Dominium Management Serv. V. Nationwide Housing
| Decision Date | 30 April 1998 |
| Docket Number | Civil No. 4-96-849 (DSD/FLN). |
| Citation | 3 F.Supp.2d 1054 |
| Parties | DOMINIUM MANAGEMENT SERVICES, INC., Plaintiff, v. NATIONWIDE HOUSING GROUP, Nationwide Development Group, LP and Pinnacle Group Realty Management Company, Defendants. |
| Court | U.S. District Court — District of Minnesota |
Norman J. Baer, Joseph W. Anthony, Douglas L. Elsass and Fruth & Anthony, Minneapolis, MN, for Dominium Management Services, Inc.
Steven E. Rau, Paul M. Floyd, and Rau & Floyd, Robert M. Smith, Smith Law Office, Minneapolis, MN for Nationwide Housing Group.
Joseph W. Hammell, Lucy A. Dalglish, and Dorsey & Whitney, Minneapolis, MN, Alan J. Gordee, Stephen R. Thames, and Allen, Matkins, Leck, Gamble & Mallory, Irvine, CA, for Pinnacle Group Realty Management Co.
This matter is before the court upon the motion of Nationwide Housing Group and Nationwide Development Group, L.P. (collectively referred to as "NHG") for judgment as a matter of law or, in the alternative, for new trial or remittitur. This matter is also before the court upon the motion of Pinnacle Realty Management Company ("Pinnacle") for post-trial relief including amendment of the judgment and entry of declaratory judgment. In the event that the court grants any portion of NHG's post-trial motions, Pinnacle also requests a new trial on Pinnacle's claims against Dominium Management Services, Inc. ("Dominium"). Based on a review of the file, record and proceedings, the court grants in part and denies in part NHG's motion for judgment as a matter of law, conditionally grants NHG's motion for new trial, grants Pinnacle's motion for amendment of the judgment, and denies Pinnacle's motions for declaratory judgment and new trial.
Dominium is a property management company that manages properties for a fee and also develops and owns interests in real estate projects. Nationwide Development Group is a California limited partnership that was the general partner of many other limited partnerships. Nationwide Housing Group is a corporation and the general partner of Nationwide Development Group. NHG was controlled by three individuals who were also officers: chael Weyrick, President ("Weyrick"); David Slajchert, Vice President ("Slajchert"); and Laura Lynch, Executive Vice President ("Lynch"). Pinnacle is a property management company. Pinnacle's President is Stan Harrelson.
This action involves a dispute which arose in 1996. NHG was the general partner and property manager of approximately 40 real estate limited partnerships which were formed to own and operate apartment projects that would qualify for federal tax credits ("Portfolio Partnerships"). The Portfolio Partnerships owned more than 80 apartment buildings which together consisted of approximately 5,300 apartment units. Individuals and corporations invested in the partnerships by purchasing partnership units and becoming limited partners. NHG also formed two limited partnerships for the purpose of investing in the Portfolio Partnerships. The two partnerships were called the NHG Institutional Fund Limited Partnership ("Institutional Fund") and the NHG Opportunity Fund Limited Partnership ("Opportunity Fund"). The investors in the Institutional Fund and the Opportunity Fund were exclusively corporate and institutional investors. The Institutional Fund owned a majority interest in 15 of the Portfolio Partnerships. Those 15 partnerships owned 43 apartment projects totaling 2,830 apartments ("Institutional Fund Portfolio").
By 1996, NHG was facing significant financial and operational difficulties. It had debts in excess of its assets, and was unable to meet its operational expenses. To meet some of its operational difficulties, NHG contracted for Dominium to manage almost all of the properties owned by the Portfolio Partnerships. The contract was for a period of one year, from May 1, 1996 through April 30, 1997. To meet its immediate cash needs, NHG had to borrow funds. On May 20, 1996, NHG borrowed $50,000 from Dominium. In exchange for the loan, Weyrick, Slajchert, and Lynch signed a promissory note, promising to repay Dominium the $50,000 plus interest. On June 14, 1996, NHG borrowed an additional $100,000 from Dominium. Weyrick, Slajchert, and Lynch signed another promissory note to repay the $100,000 plus interest. NHG and its principals entered into security agreements with Dominium which granted Dominium a security interest in all of NHG's assets and interests, including its interests in the Portfolio Partnerships. The promissory notes were due on August 15, 1996. On August 13, 1996, Dominium agreed to extend the repayment on the notes until August 22, 1996.
