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SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS

JONATHAN R. CALDWELL and CALDWELL URBAN VENTURES LLC,

Plaintiffs,

— against —

MARCUS D. WHITFIELD and PINNACLE GREYSTONE CAPITAL LLC,

Defendants.

Index No. 519847/2023

MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS' MOTION FOR A PRELIMINARY INJUNCTION

Filed: October 2, 2023 Before Hon. Patricia Velez, J.S.C.

Attorneys for Plaintiffs:

CALDERWOOD & HARKNESS LLP 599 Lexington Avenue, 34th Floor New York, NY 10022 Douglas Carmichael, Esq. Patrick Gallagher, Esq. Telephone: (212) 548-7200 Facsimile: (212) 548-7201

PRELIMINARY STATEMENT

Plaintiffs Jonathan R. Caldwell ("Caldwell") and Caldwell Urban Ventures LLC ("Caldwell Urban Ventures" and, together with Caldwell, "Plaintiffs") respectfully submit this memorandum of law in support of their motion, brought by order to show cause, for a preliminary injunction restraining defendants Marcus D. Whitfield ("Whitfield") and Pinnacle Greystone Capital LLC ("Pinnacle Greystone" and, together with Whitfield, "Defendants") from further encumbering, transferring, conveying, pledging, hypothecating, or otherwise dissipating the real property located at 540-548 Atlantic Avenue, Brooklyn, New York 11217 (the "Property"), and any assets of Atlantic Yards Development Partners LLC ("AYDP"), the special purpose vehicle through which the parties hold the Property.

The underlying action, commenced by the filing of a Verified Complaint on September 18, 2023, asserts claims for common-law fraud, fraudulent inducement, constructive fraud, breach of fiduciary duty, unjust enrichment, and aiding and abetting fraud. These claims arise from Whitfield's systematic concealment of material adverse conditions and his self-dealing in connection with a $14.8 million joint real estate investment in which Caldwell committed total equity of $5,920,000 based on materially false representations by Whitfield concerning the condition, encumbrances, environmental status, and income potential of the Property.

The relief Plaintiffs seek is narrowly tailored and urgently needed. The Property at 540-548 Atlantic Avenue is the sole substantial asset of AYDP and constitutes the primary—indeed, effectively the only—asset from which Plaintiffs can recover compensatory damages of at least $6,200,000. Defendants, however, have demonstrated a pattern of deception and self-dealing that creates a substantial and well-founded risk that, absent injunctive relief, the Property will be further encumbered, transferred, or otherwise dissipated before this Court can adjudicate Plaintiffs' claims on the merits.

The facts underlying Plaintiffs' claims are supported by extensive documentary evidence already in Plaintiffs' possession. That evidence establishes, among other things, that Whitfield: (1) concealed $1,340,000 in outstanding New York City real property tax liens that encumbered the Property at the time of acquisition; (2) suppressed a Phase II environmental site assessment revealing petroleum contamination requiring an estimated $620,000 in remediation, while affirmatively representing that the environmental assessment was "clean"; (3) circulated a materially inflated pro forma rent roll overstating projected annual gross rental income by approximately $580,000, or 26.9%; and (4) secretly caused Pinnacle Greystone to enter into a self-dealing consulting agreement with Glenmore Realty Advisors Inc.—a firm controlled by Whitfield's brother-in-law—diverting $370,000 in project funds without Caldwell's knowledge or consent.

Plaintiffs satisfy each prong of the well-established preliminary injunction standard under New York law. First, Plaintiffs are likely to succeed on the merits. The documentary evidence of four distinct categories of fraud is compelling, and Defendants will not be able to credibly deny the existence or materiality of these concealed facts. Second, Plaintiffs will suffer irreparable harm absent injunctive relief. The Property is the sole substantial asset from which Plaintiffs can recover, Defendants control that asset, and Defendants have already demonstrated a willingness to divert project funds for Whitfield's personal benefit. Third, the balance of equities tips decisively in Plaintiffs' favor. The requested injunction merely maintains the status quo by preventing further encumbrance or transfer; it does not deprive Defendants of possession, use, or rental income from the Property.

For each of these reasons, and for the additional reasons set forth below, the Court should grant Plaintiffs' motion.

STATEMENT OF FACTS

The following facts are drawn from the Verified Complaint (Exhibit A), the Affidavit of Jonathan R. Caldwell sworn to on October 2, 2023 (Exhibit I), and the documentary exhibits submitted herewith.

A. The Parties

Jonathan R. Caldwell. Plaintiff Jonathan R. Caldwell is an individual investor residing at 440 East 72nd Street, Apartment 18D, New York, New York 10021. (Caldwell Aff. ¶ 2.) Mr. Caldwell is fifty-eight years old and is a seasoned real estate professional with decades of experience in New York City real estate transactions. (Caldwell Aff. ¶ 3.) He holds a Bachelor of Science degree in Finance from the Wharton School of the University of Pennsylvania and a Master of Business Administration degree from Columbia Business School. (Id.) Prior to his career as an independent investor, Mr. Caldwell served as a Managing Director at Hargrove Meridian Partners LLC, a New York-based real estate investment firm, where he was responsible for sourcing, underwriting, and managing commercial and residential real estate investments across the five boroughs. (Caldwell Aff. ¶ 4.) Mr. Caldwell's estimated net worth is approximately $34 million, of which approximately $19 million is deployed in New York City-area real estate investments. (Caldwell Aff. ¶ 5.)

Caldwell Urban Ventures LLC. Plaintiff Caldwell Urban Ventures LLC is a New York single-member limited liability company formed on March 8, 2021, with an Employer Identification Number of 86-4031278. (Caldwell Aff. ¶ 6; Exhibit G.) Mr. Caldwell is the sole member and manager of Caldwell Urban Ventures. (Id.) Caldwell Urban Ventures was formed as the investment vehicle through which Mr. Caldwell would hold his forty percent (40%) membership interest in the project entity, AYDP. (Caldwell Aff. ¶ 7.)

Marcus D. Whitfield. Defendant Marcus D. Whitfield is an individual residing at 88 Montague Street, Penthouse B, Brooklyn, New York 11201. (Verified Compl. ¶ 8.) Mr. Whitfield is fifty-two years old and presents himself as an experienced real estate developer and investment manager with a track record of over $200 million in aggregate real estate transactions across the Brooklyn and Queens markets. (Caldwell Aff. ¶ 9.) Mr. Whitfield holds a Juris Doctor degree from Fordham University School of Law, although he does not currently practice law. (Verified Compl. ¶ 10.) Mr. Whitfield is the sole member and manager of Pinnacle Greystone Capital LLC and served as the managing co-investor responsible for sourcing, conducting due diligence on, acquiring, and overseeing the development of the Property. (Caldwell Aff. ¶ 11.)

Pinnacle Greystone Capital LLC. Defendant Pinnacle Greystone Capital LLC is a New York limited liability company formed on June 14, 2019, with an Employer Identification Number of 83-2917465. (Verified Compl. ¶ 12.) Its principal office is located at 330 Furman Street, Suite 410, Brooklyn, New York 11201. (Id.) Mr. Whitfield is the sole member and manager of Pinnacle Greystone. (Caldwell Aff. ¶ 13.) In the co-investment transaction at issue, Pinnacle Greystone served as the managing co-investor and held a sixty percent (60%) membership interest in AYDP. (Exhibit G.)

B. The Co-Investment and Acquisition

In or about March 2021, Whitfield approached Caldwell with a proposed co-investment opportunity involving the Property—a mixed-use building located at 540-548 Atlantic Avenue, Brooklyn, New York 11217. (Caldwell Aff. ¶ 14.) The Property comprises a 42,000-square-foot building situated on an approximately 0.38-acre lot zoned C6-2A under the New York City Zoning Resolution. (Id.) The building features ground-floor retail space and upper-floor space with residential conversion potential—a configuration that, according to Whitfield's representations, offered significant value-add upside through a repositioning and renovation program. (Caldwell Aff. ¶ 15.)

Whitfield presented himself to Caldwell as having originated and sourced the opportunity, having conducted extensive due diligence on the Property, and having negotiated the purchase terms directly with the seller. (Caldwell Aff. ¶ 16.) Whitfield circulated a detailed investment memorandum, a pro forma financial model, and supporting due diligence materials to Caldwell in March 2021, which are attached hereto as Exhibit D. (Id.) The parties agreed that Whitfield, through Pinnacle Greystone, would serve as the managing co-investor with primary responsibility for all aspects of due diligence, acquisition, and development oversight, while Caldwell would serve as a passive co-investor contributing capital through Caldwell Urban Ventures. (Caldwell Aff. ¶ 17; Exhibit G § 3.1.)

To effectuate the investment, the parties formed Atlantic Yards Development Partners LLC, a New York limited liability company, on April 22, 2021, with an Employer Identification Number of 87-1253946. (Exhibit G.) AYDP's registered agent is National Filing Services Inc., located at 28 Liberty Street, New York, New York 10005. (Id.) Pursuant to the AYDP Operating Agreement (Exhibit G), Caldwell Urban Ventures LLC holds a forty percent (40%) membership interest and Pinnacle Greystone Capital LLC holds a sixty percent (60%) membership interest. (Exhibit G § 2.1.)

The acquisition of the Property closed on May 14, 2021, at a purchase price of $14,800,000. (Caldwell Aff. ¶ 20; Exhibit H.)

The capital structure for the acquisition was as follows:

Senior Debt. AYDP obtained a senior acquisition and construction loan from Broadmark Commercial Lending Corp. ("Broadmark"), located at 140 Broadway, 22nd Floor, New York, New York 10005 (Loan Officer: David Poulos), in the principal amount of $9,620,000, representing approximately sixty-five percent (65%) of the acquisition price (i.e., a 65% loan-to-value ratio). (Caldwell Aff. ¶ 21; Exhibit H.) The Broadmark loan is secured by a first-priority mortgage on the Property. (Exhibit H.)

Equity. The total equity required at closing was $5,180,000, representing the difference between the $14,800,000 purchase price and the $9,620,000 Broadmark senior loan. (Caldwell Aff. ¶ 22.) In accordance with their respective membership interests, Caldwell Urban Ventures contributed $2,072,000 at closing (40% of $5,180,000) and Pinnacle Greystone contributed $3,108,000 at closing (60% of $5,180,000). (Id.) Caldwell's total committed equity—encompassing his proportionate share of the full acquisition price, anticipated capital calls for renovation, and reserves—was $5,920,000 (40% of $14,800,000). (Caldwell Aff. ¶ 23.) Whitfield's total committed equity was $8,880,000 (60% of $14,800,000). (Id.)

The projected total development budget for the Property, as set forth in Whitfield's March 2021 pro forma (Exhibit D), was $22,350,000, comprising the $14,800,000 acquisition price and an estimated $7,550,000 in renovation and repositioning costs. (Caldwell Aff. ¶ 24.) Whitfield's pro forma projected a stabilized value for the completed project of $31,200,000, yielding a projected equity multiple of approximately 2.13x on total invested equity. (Caldwell Aff. ¶ 25; Exhibit D.) It was this projection—built, as Plaintiffs now know, on a foundation of material misrepresentations and concealment—that induced Caldwell to commit his capital to the venture.

C. Whitfield's Material Misrepresentations and Concealment

The evidence demonstrates that Whitfield engaged in a systematic course of fraud, concealing material adverse information about the Property and diverting project funds for his personal benefit. The fraud falls into four distinct categories, each of which is independently material and each of which would have caused a reasonable investor in Caldwell's position to decline the investment or to demand materially different terms.

1. Concealed NYC Real Property Tax Liens ($1,340,000). At the time of the acquisition of the Property in May 2021, $1,340,000 in outstanding New York City real property tax liens encumbered the Property. (Caldwell Aff. ¶ 27; Exhibit B.) These liens were a matter of public record, readily discoverable through a routine title search or inquiry to the New York City Department of Finance. (Caldwell Aff. ¶ 28.)

Whitfield, in his capacity as the managing co-investor responsible for conducting due diligence on the Property, affirmatively represented to Caldwell on multiple occasions—including in written communications and during in-person meetings in March and April 2021—that all outstanding tax obligations on the Property had been "resolved" and that the Property would be conveyed to AYDP free and clear of tax liens. (Caldwell Aff. ¶ 29.) These representations were false. The tax liens were not resolved; they remained outstanding and continued to accrue interest and penalties. (Id. ¶ 30.)

Caldwell did discover the existence of the $1,340,000 in outstanding tax liens until August 2023, when Broadmark Commercial Lending Corp. required updated title reports as a condition of extending the maturity of the construction loan. (Caldwell Aff. ¶ 31.) The updated title report revealed the pre-existing liens, which had remained undisclosed for over two years. (Id.)

