Frank C. Pollara Grp., LLC v. Ocean View Inv. Holding, LLC

• Citation: 784 F.3d 177
• Decision Date: 23 April 2015
• Docket Number: No. 13–4584.,13–4584.
• Parties: FRANK C. POLLARA GROUP, LLC; Frank C. Pollara, Individually v. OCEAN VIEW INVESTMENT HOLDING, LLC, f/k/a Southgate Crossing Investments, LLC; OMEI Group, LLC ; Lucy Cheng; Mait Dubois, Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

784 F.3d 177

FRANK C. POLLARA GROUP, LLC; Frank C. Pollara, Individually

v.OCEAN VIEW INVESTMENT HOLDING, LLC, f/k/a Southgate Crossing Investments, LLC; OMEI Group, LLC ; Lucy Cheng; Mait Dubois, Appellants.

No. 13–4584.

United States Court of Appeals, Third Circuit.

Argued on Dec. 9, 2014.

Filed: April 23, 2015.

Andrew C. Simpson, Esq. [Argued], Emily A. Shoup, Esq., Andrew C. Simpson Law Offices, Christiansted, VI, for Appellants.

K. Glenda Cameron, Esq., Law Offices of K.G. Cameron, Lee J. Rohn, Esq., Mary F. Carpenter, Esq., Rhea R. Lawrence, Esq. [Argued], Lee J. Rohn & Associates, Christiansted, VI, for Appellees.

Before: CHAGARES, JORDAN and SHWARTZ, Circuit Judges.

OPINION

JORDAN, Circuit Judge.

This case arose from a real estate investment and development scheme based on the island of St. Croix in the United States Virgin Islands. The OMEI Group (“OMEI”), Ocean View Investment Holdings, LLC (“Ocean View”), Lucy Cheng, and Mait Dubois (collectively, the “Appellants”) ask us to reverse a ruling of the District Court of the Virgin Islands denying their motion for summary judgment on claims of misrepresentation brought by Frank Pollara and his construction company, the Frank C. Pollara Group. Because the summary judgment motion did not present a pure question of law and because the Appellants failed to properly preserve the factual issues they now endeavor to raise, we conclude that we cannot review the District Court's ruling on that motion. We can, however, and will affirm the District Court's refusal to set aside the jury verdict awarding Pollara and his company compensatory and punitive damages.

I. Background ¹

A. The Project that Wasn't

OMEI is a Delaware limited liability company that supposedly served as an investment vehicle for people that Lucy Cheng claimed to represent. Cheng presented herself as an investment specialist and an expert in international tax matters. Mait Dubois was her deputy in the management of OMEI. Cheng and Dubois were also the front people for the investors in Ocean View,² an entity established exclusively to lend money to yet another entity, Southgate Crossing, LLC, which is said to be the “owner” of a real estate development known as “Southgate Crossing.”³ Ocean View used intercompany loans to funnel money to Southgate Development Group, LLC (“SDG”), which, in turn, was supposed to develop Southgate Crossing. The layers of business entities involved in this matter were avowedly meant to insulate the investors and the underlying real estate asset from liability and to minimize any tax burden.⁴

A South Carolina realtor named Rick Willis—who is not a party to this action—devised the initial plan for Southgate Crossing, which was to purchase 68 acres at Estate Southgate on St. Croix, re-zone it to increase the number of housing units that could be built on the property, and to then subdivide the land, build subdivision infrastructure, and sell the individual lots.⁵ Willis met Cheng at a seminar in 2006 and she agreed to become a participant in the project. When Cheng met secretly with her investors, however, she said that it was not her intention to develop the land at all, but rather to sell it as soon as possible.

In 2007, Willis was working with an architect, Christopher McCarthy, who proposed putting over 200 houses on the Southgate Crossing property. Cheng conferred with McCarthy sometime around October of 2007 and told him that she was in charge of overseeing the project and safeguarding the investors' interests. She also told McCarthy that her “specialty” was manipulating companies to make it “look[ ] like A and run it through so many different permutations that it would come out over here as Z.” (App. at 541–42.) After McCarthy created preliminary schematics for the proposed development, Cheng made him sign a contract that assigned to SDG the copyright to the drawings, before she would pay him. Prior to signing the contract, McCarthy had never heard of SDG. McCarthy explained to Cheng that the schematics were not sufficient to obtain building permits. They were, he said, just “pretty pictures.” (App. at 547.)

