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Case Update

June 17, 2014 - On May 30th, the League's law firm filed their latest case arguments. On June 16th, Counsel for some 280 plaintiff League members filed our response.

From the plaintiff standpoint, the case can currently be summarized as follows:

According to League By-Law 30(3)(a) all 3,945 League members were entitled to vote on the cantilever proposal on February 12.

By E-mail, mail and on-site promotions from October to February, the board repeatedly instructed League members that "Not Voting Equals a 'No' Vote".

Since the meaning of the statement is plain and unambiguous, many League members understood abstaining as just a convenient option for casting a "No" vote.


This proposal overview flyer was posted to the League website
on or about November 22, 2013. (Click to view document)



This Q&A flyer was posted to the League website on
November 1, 2013 and is believed to have been mailed to all members on December 13, 2013.(Click to view document)



This proposal overview flyer appeared on page 9 of the 46-page
brochure that was mailed to "active" members on or about
January 11, 2014. (Click to view document)


In our April E-mail poll, 50% of responding League members indicated that they had not voted because they believed what they were repeatedly told, that "Not Voting Equals a 'No' Vote!"

A good number of the other respondents -- both for and against the cantilever -- wrote that they also understood that "Not Voting Equals a 'No' Vote!"

Yet, according to the League's own official vote total, the "Not voting equals a 'No'" message turns out to have been false. An apparent ploy. Members who did not vote were not counted as "No" votes. These members were, in fact, not counted at all.

Hence, we believe that the message had a decisive impact on the vote's outcome since 2,376 League members who were entitled to vote did not. (84% of the League's members live locally within the tri-state area.)

As the elected trustees of the League's assets, we believe that the board is legally required to provide League members with accurate, truthful information especially on such major issues as a real estate transaction impacting our institution's core asset.

We believe that repeatedly instructing members that "Not voting equals a 'No'" is a major violation of this requirement because, in fact, "not voting" meant that a member would not be counted at all.

We also believe that the ploy also sets an extremely dangerous precedent for those who oversee the League's assets in the future.

Those wishing to review details of the case may do so via the NY State Court Case Search website. After you pass the "Enter Characters" screen, enter the case number 650522 and year 2014. The search engine will return a link that enables you to access the complete list of digital case files to date.

If you have any questions, please contact Richard Caraballo at 800-837-1227. Thank you.



ASL Unite.
The Art Students League
Members' Group
for Enhanced
League Oversight
& Governance.

ASL Unite.
60 Erie Street
Suite 103
Jersey City, NJ
07302

800-837-1227
info@aslunite.org

UPDATE

April 5, 2014

Dear League Member,

Thursday concluded in-person hearings for the matters that where placed on behalf of the League before the Court. In the days ahead, the Court will deliberate and submit a formal ruling.

The hearing lasted from 10 am to about 2:45 pm and included testimony from former board president John Varriano and Executive Director Ira Goldberg.

A central question at issue is whether or not the board has legally attained the number of votes they needed to win approval for the "Extell transaction" according to a plain reading of League By-Laws 30 and 31.

Judge Schweitzer indicated that he expects to complete his opinion sooner rather than later, but beyond that, we have no date for when the Court will release its finding.

Thank you,
ASL Unite.

UPDATE

March 28, 2014

Dear League Member,

We received a total of over 310 signatures for the legal action brought on behalf of the League to review the propriety of the Extell transaction and process. The signature total far exceeds the minimum needed to proceed with the Court's review. The members of ASL Unite offer our thanks to all who signed to support this judicial review.

An update on the proceedings: The first public hearing occurred on Monday, March 24 and lasted from 10:30 to 4:30.

A number of witnesses presented to the Court: a) League member Richard Caraballo presented 249 Derivative Action forms to the Court which gives the plaintiffs standing in the case, b) real estate developer Gary Barnett testified regarding the cantilever and cantilever negotiations, c) Venable attorney Peter Britell testified regarding the cantilever negotiations and d) a Yale professor presented "expert" opinions on corporate by-laws.

The hearing will continue on Thursday, April 3rd, at 10 AM. It is open to the public, and plaintiffs' attorney Mr. Mortner thinks having supporters there is a very good thing. We hope some of you will attend:

    Honorable Melvin L. Schweitzer, J.S.C.
    Room 218
    Supreme Court of the
    State of New York
    Courthouse
    60 Centre Street
    New York, NY

Protect
the League with just your signature.


