333 Johnson, LLC Announces: Judge Allows Lawsuit Against Normandy Partners Over Netflix Brooklyn Site To Proceed To Discovery And Trial

NEW YORK, July 12, 2021 /PRNewswire/ -- A New York state Supreme Court judge has allowed a lawsuit filed in December against Normandy Real Estate Partners involving the Netflix studio site at 333 Johnson Avenue in Brooklyn to proceed to discovery and trial. The judge sustained the principal cause of action – breach of fiduciary duty of loyalty – brought by plaintiff 333 Johnson LLC. 

333 Johnson partner and Sciame Construction (https://sciame.com/) founder Frank Sciame noted, "There is no doubt that with the judge allowing discovery, the truth will surface. The crux of Normandy's case—that Sciame Construction was not capable of building a Netflix Studio—is tantamount to saying that Rolls Royce can't build engines."

The 333 Johnson site in Brooklyn, New York, is currently under construction and is slated to be the future location of a Netflix Studios complex. The verified complaint filed December 28, 2020 in state Supreme Court charges breach of fiduciary duty of loyalty and fraud in connection with the sale of the property. Plaintiff 333 Johnson was in a joint venture with defendant Normandy Real Estate Partners ("Normandy REP") as a minority partner for three and one half years. The joint venture's purpose was to develop and sell the 333 Johnson property in the East Williamsburg section of Brooklyn. In the suit, the plaintiff alleges defendant Normandy REP deprived plaintiff of a deal with a value of $360 million dollars. The plaintiff was entitled to purchase Normandy's interest in the joint venture, and alleges Normandy concealed information about Netflix's lease of the property and induced plaintiff to waive that right. The same court had already ruled on a motion by the plaintiff for pre-lawsuit discovery as well as an order compelling the preservation of evidence. It was an unusual motion succeeding in a ruling that the plaintiff had sufficient information to file the lawsuit against Normandy, and the court ordered Normandy REP, Netflix Inc., and Steel Equity Management, LLC to preserve all relevant documents about the property and the allegations by the plaintiff.

Prior to the sale, the property was improved with 160,000 square feet of interconnected buildings, with the potential for an additional 150,000 square feet. Prior to entering into the joint venture in 2015, plaintiffs invested substantial money and time to ensure that the property can be developed into a highly desirable project. They also created a strategic business plan to market the property.  Some of the contributions 333 Johnson made to the joint venture were hiring architects and engineers, conducting market surveys of the area that generated tenant interest and lease offers and performing environmental assessments. At the end of this process, 333 Johnson partnered with Normandy REP to implement the business plan and develop the property for sale or lease. Per the agreement between 333 Johnson and Normandy REP, 333 Johnson was initially designated the managing partner of the entity.

According to the Complaint in fall 2018, Normandy REP abruptly brought a buyer to 333 Johnson and demanded a waiver of 333 Johnson's right of first offer, which was spelled out in the parties' joint venture agreement. The Complaint went on to note that defendant Normandy REP warned 333 Johnson not to interfere with the sale that would result in a small profit for the joint venture for a property the defendant described as "a broken-down warehouse in Brooklyn." The potential purchaser, Steel Equities, made an offer of $52.5 million, well below the value of the property if the Netflix lease had been in play.

The only reason 333 Johnson agreed to the sale was because Normandy REP did not disclose Netflix's desire to lease the entire site for sound studios, the lawsuit alleges. As noted in the court filing, Normandy clearly knew of Netflix' interest in the property because Normandy was already in discussion with Netflix over leasing Normandy properties in Manhattan. This included space at 888 Broadway which was owned and managed by a Normandy affiliate. It is alleged in the Complaint that Normandy REP arranged site access at the Brooklyn property for Netflix and its team of contractors, architects and engineers prior to the sale of the property to Steel Equities. On the exact day that the sale of the parcel closed (December 26, 2018) Steel Equities executed a lease with Netflix for the entire property as noted in the complaint. The first time 333 Johnson learned of the lease was when it was publicly announced in April 2019. At that same time New York State Empire Development offered $4 million in performance-based excelsior tax credits' linked to jobs that would be created at both 888 Broadway in Manhattan and 333 Johnson in Brooklyn. 

"We could have realized more than $300 million from the Netflix lease had we not been cheated out of that opportunity by our former partner Normandy REP," said Jin Lee of 333 Johnson LLC.  "We are delighted by the ruling and look forward to quickly proceeding to discovery and trial."

The Complaint seeks total damages in excess of $300 million and the trial is expected to be scheduled in early 2022.

SOURCE 333 Johnson, LLC