Morin v. Trupin

• Decision Date: 13 April 1989
• Docket Number: No. 88 Civ. 5743 (RWS),88 Civ. 8464 (RWS).,88 Civ. 5743 (RWS)
• Citation: 711 F. Supp. 97
• Parties: Simeon MORIN and Delano Morin, Plaintiff, v. Barry H. TRUPIN, et al., Defendants. Stewart BLAIKIE, et al., Plaintiffs, v. Barry H. TRUPIN, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

711 F. Supp. 97

Simeon MORIN and Delano Morin, Plaintiff, v. Barry H. TRUPIN, et al., Defendants.

Stewart BLAIKIE, et al., Plaintiffs, v. Barry H. TRUPIN, et al., Defendants.

Nos. 88 Civ. 5743 (RWS), 88 Civ. 8464 (RWS).

United States District Court, S.D. New York.

April 13, 1989.

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Adler Hindy Turner & Glasser, New York City, Manning, Raab, Dealy & Strum, New York City (William J. Dealy, of counsel), for plaintiff.

Ohrenstein & Brown, New York City (Mark J. Bunim, Geoffrey W. Heineman, of counsel), for defendant Ferber Greilsheimer, Chan & Essner & Robert Chan.

Abelson Goldston & Odesser, New York City (Edward H. Odesser, of counsel), for defendants Continental Realty Corp. and Emanuel Organek.

Jackson & Nash, New York City (Victoria A. Stewart, of counsel), for defendant Jackson Cross Co.

Summit Rovins & Feldesman, New York City (John L. Amabile, of counsel), for defendants Barry H. Trupin, Bennett W. Trupin, Gerald Schaffer, Marvin Schaffer, David Kay, Herb Silverstein, The Tara Jill Trupin 1985-B Trust, RRI Realty Corp., Stuart Stern, Jerry Bills and Pass-Through Mortgage Corp.

Gaston & Snow, New York City (Eva H. Posman, Donald N. Cohen, of counsel), for defendants Laventhol & Horwath and Elliott Lesser.

Squadron, Ellenoff, Plesent & Lehrer, New York City (Ira Lee Sorkin, of counsel), for defendant Salvatore Bucci.

Meyers Tersigni Lurie Feldman & Gray, New York City, for defendant True Management Corp., Mellon Management Corp., MHT Properties, MHT Corporation, Gary D. Rogers Charterhouse Capital Investment Corp., H. Stewart Carrico II.

OPINION

SWEET, District Judge.

Defendants Ferber Greilsheimer Chan & Essner ("Ferber Greilsheimer") and Robert Chan ("Chan") (collectively the "Ferber Defendants") have moved pursuant to Rules 12(b)(1) and 12(b)(6) Fed.R.Civ.P. to dismiss the complaint of plaintiffs Simeon Morin ("Simeon") and Delano Morin ("Delano") (together, the "Morins") on the grounds that the count based on the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO") (denominated Count 3) and the common law fraud Count (denominated Count 4) fail to state claims upon which relief can be granted. The Ferber defendants have also moved pursuant to Rule 56(b) Fed.R.Civ.P. for summary judgment. Finally, the Ferber defendants have moved for sanctions pursuant to Rules 11 and 56(g) Fed.R.Civ.P. The Morins have moved pursuant to Rules 15 and 21 Fed.R.Civ.P. to amend their complaint.

In a related action, Blaikie v. Trupin ("Blaikie"), Ferber Greilsheimer, William Greilsheimer ("Greilsheimer") and Chan (collectively, the "Ferber defendants") have moved pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss plaintiffs' RICO Counts (denominated Counts 3 and 6), the common law fraud count (denominated Count 7), the tort count (denominated Count 8) and the breach of fiduciary duty count (denominated Count 20). They have also moved pursuant to Rule 56(b) for summary judgment, pursuant to 9(b) to dismiss plaintiffs' Third, Sixth, Seventh and Eighth counts, and pursuant to Rule 11 for sanctions.

Plaintiffs in both actions have moved to consolidate the actions, and defendants Continental Realty Corporation ("Continental") and Emanuel Organek ("Organek") have moved by letter motion to conduct discovery as to the identification of witnesses and production of documents relied upon by plaintiffs in making allegations in the Consolidated Complaint.

For the reasons set forth below, the motions to dismiss the claims against the Ferber defendants are granted, as are the motions to amend the complaint, to consolidate the actions and to conduct discovery. The motion for sanctions is denied.

The Morin Action

The Parties and The Complaint

Ferber Greilsheimer is a New York City law firm. Chan is a member of Ferber Greilsheimer. The Morins are investors in Rothschild Realty Partners 130 Series ("Rothschild Realty" or the "Investor Partnerships").

