Cambridge Capital Real Estate Invs., LLC v. Archstone Enter. LP

• Decision Date: 22 March 2016
• Citation: 137 A.D.3d 593,28 N.Y.S.3d 33
• Parties: CAMBRIDGE CAPITAL REAL ESTATE INVESTMENTS, LLC, Plaintiff–Respondent–Appellant, v. ARCHSTONE ENTERPRISE LP, et al., Defendants–Appellants–Respondents, Jeffrey Fitts, etc., et al., Defendants.
• Court: New York Supreme Court — Appellate Division

137 A.D.3d 593
28 N.Y.S.3d 33

CAMBRIDGE CAPITAL REAL ESTATE INVESTMENTS, LLC, Plaintiff–Respondent–Appellant,
v.
ARCHSTONE ENTERPRISE LP, et al., Defendants–Appellants–Respondents,

Jeffrey Fitts, etc., et al., Defendants.

Supreme Court, Appellate Division, First Department, New York.

March 22, 2016.

28 N.Y.S.3d 34

Weil, Gotshal & Manges LLP, New York (Jonathan D. Polkes of counsel), for appellants-respondents.

Wolf Haldenstein Adler Freeman & Herz, New York (Benjamin Y. Kaufman of counsel), for respondent-appellant.

SWEENY, J.P., RENWICK, MANZANET–DANIELS, KAPNICK, JJ.

Order, Supreme Court, New York County (Marcy S. Friedman, J.), entered October 10, 2014, which, to the extent appealed from as limited by the briefs, granted defendants' motion to dismiss the causes of action for breach of contract for failing to obtain authorization and breach of the implied covenant of good faith and fair dealing, and denied defendants' motion to dismiss the causes of action for breach of contract with regard to the sale transaction, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and an accounting, unanimously modified, on the law, to dismiss the causes of action for breach of contract with regard to the sale transaction, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and an accounting, and otherwise affirmed, without costs. The Clerk is directed to enter judgment dismissing the complaint.

In October 2007, plaintiff invested $20 million in Archstone Multifamily JV LP (the Fund), in exchange for an approximate 1% interest. Defendant Archstone Multifamily GP, LLC is the general partner of the Fund (Fund GP). The Fund acquired and took private what is now known as Archstone Enterprise LP (Archstone). Archstone controls the assets of Archstone–Smith Real Estate Investment Trust (REIT), one of the largest multi-family REITs in the United States, with assets valued at approximately $23.7 billion. Lehman Bros. Holding, Inc. and affiliates were sponsors of the transaction, providing $3 billion in secured financing, or 47% of the total. (Bank of America and Barclay's provided 28% and 25% of the remaining financing, respectively.) Less than a year later, on September 15, 2008, Lehman entered into bankruptcy.

In January 2009, the sponsors committed an additional $485 million in financing to Archstone. On March 31, 2009, the original limited partnership agreement was amended and restated in its entirety. On December 1, 2010, the sponsors exchanged approximately $5.2 billion in debt, plus accrued interest, for new preferred equity interests in Archstone. The recapitalization left Archstone with two classes of interests, the preferred interests held by the sponsors, and the common interest held by the Fund (and thus indirectly by plaintiff).

On January 20, 2012, Lehman acquired half of the other sponsors' interests in Archstone for $1.33 billion. On June 6, 2012 it purchased the remaining interests of the sponsors for $1.65 billion. Upon consummation of the second acquisition, Lehman owned nearly all of Archstone.

On November 26, 2012, Lehman announced that it had entered into an asset

28 N.Y.S.3d 35

purchase agreement whereby Archstone would sell its assets to Equity Residential and AvalonBay Communities, Inc. for $2.7 billion in cash, $3.8 billion in stock, and the assumption of $9.5 billion in debt. Plaintiff alleges that the sale will generate enough to pay Lehman's preferred interests, but "essentially wipe out" the minority interests. Plaintiff alleges...