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Anastasia Griffith, Alan Weissman, & Matthew D. Wolf v. Steiner Williamsburg

December 3, 2010

ANASTASIA GRIFFITH, ALAN WEISSMAN, & MATTHEW D. WOLF, PLAINTIFF,
v.
STEINER WILLIAMSBURG, LLC, DEFENDANT.



The opinion of the court was delivered by: Andrew J. Peck, United States Magistrate Judge:

OPINION AND ORDER

Plaintiffs Anastasia Griffith and Alan Weissman*fn1 bring this action against defendant Steiner Williamsburg, LLC ("Steiner") for revocation of plaintiffs' agreements to purchase condominium units at 80 Metropolitan Avenue in Brooklyn, as well as a refund of their deposits, alleging that Steiner failed to comply with the requirements of the Interstate Land Sales Full Disclosure Act ("ILSA"), 15 U.S.C. §§ 1701-20. (See Dkt. No. 1: Comp. ¶¶ 1-3, 76-80.) Steiner's counterclaims assert that plaintiffs anticipatorily breached the agreements by refusing to close title on the units, entitling Steiner to retain plaintiffs' deposits and be reimbursed for its attorneys' fees incurred in this action. (See Dkt. No. 5: Ans. ¶¶ 90-109.)

Presently before the Court are the parties' cross-motions for summary judgment. (Dkt. No. 15: Pls. Notice of Motion; Dkt. No. 18: Steiner Notice of Motion). The parties have consented to decision of this case by a Magistrate Judge pursuant to 28 U.S.C. § 636(c). (Dkt. No. 9.)

For the reasons set forth below, plaintiffs' motion for summary judgment is GRANTED and Steiner's summary judgment motion is DENIED.

FACTS

Steiner is the sponsor of the condominium development located at 80 Metropolitan Avenue, Brooklyn (the "Condominium"). (Dkt. No. 16: Pls. Rule 56.1 Stmt. ¶ 1; Dkt. No. 19: D. Steiner Aff. ¶ 3; Dkt. No. 22: Steiner Rule 56.1 Stmt. ¶ 2.) The "Condominium Offering Plan" filed with the New York State Attorney General on August 21, 2007 describes the Condominium as 114 tower units, 9 townhouse units, 24 cabanas, 53 parking spaces and 8 storage rooms. (Pls. Rule 56.1 Stmt. ¶¶ 6-7, 11 & Ex. B: Condominium Offering Plan; D. Steiner Aff. ¶¶ 3-4; Steiner Rule 56.1 Stmt. ¶¶ 3-4.) Steiner advertised, marketed and/or sold the Condominium through the mail and in interstate commerce. (Pls. Rule 56.1 Stmt. ¶¶ 16-23 & Exs. C & D: Steiner Response to Request for Admissions ["RFAs"] ¶¶ 6-14.)

On November 7, 2007, plaintiff Griffith signed a purchase agreement to buy unit 3B in the Condominium and gave a $57,500 deposit. (Dkt. No. 1: Compl. ¶¶ 17-18 & Ex. A: Griffith Purchase Agreement; Pls. Rule 56.1 Stmt. ¶ 2.)*fn2 Also on November 7, 2007, plaintiff Weissman signed a purchase agreement to buy unit 3H and parking space P10, paying a $95,500 deposit. (Compl. ¶¶ 19-20 & Ex. B: Weissman Purchase Agreement; Pls. Rule 56.1 Stmt. ¶ 4; D. Steiner Aff. ¶ 10; Steiner Rule 56.1 Stmt. ¶¶ 8-9.) Under the terms of both Purchase Agreements, the deposits were held in escrow and would serve as "liquidated damages" in the event of plaintiffs' default. (Purchase Agreements ¶ 5; D. Steiner Aff. ¶ 10; Steiner Rule 56.1 Stmt. ¶¶ 9-10.)

When plaintiffs purchased the units, the Condominium was still under construction and Steiner had not yet obtained a certificate of occupancy for any of the units. (Compl. ¶¶ 44, 46; Dkt. No. 5: Ans. ¶¶ 44, 46; Pls. Rule 56.1 Stmt. ¶¶ 31, 34.)

As discussed on pages 10-12 below, ILSA applies to the sale of condominium units and provides that:

In the case of any contract or agreement for the sale or lease of a lot for which a property report is required by this chapter and the property report has not been given to the purchaser or lessee in advance of his or her signing such contract or agreement, such contract or agreement may be revoked at the option of the purchaser or lessee within two years from the date of such signing, and such contract or agreement shall clearly provide this right.

15 U.S.C. § 1703(c).

As of the date of plaintiffs' purchases, Steiner had not given plaintiffs a property report relating to the Condominium and had not filed a statement of record with the United States Department of Housing and Urban Development ("HUD"). (Pls. Rule 56.1 Stmt. ¶¶ 24-27 & Exs. C & D: Steiner Response to RFAs ¶¶ 15-18.)*fn3 Additionally, the Purchase Agreements did not contain a provision notifying the plaintiffs that, if they did not "receive a Property Report prepared pursuant to the rules and regulations of the Office of Interstate Land Sales Registration, [HUD], in advance of [their] signing the contract or agreement, the contract or agreement of sale may be cancelled at [their] option for two years from the date of signing." (Pls. Rule 56.1 Stmt. ¶ 29 & Exs. C & D: Steiner Response to RFAs ¶ 38.)