The Complaint alleges that in November, 1985, Simeon purchased 5.75 units in Rothschild Realty in the face amount of $1,006,250. That same month, Delano purchased 2.75 units in the face amount of $467,500. In connection with these investments, the Morins executed promissory notes (the "Notes"). Between July 1986 and December 31, 1986, the Morins made payments of $345,000 on the Notes to Rothschild Realty.

According to the Complaint, the Investor Partnerships owned limited partnership interests in three organizations: Dallas Realty Associates, which owned commercial real estate in Dallas, Texas (the "Dallas Property"), Lincoln Center Associates, which owned commercial real estate in Indianapolis, Indiana (the "Indianapolis Property"), and the Mutual Home Bank Building Partnership which owned commercial real estate in Grand Rapids, Michigan (the "Grand Rapids Property") (collectively, the "Properties").

The Complaint alleges that the Morins have been defrauded in connection with their investment in the Partnerships. Principally, it alleges that the Properties were sold and resold among entities controlled by Barry Trupin at inflated prices; that the private placement memoranda for the Partnerships contained fraudulent information; that appraisals of the Properties were inflated; that financial forecasts for the Investor Partnerships were fraudulent; that tax opinions were false; and that adverse information concerning the Properties was covered up.

On August 17, 1988, the Morins brought suit against thirty-seven defendants including the general partner of the Partnerships, the promoters of the offering of Partnership interests and their affiliates, control persons, officers, sales people, successors in interest, known employees, lawyers who worked on the offering memorandum, accountants, and appraisal companies. The defendants are accused, inter alia, of issuing private placement memoranda in a series of real estate tax shelters involving defendant Barry Trupin ("Trupin") and others which contained material misstatements and omissions of fact.

The Ferber Defendants are alleged to have acted as "litigation counsel" to the Partnership after the Morins made their investments. They are charged in Count 3 with violations of RICO and in Count 4 with common law fraud, and are alleged to have known about the fraud in the investment because of their activities as counsel to various entities involved in the deals, as personal counsel to Trupin, and as litigation counsel.

Although the Complaint is lengthy, the charges against the Ferber defendants are set forth in the following paragraphs:

64. Ferber Greilsheimer, acting through Robert Chan and other members or associates of such firm, acted as litigation counsel to the Investor Partnerships and American Realty Associates, for the benefit and at the direction of Barry Trupin, in seeking to collect on Investor Notes ... notwithstanding the fact that Ferber Greilsheimer knew or must have known that, as a result of the misrepresentations and omissions described herein, the makers of such Investor Notes had full and complete defenses to the payment thereof.

192. Defendants acting on behalf of Barry Trupin, including ... Ferber Greilsheimer have made constant and repeated efforts to collect sums purportedly owing in connection with the Investor Notes, knowing that the proceeds of such efforts would be paid, and were paid, to Barry Trupin and/or his affiliates and knowing that the makers of such notes had complete defenses thereto.

195. Ferber Greilsheimer acted as litigation counsel for the Investor Partnerships, American Realty Associates, Charterhouse, and other entities controlled by Barry Trupin in collecting, or seeking to collect, sums pursuant to the Investor Notes, and has instituted numerous lawsuits, including actions on behalf of American Realty Associates against the Morins, in furtherance thereof.

196. In or about July, 1986, as a result of demands made by Ferber Greilsheimer, the Morins attended a meeting at the offices of Ferber Greilsheimer, at which Robert Chan, purportedly acting on behalf of Rothschild Realty Partners 130.11, falsely represented to the Morins that their notes were valid, fully enforceable and subject to no defenses. Neither he nor anyone else acting on behalf of Barry Trupin made any disclosure of any of the problems that had arisen in connection with the Properties, as to none of which the Morins had any knowledge....

197. ... in reliance on the representations made in the July, 1986 meeting, and as a result of the wilful failure of Ferber Greilsheimer and other defendants to disclose the true facts concerning the subject transactions, the Morins made payments to Rothschild Realty Partners 130.11 of approximately $345,000 during the period from July, 1986 to December 31, 1986.

198. Subsequently, the Morins refused to make payments in respect of their Notes, because of their inability to receive information concerning their investment.... On October 1, 1987, Ferber Greilsheimer (Robert Chan) wrote to the plaintiffs by letter sent via the federal mails, and demanded payment on their Notes. Ferber Greilsheimer advised the plaintiffs that it was counsel to American Realty Associates and that American Realty Associates was "the holder" of their Notes. On information and belief, American Realty Associates was not the holder of the Notes. Ferber Greilsheimer knew but purposefully failed to disclose the facts as to what had occurred with respect to the Owning Partnerships, the Acquiring Partnerships and the Properties.

199. All such actions to enforce the Investor Notes have been and are a continuing and essential element of the ongoing scheme to defraud the makers of such notes.

241. Ferber Greilsheimer, acting through defendant Robert Chan and other members or associates of the firm ... has acted as attorneys for members of the Rothschild Group for several years. It was listed on a Rothschild Reserve corporate brochure in 1982 as

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