Ackerman v. NAT. PROPERTY ANALYSTS, INC., 92 Civ 0022 (LJF)

• Decision Date: 09 September 1992
• Docket Number: No. 92 Civ 0022 (LJF),92 Civ 1298 (LJF).,92 Civ 0022 (LJF)
• Citation: 887 F. Supp. 494
• Parties: Fred ACKERMAN, et al., Plaintiffs, v. NATIONAL PROPERTY ANALYSTS, INC., et al., Defendants. Steven S. REMINGTON, M.D., et al., Plaintiffs, v. Alan TALANSKY, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

887 F. Supp. 494

Fred ACKERMAN, et al., Plaintiffs, v. NATIONAL PROPERTY ANALYSTS, INC., et al., Defendants.

Steven S. REMINGTON, M.D., et al., Plaintiffs, v. Alan TALANSKY, et al., Defendants.

Nos. 92 Civ 0022 (LJF), 92 Civ 1298 (LJF).

United States District Court, S.D. New York.

September 9, 1992.

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John Triggs, Jacobson & Triggs New York City, for plaintiffs in docket no. 92-CV-0022-LJF.

George W. Croner, Kohn, Savett, Klein & Graf, Philadelphia, PA, Lori A. Sullivan, Sullivan & Damen, White Plains, NY, for Nat. Property Analysts, Inc., Edward B. Lipkin, Howard N. Brownstein.

Daniel P. Levitt, New York City, for Alan Talansky, First Atlantic Inv. Corp., United Growth Properties L.P., United Properties of America, L.P., AST Properties, Inc., Nat. Community Centers III, IV, VII, VIII, IX, X, XI-a, XIV, XV, XVI.

Thomas B. Kinzler, Kelley Drye & Warren New York City, for Travelers Indem. Co.

Charles L. Chrein, New York City, pro se.

William J. Burke, Burke & Stone New York City, for Melvin Spitz.

Robert Carlson, Reid & Priest New York City, for Spengler Carlson Gubar Brodsky & Fischling.

Kenneth J. Warren, Manko Gold & Katcher, Bala Cynwyd, PA, for Admiral Ins. Co.

David A. Boyar, New York City, for Hutton Nelson & McDonald.

David W. Rivkin, Debevoise & Plimpton, New York City, for Price Waterhouse & Co.

Geoffrey W. Heineman, Ohrenstein & Brown, New York City, for Wharton Econometric Forecasting Associates, Inc.

John N. Romans, Katten Muchin & Zavis, New York City, for Greyhound Financial Corp.

James Kaplan, Wilson Elser Moskowitz Edelman & Dicker, New York City, for Weiner Zuckerbrot Weiss & Brecher.

Janis Meyer, White & Case, New York City, for Credit Lyonnais.

Richard O'Leary, McCarter & English, New York City, for Lincoln Nat. Life Ins. Co., Lincoln Nat. Corp., Sec. Conn. Life Ins. Co., First Penn Pacific Life Ins. Co., American States Life Ins. Co.

Solomon J. Jaskiel, Beigel & Sandler, New York City, for plaintiffs in docket no. 92-CV-1292-LJF.

Tracy Elise Poole, Wood, Williams, Rafalsky & Harris, New York City, for Resolution Trust Corp.

OPINION & ORDER

LOUIS J. FREEH, District Judge.

In these related actions, over two hundred individual plaintiffs seek to recover their losses as limited partners in shopping centers organized and sold by defendants.¹ Defendants Alan Talansky ("Talansky"), United Growth Properties, L.P. ("United Growth"), AST Properties, Inc. ("AST"), First Atlantic Investment Corp. ("First Atlantic"), United Properties of America, L.P. ("United"), National Community Centers ("NCC or Partnership") III, IV, VII, VIII, IX, X, XI-a, XIV, XV and XVI, National Property Analysts, Inc. ("NPA"), Price Waterhouse & Company ("Price Waterhouse"), Hutton Nelson & Edward ("Hutton Nelson"), Wharton Econometric Forecasting Associates Inc. ("Wharton"), Weiner Zuckerport Weiss & Brecher ("Weiner Zuckerport"), Spengler Carlson Gubar Brodsky & Fischling, ("Spengler Carlson"), Credit Lyonnais, Lincoln National Corporation ("Lincoln"), Lincoln National Life Insurance Company, Security Connecticut Life Insurance Company, First Penn Pacific Life Insurance Company and American States Life Insurance Company (collectively the "Lincoln defendants"), Travelers Indemnity Corp. ("Travelers"), Edward P. Lipkin ("Lipkin"), Howard N. Brownstein ("Brownstein"), Melvin Spitz ("Spitz"), and Charles Chrein ("Chrein") move to dismiss the complaints pursuant to Fed.R.Civ.P. 12(b)(1), 12(b)(6) and 9(b). Credit Lyonnais moves in the alternative for summary judgment pursuant to Fed.R.Civ.P. 56. For the reasons stated at oral argument and below, defendants' motions to dismiss the federal securities and civil RICO claims are granted. Defendants' motions to dismiss the remaining pendent state law claims are granted in part and denied in part, as explained below.²

Introduction

From 1985 to June 1986, a number of individual investors — including plaintiffs — purchased interests in twelve separate limited partnerships. The purpose of the partnerships was to acquire and operate shopping centers around the country. In 1989, ten of the partnerships were consolidated into a single partnership known as "United Growth".

Plaintiffs allege that defendants committed fraud in the initial formation and subsequent "roll-up" of the twelve limited partnerships. Specifically, plaintiffs allege that the private placement memoranda ("PPM's") for both the individual partnerships and the United Growth roll-up contained material misrepresentations and omissions which induced them into purchasing their initial investments and then agreeing to the roll-up.³

The Facts

Assuming, as the Court must, that the allegations in the two complaints are true, the facts are as follows. From March 1985 to June 1986, twelve National Community Center limited partnerships were created for the purpose of purchasing and operating shopping centers around the United States. Each of the individual plaintiffs purchased interests in the limited partnerships by relying on, inter alia, the PPMs and other offering materials prepared, distributed and communicated by NPA, its majority shareholders Lipkin and Brownstein, NPA's general partner Talansky, and Talansky's broker, First Atlantic. (hereinafter sometimes referred to as "the Sellers"). The PPMs provided plaintiffs with financial projections and reports prepared by Price Waterhouse, Hutton Nelson, and Wharton (collectively "the Accountants") which were based upon computed financial predictions concerning the future of the shopping centers. The PPMs cautioned plaintiffs that the financial projections were based upon estimates and assumptions made by the Sellers and their accountants. The PPMs also disclosed the fees and benefits to the Sellers.

The Sellers arranged for Credit Lyonnais, Lincoln and the Lincoln defendants (collectively the "Lenders") to loan plaintiffs, should they need it, the money necessary to finance their capital contributions to the partnerships. Travelers acted as a surety for certain plaintiffs, issuing surety bonds covering plaintiffs' notes and agreeing to make payments to the Lenders in the event of a plaintiff's default. The Investor Bond Agreement permitted Travelers to collect, from the plaintiffs involved, the amounts paid by Travelers to the lender on behalf of the defaulting plaintiff. In some cases Travelers demanded that a particular plaintiff's obligation to Travelers be guaranteed by NPA through indemnification agreements. The existence of the indemnification agreements was never disclosed to plaintiffs.

Once a shopping center was acquired, each of the individual limited partnerships entered into an agreement with NPA to manage the property. The partnerships also agreed to pay an annual license fee to NPA for the partnerships' right to use the NCC service mark and operation systems.

Because the performance of the limited partnerships was not meeting the Sellers original expectations, on or about July 17, 1989, plaintiffs and other investors in each of the NCC Partnerships, except those in NCC XII, received a new private placement memorandum relating to the United Growth rollup. The United Growth PPM was prepared by United, serving as general partner of United Growth, AST, the general partner of United, Talansky, and United Growth's counsel, Spengler Carlson. The United Growth PPM was intended to induce the NCC limited partnerships into exchanging their interests in their respective NCCs for interests in the United Growth partnership. The United Growth PPM informed the investors that NPA was withdrawing as manager of the shopping centers. In reliance upon the United Growth PPM, plaintiffs in ten of the twelve NCCs agreed to exchange their partnership interests for a new interest in the United Growth roll-up. Under the management of United Growth, Talansky, and his corporate affiliates United and AST, the shopping centers continued to fail to meet the Sellers initial forecasts.

On December 19, 1991, the Ackerman plaintiffs filed this law suit. The Remington complaint was filed in New York State Court a little over a month later on or about January 31, 1992, and removed to this Court on February 24, 1992.

Discussion

A complaint must be dismissed under Fed.R.Civ.P. 12(b)(1) and (6) only if "it appears `beyond a reasonable doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Goldman v. Belden, 754 F.2d 1059, 1065 (2d Cir.1985). In addition, in deciding a motion to dismiss, a Court must read the facts alleged in the complaint "generously" drawing all reasonable inferences in favor of the party opposing the motion. Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir.1989). The trial court's role is to appraise the legal merits of the complaint and not to weigh the evidence which might be introduced at trial. See Ricciuti v. N.Y.C. Transit Authority, 941 F.2d 119, 124 (2d Cir.1991) (plaintiff is not compelled to prove his case at the pleading stage). The ultimate issue "is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). Finally, the trial court should grant a Rule 12(b)(6) motion "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957))

In considering a Rule 9 motion in the context of a fraud claim, Rule 9(b) states: "In averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be...