Mason Tenders Dist. Council Pension Fund v. Messera
| Decision Date | 26 March 1997 |
| Docket Number | No. 95 Civ. 9341(RWS).,95 Civ. 9341(RWS). |
| Citation | 958 F.Supp. 869 |
| Parties | MASON TENDERS DISTRICT COUNCIL PENSION FUND, et al., Plaintiffs, v. James MESSERA, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Proskauer Rose Goetz & Mendelsohn, New York City (Myron D. Rumeld, Nancy Kilson, of counsel), for Plaintiffs.
Vedder, Price, Kaufman, Kammholz & Day, Levin & Weissman and Roger Levin, New York City (John H. Eickemeyer, Neil A. Capobianco, Taryn V. Shelton, of counsel), for Defendants.
Ohrenstein & Brown, Cunningham & Lee and Gerard Cunningham, New York City (Christopher B. Hitchcock, Philip Touitou, of counsel), for Defendants.
Kramer, Levin, Naftalis & Frankel, Joseph Albanese and Albanese, Albanese & Fiore, New York City (Philip S. Kaufman, Marjorie E. Sheldon, of counsel), for Defendants.
Defendants Roger Levin ("Levin") and Levin & Weissman ("L & W") (collectively, the "Levin Defendants") have moved pursuant to Rule 12(b)(6), Fed.R.Civ.P. to dismiss all of the claims asserted against them by plaintiffs, the Mason Tenders' District Council Trust Funds (the "Funds").1 The Funds have cross-moved for summary judgment pursuant to Rule 56, Fed.R.Civ.P., with respect to their claims for breach of fiduciary duty.
Defendants Joseph Albanese ("Albanese") and Albanese, Albanese & Fiore ("AA & F") (collectively, the "Albanese Defendants") have moved for summary judgment dismissing the claims against them.
Defendants Gerard Cunningham ("Cunningham") and Cunningham & Lee ("C & L") (collectively, the "Cunningham Defendants") have moved for partial summary judgment dismissing certain of the legal malpractice claims against them.
For the reasons set forth below, the Funds' motion for summary judgment will be denied; the Levin Defendants' motion to dismiss will be granted in part and denied in part; the Albanese Defendants' motion for summary judgment will be granted; and the Cunningham Defendants' motion for partial summary judgment will be granted in part and denied in part.
The parties, prior proceedings and facts in this action have been fully set forth in two prior opinions of the court, familiarity with which is assumed. See Mason Tenders District Council Pension Fund v. James Messera, 1996 WL 351250 (S.D.N.Y. June 26, 1996); Mason Tenders District Council Pension Fund v. James Messera, 1996 WL 578048 (S.D.N.Y. Oct.8, 1996). The facts relevant to the instant motions are set forth below.
The Funds consist of various "employee pension benefit plans" or "employee welfare benefit plans" within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1002(3). The Funds provide benefits to members of local unions affiliated with the Laborers' International Union of North America ("LIUNA"), which local unions together comprise the Mason Tenders' District Council of Greater New York (the "District Council"). The Funds are administered by the District Council and contributing employers in the industry.
Defendants Cunningham, Levin and Albanese are attorneys and Defendants C & L, L & W and AA & F are their respective law firms.
The Funds are trust funds established under the auspices of the District Council which have provided benefit plans to the members of the Mason Tenders' local unions which are organized as part of LIUNA. The District Council, the governing body of the local unions, entered into a consent decree on December 27, 1994 in a civil action, U.S. v. Mason Tenders District Council, 94 Civ. 6487(RWS), brought by the Government against it alleging violations of the Racketeer Influenced and Corrupt Organization Act ("RICO"), including certain improprieties with respect to the administration of the Funds.
On November 2, 1995, this action was commenced, pleading eighty-four causes of action against nearly fifty separate defendants. The gravamina of this action are the first four claims, which plead violations of 18 U.S.C. §§ 1962(b) and of RICO, and of 18 U.S.C. § 1962(d), conspiracy to violate 18 U.S.C. § 1962(b) and (c). The remaining causes of action allege various statutory and common law claims.
The Levin Defendants' motion to dismiss was filed on April 22, 1996. Thereafter, the Funds cross-moved for partial summary judgment. Oral argument on both motions was heard on October 2, 1996. The Court received further submissions through December 12, 1996, at which time the motions were deemed fully submitted.
