Deal Or No Deal, The Moxy Hotel Edition (Or, The Joint Venture That Never Was)

You can't have a business divorce without first having a business marriage.

Simple enough, right? But, a number of cases we've featured on this blog involve the central question of whether the parties, in fact, formed a business relationship... and the attendant difficulties in litigating those types of disputes. Specifically, in a post not too long ago, my colleague Frank McRoberts called oral joint ventures "the wild west of business associations" because they are easy to allege, and hard to disprove. Many of these cases go the distance because of the fact-sensitive nature of determining whether or not the parties' objective conduct and actions created (wittingly or unwittingly) a joint venture. "Fact-sensitive" is litigator code for "trial" as it often means that the court is reluctant to resolve the dispute on a dispositive motion.

Today's case, Gedula 26, LLC v Lightstone Acquisitions III LLC, 2025 NY Slip Op 05571 (1st Dept, October 9, 2025), is a prime example of the long litigation odyssey that can arise from this type of dispute (namely, 11 years of litigation, 2 appeals, and a 5-day bench trial)—all to find that no contract was ever formed to allow plaintiff a 25% equity interest in the defendants' hotel business.

No contract, no partnership.

Background

At the center of this 11-year dispute is the Moxy Hotel Times Square, located at 485 Seventh Avenue. Rather, it is the building that was ultimately developed into the Moxy Hotel by our defendants, affiliates of The Lightstone Group, a major real estate development company run by David Lichtenstein.

In 2014, Lightstone structured the acquisition of the real property at 485 Seventh Avenue—then, being used as an office building—from Abraham Talassazan (owned through the various plaintiff-entities), who had purchased the building in 2004 for $48 million. The agreed upon purchase price in 2014 was an eye-popping $182 million.

Aside from the sale of the real property, Talassazan also expressed his interest in participating in Lightstone's intended redevelopment of the property from an office building into a hotel, pressing for meetings with various Lightstone principals to discuss the possible structure of a partnership. Lightstone, for its part, repeatedly told Talassazan that it could only enter a partnership after it closed on the property and put together its "capital stack" (i.e., the debt and equity financing for the development and construction project required to convert the property into a hotel).

The potential partnership discussions progressed to the point where the final, executed Purchase and Sale Agreement included a provision with a 75-day window during which the parties would "negotiate in good faith... for Sellers [Talassazan] to acquire up to a twenty-five (25%) ownership interest in the entity which will acquire title to the Property, on terms and conditions determined in Purchaser's [Lightstone] sole discretion."

That said, tensions between the parties began to rise over a delayed closing, and dispute over an $8.5 million reduction in purchase price exercised by Lightstone. Nevertheless, in various communications leading up to the closing, Talassazan made clear that he expected to continue discussing (and perhaps finalizing) partnership at the closing.

The "Landau Email"

On November 18, 2014, Lightstone circulated an internal email, dubbed by the court as the "Landau Email," sent from Lightstone's outside transactional counsel (Eric Landau, Esq.) to the Lightstone representatives negotiating the transaction with Talassazan, presumably sent in anticipation of Talassazan's expected partnership discussion.

The Landau Email provided a "skeletal" outline of what a partnership with Talassazan could look like, generally providing that, "Seller agrees that Purchaser shall have the right to acquire 25% of the equity ownership interest in the Property Owner that is retained by Lightstone Group at the time of the construction loan closing (or on such earlier date as Lightstone Group elects to finalize the organizational structure of the property owner)," but otherwise restricting that interest: from sharing in fees payable to Lightstone; from being owned wholly by Talassazan except as permitted by Lightstone in its sole discretion; and from having any day-to-day or major decision rights. The email generally left for future discussion, "such other rights and obligations as shall be acceptable to Seller and Purchaser in their respective sole discretion."

The Landau Email was not addressed to Talassazan, nor was it transmitted to him on November 18, 2014.

Diverging Stories at the Closing

The next morning, November 19, 2014, the parties moved forward with the real estate closing.

The parties agree that Lightstone brought a printout of the Landau Email to the closing. From there, the parties' accounts diverge:

Talassazan's Version: He and his lawyer were given the Landau Email. They stepped out to review it, found the terms acceptable, returned to the conference room, and told Lightstone that he "accepted the terms." He testified that they all "shook hands and said 'Mazel Tov' to each other," which, in his mind, confirmed a binding, partnership agreement.

