The opinion of the court was delivered by: STANLEY S. BROTMAN
Presently before the Court are the motions for summary judgment of Defendants Pat Charles
and Charles, Sturm & Master (hereinafter "Charles"), and of Defendant Norman Cohen. For the reasons set forth below, Defendants' motions are granted in part and denied in part.
FACTS AND PROCEDURAL BACKGROUND
The facts and procedural background of this case are exhaustively described in two published opinions of this Court. See Gilmore v. Berg, 807 F. Supp. 1176 (D.N.J. 1992); Gilmore v. Berg, 761 F. Supp. 358 (D.N.J. 1991). Set forth below are the facts and background relevant to the motions presently before the Court.
In December 1980 Plaintiffs purchased unregistered securities in Cooper River Office Building Associates ("CROBA"), a New Jersey limited partnership. The information regarding the limited partnership was contained in a private placement memorandum dated September 19, 1980. Plaintiffs allege that on December 13, 1980, Office Buildings of Cooper River, Inc. ("OBCR"), a Nevada corporation owned by John Berg (50 percent), Howard Green (25 percent), and Gilbert Tucker (25 percent), paid a bankrupt entity in Camden, New Jersey $ 2,500,000 for two commercial office buildings and the land on which they stand. On the same day, OBCR sold the two buildings for $ 4,770,000 and leased the underlying land for a seventeen-year term to Management of Cooper River, Inc. ("MCR"). Also on that same day, MCR sold the two buildings and assigned the lease for $ 5,300,000 to CROBA, the general partner of which was American Real Estate Associates, Inc. ("AREA"). MCR is a wholly-owned subsidiary of AREA, a company controlled by Berg.
The facts relevant to the present motions involve the roles played by Charles, an attorney who prepared a tax opinion letter, and Cohen, an accountant who prepared a report on the projected financial performance of the partnership. Both documents were attached to the private placement memorandum, which referred to Charles and Cohen as "experts."
Berg communicated with Charles in April 1980 and retained him to represent AREA in connection with the purchase in the bankruptcy court of the office buildings and land. In May 1980 Berg informed Charles that if the purchase was successful, Berg intended to syndicate the Property. Berg asked Charles to prepare a tax opinion letter for AREA to use in syndicating the property. He gave Charles a draft letter that he claimed he and a tax attorney had drafted. Berg asked Charles to review the letter and the proposed private placement memorandum. Charles reviewed the letter, conducted legal research, revised the letter, and agreed to sign it as revised. Berg and Charles agreed on the revised letter on June 13, 1980, and Berg put it on Charles's stationary. The letter states that the purchase price of $ 5.3 million reflects the fair market value of the property as determined by AREA, and that the opinion would be amended to reflect any variation between information in the memorandum and later developed facts.
Several weeks later Berg told Charles that he would not request Charles to sign the letter and would not send it to proposed investors until after the closing of title on the property. In fact, Berg in July 1980 actively started soliciting limited partners through the private placement memorandum, which included Charles's tax opinion letter. Sometime prior to December 1980, Charles learned that Berg was selling interests in the syndication. Charles claims, however, that he was unaware his tax opinion letter was part of the private placement memorandum.
Around this same time, Charles helped obtain bankruptcy court approval of the proposed AREA purchase and prepared the documentation necessary to close title. The closing took place at two meetings, on December 15, 1980 and January 13, 1981. Charles and Berg had agreed on a flat fee of $ 9,000, plus costs, for all of Charles's legal services. The fee was paid in full at the final closing. Two weeks later, at Berg's request, Charles executed the tax opinion letter and sent it to Berg. Thereafter, Charles provided limited legal services to Berg and his controlled entities.
An important event during the syndication of CROBA was the preparation of a draft "errata" sheet that was meant to inform prospective investors of, inter alia, (1) the purchase out of bankruptcy for $ 2,500,000, (2) Berg's full role in the transaction, and (3) the step-up in price from $ 2.5 million to $ 5.3 million. Charles received the errata sheet sometime in November 1980 and was told by Berg not to worry about it. Plaintiffs claim that they never received the errata sheet and, therefore, that they never knew these material facts before purchasing their interest in CROBA.
As for Cohen, Berg retained him in June 1980 to review a set of financial projections for the limited partnership and to prepare and sign a forecast letter to be included in the private placement memorandum. Berg gave Cohen a set of projections, assumptions on which the projections were based, and a draft forecast letter. In July 1980 Cohen prepared the forecast letter and delivered it to Berg for inclusion in the private placement memorandum. The language of the letter on which Plaintiffs stake their claims against Cohen reads: