The opinion of the court was delivered by: Thomas C. Platt, United States District Judge.
Before the Court are objections by Plaintiffs Clarence and Aischa
Mitchell ("Mitchells") to a Report and Recommendation issued by United
States Magistrate Judge William D. Wall recommending that this Court deny
the Mitchells' Motion for a Preliminary Injunction. For the following
reasons, the Court OVERRULES the Mitchells' objections, ADOPTS Magistrate
Judge Wall's Report and Recommendation as an order of this Court; DENIES
the Mitchells' Motion for a Preliminary Injunction and AFFIRMS Magistrate
Judge Wall's denial of their discovery request.
While Magistrate Judge Wall's Report and Recommendation relates the
entire factual background of this case, the Courr believes it necessary
to restate that factual background in order to properly address the
Mitchells' objections. Familiarity with Magistrate Judge Walls Report and
commendation, however, is presumed.
Plaintiffs Clarence and Aischa Mitchell are an African American
couple. (R. at 151:19; 293:03.) Clarence Mitchell is a partner with
Anderson. Consulting spin-off Accenture. (R. at 151:01-05.) Aischa
Mitchell is a fashion model with Wilhelmena Models, Incorporated. (R. at
151:13-14.) The Mitchells reside in New York, New York. (Defs.'
Evidentiary Hearing Ex.1.) Marie Ongioni ("Ongioni") is the Mitchells'
real estate attorney. (R. at 161:22-23;
246:17-18, 247:15-22, 303:03-04; Defs.' Evidentiary Hearing Ex. 2.)
Defendants Sheila and Harvey Shane ("Shanes") are the owners of real
property located as 2548 Deerfield Road in Southampton, New York
("Property").*fn1 (R. at 92:01, 07; Defs.' Evidentiary Hearing Ex. 2.)
The Shanes currently, and did at all relevant times, reside in Florida.
(R. at 94:01-03, 105:13; Defs.' Evidentiary Hearing Ex. 2.) Kara Bak
("Bak") is the Shanes' real estate attorney. (R. at 12:18-19; 23:19-22,
25:24-26:01, 303:03; Defs.' Evidentiary Hearing Ex. 2.)
Defendant Century 21 Rustic Realty ("Century 21") is the listing broker
for the Property. (R. at 91:21, 92:12-13; Defs.' Evidentiary Hearing Ex.
2.) Defendant Matthew J. Ryan ("Ryan") is employed by Century 21 and is
the listing agent for the Property. (R. at 91:21-23; Defs.' Evidentiary
Hearing Ex. 2.) Ryan held an open listing on the Property for Century 21
in August of 2000 but eventually became the Shanes' exclusive agent in
the Fall of 2001. (R. at 92:12-13, 94:18, 296:12-18.)
Robin Kaplan ("Kaplan") is the selling broker for the Property and was
one of the people with whom Mitchells communicated when they began
searching for homes in eastern Long Island.*fn2 (R. at 292:23,
296:10-23; Defs.' Evidentiary Hearing Ex.2.) Kaplan was employed by Allen
U. Schneider Associates, Incorporated ("Shneider Associates"). (Defs.'
Evidentiary Hearing Ex. 1; Pl.'s Evidentiary Hearing Ex. W.)
Michael Selleck ("Selleck") successfully bid on the Property and is the
contract vendee of the Property. (R. at 7:07-14, 16:11-17.) Selleck has
not yet closed on the Property.
B. The Mitchelis' Attempts to Purchase the Property
On May 4, 2001, the Mitchells communicated with Kaplan at Schneider
Associates and requested assistance in finding a home to purchase in
eastern Long Island. (R. at 292:23-24.) Two days later, on May 6, 2001,
Kaplan met with the Mitchells for the first time. (R. at 293:01.) Several
months later, in law November or early December of 2001, Kaplan showed
the Mitchells the Property. (R. at 131:21-25.)
Subsequent to viewing the Property for the first time with Kaplan, the
Mitchells returned with an architect and discussed whether changes could
be made to the Property. (R. at 152:22-24, 153:02-04). In early to mid
December of 2001, after learning that their proposed changes could be
made, the Mitchell, offered the Shanes $655,000.00 through Kaplan for the
Property. (R. at 153:02-04, 11-13, 16.) The Mitchells then went on
holiday with that offer outstanding. (R. at 153:16-17.)
On December 26, 2001, Kaplan called the Mitchells in San Jose,
California. (R. at 154:02-05.) Kaplan unified to Mitchells that another
prospective purchaser had offered $672,000.00 for the Property. (R. at
154:02-05.)