March 10, 2014

Dear League Member,

We have filed a legal action in New York State Supreme Court on behalf of the Art Students League to challenge the League's claim of the Extell transaction approval for several reasons, including the following:
  • The Board claimed an approval "majority" by ignoring the specific legal requirements of the League's By-Laws.

  • The proposal which members voted on is in direct violation of the League's By-Laws by giving "any" board member, "acting singly", the authority to make substantive, unlimited changes to the final contracts without any subsequent member oversight and approval.

  • The contract provides insufficient protections for recovery against damage to our building.

  • The cantilever's value was grossly understated and does not reflect its actual value to Extell.
Please see the enclosed document which provides background material and our position in greater detail.

We need to gather signatures from 5% of the members to proceed with the court action. We are therefore providing this Authorization Form for you to sign to join the action, along with over 100 members who are already participating.

Please print, sign, date, and scan or clearly photograph your entire Authorization Form and return it ASAP via your preferred method:
  1. By E-mail: legal@aslunite.org, or
  2. By fax to 201-586-0344 or
  3. By mail to: ASL Unite, 60 Erie Street, Suite 103, Jersey City, NJ 07302.
If you know of other members who would sign, please pass the blank form on to them as well.

We are also collecting donations to cover some of our ongoing expenses. You may use the Paypal link above at the top of aslunite.org's website home page.. And thank you.


ATTACHMENTS:






Why ASL Members Should Join Our Derivative Legal Action to Stop the Current Proposed Transfer of Cantilever Development and Air Rights to Extell.
  1. The Board of Control Delayed and Withheld Disclosure of Significant Due Diligence Material and Prevented Opposition to the Extell Transaction to be Expressed.

    Although Members have made numerous requests, the Board of Control has not provided significant due diligence materials such as structural or safety engineering reports. It appears that they have not done proper due diligence and there are no such important independent reports. Members initially could access the 2013 proposed agreements only by going to the ASL building and viewing them in person. Furthermore, this supervised access was allowed only weeks after the board had executed the contract.

    A Member had to garner the assistance of a politician, who wrote a letter to the League with a copy to the Attorney General of the State of New York, to pressure the Board of Control to allow the 2013 agreement to be copied and taken out of the ASL building. The 2005 agreements, parts of which are in the 2013 agreement, still have not been made available for one of our independent attorneys to review.

    It is the duty of the Board of Control to disclose fully and fairly all material information to Members in a lawful manner. Officers and administrators of the ASL gave speeches in art classes in favor of the Extell transaction but anyone wishing to speak before a class in opposition to it was told they would be ejected from the building. In addition, the Board and administrators of the ASL hung posters and material in favor of the Extell transaction but no posters in opposition to the transaction were permitted. As a result of these tactics, many members of the ASL had no knowledge of the material misrepresentations made concerning the Extell transaction.

  2. We Seek an Independent Due Diligence Review of the Extell Transaction by Professionals With No Previous Association with the Current Board or with Extell. It is essential to hire independent professionals to perform a complete and proper evaluation of the transaction.

    We have not been able to obtain from the Board of Control due diligence materials from independent professionals such as a structural engineer's report to evaluate the construction protection plan of the League's building; a business analysis and relocation plan of the League during construction; independent appraisals; and a cost analysis of the potential impact of the cantilever on the League's building during and after construction.

    The proposed Extell transaction would be the most significant financial transaction ever taken by the ASL membership and the Members should demand a thorough review. We are not a desperate institution and should not act like one.

    The Purchase price of $31.8 million is Materially Inadequate and the Haims appraisal is erroneous and significantly understates the value of the cantilever to Extell.

    The appraisal firm hired has a potential conflict of interest. Jerome Haims Realty Inc., lists Extell as a client of the firm which is a material fact that was not disclosed to the Members. A second appraiser seems merely to have reviewed the first appraiser's results.

    A major law firm found several significant deficiencies and lack of protections in the contract. There is nothing in the agreement that requires Extell to guarantee the performance of Trio, the purchaser. Trio may not have the assets or the interest to indemnify the ASL under any of the provisions of the contract. We want a thorough review by an independent real estate attorney with no previous ties with the Board of Control, and no involvement in the air-rights sale to Extell in 2005.

  3. Material Misrepresentations Were Made by the Art Students League ("ASL") Board of Control to Members in Violation of New York State Non-Profit Laws and the ASL Constitution.

    The Board's claim of a "majority" approval is possible only by ignoring the specific legal requirements of the League's corporate By-Laws.