2. Suppression of Phase II Environmental Assessment ($620,000 Remediation). In or about February 2021—prior to the closing of the acquisition—Ridgepoint Environmental Consultants LLC ("Ridgepoint") conducted a Phase II environmental site assessment of the Property. (Caldwell Aff. ¶ 32; Exhibit C.) The Phase II assessment, a copy of which is attached hereto as Exhibit C, revealed the presence of petroleum contamination in the soil and groundwater beneath the Property, with estimated remediation costs of approximately $620,000. (Exhibit C at 14-17.)

Whitfield did not disclose the existence of the Phase II assessment or its findings to Caldwell at any time prior to, during, or after the closing. (Caldwell Aff. ¶ 33.) To the contrary, Whitfield affirmatively represented to Caldwell in his March 2021 investment materials and in oral discussions that the Phase I environmental site assessment for the Property was "clean" and that no environmental issues had been identified. (Caldwell Aff. ¶ 34; Exhibit D.) Whitfield's representation that the Phase I was "clean" was itself misleading, because a Phase I assessment that identifies recognized environmental conditions—as the Phase I here must have, given that a Phase II was subsequently commissioned—is not "clean" in the industry-standard sense of the term. (Caldwell Aff. ¶ 35.) More fundamentally, Whitfield's silence regarding the Phase II assessment, which he either commissioned or received in the ordinary course of his due diligence responsibilities, constituted a material omission.

Caldwell first learned of the Phase II assessment and the petroleum contamination in August 2023, when Broadmark required updated environmental reports as part of the loan extension process. (Caldwell Aff. ¶ 36.) The discovery that the Property was contaminated—and that Whitfield had known of the contamination for over two years while concealing it from Caldwell—was a pivotal moment in Caldwell's understanding of the scope of Whitfield's fraud. (Id.)

3. Inflated Pro Forma Rent Roll. Whitfield's March 2021 investment materials, including his pro forma financial model (Exhibit D), projected annual gross rental income at stabilization of $2,160,000. (Caldwell Aff. ¶ 37; Exhibit D.) This projection was a critical input in the valuation analysis that yielded the $31,200,000 stabilized value and the 2.13x equity multiple that Whitfield used to induce Caldwell's investment. (Id.)

Following the discovery of the tax liens and environmental contamination in August 2023, Caldwell retained the independent accounting firm of Ellerby & Associates CPAs LLP ("Ellerby"), located at 757 Third Avenue, Suite 1800, New York, New York 10017 (managing partner: Grace Ellerby, CPA), to conduct an independent analysis of the Property's income potential. (Caldwell Aff. ¶ 38.) Ellerby's analysis, a copy of which is attached hereto as Exhibit F, concluded that actual market conditions at the time of the investment supported annual gross rental income of only approximately $1,580,000—not $2,160,000 as Whitfield had represented. (Exhibit F at 8.) This represents an overstatement of approximately $580,000 per year, or approximately 26.9%. (Caldwell Aff. ¶ 39.) The inflated rent roll had the direct effect of overstating the Property's projected stabilized value, thereby making the investment appear far more attractive to Caldwell than it actually was.

4. Undisclosed Self-Dealing Consulting Agreement with Glenmore Realty Advisors Inc. On April 30, 2021—just two weeks before the acquisition closed on May 14, 2021—Whitfield caused Pinnacle Greystone Capital LLC to enter into a consulting agreement with Glenmore Realty Advisors Inc. ("Glenmore"), a firm controlled by Neil Osterberg, Whitfield's brother-in-law. (Caldwell Aff. ¶ 40; Exhibit E.) The consulting agreement, a copy of which is attached hereto as Exhibit E, provided for payment to Glenmore of a $370,000 "acquisition advisory fee" from AYDP project funds. (Exhibit E at 1-2.)

The Glenmore consulting agreement was executed without Caldwell's knowledge, consent, or approval. (Caldwell Aff. ¶ 41.) The existence of the agreement was not disclosed to Caldwell at any time prior to or following the closing. (Id.) The AYDP Operating Agreement (Exhibit G) requires that any consulting or advisory agreements with related parties be disclosed to and approved by all members. (Exhibit G § 5.4.) Whitfield's failure to disclose the Glenmore agreement—and his use of project funds to pay a $370,000 fee to his brother-in-law's firm—constitutes self-dealing in violation of his fiduciary duties and the express terms of the Operating Agreement. (Caldwell Aff. ¶ 42.)

Caldwell's forty percent (40%) share of the $370,000 in diverted project funds amounts to $148,000. (Caldwell Aff. ¶ 43.)

D. Discovery of the Fraud (August 2023)

The full scope of Whitfield's fraud came to light in August 2023 through circumstances that were entirely outside Whitfield's control. (Caldwell Aff. ¶ 44.) The renovation project had fallen behind schedule and the Broadmark senior loan was approaching its maturity date. As a condition of extending the loan maturity, Broadmark required that AYDP provide updated title reports and environmental assessments. (Caldwell Aff. ¶ 45.)

The updated title report revealed the $1,340,000 in outstanding tax liens that Whitfield had represented were "resolved." (Caldwell Aff. ¶ 46; Exhibit B.) The updated environmental report brought to light the February 2021 Phase II assessment by Ridgepoint Environmental Consultants LLC, revealing the petroleum contamination that Whitfield had concealed. (Caldwell Aff. ¶ 47; Exhibit C.) These revelations prompted Caldwell to undertake a comprehensive review of the investment, leading to the discovery of the inflated rent roll and the undisclosed Glenmore consulting agreement. (Caldwell Aff. ¶ 48.)

Upon discovering the extent of Whitfield's fraud, Caldwell promptly retained the law firm of Calderwood & Harkness LLP on September 11, 2023. (Caldwell Aff. ¶ 49.) The Verified Complaint in this action was filed on September 18, 2023—seven days later. (Id.) Caldwell has acted with diligence and dispatch at every stage.

E. The Present Risk of Dissipation

The risk that Defendants will further encumber, transfer, or dissipate the Property and the assets of AYDP is both real and imminent.

The Property at 540-548 Atlantic Avenue is the sole substantial asset of Atlantic Yards Development Partners LLC. (Caldwell Aff. ¶ 50.) AYDP was formed as a single-purpose entity to hold and develop the Property, and it has no other material assets. (Id.) The Property is therefore the primary—and effectively the only—asset from which Plaintiffs can satisfy a judgment in this action, which Plaintiffs estimate will be at least $6,200,000 in compensatory damages, plus punitive damages. (Caldwell Aff. ¶ 51.)

Whitfield, through Pinnacle Greystone's sixty percent (60%) membership interest and his role as manager of AYDP, exercises unilateral control over the Property and the affairs of the SPV. (Caldwell Aff. ¶ 52; Exhibit G § 3.1.) Under the Operating Agreement, the manager has authority to execute documents, enter into agreements, and take actions on behalf of the company, including with respect to financing, encumbrances, and transfers of real property. (Exhibit G §§ 3.1, 3.3.)

Whitfield has already demonstrated a willingness to divert project assets without Caldwell's knowledge. The $370,000 payment to Glenmore Realty Advisors Inc.—a related-party entity controlled by Whitfield's brother-in-law—was made from project funds without any disclosure to or approval by Caldwell, in direct violation of the Operating Agreement. (Caldwell Aff. ¶ 53.) This pattern of conduct provides a concrete and well-founded basis for concluding that Whitfield will continue to use his managerial authority to benefit himself at the expense of Caldwell and the AYDP venture.

The risk is compounded by the current state of the Broadmark senior loan. The $9,620,000 loan from Broadmark is presently subject to maturity extension negotiations. (Caldwell Aff. ¶ 54.) If the loan matures without extension, Broadmark could initiate foreclosure proceedings, which would eliminate Caldwell's equity interest in the Property. (Id.) Alternatively, Whitfield could use the maturity event as a pretext to refinance the loan on terms that further subordinate or impair Caldwell's interests—for example, by obtaining mezzanine financing, adding additional liens, or restructuring the capital stack in a manner that dilutes or eliminates Caldwell's position. (Caldwell Aff. ¶ 55.)

There is also a substantial risk that Whitfield could transfer the Property, or the membership interests in AYDP, to a related entity or to a third party—potentially a bona fide purchaser for value—thereby frustrating Caldwell's ability to collect any judgment entered in this action. (Caldwell Aff. ¶ 56.) Once such a transfer occurs, recovery of the Property or its value may be impossible, and the Court's ability to fashion a meaningful remedy will be irreparably compromised.

LEGAL STANDARD

Under New York law, a preliminary injunction is a provisional remedy designed to maintain the status quo pending the resolution of an action on the merits. CPLR § 6301. A party seeking a preliminary injunction must demonstrate: (1) a likelihood of success on the merits; (2) irreparable injury in the absence of injunctive relief; and (3) a balance of the equities in the movant's favor. Nobu Next Door, LLC v. Fine Arts Hous., Inc., 4 N.Y.3d 839, 840 (2005); Northpoint Casualty Group Ins. Co. v. Capasso, 75 N.Y.2d 860, 862 (1990); W.T. Grant Co. v. Srogi, 52 N.Y.2d 496, 517 (1981).

The movant need not demonstrate a certainty of success on the merits; rather, the movant must show "a probability of success, not a certainty." Barbes Rest. Inc. v. ASRR Suzer 218, LLC, 140 A.D.3d 430, 431 (1st Dep't 2016). The standard requires the movant to establish a "clear right" to relief. Doe v. Axelrod, 73 N.Y.2d 748, 750 (1988).

In fraud cases involving real property, New York courts have recognized that the risk of dissipation of the sole asset from which a plaintiff can recover constitutes irreparable harm sufficient to warrant injunctive relief. Stonefield Securities Indosuez v. Rossiyskiy Kredit Bank, 94 N.Y.2d 541, 549 (2000) (recognizing that a showing of imminent dissipation may support the irreparable harm prong). Where a defendant has demonstrated a propensity for deception, asset concealment, or self-dealing, that history is properly considered in evaluating both the likelihood of success and the irreparable harm prongs of the preliminary injunction analysis. See JSC Foreign Econ. Ass'n Technostroyexport v. Int'l Dev. & Trade Servs., Inc., 295 F. Supp. 2d 366, 388 (S.D.N.Y. 2003) (applying New York law); Republic of Haiti v. Duvalier, 211 A.D.2d 379, 385 (1st Dep't 1995).

The purpose of a preliminary injunction in this context is not to grant the movant premature victory, but to preserve the court's ability to afford meaningful relief after trial. See Uniformed Firefighters Ass'n of Greater N.Y. v. City of New York, 79 N.Y.2d 236, 241 (1992). As the Court of Appeals has explained, a preliminary injunction is warranted when, without it, "the plaintiff will be unable to obtain complete relief." Northpoint Casualty Group Ins. Co., 75 N.Y.2d at 862.

ARGUMENT

POINT I: PLAINTIFFS ARE LIKELY TO SUCCEED ON THE MERITS

Plaintiffs are likely to succeed on each of their claims against Defendants. The documentary evidence already in Plaintiffs' possession—including tax lien records, the suppressed Phase II environmental assessment, the undisclosed Glenmore consulting agreement, and the independent rent analysis by Ellerby & Associates—establishes the essential elements of each cause of action. Defendants will not be able to credibly deny the existence or materiality of the concealed facts.

A. Common-Law Fraud and Fraudulent Inducement

Under New York law, the elements of a cause of action for common-law fraud are: (1) a material misrepresentation or omission of a fact; (2) knowledge of its falsity (scienter); (3) an intent to induce reliance; (4) justifiable reliance by the plaintiff; and (5) damages proximately caused by the reliance. Eurycleia Partners, LP v. Padilla & Severin LLP, 12 N.Y.3d 553, 559 (2009); Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 421 (1996). A claim for fraudulent inducement applies the same elements where the misrepresentation induces the plaintiff to enter into a transaction. Deerfield Commc'ns Corp. v. Chesebrough-Ponds, Inc., 68 N.Y.2d 954, 956 (1986).

Plaintiffs satisfy each element as to multiple, independent categories of fraud.

Material Misrepresentation and Omission. Whitfield made four distinct categories of material misrepresentations and omissions, each of which is independently sufficient to support the fraud claims:

First, Whitfield affirmatively represented to Caldwell that all outstanding tax liens on the Property had been "resolved," when in fact $1,340,000 in New York City real property tax liens encumbered the Property and remained outstanding. (Caldwell Aff. ¶ 29; Exhibit B.) This misrepresentation was plainly material: the existence of $1,340,000 in undisclosed tax liens significantly affects the value of the Property, creates a risk of enforcement by the City, and would have been a critical factor in any reasonable investor's decision to invest.

