NTD I, LLC v. Alliant Asset Mgmt. Co.

• Decision Date: 23 January 2019
• Docket Number: No. 4:16CV1246 ERW,4:16CV1246 ERW
• Citation: 362 F.Supp.3d 664
• Parties: NTD I, LLC, North Tower Development, LLC, and Paul Weismann, Plaintiffs, v. ALLIANT ASSET MANAGEMENT COMPANY, LLC, Alliant Capital, Ltd., Alliant Credit Facility ALP, LLC, and Alliant Tax Credit Fund 36, Ltd., and Alliant Tax Credit 36, LLC., Defendants. Alliant Tax Credit Fund 36, Ltd., and Alliant Tax Credit 36, LLC., Counterclaim Plaintiffs, v. NTD I, LLC, Paul Weismann, and WC Orange, LLC., Counterclaim Defendants.
• Court: U.S. District Court — Eastern District of Missouri

362 F.Supp.3d 664

NTD I, LLC, North Tower Development, LLC, and Paul Weismann, Plaintiffs,

v.ALLIANT ASSET MANAGEMENT COMPANY, LLC, Alliant Capital, Ltd., Alliant Credit Facility ALP, LLC, and Alliant Tax Credit Fund 36, Ltd., and Alliant Tax Credit 36, LLC., Defendants.

Alliant Tax Credit Fund 36, Ltd., and Alliant Tax Credit 36, LLC., Counterclaim Plaintiffs,

v.NTD I, LLC, Paul Weismann, and WC Orange, LLC., Counterclaim Defendants.

No. 4:16CV1246 ERW

United States District Court, E.D. Missouri, Eastern Division.

Signed January 23, 2019

Michael J. Fencer, Casner and Edwards, LLP, Boston, MA, Scott K.G. Kozak, Armstrong Teasdale LLP, Robert L. Devereux, Danna McKitrick, P.C., St. Louis, MO, for Plaintiffs/Counterclaim Defendants.

Andrew D. Lamb, Robert P. Berry, Berry and Silberberg PC, St. Louis, MO, Joshua Courtney Stokes, Berry and Silberbert, Pasadena, CA, Michael L. Cypers, Glaser and Weil, LLP, Los Angeles, CA, for Defendants/Counterclaim Plaintiffs.

MEMORANDUM AND ORDER

E. RICHARD WEBBER, SENIOR UNITED STATES DISTRICT JUDGE

This matter comes before the Court on Defendants' Motion for Summary Judgment as to Counts I, II, III, IV, V and VII of Plaintiffs' Complaint [153].

I. BACKGROUND

This litigation originated in the Eastern District of Missouri when NTD I, LLC ("NTD" and "General Partner"), North Tower Development, LLC, and Paul Weismann ("Weismann") (collectively "Plaintiffs" and "Counterclaim Defendants") filed a complaint on August 1, 2016, asserting various claims against Alliant Asset Management Company, LLC, Alliant Capital, Ltd., Alliant Credit Facility, Ltd., Alliant Credit Facility ALP, LLC, Alliant Tax Credit Fund 36, Ltd., and Alliant Tax Credit 36, LLC (collectively "Defendants" and "Counterclaim Plaintiffs") related to a Limited Partnership Agreement ("LPA") between the parties. ECF 1.

In 2006, Water Tower Place Limited Partnership (the "Partnership") was formed, pursuant to an Amended and Restated LPA, for the general purpose of constructing, rehabilitating, and operating affordable housing apartment units to qualify for federal and state low-income housing tax credits. Water Tower Place is located in Saint Louis, Missouri, and is comprised of 178 residential housing units in 34 buildings. The project was financed by a 2006 issuance of Multifamily Housing Revenue Bonds that provide federal and state low-income housing tax credits. Water Tower Place must meet regulatory provisions through 2020 to remain housing tax credit qualified. Housing tax credits are contingent on Water Tower Place maintaining occupant eligibility, and/or unit gross rent compliance.

The claims asserted by Plaintiffs in their Complaint [1] are: Count I, for declaratory judgment reducing the Alliant Tax Credit Fund 36, Ltd. and Alliant Tax Credit 36, LLC's (collectively "Limited Partners") interests to zero; Count II, for declaratory judgment excusing Weismann from surety obligations; Count III, for breach of contract to recover the Limited Partners' Capital Contributions; Count IV, excusing Weismann from surety obligations due to the Limited Partners' contract breach; Count V, for damages for the Limited Partners' breach of the implied covenant of good faith and fair dealing; Count VI¹ , for damages for Defendants' tortious interference with, and their inducement of a contract breach; Count VII, for equitable contribution and restitution to Weismann; and Count VIII² , for punitive damages.

Defendants moved to dismiss the lawsuit claiming first, Plaintiffs were the first to breach and therefore precluded from bringing two claims against Defendants, second, only one Plaintiff is a party to the LPA and therefore the rest do not have third-party rights to bring an action, third, Plaintiffs' declaratory relief and equitable claims as well as their tortious interference claims should be dismissed because a party cannot interfere with contracts to which it is not a party, fourth, a parent company cannot be held liable for interference with a subsidiary's contract, fifth, Plaintiffs' claims for monetary damages are precluded by the plain language of the contract, and finally, punitive damages are not allowed in a breach of contract case. ECF 17, 18. Additionally, Defendants argued Plaintiffs' jury demand is invalid because they waived their right to a jury trial in the LPA and Guaranty Agreement contracts. ECF 17, 18. After a hearing, the Court granted Defendants' Motion to Dismiss as to Count VII and Count VIII of Plaintiffs' Complaint and granted Defendants' Motion to Strike Plaintiffs' demand for a jury trial. ECF 38.

