NTD I LLC et al v. Alliant Asset Management Company, LLC et al
Filing
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MEMORANDUM AND ORDER. (See Full Order.) IT IS HEREBY ORDERED that Defendants' Motion to Dismiss [ECF No. 17 ] is GRANTED, in part, and DENIED, in part. IT IS FURTHER ORDERED that Defendants' Counts VI and VIII are DISMISSED WITHOUT PREJUDICE. IT IS FURTHER ORDERED that Defendants' Motion to Strike Jury Demand [ECF No. 17 ] is GRANTED. Signed by District Judge E. Richard Webber on 2/15/2017. (CBL)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
NTD I, LLC, NORTH TOWER
DEVELOPMENT, LLC, and PAUL
WEISMANN,
Plaintiffs,
v.
ALLIANT ASSET MANAGEMENT
COMPANY, LLC, ALLIANT CAPITAL,
LTD., ALLIANT CREDIT FACILITY ALP,
LLC, and ALLIANT TAX CREDIT FUND
36, LTD, and ALLIANT TAX CREDIT 36,
LLC.,
Defendants.
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No. 4:16CV1246 ERW
MEMORANDUM AND ORDER
This matter comes before the Court on Defendants’ Motion to Dismiss and Motion to
Strike Jury Demand [ECF No. 17].
I.
BACKGROUND
This litigation arises out of a dispute between Plaintiffs NTD I, LLC, North Tower
Development, LLC, and Paul Weismann and Defendants Alliant Asset Management Company,
LLC ("Asset Management"), Alliant Capital, Ltd. ("Capital"), Alliant Credit Facility, Ltd.
("Credit Facility"), Alliant Credit Facility ALP, LLC ("Credit Facility ALP"), Alliant Tax Credit
Fund 36, Ltd. ("Fund 36 Ltd."), and Alliant Tax Credit 36, LLC ("Fund 36 LLC," and together
with Fund 36 Ltd., the "Limited Partners").
In 2006, Water Tower Place Limited Partnership (the “Partnership”) was formed,
pursuant to an Amended and Restated Agreement of Limited Partnership (the “LPA”), for the
1
general purpose of constructing, rehabilitating, and operating affordable housing apartment units
to qualify for federal and state low-income housing tax credits. Water Tower Place is located in
Saint Louis, Missouri, and comprised of 178 residential housing units in 34 buildings. The
project was financed by a 2006 issuance of Multifamily Housing Revenue Bonds that provide the
low-income housing tax credits and Water Tower Place must meet regulatory provisions through
2020 to remain housing tax credit qualified. Housing tax credits are contingent on Water Tower
Place maintaining occupant eligibility, and/or unit gross rent compliance.
A. The Parties
Plaintiff NTD I, LLC, is the General Partner of the project Partnership. Defendant Fund
36 LLC is the Partnership's Administrative Limited Partner. Fund 36 LTD is the Partnership's
State Limited Partner and Investor Limited Partner. Plaintiff North Tower Development, LLC
(the “Developer”), managed the construction and rehabilitation of Water Tower Place, pursuant
to a Development Services Agreement. Plaintiff Paul Weismann is the sole member and manager
of both the General Partner and the Developer. Plaintiffs Weismann and the Developer
guaranteed performance of the General Partner under the LPA, pursuant to a Guaranty
Agreement. Alliant Asset Management, Alliant Capital, Alliant Credit Facility, Alliant Credit
Facility ALP, along with the Limited Partners are affiliates that operate together under the
corporate umbrella of the Alliant Company (collectively, “Alliant”).
B. Duties and Obligations of the Parties
Under the LPA, the General Partner is responsible for overall management and control of
the Partnership business. The General Partner is entitled to one one-hundredth of a percent
(0.01%) of the Federal housing tax credits. The General Partner is obligated to make operating
loans to the Partnership as needed to fund operating deficits. The General Partner's obligation to
2
fund operating deficits expires and is discharged on the “Sunset Date.” According to the LPA,
the Sunset Date occurs thirty-six months after the date on which Water Tower Place attains a
benchmark entitled “Rental Achievement.”1 Weismann is responsible for the management and
control of the General Partner and the Developer. Weismann’s obligation to fund Operating
Deficits, as surety of the General Partner or otherwise, expires and is discharged on the “Sunset
Date.”
Also pursuant to the LPA, the Administrative Limited Partner's duties include receiving
and approving certain Partnership reporting, giving its consents and/or approvals on various
Partnership decisions, and exercising discretion as to certain LPA matters. The Administrative
Limited Partner is entitled to one one-hundredth of a percent (0.01%) of the housing tax credits.
The State Limited Partner’s role is to receive one hundred percent (100%) of the state housing
tax credits. The Investor Limited Partners role is to receive ninety-nine and ninety-seven one
hundredths percent (99.97%) of the federal housing tax credits, as well as ninety-nine and ninetysix one hundredths percent (99.96%) of all losses.
