SLSJ, LLC v. Albert Kleban & the Le Rivage Ltd.
| Decision Date | 30 April 2015 |
| Docket Number | Civil Action No. 3:14-cv-390 (CSH) |
| Court | U.S. District Court — District of Connecticut |
| Parties | SLSJ, LLC, Plaintiff, v. ALBERT KLEBAN and THE LE RIVAGE LIMITED PARTNERSHIP, Defendants. |
RULING ON DEFENDANTS' MOTION TO DISMISS [DOC. 17] AND DEFENDANTS' MOTION TO COMPEL ARBITRATION [DOC. 19]
I. INTRODUCTION
Plaintiff SLSJ, LLC ("Plaintiff" or "SLSJ") brings this action against Albert Kleban ("Kleban") and Le Rivage Limited Partnership ("Le Rivage") (herein collectively "Defendants"), Plaintiffs' former partners in Sun Realty Associates ("Sun Realty"), a family-owned Connecticut limited liability company with the sole business purpose of owning ,operating, managing and leasing the Black Rock Shopping Center ("Black Rock"), a commercial property in Fairfield, Connecticut. Specifically, Plaintiff seeks money damages relating to a Membership Interest Purchase Agreement ("Purchase Agreement") it executed on June 27, 2013, in which Plaintiff agreed to sell its 33.3333 percent membership interest in Sun Realty and outstanding promissory notes to Kleban for the sum of $2,020,540.41.1 SLSJ also seeks to recover with respect to an "Assignment of MembershipInterest," dated July 29, 2013, which SLSJ executed to assign all of its right, title and interest in its Sun Realty membership interest and preferred return capital contributions (promissory notes ) to defendant Le Rivage, Kleban's successor in interest under the Purchase Agreement. Kleban, on behalf of Sun Realty and Sun Realty-SMP, Inc. (hereinafter "SMP"), Sun Realty's manager, authorized that transfer.
Plaintiff alleges that in selling its interest in the membership agreement, it relied upon Kleban's fraudulent statements and misrepresentations regarding the value of Black Rock.2 Within six months of that sale, in December 2013, Defendants, through Kleban Properties, sold an 80% interest in a portfolio of three properties, including the Black Rock Shopping Center, for a purchase price of $150 million.3
In its Complaint, SLSJ asserts five claims: breach of fiduciary duty, violation of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), and fraud against Kleban; and aiding and abetting breach of fiduciary duty and "imposition of constructive trust" against Le Rivage, Doc. 1 ("Complaint," filed 3/26/2014). As relief, Plaintiff prays for "[a]n award of damages" or the "[i]mposition of a constructive trust over the proceeds of any sale of Black Rock Shopping Center or an interest therein attributable to the 33.3333 percent membership interest in Sun Realty assigned by SLSJ to defendants," minus an "appropriate offset for the amounts SLSJ received under thePurchase Agreement." Id., at 19-20 (¶¶ A-B). In addition, Plaintiff seeks "[a]n award of pre-judgement and post-judgment interest, attorneys' fees and costs." Id., at 20 (¶ C).
Pending before the Court are two potentially dispositive motions by Defendants: a motion to dismiss the action for lack of personal jurisdiction over Defendants pursuant to Federal Rule 12(b)(2) of Civil Procedure [Doc. 17] and a motion to compel arbitration [Doc. 19] pursuant to Sun Realty's Operating Agreement. The Court herein resolves both motions.
II. FACTUAL BACKGROUND
The following facts have been gathered from the case record - i.e., pleadings, affidavits, and exhibits. Plaintiff's case centers on Sun Realty Associates, LLC, a Connecticut limited liability company with the "sole business purpose" of ownership, operation, management, and leasing of commercial real estate in Fairfield, Connecticut, known as the Black Rock Shopping Center.4 Doc. 1, ¶ 13. Sun Realty originated as a family business owned by three brothers, Leon, Harry and Irving Kleban, each of whom is now deceased. Id., ¶¶ 4-5. The Kleban brothers passed their membership interests in Sun Realty to their children, grandchildren, and/or affiliated business entities or trusts. Id. Defendant Albert J. Kleban is the son of Irving Kleban and is the general partner of Defendant Le Rivage, which is a member of Sun Realty. Id., ¶¶ 14, 17. Lois Jeruss, who is Defendant Kleban's cousin, is the daughter of Leon Kleban, and the managing member of Plaintiff SLSJ. Id., ¶ 14. Jeruss currently owns 70% of Plaintiff, and the remainder is owned by her two daughters. Id., ¶ 18. As discussed supra, Plaintiff previously owned a 33.3333% membership interest in Sun Realty. Id., ¶ 13.
Pursuant to Sun Realty's "Operating Agreement," SMP was appointed as manager of Sun Realty. Id., ¶¶ 15, 20. Defendant Kleban was at all relevant times the President of SMP. Id., ¶ 15. Plaintiff asserts that, pursuant to the Operating Agreement, SMP, as manager, held "full, exclusive and complete discretion, power and authority [subject to limitations not relevant here] to manage, control, administer and operate the business and affairs of the Company [and] to make all decisions affecting such business and affairs . . ." Id., ¶ 20. Plaintiff alleges that SMP "owed an express, contractual duty under the operating agreement to 'render, to the extent circumstances render it just and reasonable, true and full information of all things affecting the Members to any Member.'" Id., ¶ 21.
