 Third Avenue, 16* Floor New York, N.Y. 1.0022 *sit- SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ALPHONSE FLETCHER, Jr., and IndexNo. |j \0\1$fl FLETCHER ASSET MANAGEMENT, INC. VERIFIED COMPLAINT Plaintiffs, THE DAKOTA INC., BRUCE BARNES, PAMELA LOVINGER, PETER NITZE, NEWYOflK JOHN RYDZEWSKI, and ANTHONY R. COUMTY oimm OTOCE SMITH AND GAEL SMITH ARNOLD, as co-executors of THE ESTATE OF FEB-12011 RUTH PROSKAUER SMITH, NOTOGMfWliD Defendants. VWTH COPY RLE ^^ssi Plaintiffs Alphonse ("Buddy") Fletcher, Jr. ("Fletcher") and Fletcher Asset Management, Inc. ("FAM"), by their counsel Komstein Veisz Wexler & Pollard, LLP, for their verified complaint against defendants, The Dakota Inc. (the "Dakota," the "Building," or the "Corporation"), Bruce Barnes, Peter Nitze, John Rydzewski and Pamela Lovinger (the "Individual Defendants;" together with the Dakota, the "defendants"), as well as the Estate of Ruth Proskauer Smith (the "Estate") allege as follows: Nature of the Action 1. This is an action for defamation, tortious interference with contract, breach of fiduciary duty, aiding and abetting breach of fiduciary duty and unlawful discrimination arising out of defendants' tortious and unlawful mistreatment of their fellow shareholder and neighbor Alphonse ("Buddy") Fletcher Jr. ("Fletcher"). As founder and CEO of plaintiff FAM, a successful investment management firm, Fletcher is a prominent African-American investor and philanthropist. This lawsuit seeks relief as a result of the defendants' acts and statements in opposing Fletcher's effort to accommodate his growing family by purchasing the apartment next to his own at the Dakota, a renowned cooperative apartment building located on the Upper West Side of Manhattan, and restoring the two apartments to their original size and configuration as one unit. The facts also arise from Fletcher's past efforts to defend the rights of other minority and female shareholders and applicants at the Dakota. 2. Motivated by unlawful animus and engaging in impermissible self-dealing, the Dakota, the Individual Defendants and the Dakota's Board of Directors (the "Board") unlawfully blocked Fletcher's effort to purchase the adjoining apartment after he had already entered into a contract for the purchase with the apartment's current owner, the Estate of Ruth Proskauer Smith. In so doing, the defendants not only breached their fiduciary duty to Fletcher by self- dealing and by failing to treat him in the same manner as other Dakota shareholders, but they also committed further unlawful acts by spreading demonstrably false, insulting, and inherently defamatory reports about Fletcher's financial condition, his integrity, and the financial condition of FAM. The reports included, for example, the false, malicious, and harmful rumors that Fletcher was either unable or unwilling to satisfy commitments that he had made to various charities, that Fletcher lacked sufficient assets to purchase the apartment and that FAM's financial condition was precarious. 3. More specifically, last spring Fletcher entered into a contract for the all-cash purchase of Apartment 50, with the apartment's owner, free of any financing contingency. Ruth Proskauer Smith, whose Estate now owns the apartment, was Fletcher's next-door neighbor and friend and had long made clear to her family and other Dakota shareholders that she wanted Fletcher to purchase the apartment after her death. She wanted this to happen so that Fletcher could restore the two apartments to their original layout as one unit, and so that he could have a larger residence in the Dakota for his family. Shortly after entering the purchase contract, Fletcher, following long-established Board procedures, submitted his application for the Board to approve the proposed transaction. 4. Yet despite Fletcher's great wealth, longstanding responsible behavior as a Dakota shareholder and his ownership of a highly profitable investment management firm, the defendants rejected Fletcher's application. In so doing, and in the course of their related dealings, defendants maliciously and wrongfully impugned Fletcher's reputation, financial condition and that of his company, FAM, to Board members, Dakota shareholders not on the Board, and others, including current and potential FAM investors. Although such conduct by a coop board on the Upper West Side of Manhattan in the beginning of the twenty-first century may seem surprising, this behavior was consistent with the defendants' extensive pattern of hostility toward non-white residents of the Building. Indeed, Fletcher had himself tried to stop such unequal treatment when he served as Board President several years before and he himself had been subjected to it as far back as 1992, when he first sought to purchase an apartment in the Dakota. This unequal treatment — which several of the individual defendants have long referred to as "the Buddy Rule" —continues to this day, including through ongoing and highly unusual restrictions on Fletcher and his mother's use of their own apartments. 5. After the Board initially indicated its intention to reject his application to purchase Apartment 50 in April 2010, Fletcher offered numerous times to address any questions or concerns the Board might have regarding his finances and those of FAM. In an attempt to reach an amicable resolution, Fletcher repeatedly attempted to engage in discussions with defendants over the course of many months, to no avail. In addition, Fletcher agreed to submit hundreds of pages of disclosures concerning his own finances and the financial situation of FAM, although the Dakota's established policies — specifically designed to protect existing shareholders from burdensome procedures — clearly did not require this. The Board, however, refused even to ask Fletcher any questions regarding his extensive submission and instead presented a series of purported concerns about Fletcher and FAM's financial condition. Yet after Fletcher indisputably addressed each issue, the Board came up with purported new concerns and threatened new, unique conditions in connection with its consideration of Fletcher's application to purchase Apartment 50. 6. Despite Fletcher's numerous efforts, it eventually became clear that the defendants would not willingly relent in their determination to block Fletcher's purchase of Apartment 50, notwithstanding his financial qualifications and past service to the Building. The Board President went so far as to threaten that the Board would only approve Fletcher's application if Fletcher "won the lottery." Presumably based on the theory that the best defense is a good offense, the Board also falsely and injuriously accused Fletcher of playing the "race card." Indeed, long before Fletcher began to raise concerns about Board misconduct in connection with the handling of his application, the individual defendants sought to undermine Fletcher by suggesting to Board members and others that Fletcher might, in the future, use his status as an African-American to persuade the Board to approve his application. This baseless allegation caused further harm to Fletcher by raising hostility toward him and diminishing his relationship with other shareholders in the Building. 7. Other Board members' actions confirm the Board's breach of fiduciary duty and other impermissible conduct. On or about November 3, 2010, then-Board member Pamela Lovinger suddenly resigned from the Dakota Board and announced that she would be listing her 4 own apartment (Apartment 51) jointly for sale with Apartment 50 as an 11-room apartment at a combined price of $19.5 million. On information and belief, Mr. Rydzewski instigated this plan for the joint sale. On information and belief, the other Board members who are individual defendants in this action encouraged Ms. Lovinger to enter this arrangement for a combined purchase based on their belief that such a sale would bring financial benefit to them. Specifically, the market value of their own apartments at the Dakota - where prices have been significantly depressed, in their view — would increase substantially if such a large sale were to occur within the Building.