2021 BDL 147 Mercer Street LLC V Andre Balazs Et Al Summons Complaint 1

FILED: NEW YORK COUNTY CLERK 04/09/2021 12:29 PM INDEX NO.
652374/2021
NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 04/09/2021
SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK
------------------
-----------------------------------X
BDL 147 MERCER STREET, LLC
Index No.:
Plaintiff,
SUMMONS
-against-
ANDRE BALAZS, AB 147 MERCER STREET LLC,

HOTELSAB LLC and MERCER MANAGEMENT L.L.C.
Defendants.
___..- __----...___-.-__--__-_...---__ _..-X
To the above-named defendants
You are hereby summoned and required to serve upon Plaintiff's attorney an answer to the
complaint in this action within 20 days after the services of this summons, exclusive of the day
of services or within 30 days after service is complete if this summons is not personally delivered
to you within the State of New York. In case of your failure to answer, judgment will be taken
against you by default for the relief demanded in the complaint.
The basis of the venue designated is Plaintiff's principal place of business is located within New
York County.
Dated: New York, New York
April 9, 2021
Y 2
, etc.
fÉVY SONET & SIEGEL, LLP

Steven G. Sonet
21't
630 Third Avenue, Floor
New York, NY 10017
(212) 661-1212
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FILED: NEW YORK COUNTY CLERK 04/09/2021 12:29 PM INDEX NO. 652374/2021
SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK
---------------------------------- --- X
BDL 147 MERCER STREET, LLC
Index No.:
Plaintiff,
VERIFIED COMPLAINT
-against-
ANDRE BALAZS, AB 147 MERCER STREET LLC,

HOTELSAB LLC and MERCER MANAGEMENT L.L.C.
Defendants.
________________-______-----------------X
Plaintiff BDL 147 Mercer Street, LLC ("BDL") derivatively on behalf of nominal
defendant Mercer Operating LLC ("Mercer LLC"), by and through their counsel, Levy Sonet
and Siegel LLP, allege for their verified complaint against Defendants Andre Balazs ("Balazs"),
AB 147 Mercer Street LLC ("BALAZS LLC"), Hotelsab LLC ("HotelsAB"), and Mercer
Management L.L.C. ("MM LLC") as follows:
NATURE OF THE ACTION
1, This action is brought on a derivative basis by BDL for the benefit of nominal
defendant Mercer LLC to obtain a permanent injunction to remove Defendant Balazs from his
duties as the Mãñaging Director of the Mercer Hotel located at 147 Mercer St, New York, NY
"owner"
and to enjoin Balazs from referring to himself as the of the Mercer Hotel for marketing
and publicity purposes.
2. This action is also brought on a derivative basis by BDL for the benefit of
nominal defendant Mercer LLC to recover dareages arising from (i) breach of fiduciary duty by
Balazs as Managing Director of the breach of fiduciary HotelsAB in its day-

Hotel, (ii) duty by
to-day operation of the Hotel; (iii) breach of the Mercer LLC Operating Agreement by BALAZS
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LLC; (iv) breach of the implied covenant of good faith and fair dealing by BALAZS LLC; (v)
breach of the Mercer LLC Management Agreement by MM LLC; and (vi) and breach of
fiduciary duty by MM LLC.
J_URISDICTION AND VENUE
3. This court has personal jurisdiction as Plaintiff, nominal defendant and the
Defeñdañts all conduct business in the State of New York and/or have principal places of
business in New York.
4. Venue in the New York County is proper pursuant to N.Y. C.P.L.R. § 503.
THE PARTIES
5. Plaintiff BDL is a New York limited liability corspsy with offices in New York
County.
6. Nominal Defendant Mercer LLC is a Delaware limited liability company
authorized to do business in New York and having a New York office located at 147 Mercer St,
New York, NY.
7. Defendant BALAZS LLC is a Delaware limited liability company authorized to
do business in New York and having a New York office located in New York County.
hotelier."
8. Defendant Balazs is an individual and a "celebrity In addition to other
locations within and without the United States, he maintains a residence in New York.
9. Defendant HotelsAB is a Delaware limited liability company authorized to do
business in New York and having a New York office located at 158 Mercer St, New York, NY.
10 Defendant MM LLC is a Delaware limited liability company authorized to do
business in New York and having a New York office located at 147 Mercer St, New York, NY.
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11. Mercer LLC was created in May, 2007 for the sole purpose of leasing the real
property located at 147 Mercer Street, New York, NY from the Hotel's owner, non-party The
Mercer I, LLC ("Mercer I"), and to operate the Mercer Hotel and its ancillary facilities.
12. The Mercer Hotel is a boutique hotel in the SoHo District of