Second, Whitfield affirmatively represented that the Phase I environmental assessment of the Property was "clean" and did not disclose the existence of the Phase II environmental site assessment prepared by Ridgepoint Environmental Consultants LLC in February 2021, which revealed petroleum contamination requiring an estimated $620,000 in remediation. (Caldwell Aff. ¶¶ 33-35; Exhibits C, D.) Environmental contamination of this magnitude is unquestionably material to a real estate investment. The $620,000 remediation cost alone represents a significant addition to the development budget, and the presence of contamination can affect the Property's financing, insurance, and ultimate value.

Third, Whitfield's March 2021 pro forma and investment materials projected annual gross rental income at stabilization of $2,160,000, when actual market conditions supported rental income of only approximately $1,580,000—an overstatement of approximately $580,000 per year, or 26.9%. (Caldwell Aff. ¶¶ 37-39; Exhibits D, F.) This inflation directly affected the projected stabilized value of $31,200,000 and the 2.13x equity multiple that Whitfield used to induce Caldwell's investment. An overstatement of nearly 27% in projected rental income is material by any standard.

Fourth, Whitfield concealed the existence of the $370,000 consulting agreement between Pinnacle Greystone and Glenmore Realty Advisors Inc., a related-party firm controlled by Whitfield's brother-in-law. (Caldwell Aff. ¶¶ 40-42; Exhibit E.) The diversion of $370,000 in project funds to a related party, without disclosure or consent, constitutes a material omission and a classic instance of self-dealing fraud.

Scienter. Whitfield's knowledge of the falsity of his representations is readily inferable from the evidence. As the managing co-investor who sourced the transaction and oversaw all aspects of due diligence, Whitfield either commissioned or received the Phase II environmental assessment from Ridgepoint Environmental Consultants LLC. (Caldwell Aff. ¶ 32.) A Phase II assessment is not conducted in a vacuum; it is commissioned in response to findings in a Phase I assessment, and the commissioning party necessarily receives the results. Whitfield's representation that the environmental assessment was "clean" demonstrates not merely knowledge of the Phase II's existence, but an affirmative intent to conceal it.

With respect to the Glenmore consulting agreement, Whitfield personally executed the agreement on behalf of Pinnacle Greystone, two weeks before the acquisition closed. (Exhibit E.) He necessarily had knowledge of the side deal because he created it.

With respect to the $1,340,000 in tax liens, these encumbrances are publicly recorded with the New York City Department of Finance and would have been revealed by even a cursory title search—the most basic element of real estate due diligence. (Caldwell Aff. ¶ 28.) Whitfield's due diligence role as managing co-investor created a clear obligation to discover and disclose such liens. His failure to do so, coupled with his affirmative representation that tax obligations had been "resolved," demonstrates knowledge and intent.

As to the inflated rent roll, Whitfield, as an experienced developer with over $200 million in Brooklyn/Queens transactions, was in a position to know—and did know, or at a minimum was reckless in not knowing—that market rents could not support the $2,160,000 in annual gross income he projected. (Caldwell Aff. ¶ 37.) The 26.9% overstatement is not a marginal difference that might reflect reasonable disagreement among appraisers; it is a gross inflation that can only be explained by an intent to deceive.

Intent to Induce Reliance. Whitfield circulated his March 2021 investment materials, including the pro forma, the misrepresentations about environmental conditions, and the representations about tax liens, specifically to Caldwell for the express purpose of inducing Caldwell's $5,920,000 co-investment commitment. (Caldwell Aff. ¶ 16.) The timing of the Glenmore consulting agreement—executed on April 30, 2021, just two weeks before the May 14, 2021 closing—further evidences an intent to embed the self-dealing arrangement into the transaction before Caldwell discover it. (Id. ¶ 40.)

Justifiable Reliance. Caldwell's reliance on Whitfield's representations was both actual and justifiable. Caldwell reasonably relied on Whitfield's representations regarding due diligence matters that were within Whitfield's exclusive control and responsibility as managing co-investor. (Caldwell Aff. ¶ 17.) The AYDP Operating Agreement expressly vested due diligence responsibilities in Pinnacle Greystone, and Caldwell, as the passive co-investor, was entitled to rely on Pinnacle Greystone's discharge of those responsibilities. (Exhibit G § 3.1.)

Caldwell had no independent access to the Phase II environmental assessment; it was neither provided to him nor disclosed to him. (Caldwell Aff. ¶ 33.) Similarly, the Glenmore consulting agreement was executed in secret, without Caldwell's knowledge. (Caldwell Aff. ¶ 41.) While tax lien records are publicly available, Caldwell was entitled to rely on Whitfield's affirmative representation that all tax obligations had been "resolved," particularly given the division of responsibilities under the Operating Agreement. See DDJ Mgmt., LLC v. Rhone Grp. L.L.C., 15 N.Y.3d 147, 154 (2010) (reliance is justified where the plaintiff does not have the means discover the truth through the exercise of ordinary diligence); Danann Realty Corp. v. Harris, 5 N.Y.2d 317, 322 (1959) (reliance may be justified even where the truth could have been discovered, if the defendant actively concealed the facts).

Damages. Plaintiffs have suffered damages of at least $6,200,000, comprising the following:

• Total committed equity of $5,920,000 (40% of $14,800,000), which Caldwell committed based on Whitfield's materially false representations;

• $148,000, representing Caldwell's 40% share of the $370,000 in project funds diverted to Glenmore Realty Advisors Inc.;

• Approximately $132,000 in carrying costs, professional fees (including the cost of the Ellerby independent rent analysis and legal fees incurred in investigating the fraud), and lost opportunity costs.

These damages are directly and proximately caused by Whitfield's fraud. Absent Whitfield's misrepresentations and concealment, Caldwell would not have invested in the project.

B. Constructive Fraud

Under New York law, a claim for constructive fraud lies where there is a fiduciary or confidential relationship between the parties and the fiduciary makes a material misrepresentation, even in the absence of scienter. Brown v. Lockwood, 76 A.D.2d 721, 731 (2d Dep't 1980); Wendt v. Fischer, 243 N.Y. 439, 443 (1926). The elements are: (1) a fiduciary or confidential relationship; (2) a material misrepresentation or omission; and (3) damages. Brown, 76 A.D.2d at 731.

The co-investment structure through AYDP created a fiduciary relationship between Whitfield and Caldwell. As co-members of a New York limited liability company, Whitfield and Caldwell (through their respective entities) owed each other fiduciary duties. See Pokoik v. Pokoik, 115 A.D.3d 428, 429 (1st Dep't 2014) (members of an LLC owe fiduciary duties to each other). This fiduciary relationship was particularly strong given Whitfield's role as managing co-investor with exclusive authority over due diligence, acquisition, and development oversight. (Exhibit G § 3.1.) The material misrepresentations and omissions described above—the concealed tax liens, the suppressed Phase II assessment, the inflated rent roll, and the undisclosed Glenmore agreement—each constitute breaches of this fiduciary relationship giving rise to constructive fraud, regardless of whether Whitfield acted with scienter (which, as demonstrated above, he plainly did).

C. Breach of Fiduciary Duty

Whitfield owed fiduciary duties of loyalty and care to Caldwell in multiple capacities: as the manager of AYDP, as the sixty percent (60%) majority member of AYDP, and as the managing co-investor who assumed responsibility for sourcing, due diligence, and development oversight. (Exhibit G §§ 3.1, 3.3.)

The duty of loyalty required Whitfield to act in the best interests of the venture and its members, to disclose all material information, and to refrain from self-dealing. See Birnbaum v. Birnbaum, 73 N.Y.2d 461, 466 (1989) (fiduciaries owe undivided loyalty); Meinhard v. Salmon, 249 N.Y. 458, 464 (1928) (Cardozo, C.J.) (fiduciaries owe "the duty of the finest loyalty"). The duty of care required Whitfield to exercise reasonable diligence in the discharge of his responsibilities, including the conduct of due diligence on the Property. See Levandusky v. One Fifth Ave. Apartment Corp., 75 N.Y.2d 530, 537-38 (1990).

Whitfield breached these duties through a pervasive pattern of concealment, misrepresentation, and self-dealing. Specifically:

(a) Whitfield concealed $1,340,000 in outstanding tax liens while affirmatively representing that tax obligations had been "resolved."

(b) Whitfield suppressed the Phase II environmental assessment revealing $620,000 in required remediation while affirmatively representing that the environmental assessment was "clean."

(c) Whitfield circulated a materially inflated rent roll overstating projected annual gross rental income by approximately 26.9%.

(d) Whitfield caused Pinnacle Greystone to enter into a $370,000 consulting agreement with Glenmore Realty Advisors Inc., a related-party entity controlled by his brother-in-law, without Caldwell's knowledge or consent and in violation of Section 5.4 of the AYDP Operating Agreement, which requires disclosure of and approval for related-party transactions. (Exhibit G § 5.4.)

Each of these acts constitutes a separate and independent breach of fiduciary duty. Taken together, they reveal a systematic scheme by Whitfield to exploit his position of trust and control for personal gain at the expense of Caldwell and the venture.

D. Unjust Enrichment and Aiding and Abetting Fraud

Pinnacle Greystone Capital LLC was unjustly enriched by Whitfield's fraudulent conduct. Pinnacle Greystone received the direct benefit of Caldwell's capital contribution, which was induced by fraud, and Pinnacle Greystone was the entity that executed the $370,000 consulting agreement with Glenmore Realty Advisors Inc. and caused the diversion of project funds. (Exhibit E.) Under New York law, unjust enrichment lies where the defendant has been enriched at the plaintiff's expense and equity and good conscience require restitution. Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 182 (2011).

Additionally, Pinnacle Greystone aided and abetted Whitfield's fraud. To establish aiding and abetting fraud under New York law, a plaintiff must show: (1) the existence of a fraud; (2) the defendant's knowledge of the fraud; and (3) the defendant's substantial assistance in the achievement of the fraud. Stanfield Offshore Leveraged Assets, Ltd. v. Ridgeway Insurance, 64 A.D.3d 472, 476 (1st Dep't 2009). Because Whitfield is the sole member and manager of Pinnacle Greystone, the entity necessarily had knowledge of and substantially assisted in the fraud—Whitfield's knowledge is imputed to Pinnacle Greystone, and Pinnacle Greystone was the vehicle through which several of the fraudulent acts were carried out. (See Exhibit E; Exhibit G.)

E. Documentary Evidence Already in Plaintiffs' Possession

Plaintiffs' claims are not based on conjecture or conclusory allegations. They are supported by robust documentary evidence already in Plaintiffs' possession, including the following exhibits submitted herewith in support of this motion:

Exhibit A: Verified Complaint filed September 18, 2023, setting forth the factual allegations and causes of action in detail.

Exhibit B: New York City real property tax lien records for the Property at 540-548 Atlantic Avenue, confirming $1,340,000 in outstanding liens at the time of the May 2021 acquisition.

Exhibit C: Phase II Environmental Site Assessment prepared by Ridgepoint Environmental Consultants LLC, dated February 2021, documenting petroleum contamination and estimating $620,000 in remediation costs.

Exhibit D: Whitfield's March 2021 pro forma and investment materials, containing the affirmative misrepresentations regarding environmental conditions, tax liens, and projected rental income of $2,160,000 per year.

Exhibit E: Consulting agreement between Pinnacle Greystone Capital LLC and Glenmore Realty Advisors Inc., dated April 30, 2021, documenting the $370,000 "acquisition advisory fee" paid from project funds to Whitfield's brother-in-law's firm.

Exhibit F: Independent rent analysis prepared by Ellerby & Associates CPAs LLP, concluding that actual market rents supported approximately $1,580,000 in annual gross rental income, versus Whitfield's projection of $2,160,000.

Exhibit G: Atlantic Yards Development Partners LLC Operating Agreement, establishing the membership interests, fiduciary obligations, and related-party transaction disclosure requirements.

Exhibit H: Broadmark Commercial Lending Corp. loan documents (relevant excerpts), documenting the $9,620,000 senior loan and the first-priority mortgage on the Property.

Exhibit I: Affidavit of Jonathan R. Caldwell, sworn to on October 2, 2023, setting forth the factual basis for this motion in Mr. Caldwell's own words.

This documentary record provides compelling evidence of Plaintiffs' likelihood of success on the merits. While Defendants will have the opportunity to contest these facts at trial, the weight of the documentary evidence at this stage overwhelmingly supports the entry of injunctive relief.

POINT II: PLAINTIFFS WILL SUFFER IRREPARABLE HARM ABSENT INJUNCTIVE RELIEF

A. The Property Is the Sole Substantial Asset Securing Plaintiffs' Claims

The Property at 540-548 Atlantic Avenue is held by Atlantic Yards Development Partners LLC, which was formed as a single-purpose entity for this investment and has no other material assets. (Caldwell Aff. ¶ 50.) The Property is the only asset from which Plaintiffs can satisfy a judgment in this action. If the Property is further encumbered, transferred, or dissipated before this Court can adjudicate the merits of Plaintiffs' claims, Plaintiffs will be left with a judgment that they cannot collect—a paradigmatic form of irreparable harm. See Stonefield Securities Indosuez v. Rossiyskiy Kredit Bank, 94 N.Y.2d 541, 549 (2000); Honeywell Int'l Inc. v. Sterling Reach Partners LLC, 24 A.D.3d 80, 88-89 (1st Dep't 2005).

