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ROSS v. UKI LTD.

March 1, 2004.

JOEL ROSS, ROSS PROPERTIES, INC. and CITADEL REALTY GROUP, LLC, Plaintiff, -against- UKI LTD., TONEX HOLDINGS, LTD., JACOB SCHIMMEL, MARC SCHIMMEL and HAROLD SCHIMMEL, Defendants


The opinion of the court was delivered by: WILLIAM PAULEY, District Judge

MEMORANDUM AND ORDER

In this breach of contract and quantum meruit action, plaintiffs Joel Ross ("Ross"), Ross Properties, Inc. ("Ross Properties"), and Citadel Realty Group, LLC ("Citadel") allege that defendants UKI Ltd. ("UKI"), Tonex Holdings, Ltd. ("Tonex"), Jacob Schimmel, Abraham Moses Schimmel ("Marc Schimmel"), and Harry C. Schimmel breached a series of oral brokerage agreements with plaintiffs. Currently before this Court are motions to dismiss this action for lack of personal jurisdiction, pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure, by defendants Harry Schimmel, Marc Schimmel, and Tonex. For the reasons set forth below, Harry Schimmel's motion is granted, and Marc Schimmel's and Tonex's motions are denied. Page 2

  BACKGROUND

 I. The Parties

  Ross is a licensed real estate broker in New York, and a principal in two New York-based real estate brokerage agencies, Ross Properties and Citadel. (Affidavit of Joel Ross in Opposition to Motion to Dismiss, dated May 22, 2003 ("Ross Aff.") ¶ 2; Complaint ("Compl.") ¶¶ 1-3.) UKI is a United Kingdom limited liability company, based in London, that serves as an advisor and asset manager for real estate investors. (Declaration of Abraham Moses Schimmel, dated January 15, 2003 ("M. Schimmel Decl.") ¶ 10.) Tonex is a holding company, organized under the laws of Gibraltar, that owns various subsidiaries that invest in real estate and other assets. (Declaration of Maurice Moses Benady, dated March 27, 2003 ("Benady Decl.") ¶ 3.) Tonex is beneficially owned by a trust whose beneficiaries are members of the Schimmel family. (Ross Decl. ¶¶ 27-28, Exs. 9, 11, 20, 26, 42-44.) Jacob Schimmel and Marc Schimmel, U.K. citizens who reside in London, England, are officers, directors, and shareholders of UKI. (M. Schimmel Decl. ¶¶ 2, 10; Declaration of Jacob Schimmel, dated June 20, 2003 ("J. Schimmel Decl.") ¶ 1; Compl. ¶ 6.) Harry Schimmel, Jacob and Marc Schimmel's father, is a U.K. citizen who has at times served as a consultant to UKI. (Declaration of Harry C. Schimmel, dated March 21, 2003 ("H. Schimmel Decl.") ¶¶ 2, 11.) Page 3

  In October 1998, Ross was introduced to Jacob and Marc Schimmel, and agreed to assist the Schimmels in accessing sources of capital in the United States for various real estate acquisitions. (Ross Decl. ¶ 6.) Ross claims that although he personally dealt with Jacob and Marc Schimmel, they were "young, inexperienced and unsophisticated with regard to real estate financing, " and that Harry Schimmel was in fact the "head . . . of the entire Schimmel real estate empire." (Ross Decl. ¶¶ 7-8.)

 II. The Westbrook Transactions

  In October 1998, Ross introduced Marc and Jacob Schimmel to the principals of Westbook Partners, LLC ("Westbrook"), an opportunity fund based in New York that targeted real-estate investments. (Ross Decl. ¶ 9.) Over the course of the next few months, Ross, on behalf of Jacob and Marc Schimmel, negotiated a joint venture with Westbrook (the "Westbrook Joint Venture") in which the Schimmels would provide 10% of the equity and Westbrook would provide 90%, with the Schimmels managing the acquired properties. (Ross Decl. ¶¶ 10, 11.)

  On November 4, 1998, UKI, by Marc Schimmel, entered into an agreement with Ross Properties (the "Joint Venture Agreement") under which Ross Properties was to be paid a commission based on the equity contributed by Westbrook for Page 4 acquisitions of property by the Westbrook Joint Venture. (Ross Decl. ¶ 12, Ex. 3.) Ross was paid approximately $1.5 million under the Joint Venture Agreement. (Ross Decl. ¶ 14, Ex. 5.)

  While the Complaint and opposing declaration are far from clear on this point, Ross also appears to allege that he entered into a simultaneous oral agreement with the Schimmels at the time of the Joint Venture Agreement (the "Westbrook Oral Agreement"). Under the Westbrook Oral Agreement, Ross was to receive a brokerage commission of 1% of the gross proceeds of any transaction, other than those covered under the Joint Venture Agreement, involving the Schimmels (or any related entity) and Westbrook. (Compl. ¶ 14.)

  A. The British Land Agreement

  In March 1999, Tonex, through a wholly-owned subsidiary Allerbeck Limited, purchased a portfolio of properties from The British Land Company, PLC (the "Bond Portfolio"). (Ross Decl. ¶ 30, Exs. 13, 25.) Tonex financed the acquisition of the Bond Portfolio through a secured loan facility with a German bank, DG Bank AG (the "British Land Agreement"). (Ross Decl. Ex. 13; Compl. ¶ 18.) Ross alleges, however, that Tonex first procured a viable offer from Westbrook to fund the acquisition of the Bond Portfolio (the "Westbrook Offer"), and then leveraged the Westbrook Offer to obtain a more favorable deal from DG Bank AG. Page 5 (Ross Decl. ¶ 31; Compl. ¶ 18.) Ross claims that, under the terms of the Westbrook Oral Agreement, he is entitled to a 1% brokerage commission on the British Land Agreement. Ross alleges that Jacob Schimmel acknowledged this debt, but that Marc Schimmel refused to pay it, stating that "we will do a lot more business with you [Ross] in the future and will make it up to you that way." (Ross Decl. ¶¶ 31-32.)

  B. Project Alliance

  In March 2001, Jacob Schimmel told Ross that the Schimmel family desired to sell many of their properties. (Ross Decl. ¶ 42.) Ross suggested to Jacob Schimmel that the family sell certain of their properties to Westbrook, and reminded him that if they did so, Ross would be owed a 1% commission under the Westbrook Oral Agreement. (Ross Decl. ¶ 42.) Jacob Schimmel agreed. (Ross Decl. ¶¶ 42-43, 47.) Later that year, Westbrook, along with another fund, purchased a $573,000,000 portfolio of properties beneficially owned by Marc Schimmel, Jacob Schimmel, and Tonex ("Project Alliance"). (Ross Decl. ¶¶ 44-45, ...


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