("Hotel") luxury
Manhattan.
13. The operating agreement for Mercer LLC was entered into by and between
Plaintiff BDL and Defendant BALAZS LLC on May 8, 2007; and it was subsequently amended
by the parties on May 31, 2018 (the "OA").
14. BDL and BALAZS LLC are, and have always been, the sole members of Mercer
LLC, with each having a membership interest of 65% and 35% respectively.
15. Upon information and belief, Balazs has a 98.9% ownership interest in BALAZS
LLC. Also upon information and Belief, BALAZS LLC is managed by non-party Mercer
Mañager Corp., an entity owned and controlled by Balazs. As such, Balazs has power and
control over BALAZS LLC and all actions taken by it.
16. Although Balazs individually is not a member of Mercer LLC, OA Sections
"owner"
5.1(d) and 5.3(f) permit Balazs to identify himself the Hotel's and identify the Hotel as
a part of a select group of hotels operated by Defendant HotelsAB, including, among others, the
"face"
Chateau Marmont in Los Angeles. As a result, Balazs is the public of the Hotel and all
public references to the Hotel identify Balazs as the Hotel's owner.
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Balazs'
17. Upon information and belief, widespread, negative press regarding
personal life combined with the very public allegations of discrimination, abuse, misconduct and
hotel" Marmonti
neglectful management by HotelsAB at "sister Chateau has been incredibly
harmful to the Hotel as a result of its association with Balazs and HotelsAB.
18. Mercer LLC is mariaged under the joint direction of its two members BDL and
BALAZS LLC (each a "Manager", together the "Managers").
19. Pursuant to OA Section 5.1(a), BDL and BALAZS LLC are required to act
severally)"
"together (and not to make all decisions and take all actions for and on behalf of
Mercer LLC, except to the extent that the OA specifically states otherwise.
20. Pursuant to OA Section 5.1(a) and 5.1(b), certain decisions must be made jointly
by either Richard Born or Ira Drukier as BDL's authorized representative and Balazs as
BALAZS LLC's authorized representative (each such decision a "Joint Directive").
21. Joint Directives include, without limitation, (i) entering into, making and
performing contracts and agreements; (ii) decisions regarding construction and other related
agreements; (iii) execution of Hotel management agreements; (iv) maintaining Mercer LLC's
assets in good order; (v) collecting sums due Mercer LLC; (vi) paying debts and obligations of
Mercer LLC; (vii) entering into any and all other agreements with any other person for any
purpose; (viii) selecting, removing and changing the authority and responsibility of lawyers,
accountants, and other advisers and consultants; and (ix) all other acts as may be necessary or
appropriate to the conduct of the Mercer LLC's business.
1
Examples include a widely cited September 16, 2020, article in the Hollywood Reporter titled: "Rot at
Holly woods "Playgmund": Chateau Mannont Staff Allege Racial Discrimination, Sexual Misconduct and
Mañagcment"
Neglectful which ±:ªhd a workplace rife with toxic behavior, irdúdirig neglectful se .gement and
unaddressed racial discrimination and sexual miscüñdüct.
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22. As such, every decision pertaining to the Hotel's operation requires the
unanimous coñsênt of Balazs and Drukier or Born.
23. On Mercer LLC entered into a Management Agreement with non-

