Plaza Realty of Ro Piedras, Inc. et al

Filing 18

OPINION AND ORDER. DENIED 9 MOTION to dismiss For Failure to State a Claim For Which Relief Can be Granted as to All Defendants filed by Sergio Gabriel Selcer, Mindy Feinberg-Dinnerman. Signed by Judge Salvador E Casellas on 12/16/2010.(LB)

Plaza Realty of Rio Piedras, Inc. v. Selcer, et.al.

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I N THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF PUERTO RICO

P L A Z A REALTY OF RIO PIEDRAS, I N C ., C iv il No. 10-1321 (SEC) Plaintiff v. M R . SERGIO GABRIEL SELCER, ET AL D e f e n d a n ts

OPINION and ORDER P e n d in g before this Court is Defendants Sergio Gabriel Selcer and Mindy Feinberg's (c o lle c tiv e ly "Defendants") motion to dismiss (Docket # 9), and Plaintiff Plaza Realty of Rio P ie d ra s , Inc.'s ("Plaintiff") opposition thereto (Docket # 10). After reviewing the filings, and th e applicable law, Defendants' motion to dismiss is DENIED. Factual and Procedural Background

15 O n April 16, 2010, Plaintiff filed the present suit under diversity jurisdiction, for breach 16 17 m a lic io u s ly and in bad faith concealed information" regarding the status of the lease contracts 18 a n d rent rolls pertaining to the property Plaintiff purchased from Defendants. 19 Pursuant to the complaint, on July 3, 2008, Plaintiff and Defendants entered into an 20 O p tio n to Purchase Agreement ("Option Agreement"),2 whereby Plaintiff obtained the option 21 22 23 24 25 26 Under the Civil Code of Puerto Rico's Article , P.R. Laws Ann. tit. 31, § 3018, "those who in fulfilling their obligations are guilty of fraud, negligence, or delay, and those who in any manner whatsoever act in contravention of the stipulations of the same, shall be subject to indemnify for the losses and damages caused thereby." The parties to the Option Agreement are Cinemas Management of Puerto Rico, Inc. and Defendants. In accordance with the complaint, Cinemas is a company that provides management and operation services to commercial real estate companies, including Plaintiff.
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o f contract claim and damages.1 According to Plaintiff, Defendants "willfully, negligently,

Dockets.Justia.com

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to purchase a property owned by Defendants which consists of a "strip style shopping center" c o m p ris e d of both commercial space and free standing units, located in San Juan, Puerto Rico. S o m e of Plaintiff claims hinge on Defendants' alleged breach of its obligations stemming f ro m Section "O" of the Option Agreement.3 Plaintiff also points to a catchall obligation c o n ta in e d in the "Deed of Purchase and Sale" ("Deed"), which states in pertinent part that "there a re no material facts or circumstances, related to the title, use, condition, or operation of the R e a lty, which Seller has not disclosed to the purchaser."According to Plaintiff, this was an e s se n tia l condition of the contract of sale. Plaintiff alleges that, notwithstanding the above, D e f e n d a n ts made fraudulent misrepresentations about three tenants: Encantos Restaurants, o w n e r of the Taco Bell franchise of Puerto Rico; Don Pedro BBQ; and Subway Restaurants.4 A c c o rd in g ly, Plaintiff contends that the rent rolls, estoppel certificates provided by the tenants, a n d other documents Defendants supplied in compliance with the Option Agreement failed to

