Judge Puts Duryea’s Deal on Hold

A New York State Supreme Court judge issued a temporary restraining order suspending implementation of a settlement between the Town of East Hampton and Duryea's Lobster Deck in Montauk, following an outcry that prompted the town board to hire outside counsel to advise the town on litigation involving Sunrise-Tuthill Properties, corporations affiliated with the billionaire Marc Rowan, who bought Duryea's in 2014. 

On Wednesday, Justice David T. Reilly issued a stay of a settlement concluding three lawsuits Mr. Rowan filed against the town last year after hearing testimony from Michael Sendlenski, the town attorney, Supervisor Peter Van Scoyoc, Councilwoman Sylvia Overby, Councilman Jeff Bragman, and Ann Glennon, the town's principal building inspector. All five of the town board members, along with Mr. Sendlenski and Ms. Glennon, were subpoenaed to appear in court.

According to a statement issued by the town on Friday, the town argued that the stipulation of settlement was invalid because the board did not vote on a resolution authorizing the settlement before it was finalized. Mr. Van Scoyoc did not sign the agreement, only Mr. Sendlenski did. 

Mr. Sendlenski announced on April 1 that he would be resigning effective May 3. 

"The town board can really only take action by voting on a resolution," Mr. Van Scoyoc said on Friday. "While we had conversations in executive session, which is the appropriate way to discuss terms of any agreement, the board never took a formal vote on this matter." 

A majority of the town's attorneys had recused themselves in the matter given conflicts of interest, Mr. Van Scoyoc said. Last month, the board voted to retain Steven Stern of Sokoloff Stern L.L.P. to review the terms of the settlement. "We hired outside counsel because everyone in Town Hall was conflicted out in this case," he said. "That order to show cause resulted in a court date with the judge. The request was that he stay the implementation of the settlement. The judge did grant the town that motion and stayed the stipulation. Outside counsel continues to work on resolving the matter." 

Mr. Bragman said on Friday that he was "very pleased" that the court agreed that a vote to validate the settlement was a legal requirement. "That really was what the argument was about. I'm pleased, in this preliminary decision, that the judge appeared to credit our position, which was that a formal vote by resolution was required under law. That's not just a formality, it's an absolute requirement. I was pleased that the evidence supported the fact that that hadn't occurred." 

"As has been discussed with the town for years," Michael Walsh, an attorney representing Mr. Rowan, wrote in an email on Friday, "the only new construction here is for an advanced septic system which the town has expressly authorized and encouraged." That project is before the zoning board of appeals, he said. 

The settlement would have allowed Mr. Rowan to apply to the town planning board to legalize table service where it was technically disallowed. The town was to deliver a certificate of occupancy for structures on the property pertaining to the complex's ice manufacturing, sale, and storage facility; fish processing, preparation, and cleaning; fish market; wholesale and retail seafood shop with ancillary areas; an accessory dining patio; a cottage and garage, and outdoor decks, as well as a house and attached garage that was once the Duryea family's residence.

A pending building permit application for the reconstruction of an existing garage was to be issued, and Mr. Rowan was not to be prevented from applying for future alterations on the site. The town was also to honor state patents granted to the Duryeas long ago, acknowledging that it has no jurisdiction over a pier repaired after Superstorm Sandy in 2012.

"We have more discussion to do about the case," Mr. Van Scoyoc said. "The goal is always to try and settle cases without litigation. That's not always possible. This is part of an effort to do so, and judges usually encourage both parties to resolve things without litigation. We're going to keep all possible paths open while we take more time to review and negotiate settlement of these three lawsuits against the town."