A retrospective appraisal by Tidewater Appraisal Group LLC, located at 26 Court Street, Suite 901, Brooklyn, New York 11242 (senior appraiser: Kevin Romero, MAI), is anticipated to establish the Property's current market value. However, whatever the Property's current appraised value may be, that value is substantially impaired by the undisclosed tax liens totaling $1,340,000 and the $620,000 in required environmental remediation—costs that were concealed from Caldwell and that reduce the equity available for recovery. Moreover, the Property is already encumbered by a $9,620,000 first-priority mortgage in favor of Broadmark. (Exhibit H.) Given these existing encumbrances and impairments, any additional liens, mortgages, or transfers could render Plaintiffs' equity interest worthless and eliminate their ability to recover.

B. Defendants Control the Property and Have Demonstrated a Willingness to Divert Assets

The irreparable harm in this case is not speculative. Whitfield, through Pinnacle Greystone's sixty percent (60%) membership interest and his role as manager of AYDP, exercises unilateral control over the Property and the affairs of the SPV. (Caldwell Aff. ¶ 52; Exhibit G § 3.1.) He has the authority—without Caldwell's consent—to execute documents, enter into financing arrangements, and effectuate transfers on behalf of AYDP. (Exhibit G §§ 3.1, 3.3.)

Whitfield has already demonstrated his willingness to divert project assets without Caldwell's knowledge or consent. The $370,000 payment to Glenmore Realty Advisors Inc. is not merely evidence of fraud; it is evidence of a pattern of conduct—a willingness to treat the assets of the venture as his personal property to be deployed for his own benefit. (Caldwell Aff. ¶ 53.) Where a defendant has demonstrated such a propensity, courts have recognized that the risk of further dissipation is not speculative but real and imminent. See JSC Foreign Econ. Ass'n Technostroyexport, 295 F. Supp. 2d at 388; Republic of Haiti v. Duvalier, 211 A.D.2d at 385.

The risk is further heightened by the status of the Broadmark senior loan. The $9,620,000 loan is currently subject to maturity extension negotiations. (Caldwell Aff. ¶ 54.) This creates multiple avenues for harm:

(a) If the loan matures without extension, Broadmark may exercise its right to foreclose on the Property, which would extinguish Caldwell's equity interest entirely.

(b) Whitfield may use the maturity event as a pretext to refinance the Property on terms that further subordinate or impair Caldwell's interests—for example, by obtaining mezzanine financing from a related party, placing additional liens on the Property, or restructuring the capital stack to dilute Caldwell's position.

(c) Whitfield may transfer the Property or the membership interests in AYDP to a related entity or a third party to frustrate Caldwell's ability to collect a judgment.

Each of these scenarios would inflict irreparable harm on Plaintiffs. The entry of a preliminary injunction is the only effective means of preventing such harm.

C. Money Damages Alone Would Be Inadequate

The standard for irreparable harm does not require that Plaintiffs show that no monetary award could ever compensate them. Rather, the question is whether money damages would be an adequate remedy under the circumstances of this case. See Stonefield Securities Indosuez, 94 N.Y.2d at 549. Here, they would not.

Where the defendant has engaged in fraud and controls the only asset from which recovery is possible, the risk of dissipation renders money damages inadequate as a practical matter. See id.; Republic of Haiti, 211 A.D.2d at 385. The unique nature of the real property and the single-purpose-entity structure means that once the Property is encumbered or transferred, it may be impossible to recover or to unwind the transaction—particularly if the Property is conveyed to a bona fide purchaser for value or if additional lienholders obtain priority.

Moreover, there is no assurance that Whitfield, as an individual, possesses sufficient unencumbered personal assets to satisfy a judgment of $6,200,000 or more, plus potential punitive damages. (Caldwell Aff. ¶ 56.) Whitfield's personal wealth is understood to be substantially tied up in real estate ventures and investment entities, many of which may be encumbered or otherwise unavailable to satisfy a judgment. (Id.) Without the Property, Plaintiffs may have no practical means of recovery—a quintessential showing of irreparable harm.

POINT III: THE BALANCE OF EQUITIES TIPS DECISIVELY IN PLAINTIFFS' FAVOR

A. Minimal Burden on Defendants

The injunction Plaintiffs seek is narrowly tailored to preserve the status quo. It would merely restrain Defendants from encumbering, transferring, conveying, pledging, hypothecating, or otherwise dissipating the Property or the assets of AYDP. It would not deprive Defendants of the use, possession, or enjoyment of the Property. It would not prevent Defendants from collecting rents, managing the Property, or carrying out routine property management activities. It would not interfere with Defendants' ability to make payments on the existing Broadmark senior loan or to comply with their obligations to existing creditors.

In short, the injunction would impose only one restriction: Defendants would be prohibited from placing additional liens, mortgages, or other encumbrances on the Property, and from transferring ownership of the Property or the membership interests in AYDP, without prior notice to Plaintiffs and approval of this Court. This is a minimal burden in light of the compelling evidence of fraud and the substantial risk of dissipation. See CPLR § 6301; Town of Huntington v. Long Island Power Auth., 130 A.D.3d 1013, 1014 (2d Dep't 2015) (balance of equities favors injunction where burden on defendant is minimal and movant faces significant harm).

B. Plaintiffs' Equities Are Compelling

The equities in favor of Plaintiffs are overwhelming. Caldwell invested $5,920,000 in committed equity in this venture—a substantial sum—based on Whitfield's materially false representations regarding the condition, encumbrances, environmental status, and income potential of the Property. (Caldwell Aff. ¶ 23.) Caldwell stands to lose his entire investment if the Property is further encumbered, transferred, or otherwise dissipated before this Court can adjudicate the merits.

It bears emphasis that the fraud was discovered not through any voluntary disclosure by Whitfield, but solely because an external condition—Broadmark's requirement for updated title and environmental reports in connection with loan maturity extension—forced the truth to the surface. (Caldwell Aff. ¶¶ 44-47.) Absent that external trigger, Whitfield would have continued to conceal the tax liens, the environmental contamination, the inflated rent roll, and the Glenmore self-dealing agreement. There is no reason to believe that Whitfield would hesitate to take additional steps to dissipate assets or obstruct Caldwell's recovery in the period between now and trial.

Caldwell has also acted with diligence and dispatch. Upon discovering the fraud in August 2023, he promptly retained counsel, filed the Verified Complaint within seven days of retaining Calderwood & Harkness LLP, and now moves for injunctive relief on the earliest practicable date. (Caldwell Aff. ¶ 49.) No claim of laches or undue delay can be leveled against Plaintiffs.

C. Public Interest

The public interest strongly supports the entry of injunctive relief. Courts have a compelling interest in preventing the dissipation of assets by defendants who have been credibly accused of fraud. See Republic of Haiti, 211 A.D.2d at 386. The integrity of the judicial system depends on the ability of courts to fashion meaningful remedies at the conclusion of litigation. If defendants are free to encumber, transfer, or dissipate the very assets from which a plaintiff's judgment must be satisfied—while the litigation is pending and after the fraud has been discovered—the deterrent effect of the fraud laws is undermined and the incentive to engage in such conduct is increased.

Granting the preliminary injunction in this case will preserve the Court's ability to afford Plaintiffs complete and effective relief at trial. Denying the injunction, by contrast, would create a window of opportunity for Defendants to render any future judgment uncollectible.

CONCLUSION

For the foregoing reasons, Plaintiffs Jonathan R. Caldwell and Caldwell Urban Ventures LLC respectfully request that the Court grant a preliminary injunction as follows:

(a) Restraining defendants Marcus D. Whitfield and Pinnacle Greystone Capital LLC, and all persons acting in concert with them or at their direction, from encumbering, transferring, conveying, pledging, hypothecating, or otherwise dissipating the real property located at 540-548 Atlantic Avenue, Brooklyn, New York 11217, or any assets of Atlantic Yards Development Partners LLC, including but not limited to placing any mortgage, lien, security interest, or other encumbrance on the Property, entering into any sale or exchange agreement with respect to the Property, or transferring any membership interests in AYDP;

(b) Directing defendants to maintain the Property and the assets of Atlantic Yards Development Partners LLC in their current condition pending final resolution of this action, including the maintenance of existing insurance coverage and the continued payment of all taxes, utilities, and obligations arising under the Broadmark senior loan;

(c) Requiring defendants to provide plaintiffs with not less than ten (10) business days' prior written notice of any proposed transaction, agreement, or encumbrance involving the Property or the membership interests in Atlantic Yards Development Partners LLC, and to refrain from consummating any such transaction absent further order of this Court;

(d) Granting such other and further relief as this Court deems just and proper.

Dated: October 2, 2023 New York, New York

Respectfully submitted,

CALDERWOOD & HARKNESS LLP Attorneys for Plaintiffs

By: ________

Douglas Carmichael, Esq. Patrick Gallagher, Esq. 599 Lexington Avenue, 34th Floor New York, NY 10022 Telephone: (212) 548-7200 Facsimile: (212) 548-7201

VERIFICATION

This memorandum of law is submitted in support of Plaintiffs' motion for a preliminary injunction and is accompanied by the Affidavit of Jonathan R. Caldwell, sworn to on October 2, 2023 (Exhibit I), in which Mr. Caldwell confirms under oath the factual statements set forth herein and in the Verified Complaint. The factual representations contained in this memorandum are based upon Mr. Caldwell's personal knowledge, the documentary exhibits annexed hereto, and the investigation of Plaintiffs' counsel. Plaintiffs respectfully refer the Court to Mr. Caldwell's Affidavit for a detailed, sworn account of the facts giving rise to this motion.

EXHIBIT LIST

The following exhibits are submitted herewith in support of Plaintiffs' Motion for a Preliminary Injunction:

Page

PRELIMINARY STATEMENT	3
STATEMENT OF FACTS	5
A. The Parties	5
B. The Co-Investment and Acquisition	7
C. Whitfield's Material Misrepresentations and Concealment	9
1. Concealed NYC Real Property Tax Liens ($1,340,000)	9
2. Suppression of Phase II Environmental Assessment ($620,000 Remediation)	10
3. Inflated Pro Forma Rent Roll	11
4. Undisclosed Self-Dealing Consulting Agreement with Glenmore Realty Advisors Inc.	12
D. Discovery of the Fraud (August 2023)	13
E. The Present Risk of Dissipation	14
LEGAL STANDARD	16
ARGUMENT	17
POINT I: PLAINTIFFS ARE LIKELY TO SUCCEED ON THE MERITS	17
A. Common-Law Fraud and Fraudulent Inducement	17
B. Constructive Fraud	22
C. Breach of Fiduciary Duty	23
D. Unjust Enrichment and Aiding and Abetting Fraud	25
E. Documentary Evidence Already in Plaintiffs' Possession	26
POINT II: PLAINTIFFS WILL SUFFER IRREPARABLE HARM ABSENT INJUNCTIVE RELIEF	27
A. The Property Is the Sole Substantial Asset Securing Plaintiffs' Claims	27
B. Defendants Control the Property and Have Demonstrated a Willingness to Divert Assets	29
C. Money Damages Alone Would Be Inadequate	30
POINT III: THE BALANCE OF EQUITIES TIPS DECISIVELY IN PLAINTIFFS' FAVOR	32
A. Minimal Burden on Defendants	32

B. Plaintiffs' Equities Are Compelling	33
C. Public Interest	34
CONCLUSION	35
EXHIBIT LIST	37
Exhibit	Description
Exhibit A	Verified Complaint filed September 18, 2023
Exhibit B	New York City real property tax lien records for 540-548 Atlantic Avenue, Brooklyn, NY 11217, confirming $1,340,000 in outstanding liens at the time of acquisition
Exhibit C	Phase II Environmental Site Assessment prepared by Ridgepoint Environmental Consultants LLC, dated February 2021
Exhibit D	Whitfield's March 2021 pro forma and investment materials
Exhibit E	Consulting agreement between Pinnacle Greystone Capital LLC and Glenmore Realty Advisors Inc., dated April 30, 2021
Exhibit F	Independent rent analysis prepared by Ellerby & Associates CPAs LLP
Exhibit G	Atlantic Yards Development Partners LLC Operating Agreement
Exhibit H	Broadmark Commercial Lending Corp. loan documents (relevant excerpts)
Exhibit I	Affidavit of Jonathan R. Caldwell, sworn to on October 2, 2023