Defendant Kleban, through SMP, arranged for Turnpike Properties, LLC (hereinafter "Turnpike") to manage the Black Rock Shopping Center. Id., ¶ 16. Defendant Kleban is the managing member of Turnpike and his son, Kenneth M. Kleban, is the co-manager.5 Id. Plaintiff argues that "Defendant Kleban, as president of [SMP], as managing member of [Turnpike], and as the individual with principal responsibility to manage Sun Realty[,] owed fiduciary duties to members of Sun Realty, including [Plaintiff]." Id., ¶ 22.
SLSJ asserts that it "entrusted Kleban to put other members' interests above his own, to refrain from self-dealing and to provide material information concerning SLSJ's investment." Id., ¶ 26. In addition, Plaintiff claims that "Le Rivage, as a member of Sun Realty also owed duties ofgood faith and fair dealing to SLSJ and other members under governing Connecticut law." Id., ¶ 27.
On April 6, 2013, Defendant Kleban sent an e-mail to the members of Sun Realty, detailing a number of problems with tenants at the Black Rock Shopping Center and also outlining the current financial status of Sun Realty. Id., ¶ 29. The e-mail included a request for capital contributions from Sun Realty members, including a proposed capital contribution of $99,999.90 from Plaintiff. Id., ¶ 31; see also Doc. 1-1 (Ex. A), at 4.6
On April 19, 2013, Kleban's son, acting as co-manager of Turnpike, sent an e-mail to Sun Realty members regarding issues with tenants and potential capital calls. Doc. 1, ¶ 35. See also Doc. 1-2 (Ex. B), at 3 ().7 That email indicated that "'there would indeed be a capital call of significance - on top of [a] debt to equity conversion - in 2016 or before'" and "attached an analysis stating that the value of Black Rock Shopping Center was approximately $20.6 million, and the value of Sun Realty was less than $5 million." Doc. 29, at 11; see also Doc. 1, ¶ 35, Doc. 1-2, at 3.
Thereafter, on April 30, 2013, Plaintiff received a similar valuation of Sun Realty from another member of that entity, also allegedly prepared by Defendant Kleban. Doc. 1, ¶ 37; Doc. 1-3. In that email, captioned "Subject: Sun Realty," Allan Kleban wrote, "Here is the one page valuation that I have discussed with Ken and Albert" and "[t]hey are agreeable to buying your interest and mine at this valuation." Doc. 1-3, at 2.
On May 3, 2013, Defendant Kleban forwarded a letter of intent to Plaintiff, "offering to pay $2,020,540.41 to SLSJ to purchase its membership interest and its $914,308 in principal amount promissory notes from Sun Realty." Doc. 1, ¶ 39. Defendant Kleban forwarded a second letter of intent to Plaintiff on May 22, 2013, once again offering to purchase SLSJ's membership interest and notes for $2,020,540.41; and "SLSJ accepted Kleban's offer days thereafter." Id., ¶ 40.
On June 27, 2013, SLSJ executed a written Membership Purchase Agreement ("Purchase Agreement") with Defendant Kleban, dated June 1, 2013, wherein SLSJ agreed to sell its 33.3333%membership interest and outstanding promissory notes to Kleban, in exchange for $2,020,540.41, with one half payable in the form of a promissory note. Id., ¶ 41.
On July 29, 2013, Plaintiff executed an "Assignment of Membership Interest" (the "Assignment"), assigning its membership interest in Sun Realty to Le Rivage, as Kleban's successor-in-interest under the Purchase Agreement. Id., ¶ 42. Kleban then authorized the transfer on behalf of Sun Realty and its manager, SMP. Id. According to Plaintiff, the e-mails and valuations prior to the Assignment were misleading in that, unbeknownst to Plaintiff, during 2013, Kleban was attempting to identify a third-party investor to purchase the Black Rock Shopping Center. Id., ¶ 43.
In December of 2013, Kleban Properties sold an 80% interest in a portfolio of three properties, including the Black Rock Shopping Center, to Regency Centers Corporation ("Regency").8 Id., ¶ 44. Plaintiff alleges that "SLSJ had no knowledge or information [prior to December 2013] concerning Kleban's efforts to obtain investors in Sun Realty or Black Rock Shopping Center." Id., ¶ 45. Under publicly announced terms, Regency paid the sum of $150 million for an 80% majority stake in the three shopping centers, all located in Fairfield, Connecticut. Id., ¶ 46.
In particular, Plaintiff claims that it had no knowledge of the following facts at the time it agreed to sell its membership interest to Kleban: (1) in early 2013, Kleban was approached by one or more third parties, inquiring about potential acquisition of properties including the Black Rock Shopping Center; (2) in early 2013, Kleban...
To continue reading
Request your trial