The Albanese Defendants' motion for summary judgment was filed on October 22, 1996. Oral argument was heard on February 5, 1997, at which time the motion was deemed fully submitted.
On August 20, 1996, the Funds moved to amend the complaint to add the Cunningham Defendants. The motion was granted on September 23, 1996, and the Amended Complaint (hereinafter, the "Complaint") was filed on October 2, 1996. The Cunningham Defendants' motion to dismiss was filed on November 22, 1996. Oral argument was heard on March 5, 1997, at which time the motion was deemed fully submitted.
The Complaint alleges that between November 1989 and February 1990, the Funds purchased eight properties in Brooklyn, New York (the "Brooklyn Properties") based on "false and fraudulent real estate appraisals that grossly inflated the true value" of these properties. The Brooklyn Properties were purchased from a member of the Genovese Organized Crime Family, Charles Trentacosta, and Trentacosta made a profit of $1,341,903.05 in the transaction.
At around the same time, the Funds were the victim of a separate fraudulent transaction involving a property located at 32-36 West 18th Street (the "18th Street Building"). The Complaint alleges that in December 1989, defendant Ronald Miceli, now a convicted racketeer, arranged to purchase the 18th Street Building for $7,465,000. Miceli obtained a $15,850,000 loan from the Pension Fund in February 1990 in order to purchase the Building. As security for the loan, the Pension Fund obtained a mortgage on the 18th Street Building and on another piece of commercial property owned by Miceli in Long Island, New York. The loan had previously been discussed at a Trustees meeting held on December 6, 1989, and its consummation was reported to the Trustees by the Funds' real estate counsel at a subsequent meeting held on March 8, 1990. The minutes of that meeting show that there was discussion concerning the transaction, including an inquiry as to whether there were limitations in the Trust documents on the percentage of Pension Fund assets that could be invested in real estate. There is no indication in these minutes or any subsequent minutes that any of the attorneys present responded to that inquiry.
On the same date Miceli procured the loan, he purchased the building for $7,465,000. Approximately eight months later, at a Trustees meeting conducted on November 13, 1990, the Trustees approved the Pension Fund's purchase of the 18th Street Building from Miceli for $24 million. There is no evidence of any explanation as to why the property was purchased for nearly $10 million more than the amount of the loan made nine months earlier, and about $16.5 million more than the price Miceli had obtained. Nor is there any evidence to suggest that any inquiry was made into the existence of appraisals that would justify the $24 million purchase price.
Furthermore, there is no evidence in the Trustees Meeting minutes to suggest that any of the professionals alerted the Trustees to the fact that their fiduciary liability policy contained an exclusion which stated: "coverage as provided hereunder shall apply to an investment by the Fund in real estate and/or mortgage that is: ... specifically directed or approved by and managed by a Qualified Professional Asset Manager (`QPAM')."
Shortly before the loan transaction in February, the Fund had obtained three appraisals on the 18th Street Building. Two of the appraisals valued the property at approximately $15,900,000, while the third valued it at only $8,300,000. The third appraisal also noted that the property had been purchased just two years earlier for only $7.7 million. As of October 1993, the 18th Street Building was valued at $5 million, notwithstanding the fact that the Pension Fund had by then invested several million dollars in renovating the site, over and above the $24 million purchase price.
In the related civil action filed by the Government, this Court granted summary judgment against two of the Funds' former Trustees, Joseph Fater and James Lupo, finding that they had breached their fiduciary duties in connection with the purchase of the 18th Street Building. See United States v. Mason Tenders District Council, 909 F.Supp. 882, 887 (S.D.N.Y.1995). The Court entered a judgment in the amount of $16,535,000 for losses associated with the purchase of the 18th Street Building.2
A third fraudulent real estate transaction occurred with respect to a property located at 6060 Indian Creek Drive, Miami Beach, Florida (the "Indian Creek Property"). The Complaint alleges that in 1987, one of the Funds purchased the Indian Creek Property from the mother of defendant James Messera a "capo" in the Genovese Organized Crime Family and now a convicted racketeer. The $1.45 million purchase price paid by the Welfare Fund was allegedly twice the property's appraised value.
Another of the transactions addressed by the Complaint relates to the renovation of the 18th Street Building following its purchase by one of the Funds, and a subsequent lawsuit with the contractor over payment for the work. The Complaint alleges that after the Pension Fund bought the 18th Street Building in 1990, it spent $5.62 million to renovate the property although the property's market value was thereafter appraised at only $5 million. It is...
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