May 16, 2007,
party BD Hotels and MM LLC for the operation, management and supervision of the Hotel
("Management Agreêmêñt"). The Management Agreement incorporates the OA by reference.
24. Upon information and belief, Balazs has a 98.9% ownership interest in MM LLC
and is its mañaging member. As such, Balazs has power and control over MM LLC and all
actions taken by it.
25. BD Hotels is under the control of Richard Born and Ira Drukier.
26. Pursuant to Paragraph 1 of the Mañagement Agreement, BD Hotels and MM LLC
"jointly shall manage and operate the Hotel in an efficient and businesslike manner, acting at all
interests"
times in a manner consistent with [Mercer LLC]'s best as the Hotel's "Managing
Agent".
27. Pursuant to Paragraph 8 of the Management Agreement, if there is any
inconsistency between the Mâñagement Agreement and the OA, the provisions in the OA are
controlling and all rights, obligations and powers of the parties shall be controlled by the OA.
Director"
28. OA Section 5.3 conditionally designates Balazs as the "Managing of the
Hotel.
29. As Managing Director, OA Section 5.1(c) requires Balazs to be responsible "for
Managers' decisions"
the day-to day implementation of the regarding Hotel Operations. OA
Section 5.1(c) further requires Balazs to "provide ongoing direction and supervision to the staff
consultants"
of the Hotel and third-party in a manner "consistent with the [Mâñager's]
decisions."
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Balazs'
30. Pursuant to OA Section 5.3(e), right to serve as Managing Director is
personal to him and cannot be assigned, transferred or delegated, although Balazs is permitted to
use an entity related to BALAZS LLC for purposes of central reservations, sales, marketing and
services"
other "hotel at cost.
31 Pursuant to OA Section 5.3(e), all rights given to Balazs under OA Section 5.1(c)
Balazs' "owner"
and 5.1(d), including right to be identified as the Hotel's and media spokesman,
automatically terminate if Balazs either "regularly fail[s} to implement material Hotel
decisions"
operational or if he "has taken material action and incurred material obligations
LLC]."
without the approval of [BDL and BALAZS
32. As Balazs is routinely absent from the Hotel for extended periods, Balazs relies
on Defendant HotelsAB and its Chief Operating Officer, Paul Denning to ñianage the Hotel's
day-to-day operations.
33. Upon information and belief, HotelsAB is related to BALAZS LLC, and also
upon information and belief, Balazs has a 98.9% ownership interest in HotelsAB and is its
managing member. As such, Balazs has power and control over HotelsAB and all actions taken
by it.
DEMAND FUTILITY
34. Plaintiff brings this suit because the actions of the Defendants, all of which are
under the direction and control of Balazs, amount to gross negligence, bad faith and intentional
misconduct, self-dealing, breach of contract and breach of the implied covenant of good faith and
fair dealing.
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35. Even though Plaintiff BDL has a 65% membership interest in Mercer LLC,
decisions regarding Mercer LCC require the unanimous consent of BDL and BALAZS LLC.
36. Given the nature of the claims, and because BALAZS LLC and its affiliated
persons and entities are all interested in the challenged transactions and incapable of making
impartial decisions regarding whether to bring suit, any attempt to obtain majority approval to
bring a suit on behalf of Mercer LLC would be impossible. Any pre-suit demand would be
futile, and this derivative action is necessary to obtain the requested relief for Mercer LLC.
37. On November 11, 2019, BDL sent to Balazs a letter informing him that based on
his ongoing and gross misconduct, he no longer met the requirements allowing him to serve as
Managing Director of the Hotel. Balazs refuses to step down despite the automatic termination
of his agency under the Operating Agreement.
-
AS AND FOR A FIRST CAUSE OF ACTION
BREACH OF FIDUCIARY DUTY AGAINST ANDRE BALAZS
38. Plaintiff repeats and realleges the allegations contained in paragraphs 1 through
37 as if fully set forth herein.
39. As the Managing Director of the Hotel, Balazs is an agent of Mercer LLC. The
terms and conditions of the agency are defined in the OA.
40. Balazs was aware of the terms and conditions of his agency and he agreed to them
when he signed the OA on behalf of BALAZS LLC.
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41. As an agent of Mercer LLC, Balazs is a fiduciary required perform his duties with
utmost good faith and with undivided loyalty to Mercer LLC. Balazs must act only as authorized
by Mercer LLC and is prohibited from taking any action that is inconsistent with his agency. For
the reasons set forth below, Balazs breached his fiduciary duties to Mercer LLC both in his
capacity as Managing Director of the Hotel and as BALAZS LLC's authorized representative.
42. Upon information and belief, Balazs engaged in self-dealing when he caused
Mercer LLC to pay over $100,000 in personal legal ex-peñses and settlement fees related to a
harassment claim brought against Balazs in 2018. Despite numerous requests by BDL, Balazs
Balazs'
refuses to explain why he charged these amounts to Mercer LLC. attorney has similarly
refused to discuss the claims with BDL explaining that Mercer LLC was not a named client with
respect to such matters.
43. Balazs exhibited gross negligence, bad faith and intentional misconduct by
willfully and regularly taking material actions without first obtaining BDL's consent as required
by the terms of his agency. In direct contradiction of the Manager's budget directives, and
without BDL's knowledge and consent, Balazs has, among other things, expeñded significant
projects"
capital on "pet such as the unnecessary renovation of the women's locker room and
Director" Director"
imprudently hired a Hotel "Art and a Hotel "Brands at a combined salary of
$245,000.
44. At the same time, Balazs exhibited gross negligence, bad faith and intentional
misconduct by willfully and regularly disregarding Joint Directives actually agreed to by BDL
and BALAZS LLC. Essential mañâgement positions remained vacant for months, including the
positions of Chief Engineer, Front Office Manager, Controller and Director of Housekeeping
with little or no effort to by Balazs to fill these positions. For years, and despite numerous
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requests by the Mañagers, Balazs failed to prepare and plan estimates and designs for the very
much needed renovation of the Hotel's guest rooms and he routinely failed to timely prepare and
present Hotel operating budgets.
45. Balazs exhibited gross negligence, bad faith and intentional misconduct by failing
to adequately supervise HotelsAB's performance of its duties at the Hotel, failing to correct
HotelAB's gross misreañagement of the Hotel, and violating his duty of candor by failing to
inform the Managers of HotelAB's gross mismanagement of the Hotel.
46. Balazs exhibited gross negligence, bad faith and intentional misconduct by
providing BDL incomplete, misleading or inaccurate information regarding the Hotel, the
Hotel's employees, and allegations of misconduct occurring at the Hotel.
47. When BDL became aware of management problems from concerned Hotel
employees, Balazs often refused to even discuss such matters with BDL. On other occasions,
Balazs failed to follow through on the corrective measures agreed to by BDL and BALAZS
LLC.
48. Currently there is at least one outstanding lawsuit against Mercer LLC based on
Balazs'
allegations not fully understood by BDL as a result of refusal to provide clear and
accurate information to Mr. Drukier and Mr. Born.
Balazs'
49. willful, intentional disregard of his duties and apparent rñisappropriation
of Mercer LLC's assets have, among other things, crippled the Mañager's ability to properly
umuaso Mercer LLC, caused reputational harm to the Hotel, and resulted in third party litigation
and significant monetary losses to Mercer LLC.
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50. As a result of the foregoing, Plaintiff is entitled to receive a permanent injunction
to remove Balazs as the Managing Director of the Hotel as required by OA Section 5.3(e).
51. Balazs has acted with a high degree of moral culpability to warrant punitive
damages.
52. As a direct and proximate result of BALAZS LLC's breaches of fiduciary duty,
Plaintiff has suffered damages in an amount to be determined at trial, but in no event less than
$500,000.
AND FOR A SECOND CAUSE OF ACTION-