Under Section "O" of the Option Agreement, Defendants had the following obligations that are material to the present suit: 1) "to obtain from the lessee an estoppel certificate in a form mutually agreed to by the Parties, as to the effects to confirm such lessee's commitment to comply with its corresponding Lease, and deliver them to the Purchaser on the closing date;" 2) "continue to operate the Shopping Center in the normal course of business, including renewing leases, executing new leases, and exercises any right granted by law or established in a lease in the event of a default by a Tenant;" 3) to notify the Purchaser and keep the Purchaser informed of any changes regarding any current lease of the Commercial Spaces or Free Standing Units and the Seller shall consult the Purchaser the terms of any new leases of the Commercial Spaces or Free Standing Units prior to its execution." See Docket # 10-1, p. 16. With regards to "Taco Bell," Plaintiff alleges that Defendants, on October 3, 2008, were notified of the "critical financial condition that was affecting the Plaza Puerto Rico Taco Bell," and thus requested Defendants modify the terms of the Taco Bell lease. As to Don Pedro BBQ, Plaintiff contends that Defendants had authorized a reduction amounting to $2,000 of Don Pedro BBQ's lease. Lastly, Plaintiff avers that Defendants reduced Subway Restaurants' Common Area Maintenance charges by $3.74 per square foot via an oral agreement between Defendants and the tenant.
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re f le c t the economic reality of the purchased property. Plaintiff alleges that, as a result, they w e re deceived into acquiring the property at an overstated price. On July 6, 2010, Defendants moved for dismissal pursuant to a forum selection clause c o n ta in e d in the Option Agreement. Docket # 9. Plaintiff opposed (Docket # 10), Defendants re p lie d (Docket # 13), and Plaintiff sur-replied (Docket # 16). Standard of Review A lth o u g h Defendants invoked FED. R. CIV. P. 12(b)(3) as the procedural vehicle for u rg in g dismissal under the forum selection clause, the First Circuit has held that such dismissals a re founded on Rule 12(b)(6). Lambert v. Kysar, 983 F.2d 1110, 1112, n. 1 (1st Cir. 1993); see a ls o Doe v. Seacamp Ass'n, 276 F. Supp. 2d 222, 224, n. 2 (D. Mass. 2003); LFC Lessors v. P a c if ic Sewer Maintenance Corp., 739 F.2d 4, 7 (1st Cir. 1984). Therefore, courts have e m p h a s iz e d that a motion to dismiss based upon a forum-selection clause is considered as one a lle g in g failure to state a claim for which relief can be granted, under Rule 12(b)(6), and not one f o r lack of subject-matter jurisdiction. Silva v. Encyclopedia Britannica, Inc., 239 F.3d 385, 386 (1st Cir. 2001); Outek Caribbean Dist. V. Echo, Inc., 206 F. Supp. 2d 263, 266 (D.P.R. 2002). T o survive a Rule 12(b)(6) motion, Plaintiffs' "well-pleaded facts must possess enough h e f t to show that [they are] entitled to relief." Clark v. Boscher, 514 F. 3d 107, 112 (1 st Cir. 2 0 0 8 ).5 In evaluating whether Plaintiffs are entitled to relief, the court must accept as true all o f their "well-pleaded facts [and indulge] all reasonable inferences therefrom" in the plaintiff's f a v o r. Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1964 (2007). The First Circuit has held th a t "dismissal for failure to state a claim is appropriate if the complaint fails to set forth factual

FED. R. CIV. P. 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief," in order to allow the defendant fair notice of what the claim is and the grounds upon which it rests. Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1964 (2007).

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a lle g a tio n s , either direct or inferential, respecting each material element necessary to sustain re c o v e ry under some actionable legal theory." Gagliardi v. Sullivan, 513 F. 3d 301, 305(1 st Cir. 2 0 0 8 ). Courts "may augment the facts in the complaint by reference to documents annexed to th e complaint or fairly incorporated into it, and matters susceptible to judicial notice." Id. at 305-306. However, in judging the sufficiency of a complaint, courts must "differentiate between w e ll-p le a d e d facts, on the one hand, and `bald assertions, unsupportable conclusions, p e rip h ra s tic circumlocution, and the like,' on the other hand; the former must be credited, but th e latter can safely be ignored." LaChapelle v. Berkshire Life Ins., 142 F.3d 507, 508 (quoting A u ls o n v. Blanchard, 83 F.3d 1, 3 (1st Cir.1996)); Buck v. American Airlines, Inc., 476 F. 3d 2 9 , 33 (1st Cir. 2007); see also Rogan v. Menino, 175 F.3d 75, 77 (1st Cir. 1999). Thus Plaintiffs m u s t rely in more than unsupported conclusions or interpretations of law, as these will be re je c te d . Berner v. Delahanty, 129 F.3d 20, 25 (1st Cir. 1997) (citing Gooley v. Mobil Oil Corp., 8 5 1 F.2d 513, 515 (1st Cir. 1988)). T h e re f o re , "even under the liberal pleading standards of Federal Rule of Civil Procedure 8 , the Supreme Court has recently held that to survive a motion to dismiss, a complaint must a lle g e `a plausible entitlement to relief.'" Rodríguez-Ortíz v. Margo Caribe, Inc., 490 F.3d 92 (1st Cir. 2007) (citing Twombly, 127 S. Ct. at 1965). Although complaints do not need detailed f a c tu a l allegations, the "plausibility standard is not akin to a `probability requirement,'but it a s k s for more than a sheer possibility that a defendant has acted unlawfully." Twombly, 127 S . Ct. At 1965; see also Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). A plaintiff's obligation to "provide the `grounds' of his `entitle[ment] to relief' requires more than labels and c o n c l u s io n s , and a formulaic recitation of the elements of a cause of action will not do." T w o m b l y, 127 S. Ct. At 1965. That is, "factual allegations must be enough to raise a right to re lie f above the speculative level, on the assumption that all allegations in the complaint are

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CIVIL NO. 10-1321 (SEC) tru e ." Parker v. Hurley, 514 F. 3d 87, 95 (1 st Cir. 2008).

