Soffer v. Five Mile Capital Partners, LLC
| Decision Date | 19 February 2013 |
| Docket Number | 2:12-CV-1407 JCM (GWF) |
| Parties | JEFFREY SOFFER, et al., Plaintiff(s), v. FIVE MILE CAPITAL PARTNERS, LLC, et al., Defendant(s). |
| Court | U.S. District Court — District of Nevada |
Presently before the court is defendants Five Mile Capital Partners, LLC ("FMC LLC"); Five Mile Capital II Pooling International, LLC ("FMC II Pooling"); Five Mile Capital II Town Square SPE, LLC ("FMC II Town Square"); James G. Glasgow, Jr. ("Glasgow"); and David J. Lattimer's ("Lattimer"), (collectively "defendants") motion to dismiss. (Doc. # 27).1 Plaintiffs Jacquelyn and Jeffery Soffer (the "Soffers"); and limited liability companies controlled by the Soffers, Turnberry Capital, LLC ("TBC"); J&JS Town Square, LLC ("J&JS"); and Turnberry Town Square, LLC ("TBTS"), (collectively, "plaintiffs") filed a response. (Doc. # 38).2 Defendants replied. (Doc. # 42).
This dispute arises out of a potential joint venture real estate relationship that souredin 2010. Plaintiffs allege that defendants FMC LLC, FMC II Pooling, FMC II Town Square, (collectively, "FMC") a hedge fund in Connecticut; as well as Glasgow and Lattimer (collectively "FMC managers") (1) interfered with contractual relations and/or prospective economic advantage, (2) committed fraud, and (3) breached their fiduciary duties.
Town Square is a mixed-use space that was developed by the Soffers and operated by the Soffers and their affiliates until March 2011. Town Square was financed by two loans obtained in 2006. The first loan, obtained by Turnberry/Centra Sub, LLC ("Turnberry Sub"), was a $470 million construction loan from a syndicate of fifteen lenders (the "Senior Lenders"). The loan was made pursuant to a construction loan agreement between Turnberry Sub and Deutsche Bank Trust Company Americas ("Deutsche Bank"), as an administrative agent for the Senior Lenders. Repayment of the construction loan was secured by a deed of trust that granted the Senior Lenders a mortgage lien on Town Square and a $40 million payment guaranty issued by the Soffers.
The second loan, Turnberry/Centra Quad, LLC ("Turnberry Quad"), was a $50 million mezzanine loan. The loan was made pursuant to a mezzanine loan and security agreement between Turnberry Quad and Deutsche Bank, as initial lender and administrative agent for the Senior Lenders. As part of an agreement between Turnberry Quad and Deutsche Bank, upon default under the mezzanine loan agreement, the lender could sell at a public or private sale Turnberry Quad's ownership interest in Turnberry Sub. This would displace the Soffers and their affiliates as the ultimate owner of Town Square. In 2007, FMC II Pooling purchased a $20 million participation interest in the mezzanine loan. Together, Deutsche Bank and FMC II Pooling became the "mezzanine lenders."
In December 2008, in anticipation of being unable to repay the construction loan and the mezzanine loan (collectively, the "loans"), the Soffers and Turnberry Sub entered into pre-negotiation agreements with Deutsche Bank, as agent for the Senior Lenders (the "construction loan PNA" and the "mezzanine loan PNA"; collectively, the "PNAs"). Under the PNAs, the parties sought to restructure a new loan. In November 2009, the mezzanine loan PNA was amended to include FMC II Pooling and its affiliates as "negotiating parties."
In March 2009, the Soffers commenced negotiation with the Senior Lenders to restructure the loans. The parties planned a "friendly foreclosure" to facilitate a global restructuring of the construction loan which would wipe out the mezzanine loan. The Soffers, not wanting the mezzanine lenders to be wiped out, reached out to Glasgow in the summer of 2009. The Soffers proposed ajoint venture whereby the Soffers, TBC, and FMC would form a new borrower to take the new loan from the Senior Lenders in exchange for retiring the mezzanine loan. Plaintiffs allege that the FMC managers feigned interest in the joint venture in order to steal Town Square from the Soffers.
