Foster v. Attias

1

RACHEL FOSTER, ET AL., Plaintiffs, v. MOSHE ATTIAS, ET AL., Defendants.

MOSHE ATTIAS and MARION COURT, LLC, Plaintiffs, v. 532 BROOKLYN, LLC and ALAIN KODSI, Defendants.

Civil Action Nos. 18-4853, 19-866

United States District Court, E.D. Pennsylvania

May 12, 2023

MEMORANDUM OPINION

Goldberg, J.

This matter involves a tangled mess of failed real estate transactions entered into between Alain Kodsi and his wife Rachel Foster^[1](the “Foster Parties”), and Moshe Attias^[2] (the “Attias Parties”). The contentious history of this litigation involves myriad claims and counterclaims.

In April of 2022, on the eve of the first trial listing, the parties submitted eleven motions in limine, many of which were belated dispositive motions. Because the case was not actually trial ready, I continued the matter and directed that the parties submit motions for summary judgment.

The parties have now filed Cross-Motions for Summary Judgment on numerous issues. I reluctantly voice my frustration with both parties' presentations of these Motions, which often fail to cite to evidence, or which rely upon facts that are not supported by any evidence of record. And in some instances the evidence cited is inadmissible. The parties have also been less than clear about the scope of their claims and the legal and evidentiary burdens they bear.^[3]That said, I have attempted to carefully review these Motions, which will be granted in part and denied in part. The basis for my rulings is set forth below.

I. STATEMENT OF FACTS

The following facts are derived from the evidence submitted by the parties and the parties' statements of facts.^[4] Where there is conflicting evidence about a particular fact, Federal Rule of Civil Procedure 56 requires that I view those facts and evidence in the light most favorable to the non-moving party. Facts recited by the parties but not pertinent to the issues at hand are not included.

A. The Pending Actions

On November 5, 2018, three of the Foster Parties (Rachel Foster, DEMK, LLC, and 532 Brooklyn) commenced a federal action against two of the Attias Parties (Moshe Attias and Unity Loft) setting forth federal claims under the Racketeer Influenced and Corrupt Organization Act (“RICO”), 18 U.S.C. § 1962, and state law claims for fraud, breach of fiduciary duty, and breach of contract (The “Foster Action”).

The Attias Parties (Attias and Unity Loft) filed a counterclaim complaint alleging fraudulent transfer, unjust enrichment, and fraud. On November 26, 2019, the parties stipulated to dismissal of the Foster Parties' breach of fiduciary claims. On September 9, 2020, I dismissed all counterclaims against Foster and DEMK with prejudice and all but the fraudulent transfer counterclaim against 532 Brooklyn.

On February 15, 2019, Moshe Attias and Marion Court, LLC filed a state court action in the Philadelphia Court of Common Pleas against 532 Brooklyn, LLC and Alain Kodsi. (The “Attias Action”). 532 Brooklyn and Kodsi removed the case to federal court, and I consolidated that matter with the Foster Action. On December 16, 2019, the Attias Parties filed an amended complaint in the Attias Action adding WPHL Housing Associates, LLC (“WPHL”) as a party, and setting forth claims for several breaches of contract, breach of promissory note, fraudulent transfer, unjust enrichment, fraud, conversion, and specific performance. WPHL then filed counterclaims for breach of fiduciary duty and breach of contract.

B. The Initial Real Estate Transactions at Issue

The parties have entered into a series of real estate transactions that give rise to their countless disputes. To the extent the parties have provided evidence regarding these transactions, I will attempt to set forth the facts related to each property at issue.

1. Unity Street Property

Unity Loft is a limited company formed by Attias to purchase the property located at 1328-34 Unity Street, Philadelphia (“Unity Street Property”). (Foster Parties' Ex. 1, Dep. of Moshe Attias (“Attias Dep.”) 14:21-24, 19:11-12.) Attias testified that he opened this LLC under the instruction of his partner in the transaction, Alain Kodsi, but because Kodsi did not want to be named in the LLC, Unity Loft was opened under Attias's name only. (Id. at 19:22-20:22, 21:5-22.) Attias registered Unity Loft with the Internal Revenue Service indicating that he was the sole member. (FSUF ¶ 5; AR ¶ 5.)

Unity Loft purchased the Unity Street Property for $325,000, which he obtained from Rachel Foster via wire transfer. (FSUF ¶ 8; AR ¶ 8; Attias Dep. 27:7-28:9; Foster Parties' Ex. 3.) Under the original deal between Attias and Kodsi, Kodsi was to invest $350,000 and then become a fifty-fifty partner. (Attias Dep. 32:21-33:7.) According to the Attias Parties, however, in January 2018, the funds advanced by Foster (and Kodsi) for the Unity Street Property were returned, and the Foster Parties released all claims to the Unity Street Property. (Id.) (Attias Parties' Ex. BB.) Attias rented out the Unity Street Property to someone named Joseph who never paid rent. (FSUF ¶ 13; AR ¶ 13.)

