The opinion of the court was delivered by: SWEET
Defendant Carl Tunick ("Tunick") has moved for summary judgment pursuant to Rule 56, Fed. R. Civ. P. dismissing three malpractice claims and one ERISA breach of fiduciary claim asserted against him by Plaintiffs, the Mason Tenders' District Council Trust Funds.
For the reasons set forth below, Tunick's motion for summary judgment will be granted.
The parties, prior proceedings, and facts in this action have been set forth in three prior opinions of this Court, familiarity with which is assumed. See Mason Tenders Dist. Council Pension Fund v. Messera, 1996 U.S. Dist. LEXIS 8929, No. 95 Civ. 9341, 1996 WL 351250 (S.D.N.Y. June 26, 1996); Mason Tenders Dist. Council Pension Fund v. Messera, 1996 U.S. Dist. LEXIS 14822, No. 95 Civ. 9341, 1996 WL 578048 (S.D.N.Y. Oct. 8, 1996); Mason Tenders Dist. Council Pension Fund v. Messera, 958 F. Supp. 869 (S.D.N.Y. 1997). The parties, facts, and prior proceedings relevant to the instant motion are set forth below.
The Mason Tenders' District Council Trust Funds consist of seven "employee pension benefit plans" or "employee welfare benefit plans" within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1002(3).
They provide benefits to members of local unions affiliated with the Laborers' International Union of North America ("LIUNA"), which local unions together comprise the Mason Tenders' District Council of Greater New York (the "District Council"). The Mason Tenders' District Council Trust Funds are administered by the District Council and contributing employers in the industry. For the purposes of this motion, "Funds" shall include the Mason Tenders District Council Pension Fund ("Pension Fund") and the Mason Tenders District Council Welfare Fund ("Welfare Fund") (collectively, the "Funds") because the claims raised against Tunick relate to real estate investments made, and losses incurred, only by those two Funds.
Defendant Tunick was an attorney. After the initial filing of motion papers, on or about October 31, 1997, Tunick passed away. Tunick's reply brief in further support of the motion for summary judgment was submitted on behalf of Tunick's estate.
The Funds are trust funds established under the auspices of the District Council which have provided benefit plans to the members of the Mason Tenders' local unions which are organized as part of LIUNA. The District Council, the governing body of the local unions, entered into a consent decree on December 27, 1994, in a civil action, U.S. v. Mason Tenders Dist. Council, 94 Civ. 6487 (RWS), brought by the Government against it alleging violations of the Racketeer Influenced and Corrupt Organization Act ("RICO"), including certain improprieties with respect to the administration of the Funds.
On November 2, 1995, this action was commenced, pleading eighty-four causes of action against nearly fifty separate defendants. The gravamina of this action are the first four claims, which plead violations of 18 U.S.C. §§ 1962(b) and of RICO, and of 19 U.S.C. § 1962(d), conspiracy to violate 18 U.S.C. § 1962(b) and (c). The remaining causes of action allege various statutory and common law claims.
On August 20, 1996, Plaintiffs moved to amend the complaint. The motion was granted on September 23, 1996, and the First Amended Complaint (for the purposes of this motion, the "Complaint") was filed on October 1, 1996. On November 4, 1997, the parties stipulated and agreed to dismiss all claims against Defendants Gerard Cunningham ("Cunningham") and the law firm Cunningham & Lee ("C & L") (collectively, the "Cunningham Defendants"). A Second Amended Complaint was filed on November 20, 1997.
On October 22, 1996, Defendants Joseph Albanese ("Albanese") and Albanese, Albanese & Fiore ("AA & F") (collectively, the "Albanese Defendants") filed a motion for summary judgment, seeking dismissal of malpractice claims against them. In an opinion dated March 26, 1997, the malpractice claims were dismissed against the Albanese Defendants because Plaintiffs failed to prove an attorney-client relationship with the Funds. See Mason Tenders Dist. Council Pension Fund v. Messera, 958 F. Supp. 869 (1997) [hereinafter the Albanese Decision ].
Tunick filed the instant motion for summary judgment on September 15, 1997. Oral argument was heard on March 12, 1998, at which time the motion was deemed fully submitted.
After filing this motion, the parties stipulated and agreed to dismiss the ERISA breach of fiduciary claim against Tunick without prejudice. Accordingly, this opinion addresses the remaining claims against Tunick.
I. The Real Estate Transactions
Plaintiffs allege that between November 1989 and February 1990, the Pension Fund purchased eight properties in Brooklyn, New York (the "Brooklyn Properties") based on "false and fraudulent real estate appraisals that grossly inflated the true value" of these properties. The Brooklyn Properties were purchased from a member of the Genovese Organized Crime Family, Charles Trentacosta, and Trentacosta made a profit of $ 1,341,903.05 in the transaction.
