The lawsuit filed in Manhattan Wednesday alleges that Jon Asgeir Johannesson and his wife installed an "ugly" kitchen from the low-cost household furnishings store into the 16th-floor apartment at the Gramercy Park Hotel.
The lawsuit filed on behalf of the Paramount Realty Group of America Corp. claims the couple rented the apartment out for about $300,000, then failed to make promised renovations on time.
When they did, the lawsuit claims the kitchen was unsuitable for such a luxurious home.
Johannesson helped turn investment company Baugur Group into a powerhouse of retailing in Europe.
There was no phone listing for Johannesson at his home.