Rodin Properties-Shore Mall v. Cushman & Wakefield, CIV.A. 95-6541(SSB).

Page 709

49 F.Supp.2d 709

RODIN PROPERTIES-SHORE MALL, N.V., Plaintiff, v. CUSHMAN & WAKEFIELD OF PENNSYLVANIA, INC., Cushman & Wakefield, Inc., and Neal Rodin, Defendants.

Neal Rodin, Third-Party Plaintiff, v. ABN AMRO Bank, N.V., ABN AMRO Holding, N.V., Stichting Bedrijfspensioenfonds Voor De Metaalindustrie, Stichting Pensioenfonds Rabobankorganisatie, Amev Levensverzekering, N.V., and Centraal Beheer Pensioenverzekering, N.V., Third-Party Defendants.

Neal Rodin, Counterclaim Plaintiff, v. Rodin Properties-Shore Mall, N.V., Counterclaim Defendant.

Cushman & Wakefield of Pennsylvania, Inc., and Cushman & Wakefield, Inc., Crossclaim Plaintiffs, v. Neal Rodin, Crossclaim Defendant.

Cushman & Wakefield of Pennsylvania, Inc., and Cushman & Wakefield, Inc., Third-Party Plaintiffs, v. Shore Mall Associates, L.P., R.K. Realty Two Associates, L.P., Leo Ullman, and Reid & Priest LLP, Third-Party Defendants.

Shore Mall Associates, L.P., Counterclaim Plaintiff, v. Cushman & Wakefield of Pennsylvania, Inc., Counterclaim Defendant.

Shore Mall Associates, L.P., Crossclaim Plaintiff, v. ABN AMRO Bank, N.V., ABN AMRO Holding, N.V., Stichting Bedrijfspensioenfonds Voor De Metaalindustrie, Stichting Pensioenfonds Rabobankorganisatie, Amev Levensverzekering, N.V., and Centraal Beheer Pensioenverzekering, N.V., Crossclaim Defendants.

Shore Mall Associates, L.P., Rule 14(a) Plaintiff, v. Rodin Properties-Shire Mall, N.V., Rule 14(a) Defendant.

No. CIV.A. 95-6541(SSB).

United States District Court, D. New Jersey.

January 25, 1999.

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Mark McMenamy, Bressler, Amery & Ross, P.C., Morristown, NJ, and Robert C. Sentner, Nixon, Hargrave, Devans & Doyle LLP, New York City, for Plaintiff Rodin Properties-Shore Mall, N.V.

Thomas D. Ruane, ST. John & Wayne, L.L.C., Newark, NJ, for Defendant Cushman & Wakefield of Pennsylvania, Inc.

Cozen & O'Connor, Newark, NJ, and Michael Minsker, Charlotte, NC, for Defendant Cushman & Wakefield, Inc.

Diana Vondra Carrig, Pepper, Hamilton & Scheetz LLP, Cherryhill, NJ, and Barbara W. Mather, Pepper, Hamilton & Scheetz LLP, Philadelphia, PA, for Defendant Neal Rodin.

Frederick Lee Whitmer, Pitney, Hardin, Kipp & Szuch, Morristown, NJ, for Third-Party Defendants ABN AMBRO Bank, N.V., ABN AMBRO Holding, N.V., Stichting Bedrijfspensioenfonds Voor De

Metaalindustrie, Stichting Pensioenfonds Rabobankorganisatie, Amev Levensverzekering, N.V., Centaal Beheer Pensioenverzekering, N.V.

Barbara Mather, Pepper Hamilton & Scheetz LLP, Philadelphia, Pa, for Third-Party Defendant Shore Mall Associates, L.P.

Mark S. Olinsky, Sills Cummis Zuckerman Radin Tischman Epstein & Gross, P.A., Newark, NJ, for Third-Party Defendants Thelen Reid & Priest, LLP and Leo Ullman.

Anthony M. Radice, Morrison & Foerster LLP, New York City, for Third-Party Defendant Thelen Reid & Priest, LLP

Theodore S. Steingut, Dornbush Mensch Mendelstam Shaeffer LLP, New York City, for Third-Party Defendant Leo Ullman.

MOTION OF THIRD-PARTY DEFENDANTS THELEN REID & PRIEST LLP AND LEO ULLMAN TO DISMISS OR IN THE ALTERNATIVE TO SEVER, THE THIRD-PARTY COMPLAINTS OF DEFENDANTS CUSHMAN & WAKEFIELD OF PENNSYLVANIA, INC. AND CUSHMAN & WAKEFIELD, INC.

RODIN PROPERTIES-SHORE MALL N.V., AND N.V., SHAREHOLDERS' MOTION TO DISMISS, OR IN THE ALTERNATIVE TO SEVER, NEAL RODIN's COUNTERCLAIM AND THIRD-PARTY COMPLAINT AND SHORE MALL ASSOCIATES' RULE 14 CLAIM AND CROSS-CLAIM

AAB'S MOTION TO DISMISS RODIN'S AMENDED THIRD-PARTY COMPLAINT AND SHORE MALL ASSOCIATES' CROSSCLAIMS

BROTMAN, District Judge.