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS
JONATHAN R. CALDWELL and CALDWELL URBAN VENTURES LLC,
Plaintiffs,
— against —
MARCUS D. WHITFIELD and PINNACLE GREYSTONE CAPITAL LLC,
Defendants.
Index No. 519847/2023
MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS' MOTION FOR A PRELIMINARY INJUNCTION
Filed: October 2, 2023 Before Hon. Patricia Velez, J.S.C.
Attorneys for Plaintiffs:
CALDERWOOD & HARKNESS LLP 599 Lexington Avenue, 34th Floor New York, NY 10022 Douglas Carmichael, Esq. Patrick Gallagher, Esq. Telephone: (212) 548-7200 Facsimile: (212) 548-7201
TABLE OF CONTENTS
PRELIMINARY STATEMENT
Plaintiffs Jonathan R. Caldwell ("Caldwell") and Caldwell Urban Ventures LLC ("Caldwell Urban Ventures" and, together with Caldwell, "Plaintiffs") respectfully submit this memorandum of law in support of their motion, brought by order to show cause, for a preliminary injunction restraining defendants Marcus D. Whitfield ("Whitfield") and Pinnacle Greystone Capital LLC ("Pinnacle Greystone" and, together with Whitfield, "Defendants") from further encumbering, transferring, conveying, pledging, hypothecating, or otherwise dissipating the real property located at 540-548 Atlantic Avenue, Brooklyn, New York 11217 (the "Property"), and any assets of Atlantic Yards Development Partners LLC ("AYDP"), the special purpose vehicle through which the parties hold the Property.
The underlying action, commenced by the filing of a Verified Complaint on September 18, 2023, asserts claims for common-law fraud, fraudulent inducement, constructive fraud, breach of fiduciary duty, unjust enrichment, and aiding and abetting fraud. These claims arise from Whitfield's systematic concealment of material adverse conditions and his self-dealing in connection with a $14.8 million joint real estate investment in which Caldwell committed total equity of $5,920,000 based on materially false representations by Whitfield concerning the condition, encumbrances, environmental status, and income potential of the Property.
The relief Plaintiffs seek is narrowly tailored and urgently needed. The Property at 540-548 Atlantic Avenue is the sole substantial asset of AYDP and constitutes the primary—indeed, effectively the only—asset from which Plaintiffs can recover compensatory damages of at least $6,200,000. Defendants, however, have demonstrated a pattern of deception and self-dealing that creates a substantial and well-founded risk that, absent injunctive relief, the Property will be further encumbered, transferred, or otherwise dissipated before this Court can adjudicate Plaintiffs' claims on the merits.
The facts underlying Plaintiffs' claims are supported by extensive documentary evidence already in Plaintiffs' possession. That evidence establishes, among other things, that Whitfield: (1) concealed $1,340,000 in outstanding New York City real property tax liens that encumbered the Property at the time of acquisition; (2) suppressed a Phase II environmental site assessment revealing petroleum contamination requiring an estimated $620,000 in remediation, while affirmatively representing that the environmental assessment was "clean"; (3) circulated a materially inflated pro forma rent roll overstating projected annual gross rental income by approximately $580,000, or 26.9%; and (4) secretly caused Pinnacle Greystone to enter into a self-dealing consulting agreement with Glenmore Realty Advisors Inc.—a firm controlled by Whitfield's brother-in-law—diverting $370,000 in project funds without Caldwell's knowledge or consent.
Plaintiffs satisfy each prong of the well-established preliminary injunction standard under New York law. First, Plaintiffs are likely to succeed on the merits. The documentary evidence of four distinct categories of fraud is compelling, and Defendants will not be able to credibly deny the existence or materiality of these concealed facts. Second, Plaintiffs will suffer irreparable harm absent injunctive relief. The Property is the sole substantial asset from which Plaintiffs can recover, Defendants control that asset, and Defendants have already demonstrated a willingness to divert project funds for Whitfield's personal benefit. Third, the balance of equities tips decisively in Plaintiffs' favor. The requested injunction merely maintains the status quo by preventing further encumbrance or transfer; it does not deprive Defendants of possession, use, or rental income from the Property.
For each of these reasons, and for the additional reasons set forth below, the Court should grant Plaintiffs' motion.
STATEMENT OF FACTS
The following facts are drawn from the Verified Complaint (Exhibit A), the Affidavit of Jonathan R. Caldwell sworn to on October 2, 2023 (Exhibit I), and the documentary exhibits submitted herewith.
A. The Parties
Jonathan R. Caldwell. Plaintiff Jonathan R. Caldwell is an individual investor residing at 440 East 72nd Street, Apartment 18D, New York, New York 10021. (Caldwell Aff. ¶ 2.) Mr. Caldwell is fifty-eight years old and is a seasoned real estate professional with decades of experience in New York City real estate transactions. (Caldwell Aff. ¶ 3.) He holds a Bachelor of Science degree in Finance from the Wharton School of the University of Pennsylvania and a Master of Business Administration degree from Columbia Business School. (Id.) Prior to his career as an independent investor, Mr. Caldwell served as a Managing Director at Hargrove Meridian Partners LLC, a New York-based real estate investment firm, where he was responsible for sourcing, underwriting, and managing commercial and residential real estate investments across the five boroughs. (Caldwell Aff. ¶ 4.) Mr. Caldwell's estimated net worth is approximately $34 million, of which approximately $19 million is deployed in New York City-area real estate investments. (Caldwell Aff. ¶ 5.)
Caldwell Urban Ventures LLC. Plaintiff Caldwell Urban Ventures LLC is a New York single-member limited liability company formed on March 8, 2021, with an Employer Identification Number of 86-4031278. (Caldwell Aff. ¶ 6; Exhibit G.) Mr. Caldwell is the sole member and manager of Caldwell Urban Ventures. (Id.) Caldwell Urban Ventures was formed as the investment vehicle through which Mr. Caldwell would hold his forty percent (40%) membership interest in the project entity, AYDP. (Caldwell Aff. ¶ 7.)
Marcus D. Whitfield. Defendant Marcus D. Whitfield is an individual residing at 88 Montague Street, Penthouse B, Brooklyn, New York 11201. (Verified Compl. ¶ 8.) Mr. Whitfield is fifty-two years old and presents himself as an experienced real estate developer and investment manager with a track record of over $200 million in aggregate real estate transactions across the Brooklyn and Queens markets. (Caldwell Aff. ¶ 9.) Mr. Whitfield holds a Juris Doctor degree from Fordham University School of Law, although he does not currently practice law. (Verified Compl. ¶ 10.) Mr. Whitfield is the sole member and manager of Pinnacle Greystone Capital LLC and served as the managing co-investor responsible for sourcing, conducting due diligence on, acquiring, and overseeing the development of the Property. (Caldwell Aff. ¶ 11.)
Pinnacle Greystone Capital LLC. Defendant Pinnacle Greystone Capital LLC is a New York limited liability company formed on June 14, 2019, with an Employer Identification Number of 83-2917465. (Verified Compl. ¶ 12.) Its principal office is located at 330 Furman Street, Suite 410, Brooklyn, New York 11201. (Id.) Mr. Whitfield is the sole member and manager of Pinnacle Greystone. (Caldwell Aff. ¶ 13.) In the co-investment transaction at issue, Pinnacle Greystone served as the managing co-investor and held a sixty percent (60%) membership interest in AYDP. (Exhibit G.)
B. The Co-Investment and Acquisition
In or about March 2021, Whitfield approached Caldwell with a proposed co-investment opportunity involving the Property—a mixed-use building located at 540-548 Atlantic Avenue, Brooklyn, New York 11217. (Caldwell Aff. ¶ 14.) The Property comprises a 42,000-square-foot building situated on an approximately 0.38-acre lot zoned C6-2A under the New York City Zoning Resolution. (Id.) The building features ground-floor retail space and upper-floor space with residential conversion potential—a configuration that, according to Whitfield's representations, offered significant value-add upside through a repositioning and renovation program. (Caldwell Aff. ¶ 15.)
Whitfield presented himself to Caldwell as having originated and sourced the opportunity, having conducted extensive due diligence on the Property, and having negotiated the purchase terms directly with the seller. (Caldwell Aff. ¶ 16.) Whitfield circulated a detailed investment memorandum, a pro forma financial model, and supporting due diligence materials to Caldwell in March 2021, which are attached hereto as Exhibit D. (Id.) The parties agreed that Whitfield, through Pinnacle Greystone, would serve as the managing co-investor with primary responsibility for all aspects of due diligence, acquisition, and development oversight, while Caldwell would serve as a passive co-investor contributing capital through Caldwell Urban Ventures. (Caldwell Aff. ¶ 17; Exhibit G § 3.1.)
To effectuate the investment, the parties formed Atlantic Yards Development Partners LLC, a New York limited liability company, on April 22, 2021, with an Employer Identification Number of 87-1253946. (Exhibit G.) AYDP's registered agent is National Filing Services Inc., located at 28 Liberty Street, New York, New York 10005. (Id.) Pursuant to the AYDP Operating Agreement (Exhibit G), Caldwell Urban Ventures LLC holds a forty percent (40%) membership interest and Pinnacle Greystone Capital LLC holds a sixty percent (60%) membership interest. (Exhibit G § 2.1.)
The acquisition of the Property closed on May 14, 2021, at a purchase price of $14,800,000. (Caldwell Aff. ¶ 20; Exhibit H.)
The capital structure for the acquisition was as follows:
Senior Debt. AYDP obtained a senior acquisition and construction loan from Broadmark Commercial Lending Corp. ("Broadmark"), located at 140 Broadway, 22nd Floor, New York, New York 10005 (Loan Officer: David Poulos), in the principal amount of $9,620,000, representing approximately sixty-five percent (65%) of the acquisition price (i.e., a 65% loan-to-value ratio). (Caldwell Aff. ¶ 21; Exhibit H.) The Broadmark loan is secured by a first-priority mortgage on the Property. (Exhibit H.)
Equity. The total equity required at closing was $5,180,000, representing the difference between the $14,800,000 purchase price and the $9,620,000 Broadmark senior loan. (Caldwell Aff. ¶ 22.) In accordance with their respective membership interests, Caldwell Urban Ventures contributed $2,072,000 at closing (40% of $5,180,000) and Pinnacle Greystone contributed $3,108,000 at closing (60% of $5,180,000). (Id.) Caldwell's total committed equity—encompassing his proportionate share of the full acquisition price, anticipated capital calls for renovation, and reserves—was $5,920,000 (40% of $14,800,000). (Caldwell Aff. ¶ 23.) Whitfield's total committed equity was $8,880,000 (60% of $14,800,000). (Id.)
The projected total development budget for the Property, as set forth in Whitfield's March 2021 pro forma (Exhibit D), was $22,350,000, comprising the $14,800,000 acquisition price and an estimated $7,550,000 in renovation and repositioning costs. (Caldwell Aff. ¶ 24.) Whitfield's pro forma projected a stabilized value for the completed project of $31,200,000, yielding a projected equity multiple of approximately 2.13x on total invested equity. (Caldwell Aff. ¶ 25; Exhibit D.) It was this projection—built, as Plaintiffs now know, on a foundation of material misrepresentations and concealment—that induced Caldwell to commit his capital to the venture.
C. Whitfield's Material Misrepresentations and Concealment
The evidence demonstrates that Whitfield engaged in a systematic course of fraud, concealing material adverse information about the Property and diverting project funds for his personal benefit. The fraud falls into four distinct categories, each of which is independently material and each of which would have caused a reasonable investor in Caldwell's position to decline the investment or to demand materially different terms.
1. Concealed NYC Real Property Tax Liens ($1,340,000). At the time of the acquisition of the Property in May 2021, $1,340,000 in outstanding New York City real property tax liens encumbered the Property. (Caldwell Aff. ¶ 27; Exhibit B.) These liens were a matter of public record, readily discoverable through a routine title search or inquiry to the New York City Department of Finance. (Caldwell Aff. ¶ 28.)
Whitfield, in his capacity as the managing co-investor responsible for conducting due diligence on the Property, affirmatively represented to Caldwell on multiple occasions—including in written communications and during in-person meetings in March and April 2021—that all outstanding tax obligations on the Property had been "resolved" and that the Property would be conveyed to AYDP free and clear of tax liens. (Caldwell Aff. ¶ 29.) These representations were false. The tax liens were not resolved; they remained outstanding and continued to accrue interest and penalties. (Id. ¶ 30.)
Caldwell did discover the existence of the $1,340,000 in outstanding tax liens until August 2023, when Broadmark Commercial Lending Corp. required updated title reports as a condition of extending the maturity of the construction loan. (Caldwell Aff. ¶ 31.) The updated title report revealed the pre-existing liens, which had remained undisclosed for over two years. (Id.)