BREACH OF FIDUCIARY DUTY AGAINST HOTELSAB
51, as if fully set forth herein.
Balazs'
54. Balazs appointed HotelsAB as its subagent under direction and control to
services"
provide central reservations, sales, marketing and other "hotel to Mercer LLC.
55. Upon information and belief, as Balazs is the 98.9% owner and managing
Balazs'
member of HotelsAB, HotelsAB was aware of the nature and limited scope of agency to
Mercer LLC. HotelsAB also knew that it engaged in conduct that violated the terms of its
agency.
Balazs'
56. As subagent, HotelsAB has fiduciary relaticñship with Mercer LLC. As a
fiduciary, HotelsAB has a duty to perform its duties as Mercer LLC's agent in good faith and
with loyalty, in a manner consistent with the powers of its agency and act only as authorized by
Mercer LLC.
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57. In the event of any conflict between HotelAB's fiduciary duty to Balazs and
HotelAB's fiduciary duty to Mercer LLC, HotelAB's duty to Mercer LLC takes precedence. For
the reasons set forth below, Balazs breached its fiduciary duties to Mercer LLC.
58. HotelsAB exhibited gross negligence, bad faith and intentional misconduct by
Balazs'
following instructions from Balazs known to be outside the scope of agêñcy (and
therefore outside the scope of HotelsAB's subagency) and by failing to implement the Manager's
Joint Directives at the Hotel.
59. HotelsAB through gross negligence, bad faith and intentional misconduct failed to
properly staff the Hotel and ensure that the staff had the tools necessary to perform basic
housekeeping and routine maintenance. As a result of HotelAB's gross mismanagement, Hotel
staff failed to comply with hotel industry best practices, failed to pay essential bills, and failed to
meet basic operational standards resulting in physical damage to the Hotel, code violations and
potential health and safety risks to Hotel staff and guests.
60. HotelsAB through gross negligence, bad faith and intentional misconduct failed to
properly or timely address HR matters at the Hotel and took deliberate and chiated steps to
ensure that BDL was not informed of such matters.
Balazs'
61. Upon information and belief, at direction, HotelsAB has and connnues to
intentionally withhold information from BDL regarding financial improprieties, misuse of
Mercer LLC's property, self-dealing, and other wrongdoing by Balazs and HotelsAB.
62. Despite its obligation to collect fees from Hotel guests, HotelsAB through gross
negligence, bad faith and intentional misconduct failed to collect approximately $1.5 million in
accounts receivable from guests favored by Balazs and HotelsAB.
1I
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63. Upon information and belief, approximately $300,000 is still owed to the Hotel by
a personal friend of Balazs.
64. Approximately $1 million was owed to the Hotel by a friend of Hotel
management and principal at Biom'up. Despite HotelsAB's knowledge of the unpaid and
seriously delinquent account balance, HotelsAB continued to permit this individual to reside at
the Hotel. By the time BDL learned of the outstanding balance and ordered it collected,
Biom'up filed for bankruptcy. The account was ultimately settled for approximately $250,000,
resulting in an approximately $1,000,000 loss to Mercer LLC.
65. HotelsAB's failure to collect outstanding accounts also resulted in improper
payments of New York State and New York City hotel taxes and occupancy taxes by Mercer
LLC on over $1.3 million of uncollected Hotel revenue. Mr. Balazs and AB Property's
concealment of the $1.3 million debt has also resulted in personal tax liability for BDL as it has
been forced to pay tax on phantom income.
66. HotelsAB's willful, intentional disregard of its duties has, among other things,
crippled the Manager's ability to properly manage Mercer LLC, caused reputational harm to the
Hotel, and resulted in third party litigation and significant monetary losses to Mercer LLC.
67. HotelsAB has acted with a high degree of moral culpability to warrant punitive
damages.
68. As a direct and proximate result of HotelsAB's breaches of fiduciary duty,
Plaintiff has suffered damages in an amount to be determined at trial, but in no event less than
$1,300,000.
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AS AND FOR THIRD CAUSE OF ACTION -
BREACH OF CONTRACT AGAINST BALAZS LLC
51 and 54 through 67, as if fully set forth herein.
70. The OA is a valid, enforceable contract.
71. BDL substantially performed all of its obligations under the OA.
72. BALAZS LLC materially and substantially breached its obligations under the OA
by refusing and failing to obtain BDL's consent or prior approval before taking decisions or
actions for and on behalf of Mercer LLC in breach of OA Section 5.1(a), including, without
limitation, by:
(i) entering into, making and performing contracts and agreements;
(ii) making decisions regarding construction and other related agreements;
(iii) executing Hotel management agreements,
(iv) selecting and changing the authority and responsibility of lawyers,
various HotelsAB employees with authority over financial