2. The Small Properties

In June 2016, DEMK, LLC (part of the Foster Parties) transferred $400,000 to Home Design Services, Inc. (an entity owned and controlled by Attias). (FSUF ¶¶ 14-17; ASUF ¶¶ 14-17.) The money was intended for all expenses related to the purchase of eight single family residential properties at a Philadelphia's sheriff sale (the “Small Properties”). (Attias Dep. 52:6-23.) The Small Properties were to be titled under the name of an entity called AEM Investments. (FSUF ¶ 18; AR ¶ 18.)

Among the properties acquired under this agreement was 749 Locust Avenue, Philadelphia, Pennsylvania. (FSUF ¶ 19; AR ¶ 19.) When purchased, however, that property was titled solely in Attias's name, not in the name of AEM Investments. Attias contends that the erroneous titling was the result of a mistake by the Philadelphia Sheriff's Office when preparing the deed, which put the deed solely in Attias's name. (FSUF ¶¶ 19-21; AR ¶¶ 19-221.)

The Foster Parties assert, without evidence, that Attias used only $264,536 of the $400,000 transferred to purchase the Small Properties but refused to return the remaining $135,464. Indeed, the exhibit cited by the Foster Parties is an unauthenticated handwritten document on a sheet of lined notebook paper. (Foster Parties' Ex. 5.) The Attias Parties counter that the $264,536 amount did not reflect any of the purchase related costs such as taxes, insurance, attorneys' fees, and liens, and that the actual amount spent was approximately $320,000 for all of the Small Properties. (Attias Parties' Ex. I, Dep. of Alain Kodsi (“Kodsi Dep.”) 127:17-21.)

The Attias Parties also assert that, under a January 2018 Agreement between Attias and Kodsi, described in more detail infra, the remaining money was to be kept by Attias as payment for construction work on a prior project, the West Philadelphia High School Project. (Attias Parties' Ex. BB, p. 5.)

3. The Lippincott Lofts Property

Attias formed an entity called Lippincott Lofts, LLC for the purpose of purchasing a property known as Lippincott Lofts. (FSUF ¶ 25; ASUF ¶ 25.) The IRS documents reflect that Attias was the sole member of Lippincott Lofts, LLC. (Attias Dep. 74:22-75:4.)

In 2017, pursuant to a verbal joint venture agreement with Kodsi, Attias, through Lippincott Lofts, LLC, acquired two warehouses located at 2016 W. Lippincott Street and 2024-34 W. Lippincott Street. Under the agreement, Kodsi would invest the capital and then the parties would split the profits 70/30. (Kodsi Dep. 144:8-13.)

4. The Locust Avenue Lots

In April 2016, Attias acquired two lots located at 704-718 and 720 Locust Avenue (“Locust Avenue Lots”) pursuant to a verbal joint venture agreement with Kodsi to purchase, develop and resell the Locust Avenue lots. (ASUF ¶ 26; FR ¶ 26.)

5. The 13^th Street Property

I note that many of the facts recited by the Attias Parties regarding the 13^th Street Properties are unsupported by any citation to the record. Accordingly, for purposes of summary judgment, I must disregard them. Facts which do have record cites reflect that, in 2016, Kodsi was seeking to avoid paying capital gains tax on proceeds from the sale of real estate by proceeding with an exchange under Section 1031 of the Internal Revenue Code.^[5]Accordingly, he spoke with Attias about purchasing a property- the “13^th Street Property”-owned by Attias's entity Marion Court, LLC and located at 5840-5850 N. 13^th Street and 5824-5838 N. 13^th Street in Philadelphia, PA. In connection with those discussions, Kodsi represented that Attias could not be a co-owner of replacement property in order for the 1031 exchange to occur. (Kodsi Dep. 33.)

On July 27, 2016, Attias, on behalf of Marion Court, executed a Residential Contract of Sale (“Agreement of Sale”) with 532 Brooklyn whereby Attias agreed to transfer the 13^th Street Property, through Marion Court, LLC, to 532 Brooklyn. (Foster Parties' Ex. 6; Attias Parties' Ex. U.) According to the Agreement of Sale, the total purchase price for the 13^th Street Property was $3.8 million. (Foster Parties' Ex. 6; Attias Parties' Ex. U.) The Agreement of Sale provided that Marion Court, LLC would renovate the property pursuant to certain construction plans. (Id.)

At his deposition, Attias testified that, according to discussions prior to the execution of the contract, the $3.8 million was going to be used to renovate the two separate buildings at the 13^th Street Property into approximately seventy-five residential units. (Attias Dep. 131:11-14.) Attias asserted that he first needed to pay the debt on the property and then start construction of the project including the purchase of material for both...