In order to demonstrate their resolve and genuine desire to purchase
the Property, the Mitchells authorized Kaplan that same day to offer
$685,000 for the Property. (R. at 154:14-15, 308:12-18.) On December 26,
2001, Kaplan faxed the following to Ryan:
(Defs.' Evidentiary Hearing Ex. 1; R. at 295:09-23, 297:25-298:01-05.)
The Mitchells contend whey were unaware that their initial offer
contained an 80% mortgage financing contingency. (R. at 184:04-17.)
Clarence Mitchell testified that he only authorized Kaplan to offer the
Stanes $685,000.00 for the Property with the standard contingencies, but
that he did not discuss what those standard contingencies were.*fn3 (R.
at 184:23-185:01.)
The Shanes expressed interest in the Mitchells' December 26, 2001
offer. (R. at 112:13-14.) However, the Shanes wanted proof that the
Mitchells could consummate the sale before formally accepting their
offer. (R. at 154:22-25.)
Accordingly, while still away on holiday, the Mitchells authorized a
person in their cooperative in New York City to run a credit check on
them. (R. at 155:04-07.) On December 27, 2001, the Mitchells were
preapproved by the Manhattan Mortgage Company ("Manhattan Mortgage") for a
mortgage of $616,500.00, which represents approximately 90% of the
$685,000.00 purchase price agreed to by the Shanes and Mitchells. (R. at
155:08-11, 294:11-16, 295:07-08, 25, 297:18-20.) Manhattan Mortgage's
preapproval letter was sent to Kaplan, Ryan and Ryan's manager. (R. at
294:11-12, 25, 295:01-03.) Ryan forwarded a copy of that preapproval
letter to the Shanes as well. (R. at 112:17-19.)
The Shanes took immediate issue with the 90% financing contained
Manhattan Mortgage's preapproval letter. (R. at 112:24-113:02.) They told
Ryan they were concerned that 90% financing would not inject enough
equity into the Property and that it would defeat a "smooth[]
transition." (R. at 113:01-02.)
Accordingly, Ryan contacted Kaplan and relayed the Shanes'
dissatisfaction with the 90% mortgage contingency. (R. at 113:14-17.)
Kaplan told Ryan that the Mitchells would obtain 80% mortgage financing.
(R. at 113:18-20.) Ryan consequently agreed to issue a memorandum of sale
based on the terms of the Mitchells' December 26, 2001 offer which
included an 80% mortgage contingency clause. (R. at 113-11-23.)
On December 29, 2001, Ryan prepared that memorandum of sale. (Defs.
Evidentiary Hearing Ex. 2.) Ryan's memorandum of sale listed a
$685,000.00 purchase price and stated that the sale was subject to both
80% "Bank Financing" and an engineers report.*fn4 (Defs. Evidentiary
Hearing Ex. 2.) Ryan sent copies of his memorandum of sale to Ongioni,
Kaplan, Bak and the Shanes. (R. at 113:23-24.)
Kaplan had also previously prepared her own memorandum of sale on
December 27, 2001.*fn5 (R. at 312:05-12; Defs. Evidentiary Hearing Ex.
18.) Kaplan's first memorandum of sale indicated that the purchase
agreement was "[s]ubject to . . . 80% financing." (Defs. Evidentiary
Hearing Ex. 18.) It is not clear if Kaplan ever disseminated her first
memorandum of sale to anyone.
On January 3, 2002, Bak sent "four duplicate original Contracts of Sale
and Riders" for the Property to Ongioni. (Defs.' Evidentiary Hearing Ex.
3.) The cover letter under which those contracts were seat stated that if
the contracts were acceptable to the Mitchells, they were to sign and
return then, with a check for $68,500.00 payable to Bak. (Defs.'
Evidentiary Hearing Ex. 3.) That cover letter also stated that "[s]ince
this is not to be considered a continuing offer to sell, if the signed
contracts are not returned to my office within ten days from, w receipt
same [sic], then this offer shall be considered terminated without
prejudice'. to either party."*fn6 (Defs.' Evidentiary Hearing Ex. 3.)
Finally, Bak's cover letter directed Ongioni to contact Bak before making
any changes to the contracts. (Defs. Evidentiary Hearing Ex. 3.) Ongioni
received that cover letter and to four duplicate contracts on January 4,
2002. (R. at 248:18-19, 249:04.)