(v) designating
accounts
(vi) making significant, unbudgeted expenditures of Mercer LLC's capital.
(vii) failing to properly maintain Mercer LLC's assets; and
(viii) failing to collect sums due Mercer LLC.
73. BALAZS LLC materially and substantially breached its contractual obligations
by refusing and failing to obtain BDL's consent or prior approval before permitting Balazs, as
Balazs'
Mercer LLC's agent, and HotelsAB, as subagent, to legally bind Mercer LLC in breach
of OA Section 5.1(c).
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by refusing and failing to obtain BDL's consent or prior approval before engaging the services of
an attorney to render services to Mercer LLC in breach of OA Section 5.3(b).
by collecting management fees over and above that to which they were entitled in breach of OA
Section 5.3(g).
by refusing and failing to obtain BDL's consent or prior approval before authorizing the use of
employees'
Ms. Kutelvas and other AB Hotel services for the Mercer Hotel LLC in breach of
OA Section 5.3(f).
by knowingly permitting HotelsAB to submit charges for reimbursement that were improperly
allocated to Mercer LLC in breach of OA Section 5.3(f).
by failing to properly allocate and charge fairly and reasonably for overhead shared with
HotelsAB in breach of OA Section 5.8 (a).
by failing to transact business with Balazs and HotelsAB on an arm's length basis in breach of
OA Section 5.8(g).
Balazs'
by authorizing the use of Mercer LLC's capital to pay for personal legal expenses in
violation of OA Sections 5.1, 5.8(h), and 5.8(n).
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81. BALAZS LLC materially and substantially breached its contractüãl obligations
by misrepresenting to third parties its sole authority to legally bind Mercer LLC and then doing
so in breach of OA Section 5.1(c).
82. All of the above breaches by BALAZS LLC were willful and intentional, done for
the purpose of benefiting BALAZS LLC or persons or entities related to BALAZS LLC at the
expense of Mercer LLC.
83. As a direct and proximate result of BALAZ LLC's breaches of contract, Plaintiff
has suffered damages in an amount to be determined at trial, but in no event less than
$1,500,000.
AS AND FOR FOURTH CAUSE OF ACTION

BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING
AGAINST BALAZS LLC
51, 54 through 67, and 70 through 83, as if fully set forth herein.
85. Inherent in the Operating Agreement is an implied covenant of good faith and fair
dealing.
Balazs'
86. Pursuant to OA Section 5.3(e), position as the Mâñaging Director of the
Hotel automatically terminated when Balazs regularly failed to implement material Hotel
operational decisions and took material actions and incurred material obligations on behalf of
Mercer LLC without BDL's approval.
87. The Operating Agreement is silent regarding what happens if Balazs refuses to
accept the automatic termination of his position.
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88. BALAZS LLC's failure to cause Balazs to step down as Managing Director of the
Hotel is unreasonable, an act of bad faith, and a breach of the implied covenant of good faith and
fair dealing.
89. An implied obligation of BALAZS LLC to cause Balazs to step down as
Managing Director is reasonably inferred in the OA.
90. As a direct and proximate result of BALAZS LLC's breach of the implied
covenant of good faith and fair dealing, Plaintiff has suffered damages in an amount to be
determined at trial, but in no event less than $1,500,000.
AS AND FOR FIFTH CAUSE OF ACTION-
BREACH OF CONTRACT AGAINST MM LLC
91. Plaintiff repeats and realleges the allegations contained in 1 through 51, 54
through 67, 70 through 83, and 86 through 89 as if fully set forth herein.
92. The Management Agreement is a valid, enforceable contract.
93. Mercer LLC substantially performed all of its obligations under the Management
Agreement.
94. Upon information and belief, MM LLC materially and substantially breached its
contractual obligations to operate, manage and supervise the Hotel with non-
by failing jointly
Hotels'
party BD Hotels, and refusing and failing to obtain BD coñsent or prior approval before
taking decisions or actions for and on behalf of Mercer LLC in breach of Paragraphs 1 and 3 of
the Management Agreement, including without limitation, by:
(i) entering into, making and performing contracts and agreements;
(ii) making decisions regarding construction and other related agreements;
(iii) executing Hotel management agrecmêñts;
(iv) engaging the services of an attorney to render services to Mercer LLC,
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(v) making significant, unbudgeted expenditures of Mercer LLC's capital.
(vi) failing to properly maintain Mercer LLC's assets; and
(vii) failing to collect sums due Mercer LLC.
95. Upon information and belief, MM LLC also materially and substantially breached
its contractual obligations by instructing Balazs and HotelsAB to make decisions or take actions
for and on behalf of Mercer LLC without BD Hotel's knowledge or consent in breach of
Paragraphs 1 and 3 of the Management Agreement.
96. MM LLC materially and substantially breached its contractual obligations by
failing to manage and operate the Hotel in an efficient and businesslike manner and by acting in
a manner inconsistent with Mercer LLC's best interests in breach of Paragraph 3 of the
Management Agreement including, without limitation, by (i) failing to properly or timely address
known HR matters at the Hotel; (ii) failing to properly or timely address known financial
improprieties at the Hotel; (iii) willfully ignoring certain other known operational failures at the
Hotel; and (iv) refusing and failing to disclose to BD Hotels material information necessary for
BD Hotels to jointly operate, manage and supervise the Hotel under the Management
Agreement.
97. Upon information and belief, MM LLC also materially and substantially breached
its contractual obligations by collecting management fees over and above that to which it was
entitled in breach of in breach of Paragraph 4 of the Mâñâgement Agreement.
98. All of the above breaches by MM LLC were willful and intentional, done for the
purpose of benefiting MM LLC or persons or entities related to MML LLC at the expense of
Mercer LLC.
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99. As a direct and proximate result of MM LLC's breaches of contract, Plaintiff has
suffered damages in an amount to be determined at trial, but in no event less than $1,500,000.
AS AND FOR SIXTH CAUSE OF ACTION-

