Kilbride Invs. Ltd. v. Cushman & Wakefield of Pa., Inc.

• Citation: 294 F.Supp.3d 369
• Decision Date: 16 February 2018
• Docket Number: CIVIL ACTION NO. 13–5195
• Parties: KILBRIDE INVESTMENTS LIMITED, Busystore Limited in Liquidation, and Bergfeld Co. Limited, Plaintiffs, v. CUSHMAN & WAKEFIELD OF PENNSYLVANIA, INC., Blank Rome LLP, and Cozen O'Connor, P.C., Defendants, and Cushman & Wakefield of Pennsylvania, Inc., Third Party Plaintiff, v. Chaim Zev Leifer, Haskel Kish and JFK Blvd. Acquisition G.P., LLC, Third Party Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

294 F.Supp.3d 369

KILBRIDE INVESTMENTS LIMITED, Busystore Limited in Liquidation, and Bergfeld Co. Limited, Plaintiffs,

v.CUSHMAN & WAKEFIELD OF PENNSYLVANIA, INC., Blank Rome LLP, and Cozen O'Connor, P.C., Defendants,andCushman & Wakefield of Pennsylvania, Inc., Third Party Plaintiff,

v.Chaim Zev Leifer, Haskel Kish and JFK Blvd. Acquisition G.P., LLC, Third Party Defendants.

CIVIL ACTION NO. 13–5195

United States District Court, E.D. Pennsylvania.

Signed February 16, 2018

Filed February 20, 2018

Brett D. Dockwell, Danielle Caroline Lesser, Morrison Cohen LLP, New York, NY, Mary Kay Brown, Jami B. Nimeroff, Raymond McGarry, Brown McGarry Nimeroff LLC, Philadelpia, PA, for Plaintiffs.

Jayne Risk, DLA Piper Rudnick Gray Cary US, LLP, Justin Edward Kerner, Nathan P. Heller, DLA Piper LLP, John G. Harkins, Jr., Dawn Michele Sigyarto, Harkins Cunningham LLP, Ira A. Rosenau, Paige M. Willan, William A. Harvey, Matthew J. Borger, Klehr Harrison Harvey Branzburg L.L.P., Philadelphia, PA, for Defendants.

MEMORANDUM

DuBois, District Judge

I. INTRODUCTION

This is a fraud case in which Kilbride Investments Limited, Busystore Limited, and Bergfeld Co. Limited (collectively, "plaintiffs"), allege that defendants, Cushman & Wakefield of Pennsylvania, Inc. ("C & W"), Blank Rome LLP ("Blank Rome"), and Cozen O'Conner, P.C. ("Cozen"),¹ induced them into investing at least $27 million in a real-estate development project called "River City," in Philadelphia, Pennsylvania, by fraudulently misrepresenting the applicable zoning restrictions, the feasibility of the project, and the valuation of the real estate.

Before the Court are two Motions for Summary Judgment filed by defendant Cozen O'Connor and Cushman & Wakefield, and four Daubert Motions filed by plaintiffs and defendants. This Memorandum addresses Cozen's Motion for Summary Judgment. For the reasons that follow, Cozen's Motion for Summary Judgment is granted in part and denied in part.

II. BACKGROUND

A. Naselsky's Work at Cozen O'Connor

The River City Property consisted of 8.2 acres, divided into five parcels located along JFK Boulevard in Philadelphia, Pennsylvania. Def. Cozen's Statement of Undisputed Material Fact in Supp. Mot. Summ. J. ¶ 8 ("Cozen's SOF") (Document No. 117, filed April 17, 2017). In the spring of 2006, Ravinder Chawla and Richard Zeghibe developed a plan to purchase and flip the River City Property. Pls.' Counterstatement of Material Facts in Opp. to Mot. Summ. J., ¶¶ 36–40 ("Pls.' SOF") (Document No. 149, filed May 24, 2017). On or about March 14, 2006, Chawla and Zeghibe, through their entities, World Acquisition Partners Corporation ("WAP")² and Patriot Properties, Inc. ("Patriot),³ retained real estate attorney Charles Naselsky of Cozen O'Connor to represent them in connection with the acquisition of the River City Property. Id. at ¶¶¶ 2,3, 6.⁴

