Friedman v. Hartmann
| Decision Date | 30 March 1992 |
| Docket Number | No. 91 Civ. 1523 (PKL).,91 Civ. 1523 (PKL). |
| Citation | 787 F. Supp. 411 |
| Parties | Jay FRIEDMAN, Tamiko Shibamura, Shin Nagase, and Realty Group International (U.S.A.), Inc., Plaintiffs, v. Robert D. HARTMANN, Gerard J. Muro, William P. Farrell, Steven Witten, Joseph R. Daly, Real Estate Plus, Inc., Harley Associates, Ltd., 714 Main Associates, Colony Beach Associates, Newbrite Associates Limited Partnership, and Newbrite Associates, Defendants. Robert D. HARTMANN, Real Estate Plus, Inc., Harley Associates, Ltd., 714 Main Associates and Colony Beach Associates, Third-Party Plaintiffs, v. Kathy K. PRIEST, Snyder and Priest, and James M. O'Connor, Third-Party Defendants. |
| Court | U.S. District Court — Southern District of New York |
Marc Bogatin, New York City, for third-party plaintiffs.
D'Amato & Lynch (Robert E. Kushner, of counsel), Paul, Weiss, Rifkind, Wharton & Garrison (Max Gitter, of counsel), New York City, for third-party defendants Kathy K. Priest and Snyder & Priest.
Ohrenstein & Brown (Mark J. Bunim, of counsel), New York City, for third-party defendant James M. O'Connor.
The third-party defendants in this action have moved, pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss the third-party complaint for failure to state a claim upon which relief can be granted. For the reasons stated below, the motion of the third-party defendants is granted.
Plaintiffs have brought this action against defendants for fraud; violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-68; conspiracy to violate RICO; conversion; breach of contract; money had and received/unjust enrichment; and breach of fiduciary duty, arising out of an aborted real estate transaction. Plaintiffs seek, inter alia, compensatory damages of $600,000, treble damages under RICO, and punitive damages.
According to the complaint, at relevant times, plaintiffs Jay Friedman, Tamiko Shibamura, and Shin Nagase were the sole shareholders of plaintiff Realty Group International (U.S.A.), Inc. ("RGI"), a real estate brokerage concern. Defendant Gerard J. Muro was a licensed salesperson employed by RGI. Defendant Robert D. Hartmann ("Hartmann") had an ownership interest in defendant Real Estate Plus, Inc. ("Real Estate Plus"); had an ownership interest in and was president of defendant Harley Associates, Ltd. ("Harley Associates"); was, along with defendant Steven Witten ("Witten"), a general partner of defendant Newbrite Associates ("Newbrite"); and was a partner in defendants 714 Main Associates and Colony Beach Associates. Defendant William P. Farrell ("Farrell") was president of Real Estate Plus. Joseph R. Daly was a general partner of Newbrite Associates Limited Partnership (the "Seller"), a limited partnership existing under the laws of the State of Connecticut.
Plaintiffs allege, inter alia, that Hartmann secured their agreement to invest as limited partners in partnerships that were to purchase and develop a number of commercial properties located in Connecticut. These properties included the Newbrite Plaza shopping center, located in New Britain, Connecticut (the "Newbrite Shopping Center"). Plaintiffs allege that defendants Hartmann, 714 Main Associates, Colony Beach Associates, and Witten obtained $600,000 from plaintiffs by knowingly misrepresenting to plaintiffs material facts concerning the purchase of the Newbrite Shopping Center and by actively concealing from plaintiffs material facts concerning the purchase of the Newbrite Shopping Center. According to the complaint, on or about September 11, 1989, the Seller entered into a purchase agreement (the "purchase agreement") with defendants Hartmann and Witten, whom it described as general partners of a partnership to be formed known as Newbrite Associates, pursuant to which the Seller agreed to convey the Newbrite Shopping Center for $10.1 million. Plaintiffs claim that although the purchase agreement expressly represented that neither the Seller nor Hartmann, Witten, or Newbrite dealt with any broker in connection with the sale of the Newbrite Shopping Center other than The Beazley Company and Brooks Properties, Inc., on or about September 11, 1989 (the same day on which the purchase agreement was executed), defendant Farrell — on behalf of Real Estate Plus, of which he was president — executed a written brokerage agreement with the Seller that provided that the Seller would pay at the closing a $1 million brokerage commission to Real Estate Plus. Plaintiffs refer to this agreement as the "Secret Commission Agreement."