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T h e Court "may augment the facts in the complaint by reference to documents annexed t o the complaint or fairly incorporated into it, and matters susceptible to judicial notice." G a g lia rd i v. Sullivan, 513 F. 3d 301, 305-06 (1 st Cir. 2008). A p p lic a b le Law and Analysis In support of their motion, Defendants argue that this district is an improper venue for th e present claims. According to Defendants, pursuant to Section "Q" of the Option Agreement, th e proper forum for any suit arising out of said agreement is the Superior Court of Puerto Rico, S a n Juan Section. On this point, Defendants aver that the intent of the parties and the clear la n g u a g e of the contract's provision disallow a different interpretation. In opposition, Plaintiff argues that its causes of action stem from Defendants' willful, n e g lig e n t, malicious and bad faith actions and representations, and breach of the Option A g r e e m e n t as well as the Deed. Specifically, Plaintiff contends that insofar as the Deed does n o t contain a forum selection clause, the District court is a proper venue to elucidate Plaintiff's c la im . In their reply, Defendants contend that Plaintiffs' claims hinge on the alleged violations o f Section "O" of the Option Agreement, thus there are no claims for breach of contract under th e Deed. Even so, Defendants insist that the Deed does not contain any obligation requiring th a t Defendants divulge any changes regarding the status pertaining to the leases of the c o m m e rc ia l units. A lth o u g h generally, "there is a strong presumption in favor of the plaintiff's choice of f o ru m ," Rafael Rodriguez Barril, Inc. v. Conbraco Indus., No. 08-1993, slip. op. at 8 (D.P.R. J u n e 30, 2009) (citing Coady v. Ashcraft & Gerel, 223 F.3d 1, 11 (1st Cir. 2000), "when parties a g re e to a forum selection clause, it is the resisting party who must show the unreasonableness

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o f enforcement under the circumstances." Id. (citing M/S Bremen v. Zapata Off-Shore Co., 407 U .S . 1, 10 (1972)). In analyzing the validity of a forum selection clause, the First Circuit has " re c o g n iz e d the general importance of enforcing these clauses." Outek Caribbean, 206 F. Supp. 2 d at 270. Furthermore, the court has held that in the context of a motion to dismiss based on a forum clause, the forum clause is prima facie valid, and must be enforced, unless the opposing p a r t y can show the clause to be unreasonable, unjust, or invalid due to fraud. Silva v. E n c yc lo p e d ia Britannica, Inc., 239 F.3d 385, 386 (1st Cir. 2001); see also Mercado-Salinas v. B a rt Enters. Int'l, 669 F. Supp. 2d 176, 184 (D.P.R. 2009). Therefore, the burden shifts to the re sis tin g party to show that "the particular clause: 1) was not `freely negotiated' or was the re su lt of fraud; 2) contravenes a strong public policy of the forum where the suit is brought; or 3 ) the party challenging its enforceability shows that trial in the contractual forum will be so g ra v e ly difficult that it will, for all practical purposes, be deprived of its day in court." Marrero v . Aragunde, 537 F. Supp. 2d 305, 308 (D.P.R. 2008); see also D.I.P.R. Mfg. v. Perry Ellis, 472 F . Supp. 2d 151, 154 (D.P.R. 2007). Courts have held that "[t]he fact that another location would prove more convenient to th e party resisting the agreed upon location is not sufficient to meet the `heavy burden' required to obviate a forum selection clause." Antilles Cement Corp. v. Aalborg Portland A/S, 526 F. S u p p . 2d 205, 208 (D.P.R. 2007) (citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595, 1 1 1 S.Ct. 1522, 113 L.Ed.2d 622 (1991). Otherwise, "forum selection clauses would almost n e v e r be enforceable, for inconvenience to at least one of the parties is an almost forgone c o n c lu s io n when dealing with a provision that requires litigating away from one's home turf." A n tille s Cement Corp., 526 F. Supp. 2d at 208 (citing In re Mercurio, 402 F.3d 62, 66 (1st Cir. 2 0 0 5 )).

