N. Penn Towns, LP v. Concert Golf Partners, LLC

• Decision Date: 12 August 2021
• Docket Number: Civil Action No. 19-4540-KSM
• Citation: 554 F.Supp.3d 665
• Parties: NORTH PENN TOWNS, LP, directly and as assignee of Philmont Country Club, Plaintiff, v. CONCERT GOLF PARTNERS, LLC, et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

554 F.Supp.3d 665

NORTH PENN TOWNS, LP, directly and as assignee of Philmont Country Club, Plaintiff,

v.CONCERT GOLF PARTNERS, LLC, et al., Defendants.

Civil Action No. 19-4540-KSM

United States District Court, E.D. Pennsylvania.

Filed August 12, 2021

David Ryan Scott, Kandis L. Kovalsky, Michael Weinert, Edward T. Kang, Kang Haggerty & Fetbroyt LLC, Philadelphia, PA, for Plaintiff.

Walter Weir, Jr., Gina M. Stowe, Susan M. Verbonitz, Weir & Partners LLP, Philadelphia, PA, for Defendants Concert Golf Partners, LLC, Peter Nanula.

Cory Mitchell Gray, Greenberg Traurig LLP, Florham Park, NJ, George J. Farrell, Greenberg Traurig, Gina M. Stowe, Walter Weir, Jr., Weir & Partners LLP, Philadelphia, PA, Gregory J. Casas, Greenberg Traurig LLP, Austin, TX, for Defendants Ridgewood Real Estate Partners, LLC, Michael Plotnick.

Cory Mitchell Gray, Greenberg Traurig LLP, Florham Park, NJ, George J. Farrell, Greenberg Traurig, Walter Weir, Jr., Weir & Partners LLP, Philadelphia, PA, Gregory J. Casas, Greenberg Traurig LLP, Austin, TX, for Defendant Jonathan Grebow.

MEMORANDUM

Marston, District Judge

As part of the fallout of a botched real estate transaction, Plaintiff North Penn Towns, L.P. ("NPT"), directly and as assignee of Philmont Country Club ("PCC"), has sued Defendants Concert Golf Partners, LLC ("CGP"), Concert Philmont, LLC, Concert Philmont Properties LLC, and Peter Nanula (collectively, "the Concert Defendants") and Ridgewood Real Estate Partners, LLC ("Ridgewood"), Ridgewood Philmont, LLC, Jonathan Grebow, and Michael Plotnick (collectively, the "Ridgewood Defendants") for fraud, breach of contract, conspiracy, and violations of federal antitrust law. (Doc. No. 1.)

The Concert Defendants and Ridgewood Defendants filed a joint motion to dismiss, arguing that NPT cannot bring claims as an assignee of PCC; that NPT fails to state an antitrust claim because it, among other things, does not define a relevant market in which competition has been harmed; and that NPT did not satisfy the heightened pleading standard for fraud claims. (Doc. Nos. 13, 21.) NPT opposed the motion. (Doc. Nos. 17, 22, 33.) The Court held oral argument on the motion on July 22, 2021.

For the reasons that follow, the Court grants in part and denies in part Defendants’ motion.

I. Factual Background

A. PCC Decides to Sell Part of Its Property to Raise Money for Improvement Projects

PCC operated a member-owned country club ("Philmont Club") located in Huntington Valley, Pennsylvania.¹ (Doc. No. 1 at ¶ 28.) Founded in 1906, Philmont Club boasted many amenities, including two 18-hole golf courses (the "North Course" and the "South Course"), tennis courts, a swimming pool, and a clubhouse. (Id. at ¶ 29.) However, in the early 2000s, PCC "found itself in poor financial and physical shape." (Id. at ¶ 30.) Because it needed to raise money to improve Philmont Club's facilities, PCC decided to sell nine of the South Course's eighteen holes (the "Property") to a residential real estate developer. (Id. at ¶ 31.)

At first, PCC agreed to sell the Property to Toll Brothers, a homebuilder. (Id. at ¶ 32.) However, that arrangement quickly fell apart, and the Toll Brothers agreement was terminated in July 2014. (Id. at ¶ 33.)

B. NPT Enters the Picture and Agrees to Develop the Property

About a year later, in May 2015, PCC agreed to sell the Property to another homebuilder, NVR, Inc. (Id. at ¶ 34.) However, because NVR "does not engage in property development—that is, the process of taking raw land and readying it for home construction, including ... grading the land and installing infrastructure such as sewer and electrical lines," NVR assigned the agreement of sale to NPT, a property developer. (Id. at ¶¶ 35–36.) The plan was for NPT to develop the Property into developed lots which NVR would then purchase from NPT. (See id. at ¶¶ 35–37.) NPT and NVR entered into a Lot Purchase Agreement ("LPA") to this effect on July 22, 2015. (Id. at ¶ 37.) The following day, July 23, NPT and PCC entered into an agreement of sale ("AOS"), pursuant to which PCC agreed to sell the Property to NPT. (Id. at ¶ 38; Doc. No. 1-1, Ex. 2.)

Taken together, under the AOS and LPA, NPT would first purchase the Property from PCC and then obtain development approvals from Lower Moreland township (the "Township"), develop the Property into individual development lots ("units"), and sell the units to NVR, who would ultimately construct the homes and sell them to consumers. (Doc. No. 1 at ¶ 39.)

