Eli Karp is accusing his former lawyer of bilking him for a year while shirking his legal duties.
The Hello Living developer filed a malpractice lawsuit against attorney Leo Jacobs, whom he accused of failing to get a judge to drop a $16 million judgment tied to a foreclosure of a 55-unit apartment building at 271 Lenox Road in Prospect Lefferts Gardens, Crain’s New York reported.
The developer seeks an unspecified amount of legal fees, plus damages.
Karp, a once-rising developer known for his sleek, “Hello”-branded luxury rentals, owned about a dozen New York buildings before surrendering several of them to lenders because of unpaid debt.
Jacobs, a brash attorney known for getting developers battling mounting debt out of jams, has represented A-list clients like Charles Cohen, Joseph Chetrit and Joseph Moinian.
In January of last year, Karp hired Jacobs’ firm Jacobs PC, paying it an up-front fee of $50,000, to help him avoid paying the nearly $16 million judgment, according to the suit. Jacobs then billed him at an hourly rate of $1,250, which rose to $2,000 an hour by January, the filing says.
But Jacobs was slow from the gate, never submitting the motions that might have stopped or at least delayed the judgment, Karp alleges.
Despite regularly promising Karp that he “possessed a plan to remedy the situation,” Jacobs never launched the kinds of lawsuits against players in the foreclosure case that might have gotten the judgment reversed, the lawsuit said.
For the 14 months Karp employed Jacobs, the lawyer kept sending Karp ever-increasing invoices, according to the suit.
Jacobs had no comment for Crain’s. The Midtown-based attorney also didn’t immediately respond to a request for comment from The Real Deal.
Karp is asking a judge to force Jacobs to return every dollar Karp spent to employ him, as well as make Jacobs pay an unspecified amount of money for damages to Karp’s allegedly lost business. Karp claims the $16 million judgment has resulted in him being blackballed by the real estate industry.
His “ability to obtain financing, attract capital, negotiate transactions, maintain existing business relationships, pursue new development opportunities and conduct his business affairs in the ordinary course was materially and foreseeably impaired,” according to the suit.
Karp’s troubles in the case began in 2022, when an affiliate of the lender Greystone sued Karp to foreclose on the Lenox Road building after he defaulted on a $34.5 million mortgage loan.
Greystone ultimately won a $42.8 million judgment against Karp and took possession of the 15-story building after a court-ordered auction for $10.4 million. But Greystone argued that fell short of what the property was worth.
The lender then got a judge to require Karp to kick in $16 million since the developer had personally guaranteed the initial loan.
In February, Karp fired Jacobs, replacing him with his lawyers from the original foreclosure case, Kenny Oh and Muriel Raggi of KOR Law. Raggi is a former Jacobs PC attorney.
After the switch, Karp’s new attorneys convinced a Brooklyn Supreme Court judge that his judgment was likely based on flawed math by the appraiser — and should be put on hold until Karp could weigh in with his own appraisal. Greystone has since asked the judge to let it re-argue its case, according to Crain’s.
“Without breaking privilege, Jacobs PC had a different strategy which Eli was aware of and which successor counsel had implemented,” Jacobs previously told TRD. “To be clear there is no prejudice to the client. We are happy for Eli nevertheless and wish him success in his case.”
In January, Karp also sued Greystone and appraisal firm BBG, alleging they engineered a “loan-to-own” scheme by intentionally overvaluing his 271 Lenox Road apartment building, TRD previously reported.
– Dana Bartholomew
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