    As represented by the League in court, there were 3,945 members entitled to vote on February 12th. Accordingly, 1,973 "yes" votes were needed for a majority approval of the transaction. Therefore, the transaction was not approved by its members and the League is not allowed under the constitution to transfer any real estate rights.

    Additionally, the voting instructions for the Extell Transaction stated "that not voting is equal to a 'NO' vote". This statement was false. The ASL Board of Control misrepresented the ASL Constitution and By-Laws and suppressed the number of votes in opposition to the Extell transaction. We believe the court will not let this behavior stand.

    The Extell transaction prospectus mailed to Members stated that if the deal was not approved on February 12th that the Board would have to wait until December 2014 after the election of a new Board to present an improved contract. This is not true, an improved contract doesn't need a second Board's approval. The Board itself agreed to an improved contract in December after its first approval in October 2013.

  4. The Proposed Resolutions of the Members for the Extell Transaction Contain Language that is Unlawful and Violates the ASL Constitution and By-Laws.

    One of the February 12th resolutions gives any officer or the Executive Director (an employee) of the League power to "execute and deliver any such document and do any such act and/or thing (including authorizing changes to and/or modifications of the Agreement, substantive or otherwise, which may include, without limitation or restriction, changes which such officers deem beneficial to the League)."

    This means that Sal Barbieri or Ira Goldberg can make any changes they please, after the members approve the transaction. This power is unlawful under the ASL By-Laws, which require approval by two consecutive Boards of Control and a majority of members for any transaction involving the ASL building and its rights. One individual could jeopardize the existence of the ASL as we know it.

    We believe the very survival of the ASL is at risk. We have been told by more than one ASL Instructor that "the League is not the building." If the current Extell transaction is approved, this may become a reality very soon. A single officer could cause the loss of our home on 57th street -- a special location that has been our home for over 100 years.

    Considering the foregoing we are far better off without this transaction and its $31.8 million than we are with it. The ASL will still have the $52 million of net assets on their books and we can start rebuilding and improving the League. With the right Board of Control and executives in charge, we can have governance which is transparent, in partnership with its members, and which knows how to raise money for a premiere unique art institution. The Board of Control has a duty to uphold the laws of New York and the ASL Constitution and By-Laws, regardless of the amount of money at stake. We as Members should demand it.

    Please join our legal action by signing an authorization form today.

    ATTACHMENTS:
    Authorization Form
    Fax this completed form to 201-586-0344



"Because the first step
is vigilance."


ASL Unite.
The Art Students League
Members' Group
for Enhanced
League Oversight
& Governance.

ASL Unite.
60 Erie Street
Suite 103
Jersey City, NJ
07302

800-837-1227
info@aslunite.org

3,946 League members were "entitled to vote" on February 12.

The Board's claim of an approval "majority" is only possible by ignoring the specific legal requirements of the League's corporate By-Laws.

Here's why: According to documents provided by the League as part of the current legal process, we now know that there were 3,946 League members on February 12, all of whom were "entitled to vote", according to League By-Law 30 (3)(a).

League By-Law 30 (3)(a) states that "Any Inactive Member may reinstate his or her status as an Active Member "by voting at any meeting of Members".

League By-Law 31(b) requires that "The Board of Control shall take no action to sell, lease, mortgage, or dispose of the Building or any interest therein (including development, or other rights associated with the ownership of the Building) unless and until [...] a majority of Members entitled to vote [...] have approved the proposed transaction".

Note that By-Law 31(b) specifies "a majority of Members entitled to vote".

According to By-Law 31(b), the total number of League members who are required to approve the Extell transaction is 1,974 because all 3,946 League members are "entitled to vote", pursuant to By-Law 30 (3)(a).

Therefore, if, in fact, only 1,342 members approved the building "ownership" transaction and 2,604 members "entitled to vote" did NOT approve, there are 2,604 "No" votes.

The Board claimed an approval "majority" by ignoring the specific legal requirements of the above-cited League By-Laws.

PRESS RELEASE -- FOR IMMEDIATE RELEASE -- PDF VERSION

A Groundswell of
Art Students League
Members mobilize to postpone Extell vote.

The Art Students League, at 215 West 57th Street, built in 1892, is a much admired jewel of the Beaux Arts, or "French Renaissance," architectural style that flourished in New York in the late 19th Century. The building is protected from alteration under the New York Landmarks Preservation law and is listed on the National Register of Historic Places.
NEW YORK, January 20, 2014 - In a concerted effort to halt a rushed bid to obtain members’ approval to the proposed Extell cantilever at 217 West 57th Street, members of ASL Unite (ASLUnite.org) have called for a League members’ meeting to halt the vote in order that due diligence be performed.


