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RODIN PROPERTIES-SHORE MALL v. CUSHMAN & WAKEFIELD

January 25, 1999

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.



The opinion of the court was delivered by: Brotman, District Judge.

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

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.

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 Third-Party Complaint, ¶ 60. IBUS/UBS recommended that N.V. take control of the Shore Mall. See id., ¶ 61. According to Rodin, N.V. and the Dutch investors thereafter implemented a plan to gain control of the Shore Mall by denying SMA the opportunity to further develop the property, thereby depressing its value and forcing SMA to sell the property to N.V. or to another buyer. See id., ¶ 64. Between 1993 and 1995, in keeping with its plan, N.V. rejected SMA's proposals to improve and expand the Shore Mall. See id., ¶ 66. In September of 1995, Rodin claims that AAB, acting on behalf of the Dutch investors, threatened to sue Rodin and Ullman unless SMA sold the Shore Mall immediately with the proceeds to go entirely to N.V. See id., ¶ 69. When they refused, N.V. removed them from N.V.'s Supervisory Board of Directors. See id., ¶ 70.

On December 28, 1995, N.V. filed its original Complaint in this
action asserting a variety of claims, including fraud, breach of
fiduciary duty, and breach of contract. On January 30, 1996, N.V.
filed an Amended Complaint. On April 9, 1996, Rodin moved to
dismiss N.V.'s Amended Complaint. On May 14, 1996, Cushman &
Wakefield moved to dismiss N.V.'s Amended Complaint. On January
9, 1997, the Court ordered the parties to submit supplemental
briefs regarding certain choice-of-law issues. On March 26, 1997,
the Court rejected Rodin's motion to dismiss on forum non
conveniens grounds and dismissed N.V.'s Amended Complaint without
prejudice and with leave to replead all counts under Netherlands
law, with the exception of N.V.'s contract and  piercing the
corporate veil counts which were to be replead under New Jersey
law.

On April 25, 1997, N.V. filed its Second Amended Complaint alleging under Dutch law (1) onrechtmatige daad against Rodin and C & W, Pa., (2) breach of supervisory duty against Rodin, (3) breach of contract against C & W, Pa., and (4) piercing the corporate veil against C & W, Inc. All three defendants moved to dismiss N.V.'s Second Amended Complaint or, in the alternative, for summary judgment. On June 17, 1998, the Court denied the motions to dismiss in their entirety and ordered N.V. to replead its breach of contract claim under New Jersey law.

On June 30, 1998, N.V. filed a Third Amended Complaint. On July 31, 1998, Rodin filed his Answer to N.V.'s Third Amended Complaint. He also filed a Counterclaim against N.V. and a Third-Party Complaint against the Dutch Investors. On September 14, 1998, Rodin filed an Amended Answer to the Third Amended Complaint, an Amended Third-Party Complaint against the Dutch Investors for contribution, and an Amended Counterclaim against N.V. alleging breach of contract for failure to provide him with officers' and directors' insurance for actions commenced in the United States. On August 7, 1998, Cushman & Wakefield filed Answers and Crossclaims against Rodin for contribution and indemnification. They also filed Third-Party Complaints against SMA, RK Realty Two Associates, L.P., Ullman, and Reid for contribution and indemnification and to join Reid and Ullman as indispensable parties. On September 24, 1998, Rodin filed an Answer and a Counterclaim for indemnification and contribution to the Crossclaims of Cushman & Wakefield. Also on September 24, 1998, SMA filed an Answer to the Third-Party Complaints of Cushman & Wakefield. SMA also filed a Counterclaim against C & W, Pa. for contribution and indemnification, a Crossclaim against the Dutch Investors for contribution, tortious interference with contractual relationship, and intentional interference with expectation of economic benefit or advantage, and a Rule 14(a) Claim against N.V. for breach of the duty of good faith and breach of fiduciary duties.

In addition to the action presently pending before the Court, two actions arising out of the same events are currently pending before other tribunals. One such action has been filed before the Supreme Court of New York, County of New York. On December 22, 1995 — six days before filing suit in this Court — N.V. filed a Complaint in New York state court against Ullman, Rodin, C & W, Pa., C & W, Inc., SMA and Reid. On April 4, 1997, the New York court dismissed N.V.'s claims against Rodin and SMA, finding that it lacked personal jurisdiction over them. Thereafter, N.V. filed an Amended Complaint against Ullman, C & W, Pa., C & W, Inc., and Reid alleging (1) fraud against all four defendants, (2) negligence, negligent misrepresentation, gross negligence, piercing the corporate veil, and onrechtmatige daad against C & W, Pa. and C & W, Inc., (3) breach of fiduciary duty, legal malpractice, negligent misrepresentation, and onrechtmatige daad against Ullman and Reid.