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A d d itio n a lly, "[a] fundamental question in evaluating the effect to be afforded to a forum s e le c tio n clause is whether its language is mandatory or permissible." Marrero v. Aragunde, 537 F . Supp. 2d 305, 308 (D.P.R. 2008) (citing Autoridad de Energia Electrica v. Ericsson Inc., 201 F .3 d 15 (1st Cir. 2001). Whereas a "mandatory clause is one that requires that the litigation be b ro u g h t only in the chosen forum, to the exclusion of others... a permissible clause [sic] is one th a t allows the parties to litigate in the chosen forum, but does not purport to exclude them from litig a tin g in some other forum that otherwise has jurisdiction." Id. (citing Ericsson, 201 F.3d at 1 9 ). Courts will ordinarily enforce a forum selection clause that is mandatory. Id. The validity of forum selection clauses has been consistently upheld by the Puerto Rico S u p re m e Court, this district, and the First Circuit. Outek Caribbean, 206 F. Supp. 2d at 270; S ilv a , 239 F.3d at 386; Perry Ellis Intl., 472 F. Supp. 2d at 155. This precedent is so strong, that th e s e types of clauses have been implemented even when a Puerto Rico law expressly proscribes th e enforcement of said types of clauses. Perry Ellis Intl., 472 F. Supp. 2d at 155 (citations o m itte d ). However, courts are hesitant to enforce forum selection clauses unless they clearly s ta te the parties' unambiguous intent that the controversy be litigated exclusively in a particular f o ru m . Mercado-Salinas, 669 F. Supp. 2d at 184-185 (citing Cummings v. Caribe Mktg. & Sales C o ., Inc., 959 F. Supp. 560, 565 n.7 (D.P.R. 1997). This Court first notes that Plaintiff expressly claims that "one of the essential conditions o f the Deed was [Defendants'] representations to Plaza that there were no material facts or c irc u m s ta n c e s , related to the title, use, condition or operation of Plaza Puerto Rico that they had n o t previously disclosed to Plaza." Docket # 1, p. 5. Thus they assert that Defendants breached s a id contract. Morever, said Deed does not contain a forum selection clause. Accordingly, P la in tif f 's claims of breach of contract arising from the Deed exist even absent claims regarding

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th e Option Agreement. As such, dismissal of the claims regarding the alleged breach of the D e e d 's contractual obligations is unwarranted. On the other hand, there is a forum selection clause in the Option Agreement, which s ta te s that "the parties herein have agreed that this Option shall be governed and construed in a c c o rd a n c e with the laws of the Commonwealth of Puerto Rico, and submit themselves to the ju ris d ic tio n of the Superior Court of Puerto Rico, San Juan Section." Unlike in Rivera v. Centro M e d ic o de Turabo, Inc., 575 F.3d 10, 17-18 (D.P.R. 2009), here the agreement to submit to the S u p e rio r Court of Puerto Rico, San Juan Section is not preceded and informed by a qualifying p h ra se : "all disputes arising out of or relating to this Agreement shall be submitted to the S u p e rio r Court of Puerto Rico." Instead, it is similar to the forum selection clause discussed in R e d o n d o Constr. Corp. v. Banco Exterior de Espana, S.A., 11 F.3d 3 (1st Cir. 1993), where the C o u rt held that "language providing that each [party] hereby expressly submits to jurisdiction o f all Federal and State Courts located in the State of Florida was permissive," and did not n e g a tiv e ly exclude any other proper jurisdiction. See Ericsson, Inc., 201 F.3d at 18. This d if f e re n c e is determinative in concluding that the forum selection clause found in the Option A g re e m e n t is permissive. The present parties merely consented for the Superior Court of Puerto R ic o , San Juan Section to exert jurisdiction over the parties in relation to causes of action s te m m in g from the Option Agreement; however, the parties did not negatively exclude the p ro p e r jurisdiction of other courts. As such, Defendants' arguments on this front fail. Considering that the forum selection clause is permissive in nature, and that Defendants h a v e failed to show that this venue is improper because the forum selection clause contained in the Option Agreement: 1) was not `freely negotiated' or was the result of fraud; 2) c o n tra v e n e s a strong public policy of the forum where the suit is brought; or 3) the party c h a lle n g in g its enforceability shows that trial in the contractual forum will be so gravely

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d if f ic u lt that it will, for all practical purposes, be deprived of its day in court; " the court is not o b lig a te d to enforce said clause. Marrero v. Aragunde, 537 F. Supp. 2d 305, 308 (D.P.R. 2008); s e e also Perry Ellis, 472 F. Supp. 2d at 154. C o n c lu s io n Based on the foregoing, Defendants' motion to dismiss is DENIED. IT IS SO ORDERED. In San Juan, Puerto Rico, this 16 th day of December, 2010. S /S a lv a d o r E. Casellas S a lv a d o r E. Casellas U .S . Senior District Judge