Arch Companies must pay Israeli billionaire family $528K following arbitration at 11 Greene Street

Jeffrey Simpson’s Arch Companies sought an arbitration seeking to view and copy books and records related to a $44 million refinancing at 11 Greene Street, a 36-unit mixed-use new construction project in Soho.

In 2017 Arch Companies became manager and led the project, but in 2022 was replaced by the project’s equity, controlled by Viatcheslav Mirilashvili, a Russian-born Israeli businessman whose family is worth billions. Mirilashvili also goes by his Hebrew name Yitzchak.

The arbitrators ruled against Arch Companies and directed it to pay $528,492 in attorneys’ fees and other costs. The decision was disclosed in documents Mirilashvili filed August 25, 2023, with the Manhattan State Supreme Court, seeking to enforce the arbitration award.

Arch Companies had been manager of the new development at 11 Greene Street, with a 1.4 percent stake and Viatcheslav Mirilashvili, referred to as “RT member” had controlled the equity with a 98.6 percent stake in the entity TDRT 11 Greene Street LLC, and Mirilashvili also had control of major decisions, such as refinancing, according to the arbitration award.

According to the arbitration ruling, “In September of 2022, RT member refinanced the mortgage on the Project property by securing a $45 million loan from Valley National Bank. At or about the same time, RT Member removed Arch 11 as the Project Manager, as it had a right to do.
“It appears that during this same time-period RT Member and Arch 11 were engaged in acrimonious, and ultimately unsuccessful, negotiations for the buy-out of Arch 11’s interest in the Company. Further acrimony ensued with respect to transitioning the management of the Company from Arch 11 to RT Member.”

The three-person arbitration rejected Arch’s request to see books and records.

According to the filing, “On June 1, 2023, the Panel issued an Interim Award, a copy of which is attached hereto as Exhibit B, denying Arch’s claim for breach of the LLC Agreement and concluding that Arch was not entitled to inspect and copy the records that it sought from the Company. First, the Panel found that the documents Arch was seeking to inspect were not subject to the inspection right granted to Arch by the LLC Agreement. Ex. B at 10. Second, the Panel found that, contrary to Arch’s argument, the more restricting inspection rights of the LLC Agreement displaced the inspection provisions in Delaware’s LLC Act. Ex. B at 14. Third, the Panel noted that “there is evidence in the record that suggests that . . . [Arch’s] request [to inspect the Company’s books and records] may actually serve an improper purpose.” Id. Among other things, the Panel found evidence that “Arch . . . threatened to interfere with the [Company’s] refinancing when [Arch] was dissatisfied with buyout terms offered” and noted that “Arch . . . has articulated various and shifting rationales for its inspection request.””