Rubinbaum Llp v. Related Corporate Partners
| Citation | 154 F.Supp.2d 481 |
| Decision Date | 16 February 2001 |
| Docket Number | No. 00 CIV 2715 JGK.,00 CIV 2715 JGK. |
| Parties | RUBINBAUM LLP, Plaintiff, v. RELATED CORPORATE PARTNERS V, L.P., Related Corporate SLP, L.P., the Brannon Group, L.C., D. Reid Brannon and Ivan I. Brannon, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Page 481
v.
RELATED CORPORATE PARTNERS V, L.P., Related Corporate SLP, L.P., the Brannon Group, L.C., D. Reid Brannon and Ivan I. Brannon, Defendants.
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COPYRIGHT MATERIAL OMITTED
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KOELTL, District Judge.
The plaintiff, RubinBaum LLP ("RubinBaum"), brings this statutory interpleader action pursuant to 28 U.S.C. § 1335. RubinBaum has met the requirements of 28 U.S.C. § 1335(a)(2) by depositing $906,963.56 (the "Funds") it held as an escrow agent with the registry of the Court.1 As required by 28 U.S.C. § 1335(a)(1), the Funds are allegedly subject to adverse claims by Related Corporate Partners V, L.P. ("Related V") and Related Corporate SLP, L.P. ("Related SLP") (collectively the "Related Defendants"); the Brannon Group, L.C. (the "Company"); and D. Reid Brannon and Ivan I. Brannon (the "Brannons"). The Related Defendants have filed cross-claims based on Florida common law against the Company and the Brannons alleging claims for breach of fiduciary duties, breach of contract, accounting, and declaratory judgment. The Brannons move to dismiss the interpleader action and cross-claims against them pursuant to Fed. R.Civ.P. 12(b).2 The Company and the Brannons move to transfer the case to the
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Southern District of Florida pursuant to 28 U.S.C. § 1404(a) or 28 U.S.C. § 1406(a).
The Brannons argue that the statutory interpleader action should be dismissed with respect to them because they are not "claimants" of the Funds. The gist of the argument is that if they are not "claimants," then they are not subject to 28 U.S.C. § 2361, which provides for nationwide service of process for statutory interpleader actions. In the alternative, the Brannons move to dismiss the Related Defendants' cross-claims for lack of personal jurisdiction. They argue that the Court does not have personal jurisdiction over them with respect to the cross-claims because 28 U .S.C. § 2361 only establishes personal jurisdiction for the statutory interpleader claim and not for the cross-claims. The Brannons also argue that they do not have sufficient contacts with New York for the New York long arm statute to be an independent basis of personal jurisdiction for the cross-claims and that the exercise of personal jurisdiction over them would violate their right to due process because they have insufficient minimum contacts with New York. Finally, the Company and the Brannons advance a number of reasons why the entire case or at least the cross-claims should be transferred to the Southern District of Florida.
This case arises out of various agreements entered into by the Related Defendants, the Company, and the Brannons concerning the Related Defendants' investment in an affordable housing project. The Related Defendants are limited partnerships organized under the laws of Delaware and have their principal places of business in New York City. (Compl. ¶¶ 5, 6.) The Related Defendants are all affiliated with Related Capital Company, which maintains its principal place of business in New York City, and with other Related Companies (collectively "Related"). (Declaration of D. Reid Brannon dated June 2, 2000 ("R. Brannon Decl.") at ¶ 15; Declaration of Eric Trucksess dated July 7, 2000 ("Trucksess Decl.") at ¶ 1.) Related invests in limited liability companies that own affordable housing projects, which qualify for certain federal tax credits. (R. Brannon Decl. ¶ 15.) The Company is a limited liability company organized under the laws of Florida with its principal place of business in Florida. (Compl. ¶ 7.) The Company owns the Keys Apartments (the "Project"), which are located in Leisure City, Florida. (Compl. ¶ 10.) The Brannons are officers and managers of the Company, are residents of Florida, and manage the Project. (Compl. ¶¶ 8-9; R. Brannon Decl. ¶ 2.)
In 1995, Related invested in Phases 1 and 2 of the Project. (R. Brannon Decl. ¶ 16.) In 1996, Related agreed to invest in Phase 3 of the Project through the Related Defendants. (Id.) The Related Defendants, the Company, the Brannons, and others negotiated and executed the Second Amended and Restated Regulations dated December 1, 1997 (the "Regulations"), which set forth the terms and conditions by which Related would invest in the Project. (Compl.¶ 10.) Various combinations of these parties also agreed to a number of other agreements setting forth the terms and conditions of that investment and arranging financing for the Project. (Compl. ¶ 10; R. Brannon Decl. ¶¶ 17-21.) Under the Regulations, Related V was required to make capital contributions of $2,467,394 to Phase III of the Project payable in three installments. (Compl. ¶ 11; R. Brannon Decl. ¶ 18.) The initial installment was to be $1,287,394, and the second and third installments were to be $708,000 and $472,000. (Id.)