On January 5, 2002, the Mitchells had an engineer inspect the
Property. (R. at 156:01-06.) The engineer uncovered several problems with
the Property during the course of Inspection. (R at 156:07-08, 13-15,
21-25, 157:01-02, 13-18.) On January 10, 2002 (six days after Ongioni
received the contracts), the engineer issued a formal report to the
Mitchells that outlined the problems with the Property that he had
uncovered. (R. at 158:03-08.) The Mitchells estimated that it would cost
approximately $20,000.00 to $25,000.00 to repair those problems. (R. at
158:13-14.)
Following the issuance of the engineer's report, Ongioni contacted Bak
to discuss semantic changes to be made to the contracts and the results
of the engineer's report. (R. at 249:05-250:01.) In the meantime, the
Mitchells contacted Kaplan. (R. at 158:15-18.) The Mitchells directed
Kaplan to demand an $8,000.00 to $10,000.00 purchase price reduction from
the Shanes as a compromise for the results of the engineer's report. (R.
at 158:15-24.)
Kaplan subsequently called Ryan and relayed the Mitchells' request for
an $8,000.00 to $10,000.00 purchase price reduction. (R. at 104:01-16.)
On January 14, 2002 (ten days after Ongioni received the contracts), Ryan
called the Shanes to discuss the Mitchells' price reduction request. (R.
at 103:18, 104:20.)
The Shanes were not pleased with that request. (R. at 104:21-105:08.)
Mr. Shane initially told Ryan he would not entertain that request and
declined to renegotiate. (R. at 105:06-08.) However, after some coaxing
from Ryan, the Shanes agreed to an $8,000.00 purchase puce reduction.
(R. at 105:09-18.)
On January 15, 2002 (eleven days after Ongioni received the contracts
and two days before they were due back to Bak), Kaplan called Ryan to
express the Mitchells' gratitude for holding the deal together and to
assure Ryan that Kaplan would personally certify the contracts were in
Bak's office by January 17, 2002. (R. at 106:18-107:02.) Shortly
thereafter, the Mitchells faxed a signed signature page of the contract
to Bak and Kaplan. (R. at 159:12-15.)
On January 18, 2002 (fourteen days after Ongioni received the contracts
and one day after the Shanes' deadline expired), the Mitchells drew a
certified check for $67,700.00 from Citibank, which represented 10% of
the negotiated $677,000.00 purchase price. (R. at 160:06-12; Defs.'
Evidentiary Hearing Ex. 9.) the Mitchells then took the contract and
modified it by: (1) crossing out the $685,000.00 purchase price wherever
it appeared and replacint it with a $677,000.00 price; and (2) crossing
out and replacing the 80% mortgage contingency sum of $548,000.00 with a
90% mortgage contingency sum of $609,300.00 (Def.'s Evidentiary Hearing
Ex. 5; R at 32:20-25, 39:23-25, 53:11-13, 123:08-16, 162:09-13,
251:11-18, 259:18-21, 260:05-261:02.) The Mitchells then sent the
contracts to Ongioni.*fn7 (R. at 160:10-11, 161:06-13.)
On January 20, 2002 (sixteen days after Ongioni received the contracts
and three days after the Shanes' deadline expired), Ryan presented an
offer from Selleck to the Shanes.*fn8 (R. at 127:23-24.) Selleck
apparently offered the Shanes $685,000.00 for the Property with a mortgage
contingency of $285,000.00 (R. at 102:12-17.) The Shanes indicated a
preference for that offer, but did not accept it at the time it was made.
(R. at 127:24-128:02.)
On January 22, 2002 (eighteen days after Ongioni received the contracts
and five days after the Shanes' deadline expired), Selleck presented Ryan
with a preapproval letter from his mortgage company, the IPI Skyscraper
Mortgage Corporation. (R. at 96:16, 97:08-09, 98:01, 139:23-24.) That
same day, Ryan notified the Shanes that he received Selleck's approval
letter. (R. at 98:02-04.)
On January, 22, 2002, Ongioni also sent the Mitchells' modified signed
contracts and $67,700.00 deposit check to Bak by overnight mail. (R. at
250:19-21.) Ongioni did not send the contracts until January 22, 2002
because she had been on vacation the whole previous week, and January
21, 2002 was a legal holiday.*fn9 (R. at 250:04-20.) Additionally, on
January 22, 2002, Ryan notified Bak that Selleck was considering the
Property. (R. at 31:22-32:01.)
On January 23, 2002 (nineteen days after Ongioni received the contracts
and six days after the Shanes' deadline expired), Ryan called Bak. (R. at
32:11-24.) In that call, Ryan told Bak that the Shanes had decided to
consummate the Mitchells' deal and that Bak should go through with that
deal. (R. at 32:11-14.)
