B Choice Ltd. v. Epicentre Dev. Assocs., LLC
| Decision Date | 03 March 2017 |
| Docket Number | CIVIL ACTION NO. H-14-2096 |
| Parties | B CHOICE LIMITED, Plaintiff, v. EPICENTRE DEVELOPMENT ASSOCIATES, LLC, et al., Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Pending before the court1 are Defendant Andrea Frattini's ("Frattini") Motion for Summary Judgment (Doc. 208), Defendants EpiCentre Development Associates, LLC ("EDA"), EpiCentre Development Associates II, LLC ("EDA II"), Alianza Financial Services, LLC, Alianza Holdings, LLC, Vanguard Equity Holdings, LLC ("Vanguard Equity"), Vantage Equity Holdings, LLC, Vantage Financial Services, LLC ("Vantage Financial"), Vantage Plus Corp. ("VPC"), Vantage Plus Development Company, LLC, Vantage Realty Holdings VI-X, LLC, Omar Botero, Jr. ("Botero"), Albert F. Delaney ("Delaney"), and Gilberto Iragorri's ("Iragorri") (collectively, the "EpiCentre Defendants") Motion for Summary Judgment (Doc. 217), and Defendants PLG Consulting, Ltd. ("PLG") and Pierluigi Guiduzzi's ("Guiduzzi") Motion for Summary Judgment (Doc. 218). The court has considered the motions, the responses, the replies,all other relevant filings, and the applicable law. For the reasons set forth below, the court RECOMMENDS that Frattini's motion for summary judgment be DENIED, the EpiCentre Defendants' motion for summary judgment be DENIED, and PLG and Guiduzzi's motion for summary judgment be DENIED.
B Choice Ltd. ("Plaintiff") brought this action alleging violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), as well as claims for fraud, breach of fiduciary duty, civil conspiracy, and breach of contract arising out of its participation in the attempted purchase and planned development of approximately 104 acres of land, the former site of the "AstroWorld" theme park.
These transactions began in June 2008 with a meeting where Botero and Delaney2 presented the opportunity of investing in the "EpiCentre Houston" development on the former site of Astroworld toGuiduzzi and Frattini3 in Parma, Italy.4 Guiduzzi and Frattini testified that they were told that any investment would account for the final ten percent of the deal to purchase the land because the other ninety percent was already subscribed.5 Frattini brought this potential investment to a client of his, Antonio Robuschi6 ("Robuschi").7 Throughout the process of this series of transactions, Frattini was the only one who relayed information to Robuschi.8 Robuschi selected Plaintiff, a shelf company, to be the instrument for investment, and Frattini asked Guiduzzi to be the director of Plaintiff.9 Robuschi owned Plaintiff's parent company, Siusi S.p.A.10 Guiduzzi testified that Frattini directed Guiduzzi's actions while Guiduzzi was director of Plaintiff.11
VPC, an entity associated with Botero and Delaney, later sent Guiduzzi a memorandum answering questions related to the project as a follow-up to the June 2008 meeting.12 An ownership grid was also provided that listed the capital from each investor and showed a highlighted portion for Robuschi's potential investment.13 None of the capital listed on the ownership grid was actually invested at the time that the memorandum was sent to Guiduzzi.14
On July 23, 2008, a capital subscription agreement was signed by Guiduzzi and Botero.15 Under this contract, Plaintiff agreed to invest $11,000,000 in the EpiCentre project in exchange for a ten-percent equity interest in EDA.16 The funds were provided by Plaintiff "for the purpose of acquiring title to the real estate formerly known as AstroWorld and to be known as EpiCentre Houston, a 104.19 acre assemblage located at 9001 Kirby Drive, Houston, TX."17 EDA was subsequently registered as a limited liabilitycompany in Texas on August 1, 2008.18
Once the agreement was signed, $11,000,000 was sent to Liliana Real, an attorney retained by EDA's Delaney and Botero, who subsequently transferred $10,000,000 to EDA on August 12, 2008.19 The other $1,000,000 was used to pay debts incurred in an unrelated project and by other entities owned by Botero, as well as costs for initial work on the EpiCentre project.20
EDA used the $10,000,000 to acquire a ten-percent interest in the limited partnership which owned the 104 acres, Houston 8th Wonder ("H8W"), an entity owned by Angel/McIver.21 This transaction was executed through EDA's payment of $9,200,000 to Fuller Cyclone, the second mortgage holder, to pay off its lien on the property and $800,000 was paid to Angel/McIver directly.22 EDA became a limited partner in H8W but did not acquire title to the property.23
In conjunction with Plaintiff's investment in EDA, twocontracts were signed between F&G, Vantage Financial, and EDA.24 The first agreement was signed some time in 2011 with an effective date of August 1, 2008, under which F&G would provide "relationship management services" to EDA and Vantage Financial and receive compensation in return for F&G's bringing potential investors to Vantage Financial for the EpiCentre project.25 Plaintiff was listed as a protected party under this agreement.26 Delaney testified that Frattini and Guiduzzi were never paid under this agreement.27 On July 7, 2009, Plaintiff entered into a consulting agreement with F&G, whereby F&G would be paid a consulting fee for its services to Plaintiff on the EpiCentre project.28
In early 2010, to avoid foreclosure on the Astroworld property, H8W conveyed the property via special warranty deed to MHB Asset, LP, a partnership owned by the Mallick Group, in exchange for debt forgiveness on the senior loan on the property inthe amount of $69, 000, 000.29 As a result, EDA lost its entire investment in H8W.30 In exchange for allowing the deal to proceed, EDA received an option to purchase the property and paid the taxes on the property for 2010 and 2011.31
On May 6, 2010, Botero, Delaney, and Iragorri sent a status report to Plaintiff.32 This report explained that H8W was required sell the land to prevent a foreclosure on the property and, if EDA wished to pursue an interest in the land, EDA would have to buy the land from the new owner.33 Accordingly, EDA was seeking new capital to purchase the land, and, although it would not get direct credit from its prior investment, it would receive a decreased purchase price.34
On May 27, 2010, Frattini and Guiduzzi received a memorandum from EDA soliciting additional capital for the EpiCentre project.35 The memorandum stated that EDA was able to obtain some seller financing through the current land partner, and that EDA was"poised to take over control and then ownership of the real estate in Houston."36
Guiduzzi testified that he first learned of the loss of Plaintiff's $11,000,000 from the May 6, 2010 memorandum sent by EDA.37 However, in July 2010, Guiduzzi emailed Delaney stating that Plaintiff's auditor "would like confirmation that the value [of the $11,000,000 investment] has not been lost."38 Delaney responded that it was "too early to make any conclusion as to the value of the investment" but that, despite the fact that EDA lost its interest in the limited partnership, EDA still had value due to its position as a "development stage company."39 However, in Delaney's deposition testimony, he stated that EDA had lost its entire investment in H8W.40
Around this same time, Guiduzzi wrote Botero and Delaney on July 2, 2010, that Frattini had told him that "Mr. Robuschi could consider helping the deal" enhancing the purchase of the land by providing a loan from Plaintiff.41 The "deal" to which Guiduzzireferred was news of a potential investment by two Mexican groups.42 On July 5, 2010, Delaney emailed Guiduzzi stating that he had investment commitments of $25,000,000 and $15,000,000 from two different Mexican groups, and that these funds were enough to pay off earlier loans to another party.43 Plaintiff then loaned €200,000 to Vantage Financial to pay for overhead expenses on or about July 5, 2010.44
In an email dated September 8, 2010, Guiduzzi reiterated to Delaney that Plaintiff's auditors required disclosure of any loss in the value of Plaintiff's investment, and stated that he and Frattini did not want anything said to the auditors about lost value because they did not want to create inconsistencies between the accounts of Plaintiff and Siusi S.p.A.45 Guiduzzi testified that Frattini told him that "the idea was that [Siusi S.p.A.] knew" about the $11,000,000 loss.46 On September 9, 2010, Guiduzzi again asked Delaney if he could assure the auditors that the value of the investment had not been lost, and, that if "everything [went] asplanned . . . [,] this statement would probably be true."47 Letters were sent to the auditors in September 2010, May 2011, and January 2013 representing that there had been no loss in the value of the investment.48
On January 29, 2011, Delaney sent an email to Guiduzzi with an update about potential investors from Mexico City and Singapore.49 Delaney said that the investor from Mexico City was "99% committed" and only needed one more vote in favor of the transaction from his investment group to move forward with the deal.50 Delaney also mentioned that another investor from Mexico City was interested in the project.51 Delaney stated that an investment group in Singapore offered to invest $15,000,000 in the project, and EDA would receive a deposit from the group by February.52
On May 8, 2011, Delaney emailed a status report to Guiduzzi stating the management of EDA was "in close negotiation with other financially involved parties for a contract that permits takingtitle to the land over a stipulated schedule."53 Delaney stated that the first closing was planned for the end of May whereby they would acquire thirteen acres of the property, twenty-one acres 120 days later, twenty-five acres 240 days later, and the remainder of the property would be conveyed one year after the closing.54 Plaintiff was cited as the primary source of...
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