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RABBI ELI KATZ SEEKS THIRD ROUND OF APPEALS IN WAVERLY GARDENS POOL DISPUTE




Waverly Gardens, a condominium development located in Monticello, has been embattled in numerous litigation ever since mid-2018.


The development was constructed by Rabbi Eli Katz of Waverly Homes LLC.


Rabbi Katz is now seeking yet a third round of appeals in court over Beis Din's psak.


Waverly Gardens consists of 60 condominiums, built in two phases. Phase I consists of 34 condominium units. Phase II consists of 26 condominium units. The majority of Phase I purchasers closed title in 2017 and 2018. Phase II purchasers are in contract to purchase their units; they did not close yet - due to concerns brought to light by the phase I purchasers - however, they have taken possession of their units.


Prior to the Phase I closings, purchasers discovered defects in Waverly Gardens’ common elements. Therefore, at the closings, the purchasers got Rabbi Katz to enter into an Escrow Agreement. This agreement identifies seven defects in the common elements and obligates Katz to be “responsible for the full completion of” the listed defects. The Escrow Agreement provides that $6,666.67 will be escrowed at each Phase I closing, calling for a total escrow fund of $200,000.


Pursuant to the Escrow Agreement, “any disagreement among the parties shall be resolved by Mr. Shlomo Bistritzky.”


Already in the first summer season, the new homeowners noticed numerous concerns, including that the mikvah and pools were not functioning, the basements of the condominiums were being infiltrated with water, as well as inadequate roads and parking. They brought the issues to Rabbi Katz, who sought to arbitrate the dispute pursuant to the Escrow Agreement - before Mr. Bistrizky. Mr. Bistrizky referred the matter to Rabbi Moshe Bergman.


The parties executed a broad Arbitration Agreement on August 1, 2018. The Arbitration Agreement provides that Rabbi Bergman “shall not be required… to follow any particular rules or procedures," however the arbitration is to be held “according to Jewish Law.”


Notably, the Arbitration Agreement (as well as the Escrow Agreement) designates only a single arbitrator.


At the second and third arbitration sessions, Katz claimed that his construction was impeccable and the damage was caused by the maintenance company. He also attempted to introduce an “Engineering Report to show that the allegations concerning the construction and maintenance of the communal pools were unfounded.” Rabbi Bergman refused to consider the expert’s report after it became clear to him that the expert never examined the pools prior to rendering an opinion.


After the third arbitration session, sensing that he may lose, Katz stopped attending additional sessions and instead started a campaign against Rabbi Bergman with the hopes that he would recuse himself and not issue an award. He also began to claim that he is “entitled to add two [rabbi arbitrators] and that [Rabbi Bergman] should not sit in judgment as a sole [rabbi arbitrator].”


To justify his demands for additional arbitrators, Rabbi Katz began to argue that he never contemplated that the dispute involved such costly damages "and that the litigants are successful business people who are well-versed in financial disputes... regarding such a case, I never intended to sign."


After this fallout, Katz refused to attend any further sessions.


Being that up until this point, despite having additional claims to pursue, the parties only discussed the defective pools, Rabbi Bergman issued only an Interim Arbitration Award.


The interim psak - dated February 6, 2020 - awards $192,645.64 to the purchasers. The psak indicates that it is "to be paid by Katz who personally signed his name [on the arbitration agreement.]


The psak further provides that Rabbi Bergman will retain jurisdiction as follows: Because Katz asked to add rabbinical judges, each Party shall choose one arbitrator - within 30 days. If the parties do not choose additional arbitrators within 30 days then they are relinquishing that right and Rabbi Bergman will remain as the sole judge.


On July 26, 2020, after Rabbi Katz had neither paid the psak award amount nor agreed to return for any additional arbitration sessions, the purchasers - represented by Brooklyn Attorneys Michael Mullen and Leopold Gross - filed a lawsuit in New York Supreme Court in Sullivan County seeking to confirm the psak and order Rabbi Katz to attend additional arbitration sessions.


On October 26, 2020, Rabbi Katz - represented by Attorney Yisroel Schulman - filed a counter-motion seeking to vacate Rabbi Bergman’s arbitration award, and to compel arbitration before the American Arbitration Association.


On July 12, 2021 Justice Stephan G. Schick agreed with Rabbi Katz and vacated Rabbi Bergman’s arbitration Award and remanded the entire matter to a mutually agreed-upon arbitration panel


Judge Schick gave three reasons for his decision:


First, “there’s no transcript." Second, “there’s no finding about what the arbitration was going to be about. There was never an agreement apparently, that I can see before me, between the parties as to what the arbitration was about.” Third, “the failure to allow the submission of expert reports on both sides. Apparently neither – the engineer for one side didn’t actually testify, a report was submitted."


Just days later, the purchasers filed an appeal to the Third Judicial Department of the Appellate Division.


On March 31, 2022, the Appellate Division reversed the Supreme Court's ruling, and confirmed Rabbi Bergman's psak.


The justices found that there was no bias in the arbitration sessions or the psak.


They added that because Rabbi Katz participated in three sessions and he did not ask the arbitrator to stay the matter, his right to a judicial determination of the arbitrability of the dispute is waived.


Importantly, the court was not disturbed by Rabbi Bergman's refusal to consider the expert's report because - with all parties present - he called the expert and heard from him directly that he did not personally inspect the pool. Therefore, "Katz failed to prove by clear and convincing evidence that he was deprived of a fundamentally fair hearing," they found.


The justices also awarded the purchasers their costs of suit.


The next issue of contention resulted due to the fact that the Appellate Division did not enter an order of judgement, which would have specified which defendant(s) it was directed at.


The purchasers forwarded the Appellate Division's ruling to the Supreme Court and asked the clerk to enter an order "directing Rabbi Katz and Waverly Homes LLC" to pay $192,645.64 as ordered by Rabbi Bergman's psak.


Rabbi Katz objected to this request, asserting that the psak only included him personally and not Waverly Homes LLC.


Due to this objection, the purchasers returned to the Appellate Division and asked them to clarify and resettle or, in the alternative, permit the parties to reargue this matter of contention.


On July 22, 2022, the Appellate Division denied to hear this argument.


Subsequently, on May 25, 2023, the Supreme Court entered an order of judgement as to both Rabbi Katz and Waverly Homes LLC.


On June 27, 2023, the Supreme Court denied to reconsider the matter.


As a result, Waverly Homes Development LLC - now represented by Chester, NY Attorney Kyle A. Seiss, Esq. - has now filed yet another notice of appeal to the Third Judicial Department of the Appellate Division "from all parts adverse to Respondent of the Judgment of the Supreme Court and all prior decisions and orders necessarily affecting the Judgment."


The challenges raised in the Notice of Appeal are "whether Waverly Homes Development LLC was properly included in the Judgment of the cout, which Judgment was to confirm an arbitration award, when Waverly Homes Development LLC was not party to the arbitration agreement, arbitration proceedings, or the arbitration award; and whether the supreme court had subject matter jurisdiction to enter judgment confirming an arbitration award against Waverly Homes Development LLC when it was not a party to the arbitration agreement, arbitration proceedings, or the arbitration award."


As previously reported here on FAA News, Waverly Gardens is also involved in numerous other side litigation.


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