In return, the State Limited Partner and the Investor Limited Partner are obligated under
the LPA to make capital contributions to the Partnership upon the satisfaction of defined
conditions. One such benchmark is the “Rental Achievement Test.” Under the LPA, the Rental
Achievement Test is: "the satisfaction of a level of Occupancy sustained for a period of three (3)
consecutive months with actual rent levels and operating expenses which produce a Debt Service
Coverage Ratio of 1.15 to 1.00 with respect to all projected permanent financing for each of such
1
The LPA defines “Rental Achievement” as: “the date that all of the following conditions have been fulfilled: (i)
Conversion; (ii) all governmental approvals necessary for Occupancy of all units in the Apartment Complex have
been obtained; and (iii) one hundred percent (100%) Occupancy of the Tax Credit Apartment Units and ninety
percent (90%) Occupancy of the Apartment Complex has occurred during each of three (3) consecutive months (but
no earlier than the three (3) consecutive months immediately preceding Conversion), and which produces a Debt
Service Coverage Ratio of 1.15 to 1.00 for each of such three (3) consecutive months.”
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three (3) consecutive months." As noted above, 36 months after the date on which Water Tower
Place attains Rental Achievement, certain obligations of the General Partner and Weismann (as
surety of the General Partner) are discharged.
Section 4.2 of the LPA states the General Partner was to attain Rental Achievement by
December 1, 2008. The General Partner was five years late in meeting this deadline. Under the
LPA, failure to attain Rental Achievement by December 1, 2008, provides a basis for rescission
of the agreement. Neither the Limited Partners nor Alliant have yet attempted to rescind the
contract. The Limited Partners have not paid $1,015,765.00 in capital contributions set forth
under the LPA.
C. Procedural Background
On August 1, 2016, Plaintiffs filed their complaint. The claims asserted by Plaintiffs are:
Count I, for declaratory judgment reducing the Limited Partners’ interests to zero; Count II, for
declaratory judgment excusing Weismann from surety obligations; Count III, for breach of
contract to recover the Limited Partners’ Capital Contributions; Count IV, excusing Weismann
from surety obligations due to the Limited Partners’ contract breach; Count V, for damages for
the Limited Partners’ breach of the implied covenant of good faith and fair dealing; Count VI,
for damages for Defendants’ tortious interference with, and their inducement of a contract
breach; Count VII, for equitable contribution and restitution to Weismann; and Count VIII, for
punitive damages. Defendants moved for an Order pursuant to Fed. R. Civ. P. 12(b)(6)
dismissing those claims, and striking Plaintiffs’ jury demand. [ECF No. 17 and 18]. Both parties
requested oral argument related to Defendants’ Motion to Dismiss. A hearing was held on
December 14, 2016.
D. Well-Pleaded Facts
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The Court accepts as true the following well-pleaded facts alleged in Plaintiffs’
complaint. By December 31, 2015 the General Partner had made operating loans totaling
$2,439,283.00 to keep Water Tower Place in compliance and generate housing tax credits.
Pursuant to the Guaranty, Weismann funded these operating deficits through the General Partner,
in performance of his surety obligation. Weismann’s obligation to fund operating deficits as
surety of the General Partner is limited to $500,000.00. The Limited Partners, and by extension,
Alliant, have received more than twelve million in benefits from Water Tower Place--over $8
million in housing tax credits, and over $4.4 million of losses.
Upon the satisfaction of certain conditions and the Rental Achievement Test, the Limited
Partners were obligated to pay capital contributions to the Partnership. Even though Rental
Achievement was delayed for five years, the General Partner cured its failure and Rental
Achievement was attained on December 31, 2013. The Limited Partners never declared any
breach of the LPA for delayed Rental Achievement. Although all conditions were satisfied on
December 31, 2013, to trigger the Limited Partners’ capital contributions, and the Partnership
gave notice to the Limited Partners and Alliant, the Limited Partners did not make the required
contribution. The Limited Partners’ decision was in actuality made by Alliant management. As
an excuse for the Limited Partners’ failure to contribute, Alliant disputed that Water Tower Place
had attained Rental Achievement. Alliant’s challenge was unsupported and designed to delay or
avoid payment of the capital contributions.
Because the Limited Partners funded only $5 million of their $6.2 million in capital
contributions, they now owe at least $1,015,765.00 in capital contributions. Since October 1,
2007, the Developer has been entitled to a $1,250,000 development fee, pursuant to the
Development Services Agreement.
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II.
STANDARD
Under FRCP 12(b)(6), a party may move to dismiss a claim for “failure to state a claim
upon which relief can be granted.” The notice pleading standard of FRCP 8(a)(2) requires a
plaintiff to give “a short and plain statement showing that the pleader is entitled to relief.” To
meet this standard and to survive a FRCP 12(b)(6) motion to dismiss, “a complaint must contain
sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotations and citation omitted). This
requirement of facial plausibility means the factual content of the plaintiff’s allegations must
“allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Cole v. Homier Distrib. Co., 599 F.3d 856, 861 (8th Cir. 2010) (quoting Iqbal, 556
U.S. at 678). Courts must assess the plausibility of a given claim with reference to the plaintiff’s
allegations as a whole, not in terms of the plausibility of each individual allegation. Zoltek Corp.
v. Structural Polymer Group, 592 F.3d 893, 896 n.4 (8th Cir. 2010) (internal citation omitted).