BREACH OF FIDUCIARY DUTY AGAINST MM LLC
51, 54 through 67, 70 through 83, 86 through 89, 92 and 98 as if fully set forth herein.
101. As Mercer LLC's named managing agent under the Management Agreement,
MM LLC has a fiduciary duty to Mercer LLC.
102. MM LLC is required perform its duties with utmost good faith and with
undivided loyalty to Mercer LLC. MM LLC must act only as authorized by the Management
Agreement and is prohibited from taking any action that is inconsistent with its agency. For the
reasons set forth below, MM LLC breached its fidüciary duties to Mercer LLC.
103. ML MMC exhibited gross negligence, bad faith and intentional misconduct by
intentionally and willfully withholding information from Mercer LLC and its Managers
regarding the financial improprieties, misuse of Mercer LLC's property, self-dealing, breaches of
contract and other wrongdoing detailed above by Balazs, HotelsAB and BALAZS LLC.
104. Upon information and belief, ML MMC exhibited gross negligence, bad faith and
intentional misconduct with and and Andre Rain7c and

by conspiring assisting encouraging
HotelsAB to breach their respective duties to Mercer LLC by, among other things, (i) facilitating
Balazs'
taking of material actions and incurring material obligations on behalf of Mercer LLC
without BDL's knowledge and coñseñt; (ii) causing and/or assisting BALAZS LLC to cause
Balazs'
Mercer LLC to pay over $100,000 in legal expenses and settlement fees related to
personal legal matters; (iii) taking affirmative actions to conceal (and assisting the other
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Defendants to conceal) evidence of gross negligence, bad faith and intentional misconduct by
Balazs, Hotels AB and BALAZS LLC from Mercer LLC's Managers and other agents.
105. MM LLC acted with a high degree of moral culpability to warrant punitive
damages.
106. MM LLC's willful, intentional disregard of its duties has, among other things,
crippled the Manager's ability to manage Mercer LLC, caused reputational harm to the Hotel,
and resulted in third party litigation and significant monetary losses to Mercer LLC.
107. As a direct and proximate result of MM LLC's breaches of fiduciary duty to
Mercer LLC, Plaintiff has suffered damages in an amount to be determined at trial, but in no
event less than $1,500,000.
WHEREFORE, Plaintiff respectfully demands judgment against Defendants as follows:
(a) On the First Cause Of Action, against Balazs, for a permanent injunction
to remove Balazs as the Managing Director of the Hotel, and for damages,
in an amount to be determined at trial, but not less than $500,000, together
with punitive or exemplary damages, in an amount to be determined at
trial;
(b) On the Second Cause Of Action, against HotelsAB, for damages, in an
amount to be determined at trial, but not less than $1,500,000, together
trial;
(c) On the Third Cause Of Action, against BALAZS LLC, for damages, in an
amount to be determined at trial, but not less than $1,500,000;
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(d) On the Fourth Cause Of Action, against BALAZS LLC, for damages, in
an amount to be determined at trial, but not less than $1,500,000;
(e) On the Fifth Cause Of Action, against MM LLC, for damages, in an
amount to be determined at trial, but not less than $1,500,000;
(f) On the Sixth Cause Of Action, against MM LLC, for damages, in an
amount to be determined at trial, but not less than $1,500,000, together
trial;
(g) Granting Plaintiff such other and further relief as the Court deems just and
proper, including the costs and disbursements of this action.
Dated: New York, New York
April 9, 2021
LEVY SONE & SIEGEL, LLP
By:
Steven G. Sonet
Attorneys for Plaintiff
630 Third Avenue
New York, NY 10017
(212) 661-1212
smnetassi LPsom
20
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VERIFICATION
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
IRA DRUKIER, being duly sworn, deposes and says:
1. I am a manager of 147 Mercer Street LLC. I have read the foregoing
Verified Complaint and know the contents thereof and that the same are true to my knowledge
except to those matters stated to be alleged upon information and belief and as to those matters
deponent believes them to be true.
I DRUKIE
Sworn to before me this