Another action involving the same events at issue in the case before this Court has been filed in the Netherlands. On January 9, 1998, Rodin executed an Assignment of Claims by which he conveyed to SMA all of his claims against N.V. and the Dutch Investors arising out of the financing SMA obtained from N.V. Soon thereafter, SMA filed an action in the Netherlands against the Dutch investors for contribution and indemnification should Rodin or Ullman be held liable to N.V. in either the present action or the New York action. On July 30, 1998, Rodin and SMA entered into an Assignment Agreement which stated (1) that the Assignment of Claims Rodin executed on January 9, 1998 was intended to assign to SMA Rodin's claims against the Dutch Investors in the Netherlands only, not in the United States, and (2) that SMA assigns to Rodin the right to assert in the United States District Court for the District of New Jersey any of its claims against N.V. or the Dutch investors.

On November 30, 1998, N.V. and N.V.'s shareholders filed a motion to dismiss, or in the alternative to sever, Rodin's Counterclaim and Third-Party Complaint and SMA's Rule 14 Claim and Crossclaim. Also on November 30, 1998, AAB filed a motion to dismiss, or in the alternative to sever, Rodin's Third-Party Complaint and SMA's Crossclaim. On December 9, 1998, Reid and Ullman filed a motion to dismiss, or in the alternative to sever, the Third-Party Complaints of C & W, Pa. and C & W, Inc.

II. DISCUSSION

  A. MOTION OF THIRD-PARTY DEFENDANTS THELEN REID AND ULLMAN TO
      DISMISS, OR IN THE ALTERNATIVE TO SEVER, CUSHMAN &
      WAKEFIELD'S THIRD-PARTY COMPLAINTS

Thelen Reid*fn1 and Ullman make four arguments in support of their motion: (1) the Court lacks personal jurisdiction over Thelen Reid and Ullman; (2) the Court should abstain from adjudicating Cushman & Wakefield's third-party claims against Thelen Reid and Ullman; (3) Cushman & Wakefield cannot join Thelen Reid and Ullman as indispensable parties pursuant to Fed.R.Civ.P. 19; and (4) the Court should sever Cushman & Wakefield's third-party claims against Thelen Reid and Ullman in the event that the Court fails to dismiss those claims.

1. Personal Jurisdiction

Pursuant to Federal Rule of Civil Procedure 4(e), federal "district courts have personal jurisdiction over non-resident defendants to the extent authorized under the law of the forum state in which the district court sits." Sunbelt Corp. v. Noble, Denton & Associates, Inc., 5 F.3d 28, 31 (3d Cir. 1993). New Jersey's long arm statute permits the assertion of personal jurisdiction as far as is permitted under the Fourteenth Amendment to the United States Constitution. See N.J. Ct.R. 4:4-4; Carteret Savings Bank, FA v. Shushan, 954 F.2d 141, 145 (3d Cir. 1992). The Fourteenth Amendment permits a state to exercise jurisdiction over an out-of-state defendant only where "the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471, 105 S.Ct. 2174, 2182, 85 L.Ed.2d 528 (1985) (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283 (1958)). It is the burden of the plaintiff to prove that the defendant has purposefully availed himself of the forum state. See Burke v. Quartey, 969 F. Supp. 921, 924 (D.N.J. 1997).

A plaintiff may rely upon a defendant's specific contacts with the forum state to prove that he has purposefully availed himself of that state. Personal jurisdiction pursuant to such contacts is known as specific jurisdiction:

  To make a finding of specific jurisdiction, a court
  generally applies two standards, the first mandatory
  and the second discretionary. . . . First, a court
  must determine whether the defendant had the minimum
  contacts with the forum necessary for the defendant
  to have "reasonably anticipate[d] being haled into
  court there." World-Wide Volkswagen Corporation v.
  Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62
  L.Ed.2d 490 (1980) (citations omitted). Second,
  assuming minimum contacts have been established, a
  court may inquire whether "the assertion of personal
  jurisdiction would comport with `fair play and
  substantial justice.'" Burger King Corporation v.
  Rudzewicz, 471 U.S. 462, 476, 105 S.Ct. 2174, 85
  L.Ed.2d 528 (1985) (quoting International Shoe
  Company v. Washington, 326 U.S. 310, 320, 66 S.Ct.
  154, 90 L.Ed. 95 (1945)).