By August 2008, Cheng was making all of the decisions for the project, but Willis was still involved. Around that time, Frank Pollara, a 47–year veteran of the construction industry, met with Willis about bidding to build an entrance for Southgate Crossing. Pollara reviewed the McCarthy schematics and informed Willis that they were incomplete and that it would be difficult to make a bid based on them. Pollara nevertheless submitted a bid in August 2008 and Cheng called him to talk about it. She told Pollara it was “her money” at stake and that she handled money for foreign investors. (App. at 584–85.) She further told Pollara he would also be dealing with Mait Dubois, her associate. Cheng later asked Pollara to undertake the entrance construction job.

Accordingly, Pollara submitted a scope-of-work letter. Willis told him that “Lucy [Cheng] is the person who will approve any written agreement....” (App. at 311.) Cheng, Dubois, and Willis all told Pollara that the necessary building permits for the entrance had been obtained and that the project was “ready to go.” (App. at 509, 590–91, 594–95.) Pollara heard the same thing from Kima Merrick, who was an office worker on the project for a time but was, for reasons unclear in the record, terminated. On September 6, 2008, Pollara signed a contract with “Southgate Crossing” to construct the entrance for $193,000. (App. at 1198.) At some later point, Willis—acting under Cheng's instructions and unbeknownst to Pollara—changed the contract to designate “Southgate Development Group, LLC” as the contracting entity. (App. at 594, 1198.) In actuality, the investors did not approve the creation of SDG until November 2008. When he signed the contract, Pollara was unaware that the project had not been permitted.⁶

Pollara began work on the entrance in September 2008. On September 18, the Virgin Islands Department of Planning and Natural Resources (the “Department of Planning”) served Pollara with a “stop notice” and a cease-and-desist order for failing to obtain required permits for the work. (App. at 591–92, 598.) When Pollara called Cheng about the stop order, she initially told him that “we have a permit” (App. at 599), but eventually she asked him to obtain the necessary government approvals. When he informed her that doing so was outside the scope of their contract, she offered to pay for the additional work. Pollara retained McCarthy to provide appropriate plans for the entrance so that he could submit them to the Department of Planning. The permitting process also required Pollara to add electrical, plumbing, and irrigation features that were not covered by the initial construction contract. Moreover, Pollara had to perform additional landscaping, in keeping with the newly prepared plans. He eventually succeeded in getting an earth-change permit, a flood hazard permit, an electrical permit, and a building permit.

In October, construction hit a setback when the roadway in front of Southgate Crossing was “washed out completely” by heavy rains. (App. at 515.) Cheng and Dubois instructed Pollara to repair the roadway, stating that they would pay for it, even though Pollara could not provide a cost estimate for the repairs. After Pollara sent the first invoice for his work, Cheng told him to bill SDG, rather than Southgate Crossing, LLC, because SDG was, as she put it, “the company with the money.” (App. at 595.) Cheng explained that SDG was funded by OMEI and that “she controlled the money.” (Id. ) When Pollara questioned the payment process, he was told by Cheng's accountant that Cheng approved all payment requests because it was her money. Thus, when Pollara prepared the invoice for the roadwork, it read “[c]ost of road repair as per agreement with investors” and listed charges of $37,483. (App. at 1452.)

At some point, Dubois and Cheng asked Pollara to obtain the permits that would allow the development of approximately 200 townhomes on the Southgate Crossing property. Pollara believed he could do so because he had a good relationship with the Department of Planning, and he agreed to do so because Cheng and Dubois offered him a dramatically new deal: they would make Pollara a 25% owner of the development project. The plan was—or so Pollara thought—to build about 200 townhouses in a gated community and to market and sell them. Dubois showed Pollara a spreadsheet forecasting a $20 million profit on a $100 million project, with Pollara having a 25% equity stake.

Later, Willis told Pollara that the investors might want to sell a few parcels of the property. Pollara became concerned that such sales would create the appearance that the developers simply wanted to “flip” the property, i.e., sell it off without actually adding development, which would upset the Department of Planning and the Governor because they “truly believe[d]” in the project. (App. at 612, 1364.) Cheng and Pollara also exchanged emails about the lack of cash in SDG's bank account and the fact that SDG required a capital infusion from Cheng's investors. To conceal her true motives, Cheng told Pollara that she was keeping SDG's account empty because she feared that Merrick, the one-time office worker on the project, might sue for wrongful termination. Cheng promised that she would move funds around from other accounts in order to pay for the construction work. Pollara thus hired and paid for engineering and survey work on the project and also paid for McCarthy's planning and design services.

While Cheng and Dubois reassured Pollara that they were committed to developing Southgate Crossing, they were, in reality, planning to wait for a time and then flip the property rather than develop it. Pollara stated that, had he known their true intentions, he would not have gotten involved with them. He thought that he was participating in a real project that would create jobs and...