Plaintiffs contend that defendants Hartmann and Witten signed the "Secret Commission Agreement," guaranteeing Real Estate Plus's fulfillment of obligations under it; that defendants "actively concealed" the existence and terms of the "Secret Commission Agreement" from plaintiffs; that the existence and terms of the "Secret Commission Agreement" were material facts that defendants had a continuing duty to disclose to plaintiffs; and that this "active concealment" constituted a fraudulent concealment of material facts. According to the complaint, plaintiffs did not learn of the existence of the "Secret Commission Agreement" until approximately May 21, 1990, the day before the scheduled closing on the Newbrite Shopping Center transaction. Plaintiffs further claim that Friedman demanded, on behalf of plaintiffs, that Hartmann advise the Bell Atlantic TriCon Leasing Corporation (the "Lender")1 of the "Secret Commission Agreement," but that Hartmann refused, after which plaintiffs refused to participate in the purchase of the Newbrite Shopping Center. Plaintiffs seek, inter alia, the return of the $600,000 they paid, on the ground that they would not have executed the partnership agreement or paid the $600,000 had they known of the existence and terms of the "Secret Commission Agreement" with respect to the purchase of the Newbrite Shopping Center.
After plaintiffs commenced this action, defendants Hartmann, Real Estate Plus, Harley Associates, 714 Main Associates, and Colony Beach Associates filed and served a third-party complaint upon Kathy K. Priest ("Priest"), her law firm ("Snyder & Priest"), and James M. O'Connor ("O'Connor"). The third-party complaint asserts five claims for relief. The first, second, and third claims — for indemnity based on negligence, for indemnity based on breach of contract, and for contribution — are asserted pursuant to Fed.R.Civ.P. 14(a), on the ground that the third-party plaintiffs are entitled to indemnity or contribution from the third-party defendants for any judgment or recovery obtained by plaintiffs against the third-party plaintiffs in the main action.
The third-party plaintiffs allege that they retained the third-party defendants to provide legal advice with respect to, inter alia, the Newbrite Shopping Center transaction. The third-party plaintiffs claim that the third-party defendants specifically advised Hartmann that the $1 million brokerage commission that Real Estate Plus was to receive upon the closing of the Newbrite Shopping Center transaction did not have to be disclosed; that the third-party defendants further advised Hartmann that all appropriate disclosure had been made to the limited partners; and that Hartmann relied on this advice in structuring the transaction. The third-party plaintiffs contend that the third-party defendants were negligent in their advice to Hartmann concerning his disclosure obligations and that the negligent legal advice resulted in plaintiffs' lawsuit. The third-party plaintiffs seek to hold the third-party defendants liable for all or part of any judgment that plaintiffs obtain against the third-party plaintiffs in the main action.
The fourth and fifth claims for relief — for negligence and for breach of contract — are direct claims against the third-party defendants and are joined in this action pursuant to Fed.R.Civ.P. 18(a). The third-party complaint alleges that the third-party defendants' negligence was the proximate cause of the failure of the Newbrite Shopping Center transaction to close, resulting in the loss of funds invested in the project as well lost profits. Similarly, the third-party complaint alleges that the third-party defendants' breach of their contractual obligation to render competent legal advice caused the failure of the Newbrite Shopping Center transaction to close, thereby resulting in actual and consequential damages to the third-party plaintiffs, including lost profits.
The third-party defendants have now moved, pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss the third-party complaint for failure to state a claim upon which relief can be granted. The third-party defendants argue that (1) as to the RICO claims, the third-party plaintiffs cannot obtain contribution or indemnity because neither remedy exists under RICO; (2) as to the statelaw claims asserted by plaintiffs against defendants, defendants cannot obtain contribution or indemnity under Connecticut law for their allegedly intentional misconduct; and (3) because the impleader claims asserted pursuant to Fed.R.Civ.P. 14(a) must be dismissed for failure to state a claim upon which relief can be granted, the fourth and fifth claims for relief against the third-party defendants, which were joined pursuant to Fed.R.Civ.P. 18(a), must also be dismissed.
"In ruling on a motion to dismiss for failure to state a claim upon which relief may be granted, the court is required to accept the material facts alleged in the third-party complaint as true, and not to dismiss unless it appears beyond doubt that the third-party plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Frasier v. General Electric Co., 930 F.2d 1004, 1007 (2d Cir. 1991) (citations and quotation omitted); accord Castellano v. Board of Trustees...
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