Presently before the Court are the following motions: (1) motion of Thelen Reid & Priest LLP ("Thelen Reid"), successor to third-party defendant Reid & Priest LLP ("Reid"), and third-party defendant Leo Ullman ("Ullman") to dismiss, or in the alternative to sever, the Third-Party Complaints of defendants Cushman & Wakefield of Pennsylvania, Inc. and Cushman & Wakefield, Inc. (collectively "Cushman & Wakefield"); (2) motion of Rodin Properties-Shore Mall, N.V. ("N.V.") and N.V.'s shareholders, specifically Stichting Bedrijfspensioenfonds Voor De Metaalindustrie, Stichting Pensioenfonds Rabobankorganisatie, Amev Levensverzekering N.V., and Centraal Beheer Pensioenverzekering N.V. (collectively "N.V.'s shareholders"), to dismiss, or in the alternative to sever, the Amended Counterclaim and Amended Third-Party Complaint of defendant Neal Rodin ("Rodin") and the Rule 14 Claim and Crossclaim of third-party defendant Shore Mall Associates ("SMA"); and (3) motion of ABN AMRO Bank N.V. ("ABN Bank") and ABN AMRO Holding N.V. ("ABN Holding") (collectively "AAB") to dismiss, or in the alternative to sever, defendant Rodin's Amended Third-Party Complaint and third-party defendant SMA's Crossclaim.

I. FACTUAL AND PROCEDURAL HISTORY

This lawsuit concerns a dispute about a real estate venture between a New Jersey limited partnership and a Dutch investment corporation. In 1986, defendant Rodin, third-party defendant Ullman, and others, created SMA, a New Jersey limited partnership, for the purpose of purchasing the Shore Mall shopping center located near Atlantic City, New Jersey. See Third Amended Complaint, ¶¶ 5, 8. SMA obtained its initial mortgage loan from Continental Bank. See id., ¶ 8. By 1988, SMA's partners were eager to refinance; Rodin and Ullman solicited Dutch investors for this purpose. See id., ¶ 10, 11.

The interested Dutch investors requested that Cushman & Wakefield appraise the Shore Mall property. See SMA's Crossclaim, ¶ 33. On October 31, 1989 defendant Cushman & Wakefield of Pennsylvania, Inc. ("C & W, Pa.") issued an appraisal report which valued the Shore Mall property at $65.5 million. See Rodin's Amended Third-Party Complaint, ¶ 34. AAB had its American affiliate ABN-LaSalle analyze the appraisal; ABN-LaSalle visited and inspected the Shore Mall and examined financial and other documentation regarding the Shore Mall. See id., ¶ 35. In addition, each of the Dutch investors conducted its own due diligence with respect to the Shore Mall property. See id., ¶ 36.

On or about December 12, 1989, a number of Dutch investors incorporated N.V. for the purpose of providing a loan to SMA. See SMA's Crossclaim, ¶ 39. On December 27, 1989, N.V., which was listed on the Amsterdam Stock Exchange, made an initial public offering of its shares. Third-party defendant AAB was the underwriter of the offering. See Rodin's Amended Third-Party Complaint, ¶ 40. Third-party defendants Stichting Bedreijfspensioenfonds Voor De Metaalindustrie, Stichting Pensioenfonds Rabobankorganisatie, Amev Levensverzekering N.V. and Centraal Beheer Pensioenverzekering N.V. (collectively, and along with AAB, the "Dutch Investors") bought approximately 55 percent of N.V.'s shares. See SMA's Crossclaim, ¶ 41. Private investors purchased 5 percent of the shares. See Rodin's Amended Third-Party Complaint, ¶ 41. The remaining shares, approximately 40 percent, were not sold and were therefore retained by the underwriter AAB. See id. Rodin was one of the initial members of N.V.'s Board of Supervisory Directors and also the Chairman of the Board. See Third Amended Complaint, ¶ 12. According to Rodin, N.V., through its Board of Supervisory Directors, agreed to provide officers' and directors' liability insurance coverage for members of the Board, including Rodin. See Rodin's Amended Third-Party Complaint, ¶ 51.

According to N.V., Ullman and Reid, the law firm in which Ullman was a partner, were N.V.'s United States lawyers. See Third Amended Complaint, ¶ 12. In this connection, Ullman and Reid drafted, purportedly on N.V.'s behalf, a Note and a Mortgage ("Loan Documents"). See id., ¶ 15. The Note was in the sum of $49.125 million with a term beginning in January of 1990 and ending in December of 1999. See id., ¶ 19. It stated that SMA would make interest payments at a rate of 8.5 percent for the first five years, and at 11 percent for the final five years. See id. The Note required that SMA make interest payments only to the extent that it has available cash flow. See id., ¶ 22. The Note did not require that SMA take certain precautions or refrain from certain actions to ensure that it had available cash flow to make interest payments. See id., ¶¶ 23, 24, 25, 26. The Mortgage gave N.V. certain rights of control with respect to the Shore Mall, including the right to approve leases in excess of 50,000 square feet and the right to approve the cancellation of leases in certain situations. See id., ¶ 43. The Mortgage also prevented SMA from substantially altering the structures of buildings of the Shore Mall without N.V.'s prior written consent, from creating any assignment, mortgage, security interest, or encumbrance on Shore Mall property without N.V.'s prior written consent unless certain exceptions applied, and from improving the Shore Mall without first reaching an agreement with N.V. about such improvements. See id., ¶¶ 43, 44.

Since the execution of the loan, the Shore Mall's economic performance has not reached the projections provided by C & W, Pa. See id., ¶ 55. There has been insufficient cash flow for SMA to pay interest to N.V. at the agreed-upon interest rates, resulting in the accrual of large amounts of unpaid interest. See id., ¶ 57. At the Note's maturity, all accrued interest will become due. See id., ¶ 58. It appears unlikely that SMA will be able to pay this interest. See id. In addition, the value of the Shore Mall, as collateral for the Note will be insufficient to satisfy SMA's obligation. See id.

In response to the failure of the Shore Mall to generate sufficient cash flow to pay the interest due on the Note and the decline in value of the Shore Mall property, N.V.'s Board of Supervisory Directors retained in March of 1994 IBUS Asset Management B.V., a Dutch company, and its American affiliate, UBS Asset Management (collectively "IBUS/UBS") to assess N.V.'s position and to recommend improvements. See Rodin's Amended...