Rolo v. City Investing Co. Liquidating Trust
| Decision Date | 19 January 1994 |
| Docket Number | Civ. No. 90-4420 (DRD). |
| Citation | 845 F. Supp. 182 |
| Parties | Jose and Rosa ROLO; and Dr. William and Roseanne Tenerelli, Plaintiffs, v. CITY INVESTING COMPANY LIQUIDATING TRUST, et al., Defendants. |
| Court | U.S. District Court — District of New Jersey |
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Roy A. Heimlich, Herbert I. Deutsch, Vincent R. Coffey, Alfred N. Metz, Deutsch & Frey, New York City, and William O'Brien, Glenn P. Callahan, Callahan, Delany & O'Brien, Voorhees, NJ, for plaintiffs.
Paul M. Dodyk, Cravath, Swaine & Moore, New York City, and Bruce Rosen, Matthew P. Boylan, Lowenstein, Sandler, Kohl, Fisher & Boylan, Roseland, NJ, for defendants City Investing Co. Liquidating Trust, AmBase Corp., Carteret Bancorp. Inc., George T. Scharffenberger, Marshall Manley, Edwin I. Hatch and Eben W. Pyne.
Steven M. Edwards, Davis, Scott, Weber & Edwards, P.C., New York City, for defendant David F. Brown.
Joel Hirschhorn, Douglas Centre, Coral Gables, FL, for defendant Robert Ehrling.
Robert T. Wright, Elizabeth C. Barber, Mershon, Sawyer, Johnston, Dunwody & Cole, Miami, FL, and Joseph L. Buckley and Mark E. Duckstein, Sills, Cummis, Zuckerman, Radin, Tischman, Epstein & Gross, Newark, NJ, for defendants Reubin O'D. Askew, Howard L. Clark Jr., Charles J. Simons and Peter R. Brinckerhoff.
Douglas S. Eakeley, Jeffrey J. Miller, Riker Danzig Scherer Hyland & Perretti, Morristown, NJ, for defendants Cravath, Swaine & Moore and David G. Ormsby.
Alan J. Kluger, Terri E. Tuchman, Kluger, Peretz, Kaplan & Berlin, P.A., Miami, FL, and Marshall Stoddard, Kelley Drye & Warren, Los Angeles, CA, and Kelley Drye & Warren, New York City, for defendant Greyhound Financial Corp.
Jeffrey S. Cook, Marshall Stoddard and Joseph A. Boyle, Kelley Drye & Warren, Parsippany, NJ, for defendants Greyhound Financial Corp. and Nat. Bank of Canada.
Louis L. Mrachek, Gunster, Yoakley & Stewart, P.A., West Palm Beach, FL, for defendant Nat. Bank of Canada.
Robert Young, Carlton, Field, Ward, Emmanuel, Smith & Cutler, P.A., Orlando, FL, for defendant Harbor Federal Sav. & Loan Ass'n.
Faith R. Greenfield, Michael Araten, Blank, Rome, Comisky & McCauley, Cherry Hill, NJ, for defendants The Oxford Finance Companies, Oxford First Trust Corp. and Harbor Federal Sav. & Loan Ass'n.
Marbury Rainer, Jay Basham, Parker, Hudson, Rainer & Dobbs, Atlanta, GA, and James A. Scarpone, Stephen L. Dreyfuss, Hellring, Lindeman, Goldstein & Siegal, Newark, NJ, for defendant Stanchart Business Credit, Inc.
David T. Eames, G. Wade Leak, Bodian & Eames New York City, and Paul Brickfield, Hackensack, NJ, for defendant Lloyds Bank.
John W. Little, Steel, Hector & Davis, West Palm Beach, FL, and Joseph J. Schiavone, Budd Larner Gross Rosenbaum Greenberg & Sade, P.C., Short Hills, NJ, for defendant Federal Nat. Mortg. Ass'n.
George Kielman, Sr. Counsel, Federal Home Loan Mortg. Corp., McLean, VA, and Gerald T. Ford, Siff, Rosen & Parker, Newark, NJ, for defendant Federal Home Loan Mortg. Corp.
Laura Besvinick, Greer Homer & Bonner, Miami, FL, and Edward J. Boccher, Mudge, Rose, Guthrie, Alexander & Ferdon, Parsippany, NJ, for defendant Citizens and Southern Trust Co. (Florida), Nat. Ass'n (Nations Bank).
Vincent E. Reilly, McElroy, Deutsch & Mulvaney, Morristown, NJ, for defendant Secor Nat. Bank.
Herschel E. Sparks Jr., Hughes, Hubbard & Reed, Miami, FL, and Norman C. Kleinberg, Susan Epstein, Steven Hammond, Hughes, Hubbard & Reed, New York City, and Clyde A. Szuch, Pitney, Hardin Kipp & Szuch, Morristown, NJ, for defendant the Home Ins. Co.
