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Kolber Properties, LLC v. Evan

United States District Court, D. New Jersey

February 11, 2014

KOLBER PROPERTIES, LLC, Plaintiff,
v.
DAVID EVAN, Defendant.

OPINION

JOEL A. PISANO, District Judge.

This is an action brought by Plaintiff Kolber Properties, LLC ("Plaintiff" or "Kolber Properties") against Defendant David Evan ("Defendant" or "Evan"). Plaintiff's Complaint alleges that Defendant is liable for breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment in connection with a loan to a partnership to purchase and sell real estate. Defendant has filed counterclaims alleging that Plaintiff is liable for breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, and prima facie tort, and requesting an equitable accounting and rescission. Presently before the Court is Plaintiff's Motion to Dismiss Defendant's Counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6) [ECF No. 19]. Defendant has opposed this motion, and filed a Cross-Motion to Dismiss Counts One and Two of Plaintiff's Complaint in the alternative. The Court decides these matters without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons set forth below, the Court will grant Plaintiff's Motion, and deny Defendant's Cross-Motion.

I. Background and Procedural History

As the Court has already recounted the facts of this case in its Motion to Dismiss Opinion (the "Opinion") dated June 18, 2013 [ECF No. 14], the Court will only recount relevant facts as to this motion. In May 2005, George Kolber ("Kolber"), Steven Ambrogio ("Ambrogio"), and Defendant (together, the "Partners") entered into a partnership to purchase three condominiums in Biloxi, Mississippi (the "Properties"). The Partners each contributed $89, 494.86 to the partnership, which would be used to partially fund the purchase of the Properties. The Partners also entered into a Partnership Agreement, which governed the terms of their business arrangement. Kolber Properties is not a party to this Partnership Agreement.

Pursuant to the terms of the Partnership Agreement, the Partners agreed to share profits from the operation and/or sale of the Properties according to terms set forth in the agreement. The Partners agreed to appoint Plaintiff Kolber Properties, a separate entity, to be their agent for purposes of acquiring and holding title to the Properties. Kolber Properties extended a loan to the Partnership in the amount of approximately $1.1 million to acquire the Properties in 2007. Kolber Properties was to distribute any profits realized from the Properties to the Partners. In return, the Partners each agreed to repay one-third of the principal loan to Kolber Properties plus interest within three years of the loan. The specific repayment terms for the loan are set forth in the Partnership Agreement.

In September 2007, Kolber Properties began issuing monthly interest statements to each of the Partners reflecting interest accruing from the advance. Kolber Properties also requested that each of the three Partners repay their respective one-third of the total principal and interest due from the loan. Defendant made monthly interest payments to Kolber Properties from September 2007 through October 2012 but did not make any attempt to repay principal and has not made any more payments. Kolber Properties alleges that Defendant now owes more than $364, 700 for his one-third share of the loan.

On January 15, 2013, Plaintiff commenced this action, seeking damages due to Defendant's alleged failure to repay his share of the advance. On March 6, 2013, Defendant moved to dismiss the Plaintiff's Complaint, arguing that Plaintiff Kolber Properties was bound by the terms of the Partnership Agreement, particularly the arbitration clause. This Court denied that motion on June 18, 2013, holding that Kolber Properties was not a party to the Partnership Agreement and was not therefore bound by the terms of the Agreement. [ See Opinion, ECF No. 16]. Thereafter, Defendant filed his Answer, Affirmative Defenses, and Counterclaims on July 2, 2013. Plaintiff now moves to dismiss these counterclaims, essentially on the basis that this Court has already ruled that it is not a party to the Partnership Agreement through which Defendant bases most of its counterclaims. Defendant opposes this motion, and alternatively moves to dismiss Counts One and Two of the Complaint if the motion is granted. Defendant bases this cross-motion on the premise that "[e]ither Plaintiff is a party to the Agreement, and Defendant has every right to assert contractual claims against Plaintiff based upon Plaintiff's material breach of the terms of the Agreement, or Plaintiff is not a party to the Agreement and Defendant's cross-motion... must be granted." Opp. Br. at 4.

II. Standard of Review

Federal Rule of Civil Procedure 12(b)(6) provides that a court may dismiss a complaint "for failure to state a claim upon which relief can be granted." When reviewing a motion to dismiss, courts must first separate the factual and legal elements of the claims, and accept all of the well-pleaded facts as true. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). All reasonable inferences must be made in the Plaintiff's favor. See In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 314 (3d Cir. 2010).

In order to survive a motion to dismiss, the plaintiff must provide "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This standard requires the plaintiff to show "more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A "plaintiff's obligation to provide the grounds of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (internal quotations and citations omitted). When assessing the sufficiency of a civil complaint, a court must distinguish factual contentions and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Iqbal, 556 U.S. at 678. Any legal conclusions are "not entitled to the assumption of truth" by a reviewing court. Id. at 679. Rather, "[w]hile legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Id .; see also Fowler, 578 F.3d at 210 (explaining that "a complaint must do more than allege a plaintiff's entitlement to relief").

III. Legal Discussion

In his Counterclaim, Defendant has brought six claims against Plaintiff, alleging various state law claims. The Court will address each of these claims below.

First, turning to Counts One and Two of the Counterclaim, Defendant brings claims for breach of contract and breach of the covenant of good faith and fair dealing based upon Kolber Properties' alleged failure to issue a note as required under the Partnership Agreement. These claims must fail because, as this Court has already held, Kolber Properties is neither a party to the Partnership Agreement nor otherwise bound to the Partnership Agreement by "traditional principles of contract and agency law." Bel Ray Co. Inc. v. Chemrite (Pty) Ltd., et al., 181 F.3d 435, 444 (3d Cir. 1999); see also Opinion at 6-9. Consequently, Counts One and Two, which allege that Plaintiff has breached the Partnership Agreement, are meritless. Furthermore, because Counts One and Two of Plaintiff's Complaint is premised on a loan agreement between the Partners and Plaintiff, and not the Partnership Agreement upon which Defendant's Counterclaim is based, Defendant's Cross-Motion to Dismiss is denied.

Next, in Count Three, Defendant alleges that Plaintiff has breached its fiduciary duty to him by engaging in self-dealing when it "fail[ed] to conduct itself in an honest and forthright manner with respect to the nature of the obligations and rights and responsibilities set forth in the Agreement." Countercl. ΒΆ 27. Defendant's claim, however, suffers from a fatal flaw: it fails to allege the existence of a cognizable fiduciary relationship between Plaintiff and himself. "A claim of breach of fiduciary duty obviously requires the existence of a fiduciary duty between the parties." Kronfeld v. First Jersey Nat'l Bank, 638 F.Supp. 1454, 1467 (D.N.J. 1986). In his crossclaim, Defendant alleges that Plaintiff owed a fiduciary duty to Plaintiff as a party to the Agreement because New Jersey law recognizes the existence of such a duty between co-partners in a business transaction. Kolber ...


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