This inquiry is “a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” Iqbal, 556 U.S. at 679. The Court must grant all reasonable
inferences in favor of the nonmoving party. Lustgraaf v. Behrens, 619 F.3d 867, 872-73 (8th
Cir. 2010).
“While a complaint attacked by a [FRCP] 12(b)(6) motion to dismiss does not need
detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitlement to
relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal
alterations and citations omitted); see also Iqbal, 556 U.S. at 679 (“[W]here the well-pleaded
facts do not permit the court to infer more than the mere possibility of misconduct, the complaint
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has alleged – but it has not ‘shown’ – ‘that the pleader is entitled to relief.’”) (quoting Fed. R.
Civ. P. 8(a)(2)). Nevertheless, although the “plausibility standard requires a plaintiff to show at
the pleading stage that success on the merits is more than a sheer possibility,” it is not a
“probability requirement.” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009)
(citing Iqbal, 556 U.S. 678). As such, “a well-pleaded complaint may proceed even if it strikes a
savvy judge that actual proof of the facts alleged is improbable, and that a recovery is very
remote and unlikely,” Id. (quoting Twombly, 550 U.S. at 556) (internal quotations omitted),
provided that the complaint contains sufficient facts to “give the defendant fair notice of what the
. . . claim is and the grounds upon which it rests.” Erickson v. Pardus, 551 U.S. 89, 93 (2007)
(quoting Twombly, 550 U.S. at 555) (internal quotations omitted).
III.
DISCUSSION
Defendants contend Plaintiffs have failed to state a claim upon which relief can be
granted and the case should be dismissed. Defendants set forth several arguments in support of
their Motion; they will be addressed individually below.
A. Claims III and V are precluded because the General Partner was the first to
breach the LPA.
In their complaint, Plaintiffs allege Defendants failed to make over $1,000,000 in capital
contributions to the Partnership in breach of the LPA. Plaintiffs seek to recover the Limited
Partners’ capital contributions in Count III.
Plaintiffs also seek damages for the Limited
Partners’ breach of the implied covenant of good faith and fair dealing in Count V.
Defendants argue Plaintiffs’ Counts III and V are precluded because the General Partner
was the first to commit a material breach of the LPA. Defendants allege the face of the complaint
concedes the General Partner failed to meet certain benchmarks in the development of the
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property as required under the LPA. Specifically, Defendants point out that, under Section 4.2 of
the LPA, the General Partner was obligated to meet the “Rental Achievement” benchmark by
December 1, 2008, but the complaint acknowledges it was not attained until December 31,
2013—more than five years later. Thus, Defendants assert the General Partner breached a
material term of the contract before the alleged breach by Defendants occurred. Defendants
conclude Plaintiffs’ Counts III and V must be dismissed pursuant to the “first to breach” rule.
Missouri adheres to the “first to breach” rule, which holds that a party to a contract
cannot claim its benefit where he is the first to violate it. R.J.S. Sec., Inc. v. Command Sec.
Servs., Inc., 101 S.W.3d 1, 18 (Mo. Ct. App. 2003). The “determination of the first to breach
does not end the analysis, however, as only a material breach may excuse the other party's
performance.” Id. (emphasis added). “Whether a breach is material or not is a question of fact.”
Id. However, even a material breach can be waived by a party's acceptance of defective
performance. Spencer Reed Group, Inc. v. Pickett, 163 S.W.3d 570, 574 (Mo. Ct. App. 2005).
A party in breach may also cure the breach by correcting the deficiency in his performance.
Barnett v. Davis, 335 S.W.3d 110, 113 (Mo. Ct. App. 2011).
Here, Plaintiffs argue the “first to breach” rule does not bar their claims because delayed
Rental Achievement was not a material breach. Plaintiffs maintain the delay was not material
as the Limited Partners were not deprived of the LPA benefits they reasonably expected.
Before considering the applicability of the “first to breach” rule, the Court notes the
allegations in Plaintiffs’ complaint are sufficient to state a plausible claim for relief. Plaintiffs
support their claim for breach by setting forth facts establishing the Limited Partners received the
benefits they reasonably expected--over eight million in tax credits and four million in losses
under the LPA. Defendants acknowledged at the hearing the “tax credits all came as they were
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supposed to come.” Plaintiffs further state, despite receiving expected benefits, the Limited
Partners failed to make over one million in required capital contributions. Plaintiffs also allege
the actions of the Limited Partners, denying Plaintiffs their LPA benefits, were arbitrary,
capricious, and pre-textual. Plaintiffs have pleaded sufficient facts to state a claim for relief.
With regard to the “first to breach” rule, the Court does not find it bars the assertion of
Plaintiffs’ claims.
Plaintiffs did concede in the complaint and at the hearing, Rental
Achievement occurred five years too late. However, although it is undisputed a term of the
contract was not timely met, it is not equally evident from the pleadings the breach was material
enough to invoke the “first to breach” rule. Defendants try to persuade the Court the materiality
of the Rental Achievement deadline was established by the remedies provided in the LPA for
failure to meet that deadline. Defendants point out the LPA indicates the parties agreed the
failure to meet Rental Achievement “by December 1, 2008,” permits the Limited Partners to
rescind the contract. LPA §§ 7.4(A)(viii), 7.4(B).
The Court does not find Defendants’ argument persuasive. Although Defendants may
have had the contractual right to rescind, due to a delay in Rental Achievement, this option under
the terms of the contract alone does not establish a material breach barring Plaintiffs from
seeking to enforce the contract. Significantly, the complaint also avers the Limited Partners
never declared any breach of the LPA for the delay in performance or attempted to rescind the
contract.2
Further, Plaintiffs stated at the hearing the Limited Partners continued to receive
housing tax credits and the General Partner eventually attained Rental Achievement on
December 31, 2013. Thus, the Limited Partners may have waived the delay and Plaintiffs may
have, likewise, cured any breach. Accordingly, granting all reasonable inferences in favor of
2
Defendants conceded at the hearing on the Motion to Dismiss they have not yet rescinded the contract, and were
“attempting to ride this out.”
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Plaintiffs, the Court finds the application of the “first to breach” rule to dismiss Plaintiffs’ Counts
III and V inappropriate under these circumstances.
B. Plaintiffs Weismann and North Tower Development should be dismissed from
the action because they are not third-party beneficiaries of the LPA.
Defendants argue claims asserted by Weismann and the Developer, based upon their
status as third-party beneficiaries to the LPA, should be dismissed.3 Defendants contend
dismissal is appropriate as it is undisputed Weismann and the Developer are not parties to the
LPA, and the LPA explicitly precludes the possibility of third-party beneficiary rights.
Defendants rely on Section 16.9 of the LPA, entitled “Parties in Interest,” which provides
that “[n]othing herein shall be construed to be for the benefit of or enforceable by any third party
including, but not limited to, any creditor of the Partnership.” Plaintiffs counter that the LPA’s
use of the word, “herein,” renders the clause ambiguous. Specifically, Plaintiffs maintain it is
unclear whether “herein” applies to the entire agreement or just Section 16. However, as noted
by Defendants, the LPA itself defines “herein” as follows: “[w]ords such as ‘herein,’
‘hereinafter,’ ‘hereof,’ ‘hereto’ and ‘hereunder,’ when used with reference to this Agreement,
refer to this Agreement as a whole, unless the context otherwise requires.” Based upon this
definition, and the context in which it is used in Section 16, it is apparent Section 16.9 applies to
the entire LPA. The Court does not find the ambiguity suggested by Plaintiffs.
Plaintiffs alternately argue, even if the LPA attempts to bar third-party beneficiaries,
Weismann and the Developer can assert rights as parties to contracts encompassed by the overall
transaction. Plaintiffs contend under Missouri law, the LPA, the Guaranty Agreement and the
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Weismann and the Developer have joined the General Partner in claims for breach of contract (Count III), breach
of the implied covenant of good faith and fair dealing (Count V), tortious interference (Count VI), and punitive
damages (Count VIII). In addition, Weismann has asserted a declaratory judgment claim (Count II), a material
breach claim (Count IV), and an unjust enrichment claim (Count VII).
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Development Services Agreement are each part of one overall contract that Weismann and the
Developer may directly enforce.
Under Missouri law, a contract can consist of multiple documents. Missouri Farmers
Ass'n, Inc. v. Barry, 710 S.W.2d 923, 926 (Mo. Ct. App. 1986). If the several instruments are
made at the same time, in relation to the same subject-matter, they may be read together as one
instrument. Massachusetts Bonding & Ins. Co. v. Feutz, 182 F.2d 752, 757 (8th Cir. 1950). This
rule applies, even when the parties are not the same, if the several contracts were known to all
the parties and were delivered at the same time to accomplish an agreed purpose. Id. Whether
instruments made at the same time and relating to the same subject constitute a single contract,
should be determined in light of the intention of the parties and with regard to the realities of the
situation. State v. Nationwide Life Ins. Co., 340 S.W.3d 161, 183 (Mo. Ct. App. 2011). The
parties’ intent regarding the number of documents constituting the contract is determined from
the entire instrument or instruments, subsidiary agreements, and relevant external circumstances.
Missouri Farmers, 710 S.W.2d at 926.
