MITCHELL v. CENTURY 21 RUSTIC REALTY

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.

BACKGROUND

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.

A. The Parties

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:

Dear Matthew —

(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.

At the Evidentiary Hearing conducted before Magistrate Judge Wall, Kaplan produced a second memorandum of sale that she appears to have authored on December 29, 2001. (R. at 298:15-24, 299:19-22.) That second memorandum of sale stated that the purchase agreement was subject only to production of a satisfactory engineer's report. (Pl.'s Evidentiary Hearing Ex. W.) It further stated that $615,000.00 preapproved mortgage financing was a ran of the deal. (Pl.'s Evidentiary Hearing Ex. W.) Accordingly, the 80% mortgage contingency clause was not contained in Kaplan's second December 29, 2001 memorandum of sale. (R. at 314:18-20.) Kaplan apparently faxed that second memorandum, of sale to Bak, Ongioni and Ryan the same day it was authored. (R. at 303:03-09, 310:06-13.)

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.)

The Shanes only agreed to that reduction though, on condition that the Mitchells sign the contracts and have them back in Bak's office by January 16, 2002. (R. at 105:17-21, 158:22-24.) Following more cajoling by Ryan, the Shanes agreed to give the Mitchells until January 17, 2002 to return the signed contracts to Bak. (R. at 105:22-106:05.)

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: