Ben-Yishay v. Mastercraft Development, LLC

• Decision Date: 21 April 2008
• Docket Number: No. 08-14046-CIV.,08-14046-CIV.
• Parties: Ari BEN-YISHAY, M.D. and Barbara Ben-Yishay, Plaintiffs, v. MASTERCRAFT DEVELOPMENT, LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

Page 1360

553 F.Supp.2d 1360

Ari BEN-YISHAY, M.D. and Barbara Ben-Yishay, Plaintiffs, v. MASTERCRAFT DEVELOPMENT, LLC, et al., Defendants.

No. 08-14046-CIV.

United States District Court, S.D. Florida.

April 21, 2008.

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Kenyetta Nicole Alexander, Mark R. Osherow, Osherow Shiner & Associates PA, Boca Raton, FL, for Plaintiffs.

Bart Alan Houston, Genovese Joblove & Battista, PA, Fort Lauderdale, FL, Gregory William Coleman, Burman Critton Luttier & Coleman, West Palm Beach, FL, Andrew Seiden, Seiden Alder & Matthewman, Boca Raton, FL, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS AND/OR COMPEL ARBITRATION

K. MICHAEL MOORE, District Judge.

THIS CAUSE came before the Court upon Defendant Waterline Development LLC's Motion to Dismiss Complaint and/or Motion to Compel Arbitration (dkt #24), Defendant Joseph D. Grosso, Jr., P.A. and Joseph D. Grosso, Jr.'s Motion to Dismiss (dkt # 25), and Defendants Mastercraft Development LLC, Mastercraft Services, Inc., and Perry Lap's Motion to Dismiss Complaint and Compel Arbitration (dkt # 26).

UPON CONSIDERATION of the Motions, the Responses, the pertinent portions of the record, and being otherwise fully advised in the premises, the Court enters the following Order.

I. BACKGROUND

This action arises from a failed agreement concerning the construction of three single-family homes.¹ On September 17, 2005, Dr. Ari Ben-Yishay and his wife, Barbara Ben-Yishay (together the "Ben-Yishays") entered into a Construction, Purchase and Sale Agreement (the "First Agreement") with Defendants Mastercraft Development, LLC ("Mastercraft") and Mastercraft Services ("MS"). Perry Lap ("Lap"), the managing member of Mastercraft and president of MS, negotiated the Agreement on behalf of Mastercraft and MS. Under the agreement, the Ben-Yishays were to purchase a lot and pre-construction home to be built by Mastercraft and MS in Tesoro Preserve, located in Port St. Lucie, Florida. The Ben-Yishays were unaware that the lot was under the control of Defendant Waterline Development, LLC ("Waterline"), which was also a managing member of Mastercraft.

Under the First Agreement, the Ben-Yishays were to pay $2.5 million for the lot and construction of the home, with construction to be completed within 12 months after issuance of all applicable building permits. The Ben-Yishays were obligated to deliver $250,000 as an earnest money deposit. However, the Ben-Yishay's decided to make an additional earnest money deposit of $250,000, making the total amount deposited $500,000. The funds were allegedly to be placed in escrow with Defendant Joseph D. Grosso, Jr., P.A. ("Grosso PA") acting as escrow agent. The balance was to be paid at closing. In addition, the Ben-Yishays agreed to lease the newly constructed home to Mastercraft and MS as a model home for $12,000 per month for 18 months. On September 17, 2005, the Ben-Yishays issued a check payable to Mastercraft for $250,000. On January 15, 2006, the Ben-Yishays issued a second check for $250,000 payable to Mastercraft. On January 16, 2006, the First Agreement was amended to reflect the $500,000 payment.

In March of 2006, the Ben-Yishays decided to purchase a second lot and pre-construction home in Tesoro Preserve, to be built by Mastercraft and MS. On March 29, 2006, a Second Construction, Purchase and Sale Agreement (the "Second Agreement") was entered into. Under the Second Agreement, the Ben-Yishays were to pay $3.2 million for the lot and construction of the home, with construction to be completed within nine months after issuance of all applicable building permits. The Ben-Yishays were obligated to pay $320,000 as an earnest money deposit, allegedly to be placed in escrow with Grosso PA acting as the escrow agent. The balance was to be paid at closing. In addition, the Ben-Yishays agreed to lease the newly constructed home to Mastercraft and MS as a model home for $15,000 per month for 18 months. On April 5, 2006, the Ben-Yishays issued a check for $320,000 payable to Mastercraft.

In July of 2006, the Ben-Yishays decided to purchase a third lot and pre-construction home in Tesoro Preserve, to be built by Mastercraft and MS. On July 14, 2006, a Third Construction, Purchase and Sale Agreement (the "Third Agreement") was entered into. Under the Third Agreement, the Ben-Yishays were to pay $1.75 million for the lot and construction of the home, with construction to be completed within nine months after issuance of all applicable building permits. The Ben-Yishays were obligated to pay $175,000 as an earnest money deposit, allegedly to be placed in escrow with Grosso PA acting as the escrow agent. The balance was to be paid at closing. In addition, the Ben-Yishays agreed to lease the newly constructed home to Mastercraft and MS as a model home for $8,000 per month for 18 months. On October 9, 2006, the Ben-Yishays issued a check for $175,000 payable to Mastercraft. As an incentive to enter into the Third Agreement, the Ben-Yishays were offered an incentive package, which provided certain discounts and benefits to each of the three lots purchased.

By May of 2007, no construction had commenced on any of the three lots. The delays were attributed to revisions in the plans and by the inability of Mastercraft and MS to obtain financing. In August of 2007, Mastercraft and MS offered to reduce the price of the lots if the Ben-Yishays would obtain financing for construction. The Ben-Yishays declined. On October 7, 2007, the Ben-Yishays, Mastercraft and MS agreed that if financing was not obtained within six weeks, the earnest money deposits, totaling $995,000, would be returned. The Ben-Yishays never received the money, and no accounting of the use of the funds was provided.

On February 6, 2008, the Ben-Yishays filed a Complaint (dkt # 1) alleging anticipatory repudiation and breach of contract against Mastercraft and MS with respect to the First, Second and Third Agreements (collectively, the "Agreements"). The complaint also alleged fraudulent misrepresentation against Mastercraft, MS and Lap; fraudulent inducement against Mastercraft, MS and Lap; conversion against Mastercraft, MS and Lap; imposition of an equitable lien or constructive trust as to property owned by Waterline, Mastercraft, and MS; and breach of fiduciary duty against Grosso PA and Joseph D. Grosso, Jr. ("Grosso").

II. STANDARD OF REVIEW

A motion to dismiss for failure to state a claim merely tests the sufficiency of the complaint; it does not decide the merits of the case. Milburn v. United States, 734 F.2d 762, 765 (11th Cir.1984). On a motion to dismiss, the Court must accept the factual allegations as true and construe the complaint in the light most favorable to the plaintiff. SEC v. ESM Group, Inc., 835 F.2d 270, 272 (11th Cir. 1988). "Factual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007). A complaint must contain enough facts to indicate the presence of the required elements. Watts v. Fla. Int'l Univ., 495 F.3d 1289, 1302 (11th Cir.2007). "[C]onclusory allegations, unwarranted deductions of fact or legal conclusions masquerading as facts will not prevent dismissal." Oxford Asset Mgmt., Ltd. v. Jaharis, 297 F.3d 1182, 1188 (11th Cir.2002). However, as long as the allegations rise above a speculative level, a well-pleaded complaint will survive a motion to dismiss "`even if it appears that a recovery is very remote and unlikely.'" Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) (overruled on other grounds by Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1959-60, 167 L.Ed.2d 929 (2007) (citation omitted)).

III. ANALYSIS

The validity of an arbitration agreement is covered by the Federal Arbitration Act ("FAA"). See Weeks v. Harden Mfg. Corp., 291 F.3d 1307, 1312 (11th Cir.2002). The FAA provides, in relevant part:

[A] contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2 (emphasis added). The FAA also provides:

If any suit or proceeding be brought in any of the courts, of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in the proceeding with such arbitration.

9 U.S.C. § 3.

"The FAA establishes a `federal policy favoring arbitration ... requiring that [courts] rigorously enforce agreements to arbitrate.'" Davis v. Prudential Sec. Inc., 59 F.3d 1186, 1192 (11th Cir. 1995) (quoting Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987)). "The question of whether a contract creates a duty for the parties to arbitrate the particular grievance is an issue for judicial determination." Senti v. Sanger Works Factory, Inc., No. 06-cv-1903-Orl-22DAB (ACC), 2007 WL 1174076, at *4 (M.D.Fla. 2007). "`The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.'" Creative Tile Mktg., Inc. v. SICIS Int'l....