BERISH BERGER, KILBRIDE INVESTMENTS LIMITED, BUSYSTORE LIMITED IN LIQUIDATION, TOWERSTATES LIMITED, BERGFELD CO. LIMITED and ARDENLINK LIMITED, Plaintiffs,
CUSHMAN & WAKEFIELD OF PENNSYLVANIA, INC., BLANK ROME LLP AND COZEN O'CONNOR, P.C., Defendants.
J. PAUL OETKEN, District Judge.
Plaintiffs Berish Berger, Kilbride Investments Limited ("Kilbride"), Busystore Limited in Liquidation ("Busystore"), Towerstates Limited ("Towerstates"), Bergfeld Co. Limited ("Bergfeld"), and Ardenlink Limited ("Ardenlink") (together, "Plaintiffs"), bring this fraud action against Defendants Cushman & Wakefield of Pennsylvania, Inc. ("C&W"), Blank Rome LLP ("Blank Rome"), and Cozen O'Connor, P.C. ("Cozen") (together, "Defendants"). Before the Court are Defendants' motion to transfer pursuant to 28 U.S.C. 1404(a), and C&W's motion to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons that follow, this action is transferred to the United States District Court for the Eastern District of Pennsylvania.
A. Factual Background
This action relates to an alleged fraud involving a development project known as "River City" in Philadelphia, Pennsylvania. River City, an 8.2 acre area of land along JFK Boulevard, was marketed as a 12-million-square-foot mixed-use development, featuring several 600-foot skyscrapers. However, in actuality, applicable zoning regulations only permitted River City to be developed as a small fraction of the advertised square footage, with buildings only 125 feet tall.
In early 2006, non-party Ravinder Chawla and a Philadelphia businessman, non-party Richard Zeghibe, allegedly developed a plan by which they would purchase and flip the River City site, hoping to secure a multi-million-dollar profit. In May 2006, Chawla and Zeghibe contracted to purchase River City for $32.5 million through a special purchase entity, and Charles M. Naselsky, a partner at Cozen, and later, Blank Rome, negotiated the contract on behalf of Zeghibe. Next, Chawla executed a "sham" contract to purchase the same property for $50 million, artificially inflating the property's worth.
Chawla and Zeghibe contracted with James Rappoport to develop plans for the River City site. The design was elaborate, consisting of eight towers along the Schuylkill River in Philadelphia. Rappoport also developed a three-dimensional computer model, complete with an animated fly-through, a PowerPoint presentation, drawings and schematics and a promotional memorandum describing the designs. In September 2006, Zeghibe and Chawla contracted to sell the site to Eli Weinstein for $62.5 million. Later, Weinstein, Chawla, and other associates would solicit Berger as an investor in River City. Berger alleges that, as a result of intentional misrepresentations regarding the zoning restrictions, from December 2006 to January 2007, he invested at least $27 million in River City through Weinstein.
Defendant C&W completed appraisals on the River City project, one of which was instrumental in Berger's decision to invest in the venture. This report was authored by Gerald B. McNamara and Daniel J. McNeil-state-certified appraisers-and purported to comply with the Uniform Standards of Professional Appraisal Practice ("USPAP"). C&W was retained by Naselsky, while he was at Cozen, to appraise the River City project, and included the "sham" $50 million sales contract among Chawla, Zeghibe, and the original special-purpose entity in its appraisals, but nevertheless completed no real due diligence on this sales history. As of August 2006, C&W valued the River City site at $77 million, which Plaintiffs contend was an "enormous" increase over the valuation that McNamara had originally assigned to the site 29 months prior. The 2006 appraisal did not mention the 2004 appraisal, and Plaintiffs claim they were unaware of it.
Plaintiffs also claim that C&W knew that the River City project could not be built as marketed, given the applicable zoning criteria and the fact that the project exceeded the permissible square footage ratio by 25.48%. Instead, Plaintiffs contend, C&W simply presumed that the project would eventually comply somehow with the restrictions, without disclosing these assumptions to Plaintiffs. Moreover, Plaintiffs add that C&W made little effort to determine the physical viability of the proposed skyscrapers, despite the fact that 80 to 85% of the River City property is within a designated flood plain. According to Plaintiffs, C&W's recklessness is apparent from the fact that in March 2010, the River City site was sold for $3 million-only 4% of C&W's 2006 and 2007 valuations of its worth.
Chawla and Naselsky both knew of the 125-foot height limitation by 2006, as evidenced by an email from Naselsky, then at Blank Rome, to Chawla and others noting that the building height "will be capped at 125 ft from grade, " with respect to the River City project. Rappoport also allegedly lobbied Philadelphia officials in an attempt to get the height limitation lifted. However, Plaintiffs claim, all efforts were made to keep the 125-foot limitation a secret, with Naselsky and another Blank Rome partner, William F. Kerr, Jr., writing a November 2006 memorandum discussing the River City project that omitted any mention of the limitation. This memo was purportedly provided to putative investors in the site; however, Plaintiffs never viewed it. One potential investor, Kennedy Funding ("Kennedy") did see the memo, and later provided $20 million for the acquisition of the site. Despite attempts to lobby the Philadelphia City Council, the 125-foot height ordinance was unanimously approved by the Philadelphia City Council on December 14, 2006, and no exception was made for the River City project.
