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LCA GP, LLC. v. City of Plainfield

United States District Court, D. New Jersey

March 15, 2019

LCA GP LLC, LCA LP LLC, and ANODES PARTNERS LLC,, Plaintiffs,
v.
CITY OF PLAINFIELD, THE BANK OF NEW YORK MELLON CORP., as Trustee, Defendants. THE BANK OF NEW YORK MELLON CORP., as Trustee, Third-Party Plaintiff,
v.
PLAINFIELD HOUSING FINANCE CORPORATION, Third-Party Defendant.

          OPINION

          Kevin McNulty, United States District Judge

         Before the Court is the motion of third-party defendant Plainfield Housing Finance Corporation ("PHFC") to dismiss the third-parry complaint of defendant/third-party plaintiff The Bank of New York Mellon, as Trustee ("Trustee"). (DE 166). The basis of PHFC's motion is that it has "dissolved" and "is no longer financially capable of defending" this action. Although PHFC's motion is framed as a Rule 12(b)(6) motion, PHFC in fact seeks dismissal on Article III jurisdictional grounds. PHFC contends that this action is moot because the Court is unable to grant any "effective" relief to the prevailing party.

         Trustee opposes the motion because (1) PHFC has not submitted any evidence that it is, in fact, dissolved; (2) PHFC was an active corporation at the time its motion was filed, according to a corporate status report issued by the State of New Jersey; and (3) as a matter of law, a dissolved non-profit corporation, organized under New Jersey Law, may be sued.

         For the following reasons, PHFC's motion is denied.

         I. Background[1]

         Trustee is a national banking association. (3PC ¶l). PHFC is a not-for-profit corporation organized under the laws of New Jersey. (3PC ¶2).

         On May 17, 2018, plaintiffs LCA GP LLC, LCA LP LLC, and Anodes Partners LLC filed an amended complaint against defendants City of Plainfield and Trustee alleging eight different counts related to the acquisition, management, and development of an apartment complex located in Plainfield, New Jersey. (AC. ¶¶7-8). The complex was intended to be developed as affordable housing under Section 8 of the United States Housing Act of 1937. (AC ¶8). PHFC issued bonds to finance the construction of the complex. (3PC ¶6).

         In connection with this development project, plaintiffs entered into a "Payment in Lieu of Taxes" Agreement ("PILOT") with the City of Plainfield. (3PC ¶5). Plaintiffs also entered into a Lease and Management Agreement with the Housing Authority of Plainfield ("HAP"). That agreement provided that HAP would remit all revenue from the project, including rental proceeds, to the National Community Bank of New Jersey ("NCBNJ"), which was the trustee at that time. (3PC ¶7). Trustee is the successor in interest to NCBNJ. (3PC ¶1).

         NCBNJ placed the revenue into various funds, including a tax payment fund that was meant to satisfy PILOT obligations. (3PC ¶8). The City would calculate the amounts due, notify HAP of the amount, and HAP, in turn, would notify the Trustee of the amount due. (Id.). The Trustee would then make a payment to the City. (3PC ¶9).

         Plaintiffs allege that PILOT obligations were incorrectly calculated, and that Trustee disbursed incorrect amounts to the City of Plainfield, without verifying the correct amounts. (3PC ¶9).

         There is a Trust Agreement in place between PHFC and the Trustee, which contains an indemnification agreement:

The Corporation shall pay the Trustee reasonable compensation for its services hereunder, and also all its reasonable expenses and disbursements, including attorneys' fees, and shall indemnify the Trustee against any liabilities which it may incur in the exercise and performance of its powers and duties hereunder except those caused by the Trustee's own gross negligence or willful misconduct.

(3PC ¶10). Trustee's complaint against PHFC seeks indemnification under this provision in the event any damages are awarded. (3PC ¶11).

         Trustee's third-party complaint was filed on October 23, 2018. (DE 162). The 3PC does not allege that PHFC has dissolved. PHFC filed a motion to dismiss the 3PC on November 20, 2018. (DE 166). PHFC contends that it is a dissolved non-profit ...


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