9*
day of April, 2021
Notary Public
STEVEN G. SONET
NotarvPuMlaStateatNowYork
No.4795755
Iriserver\steve\BDL.BALAZS.drukier.verification 4.9.21
21
22 of 22

2021 BDL 147 Mercer Street LLC V Andre Balazs Et Al Summons Complaint 1

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2021 BDL 147 Mercer Street LLC V Andre Balazs Et Al Summons Complaint 1

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FILED: NEW YORK COUNTY CLERK 04/09/2021 12:29 PM INDEX NO.

SUPREME COURT OF THE STATE OF NEW YORK

ANDRE BALAZS, AB 147 MERCER STREET LLC,

To the above-named defendants

Dated: New York, New York

fÉVY SONET & SIEGEL, LLP

SUPREME COURT OF THE STATE OF NEW YORK

ANDRE BALAZS, AB 147 MERCER STREET LLC,

Management L.L.C. ("MM LLC") as follows:

NATURE OF THE ACTION

and publicity purposes.

Balazs as Managing Director of the breach of fiduciary HotelsAB in its day-

fiduciary duty by MM LLC.

J_URISDICTION AND VENUE

business in New York.

6. Nominal Defendant Mercer LLC is a Delaware limited liability company

New York, NY.

7. Defendant BALAZS LLC is a Delaware limited liability company authorized to

9. Defendant HotelsAB is a Delaware limited liability company authorized to do

10 Defendant MM LLC is a Delaware limited liability company authorized to do

12. The Mercer Hotel is a boutique hotel in the SoHo District of

by the parties on May 31, 2018 (the "OA").

control over BALAZS LLC and all actions taken by it.

16. Although Balazs individually is not a member of Mercer LLC, OA Sections

public references to the Hotel identify Balazs as the Hotel's owner.

BALAZS LLC (each a "Manager", together the "Managers").

BALAZS LLC's authorized representative (each such decision a "Joint Directive").

appropriate to the conduct of the Mercer LLC's business.

unanimous coñsênt of Balazs and Drukier or Born.

23. On Mercer LLC entered into a Management Agreement with non-

("Management Agreêmêñt"). The Management Agreement incorporates the OA by reference.

actions taken by it.

26. Pursuant to Paragraph 1 of the Mañagement Agreement, BD Hotels and MM LLC

27. Pursuant to Paragraph 8 of the Management Agreement, if there is any

29. As Managing Director, OA Section 5.1(c) requires Balazs to be responsible "for

automatically terminate if Balazs either "regularly fail[s} to implement material Hotel

of his agency under the Operating Agreement.

37 as if fully set forth herein.

terms and conditions of the agency are defined in the OA.

when he signed the OA on behalf of BALAZS LLC.

respect to such matters.

present Hotel operating budgets.

inform the Managers of HotelAB's gross mismanagement of the Hotel.

Hotel's employees, and allegations of misconduct occurring at the Hotel.

accurate information to Mr. Drukier and Mr. Born.

and significant monetary losses to Mercer LLC.

50. As a result of the foregoing, Plaintiff is entitled to receive a permanent injunction

AND FOR A SECOND CAUSE OF ACTION-

51, as if fully set forth herein.

Joint Directives at the Hotel.

housekeeping and routine maintenance. As a result of HotelAB's gross mismanagement, Hotel

potential health and safety risks to Hotel staff and guests.

ensure that BDL was not informed of such matters.

intentionally withhold information from BDL regarding financial improprieties, misuse of

accounts receivable from guests favored by Balazs and HotelsAB.

a personal friend of Balazs.

64. Approximately $1 million was owed to the Hotel by a friend of Hotel

resulting in an approximately $1,000,000 loss to Mercer LLC.

65. HotelsAB's failure to collect outstanding accounts also resulted in improper

been forced to pay tax on phantom income.

68. As a direct and proximate result of HotelsAB's breaches of fiduciary duty,

AS AND FOR THIRD CAUSE OF ACTION -