Here, the LPA, the Guaranty Agreement and the Development Services Agreement were
executed together to accomplish an agreed purpose, were known to all parties, and all were
related to the Partnership transaction. Significantly, the language of the LPA itself strongly
indicates the multiple instruments were intended to be read together. The clause at Section 16.7
of the LPA, entitled, “Entire Agreement,” appears to establish the Guaranty Agreement and the
Development Services Agreement are integrated parts of the LPA. Section 16.7 states that:
[The LPA], together with the Exhibits and Schedules hereto and the Development
Services Agreement, contains the entire understanding between and among the
parties and supersedes any prior understandings and agreements between and
among them respecting the subject matter of [the LPA].4
4
Federal Rule of Procedure 10(c) provides, in part, that “[a] copy of a written instrument that is an exhibit to a
pleading is a part of the pleading for all purposes.” See also Quinn v. Ocwen Fed. Bank FSB, 470 F.3d 1240, 1244
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Other circumstances indicate the parties likely intended the various instruments to be
read together. For example, the Guaranty Agreement was attached as Exhibit E to the LPA. In
addition, the Guaranty Agreement and the Development Services Agreement were considered
“Closing Documents.” See LPA § 3.9.B. Moreover, the LPA closing was conditioned on the
execution and delivery of the Guaranty Agreement and the Development Services Agreement,
in a form and substance satisfactory to the Investor Limited Partner. See LPA § 3.9.B. Hinging
one contract upon the execution of another contract heightens the need for joint interpretation.
See Dakota Gasification Co. v. Nat. Gas Pipeline Co. of Am., 964 F.2d 732, 735 (8th Cir.
1992).
While the language of the LPA in Section 16.7 strongly indicates all three instruments
were interdependent and meant to be considered together, whether they constitute a single
contract requires a complete determination of the parties’ intent. Weismann and the Developer
have, however, at this preliminary stage, set forth plausible claims asserting rights as parties to
one complete integrated contract.
C. Declaratory Judgment Claims and Equitable Claims fail because an adequate
remedy at law exists.
Defendants argue the General Partner’s claim seeking declaratory relief under Count I,
Weismann’s declaratory relief claims under Counts II and IV, and Weisman’s claim for unjust
enrichment under Count VII should be dismissed.
With regard to the claims for declaratory relief, Defendants argue Counts I, II, and IV
should be precluded because Plaintiffs’ breach of contract claim set forth in Count III provides
(8th Cir. 2006) (“[W]ritten instruments attached to the complaint become part of it for all purposes. For that reason,
a court ruling on a motion to dismiss under Rule 12(b)(6) may consider material attached to the complaint.”)
(internal citations omitted).
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an adequate remedy at law.
Plaintiffs counter that their allegations establish an actual
controversy under the Federal Declaratory Judgment Act, 28 U.S.C. § 2201, and the Motion to
Dismiss should be denied.
Federal courts have a discretionary power to determine whether or not to exercise
jurisdiction in a declaratory judgment action. State Farm Mut. Auto. Ins. Co. v. Bonwell, 248
F.2d 862, 865 (8th Cir. 1957). Federal Rule of Civil Procedure 57 governs declaratory judgment
actions and provides, “[t]he existence of another adequate remedy does not preclude a
declaratory judgment that is otherwise appropriate.” Federal Rule of Civil Procedure 8(a)(3),
allows a party to demand relief “in the alternative or different types of relief.” Rule 8(d)(2)
further provides, “A party may state as many separate claims or defenses as it has, regardless of
consistency.”
Rule 57, however, “is not construed to mean a declaratory judgment action will lie
whenever there is a pending controversy, regardless of the need for it.” Amerisure Mut. Ins. Co.
v. Maschmeyer Landscapers, Inc., No. 4:06-CV-1308 (CEJ), 2007 WL 2811080, at *2 (E.D. Mo.
Sept. 24, 2007) (quotation omitted). “[A] declaratory judgment action should lie only in cases
where it could be of some practical convenience to the parties.” Id. (quotation omitted).
Dismissal of a claim for declaratory relief is appropriate where adjudication of a breach of
contract claim would render the request for declaratory judgment moot or redundant. See
Amerisure, 2007 WL 2811080 at *2.
Here, the declaratory relief sought does not appear duplicative of Plaintiffs’ breach of
contract claims. In Counts III and V, Plaintiffs seek damages related to Defendants’ alleged
material breaches of the LPA and the covenant of good faith and fair dealing. In contrast, in
Counts I, II, and IV, declaratory judgment is sought as follows: the General Partner seeks a
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declaration reducing the respective interests of the Investor Limited Partner and State Limited
Partner to zero and allocating their housing tax credits and losses to the General Partner (Count
I); Weismann seeks a judgment excusing him from further performance as a surety (Count II);
and, Weismann asserts the prior material breaches of Defendants excuse him from further
performance as a surety under the LPA or otherwise (Count IV).5
Thus, Plaintiffs’ claims for declaratory relief seek relief beyond damages—a
determination of the respective interests of the parties under the LPA, as well as clarification of
Weismann’s continuing obligation as a surety. See City of Sullivan v. Truckstop Restaurants,
Inc., 142 S.W.3d 181, 193 (Mo. Ct. App. 2004) (observing that declaratory judgment may be
appropriate in circumstances where it is desirable that the relationship of the parties be
established because there may be a continuing relationship or future acts which depend on the
outcome). Notably, the LPA contemplates an ongoing relationship between the parties through
2020 as the project tries to remain housing tax credit qualified. Because it is not evident Counts
I, II, and IV will be rendered moot by Plaintiffs’ contract claims in Counts III and V, the safer
course for this Court to follow, at this early stage in litigation, is to deny Defendants’ request for
dismissal.