The Institutional Fund investors formed an advisory group to exercise greater oversight and direction over NHG in the management of the Institutional Fund Portfolio. Some of the Institutional Fund investors were represented by an attorney named John Simon ("Simon"). Simon and the advisory group were actively involved in the selection of a substitute for NHG as general partner of the Institutional Fund Partnerships.
On August 14, 1996, Dominium made a proposal to NHG to acquire its assets and interest in the Portfolio Partnerships. On August 15, 1996, Pinnacle submitted its own proposal to NHG entitled "Letter of Agreement." NHG did not agree to either of the proposals. On Friday, August 16, 1996, Pinnacle submitted a "Revised Letter of Agreement" to NHG. NHG and each of its principals signed the Revised Letter of Agreement. On Monday, August 19, 1996, representatives from Pinnacle called Lynch at NHG to discuss the preparation of documentation. The Revised Letter of Agreement stated:
Pinnacle Realty Management Company, or Nominee, (hereinafter referred to as "Pinnacle"), hereby commit to provide to Nationwide Housing Group and Nationwide Development Group, their affiliated entities, and limited partnerships, (hereinafter referred to as "NHG") the sum of Nine Hundred Fifty Thousand Dollars ($950,000).
The Revised Letter of Agreement included four "funding" clauses, a "personal services contract," an "exclusivity" provision, a "confidentiality" provision, and a clause which stated that "time is of the essence."
On Tuesday, August 20, 1996, Dominium delivered a revised proposal to NHG. On the same day, the Institutional Fund's advisory group met with representatives from Pinnacle and Dominium. Harrelson made a presentation on behalf of Pinnacle. Armand Brachman, Dominium's Vice President of Operations, made a presentation on behalf of Dominium. At the end of the meeting, the advisory group decided that it wanted Dominium as the new general partner of the Institutional Fund Partnerships. On August 21, 1996, the advisory group informed NHG, Dominium, and Pinnacle that it had decided in favor of Dominium.
On August 22, 1996, Pinnacle wire transferred $162,000 to the account of NHG's attorney. The wire transfer was made in connection with the Revised Letter of Agreement. On August 23, 1996, NHG sent a letter to Pinnacle stating in part: "Due to the fact that Pinnacle was unable to perform under the Revised Letter of Agreement dated August 16, 1996[,] between Pinnacle and Nationwide Housing Group, we have elected to pursue other alternatives." NHG returned the $162,000 to Pinnacle. On the same day, NHG and its three principals signed a proposal from Dominium which outlined the terms under which Dominium would acquire NHG's assets and interests and substitute for NHG as the general partner in the Portfolio Partnerships. Between August 23, 1996, and October 16, 1996, NHG and Dominium negotiated and agreed to the specific terms for Dominium to acquire NHG's assets and interests. Since October 1996, Dominium has served as the general partner of almost all of the Portfolio Partnerships and has had responsibility for the operations of the underlying real estate projects.
On August 27, 1996, Dominium filed this action requesting declaratory relief that Dominium has an enforceable contract with NHG to acquire its interests and to become the managing general partner. On August 29, 1996, Pinnacle filed suit in a California state court, moving for a temporary restraining order and preliminary injunction to enjoin NHG from transferring, selling, or disposing of its interests in the limited partnerships, and to enjoin NHG from disposing of its corporate rights, stock, or assets. The California court denied the temporary restraining order and later denied the preliminary injunction.
In October 1996, Pinnacle filed counterclaims against Dominium for declaratory relief, intentional interference with a contractual relationship, and intentional interference with a prospective contractual relationship. Pinnacle also asserted cross-claims against NHG for injunctive relief, breach of contract, breach of the implied covenant of good faith and fair dealing, and promissory estoppel. Pinnacle moved for a temporary restraining order and preliminary injunction, which motions were denied.
In October 1997, Dominium moved for summary judgment against Pinnacle. NHG joined in the motion. Dominium and NHG argued that Pinnacle did not have a valid and enforceable contract with NHG to transfer partnership interests, but merely had an agreement to negotiate a binding contract. Summary judgment was denied.
On February 23, 1998, a jury was impaneled to hear the case. At the conclusion of the seven days of trial testimony and arguments of counsel, the jury deliberated and returned a special verdict on March 5, 1998, in favor of Pinnacle. The jury determined by a preponderance of the evidence that Pinnacle and NHG entered into a valid and enforceable contract in which Pinnacle was to acquire all of NHG's partnership interests and assets, and that NHG breached its contract with Pinnacle. The jury awarded Pinnacle $18,300,000 as fair and adequate compensation for the breach. In addition to...
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Dominium Mngmnt. Serv. V. Nationwide Housing Group, CIV. 4-96-849-DSD/FLN.
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