On January 23, 2002, Bak also received the Mitchells; contracts and
deposit check. (R. at 42:01-07, 251:11-42.) Bak called Ongioni that same
day and noted that the mortgage contingency clause in the contracts had
been changed from 80% to 90%.*fn10 (R. at 32:20-25, 167:15-17,
251:11-14.) Ongioni asked Bak to contact her if the Shanes found the
change to the mortgage contingency clause unacceptable, but it is not
clear that Bak agreed to modify Ongioni of any problem. (R. at
251:17-252:01.)
Apparently, after receiving Selleck's $685,000.00 offer, and after
receiving the Mitchells' modified contracts, the Shanes contacted Bak to
inquire if they were bound to the Mitchells' deal. (R. at 69:13-18.)
Specifically, the Shanes wished to know if the Mitchells had been given
any specific time period within which to return the signed contracts and
whether or not they could legally proceed with the Selleck deal. (R. at
69:15-18, 21-23.)
On January 24, 2002, Ryan issued an offer and acceptance to Selleck.
(R. at 128:02, 128:13-14.) Offers and acceptances are non-binding verbal
agreements among buyers and sellers indicating that the parties have
reached favorable terms. (R. ar 127:15-17, 131:11-14.)
On January 24, 2002, Bak sent contracts for the sale of the Property to
Selleck's attorney, Arthur Elfenbein. (R. at 25:21-25.) On January 25,
2002, Selleck returned his signed contracts to Bak with a deposit check
for $68,500.00. (Defs.' Evidentiary Hearing Ex. 6.) On January 28, 2002,
Bak forwarded the signed Selleck contracts to the Shanes. (Defs.'
Evidentiary Hearing Ex. 7.)
On January 29, 2002, after receiving the contracts signed by Selleck
and Selleck's $68,500.00 deposit check, Bak wrote to Ongioni and returned
the Mitchells' $67,700.00 deposit check ("January 29th Letter").
(Def's.' Evidentiary Hearing Ex. 9.) Bak notified Ongioni in that letter
that the Shanes had rejected the Mitchells' 90% mortgage financing
offer. (Defs.' Evidentiary Hearing Ex. 9.)
On January 30, 2002, before Ongioni received the January 29th
Letter, she called Bak to inquire about the status of the Mitchells'
contract. (R. at 254:12-13; Defs.' Evidentiary Hearing Ex. 10.) Bak
informed Ongioni that she had returned the Mitchells' deposit check the
day before. (R. at 254:12-15.) Ongioni expressed surprise that Bak had
not called her about the 90% mortgage financing difficulties before
rejecting the Mitchells' offer and asserted that it would purportedly
have been customary to afford the Mitchells an opportunity to offer 80%
financing. (R. at 254.19-255:17; Defs.' Evidentiary Hearing Ex. 10.)
Ongioni also informed Bak that she would call the Mitchells to
determine if they could provide that 80% mortgage financing. (R. at
255:23-25.) Ongioni subsequently phoned the Mitchells who agreed to
provide 80% mortgage financing. (R. at 256:01-04.)
Ongioni contacted Bak immediately and informed her that the Mitchells
intended to secure 80% mortgage financing. (R. at 256:04-10.) Bak
indicated that she did not think the Shanes would accept the Mitchells'
offer at that point because of the Selleck deal, but stated that she
would communicate the offer to the Shanes nonetheless. (Defs.'
Evidentiary Hearing Ex. 10.) The Shanes did not accept that offer,
because on January 30, 2002, Sheila Shane singed the Selleck contract and
thereby
sold the Property to Selleck. (Defs.' Evidentiary Hearing Ex. 8.)
On January 31, 2002, Ongioni called Bak again to see if the Shanes had
accepted the Mitchells' 80% financing proposal. R. (at 257:03-13; Defs.'
Evidentiary Hearing Ex. 10.) Bak was unavailable however, and Ongioni had
to leave a message for her. (R. at 257:05-07; Defs.' Evidentiary Hearing
Ex. 10.) Bak did not return Ongioni's call. (R. at 257:16; Defs.'
Evidentiary Hearing Ex. 10.)
On February 1, 2002, Ongioni wrote to Bak and reiterated the substance
of their January 30, 2002 phone conversation. (Defs.' Evidentiary Hearing
Ex. 10.) Ongioni also relayed that her "clients are . . . of the opinion
that there may be certain underlying issues which caused . . . [the
Shanes] to decide not to sell to . . . [the Mitchells]." (Defs.'
