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Goldstein v. Roxborough Real Estate, LLC

United States District Court, D. New Jersey

January 22, 2018



          PETER G. SHERIDAN, U.S.D.J.

         This case returns to the Court after remand from the Third Circuit. Goldstein v. Roxborough Real Estate LLC, 677 Fed.Appx. 796 (3d Cir. 2017). The Third Circuit vacated and remanded this Court's prior decision granting Defendants Roxborough Real Estate, LLC (hereinafter, “RRE”) and Brenda Hopkins' motion compel arbitration. The Third Circuit held that there was insufficient evidence in the record for this Court to determine whether Plaintiff Michael Goldstein, pro se, proceeds on his own behalf, or on behalf of limited partnerships. Id. at 800. As such, the Third Circuit remanded this matter to the Court for additional fact-finding. Id. Specifically, the Third Circuit identified three issues for the Court to consider on remand: (1) whether Plaintiff proceeds on his own behalf; (2) if so, whether Plaintiff has standing to bring those claims under Pennsylvania law; and (3) whether the Court still has jurisdiction. Presently before the Court is Defendants' motion for judgment on the pleadings pursuant Federal Rule of Civil Procedure 12(c) (ECF 29).


         This case arises from the failed real estate ventures of four limited partnerships during the real estate market collapse. In late 2006, Plaintiff and Richard Diamond, Defendant Hopkins' estranged husband, formed four limited partnerships to purchase properties in the Roxborough area of Philadelphia, Pennsylvania. (Amended Complaint at ¶ 22). The four limited partnerships were: 6112 Ridge, LP; 6210 Ridge, LP; 6212 Ridge, LP; and 6214 Ridge, LP. (Id. at ¶ 23). According to the Amended Complaint, the founding partners of the limited partnerships were Diamond, RRE, and Euthena, LLC, an entity wholly owned by Plaintiff. (Id.). RRE was responsible for managing the limited partnerships and their assets, as well as handling property management, renovation, and repair activities. (Id. at ¶ 24). Euthena was responsible for obtaining investors to fund the limited partnerships. (Id.). Defendant Hopkins was an RRE employee, responsible for managing its financial accounts and bookkeeping. (Id. at ¶ 12). In forming these limited partnerships, the parties also drafted limited partnership agreements, which contained a choice of law provision, agreeing to be governed by Pennsylvania law, and a dispute resolution provision, which states:

(e) Disputes - Any controversy or claims arising out of or relating to this Agreement, or the breach thereof, shall be submitted to mediation using such system of mediation that is employed by the American Arbitration Association of the State of Pennsylvania. Any such controversy or claim that is not resolved by such mediation shall be settled by arbitration in accordance with the rules of the American Arbitration Association provided that the laws of Pennsylvania shall be applied in such arbitration, and judgment upon the award may be entered in any court having jurisdiction thereof.

(ECF No. 29-2 at 41, “Limited Partnership Agreement”).

         Each limited partnership purchased mix-use commercial properties at locations reflected by their name; for example, 6112 Ridge, LP purchased property at 6112 Ridge Avenue (hereinafter, “Properties”). (Id. at ¶ 22). In order to secure the purchase of these properties, 6112 Ridge, LP and 6210 Ridge, LP entered separate loans with St. Edmonds Federal Savings Bank for $280, 250 and $251, 250, respectively. (Id. at ¶¶ 28, 30). Similarly, 6212 Ridge, LP and 6214 Ridge, LP obtained loans from Stonebridge Bank for $425, 000 and $320, 000, respectively. (Id. at ¶¶ 33, 37). Plaintiff, along with Diamond and Michael Fitzgerald (another silent partner), was a personal guaranty for these two loans. (Id. at ¶ 52).

         In late 2008, Plaintiff audited RRE's accounting, focusing on labor timesheets, receipts for material purchases, and the accuracy of quarterly financial and operational reports. (Id. at ¶ 42). According to Plaintiff, the audit revealed that RRE and Hopkins failed to maintain proper accounting of financial records and identified various discrepancies with its financial statements. (Id. at ¶ 43). Plaintiff claims that this misconduct caused the Properties to fall below market rate and forced the limited partnerships to sell the properties to their lenders. (Id. at ¶ 51). As a personal guaranty to the two Stonebridge Loans, Plaintiff claims the bank secured final judgments against him and Fitzgerald. (Id. at ¶ 52).

         Plaintiff now claims to have assumed RRE's former role as general partner of all four limited partnerships, and has acquired all third-party limited partnership interest. (Id. at ¶¶ 14-17). Plaintiff also asserts that he has consolidated all ownership and guaranty related claims to himself. (Id. at ¶ 18). Given that the limited partnerships are insolvent and cannot afford legal counsel, Plaintiff asserts that the present matter is brought by himself, as a limited partner. (Id.). In his Complaint, Plaintiff alleges claims of fraud, breach of contract, negligent supervision, and detrimental reliance against RRE. He also asserts claims of breach of fiduciary duty and conversion against Hopkins. Specifically, Plaintiff claims that “RRE acted fraudulently, intentionally, and in bad faith, in negotiating and entering into the [a]greements” with the limited partnerships; and that RRE, as general partner, owed a duty of care to the limited partnerships and breached this duty by permitting Hopkins to engage in tortious conduct against the limited partnerships. (Id. at ¶¶ 66, 79-80). He also claims to have detrimentally relied on assurances made in the limited partnership agreements to personally guarantee loans with Stonebridge Bank. (Id. at ¶¶ 84-86). As for Hopkins, Plaintiff claims that, as RRE's employee, she owed the limited partnerships a fiduciary duty of care and breached that duty by “routinely mismanaging the accounting and finances of the Limited Partnerships” and “skimming monies from the Limited Partnerships.” (Id. at ¶¶ 90-93).

         Legal Standard

         Federal Rule of Civil Procedure 12(c) permits a party to dismiss a suit “[a]fter the pleadings are closed . . . but early enough not to delay trial.” Fed.R.Civ.P. 12(c). “A Rule 12(c) motion for judgment on the pleadings is treated like a motion to dismiss under Rule 12(b)(6).” Syncsort Inc. v. Sequential Software, Inc., 50 F.Supp.2d 318, 324 (D.N.J. 1999). Under either rule, the Court must accept all well-pleaded factual allegations in the complaint as true and draw all reasonable inferences in favor of the nonmoving party. Id. For a complaint to survive dismissal, it “must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'” Wireless Media Innovations, LLC v. Maher Terminals, LLC, 100 F.Supp.3d 405, 407 (D.N.J. 2015) (Ashcroft v. Iqbal, 556, U.S. 662 (2009)). As such, “[a] complaint should not be dismissed unless it appears beyond doubt that ‘the facts alleged in the complaint, even if true, fail to support the claim.'” Syncsort Inc., 50 F.Supp.2d at 325.


         I. Whether Plaintiff Proceeds on His Own Behalf

         As a preliminary issue, the Court must determine whether Plaintiff pursues these claims on his own behalf, or on behalf of the limited partnerships. Defendants contend that because Plaintiff, a non-attorney, pursues this cause of action on ...

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