A Newburgh warehouse company that stores theater sets, props and costumes worth millions of dollars has sued the city for shutting off water to its fire sprinklers.
Headsup Penny Inc. says the shutoff has cost it $1.7 million and two tenants, in a April 5 complaint filed in U.S. District Court, White Plains.
“The city’s actions,” the complaint states, “was outrageous, unlawful, and presented a clear and present danger to life and property.”
White Plains attorney Paul E. Svennson, representing Newburgh, did not respond to an email requesting the city’s side of the story.
The property includes two warehouses, 40,000 square feet and 7,500 square feet, on North Montgomery Street Extension near the Newburgh – Beacon Bridge.
Ten of the 11 tenants — such as Radio City Christmas Spectacular and Lincoln Center Theatre — stored or built theater props, sets, costumes and furniture.
Headsup, operated by Katherine and Gary Rausenberger, owned the property until June 2019, when they sold it to 392 N. Montgomery LLC, of Highland Mills.
Headsup then leased the property from the landlord for $25,000 a month and subleased it to the tenants.
Before Headsup sold the property, the city sued for unpaid water bills. The company paid $23,519 to settle the dispute.
Two wells supply water for sinks and toilets, the complaint states, but cannot produce sufficient flow for fire suppression.
The warehouses are in the Town of Newburgh but have bought water from the City of Newburgh for decades, according to a court record.
Last July, Newburgh posted a notice on the property, addressed to 392 N. Montgomery LLC, warning the landlord that water service would be discontinued at the end of the month for failure to pay water bills and for violations of the city code.
The shutoff could be halted, the notice stated, by paying the bills and/or complying with the city code.
Headsup claims it had never received a water bill from the city or the landlord, after selling the property. The landlord reminded Headsup that under the lease it is responsible for the water bill, then $2,168.
Headsup paid the bill two days before water was to be shut off, according to the complaint. Service continued past the July 31 shutoff date and the company believed the problem was solved
But on August 16, the water was shut off. Two days later, Headsup received a letter from the city citing deficiencies that “pose a threat to the City of Newburgh’s water system” and including work that Headsup would have to do to get the water turned on.
Headsup argues that the city is responsible for maintaining its water system, the shutoff notice had not specified the deficiencies, and Headsup had been denied a hearing to challenge the action.
The city responded that Headsup was not entitled to prior notice of a shutoff or to a hearing because it was a commercial tenant and not a “consumer.”
Headsup sued the city in Orange Supreme Court to get the water turned back on. On Feb. 3, the court agreed with the city and denied a hearing. Headsup has appealed the decision.
The water has since been turned on, according to the complaint. But two sub-tenants had already decided not to renew leases, costing Headsup $1.5 million from Radio City Christmas Spectacular and $160,000 from Unlimited Productions. The company has also paid $79,560 for fire watch services while the sprinklers were inoperable.
Headsup accused the city of violating federal and state due process and equal protection rights.
In February, the landlord filed a nearly identical complaint in federal court, and demanded $2.5 million in damages from the city.
Then Headsup sued the landlord in Orange Supreme Court for $1.7 million, blaming it for the loss of sub-tenants. The landlord filed counterclaims against Headsup for failures to comply with the lease, maintain the property and pay rent. It is demanding $5 million.
New Windsor attorney Kevin D. Bloom and Middletown attorney Alex Smith represent Headsup. Middletown attorney Joseph J. Haspel represents the landlord.