Under the AOS, the purchase price for the Property was based on a per unit yield; each unit approved for development by the Township cost $75,308.64. (Id. at ¶ 40.) Although the final yield was uncertain, the AOS anticipated that the Township would approve 162 units, resulting in an anticipated purchase price of $12.2 million. (Id. at ¶ 41.) The AOS contemplated that, at minimum, the yield would be 150 units (id. ) and, accordingly, the minimum purchase price for the Property was $11,296,296 (id. at ¶ 42).

C. Zoning Issues Emerge, Causing NPT and PCC to Repeatedly Amend the Agreement of Sale

The AOS also provided NPT with a 90-day due diligence period, during which NPT could conduct commercially reasonable studies on the Property and terminate the AOS for any reason. (Id. at ¶ 43.) During this time frame, NPT and PCC learned of recent changes to the Township's zoning regulations. (Id. at ¶ 44.) The impact of those regulations was that the Property could only yield a maximum of 105 units—far below the minimum yield of 150 units and anticipated yield of 162 units. (Id. )

Due diligence also revealed that the Property had high levels of mercury and arsenic due to decades of pesticide use, and these environmental conditions needed to be remedied before the Property could be developed. (Id. at ¶ 45.)

The zoning issues meant that NPT would essentially be purchasing the Property at the price of 150 units while only obtaining 105 units. (Id. at ¶ 46.) This arrangement "was not economically viable for NPT." (Id. ) Furthermore, "selling the Property for a potential unit yield of only 105 units was not a viable option to solve [PCC's] financial issues." (Id. at ¶ 47; see also id. at ¶ 46 ("[T]he revenue from 105 units was not sufficient to serve [PCC's] purposes in selling the Property.").)

After the zoning issues emerged, NPT and PCC agreed to extend the due diligence period so that they could seek zoning relief from the Township. (Id. at ¶ 48.) NPT and PCC wanted the Township's permission to develop 162 or more units. (Id. ) Accordingly, NPT and PCC amended the AOS eight times, ultimately extending the due diligence period to September 26, 2016. (Id. at ¶ 49; see also Doc. No. 1-1, Ex. 3.)

During the extended due diligence period, NPT engaged in extensive discussions with the Township about creating plans to develop the Property that the Township would find agreeable and which would warrant zoning relief to allow 162 or more units be developed. (Id. at ¶ 50.) However, the Township expressed concerns about the impact any development of the Property would have on the school system and roadway congestion. (Id. at ¶ 51.) NPT suggested making the development age-restricted (i.e., no residents under the age of 19 allowed) as well as making a $1 million contribution to roadway improvements to increase the unit yield. (Id. at ¶ 52.) NPT also suggested restricting 22 acres of PCC's property from further development, to meet the Township's open space requirements. (Id. at ¶ 53.)

NPT's suggestion to implement age restrictions raised new concerns—namely, to make an age-restricted development marketable, it must include a clubhouse, which would cost approximately $1.6 million to build. (Id. at ¶¶ 54–55.) Therefore, increasing the yield to 160 units or more would come at an additional cost of $2.6 million (the $1.6 million for the clubhouse coupled with the $1 million roadway contribution), plus the environmental remediation costs. (Id. at ¶ 56.)

On September 7, 2016, NPT, NVR, and PCC met to determine the allocation of the increased cost so that the parties could modify the AOS and LPA accordingly and move forward. (Id. at ¶ 57.) NPT and PCC reached an agreement in principle, pursuant to which PCC would provide NPT with (a) a $375,000 purchase price credit, which would be decreased if the clubhouse came in under budget, and (b) a potential price reduction of up to $151,543.20 depending on the number of units approved. (Id. at ¶ 58.) This agreement is encompassed in the proposed Ninth Amendment to the AOS. (Id. at ¶ 59; Doc. No. 1-2, Ex. 4.)

D. CGP Expresses Interest in a Potential Transaction with PCC

In the midst of these negotiations, on August 30, 2016, longtime PCC and Philmont Club member David Fields had a 35-minute phone call with Defendant Nanula, the sole member of CGP.² (Doc. No. 1 at ¶¶ 9, 60.) The pair spoke "about CGP potentially investing in the Philmont Club to assist [PCC] with its pressing financial needs." (Id. at ¶ 60.) After the call, Nanula emailed Fields, requesting information about Philmont Club, including "A summary of your current real estate deal and the Toll [Brothers] deal." (Id. at ¶ 61; Doc. No. 1-2, Ex. 5 at p. 14.)³

Fields called PCC's President, Glenn Meyer, and asked if Meyer would be interested in pursuing discussions with CGP. (Doc. No. 1 at ¶ 62.) Meyer indicated that he would. (Id. ) Fields also forwarded Nanula's email to PCC's Treasurer, Sam Silverman. (Id. at ¶ 63; Doc. No. 1-2, Ex. 5.) On September 10, 2016, Silverman provided Nanula with the requested information and explained that "it would be easier to provide a summary of the NPT real estate deal verbally since [PCC] was ‘in the process of receiving an amendment to the [AOS] that will better clarify the details.’ " (Doc. No. 1 at ¶ 64; Doc. No. 1-2, Ex. 5 at p. 13.)

Nanula forwarded the information to CGP's Director of Acquisitions, Tom Moran, and sent several follow up questions to Silverman, which Silverman responded to. (Doc. No. 1 at ¶¶ 65–66...