Manhattan House Fight Escalates

THE huge $1.1 billion redevelopment of the Manhattan House on East 66th Street was to be the biggest condo conversion deal ever for Prudential Douglas Elliman and its best-selling broker, Dolly Lenz.

But with the project stalled by a tenant lawsuit and a fight for control between the sponsors, it may soon become a potential liability for Prudential Douglas Elliman, Manhattan’s largest brokerage.

In a court filing last week, N. Richard Kalikow, a developer who is the project’s managing partner, accused Douglas Elliman of colluding with his financial partner, Jeremiah W. O’Connor Jr., to wrest control away from him, sabotaging the project. Ms. Lenz was the lead broker in the deal.

In the filing last week in State Supreme Court in Manhattan, Mr. Kalikow asked the court to allow him to amend his complaint to include Prudential Douglas Elliman as a defendant in the case and to seek $75 million in damages as well as punitive damages against the company.

Mr. Kalikow said in the filing that he had discovered that although he was in charge of day-to-day operations, Ms. Lenz and other Douglas Elliman staff members held a series of secret weekly meetings with Mr. O’Connor’s team, reviewing plans and making decisions behind his back.

Stanley S. Arkin, a partner in Arkin Kaplan Rice, the law firm that represents Douglas Elliman, said the filing was an “unjustified, dishonest lawsuit, a shakedown designed to bring some kind of pressure to bear.”

He said that the meetings were “not clandestine” and that they were held because Mr. Kalikow “was not performing well” and Mr. O’Connor was “probably complaining.”

The dispute led to what seemed to be a showdown between the partners earlier this spring, soon after the attorney general approved the project’s offering plan. Under their agreement, Mr. O’Connor set a price for the project and gave Mr. Kalikow a chance to buy him out or be bought out.

Mr. Kalikow tried to put together a financing package to buy out Mr. O’Connor but was unable to complete the purchase. He contended that Mr. O’Connor scared away his financial backers by threatening an escalation of the legal dispute. Now Mr. O’Connor is asking the court to let him complete the purchase, while Mr. Kalikow is raising new legal issues.