As noted, Berger was first approached about investing in River City in November 2006. He traveled to Philadelphia in December 2006, at Weinstein's suggestion, and met with Rappoport, Chawla, Weinstein, and Mark Sahaya, a real estate broker. Rappoport showed Berger his three-dimensional model, drawings, and PowerPoint presentation, detailing the River City plan, all of which showcased buildings over 50 stories tall. Berger alleges that he was falsely informed that the tall buildings could be built "as of right." After examining the C&W 2006 appraisal, Berger began investing in the River City project, advancing the first of his funds on December 18, 2006-eventually contributing $27 million to the doomed enterprise.
B. Pennsylvania Litigation
These events have been the subject of protracted litigation in the U.S. District Court for the Eastern District of Pennsylvania. In March 2007, Berger first brought suit against Weinstein and Chawla, alleging fraud and conversion. ( See Declaration of John G. Harkins, Jr., Dkt. No. 17 ("Harkins Decl."), Ex. A.) Several other defendants were later added to this action ( Berger I ), including the special purpose entity Naselsky and Chawla used in their original transaction. Eventually, these defendants moved for summary judgment, and the Pennsylvania district court dismissed on standing grounds, as the monies advanced by Berger came from various funds with which he was affiliated, but did not originate from Berger directly. See Berger v. Weinstein, Civ. A. No. 07-994, 2008 WL 3183404, at *4-*5 (E.D. Pa. Aug. 6, 2008), aff'd, 348 F.App'x 751 (3d Cir. 2009). Berger then had the claims of his investing entities assigned to him and filed a new suit with similar allegations relating to the River City project in Philadelphia on August 20, 2008 ( Berger II ). (Harkins Decl., Ex. C.) Berger also filed a third suit on December 18, 2008 ( Berger III ) ( id., Ex. D), which was eventually consolidated with Berger II. This consolidated action later went to trial, with a jury finding Weinstein, Chawla, and Sahaya liable for various iterations of fraud, conspiracy to defraud, and unjust enrichment, and awarding Berger millions in damages. ( Id., Ex. E.) The district court denied Chawla's post-trial motion for a judgment as a matter of law, Berger v. Zeghibe, Civ. A. No. 08-5861, 2010 WL 4054274 (E.D. Pa. Oct. 14, 2010), and the Third Circuit affirmed the judgment, 465 Fed.App'x 174 (3d Cir. 2012).
C. Procedural Background
Plaintiffs filed the instant action in December 2012 (Dkt. No. 1), and all defendants filed their joint motion to change venue in January 2013 (Dkt. No. 16.) Also in January 2013, Cozen answered (Dkt. No. 14) and C&W moved to dismiss the Complaint (Dkt. No. 27). Plaintiffs filed an amended complaint in February 2013 (Dkt. No. 50), and, in March 2013, both Blank Rome and Cozen answered (Dkt. Nos. 55, 56). Also in March 2013, C&W again moved to dismiss. (Dkt. No. 58.)
II. Standard for Transfer
Title 28 U.S.C. § 1404(a) provides: "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district where it might have been brought...." Accordingly, the "threshold question, " when determining whether transfer is appropriate, is whether the action could have been brought originally in the transferee forum. Atl. Recording Corp. v. Project Playlist, Inc., 603 F.Supp.2d 690, 694-95 (S.D.N.Y. 2009) (Chin, J.). After a court determines that the action could have been permissibly brought in the transferee forum within the strictures of 28 U.S.C. § 1391(b),  it then must examine whether convenience and the interests of justice warrant a transfer. Eslworldwide.com, Inc. v. Interland, Inc., No. 06 Civ. 2503 (LBS), 2006 WL 1716881, at *3 (S.D.N.Y. June 21, 2006) ("Having concluded that this case might have been brought' in the proposed alternative district, the Court must now examine whether a transfer is warranted for the convenience of the parties and witnesses and in the interest of justice."). In determining whether transfer is in the interests of convenience and justice, the Second Circuit has specified several factors to which courts must look:
(1) the plaintiff's choice of forum, (2) the convenience of witnesses, (3) the location of relevant documents and relative ease of access to sources of proof, (4) the convenience of parties, (5) the locus of operative facts, (6) the availability of process to compel the attendance of unwilling witnesses, and (7) the relative means of the parties.
New York Marine and Gen. Ins. Co. v. Lafarge N. Am., Inc.,
599 F.3d 102, 112 (2d Cir. 2010) (quoting D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 106-07 (2d Cir. 2006) (quotations omitted)). To this basic structure, other factors have been added to reflect a careful balancing among the interests at stake in a given litigation. See, e.g., Everlast World's Boxing Headquarters Corp. v. Ringside, Inc., No. 12 Civ. 5297 (PAE), 2013 WL 788054, at *6 (S.D.N.Y. Mar. 4, 2013) ("Assessing whether transfer is a valid exercise of discretion requires the Court to balance various factors: (1) the convenience of the witnesses; (2) the convenience of the parties; (3) the location of relevant documents and the relative ease of access to sources of proof; (4) the locus of operative facts; (5) the availability of process to compel the attendance of unwilling witnesses; (6) the relative means of the parties; (7) the forum's familiarity with the governing law; (8) the weight accorded ...