At around the same time, the Funds were the victim of a separate fraudulent transaction involving a property located at 32-36 West 18th Street (the "18th Street Building"). Plaintiffs allege that in December 1989, defendant Ronald Miceli, now a convicted racketeer, arranged to purchase the 18th Street Building for $ 7,465,000. Miceli obtained a $ 15,850,000 loan from the Pension Fund in February 1990 in order to purchase the Building. As security for the loan, the Pension Fund obtained a mortgage on the 18th Street Building and on another piece of commercial property owned by Miceli in Long Island, New York. The loan had previously been discussed at a Board of Trustees' meeting held on December 6, 1989, and its consummation was reported to the trustees by the Funds' real estate counsel at a subsequent meeting held on March 8, 1990. The minutes of that meeting show that there was discussion concerning the transaction, including an inquiry as to whether there were limitations in the Trust documents on the percentage of Pension Fund assets that could be invested in real estate. There is no indication in these minutes or any subsequent minutes that any of the attorneys present responded to that inquiry.
On the same date Miceli procured the loan, he purchased the building for $ 7,465,000. Approximately eight months later, at a Board of Trustees' meeting conducted on November 13, 1990, the trustees approved the Pension Fund's purchase of the 18th Street Building from Miceli for $ 24 million. There is no evidence of any explanation as to why the property was purchased for nearly $ 10 million more than the amount of the loan made nine months earlier, and about $ 16.5 million more than the price Miceli had obtained. Nor is there any evidence to suggest that any inquiry was made into the existence of appraisals that would justify the $ 24 million purchase price.
Furthermore, there is no evidence in the Board of Trustees' meeting minutes to suggest that any of the professionals alerted the Trustees to the fact that their fiduciary liability policy contained an exclusion which stated: "coverage as provided hereunder shall apply to an investment by the Fund in real estate and/or mortgage that is: . . . specifically directed or approved by and managed by a Qualified Professional Asset Manager ("QPAM")."
Shortly before the loan transaction in February, the Fund had obtained three appraisals on the 18th Street Building. Two of the appraisals valued the property at approximately $ 15,900,000, while the third valued it at only $ 8,300,000. The third appraisal also noted that the property had been purchased just two years earlier for only $ 7.7 million. As of October 1991, the 18th Street Building was valued at $ 5 million, notwithstanding the fact that the Pension Fund had by then invested several million dollars in renovating the site, over and above the $ 24 million purchase price.
In the related civil action filed by the Government, this Court granted summary judgment against two of the Funds' former trustees, Joseph Fater and James Lupo, finding that they had breached their fiduciary duties in connection with the purchase of the 18th Street Building. See United States v. Mason Tenders Dist. Council, 909 F. Supp. 882, 887 (S.D.N.Y. 1995). The Court entered a judgment in the amount of $ 16,535,000 for losses associated with the purchase of the 18th Street Building.
A third fraudulent real estate transaction occurred with respect to a property located at 6060 Indian Creek Drive, Miami Beach, Florida (the "Indian Creek Property"). The Indian Creek Property was purchased by the Welfare Fund in 1987 from the mother of defendant James Messera, a "capo" in the Genovese Organized Crime Family and now a convicted racketeer. The $ 1.45 million purchase price paid by the Welfare Fund was allegedly twice the property's appraised value.
II. Tunick's Activities In Connection With the Funds
The Funds claim to have had an attorney-client relationship with Tunick when the above-described real estate purchases were made. The Minutes of the Regular Joint Meetings of the Board of Trustees of the Mason Tenders District Council Pension, Welfare and Annuity Funds (the "Minutes") contain no affirmative representation that Tunick represented the Funds during this period. Tunick was identified as counsel to the Union-Designated Trustees, which depending on the relevant time frame included Gasper Lupo, Frank Lupo, and/or James Lupo (the "Trustees"). The Minutes indicate that the Funds were represented by the firms of Levin & Weissman and Davis & Davis.
As the Trustees' personal attorney, Tunick accompanied them to Board of Trustees' meetings (between the years 1985 and 1994) to protect their individual interests and advised them on an as-needed and as-requested basis.
The Declaration of Trust, under which the Funds were created, authorized the trustees, including Gasper, Frank, and James Lupo, to obtain reimbursement from the Funds for the expenses they incurred in performing their duties. According to Tunick, the Funds' Administrator, Ms. Audrey Hinkly-Tabor and her successors, instructed Tunick to send his bills for representing the Trustees directly to the Funds rather than requiring the Trustees to pay the bills in the first instance and thereafter obtain reimbursement from the Funds. Tunick followed those instructions throughout the period he served as counsel to the Trustees. While Ms. Hinkly-Tabor claims no recollection of ...