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Atlantic Pier Associates, LLC v. Boardakan Restaurant Partners

July 27, 2011


The opinion of the court was delivered by: Pollak, J.

[No. 09-1619. See note 1, infra.]


The plaintiffs in this landlord-tenant dispute are the operators of two restaurants at "The Pier at Caesar's" in Atlantic City, and the defendants are various entities with ownership interests in The Pier. The restaurants contend that they were fraudulently induced to enter into a set of leases with the owners. Specifically, they allege that the owners made false statements implying that other high-profile restaurants would also become tenants at The Pier. The restaurants assert that they would not have entered into the leases if they had known that the other high-profile restaurants would not be joining them at The Pier.

Pending before the court is a motion to dismiss filed by one set of owners. The owners have presented several grounds for dismissal, including that the restaurants' suit is barred by the statute of limitations. As discussed below, the claims against these owners are indeed time-barred.

I. Factual Background*fn1

The plaintiffs in this diversity action are Boardakan Restaurant, LLC and Oceanental, LLC. These corporations operate two restaurants-Buddakan and Continental, respectively-owned by Stephen Starr, who is also a named plaintiff. The defendants can be split into three groups: (1) Atlantic Pier Associates, LLC, (2) the Gordon Defendants, and (3) the Taubman Defendants. Atlantic Pier Associates ("APA") is the landlord of The Pier. APA is a Delaware limited liability corporation that is owned by two sets of entities, referred to throughout this litigation as the Gordon Defendants and the Taubman Defendants. The Taubman Defendants consist of: TRG the Pier, LLC; Taubman Realty Group, L.P. ("TRG"); Taubman Centers, Inc. ("TCI"); and Taubman Company, LLC ("TaubCo").*fn2 The Gordon Defendants consist of: Pier Developers, Inc.; Gordon Group Holdings, LLC ("GGH"); and two individuals, Scott Sheldon and Peter Fine.*fn3 The initial complaint filed in this court named all of these defendants save for TaubCo, which was added after Magistrate Judge M. Faith Angell granted plaintiffs leave to amend their complaint. Dkt. 101.

The amended complaint alleges that the defendants engaged in a pattern of fraud and negligent misrepresentation over the course of various lease negotiations. In 2004, the defendants and plaintiffs entered into a lease allowing plaintiffs to build and operate two Stephen Starr restaurants, Buddakan and Continental, at The Pier. Am. Compl.¶¶ 46--47 (Dkt. 103).*fn4 The defendants also entered into a set of leases with entities operated by the restauranteur Jeffrey Chodorow, under which Chodorow agreed to open a night club (RumJungle) and a restaurant (English is Italian) at The Pier. Am. Compl.¶¶ 51--57; 67--72.

In November 2005, plaintiffs sent a notice to the defendants stating that, under the terms of the lease, plaintiffs could withdraw from the agreement because the premises had not been constructed and improved in accordance with the schedule mandated by the lease. Am. Compl. ¶ 85. The plaintiffs expressed a willingness to follow through with the agreement, but they sought assurances that other high-profile establishments, including RumJungle and English is Italian, would also follow through on their leases. Unbeknownst to plaintiffs, however, a Chodorow representative had sent letters to the defendants indicating that, in light of the delays, he considered the leases for RumJungle and English is Italian to be null and void, unless the parties could agree on certain amendments to the lease. Am. Compl. ¶¶ 87--88. No such amendments were entered into for the Chodorow restaurants.

In response to the plaintiffs' request for assurances, the plaintiffs allege that-despite having knowledge that the Chodorow leases had been effectively terminated-the defendants provided plaintiffs with a lease schedule that falsely stated that those establishments had binding leases to open at The Pier in the summer of 2006. Am. Compl. ¶¶ 93--97. In reliance on these and related representations,*fn5 plaintiffs then entered into an amended lease, in February 2006, which precluded the plaintiffs from walking away from the project. Am. Compl. ¶¶ 14--16.

Eventually, Buddakan and Continental opened for business at The Pier, but RumJungle and English is Italian did not. Plaintiffs allege that The Pier is now a "complete failure" and is "virtually 'dark.'" Am. Compl. ¶ 12. They further allege that they have incurred in excess of $20 million in damages, and that "the valuable brand names and marks of Buddakan and Continental are now irreparably damaged and diminished due to their association with this failed project . . . ." Am. Compl. ¶ 136.