2. Suppression of Phase II Environmental Assessment ($620,000 Remediation). In or about February 2021—prior to the closing of the acquisition—Ridgepoint Environmental Consultants LLC ("Ridgepoint") conducted a Phase II environmental site assessment of the Property. (Caldwell Aff. ¶ 32; Exhibit C.) The Phase II assessment, a copy of which is attached hereto as Exhibit C, revealed the presence of petroleum contamination in the soil and groundwater beneath the Property, with estimated remediation costs of approximately $620,000. (Exhibit C at 14-17.)
Whitfield did not disclose the existence of the Phase II assessment or its findings to Caldwell at any time prior to, during, or after the closing. (Caldwell Aff. ¶ 33.) To the contrary, Whitfield affirmatively represented to Caldwell in his March 2021 investment materials and in oral discussions that the Phase I environmental site assessment for the Property was "clean" and that no environmental issues had been identified. (Caldwell Aff. ¶ 34; Exhibit D.) Whitfield's representation that the Phase I was "clean" was itself misleading, because a Phase I assessment that identifies recognized environmental conditions—as the Phase I here must have, given that a Phase II was subsequently commissioned—is not "clean" in the industry-standard sense of the term. (Caldwell Aff. ¶ 35.) More fundamentally, Whitfield's silence regarding the Phase II assessment, which he either commissioned or received in the ordinary course of his due diligence responsibilities, constituted a material omission.
Caldwell first learned of the Phase II assessment and the petroleum contamination in August 2023, when Broadmark required updated environmental reports as part of the loan extension process. (Caldwell Aff. ¶ 36.) The discovery that the Property was contaminated—and that Whitfield had known of the contamination for over two years while concealing it from Caldwell—was a pivotal moment in Caldwell's understanding of the scope of Whitfield's fraud. (Id.)
3. Inflated Pro Forma Rent Roll. Whitfield's March 2021 investment materials, including his pro forma financial model (Exhibit D), projected annual gross rental income at stabilization of $2,160,000. (Caldwell Aff. ¶ 37; Exhibit D.) This projection was a critical input in the valuation analysis that yielded the $31,200,000 stabilized value and the 2.13x equity multiple that Whitfield used to induce Caldwell's investment. (Id.)
Following the discovery of the tax liens and environmental contamination in August 2023, Caldwell retained the independent accounting firm of Ellerby & Associates CPAs LLP ("Ellerby"), located at 757 Third Avenue, Suite 1800, New York, New York 10017 (managing partner: Grace Ellerby, CPA), to conduct an independent analysis of the Property's income potential. (Caldwell Aff. ¶ 38.) Ellerby's analysis, a copy of which is attached hereto as Exhibit F, concluded that actual market conditions at the time of the investment supported annual gross rental income of only approximately $1,580,000—not $2,160,000 as Whitfield had represented. (Exhibit F at 8.) This represents an overstatement of approximately $580,000 per year, or approximately 26.9%. (Caldwell Aff. ¶ 39.) The inflated rent roll had the direct effect of overstating the Property's projected stabilized value, thereby making the investment appear far more attractive to Caldwell than it actually was.
4. Undisclosed Self-Dealing Consulting Agreement with Glenmore Realty Advisors Inc. On April 30, 2021—just two weeks before the acquisition closed on May 14, 2021—Whitfield caused Pinnacle Greystone Capital LLC to enter into a consulting agreement with Glenmore Realty Advisors Inc. ("Glenmore"), a firm controlled by Neil Osterberg, Whitfield's brother-in-law. (Caldwell Aff. ¶ 40; Exhibit E.) The consulting agreement, a copy of which is attached hereto as Exhibit E, provided for payment to Glenmore of a $370,000 "acquisition advisory fee" from AYDP project funds. (Exhibit E at 1-2.)
The Glenmore consulting agreement was executed without Caldwell's knowledge, consent, or approval. (Caldwell Aff. ¶ 41.) The existence of the agreement was not disclosed to Caldwell at any time prior to or following the closing. (Id.) The AYDP Operating Agreement (Exhibit G) requires that any consulting or advisory agreements with related parties be disclosed to and approved by all members. (Exhibit G § 5.4.) Whitfield's failure to disclose the Glenmore agreement—and his use of project funds to pay a $370,000 fee to his brother-in-law's firm—constitutes self-dealing in violation of his fiduciary duties and the express terms of the Operating Agreement. (Caldwell Aff. ¶ 42.)
Caldwell's forty percent (40%) share of the $370,000 in diverted project funds amounts to $148,000. (Caldwell Aff. ¶ 43.)
D. Discovery of the Fraud (August 2023)
The full scope of Whitfield's fraud came to light in August 2023 through circumstances that were entirely outside Whitfield's control. (Caldwell Aff. ¶ 44.) The renovation project had fallen behind schedule and the Broadmark senior loan was approaching its maturity date. As a condition of extending the loan maturity, Broadmark required that AYDP provide updated title reports and environmental assessments. (Caldwell Aff. ¶ 45.)
The updated title report revealed the $1,340,000 in outstanding tax liens that Whitfield had represented were "resolved." (Caldwell Aff. ¶ 46; Exhibit B.) The updated environmental report brought to light the February 2021 Phase II assessment by Ridgepoint Environmental Consultants LLC, revealing the petroleum contamination that Whitfield had concealed. (Caldwell Aff. ¶ 47; Exhibit C.) These revelations prompted Caldwell to undertake a comprehensive review of the investment, leading to the discovery of the inflated rent roll and the undisclosed Glenmore consulting agreement. (Caldwell Aff. ¶ 48.)
Upon discovering the extent of Whitfield's fraud, Caldwell promptly retained the law firm of Calderwood & Harkness LLP on September 11, 2023. (Caldwell Aff. ¶ 49.) The Verified Complaint in this action was filed on September 18, 2023—seven days later. (Id.) Caldwell has acted with diligence and dispatch at every stage.
E. The Present Risk of Dissipation
The risk that Defendants will further encumber, transfer, or dissipate the Property and the assets of AYDP is both real and imminent.
The Property at 540-548 Atlantic Avenue is the sole substantial asset of Atlantic Yards Development Partners LLC. (Caldwell Aff. ¶ 50.) AYDP was formed as a single-purpose entity to hold and develop the Property, and it has no other material assets. (Id.) The Property is therefore the primary—and effectively the only—asset from which Plaintiffs can satisfy a judgment in this action, which Plaintiffs estimate will be at least $6,200,000 in compensatory damages, plus punitive damages. (Caldwell Aff. ¶ 51.)
Whitfield, through Pinnacle Greystone's sixty percent (60%) membership interest and his role as manager of AYDP, exercises unilateral control over the Property and the affairs of the SPV. (Caldwell Aff. ¶ 52; Exhibit G § 3.1.) Under the Operating Agreement, the manager has authority to execute documents, enter into agreements, and take actions on behalf of the company, including with respect to financing, encumbrances, and transfers of real property. (Exhibit G §§ 3.1, 3.3.)
Whitfield has already demonstrated a willingness to divert project assets without Caldwell's knowledge. The $370,000 payment to Glenmore Realty Advisors Inc.—a related-party entity controlled by Whitfield's brother-in-law—was made from project funds without any disclosure to or approval by Caldwell, in direct violation of the Operating Agreement. (Caldwell Aff. ¶ 53.) This pattern of conduct provides a concrete and well-founded basis for concluding that Whitfield will continue to use his managerial authority to benefit himself at the expense of Caldwell and the AYDP venture.
The risk is compounded by the current state of the Broadmark senior loan. The $9,620,000 loan from Broadmark is presently subject to maturity extension negotiations. (Caldwell Aff. ¶ 54.) If the loan matures without extension, Broadmark could initiate foreclosure proceedings, which would eliminate Caldwell's equity interest in the Property. (Id.) Alternatively, Whitfield could use the maturity event as a pretext to refinance the loan on terms that further subordinate or impair Caldwell's interests—for example, by obtaining mezzanine financing, adding additional liens, or restructuring the capital stack in a manner that dilutes or eliminates Caldwell's position. (Caldwell Aff. ¶ 55.)
There is also a substantial risk that Whitfield could transfer the Property, or the membership interests in AYDP, to a related entity or to a third party—potentially a bona fide purchaser for value—thereby frustrating Caldwell's ability to collect any judgment entered in this action. (Caldwell Aff. ¶ 56.) Once such a transfer occurs, recovery of the Property or its value may be impossible, and the Court's ability to fashion a meaningful remedy will be irreparably compromised.
LEGAL STANDARD
Under New York law, a preliminary injunction is a provisional remedy designed to maintain the status quo pending the resolution of an action on the merits. CPLR § 6301. A party seeking a preliminary injunction must demonstrate: (1) a likelihood of success on the merits; (2) irreparable injury in the absence of injunctive relief; and (3) a balance of the equities in the movant's favor. Nobu Next Door, LLC v. Fine Arts Hous., Inc., 4 N.Y.3d 839, 840 (2005); Northpoint Casualty Group Ins. Co. v. Capasso, 75 N.Y.2d 860, 862 (1990); W.T. Grant Co. v. Srogi, 52 N.Y.2d 496, 517 (1981).
The movant need not demonstrate a certainty of success on the merits; rather, the movant must show "a probability of success, not a certainty." Barbes Rest. Inc. v. ASRR Suzer 218, LLC, 140 A.D.3d 430, 431 (1st Dep't 2016). The standard requires the movant to establish a "clear right" to relief. Doe v. Axelrod, 73 N.Y.2d 748, 750 (1988).
In fraud cases involving real property, New York courts have recognized that the risk of dissipation of the sole asset from which a plaintiff can recover constitutes irreparable harm sufficient to warrant injunctive relief. Stonefield Securities Indosuez v. Rossiyskiy Kredit Bank, 94 N.Y.2d 541, 549 (2000) (recognizing that a showing of imminent dissipation may support the irreparable harm prong). Where a defendant has demonstrated a propensity for deception, asset concealment, or self-dealing, that history is properly considered in evaluating both the likelihood of success and the irreparable harm prongs of the preliminary injunction analysis. See JSC Foreign Econ. Ass'n Technostroyexport v. Int'l Dev. & Trade Servs., Inc., 295 F. Supp. 2d 366, 388 (S.D.N.Y. 2003) (applying New York law); Republic of Haiti v. Duvalier, 211 A.D.2d 379, 385 (1st Dep't 1995).
The purpose of a preliminary injunction in this context is not to grant the movant premature victory, but to preserve the court's ability to afford meaningful relief after trial. See Uniformed Firefighters Ass'n of Greater N.Y. v. City of New York, 79 N.Y.2d 236, 241 (1992). As the Court of Appeals has explained, a preliminary injunction is warranted when, without it, "the plaintiff will be unable to obtain complete relief." Northpoint Casualty Group Ins. Co., 75 N.Y.2d at 862.
ARGUMENT
POINT I: PLAINTIFFS ARE LIKELY TO SUCCEED ON THE MERITS
Plaintiffs are likely to succeed on each of their claims against Defendants. The documentary evidence already in Plaintiffs' possession—including tax lien records, the suppressed Phase II environmental assessment, the undisclosed Glenmore consulting agreement, and the independent rent analysis by Ellerby & Associates—establishes the essential elements of each cause of action. Defendants will not be able to credibly deny the existence or materiality of the concealed facts.
A. Common-Law Fraud and Fraudulent Inducement
Under New York law, the elements of a cause of action for common-law fraud are: (1) a material misrepresentation or omission of a fact; (2) knowledge of its falsity (scienter); (3) an intent to induce reliance; (4) justifiable reliance by the plaintiff; and (5) damages proximately caused by the reliance. Eurycleia Partners, LP v. Padilla & Severin LLP, 12 N.Y.3d 553, 559 (2009); Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 421 (1996). A claim for fraudulent inducement applies the same elements where the misrepresentation induces the plaintiff to enter into a transaction. Deerfield Commc'ns Corp. v. Chesebrough-Ponds, Inc., 68 N.Y.2d 954, 956 (1986).
Plaintiffs satisfy each element as to multiple, independent categories of fraud.
Material Misrepresentation and Omission. Whitfield made four distinct categories of material misrepresentations and omissions, each of which is independently sufficient to support the fraud claims:
First, Whitfield affirmatively represented to Caldwell that all outstanding tax liens on the Property had been "resolved," when in fact $1,340,000 in New York City real property tax liens encumbered the Property and remained outstanding. (Caldwell Aff. ¶ 29; Exhibit B.) This misrepresentation was plainly material: the existence of $1,340,000 in undisclosed tax liens significantly affects the value of the Property, creates a risk of enforcement by the City, and would have been a critical factor in any reasonable investor's decision to invest.
Second, Whitfield affirmatively represented that the Phase I environmental assessment of the Property was "clean" and did not disclose the existence of the Phase II environmental site assessment prepared by Ridgepoint Environmental Consultants LLC in February 2021, which revealed petroleum contamination requiring an estimated $620,000 in remediation. (Caldwell Aff. ¶¶ 33-35; Exhibits C, D.) Environmental contamination of this magnitude is unquestionably material to a real estate investment. The $620,000 remediation cost alone represents a significant addition to the development budget, and the presence of contamination can affect the Property's financing, insurance, and ultimate value.