Naselsky formed an entity called JFK BLVD Acquisition GP, LLC ("JFK Blvd."), on or about March 30, 2006, for the purpose of purchasing the River City Property from its owner at that time, R & F Penn Associates, L.P. ("R & F Penn"). Cozen SOF ¶¶ 8, 9; Pls' SOF, Ex. PSJX–11, Deposition of Andrew Teitleman, 40: 14–21. Naselsky drafted an agreement of sale, executed by R & F Penn and Zeghibe as the managing member of JFK Blvd., on May 12, 2006, providing for the sale of the River City Property to JFK Blvd. for $32.5 million. Cozen SOF ¶ 10; Pls.' SOF ¶ 67. Architect James Rappoport was also hired to design a development concept for the property to attract prospective investors. Cozen SOF ¶ 18; Pls.' SOF ¶ 76.

In May 2006, Naselsky engaged Cushman & Wakefield ("C & W") to appraise the River City Property. Cozen SOF ¶ 11; Pls.' SOF ¶ 113. On May 18, 2006, Gerald McNamara, one of the appraisers at C & W, emailed a draft engagement letter to Naselsky in connection with the appraisal of the River City Property. Pls.' SOF ¶ 118. Naselsky responded to the draft engagement letter with proposed edits, which included changing the client name from Cozen O'Conner to "JFK Acquisition G.P., LLC"⁵ and expanding the intended users section of the appraisal to include, not just the client, but "its professionals, investors and potential lenders." Pls.' SOF ¶¶ 126–28, 130.

C & W issued a draft appraisal on June 23, 2006, which appraised the property at $57 million. Pls.' SOF ¶ 140; Cozen SOF ¶ 30. The June 2006 draft appraisal stated that the River City Property "is currently reported to be under a contract of sale, dated January 2006, for a reported consideration of $50,000,000." Cozen SOF ¶ 31; Pls.' SOF ¶ 142. The June 2006 draft appraisal misstated both the sale price and date of the contract between JFK Blvd. and R & F Penn; the contract was executed in May 2006, not January 2006, and the sale price was $32.5 million, not $50 million.

Upon receipt of the June 2006 draft appraisal, Chawla emailed Naselsky instructing him to: "Please do your magic and push the value over $100 million." Cozen SOF, Ex. 23, Email from Ravinder Chawla to Charles Naselsky and Richard Zeghibe; Pls.' SOF ¶ 158. Zeghibe also provided feedback with respect to the June 2006 draft appraisal and expressed his belief that the appraised value should be higher given the River City Property's development potential. Cozen SOF, Ex. 24, Email from Richard Zeghibe to Charles Naselsky and Ravi Chawla.

Naselsky emailed McNamara on July 4, 2006, expressing concern about the $57 million figure in the June 2006 draft appraisal, stating: "[i]n essence, the number is conveniently close to the contract price where the factors that need to go into play for a development assemblage of this type seem to be missing." Pls.' SOF ¶ 170. On July 10, 2006, Naselsky met with Daniel McNeil, the C & W employee who drafted the June 2006 draft appraisal, to discuss his concerns. Id. at ¶ 172; Cozen SOF ¶ 34. Ten days later, McNeil submitted a revised draft appraisal ("the July 2006 draft appraisal") of the River City Property with a new appraised value of $77 million. Pls.' SOF ¶ 191; Cozen SOF ¶ 36. The July 2006 draft appraisal again listed the sale price of the property between R & F Penn and JFK Blvd. as $50 million, not the actual sale price of $32.5 million. Pls.' SOF ¶ 192.