Gerald J. Houlihan, Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, Miami, FL, and Harold I. Braff, Keith Harris, Braff, Harris & Sukoneck, Livingston, NJ, for defendant Chase Federal Bank.
Howard B. Levi, Kornstein Veisz & Wexler, New York City, and Robert Klivane, First Nat. Bank of Boston Law Office, Boston, MA, and Steven I. Adler, Cole, Schotz, Bernstein, Meisel & Forman, Hackensack, NJ, for defendant First Nat. Bank of Boston.
Paul G. Gizzi, Mary B. Corrarino, Kirkpatrick & Lockhart, New York City, for defendant Merrill Lynch, Pierce, Fenner & Smith Inc.
Kevin M. Hart, Stark & Stark, P.C., Princeton, NJ, for F.D.I.C., as receiver for defendant Southeast Bank, N.A.
Louis W. Childress, Brown & Childress, East Orange, NJ, and Peter J. Pizzi, John H. Denton, Connell, Foley & Geiser, Roseland, NJ, for R.T.C., as receiver for defendant Carteret Sav. Bank, F.A.
George J. Wade, Thomas F. Swift, F. Russell DuPuy, Shearman & Sterling, New York City, and Steven M. Richman, Herrick, Feinstein, Princeton, NJ, for defendant Citicorp Real Estate, Inc.
Steven H. Reisberg, Willkie, Farr & Gallagher, New York City, and Robert E. Bartkus, Pinto, Rodgers & Kopf, Morristown, NJ, for defendant Prudential Ins. Co. of America.
James J. Hagan, Bruce D. Angiolillo, Simpson Thacher & Bartlett, New York City, and James M. Altieri, Shanley & Fisher, P.C., Morristown, NJ, for defendant Paine-Webber Inc.
TABLE OF CONTENTS
PAGE
I. INTRODUCTION 193
II. JURISDICTION AND VENUE 194
III. PROCEDURAL HISTORY 194
IV. THE PARTIES 195
A. THE PLAINTIFFS 195
B. THE DEFENDANTS 195
V. FACTUAL HISTORY 196
A. THE GDC SCHEME 196
1. Targeting Prospective Lot Purchasers 197
2. House Sales Schemes 198
3. Purchaser Defaults and GDC Recycling of Lots 199
B. THE ALLEGED PARTICIPANTS IN THE SCHEME 201
1. The City Defendants 201
2. The Inside Director Defendants and Director Defendants 205
3. The Financing Defendants 206
4. The Mortgagee Defendants 208
5. The Lot Contract Defendants 211
6. Cravath and Ormsby 211
VI. DISCUSSION 212
A. MOTION TO DISMISS UNDER RULE 12(b)(2) 213
B. MOTIONS TO DISMISS UNDER RULE 12(b)(6) 216
1. Standard of Review 216
2. Interstate Land Sales Full Disclosure Act (Count III) 217
a. Aider and Abettor Liability under the Land Sales Act 217
b. Disposition of Motions to Dismiss 220
c. Statute of Limitations 223
d. Summary of Count III Rulings 224
3. Civil RICO (Count I) 224
a. The Amended Complaint 225
b. The Revised RICO Allegations 226
i. Primary Liability under the Revised RICO Allegations 227
ii. Aider and Abettor Liability under the Revised RICO
Allegations 230
c. Statute of Limitations 234
4. Securities Laws (Count II) 235
a. The Instruments are Not Securities 236
b. Statute of Limitations 243
5. Common Law Fraud (Count VII) 246
VII. CONCLUSION 247
Plaintiffs in this action are Jose and Rosa Rolo and Dr. William and Roseanne Tenerelli. They seek money damages and equitable relief on behalf of themselves and on behalf of others who purchased lots and/or houses in Florida from General Development Corporation ("GDC") and GDV Financial Corporation ("GDV") and who are members of the North Port Out-of-State Lot Owner Association (the "Association").
In general terms, the First Amended Complaint charges that GDC and its related corporations engaged in a nationwide fraudulent marketing scheme to induce plaintiffs and other members of the Association to purchase lots and houses in Florida at inflated prices. The defendants in this case are various corporate entities and individuals who, plaintiffs allege, participated in the scheme.
There are presently pending a variety of defense motions addressed to jurisdiction and to the complaint. City Trust, AmBase, Scharffenberger, Manley, Hatch and Pyne also move to dismiss under Rule 12(b)(2). Similarly defendants Askew, Brinckerhoff, Clark and Simons, who were outside directors, moved for dismissal pursuant to Rule 12(b)(2). There is also pending plaintiffs' motion for class certification. This opinion addresses the defense motions. The class certification motion is rendered moot by the disposition of the defense motions.
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