Evidentiary Hearing Ex. 10.) Ongioni finally advised Bak that "[i]f this
is the case, . . . [the Mitchells] intend to pursue the matter in the
appropriate forum." (Defs.' Evidentairy Hearing Ex. 10.)
On February 5, 2002, Bak wrote back to Ongioni to respond to Ongioni's
February 1, 2002 letter. (Defs.' Evidentiary Hearing Ex. 11.) Bak wrote
that she received the contracts outside the ten day window afforded to
the Mitchells by her January 3, 2002 cover letter, and that the contracts
contained a change to a material term. (Defs.' Evidentiary Hearing Ex.
11.) Bak concluded that because of those facts, the Shanes "felt that
the . . . [Mitchells] were not serious buyers, and moved on." (Defs.'
Evidentiary Hearing Ex. 11.)
On February 7, 2002, before she received Bak's February 5, 2002
letter, Ongioni wrote to Bak again. (Defs.' Evidentiary Hearing Ex. 12.)
Ongioni informed Bak that the Mitchells believed that "the reason
the . . . [Shanes did] not proceed[] with the sale to them . . . was
discrimination based on race." (Defs.' Evidentiary Hearing Ex. 12.)
Ongioni also notified Bak that her "clients are African American" and
that they intended to pursue their legal remedies if the Shanes would not
sell the Property to them. (Defs.' Evidentiary Hearing Ex. 12.)
Ongioni's February 7, 2002 letter was Bak's first notification that the
Mitchells were African American. (R. at 76:22-77:10.) That was also the
first time Bak discussed the Mitchells' race with the Shanes. (R. at
77:11-78:05.) Harvey Shane had not been aware that the Mitchells were
African American until that discussion because he had never met the
Mitchells (R. at 78:03-05; Defs.' Evidentiary Hearing Ex. 13.)
Ryan knew the Mitchells were African American as early as mid December
of 2001 and was certainly aware of their race by January 5, 2002. (R. at
152:22-153:01, 10-11, 155:21-156:06.) However, Ryan never discussed the
Mitchells' race with the Shanes until some time after February 1, 2002
when they had already decided to contract with Selleck. (R. at
141:10-17.)
On February 8, 2002, Bak responded to Ongioni's February 2, 2002
letter. (Defs.' Evidentiary Hearing Ex. 13.) Bak stated that the Shanes,
who lived in Boca Raton, Florida at the time, had no knowledge of the
Mitchells' race until Ongioni disclosed it in her February 7, 2002
letter. (Defs.' Evidentiary Hearing Ex. 13.) Bak also explained to
Ongioni that the reason the Shanes had pursued Selleck's deal over the
Mitchells' deal was that:
(Defs.' Evidentiary Hearing Ex. 13.)
On February 12, 2002, the Mitchells' litigation counsel, Steven
Mitchell ("SM"), wrote to Ryan's manager, Margaret-Ann Satornino
("Satornino"), and threatened legal action if she did not contact him by
February 14, 2002. (Defs.' Evidentiary Hearing Ex. 14.) Specifically, SM
threatened to "file for a preliminary injunction in the Federal District
court [sic]'s if the matter were not resolved by the date he specified.
(Defs.' Evidentiary Hearing Ex. 14.)
On February 13, 2002, Satornino wrote back to SM and informed him that
the Mitchells had been given a full and fair opportunity to purchase the
Property. (Defs.' Evidentiary Hearing Ex. 15.) Satornino also asked SM to
contact her. (Defs.' Evidentiary Hearing Ex. 15.)
Bak wrote to SM on February 13, 2002 as well. (Defs.' Evidentiary
Hearing Ex. 16.) In that letter, Bak reiterated what she had already
stated to Ongioni in her February 8, 2002 letter. (Defs.' Evidentiary
Hearing Ex. 16.) Bak also warned SM that the Shanes would pursue all
available remedies if the Mitchells proceeded with legal action (Defs.'
Evidentiary Hearing Ex. 16.)
In summation, the following occurred:
• On December 26, 2001, the Mitchells offered to
the Shanes, through Kaplan, $685,000.00 for the
Property with an 80% mortgage contingency clause.
• On or around December 27, 2001 the Shanes took
immediate issue with the 90% financing clause
contained in the Mitchells' mortgage preapproval
letter.
• On December 29, 2001, Ryan prepared and sent to
Ongioni, Kaplan, Bak and the Shanes a memorandum of
sale listing the purchase price for the Property as
$685,000.00 and stating that ...