In November 2009, FMC LLC and FMC II Town Square entered into a written limited liability company agreement (the "joint venture agreement") with TBC. The signature pages were held in escrow until the new loan was complete. Plaintiff alleges that FMC utilized the PNA and disclaimer language in the exchange of the joint venture agreement as part of FMC's scheme to lull the Soffers into believing that they were partners with FMC when in reality FMC intended on blocking the new loan.
In December 2009, the Bank of Nova Scotia ("BNS") which succeeded the Deutsche Bank as administrative agent for the Senior Lenders, nearly reached a final deal for the new loan, identifying material terms and parties to the contract.
In August 2010, plaintiffs allege that defendants began their plan to block the closing of the new loan. In September 2010, plaintiffs allege that defendant made false claims to the Senior Lenders regarding the Soffers' management of Town Square. In October 2010, plaintiffs allege that defendants stopped communicating with the Soffers.
In February 2011, defendants, along with other hedge funds, purchased a significant portion of the senior debt from the Senior Lenders. Collectively, these hedge funds gained control of the Senior Lenders and blocked the restructuring with the Soffers. In March, 2011, FMC II Pooling brought Town Center at a non-judicial foreclosure for $276,500,000.
Plaintiffs allege that this was all part of defendants' plan. To lull the Soffers into believing that they were partners with defendants in order to stop the senior lenders from consensually foreclosing and wiping out the mezzanine loan.
A court may dismiss a plaintiff's complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide "[a] short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 does not require detailed factual allegations, it demands "more than labels and conclusions" or a "formulaic recitation of the elements of a cause of action." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citation omitted).
"Factual allegations must be enough to rise above the speculative level." Twombly, 550 U.S. at 555. Thus, to survive a motion to dismiss, a complaint must contain sufficient factual matter to "state a claim to relief that is plausible on its face." Iqbal, 129 S.Ct. at 1949 (citation omitted).
In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply when considering motions to dismiss. First, the court must accept as true all well-pled factual allegations in the complaint; however, legal conclusions are not entitled to the assumption of truth. Id. at 1950. Mere recitals of the elements of a cause of action, supported only by conclusory statements, do not suffice. Id. at 1949.
Second, the court must consider whether the factual allegations in the complaint allege a plausible claim for relief. Id. at 1950. A claim is facially plausible when the plaintiff's complaint alleges facts that allows the court to draw a reasonable inference that the defendant is liable for the alleged misconduct. Id. at 1949.
Where the complaint does not permit the court to infer more than the mere possibility of misconduct, the complaint has "alleged - but not shown - that the pleader is entitled to relief." Id. (internal quotations omitted). When the allegations in a complaint have not crossed the line from conceivable to plausible, plaintiff's claim must be dismissed. Twombly, 550 U.S. at 570.
The Ninth Circuit addressed post-Iqbal pleading standards in Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). The Starr court stated, Id.
Rule 9 provides that for a party to allege fraud, he FED. R. CIV. P. 9(b). Assertions of fraud must include "the who, what, when, where, and how" of the misconduct alleged. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). Rule 9 serves several purposes, including: (1) providing defendants with adequate notice so they are able to defend the charge and deter plaintiffs from filing complaints "'as a pretext for the discovery of unknown wrongs'; (2) to protect those whose reputation would be harmed as a result of being subject to fraud charges; and (3) to 'prohibit [ ] plaintiff[s] from unilaterally imposing upon the court, the parties and society enormous social and economic costs absent some factual basis.'" Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009) (quoting In re Stac Elecs. Sec Litig., 89 F.3d 1399, 1405 (9th Cir. 1996) (citation omitted)).
Review on a motion pursuant to Fed.R.Civ.P. 12(b)(6) is normally limited to the complaint itself. See Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). If the district court relies on materials outside the pleadings in making its ruling, it must treat the motion to dismiss as one for summary judgment and give the non-moving party an opportunity to respond. Fed.R.Civ.P. 12(b); see United States v. Ritchie, 342 F.3d 903, 907 (9th Cir.2003). "A court may, however, consider...
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