Defendants also seek dismissal of Count VII where Plaintiff Weismann contends
Defendants were unjustly enriched as Weismann funded in excess of $500,000 in operating
deficits.
Weismann asserts he is entitled to equitable contribution and restitution from
Defendants for all excess amounts he funded. Defendants contend Weismann’s claim for unjust
enrichment is barred as an express contract—the LPA—governs the obligations of the parties.
5
Weismann also seeks an underlying determination of the date Rental Achievement was attained. This date is
significant to Weismann as his continuing obligation as a guarantor has a “Sunset Date” on it. Weismann is required
to fund operating deficits from the time Rental Achievement is attained until the third anniversary of that date (the
“Sunset Date”).
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Plaintiff counters that the existence of an express contract does not bar his claim as Rule 8
expressly permits him to plead alternative claims, regardless whether or not they are consistent
with one another.
A claim for unjust enrichment has three elements: a benefit conferred by a plaintiff on a
defendant; the defendant's appreciation of the fact of the benefit; and the acceptance and
retention of the benefit by the defendant under circumstances in which retention without
payment would be inequitable. Mays–Maune & Assoc., Inc. v. Werner Bros., Inc., 139 S.W.3d
201, 205 (Mo. Ct. App. 2004). These elements were met as Plaintiffs’ complaint alleged that: the
Limited Partners failed to make contractual financial contributions to the Partnership; as a result,
Weismann had to fund in excess of $500,000.00 in operating deficits to the General Partner; the
General Partner then made operating deficit loans to the Partnership; Weismann funded more
than his share of financial contributions due the Partnership; the funding of deficits permitted
Water Tower Place to continue to operate and generate tax credits; Defendants knew Weismann
was funding operating deficits; they refused to make their required capital contribution, but
continued to receive the full economic benefit of the housing tax credits.
Although Plaintiff states a plausible claim for relief, Defendants argue this claim is
nonetheless barred by the existence of an express contract governing the parties’ rights. In cases
where there is an express contract, the remedy of restitution for unjust enrichment is not
available; it is at most an alternative claim. Armbruster v. Mercy Medical Group, 465 S.W.3d 67,
73 (Mo. Ct. App. 2015). A claim for unjust enrichment is founded upon equitable principles
whereby the law implies a contract. Lowe v. Hill, 430 S.W.3d 346, 349 (Mo. Ct. App. 2014). It
is a well-settled principle of law that implied contract claims arise only where there is no express
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contract. Id. A plaintiff cannot recover under an equitable theory when she has entered into an
express contract for the very subject matter for which she seeks to recover. Id.
Here a determination is pending as to whether the parties intended the LPA, Guaranty
and Development Services Agreement to constitute a single contract.
Until it is resolved
whether one unified express contract governed Weismann’s rights, the Court will permit
Weismann to plead an alternative claim of unjust enrichment in accordance with Rule 8, which
allows inconsistent and alternative claims to be pled. Accordingly, Count VII will not be
dismissed.
D. Plaintiffs’ Tortious Interference Claim Fails.
Defendants also ask the Court to dismiss Weismann and the Developer’s claim of tortious
interference with contractual relations against Alliant6 under Count VI. Weismann and the
Developer allege Alliant intentionally caused the State and Investor Limited Partners to
unjustifiably refuse to make full payment of contributions to the Partnership. They maintain
Alliant, without justification, interfered with and induced the Limited Partners to breach the
LPA, causing Plaintiffs to suffer damages.
Defendants contend dismissal is warranted as
Plaintiffs failed to properly plead the required elements of a claim for tortious interference.
Under Missouri law, to bring a claim for tortious interference, a plaintiff must allege (1) a
contract exists of a “valid business relationship or expectancy;” (2) the defendant has knowledge
of the contract or relationship; (3) the defendant interferes with the contract or relationship; (4)
Defendant lacked justification; and (5) damage to the plaintiff resulted. Brown v. First Health
Grp. Corp., No. 4:07CV01852NLJ, 2009 WL 440489, at *7 (E.D. Mo. Feb. 20, 2009), on
reconsideration in part, No. 4:07CV1852SNLJ, 2009 WL 1940373 (E.D. Mo. July 7, 2009);
6
In the complaint, Plaintiffs define “Alliant” as follows: “Upon information and belief, Asset Management, Capital,
Credit Facility, Credit Facility ALP, and the Limited Partners are Affiliates that operate together, and/or in
combination under the corporate umbrella of the Alliant Company (collectively, “Alliant”).”
16
Nazeri v. Missouri Valley College, 860 S.W.2d 303, 316 (Mo. banc 1993); Schott v. Beussink,
950 S.W.2d 621, 628 (Mo. Ct. App. 1997).
The absence of justification is an essential element of the claim for interference with
contract. Schott , 950 S.W.2d at 628. Missouri courts have stated that a defendant who has a
valid, existing economic interest in a contract is justified in inducing its breach, unless the
defendant uses improper means to induce the breach. Lick Creek Sewer Sys., Inc. v. Bank of
Bourbon, 747 S.W.2d 317, 323 (Mo. Ct. App. 1988). “Improper means are those which are
independently wrongful notwithstanding injury caused by the interference.” Environmental
Energy Partners, Inc. v. Siemens Bldg. Technologies, Inc., 178 S.W.3d 691, 703 (Mo. Ct. App.