On September 30, 2009, Weissman notified Steiner that he was revoking his purchase agreement and requesting his deposit back due to Steiner's failure to comply with ILSA. (Pls. Rule 56.1 Stmt. ¶ 44; D. Steiner Aff. ¶ 13; Steiner Rule 56.1 Stmt. ¶ 23.) Steiner never formally responded to Weissman's notification letter. (Pls. Rule 56.1 Stmt. ¶ 46.) On October 23, 2009, Griffith notified Steiner that she was revoking her purchase agreement and requesting her deposit back due to Steiner's failure to comply with ILSA. (Pls. Rule 56.1 Stmt. ¶ 43.)*fn4 On November 5, 2009, Steiner responded to Griffith, stating that the Condominium was "exempt from ILSA and there is no ILSA violation." (Compl. ¶¶ 34-35 & Ex. G: 11/5/09 Steiner Letter to Griffith; Pls. Rule 56.1 Stmt. ¶ 45.)

Douglas Steiner, Steiner's managing member (see page 4 n.3 above), first learned of ILSA in December 2007 (Pls. Rule 56.1 Stmt. ¶ 50 & Ex. A: D. Steiner Dep. at 187). In order to obtain financing for the Condominium, Steiner was required to demonstrate its compliance with ILSA. (Steiner Rule 56.1 Stmt. ¶ 7; Pls. Opp. Rule 56.1 Stmt. ¶ 7.) In a December 3, 2007 letter to its lender, Steiner stated its intent to utilize two ILSA exemptions:

To our knowledge, the marketing and sale of lots of the Condominium by Borrower [i.e., Steiner] in the manner presently contemplated by Borrower will not conflict with and will satisfy [ILSA] . . . . To our knowledge, Borrower will meet all of the exemption criteria set forth in the relevant sections of [ILSA] and qualifies for a combination of exemptions that would exempt Borrower from the filing requirements of [ILSA]. The first ninety nine (99) lots sold will be exempt pursuant to Section 1702(b) of [ILSA]. The remaining lots in excess of the ninety nine (99) will be exempt under Section 1702(a)(2). (Dkt. No. 21: Roschelle Aff. Ex. D: 12/3/07 Steiner Letter to Wachovia Bank ¶ 8; Pls. Rule 56.1 Stmt. ¶ 54; D. Steiner Aff. ¶ 7; Steiner Rule 56.1 Stmt. ¶ 7; Pls. Opp. Rule 56.1 Stmt. ¶ 7.)

Steiner has not yet sold ninety-nine units in the Condominium. (D. Steiner Aff. ¶ 11; Steiner Rule 56.1 Stmt. ¶ 22; Pls. Opp. Rule 56.1 Stmt. at 2.) Steiner obtained temporary certificates of occupancy ("TCO") for the completed units on March 11, 2010. (Roschelle Aff. Ex. G: Certificates of Occupancy; D. Steiner Aff. ¶ 11; Steiner Rule 56.1 Stmt. ¶ 17; Pls. Opp. Rule 56.1 Stmt. at 2.)

The Parties' Motions

Plaintiffs' summary judgment motion claims that:

[T]here is no dispute that [ILSA] . . . applies to the Condominium, that Defendant [Steiner] has not complied with any of the requirements of ILSA, and that Plaintiffs exercised their statutory rights of revocation within the applicable two-year statute of limitations. Plaintiffs are, therefore, entitled to judgment as a matter of law unless Defendant [Steiner] can meet its burden of demonstrating that the Condominium falls within ILSA exemptions that were not selected by Defendant [Steiner] "for the purpose of evasion."

. . . [Steiner's] claimed exemptions are inapplicable as a matter of law because they did not exist on the date the purchase agreements in issue were entered into. (Dkt. No. 17: Pls. Br. at 1-2.)*fn5

Steiner cross-moved for summary judgment, arguing that the Condominium was exempt from ILSA's requirements under the "100-lot" and "improved lot" exemptions, even if these exemptions were not "in place at the time" of plaintiffs' Purchase Agreements. (Dkt. No. 20: Steiner Br. at 2-3.) Steiner also seeks summary judgment on its counterclaims that plaintiffs anticipatorily breached the Purchase Agreements, that Steiner thus may retain plaintiffs' deposits as "liquidated damages" and that Steiner also is entitled to "reimbursement of all costs and expenses incurred in connection with plaintiff[s'] default, including counsel fees." (Steiner Br. at 2, 18-19.)*fn6

ANALYSIS

I. SUMMARY JUDGMENT STANDARD

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary "judgment should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see also, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S. Ct. 2505, 2509-10 (1986); Lang v. Ret. Living Pub. Co., 949 F.2d 576, 580 (2d Cir. 1991).

The burden of showing that no genuine factual dispute exists rests on the party seeking summary judgment. See, e.g., Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S. Ct. 1598, 1608 (1970); Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 36 (2d Cir. 1994); Gallo v. Prudential Residential Servs., Ltd. P'ship, 22 F.3d 1219, 1223 (2d Cir. 1994). The movant may discharge this burden by demonstrating to the Court that there is an absence of evidence to support the non-moving party's case on an issue on which the non-movant has the burden of proof. See, e.g., Celotex Corp. v. Catrett, 477 U.S. at 323, 106 S. Ct. at 2552-53.

To defeat a summary judgment motion, the non-moving party must do "more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 1356 (1986). Instead, the non-moving party must "set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e); accord, e.g., Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. at 587, 106 S. Ct. at 1356; Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d Cir. 2000) (At ...


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