On March 17, 2017, Defendants answered Plaintiffs' remaining counts and filed a Counterclaim against Plaintiffs NTD and Weismann alleging first, Counterclaim Defendants failed to meet Rental Achievement by December 1, 2008 and therefore Counterclaim Plaintiffs are entitled to declaratory relief, second, alleging a breach of contract and, third, seeking injunctive relief preventing any further withdrawals from the operating deficit reserve account without authorization from the Administrative Limited Partner.³ ECF 41. Counterclaim Defendants NTD and Weismann answered Counterclaim Plaintiffs' counterclaim on April 4, 2017. ECF 45. On the same day, Counterclaim Plaintiffs moved to join WC Orange, LLC ("WCO") as a defendant to their Counterclaim seeking declaratory and injunctive relief related to an allegedly improper sale and purchase of the Partnership indebtedness. ECF 46. Counterclaim Defendants did not object to or oppose the joinder of WCO. ECF 49. Accordingly, the Court granted Counterclaim Plaintiffs' Motion for Joinder of WCO on April 25, 2017. ECF 50. Counterclaim Defendant WCO timely answered. ECF 56.

On September 27, 2017, Counterclaim Plaintiffs filed a Second Amended Counterclaim alleging four counts against Counterclaim Defendants including two additional claims for breach of contract, a claim alleging a breach of fiduciary duty, and injunctive relief against all three Counterclaim Defendants related to the purchase of certain indebtedness of the Partnership by WCO without the consent of the Administrative Limited Partner. ECF 72. Counterclaim Defendants timely answered on December 18, 2017. ECF 81, 82.

On December 22, 2017, Counterclaim Defendants moved for an order enforcing a settlement agreement with Counterclaim Plaintiffs alleging the existence of a valid, binding, and enforceable agreement to settle the action which Counterclaim Plaintiffs breached. ECF 83. Counterclaim Plaintiffs filed a Motion in Opposition alleging the agreement term sheet is not a binding settlement agreement because of the amount of undetermined terms absent in the term sheet, and stating the parties were still in negotiations in an attempt to settle the case. ECF 89. Counterclaim Defendants replied arguing, first, the term sheet unambiguously stated all of the enforceable terms, second, the performance of the agreement obligations were not subject to any conditions precedent, and third, the agreement was definite enough for specific performance. ECF 90. Following oral argument on January 30, 2018, the Court denied the Motion to Enforce the settlement. ECF 93.

Counterclaim Plaintiffs then sought leave to file a Third Amended Counterclaim; Counterclaim Defendants did not oppose, and leave was granted by the Court on May 7, 2018. ECF 98, 101-103. Counterclaim Plaintiffs' Third Amended Counterclaim alleged two additional counts from the Second Amended Counterclaim. ECF 104. Counterclaim Plaintiffs asserted the following counterclaims: first, declaratory relief against NTD and Weismann stating they failed to cause Rental Achievement as required under the Limited Partnership Agreement; second, breach of contract and injunctive relief against NTD and Weismann for withdrawing funds from the operating deficit reserve account and the replacement reserve account without the approval of the Administrative Limited Partner; third, breach of contract and injunctive relief against NTD, Weismann, and WCO resulting from the purchase of debts of the Partnership without the consent of the Administrative Limited Partner and WCO is related to the General Partner; fourth, breach of fiduciary duty and injunctive relief against NTD, Weismann, and WCO by allowing, participating in, and facilitating the purchase of the Partnership's debt by WCO; fifth, breach of contract and declaratory relief against NTD and Weismann for failure to repair material deficiencies and/or non-conformities in the physical property of Water Tower Place; and finally, breach of contract and specific performance against NTD and Weismann for failure to pay for any development deficits which are incurred by the partnership prior to rental achievement. ECF 104. Counterclaim Defendants timely answered on May 21, 2018. ECF 111, 112.

Counterclaim Defendants then moved for partial summary judgment on Counts III and IV of the Third Amended Counterclaim on May 8, 2018, alleging the LPA did not prohibit WCO from acquiring the debt in the form of a bond and the Counterclaim Defendants did not owe or breach any fiduciary duty. ECF 105, 107. Counterclaim Plaintiffs filed a Motion in Opposition alleging Section 5.5(B) of the LPA precludes WCO from directly or indirectly purchasing debt without the consent of the Limited Partners, the General Partner indirectly acquired the mortgage note without the consent of the Limited Partners, and NTD I, LLC and Weismann owe the Limited Partners a fiduciary duty which prevents this type of behavior. ECF 126. On June 29, 2018, the Court heard arguments on Counterclaim Defendants' Motion for Partial Summary Judgment. ECF 144. On July 20, 2018, the Court granted summary judgment as to WCO and NTD as to Count III, and for WCO, NTD, and Weismann as to Count IV. ECF 148.

On May 22, 2018, Counterclaim Plaintiffs moved for a preliminary injunction against Counterclaim Defendants seeking a declaration Weismann and NTD breached fiduciary duties to the Limited Partners,...