2005). Pleading "improper means" usually requires allegations of threats, violence, trespass,
defamation, misrepresentation of fact, restraint of trade, or any other wrongful act recognized by
statute or common law. BMK Corp. v. Clayton Corp., 226 S.W.3d 179, 192 (Mo. Ct. App. 2007).
Such improper means must be pled. Lick Creek, 747 S.W.2d at 323. Mere conclusions of a
pleader not supported by factual allegations cannot be taken as true, and therefore, must be
disregarded in determining whether the petition states a claim upon which relief can be granted.
Schott, 950 S.W.2d at 629.
Defendants assert Plaintiffs failed to establish the element of “absence of justification” as
Plaintiffs did not allege Alliant used improper means by committing an independently wrongful
act. Defendants maintain Plaintiffs only pleaded in a conclusory fashion that Defendants caused
a breach of the LPA without justification. The Court agrees this allegation alone would not
support a claim as it is a mere formulaic recitation of the element and lacks the required factual
assertions to establish improper means. However, Plaintiffs counter the complaint did set forth
supporting facts describing how Alliant induced the Limited Partners to breach the LPA by
17
failing to make required capital contributions. Specifically, Plaintiffs point out, in order to avoid
making a capital contribution, Alliant simply denied, without explanation, Water Tower Place
attained Rental Achievement. According to the complaint, Alliant’s challenge was “not made in
good faith for the true purpose of hindering, delaying and avoiding payment of the Capital
Contributions.”
The Court does not find Plaintiffs’ allegations are sufficient to establish a lack of
justification for their interference. Here, Alliant has an existing economic interest in the business
affairs of the Limited Partners, and, therefore, the Partnership. As such, they were entitled to
actions protecting their economic interest unless they employed improper means. In an attempt to
establish improper means, Plaintiffs, in their Memorandum in Opposition, attempted to
characterize Alliant’s alleged challenge to Water Tower Place’s attainment of Rental
Achievement as an improper “misrepresentation of fact.” However, the alleged denial is more
properly categorized as a dispute over a contract term. And here, Plaintiffs concede the required
deadline was met five years in arrears. Thus, Plaintiffs fail to properly plead facts showing
Defendants used improper means and “lacked justification.” Because Plaintiffs fail to establish
an element of tortious interference, Defendants Motion to Dismiss Count VI will be granted.
E. Plaintiffs’ Punitive Damages Claims Fail.
Defendants further contend Plaintiffs’ claims for punitive damages under Count VIII
must be dismissed. Defendants maintain punitive damages are unavailable for Plaintiffs’ breach
of contract claims and Plaintiffs have failed to plead a viable tort claim. In Count VIII, Plaintiffs
allege the Limited Partners and Alliant’s bad-faith refusal to pay capital contributions and
Alliant’s conduct denying the attainment of Rental Achievement entitles Plaintiffs to an award of
punitive damages.
18
The general rule is punitive damages may not be recovered in breach of contract actions.
Peterson v. Cont'l Boiler Works, Inc., 783 S.W.2d 896, 902 (Mo. 1990). This rule applies even
where the breach is intentional, willful, wanton or malicious. Id. at 903 (listing cases). There is
an exception to this general rule where the breaching party's conduct, apart from an intentional
breach of the contract, amounts to a separate, independent tort. Id. at 902-03.7 The plaintiff
must expressly plead this exception in order to recover punitive damages in a breach of contract
action. Id. at 904. There must be proper allegations of the independent tort. Id.
Here, Plaintiffs only specifically plead one intentional tort—tortious interference with
contract under Count VI. As discussed above, however, Plaintiffs fail to state a claim for relief
under this cause of action and Count VI will be dismissed.
Without a remaining claim,
separately alleging an independent tort, Plaintiffs’ punitive damages claim under Count VIII also
fails to state a claim for relief and must be dismissed.
F. Plaintiffs’ group allegations against Defendants fail to meet pleading standards
under Iqbal and Twombly.
Defendants argue Plaintiffs’ group allegations against Defendants should be dismissed as
they fail to meet the federal pleading standards under Iqbal and Twombly.8
Specifically,
Defendants state the complaint lumps Defendants (Alliant Asset Management, Alliant Capital,
Alliant Credit Facility, Alliant Credit Facility ALP and the Limited Partners) together, referring
to them collectively as “Alliant,” without identifying specific claims and allegations against each
Defendant. Defendants argue this type of group allegation is insufficient to withstand a 12(b)(6)
motion.
7
Missouri also has a narrow fiduciary-duty exception for punitive damages in the context of contract claims.
Peterson, 783 S.W.2d at 902. This exception is not at issue here.
8
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d
868 (2009).
