SJ Properties Suites BuyCo ehf et al v. Development Opportunity Corp et al

Filing 111

ORDER signed by Judge Rudolph T Randa on 02/23/2010 denying 89 Motion to Dismiss. (cc: all counsel) (Koll, J)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN
S J PROPERTIES SUITES, BUYCO, EHF; SJ FASTEIGNIR, EHF; and, A S K A R CAPITAL, HF; P l a i n t if fs , and, S E T H E. DIZARD, Court-Appointed Receiver of DOC Milwaukee LP; Intervenor Plaintiff, v. C a s e No. 09-C-0533 (C o n so lid a te d with Case No. 09-C-0569)

S T J , P.C., d/b/a ECONOMOU PARTNERS; E P MILWAUKEE, LLC; E C O N O M O U PARTNERS CONSTRUCTION, INC.; JOHN W. ECONOMOU; STEVE J. ECONOMOU; and, THOMAS V. ECONOMOU; Defendants.

STJ, P.C., d/b/a ECONOMOU PARTNERS; E P MILWAUKEE, LLC; E C O N O M O U PARTNERS CONSTRUCTION, INC.; JOHN W. ECONOMOU; STEVE J. ECONOMOU; and, THOMAS V. ECONOMOU; Counterclaimants, v. SJ PROPERTIES SUITES, BUYCO, EHF; Counterclaim Defendant.

S J PROPERTIES SUITES, BUYCO, EHF; Plaintiff - Counterclaim Defendant, and, SETH E. DIZARD, Court-Appointed Receiver of DOC Milwaukee LP; Intervenor Plaintiff, v. EP MILWAUKEE, LLC; D e fe n d a n t- C o u n te r c la im a n t.

DECISION AND ORDER
Background T h e genesis of this consolidated action is a hotel and condominium real estate d e v e lo p m en t construction project located at 1150 North Water Street, in downtown M ilw a u k e e , Wisconsin (the "Milwaukee Project"). This Decision and Order addresses a m o tio n to dismiss for failure to name a real party in interest filed by Defendants and C o u n terclaim an ts STJ, P.C. d/b/a Economou Partners ("STJ, P.C."); Economou Partners C o n stru ctio n , Inc. ("Economou Construction"); John W. Economou ("John Economou"); S te v e J. Economou ("Steve Economou"); Thomas V. Economou ("Thomas Economou"); and E P Milwaukee, LLC ("EP") (collectively the "Economou Defendants"). Also pending are a motion for summary judgment filed by the Plaintiff and C o u n terclaim Defendant, SJ Properties Suites, BuyCo, ehf ("BuyCo"), in the declaratory jud g m en t action prior to the consolidation of the actions, and BuyCo's motion to strike EP's 2

p rop o sed findings of fact with respect to BuyCo's summary judgment motion. On February 1 8 , 2010, the Economou Defendants filed a motion for summary judgment. The issue raised b y the Economou Defendants' summary judgment motion may have implications for the e n tire action. Therefore, no decision on the earlier BuyCo motions will be issued until the c o m p le tio n of the briefing on the recent Economou Defendants' summary judgment motion. THE ECONOMOU DEFENDANTS' MOTION TO DISMISS P u r s u a n t to Rule 17 of the Federal Rules of Civil Procedure, the Economou D e f en d a n ts seek dismissal of the action for failure to join a real party in interest. Many of th e Economou Defendants' concerns are premised on statements made "upon information and b e lie f " in the Affidavit of Gregory J. Cook ("Cook") . Rule 17(a)(1) requires that "[a]n action must be prosecuted in the name of the re a l party in interest." However, the immediate dismissal of an action that is not prosecuted in the name of the real party in interest would be in contravention of Rule 17. Instead, Rule 1 7 (a )(3 ) states: The court may not dismiss an action for failure to prosecute in th e name of the real party in interest until, after an objection, a re a so n a b le time has been allowed for the real party in interest to ra ti f y, join, or be substituted into the action. After ratification, jo in d e r, or substitution, the action proceeds as if it had been o rig in a lly commenced by the real party in interest. The modern purpose of the rule is to "protect the defendant against a subsequent action by th e party actually entitled to recover, and to insure generally that the judgment will have its p r o p e r effect as res judicata." Advisory Committee Notes to 1966 Amendment to Fed. R. C iv . P. 17. 3

T h e Court gleans that the motion was prompted by the Economou Defendants' b e lie f that, in the wake of the autumn of 2008 financial crisis, Plaintiff Askar Capital hf (" A s k a r" ) was taken over by the Icelandic equivalent of a receiver and that substantive d e c is io n s are being made by an entity that is not a party to this action. The Economou D e f en d a n ts maintain that the real party in interest may be the "resolution committee" or " w in d in g up board," or, in the alternative, Glitnir banki, hf ("Glitnir"), an Icelandic in v e stm e n t bank, or, in the alternative, some unknown Icelandic corporate entity or quasig o v e rn m e n tal entity that the Icelandic government may have taken over, in whole or in part. T o refute such concerns, Plaintiffs Buyco; SJ Fasteignir, ehf ("Fasteignir"); a n d , Askar, (collectively the "Plaintiffs"), proffer the affidavit of Bjarki A. Brynjarsson (" B ryn ja rs s o n " ), the managing director of Askar. Brynjarsson's affidavit sets forth detailed e x p la n a tio n s establishing that Askar is a separate legal entity, distinct from Glitnir, and that A s k a r is the real party in interest. (See Brynjarsson Aff. ¶¶ 4-6.) Brynjarsson's affidavit indicates that the Financial Supervisory Authority of the R e p u b lic of Iceland ("Financial Supervisory Authority"), which has a similar function in Ic e lan d to that of the Federal Deposit Insurance Corporation in the United States, is currently ad m ini sterin g the assets of Glitnir. (Id. at ¶ 3.) The Financial Supervisory Authority a p p o in te d a Resolution Committee of Glitnir (the "Resolution Committee") on October 8, 2 0 0 8 , which is the functioning Board of Directors of Glitnir. (Id.) Askar is a solvent investment bank that is not in bankruptcy, under the control o f the Resolution Committee, or under the direction of a receiver or the Icelandic

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g o v e rn m e n t.

(Id. at ¶ 7.)

Glitnir is currently Askar's majority owner with a 53.3%

c o n tro llin g interest. (Id. at ¶ 5.) Askar has been consulting with the Resolution Committee f o r any major decisions regarding loans and cash advances that Askar made and continues to make for the Milwaukee Project. (Id. at ¶ 15.) BuyCo is wholly owned by Fasteignir. (Id. at ¶ 18). Fasteignir is a wholly o w n e d subsidiary of Sjóvá Almennar Tryggingar, hf ("Sjóvá"). (Id.) Sjóvá's status may c h a n g e because Glitnir is expected to become the sole or major owner of Sjóvá as a result of G litn ir's restructuring. (Id.) However, because Brynjarsson is not involved in the

re s tru c tu rin g process, he cannot address the precise arrangements or their timing. (Id.) Based on the uncontested factual information provided by Brynarsson, the C o u rt concludes that the Economou Defendants have not established that Askar or other p lain tiff s are not the real party in interest. Therefore, the Economou Defendants' motion to d is m is s is denied. NOW, THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY O R D E R E D THAT: The Economou Defendants' motion to dismiss (Docket No. 89) is DENIED. D a te d at Milwaukee, Wisconsin this 23rd day of February, 2010. BY THE COURT

s / Rudolph T. Randa Hon. Rudolph T. Randa U .S . District Judge

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