Third, Whitfield's March 2021 pro forma and investment materials projected annual gross rental income at stabilization of $2,160,000, when actual market conditions supported rental income of only approximately $1,580,000—an overstatement of approximately $580,000 per year, or 26.9%. (Caldwell Aff. ¶¶ 37-39; Exhibits D, F.) This inflation directly affected the projected stabilized value of $31,200,000 and the 2.13x equity multiple that Whitfield used to induce Caldwell's investment. An overstatement of nearly 27% in projected rental income is material by any standard.
Fourth, Whitfield concealed the existence of the $370,000 consulting agreement between Pinnacle Greystone and Glenmore Realty Advisors Inc., a related-party firm controlled by Whitfield's brother-in-law. (Caldwell Aff. ¶¶ 40-42; Exhibit E.) The diversion of $370,000 in project funds to a related party, without disclosure or consent, constitutes a material omission and a classic instance of self-dealing fraud.
Scienter. Whitfield's knowledge of the falsity of his representations is readily inferable from the evidence. As the managing co-investor who sourced the transaction and oversaw all aspects of due diligence, Whitfield either commissioned or received the Phase II environmental assessment from Ridgepoint Environmental Consultants LLC. (Caldwell Aff. ¶ 32.) A Phase II assessment is not conducted in a vacuum; it is commissioned in response to findings in a Phase I assessment, and the commissioning party necessarily receives the results. Whitfield's representation that the environmental assessment was "clean" demonstrates not merely knowledge of the Phase II's existence, but an affirmative intent to conceal it.
With respect to the Glenmore consulting agreement, Whitfield personally executed the agreement on behalf of Pinnacle Greystone, two weeks before the acquisition closed. (Exhibit E.) He necessarily had knowledge of the side deal because he created it.
With respect to the $1,340,000 in tax liens, these encumbrances are publicly recorded with the New York City Department of Finance and would have been revealed by even a cursory title search—the most basic element of real estate due diligence. (Caldwell Aff. ¶ 28.) Whitfield's due diligence role as managing co-investor created a clear obligation to discover and disclose such liens. His failure to do so, coupled with his affirmative representation that tax obligations had been "resolved," demonstrates knowledge and intent.
As to the inflated rent roll, Whitfield, as an experienced developer with over $200 million in Brooklyn/Queens transactions, was in a position to know—and did know, or at a minimum was reckless in not knowing—that market rents could not support the $2,160,000 in annual gross income he projected. (Caldwell Aff. ¶ 37.) The 26.9% overstatement is not a marginal difference that might reflect reasonable disagreement among appraisers; it is a gross inflation that can only be explained by an intent to deceive.
Intent to Induce Reliance. Whitfield circulated his March 2021 investment materials, including the pro forma, the misrepresentations about environmental conditions, and the representations about tax liens, specifically to Caldwell for the express purpose of inducing Caldwell's $5,920,000 co-investment commitment. (Caldwell Aff. ¶ 16.) The timing of the Glenmore consulting agreement—executed on April 30, 2021, just two weeks before the May 14, 2021 closing—further evidences an intent to embed the self-dealing arrangement into the transaction before Caldwell discover it. (Id. ¶ 40.)
Justifiable Reliance. Caldwell's reliance on Whitfield's representations was both actual and justifiable. Caldwell reasonably relied on Whitfield's representations regarding due diligence matters that were within Whitfield's exclusive control and responsibility as managing co-investor. (Caldwell Aff. ¶ 17.) The AYDP Operating Agreement expressly vested due diligence responsibilities in Pinnacle Greystone, and Caldwell, as the passive co-investor, was entitled to rely on Pinnacle Greystone's discharge of those responsibilities. (Exhibit G § 3.1.)
Caldwell had no independent access to the Phase II environmental assessment; it was neither provided to him nor disclosed to him. (Caldwell Aff. ¶ 33.) Similarly, the Glenmore consulting agreement was executed in secret, without Caldwell's knowledge. (Caldwell Aff. ¶ 41.) While tax lien records are publicly available, Caldwell was entitled to rely on Whitfield's affirmative representation that all tax obligations had been "resolved," particularly given the division of responsibilities under the Operating Agreement. See DDJ Mgmt., LLC v. Rhone Grp. L.L.C., 15 N.Y.3d 147, 154 (2010) (reliance is justified where the plaintiff does not have the means discover the truth through the exercise of ordinary diligence); Danann Realty Corp. v. Harris, 5 N.Y.2d 317, 322 (1959) (reliance may be justified even where the truth could have been discovered, if the defendant actively concealed the facts).
Damages. Plaintiffs have suffered damages of at least $6,200,000, comprising the following:
• Total committed equity of $5,920,000 (40% of $14,800,000), which Caldwell committed based on Whitfield's materially false representations;
• $148,000, representing Caldwell's 40% share of the $370,000 in project funds diverted to Glenmore Realty Advisors Inc.;
• Approximately $132,000 in carrying costs, professional fees (including the cost of the Ellerby independent rent analysis and legal fees incurred in investigating the fraud), and lost opportunity costs.
These damages are directly and proximately caused by Whitfield's fraud. Absent Whitfield's misrepresentations and concealment, Caldwell would not have invested in the project.
B. Constructive Fraud
Under New York law, a claim for constructive fraud lies where there is a fiduciary or confidential relationship between the parties and the fiduciary makes a material misrepresentation, even in the absence of scienter. Brown v. Lockwood, 76 A.D.2d 721, 731 (2d Dep't 1980); Wendt v. Fischer, 243 N.Y. 439, 443 (1926). The elements are: (1) a fiduciary or confidential relationship; (2) a material misrepresentation or omission; and (3) damages. Brown, 76 A.D.2d at 731.
The co-investment structure through AYDP created a fiduciary relationship between Whitfield and Caldwell. As co-members of a New York limited liability company, Whitfield and Caldwell (through their respective entities) owed each other fiduciary duties. See Pokoik v. Pokoik, 115 A.D.3d 428, 429 (1st Dep't 2014) (members of an LLC owe fiduciary duties to each other). This fiduciary relationship was particularly strong given Whitfield's role as managing co-investor with exclusive authority over due diligence, acquisition, and development oversight. (Exhibit G § 3.1.) The material misrepresentations and omissions described above—the concealed tax liens, the suppressed Phase II assessment, the inflated rent roll, and the undisclosed Glenmore agreement—each constitute breaches of this fiduciary relationship giving rise to constructive fraud, regardless of whether Whitfield acted with scienter (which, as demonstrated above, he plainly did).
C. Breach of Fiduciary Duty
Whitfield owed fiduciary duties of loyalty and care to Caldwell in multiple capacities: as the manager of AYDP, as the sixty percent (60%) majority member of AYDP, and as the managing co-investor who assumed responsibility for sourcing, due diligence, and development oversight. (Exhibit G §§ 3.1, 3.3.)
The duty of loyalty required Whitfield to act in the best interests of the venture and its members, to disclose all material information, and to refrain from self-dealing. See Birnbaum v. Birnbaum, 73 N.Y.2d 461, 466 (1989) (fiduciaries owe undivided loyalty); Meinhard v. Salmon, 249 N.Y. 458, 464 (1928) (Cardozo, C.J.) (fiduciaries owe "the duty of the finest loyalty"). The duty of care required Whitfield to exercise reasonable diligence in the discharge of his responsibilities, including the conduct of due diligence on the Property. See Levandusky v. One Fifth Ave. Apartment Corp., 75 N.Y.2d 530, 537-38 (1990).
Whitfield breached these duties through a pervasive pattern of concealment, misrepresentation, and self-dealing. Specifically:
(a) Whitfield concealed $1,340,000 in outstanding tax liens while affirmatively representing that tax obligations had been "resolved."
(b) Whitfield suppressed the Phase II environmental assessment revealing $620,000 in required remediation while affirmatively representing that the environmental assessment was "clean."
(c) Whitfield circulated a materially inflated rent roll overstating projected annual gross rental income by approximately 26.9%.
(d) Whitfield caused Pinnacle Greystone to enter into a $370,000 consulting agreement with Glenmore Realty Advisors Inc., a related-party entity controlled by his brother-in-law, without Caldwell's knowledge or consent and in violation of Section 5.4 of the AYDP Operating Agreement, which requires disclosure of and approval for related-party transactions. (Exhibit G § 5.4.)
Each of these acts constitutes a separate and independent breach of fiduciary duty. Taken together, they reveal a systematic scheme by Whitfield to exploit his position of trust and control for personal gain at the expense of Caldwell and the venture.
D. Unjust Enrichment and Aiding and Abetting Fraud
Pinnacle Greystone Capital LLC was unjustly enriched by Whitfield's fraudulent conduct. Pinnacle Greystone received the direct benefit of Caldwell's capital contribution, which was induced by fraud, and Pinnacle Greystone was the entity that executed the $370,000 consulting agreement with Glenmore Realty Advisors Inc. and caused the diversion of project funds. (Exhibit E.) Under New York law, unjust enrichment lies where the defendant has been enriched at the plaintiff's expense and equity and good conscience require restitution. Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 182 (2011).
Additionally, Pinnacle Greystone aided and abetted Whitfield's fraud. To establish aiding and abetting fraud under New York law, a plaintiff must show: (1) the existence of a fraud; (2) the defendant's knowledge of the fraud; and (3) the defendant's substantial assistance in the achievement of the fraud. Stanfield Offshore Leveraged Assets, Ltd. v. Ridgeway Insurance, 64 A.D.3d 472, 476 (1st Dep't 2009). Because Whitfield is the sole member and manager of Pinnacle Greystone, the entity necessarily had knowledge of and substantially assisted in the fraud—Whitfield's knowledge is imputed to Pinnacle Greystone, and Pinnacle Greystone was the vehicle through which several of the fraudulent acts were carried out. (See Exhibit E; Exhibit G.)
E. Documentary Evidence Already in Plaintiffs' Possession
Plaintiffs' claims are not based on conjecture or conclusory allegations. They are supported by robust documentary evidence already in Plaintiffs' possession, including the following exhibits submitted herewith in support of this motion:
Exhibit A: Verified Complaint filed September 18, 2023, setting forth the factual allegations and causes of action in detail.
Exhibit B: New York City real property tax lien records for the Property at 540-548 Atlantic Avenue, confirming $1,340,000 in outstanding liens at the time of the May 2021 acquisition.
Exhibit C: Phase II Environmental Site Assessment prepared by Ridgepoint Environmental Consultants LLC, dated February 2021, documenting petroleum contamination and estimating $620,000 in remediation costs.
Exhibit D: Whitfield's March 2021 pro forma and investment materials, containing the affirmative misrepresentations regarding environmental conditions, tax liens, and projected rental income of $2,160,000 per year.
Exhibit E: Consulting agreement between Pinnacle Greystone Capital LLC and Glenmore Realty Advisors Inc., dated April 30, 2021, documenting the $370,000 "acquisition advisory fee" paid from project funds to Whitfield's brother-in-law's firm.
Exhibit F: Independent rent analysis prepared by Ellerby & Associates CPAs LLP, concluding that actual market rents supported approximately $1,580,000 in annual gross rental income, versus Whitfield's projection of $2,160,000.
Exhibit G: Atlantic Yards Development Partners LLC Operating Agreement, establishing the membership interests, fiduciary obligations, and related-party transaction disclosure requirements.
Exhibit H: Broadmark Commercial Lending Corp. loan documents (relevant excerpts), documenting the $9,620,000 senior loan and the first-priority mortgage on the Property.
Exhibit I: Affidavit of Jonathan R. Caldwell, sworn to on October 2, 2023, setting forth the factual basis for this motion in Mr. Caldwell's own words.
This documentary record provides compelling evidence of Plaintiffs' likelihood of success on the merits. While Defendants will have the opportunity to contest these facts at trial, the weight of the documentary evidence at this stage overwhelmingly supports the entry of injunctive relief.
POINT II: PLAINTIFFS WILL SUFFER IRREPARABLE HARM ABSENT INJUNCTIVE RELIEF
A. The Property Is the Sole Substantial Asset Securing Plaintiffs' Claims