Lightstone's Version: After Talassazan received the Landau Email, he demanded to speak directly with the head decision-maker, Lichtenstein. The parties went into another room and called Lichtenstein, who told Talassazan that he wanted to close first, and that "[a]fter closing we will put a draft partnership agreement together."

The real estate sale closed. But just hours later, Lightstone sent a "default" letter in connection with the $8.5 million price dispute, a move that the Court characterized as one that "unsurprisingly enraged Talassazan" and "fractured the parties' already fragile commercial relationship and triggered this decade-long lawsuit."

Post-Trial Decision: No Deal

After 11 years of litigation, Plaintiff's remaining breach of partnership agreement and repudiation claims (premised on the Landau Email) were tried before New York County Commercial Division Justice Joel M. Cohen, who issued a thoughtful and thorough post-trial decision.

Justice Cohen found that while both sides' witnesses were credible, Lightstone's version of events was more likely.

The Court particularly noted defendants' testimony that Lightstone had made written representations to their bridge lenders describing an ownership structure that did not include Talassazan as a partner, and that an undisclosed change (like a partnership agreement with Talassazan) would have caused an immediate default. The Court also noted that parties general conduct reflected extensive negotiation and documentation of their contracts ("down to the minutiae of transferring elevator contracts"). The parties' sophistication, business acumen, and past dealings made it unlikely that Lightstone would casually enter into a complex, multi-million dollar partnership based on a "skeletal and imprecise" internal email, particularly in light of Lightstone's repeated representations to Talassazan that a partnership could not be discussed until Lightstone put together its capital stack after the real estate closing.

As for the Landau Email itself, Justice Cohen found that the email was not a valid offer, but rather a "draft of talking points." Among other things, it was missing material terms, including the identity of the purchaser, reference to consideration in exchange for the 25% interest, transfer and exit provisions, and the structure of guaranties and/or indemnities.

Justice Cohen concluded:

First Department Affirms: No Deal

The First Department affirmed.

The Appellate Court held: "No contract was objectively formed where, as here, the terms are insufficiently definite and left open for future agreement." The panel agreed that the Landau Email was not an offer, but talking points, highlighting that the parties "never established what plaintiffs' equity contribution for the partnership would be, nor did plaintiffs' member offer to pay anything".

Even the 25% interest term was deemed "not sufficiently definite" because it was premised on future events and a future organizational structure that Lightstone had yet to create.

Ultimately, the First Department held that the trial court properly determined that plaintiffs did not meet their burden to establish a firm offer and mutual intent to be bound.

Final Thoughts

This case reminds me of one Peter Mahler wrote about in 2017, Hammond v Smith—a case with strong parallels to this one—in which the Fourth Department affirmed the Monroe County Supreme Court's order granting summary judgment and dismissing the complaint on the ground that no partnership agreement existed between the two parties.

There, Appellate Court set forth and analyzed four relevant factors in determining whether a partnership existed, including:

• The parties' intent (express or implied);
• Whether there was joint control and management of the business;
• Whether the parties shared both profits and losses; and
• Whether the parties combined their property, skill, or knowledge.

Here, neither the trial court nor the First Department went through each of these factors, as, in their estimation, the "partnership" did not even get off the blocks for lack of mutual intent to form a joint venture. Even if they had, it is fairly clear that the Landau Email would not have satisfied any of these factors. In Hammond, a business proposal with cover letter actually sent to the defendant was still insufficient to demonstrate the intent to form a partnership, even where the proposal referred to the "partnership." Particularly damning in both cases were emails between the parties where equity allocation and the structure of the venture were plainly not finalized or agreed upon.

In his post on Hammond, Peter cautioned that sometimes, "the prospective co-owners allow their eagerness to go operational get ahead of their negotiations" and can be "left with little or no choice but to claim an oral partnership which, as the above discussion shows, can present insurmountable legal hurdles."

That caution rings true, and is echoed by an observation made by Justice Cohen here, in the Court's post-trial decision. Astutely noting the human element cutting through these business dealings, Justice Cohen observed:

To me, that insight explains how it is that the two sides came away from the November 19 closing with such polar opposite, yet apparently genuinely held, views on what took place at the closing. Be that as it may, as we've seen time and again, subjective belief is simply not enough to demonstrate the existence of a partnership.

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