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Pursuant to the Regulations, the Related Defendants and the Company entered into an escrow agreement dated December 1, 1997 (the "Escrow Agreement"). (Compl.¶ 12.) Under the Escrow Agreement, Related V was to deposit $1,180,000 (the "Funds"), an amount equal to the last two installments, into an escrow account with RubinBaum as the escrow agent. (Compl.¶ 13.) RubinBaum is a New York limited liability partnership that practices law in the State of New York with its principal place of business in New York City and is the successor in interest to Rubin Baum Levin Constant & Friedman. (Compl.¶ 4.) RubinBaum was to release the Funds to the Company in accordance with a schedule unless RubinBaum was advised that certain "Release Conditions" had occurred in which case the Funds were to be returned to Related V absent an objection by the Company. (Compl.¶¶ 14-16.) According to the Escrow Agreement:
the term "Release Condition" shall mean (i) at any time prior to Rental Achievement (A) a default has occurred under any of the Project Documents and is continuing, (B) any of the Managers is in material default in any of its obligations under the Regulations, or (C) a Bankruptcy of a Manager has occurred and is continuing, or (ii) Rental Achievement has not occurred within two years after the date when Completion occurs.
(Compl., Ex. A, ¶ 3(c).) Many of the terms in the Escrow Agreement are defined in the Regulations. (Id. at p. 1.) Finally, the Escrow Agreement provides that any lawsuits arising from disputes concerning the escrow account are to be resolved in New York courts pursuant to New York law. (Compl., Ex. A, ¶¶ 17, 19.)
Related paid the first installment and deposited an amount equal to the second and third installments into the escrow account. (R. Brannon Decl. ¶ 18.) However, the Related Defendants have refused to allow the release of the second and third installments because they claim that certain conditions of "Completion" have not been satisfied. (R. Brannon Decl. ¶ 25.) In March and September of 1999, Related V made two partial payments of the Second Installment totaling $405,000 as an accommodation to the Company. (R. Brannon Decl. ¶ 25.) On March 29, 2000, Related V notified RubinBaum that a Release Condition had been satisfied and requested the return of the Funds. (Compl., Ex. B; R. Brannon Decl. ¶ 26.) On April 3, 2000, the Company notified RubinBaum that it objected to the return of the Funds to Related V. The Company disputed the assertion that any "Release Condition" had occurred and the Company requested that the Funds be delivered to the Company because it had fulfilled its obligations. (Compl., Ex. C; R. Brannon Decl. ¶ 27.) The Company stated that it had certified in 1999 that "Completion" and "Rental Achievement" had occurred and again so certified. The Company also stated "that Rubin Baum acted improperly by not delivering the `Funds' to the `Company' within the specified time period." (Compl., Ex. C.)
The Brannons argue that the interpleader action against them should be dismissed for lack of personal jurisdiction because they are not "claimants" subject to 28 U.S.C. § 2361.3 Section 2361 provides that district courts may issue process in statutory interpleader actions for all
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"claimants" nationwide. Fed.R.Civ.P. 4(k)(1)(C) provides that service in a federal interpleader action is sufficient to establish personal jurisdiction over the served defendant. The Brannons contend that they are not "claimants" because they are not parties to the Escrow Agreement and have no claim to the Funds. RubinBaum replies that the Brannons are "claimants" because they are entitled to a development fee from the Related Defendants' capital contribution and have an indirect claim to the Funds.
A district court has "broad discretion" in deciding how to proceed with a motion to dismiss for lack of personal jurisdiction and has the discretion to conduct an evidentiary hearing. See CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 364 (2d Cir. 1986); APC Commodity Corp. v. Ram Dis Ticaret A.S., 965 F.Supp. 461, 464 (S.D.N.Y.1997). Because there has not been an evidentiary hearing in this case, the plaintiff need only make a prima facie showing of personal jurisdiction over the defendant to survive a motion to dismiss, and the pleadings and any supporting affidavits are to be interpreted in the light most favorable to the plaintiff. See PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir.1997); A.I. Trade Finance, Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir.1993).
The purpose of a statutory interpleader action is to avoid the problem of multiple, conflicting claims to a single fund by forcing all "claimants" to resolve their claims in one action. See, e.g., State Farm Fire & Casualty Co. v. Tashire, 386 U.S. 523, 530, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967); Ashton v. Josephine Bay Paul and C. Michael Paul Found. ., Inc., 918 F.2d 1065, 1068 (2d Cir.1990). In order to bring a statutory interpleader action,...
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