ASL Unite is a group of League members that was formed to address the many concerns associated with the proposed transaction with Extell and the League’s governance. The proposal would cantilever about a third of the tallest residential tower in North America over almost half of the width of the League.

This is not the first time the League has moved hastily to conclude a major real estate transaction without the members having had the opportunity to obtain the facts.

In March of 2005, the League's Board of Control made the following claim in a letter to the membership: "Once the building next door is developed, the opportunity to sell the air rights will be virtually eliminated and their monetary value will be diminished."

Shortly thereafter the League's Board sold off 88% of the art institution's air rights plus other valuable rights. Many League members now regret the 2005 transaction.

ASL Unite asserts that major flaws in the currently proposed contract with Extell will expose the League to grave dangers during and after the 5 years of heavy construction required to complete the project. They assert that due diligence procedures have not been followed by the League in this complex transaction. Many members feel that the deal is grossly undervalued. They assert that no independent engineering, environmental, or legal evaluations have been performed. There is a question as to whether the League had attorney representation in the drafting of the agreement.

The group also asserts that the League's leaders have been secretive about their agreement with Extell and are now attempting to rush the membership into a vote on February 12, 2014 to accept the agreement without an opportunity to study the many issues that have not been addressed.

The buyer, Broadway Trio, has offered the League $31.8 million to accept the agreement. Yet, a recent Google search listed Broadway Trio, a Delaware LLC, as a lobbying firm.

“The blanketing of the Art Students League premises at 215 West 57th Street, with one-sided notices urging the members to ‘VOTE YES’ (to the $31 million payoff) is unfair and appears desperate”, one member noted. “What’s the hurry?”

The benefit to Extell -- in a project which some have estimated at over one billion dollars -- is one-sided, when measured against the dangers to the ongoing viability of its next door neighbor.

The advertising blitz urging the membership approval lacks evidence of engineering studies, deal analyses, and risk assessments and instead claims that the deal is a one-time opportunity for the League to get rich quick (and ask no questions.)

The Special Meeting called by the members will take place on February 11, 2014 at 7:00 pm at the Art Students League of New York's building located at 215 West 57th Street New York, New York.

The press is invited to attend.

FOR MORE DETAILS, CONTACT:

On the web:

The benefit to League Members
of postponing a cantilever vote?
More time to make a wise decision --
aided by the following:
1) A specific relocation plan and budget As the Board notes in its spare-no-expense 46-pager, there have been "few sales of cantilevers in New York." Not mentioned is the fact that there is no precedent for constructing an enormous 74-story cantilevered tower over an occupied New York structure. Let's not force all our people to bet their lives on such a risky scheme.

"Why worry?" some say, "a construction accident would never happen!" But the reality is that accidents do happen. Relocating ensures that everyone stays safe. Plus, our artists won't have to make the unhappy choice between personal safety and studying with their League friends and our wonderful instructors.

2) An independent legal assessment This will ensure that the League's interests are fully and properly protected. This assessment would include the independent counsel's list of any prospective problems inherent in the cantilevered installation.

3) An independent deal assessment This will independently appraise the value of the deal, taking into account the particulars defined by the final contract.

4) An independent structural engineering studyThis will ensure that our 100-year-old building can withstand the impact of all that will be happening to it over the next five years of heavy construction. Right now, no plans have been made for a structural engineer on our side to review the project and oversee the protection of the building.

5) An business impact studyFrom the construction staging area in front of the League building that the 2005 contract signed away to the intimidating overhead heavy construction, it'll be anything but business-as-usual at the League after the Member vote. Prepared by an environmental engineer, this report would give us an idea of how much all the chaos that's coming will impact our business and operations.

6) An accurate historic building restoration estimateThis would accurately calculate the cost to restore or rebuild our historic landmark building at its current or new location. Historic restorations are expensive. If just adding a couple of floors costs more than $30 million, a full restoration has to cost a lot more. In the event of a catastrophic construction accident, the last thing the League wants to do is litigate just to get back to our present state. The time to find out how much that will cost is now. Then a full-value restoration commitment by the buyer should be locked into the agreement.

7) A formal asset protection proposal This plan will specify how the $31 million paid to ASL would be safeguarded over ASL's future.

8) An independent forensic audit This report will reassure the Membership that, despite all the worry created by the Board's urgent plea for the Extell deal -- or apparently we'll loose everything -- the League's existing assets are independently verified and accounted for.
Additional Background Materials