Pennzoil Products Co. v. Colelli & Assoc., Inc., 149 F.3d 197, 201 (3d Cir. 1998). For personal jurisdiction to comport with "fair play and substantial justice," it must be reasonable to require the defendant to defend the suit in the forum state. See World-Wide Volkswagen, Corp. v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980). To determine reasonableness, a court considers the following factors:

  the burden on the defendant, the forum State's
  interest in adjudicating the dispute, the plaintiff's
  interest in obtaining convenient and effective
  relief, the interstate judicial system's interest in
  obtaining the most efficient resolution
  of controversies, and the shared interest of the
  several States in furthering substantive social
  policies.

Id. (internal quotation marks omitted) Only in "rare cases [do the] minimum requirements inherent in the concept of fair play and substantial justice . . . defeat the reasonableness of jurisdiction even [though] the defendant has purposefully engaged in forum activities." Asahi Metal Industry Co., Ltd. v. Superior Court of Cal., Solano County, 480 U.S. 102, 116, 107 S.Ct. 1026, 1034, 94 L.Ed.2d 92 (1987) (internal quotation marks omitted).

The Court finds that it may exercise specific jurisdiction over Ullman. Ullman is a partner of SMA, a New Jersey limited partnership, which owns the Shore Mall, a New Jersey property. As such, SMA has benefitted from the privilege of conducting business in New Jersey and from the protection of New Jersey's laws. From Cushman and Wakefield's Third-Party Complaints, it appears that their claims for contribution against Ullman are at least partially related to his position with SMA. These contacts are sufficient to subject Ullman to this Court's jurisdiction pursuant to Cushman & Wakefield's third-party claims. This Court's exercise of jurisdiction over Ullman comports with notions of fair play and substantial justice. In view of the fact that Ullman is already required to defend a similar action in New York state court, his burden in defending Cushman & Wakefield's third-party action in New Jersey is not great. Furthermore, a complete resolution of this dispute which includes all involved parties is in the best interest of the interstate judicial system as well as all of the individuals and entities involved.

The Court also finds that it may exercise specific jurisdiction over Reid. To assist it in performing the loan transaction at issue in this case, Reid hired two New Jersey law firms. In December of 1989, Reid retained the Newark, New Jersey law firm of McCarter & English to review copies of the note and mortgage at issue in this case and to advise Reid regarding the Shore Mall's doing business and usury. See Certification of Bryant K. Aaron ("Aaron Certification"), Exh. E. Also in December of 1989, Reid retained the Atlantic City, New Jersey firm of Perskie, Nehmad & Zeltner ("Perskie") to advise Reid regarding the Shore Mall's compliance with construction and fire regulations. See id., Exh. F. To this end, Perskie contacted New Jersey officials and found no outstanding violations against the Shore Mall. See id. Reid also asked Perskie to advise it of all state and local government regulations affecting the Shore Mall property. See id. Perskie did so by letter to Reid dated January 2, 1990. See id. Numerous letters and telephone calls were exchanged between Reid and its New Jersey counsel. See id., Exhs. E, F. These interactions — related as they are to the loan transaction at issue in this case — rise to the level of minimum contacts sufficient to establish personal jurisdiction over Reid. By hiring local counsel, Reid purposefully availed itself of the privilege of conducting activities in New Jersey and invoked the benefits and protections of New Jersey law. The Court finds that its exercise of jurisdiction over Reid comports with notions of fair play and substantial justice for the same reasons that its exercise of jurisdiction over Ullman does.

2. Abstention

Pursuant to the Supreme Court's decision in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483, reh'g denied, 426 U.S. 912, 96 S.Ct. 2239, 48 L.Ed.2d 839 (1976), federal district courts may at times abstain from exercising jurisdiction where parallel litigation is proceeding in state court. Federal courts, however, have a "virtually unflagging obligation . . . to exercise the jurisdiction given to them." Id. at 817, 96 S.Ct. at 1246. Therefore, Colorado River abstention is to be exercised in only the most exceptional of circumstances. See id. at 818, 96 S.Ct. at 1246; Bryant v. N.J. Department of Transportation, 1 F. Supp.2d ...


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