19
A complaint “satisfies the requirements of Rule 8(a) [when] it gives [Defendants] fair
notice of the basis for [Plaintiffs'] claims.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514, 122
S.Ct. 992, 152 L.Ed.2d 1 (2002). “[Rule 8(a)(2)] requires only a short and plain statement of the
claim showing that the pleader is entitled to relief. Specific facts are not necessary; the statement
need only give the defendant fair notice of what the claim is and the grounds upon which it
rests.” Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (internal
quotation marks and alterations omitted).
The complaint has set forth a basis for asserting group allegations against “Alliant.” The
complaint states Alliant Asset Management, Alliant Capital, Alliant Credit Facility, Alliant
Credit Facility ALP and the Limited Partners are affiliates that operate together under the
corporate umbrella of the Alliant Company (collectively, “Alliant”) to syndicate affordable
housing and tax credit investments.
Plaintiffs described the nature of each Defendant’s
relationship to the project. The complaint further alleges commonality of management among
the entities and that they engaged in joint action. Plaintiffs aver that decisions made by the
Limited Partners were in actuality made by Alliant management and employees. Plaintiffs claim
that if they were unable to discern which Alliant entity’s conduct was at issue, Plaintiffs credited
the conduct to Alliant as the overall enterprise in; otherwise, Plaintiffs maintain they identified
the specific entity in the pleadings.
Upon a detailed review of the complaint, the Court finds Plaintiffs have pleaded
sufficiently detailed factual allegations of conduct to give Alliant “fair notice of what the claim is
and the grounds upon which it rests.” Although the complaint does not identify, on a defendantby defendant basis, the specific actions taken by each Alliant entity, Defendants are nevertheless
20
adequately apprised of the claims against them. Accordingly, the Court declines to dismiss
Plaintiffs’ group allegations against Alliant.
G. Motion to Strike Jury Demand.
Defendants also motion the Court to strike Plaintiffs’ demand for a jury trial. Defendants
argue Plaintiffs’ jury demand must be stricken because Plaintiffs knowingly and voluntarily
waived their rights to a jury trial in connection with the LPA and the Guaranty Agreement--the
contracts forming the basis of the Plaintiffs’ claims. Plaintiffs counter Defendants failed to meet
their burden to establish waiver and the motion should be denied.
“Although the jury-trial right can be waived, the right is fundamental,” and courts must
“indulge every reasonable presumption against its waiver.” Bank of Am., N.A. v. JB Hanna, LLC,
766 F.3d 841, 849 (8th Cir. 2014) (quotation marks, citation, and bracketing omitted). However,
“[a]greements waiving the right to trial by jury are neither illegal nor contrary to public policy.”
Popular Leasing USA, Inc. v. Austin Auto. Warehouse Corp., No. 4:04-CV-1619-TCM, 2005
WL 1798088, at *1 (E.D. Mo. July 27, 2005) (quotation marks and citation omitted). “A demand
for a jury trial may be waived by either a written or oral stipulation.” Clark v. Runyon, 218 F.3d
915, 918 (8th Cir. 2000); Regions Equip. Fin. Corp. v. Blue Tee Corp., No. 4:16-CV-140-CEJ,
2016 WL 2643359, at *2 (E.D. Mo. May 10, 2016).
Accordingly, “a party may waive its right to a jury trial under the terms of a contract.”
Regions, 2016 WL 2643359, at *2. See also JB Hanna, 766 F.3d at 849. “For a waiver to be
effective, the party waiving the right must do so 'voluntarily' and 'knowingly' based on the facts
of the case.” Regions, 2016 WL 2643359, at *2. Courts in the Eighth Circuit have considered a
number of factors to determine whether a contractual waiver of the right to a jury was knowing
and voluntary. Id. The following non-exhaustive considerations bear on this analysis: (1) whether
21
the waiver provision is “in fine print or in large or bold print,” (2) whether it is set off in a
paragraph of its own, (3) whether the provision is in a take-it-or-leave-it or in a negotiated
contract, and (4) the conspicuousness of the waiver compared to the length of the contract. Id.
Here, both the LPA and the Guaranty contain provisions waiving the right to a jury trial.
Section 16.18 of the LPA states, “[e]ach party hereto hereby waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by jury . . . .” Likewise, § 26 of the
Guaranty Agreement, to which Plaintiffs Weismann and the Developer are parties, specifically
waives any right to a jury trial. Moreover, both of the waivers in these negotiated agreements
were in separate paragraphs, written in all caps, and were the final provision located before the
signature block. Thus, the Court finds Plaintiffs knowingly and voluntarily waived their rights
under the LPA and Guaranty. The Court will strike Plaintiffs’ demand for a jury trial.
Accordingly,
IT IS HEREBY ORDERED that Defendants’ Motion to Dismiss [ECF No. 17] is
GRANTED, in part, and DENIED, in part.
IT IS FURTHER ORDERED that Defendants’ Counts VI and VIII are DISMISSED
WITHOUT PREJUDICE.
IT IS FURTHER ORDERED that Defendants’ Motion to Strike Jury Demand [ECF
No. 17] is GRANTED.
So ordered this 15th day of February, 2017.
E. RICHARD WEBBER
SENIOR UNITED STATES DISTRICT JUDGE
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