General Development Corp. v. Binstein, Civ. A. No. 89-3820.

CourtUnited States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
Writing for the CourtHAROLD A. ACKERMAN
Citation743 F. Supp. 1115
PartiesGENERAL DEVELOPMENT CORPORATION, Plaintiff, v. Mark P. BINSTEIN and Richard Joel, Defendants.
Docket NumberCiv. A. No. 89-3820.
Decision Date30 July 1990

743 F. Supp. 1115

GENERAL DEVELOPMENT CORPORATION, Plaintiff,
v.
Mark P. BINSTEIN and Richard Joel, Defendants.

Civ. A. No. 89-3820.

United States District Court, D. New Jersey.

July 30, 1990.


743 F. Supp. 1116
COPYRIGHT MATERIAL OMITTED
743 F. Supp. 1117
Nicholas deB. Katzenbach, Riker, Danzig, Scherer, Hyland & Perretti, Morristown, N.J., Joseph L. Buckley, Sills, Cummis, Zuckerman, Radin, Tischman, Epstein and Gross, P.A., Newark, N.J., Steven M. Edwards, Davis, Markel & Edwards, Paul M. Dodyk, Cravath, Swaine & Moore, New York City, for plaintiff

Mark P. Binstein, Oradell, N.J., Donald J. Williamson, Williamson & Rehill, Westwood, N.J., Herbert Deutsch, Deutsch and Frey, New York City, for defendants.

OPINION

HAROLD A. ACKERMAN, District Judge.

On October 27, 1988, General Development Corporation ("GDC") filed this action lying in diversity in the United States District Court for the Southern District of New York against Mr. Mark P. Binstein and Richard Joel, Esq., complaining of defamation, false disparagement of product and injurious falsehood on Mr. Binstein's part, and tortious interference with contract and/or prospective economic advantage; certain violations of New York, New Jersey, Massachusetts, and Connecticut statutes prohibiting deceptive business or trade practices; and violations of these same states' statutes and ethical rules prohibiting solicitation of litigation on both defendants' parts. In its complaint, GDC requested (1) injunctive relief prohibiting the defendants from engaging in improper solicitation through false and misleading statements and requiring them to refund any and all retainers received from their clients; (2) monetary damages for the injury to GDC's business, reputation, and loss of goodwill; (3) monetary damages for the injuries to GDC's actual or prospective contractual relationships; (4) punitive damages; and (5) counsel fees and costs. On September 5, 1989, the parties consented to transfer the action to the United States District Court for the District of New Jersey. On September 15, 1989, the clerk of

743 F. Supp. 1118
the court assigned the matter to me. Before me now are a battery of motions — namely, (1) the defendants' motion for summary judgment dismissing the complaint based on the doctrines of (a) unclean hands, (b) collateral estoppel and (c) standing; (2) the defendant motion for a dismissal with prejudice under Fed.R.Civ.P. 41; (3) the plaintiff GDC's motion for a dismissal without prejudice under Fed.R.Civ.P. 41(a); (4) the defendant Binstein's motion to compel discovery; and (5) the parties' cross-motions for Rule 11 sanctions. I heard the parties argue these matters to me on June 29, 1990. It is understatement to say that the parties have had a full and fair opportunity to provide the court with evidentiary submissions and briefing in support of their respective positions. I now am prepared to render a decision

BACKGROUND

The background of this action is involved. GDC is a corporation incorporated in Delaware. GDC has its principal executive offices in Miami, Florida (complaint para. 4). GDC develops planned communities in Florida. It appears, from the complaint, that GDC is involved in developing communities in Port St. Lucie, Vero Beach/Vero Beach Highlands, Sebastian Highlands, Port Malabar, Port St. John, Silver Spring Shores, Julington Creek, Port LaBelle and Port Charlotte/North Port/Myakka Estates, Florida. In developing these communities, GDC purchases land, plats the land for sale, constructs roads and drainage, water, and sewer facilities, designs and builds houses, assists in the development of commercial sites, makes land available for parks and recreation areas and provides certain services, including mortgage financing, real estate agency, and property management services, and obviously sells what it develops (see id. para. 5). At issue in this litigation is the quality of the "North Port" subdivision in Sarasota County, Florida. Defendant Binstein organized hundreds of individuals who have bought property primarily in North Port to sue GDC based on alleged federal RICO violations, securities fraud violations, and other fraudulent acts. See Rolo v. General Development Corp., Civ. A. No. 89-3373(xx)(HAA). In a nutshell, the amended complaint alleged that GDC

