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Atlantic Pier Associates, LLC v. Boardakan Restaurant Partners

August 30, 2010

ATLANTIC PIER ASSOCIATES, LLC, ET AL.
v.
BOARDAKAN RESTAURANT PARTNERS, LP, ET AL.
BUDDAKAN RESTAURANT AT THE PIER IN ATLANTIC CITY, NEW JERSEY, ET AL.
v.
ATLANTIC PIER ASSOCIATES, LLC, ET AL.



The opinion of the court was delivered by: M. Faith Angell United States Magistrate Judge

MEMORANDUM AND ORDER

On September 29, 2009, this matter was reassigned from the Honorable Educardo C. Robreno to the Honorable Louis H. Pollak. See Docket Entry No. 65. On September 30, 2009, Judge Pollak ordered that the case be assigned to me, pursuant to 28 U.S.C. §636(b)(1)(A), Federal Rule of Civil Procedure 72(a) and Local Rule of Civil Procedure 72.1(e), for pretrial management purposes. See Docket Entry No. 66.

Presently before me is Plaintiffs' Motion for Leave to File an Amended Complaint to Add The Taubman Company, LLC as an Additional Party Pursuant to Federal Rules of Civil Procedure 15(a)(2) and 15(c), inclusive of all exhibits thereto; Defendants' memorandum in opposition, and exhibits, as well as Plaintiffs' reply brief. A Hearing was held on May 24, 2010.

I. FACTUAL BACKGROUND

The factual background was presented by the Honorable Eduardo C. Robreno in his memorandum dated August 20, 2009, as follows:

I. BACKGROUND

This case is the consolidation of a landlord/tenant dispute and tort action. On September 18, 2008, APA initiated an action against Starr Plaintiffs, seeking the recovery of past-due rent. On April 16, 2009, Starr Plaintiffs initiated an action against APA, TRG Pier , TRG, TCI, GGH, Pier Developers, Peter J. Fine, Sheldon Gordon, and Scott Gordon, alleging fraud, negligent misrepresentation, civil conspiracy, and promissory estoppel. On April 20, 2009, the Court consolidated these cases (doc. no. 15). Both actions relate to agreements to lease and operate restaurants at the "Pier at Caesar's" (the "Pier') in Atlantic City, New Jersey.

A. Defendants

For the purposes of organization and clarity, a brief discussion of Defendants and their relative relationships is helpful. On May 1, 2003, Defendant Pier Developers, Inc. ("Pier Developers") entered into a Ground Lease with the entity that owns Caesar's Palace Casino, and thus, became the initial landlord of "the Pier," an area used to develop a high-end mall on a pier over the beach in Atlantic City.

On January 31, 2005, pursuant to an Operating Agreement, Defendants Pier Developers and TRG The Pier, LLC ("TRG The Pier"), a real estate investment limited liability company, formed a Delaware limited liability company known as Atlantic Pier Associates, LLC ("APA"). Defendant Pier Developers then transferred its interest in the Pier to Defendant APA, making APA the landlord of the Pier.

Pursuant to the APA Operating Agreement, Defendant TRG The Pier owned thirty percent of APA and was a minority member; Defendant Pier Developers owned seventy percent of APA and was a managing member. In April 2007, the management structure of APA changed when TRG The Pier obtained an additional fifty percent in APA, increasing its equity interest in the Pier to seventy percent, and making TRG The Pier the managing member of APA, and Pier Developers the minority member. (Aff. Chris B. Heaphy, TRG The Pier, at ¶8).

Pier Developers and TRG The Pier are both owned and controlled by separate entities, also named as Defendants in this case. First, Pier Developers is a subsidiary of Defendant Gordon Group Holdings, LLC ("GGH") a developer in the retail and entertainment industries owned by Defendant Sheldon Gordon. Defendant Scott Sheldon and Peter Fine are employees of GGH. Second, TRG The Pier is a wholly owned subsidiary of Defendant The Taubman Realty Group, LP, ("TRG") a Delaware limited partnership. Defendant Taubman Centers, Inc. ("TCI"), a public Real Estate Investment Trust, owns a sixty-five percent managing general partnership interest in TRG and conducts all its operations.

A representation of the relationships among Defendant is illustrated as follows.

Atlantic Pier Associates, LLC [APA]

Membership interest held by: Managing Member: Minority Member: TRG The Pier Pier Developers, Inc. TRG, with business conducted Sheldon Gordon, by general partner TCI G G H , and related entities For the purposes of discussion, the Court has grouped the Defendants in three categories: (1) Landlord Defendant, consisting of Defendant APA; (2) APA Minority Member Defendants, consisting of Defendants Pier Developers, GGH, Peter J. Fine, Sheldon Gordon, and Scott Gordon; and (3) APA Managing Member Defendants, consisting of Defendants TRG The Pier, TRG, and TCI.

B. Lease Agreements

On May 1, 2003, Pier Developers, as the initial landlord at the Pier, sought to attract tenants for the Pier. On March 13, 2004, Pier Developers entered into substantially identical leases with two Steven Starr restaurants, Buddakan and Continental ("the Leases"). The Leases contained several important clauses implicated in this case: (1) integration clause; (2) delay in delivery clause; and (3) counterclaim clause (noting that Tenant's covenant to pay rent is an independent covenant). Importantly, the Lease contained no provisions with respect to other tenants which would occupy the Pier (absence of "Co-tenancy Clause"). The premises leased for the Starr restaurants were delivered pursuant to the Leases, by correspondence dated November 1, 2005.

Pier Developers entered into two similar leases with entities that would do business as "RumJungle" and "English is Italian" (both restaurants were the creation of restauranteur Jeffrey Chodorow). These leases contained clauses which required Pier Developers to construct a substantial part of the space that "RumJungle" and "English is Italian" would occupy. Starr Pls.' Compl. Exs. C & H, at ¶3.1. In addition, these leases provided for automatic termination in the event that costs exceeded an agreed upon amount. The premises leased for "RumJungle" and "English is Italian" were delivered pursuant to the agreements, by correspondence dated October 31, 2005.

On November 11, 2005, a representative from the Chodorow entities sent identical letters to APA on behalf of "RumJungle" and "English is Italian," indicating that the tenant costs for both restaurants exceeded the amount specified in the agreements, and thus, the restaurants had a right to terminate the lease under ΒΆ3.3(9). Although the termination dates for both agreements had passed, the ...


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