Plaintiffs filed this diversity action on April 17, 2009. In their four-count complaint, plaintiffs allege that the defendants are liable for fraud, negligent misrepresentation, and civil conspiracy. They further allege that defendants are liable under the theory of promissory estoppel. Plaintiffs request over $20 million in compensatory damages, rescission of the February 2006 lease amendments, and punitive damages.

The pending motion to dismiss has been filed by the Taubman Defendants only.

II. Procedural Background

A. State and federal litigation

On January 9, 2007, over two years before initiating the current federal action, the plaintiffs filed a complaint against their landlord, APA, in New Jersey state court, seeking a declaration that they were not bound by the amended leases. N.J. Compl. (Dkt. 91-1). That same day, the plaintiffs sent a second draft complaint to the Gordon Defendants which included claims of fraud in the inducement, fraud, negligent misrepresentation, and breach of the implied covenant of good faith and fair dealing. Am. N.J. Compl. (Dkt. 91-2). Although the New Jersey court granted leave to amend the initial complaint to include the fraud claims and to join additional parties, the plaintiffs and the defendants entered into a Stipulation of Dismissal Without Prejudice. See Dkt. 91-4.

On June 25, 2008, plaintiffs filed a Writ of Summons in the Court of Common Pleas of Philadelphia County. Dkt. 112-5. Plaintiffs then filed, in the same action, a notice of pre-complaint discovery. Dkt. 91-5.*fn6 This state court action named APA, GGH,and TCI as defendants. (Aside from TCI, none of the other Taubman Defendants were named). The notice of pre-complaint discovery alleged various fraud claims that are analogous to those alleged in this federal action.

On July 23, 2008, the defendants in the Pennsylvania state court action sought removal to federal court on grounds of diversity of citizenship. Dkt. 1, no. 08-3448. Plaintiffs opposed removal and filed a motion to remand. Dkt. 2, no. 08-3448. In the meantime, plaintiffs ceased paying rent. Accordingly, and while the remand motion was pending, APA filed a federal complaint ("the Rent Action") against the plaintiffs, on September 18, 2008, to enforce the covenants to pay rent. See Dkt. 1, no. 08-4564.

On September 24, 2008, Judge Robreno granted the plaintiffs' motion to remand because the plaintiffs had not yet filed a complaint in state court. Dkt. 15, no. 08-3448.*fn7

The case thus returned to the Philadelphia County Court of Common Pleas, where plaintiffs proceeded to conduct pre-complaint discovery.

Plaintiffs then filed a motion to stay or dismiss the Rent Action pending resolution of the state court action. Dkt. 4, 08-4564. On January 16, 2009, Judge Robreno granted that motion and imposed a 90-day stay of the Rent Action. Dkt. 12.*fn8 The stay expired on April 16, 2009, at which time Judge Robreno held a status conference. By this time, plaintiffs' counsel had decided not to file a complaint in state court, and instead had decided to re-file the Fraud Action in federal court. This development was allegedly motivated by plaintiffs' decision not to name certain non-diverse defendants-such as Jeffrey Chodorow, the owner of RumJungle and English is Italian-in the Fraud Action. Plaintiffs also allege that they were motivated by a desire to avoid the time and expense of another removal.

At the status conference, plaintiffs' counsel stated his intention to withdraw the state action and to re-file in federal court; counsel also expressed his view that the Fraud Action should be consolidated with the Rent Action. Tr. of Hr'g at 3--5, Apr. 16, 2009 (Dkt. 35). Defense counsel agreed that "it would be appropriate" to consolidate the two cases. The next day, April 17, 2009, plaintiffs filed the Fraud Action in federal court. This federal Fraud Action was docketed under case number 09-1619. That same day, Judge Robreno ordered that the Fraud and Rent Actions be consolidated under case number 08-4564-the docket number for the Rent Action-and accordingly closed case number 09-1619. Dkt. 15. Also on April 17, 2009, plaintiffs requested a discontinuance from the state court. See Praecipe to Discontinue Action without Prejudice (Dkt. 91-7). The state court action was discontinued on April 20, 2009. Dkt. 112-12 at 40.

B. The first motion to dismiss

On June 16, 2009, the Taubman Defendants, Gordon Defendants, and APA eachfiled a motion to dismiss under Rule 12(b)(6).*fn9 The Taubman Defendants asserted that(1) the court lacked personal jurisdiction; (2) plaintiffs' claims were barred by the parol evidence rule, the gist of the action doctrine, the economic loss doctrine, and the statute of limitations; and ...

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