On June 27, 2006, Naselsky emailed Zeghibe and Chawla, attaching an "Agreement of Sale" by which JFK Blvd. was to sell the River City Property to WAP for $50 million. Pls.' SOF, Ex. P–132; Cozen SOF ¶ 22. According to plaintiffs, the transaction never occurred. Instead, the purported transaction was an "internal flip" used to "increase[ ] valuations based on agreements of sale that were never intended to close." Pls.' SOF ¶ 220.

Naselsky left his employment with Cozen on July 28, 2006. Cozen SOF ¶ 4. On July 31, 2006, Naselsky commenced employment with Blank Rome LLP ("Blank Rome"). Id. ¶ 5. In his role at Blank Rome, Naselsky continued to work with Chawla and Zeghibe on the River City Property. Pls.' SOF ¶ 234.

B. Post–Cozen: The Proposed Zoning Ordinance, and Eli Weinstein

On August 7, 2006, Naselsky received an email from Chawla notifying him that the City Council had passed a Proposed Zoning Ordinance.⁶ Cozen SOF ¶ 53. Shortly before Chawla and Zeghibe began working to acquire the River City Property in the spring of 2006, the Philadelphia City Council introduced Bill No. 060292, titled "An ordinance amending Section 14–1611 of the Philadelphia Code, entitled ‘Benjamin Franklin Parkway Controls,’ " (the "Proposed Zoning Ordinance"). Cozen SOF ¶ 43. On May 25, 2006, the Proposed Zoning Ordinance was amended to expand the territory impacted to include two of the five parcels of the River City Property.⁷ Id. ¶ 49. The Proposed Zoning Ordinance, passed by the Philadelphia City Council on June 8, 2006, imposed a height limit of 125 feet on the impacted territory, including two of the five River City Property parcels. Id. ¶ 48.

Despite the height limitations imposed by the Proposed Zoning Ordinance, Chawla and Zeghibe solicited investors to purchase the River City Property. On August 29, 2006, Chawla and Zeghibe met with Eli Weinstein, who expressed an interest in purchasing the River City Property. Cozen SOF ¶ 68; Pls.' SOF ¶ 291. Weinstein was a real estate investor who lived in Lakewood, New Jersey and is a member of the Orthodox Jewish community there. Cozen SOF ¶ 67.

On September 26, 2006, Weinstein agreed to purchase the River City Property for $70 million. Cozen SOF ¶ 69, ex. 47, "Nominee Agreement between World Acquisition Partners Corp. and Eli Weinstein"; Pls.' SOF ¶ 296.⁸ Weinstein sought potential investors in the River City Property, including Berish Berger. Cozen SOF ¶ 106. Berger is a real estate investor who lives in London, and is a member of the Orthodox Jewish community there. Id. at ¶¶ 82, 83. On December 6, 2006, Berger was present at a meeting in Philadelphia attended by Weinstein, Chawla, and Rappoport,⁹ at which Rappoport presented his designs for the River City Property. Pls' SOF ¶ 407; Cozen SOF ¶ 113. Following the December 6, 2006, meeting, Berger received a copy of the C & W appraisal which valued the River City Property at $77 million. Cozen SOF ¶ 117; Pls.' SOF ¶¶ 427–29. Berger agreed to partner with Weinstein to purchase the River City property. Cozen SOF ¶ 120.

On December 18, 2006, plaintiff Kilbride, a discretionary family trust established by Berger's father, sent $12 million to Montgomery Abstract Company, a title company which held funds for the purchase of the River City Property. Cozen SOF ¶¶ 84, 121; Pls.' SOF ¶ 451. Upon Berger's request, plaintiff Busystore Limited, a United Kingdom company formed by Berger and his wife to conduct real estate business, wired $9.5 million to Weinstein and his entity, Pine Projects LLC. Pls.' SOF ¶ 455. On January 19, 2007, plaintiff Bergfeld, a real estate company of which Berger is one of nine directors,¹⁰ wired $5 million to Pine Projects. Cozen SOF ¶ 137; Pls.' SOF ¶ 479.¹¹

Berger later discovered that Weinstein had misappropriated the funds sent to...