devised false and fraudulent representations concerning, among other things, the investment value of the real estate it was peddling, the date of completion of improvements, the types of improvements that would be made, the costs of improvements, the relationship of GDC to its many subsidiaries which permitted self-dealing and multiple dipping, the role of GDC as a developer, past and current appreciation of property at North Port and other GDC subdivisions, GDC's maintenance of improvements to plaintiff's property, the willingness or ability of the City of North Port and other municipal bodies to maintain improvements in GDC developments, such as paved roads and drainage, the availability of rentals, and the demand for building lots ("homesites") in North Port and other GDC areas, the resale results and possibilities for these "homesite" lots, the number of lots GDC would plat and continue to sell (more than 200,000 platted and sold at North Port and GDC's adjoining Port Charlotte subdivision), economic and environmental restrictions and impediments to improving North Port lots and GDC's other subdivisions, the only conditions under which the City of North Port will accept or maintain lots sold by GDC in North Port, the number of lots which GDC did, can/or will improve with central water and sewers, the problems of obtaining permits for central water and sewerage and the costs of same, the flood prone conditions at GDC developments such as North Port, the availability of refunds to out of state purchasers of property at North Port, the market value of lots and their saleability sic, the availability of improved lots to exchange, and the other facts why North Port lots and GDC's eight Florida subdivisions cannot become fully improved or marketable homesites for many, many years, if ever, and the fact that fifty-eight (58%) percent of the lot purchasers
743 F. Supp. 1119
eventually default on their contract purchases.

(Rolo Complaint para. 4). Further, the Rolo plaintiffs alleged that GDC

omitted the disclosure of material facts and conditions concerning GDC, North Port, GDC's eight (8) other massive Florida subdivisions, the value and demand for the lots and GDC homes and condos at North Port and its other subdivisions, the limited nature of the residential "core" or "model city" area at North Port and its other subdivisions; the marketability of lots and homes, the availability of rentals, the false inflation of home and lot appraisal values and the self-dealing between GDC and its subsidiaries from the date of initial sales through the closing to present.

(Id. para. 5). Based on these alleged misdeeds, the Rolo plaintiffs contended that GDC "bilked" them out of their purchase money and left them with near worthless and unmarketable lots (see id.).

Prefatory to the Rolo litigation, it appears that Mr. Binstein solicited interested individuals to sue GDC under the aegis of the "North Port Out of State Lot Owners Association" (the "Association"). It is Mr. Binstein's communications with these individuals which forms the basis for a large part of the instant litigation. In this regard, it appears from the allegations in the complaint that Mr. Binstein initially communicated with purchasers of North Port homesites who resided in New York, Connecticut, Massachusetts and New Jersey by way of a form letter. GDC attached one of the letters, specifically the one sent to New Jersey residents, as Exhibit A to its complaint.

This letter reported that the property owned by these individuals was virtually worthless as an investment and would remain unimproved despite GDC's representations or guarantees to the contrary (complaint exh. A). The letter provided "some of the many reasons" for the Association's thesis. Those reasons were that:

(1) GDC failed to pave roads and provide drainage as guaranteed and failed to maintain roads and drainage canals for certain lots;
(2) The failure to maintain articulated in number one above caused "impassable and hardly recognizable" roads and "endless flooding;"
(3) GDC "never had plans or permits to fully improve the lots and environmental and other restrictions at North Port could prevent utilities and services from ever being completed" or available to the individual lot owners;
(4) If paved roads were indeed extended to the properties, North Port would not maintain them until 80% of the lots were improved. According to the Association, this meant that at the past and current growth rate "and building demand at Port Charlotte and North Port, we will have no roads accepted or maintained for more than 300 years." "One reason for this outrageous fact is that North Port is quite low and wet land and unsuitable for intensive development because of potential for flooding and its need for extensive drainage;"
(5) GDC "at North Port and Port Charlotte platted and sold approximately 200,000 lots and, at the past and current rate of growth and demand for building lots there, it would take at least 300 years for our lots to become fully improved or marketable as those in tiny `core' area;"
(6) "In more than 20 years, GDC improved less than 10% of lots sold at North Port and Port Charlotte with central water and sewers;"
(7) "The platting and selling of lots by GDC at North Port was not phased to coincide with any expected rate of occupancy, and GDC's policy of selling lots to tens of thousands of persons for investment, with no intent to build was the surest way to guarantee that overwhelming majority of lots would remain unimproved and have little or no resale value for centuries, if ever;"
(8) "While GDC represented that lots it was selling at
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