The Property at 540-548 Atlantic Avenue is held by Atlantic Yards Development Partners LLC, which was formed as a single-purpose entity for this investment and has no other material assets. (Caldwell Aff. ¶ 50.) The Property is the only asset from which Plaintiffs can satisfy a judgment in this action. If the Property is further encumbered, transferred, or dissipated before this Court can adjudicate the merits of Plaintiffs' claims, Plaintiffs will be left with a judgment that they cannot collect—a paradigmatic form of irreparable harm. See Stonefield Securities Indosuez v. Rossiyskiy Kredit Bank, 94 N.Y.2d 541, 549 (2000); Honeywell Int'l Inc. v. Sterling Reach Partners LLC, 24 A.D.3d 80, 88-89 (1st Dep't 2005).
A retrospective appraisal by Tidewater Appraisal Group LLC, located at 26 Court Street, Suite 901, Brooklyn, New York 11242 (senior appraiser: Kevin Romero, MAI), is anticipated to establish the Property's current market value. However, whatever the Property's current appraised value may be, that value is substantially impaired by the undisclosed tax liens totaling $1,340,000 and the $620,000 in required environmental remediation—costs that were concealed from Caldwell and that reduce the equity available for recovery. Moreover, the Property is already encumbered by a $9,620,000 first-priority mortgage in favor of Broadmark. (Exhibit H.) Given these existing encumbrances and impairments, any additional liens, mortgages, or transfers could render Plaintiffs' equity interest worthless and eliminate their ability to recover.
B. Defendants Control the Property and Have Demonstrated a Willingness to Divert Assets
The irreparable harm in this case is not speculative. Whitfield, through Pinnacle Greystone's sixty percent (60%) membership interest and his role as manager of AYDP, exercises unilateral control over the Property and the affairs of the SPV. (Caldwell Aff. ¶ 52; Exhibit G § 3.1.) He has the authority—without Caldwell's consent—to execute documents, enter into financing arrangements, and effectuate transfers on behalf of AYDP. (Exhibit G §§ 3.1, 3.3.)
Whitfield has already demonstrated his willingness to divert project assets without Caldwell's knowledge or consent. The $370,000 payment to Glenmore Realty Advisors Inc. is not merely evidence of fraud; it is evidence of a pattern of conduct—a willingness to treat the assets of the venture as his personal property to be deployed for his own benefit. (Caldwell Aff. ¶ 53.) Where a defendant has demonstrated such a propensity, courts have recognized that the risk of further dissipation is not speculative but real and imminent. See JSC Foreign Econ. Ass'n Technostroyexport, 295 F. Supp. 2d at 388; Republic of Haiti v. Duvalier, 211 A.D.2d at 385.
The risk is further heightened by the status of the Broadmark senior loan. The $9,620,000 loan is currently subject to maturity extension negotiations. (Caldwell Aff. ¶ 54.) This creates multiple avenues for harm:
(a) If the loan matures without extension, Broadmark may exercise its right to foreclose on the Property, which would extinguish Caldwell's equity interest entirely.
(b) Whitfield may use the maturity event as a pretext to refinance the Property on terms that further subordinate or impair Caldwell's interests—for example, by obtaining mezzanine financing from a related party, placing additional liens on the Property, or restructuring the capital stack to dilute Caldwell's position.
(c) Whitfield may transfer the Property or the membership interests in AYDP to a related entity or a third party to frustrate Caldwell's ability to collect a judgment.
Each of these scenarios would inflict irreparable harm on Plaintiffs. The entry of a preliminary injunction is the only effective means of preventing such harm.
C. Money Damages Alone Would Be Inadequate
The standard for irreparable harm does not require that Plaintiffs show that no monetary award could ever compensate them. Rather, the question is whether money damages would be an adequate remedy under the circumstances of this case. See Stonefield Securities Indosuez, 94 N.Y.2d at 549. Here, they would not.
Where the defendant has engaged in fraud and controls the only asset from which recovery is possible, the risk of dissipation renders money damages inadequate as a practical matter. See id.; Republic of Haiti, 211 A.D.2d at 385. The unique nature of the real property and the single-purpose-entity structure means that once the Property is encumbered or transferred, it may be impossible to recover or to unwind the transaction—particularly if the Property is conveyed to a bona fide purchaser for value or if additional lienholders obtain priority.
Moreover, there is no assurance that Whitfield, as an individual, possesses sufficient unencumbered personal assets to satisfy a judgment of $6,200,000 or more, plus potential punitive damages. (Caldwell Aff. ¶ 56.) Whitfield's personal wealth is understood to be substantially tied up in real estate ventures and investment entities, many of which may be encumbered or otherwise unavailable to satisfy a judgment. (Id.) Without the Property, Plaintiffs may have no practical means of recovery—a quintessential showing of irreparable harm.
POINT III: THE BALANCE OF EQUITIES TIPS DECISIVELY IN PLAINTIFFS' FAVOR
A. Minimal Burden on Defendants
The injunction Plaintiffs seek is narrowly tailored to preserve the status quo. It would merely restrain Defendants from encumbering, transferring, conveying, pledging, hypothecating, or otherwise dissipating the Property or the assets of AYDP. It would not deprive Defendants of the use, possession, or enjoyment of the Property. It would not prevent Defendants from collecting rents, managing the Property, or carrying out routine property management activities. It would not interfere with Defendants' ability to make payments on the existing Broadmark senior loan or to comply with their obligations to existing creditors.
In short, the injunction would impose only one restriction: Defendants would be prohibited from placing additional liens, mortgages, or other encumbrances on the Property, and from transferring ownership of the Property or the membership interests in AYDP, without prior notice to Plaintiffs and approval of this Court. This is a minimal burden in light of the compelling evidence of fraud and the substantial risk of dissipation. See CPLR § 6301; Town of Huntington v. Long Island Power Auth., 130 A.D.3d 1013, 1014 (2d Dep't 2015) (balance of equities favors injunction where burden on defendant is minimal and movant faces significant harm).
B. Plaintiffs' Equities Are Compelling
The equities in favor of Plaintiffs are overwhelming. Caldwell invested $5,920,000 in committed equity in this venture—a substantial sum—based on Whitfield's materially false representations regarding the condition, encumbrances, environmental status, and income potential of the Property. (Caldwell Aff. ¶ 23.) Caldwell stands to lose his entire investment if the Property is further encumbered, transferred, or otherwise dissipated before this Court can adjudicate the merits.
It bears emphasis that the fraud was discovered not through any voluntary disclosure by Whitfield, but solely because an external condition—Broadmark's requirement for updated title and environmental reports in connection with loan maturity extension—forced the truth to the surface. (Caldwell Aff. ¶¶ 44-47.) Absent that external trigger, Whitfield would have continued to conceal the tax liens, the environmental contamination, the inflated rent roll, and the Glenmore self-dealing agreement. There is no reason to believe that Whitfield would hesitate to take additional steps to dissipate assets or obstruct Caldwell's recovery in the period between now and trial.
Caldwell has also acted with diligence and dispatch. Upon discovering the fraud in August 2023, he promptly retained counsel, filed the Verified Complaint within seven days of retaining Calderwood & Harkness LLP, and now moves for injunctive relief on the earliest practicable date. (Caldwell Aff. ¶ 49.) No claim of laches or undue delay can be leveled against Plaintiffs.
C. Public Interest
The public interest strongly supports the entry of injunctive relief. Courts have a compelling interest in preventing the dissipation of assets by defendants who have been credibly accused of fraud. See Republic of Haiti, 211 A.D.2d at 386. The integrity of the judicial system depends on the ability of courts to fashion meaningful remedies at the conclusion of litigation. If defendants are free to encumber, transfer, or dissipate the very assets from which a plaintiff's judgment must be satisfied—while the litigation is pending and after the fraud has been discovered—the deterrent effect of the fraud laws is undermined and the incentive to engage in such conduct is increased.
Granting the preliminary injunction in this case will preserve the Court's ability to afford Plaintiffs complete and effective relief at trial. Denying the injunction, by contrast, would create a window of opportunity for Defendants to render any future judgment uncollectible.
CONCLUSION
For the foregoing reasons, Plaintiffs Jonathan R. Caldwell and Caldwell Urban Ventures LLC respectfully request that the Court grant a preliminary injunction as follows:
(a) Restraining defendants Marcus D. Whitfield and Pinnacle Greystone Capital LLC, and all persons acting in concert with them or at their direction, from encumbering, transferring, conveying, pledging, hypothecating, or otherwise dissipating the real property located at 540-548 Atlantic Avenue, Brooklyn, New York 11217, or any assets of Atlantic Yards Development Partners LLC, including but not limited to placing any mortgage, lien, security interest, or other encumbrance on the Property, entering into any sale or exchange agreement with respect to the Property, or transferring any membership interests in AYDP;
(b) Directing defendants to maintain the Property and the assets of Atlantic Yards Development Partners LLC in their current condition pending final resolution of this action, including the maintenance of existing insurance coverage and the continued payment of all taxes, utilities, and obligations arising under the Broadmark senior loan;
(c) Requiring defendants to provide plaintiffs with not less than ten (10) business days' prior written notice of any proposed transaction, agreement, or encumbrance involving the Property or the membership interests in Atlantic Yards Development Partners LLC, and to refrain from consummating any such transaction absent further order of this Court;
(d) Granting such other and further relief as this Court deems just and proper.
Dated: October 2, 2023 New York, New York
Respectfully submitted,
CALDERWOOD & HARKNESS LLP Attorneys for Plaintiffs
By: ________
Douglas Carmichael, Esq. Patrick Gallagher, Esq. 599 Lexington Avenue, 34th Floor New York, NY 10022 Telephone: (212) 548-7200 Facsimile: (212) 548-7201
VERIFICATION
This memorandum of law is submitted in support of Plaintiffs' motion for a preliminary injunction and is accompanied by the Affidavit of Jonathan R. Caldwell, sworn to on October 2, 2023 (Exhibit I), in which Mr. Caldwell confirms under oath the factual statements set forth herein and in the Verified Complaint. The factual representations contained in this memorandum are based upon Mr. Caldwell's personal knowledge, the documentary exhibits annexed hereto, and the investigation of Plaintiffs' counsel. Plaintiffs respectfully refer the Court to Mr. Caldwell's Affidavit for a detailed, sworn account of the facts giving rise to this motion.
EXHIBIT LIST
The following exhibits are submitted herewith in support of Plaintiffs' Motion for a Preliminary Injunction:
Page
PRELIMINARY STATEMENT | 3
STATEMENT OF FACTS | 5
A. The Parties | 5
B. The Co-Investment and Acquisition | 7
C. Whitfield's Material Misrepresentations and Concealment | 9
1. Concealed NYC Real Property Tax Liens ($1,340,000) | 9
2. Suppression of Phase II Environmental Assessment ($620,000 Remediation) | 10
3. Inflated Pro Forma Rent Roll | 11
4. Undisclosed Self-Dealing Consulting Agreement with Glenmore Realty Advisors Inc. | 12
D. Discovery of the Fraud (August 2023) | 13
E. The Present Risk of Dissipation | 14
LEGAL STANDARD | 16
ARGUMENT | 17
POINT I: PLAINTIFFS ARE LIKELY TO SUCCEED ON THE MERITS | 17
A. Common-Law Fraud and Fraudulent Inducement | 17
B. Constructive Fraud | 22
C. Breach of Fiduciary Duty | 23
D. Unjust Enrichment and Aiding and Abetting Fraud | 25
E. Documentary Evidence Already in Plaintiffs' Possession | 26
POINT II: PLAINTIFFS WILL SUFFER IRREPARABLE HARM ABSENT INJUNCTIVE RELIEF | 27
A. The Property Is the Sole Substantial Asset Securing Plaintiffs' Claims | 27
B. Defendants Control the Property and Have Demonstrated a Willingness to Divert Assets | 29
C. Money Damages Alone Would Be Inadequate | 30
POINT III: THE BALANCE OF EQUITIES TIPS DECISIVELY IN PLAINTIFFS' FAVOR | 32
A. Minimal Burden on Defendants | 32
B. Plaintiffs' Equities Are Compelling | 33
C. Public Interest | 34
CONCLUSION | 35
EXHIBIT LIST | 37
Exhibit | Description
Exhibit A | Verified Complaint filed September 18, 2023
Exhibit B | New York City real property tax lien records for 540-548 Atlantic Avenue, Brooklyn, NY 11217, confirming $1,340,000 in outstanding liens at the time of acquisition
Exhibit C | Phase II Environmental Site Assessment prepared by Ridgepoint Environmental Consultants LLC, dated February 2021
Exhibit D | Whitfield's March 2021 pro forma and investment materials
Exhibit E | Consulting agreement between Pinnacle Greystone Capital LLC and Glenmore Realty Advisors Inc., dated April 30, 2021
Exhibit F | Independent rent analysis prepared by Ellerby & Associates CPAs LLP
Exhibit G | Atlantic Yards Development Partners LLC Operating Agreement
Exhibit H | Broadmark Commercial Lending Corp. loan documents (relevant excerpts)
Exhibit I | Affidavit of Jonathan R. Caldwell, sworn to on October 2, 2023