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Eckerd Corporation v. Rhoads Avenue Newtown Square, LP

United States District Court, E.D. Pennsylvania

August 1, 2018

ECKERD CORPORATION, Plaintiff,
v.
RHOADS AVENUE NEWTOWN SQUARE, LP, ET AL., Defendants. PARKE BANK, Plaintiff,
v.
MARC B. KAPLIN and GEORGE J. SPAEDER, Defendants.

          MEMORANDUM OPINION

          Goldberg, J.

         Currently at issue in this ongoing, multi-party litigation is whether a nonparty to a proposed settlement agreement has standing to object to that settlement.

         The cases before me involve a series of complex real estate and banking transactions pertaining to certain real property located on Rhoads Avenue in Newtown Square, Pennsylvania, and to disputes regarding various loans, mortgages, and subleases. Several parties in these related actions-Parke Bank, Shelbourne NSQ Associates, Marc B. Kaplin as Trustee for the Kaplin Stewart Meloff Reiter & Stein 401k Plan, and Mark B. Kaplin individually (collectively the “Settling Parties”)-have reached a resolution regarding a substantial No. of the remaining claims (the “Settlement Agreement”). The Settling Parties have sought approval of this agreement through a Motion to Enforce the Settlement. As will be explained in detail below, George Spaeder-a former limited partner in Rhoads Avenue Newtown Square, LP (“Rhoads LP”) which is the entity at the center of the dispute-claims he has standing to object to this settlement and, in fact, has lodged such an exception.

         After the Motion to Enforce Settlement was filed, I held a hearing wherein the Settling Parties maintained that Spaeder does not have standing to object to the Settlement Agreement, either individually or on behalf of Rhoads LP. Spaeder disagrees and urges that certain proceedings currently pending in state court could impact the proposed settlement and provide him with standing to object.

         I directed the parties to file supplemental briefs addressing (a) the current status of the state court proceedings, (b) how the outcome of those proceedings could affect Spaeder's standing to lodge objections to the proposed Settlement Agreement, and (c) the basis on which Spaeder, who no longer legally controls Rhoads LP, claims entitlement to object to the proposed Settlement Agreement on behalf of Rhoads LP. I received Spaeder's brief on February 16, 2018, and the Settling Parties' brief on March 1, 2018. Upon review of these submissions and for the following reasons, I find that Spaeder has no standing to object to the proposed settlement in the above-captioned matters.

         I. FACTUAL BACKGROUND

         To fully understand this matter, and Spaeder's lack of standing, a series of somewhat complex business transactions involving multiple parties must first be explained. The following background and facts are taken from complaints in the pertinent federal and state court actions, submissions by the parties on these dockets, and, in the matter before me, the parties' supplemental briefs and the exhibits attached to the parties' various filings.

         A. The Property

         Janet A. Kirk, Timothy Barnard, as Executor of the Estate of Jeanne K. Criddle, and Amy Sands (collectively, “Fee Owner”) own certain real property located on Rhoads Avenue in Newtown Square, Pennsylvania (the “Property”). Limited partnership Rhoads LP is a tenant of the Property under a ground lease dated May 1, 2009 (“Ground Lease”). Eckerd Corporation is the subtenant of Rhoads LP under a lease agreement dated May 25, 2012 (“Eckerd Lease”). Entitlement to the Eckerd Lease payments has been one of the primary areas of dispute in this case.

         B. The Shea Loan

         On October 23, 2008, Parke Bank-a full-service commercial bank-made a loan to an individual named John Shea under a Commercial Line of Credit Note in the principal amount of five million dollars (the “Shea Loan”). On October 25, 2011, Rhoads LP executed an agreement guaranteeing payment of the Shea Loan (“Rhoads-Shea Guaranty”). To secure all current and future obligations of Rhoads LP to Parke Bank, Rhoads LP also: (1) executed and delivered to Parke Bank a leasehold mortgage wherein Rhoads LP mortgaged to Parke Bank its leasehold interest in the Rhoads Grounds Lease (“Leasehold Mortgage”); and (2) granted Parke Bank an assignment of leases, rents, and other agreements on the Property, with all rents, income, royalties, and profits when becoming due (“Assignment of Rents”) (see subtenant agreement with Eckerd referenced above).

         Shea subsequently defaulted on his obligations to Parke Bank under the Shea Loan and, on July 11, 2012, Parke Bank issued a notice to Eckerd, as tenant under the Eckerd lease, demanding that Eckerd remit its lease payments to Parke. Thereafter, on August 24, 2012, Parke Bank obtained a judgment against Rhoads LP, as Shea's guarantor, in the amount of $1, 310, 590.63 plus continuing interest, in the Court of Common Pleas of Delaware County, Pennsylvania (the “Rhoads-Shea Judgment”).

         C. The Other Creditors of Rhoads LP

         Several other entities hold judgments against Rhoads LP. On December 22, 2011, Rhoads LP, through its general partner Rhoads GP-which was controlled by George Spaeder and Bruce Earle at the time-entered into a Loan and Security Agreement with a limited partnership known as Shelbourne NSQ Associates LP (“Shelbourne”). Via this Agreement, Shelbourne loaned Rhoads LP $850, 000 and, as security, Rhoads LP granted Shelbourne an interest in all of Rhoads LP's “presently owned and hereafter acquired personal property.” As detailed infra, the Loan and Security Agreement also granted Shelbourne the right to exercise control over Rhoads LP in the event of a default. On August 28, 2012, following a default on the loan by Rhoads LP, the Delaware County Court of Common Pleas entered a judgment against Rhoads LP in favor of Shelbourne for $1, 056, 328.56 (the “Shelbourne Judgment”).

         In September 2011, Rhoads LP also received a loan from Mark Kaplin, as the Trustee for the Kaplin Stewart Meloff Reiter & Stein 401k Plan (the “Kaplin Plan”). Rhoads LP defaulted on this loan as well and the Chester County Court of Common Pleas entered a judgment against it, on August 31, 2012, in the amount of $225, 420.72 plus continuing interest (the “Kaplin Plan Judgment”).

         D. The Federal Court Actions

         On July 11, 2012, attorneys for Parke Bank, having already obtained a judgment against Rhoads LP in Delaware County, forwarded the Assignment of Rents document to Eckerd demanding that all rental payments under the Eckerd Lease be made to Parke Bank. Rhoads LP disputed Parke Bank's authority to direct Eckerd to remit rent payments under the Eckerd Lease to Parke Bank and, instead, directed that those rent payments continue to be remitted to Rhoads LP. Shelbourne and the Kaplin Plan, as judgment creditors of Rhoads LP, similarly disputed Parke Bank's authority to direct Eckerd to remit rent payments under the Eckerd Lease to Parke Bank.

         Given the disagreement over the proper recipient of rent payments, Eckerd filed an interpleader action against the Fee Owner, Rhoads LP, Shelbourne, the Kaplin Plan, Kaplin individually, and Parke Bank (Civil Action No. 13-4752), seeking an order directing the appropriate disposition of its future rental payments (the “Interpleader Action”). Parke Bank then commenced a separate action against Kaplin and Spaeder (Civil Action No. 14-5293), alleging fraud, civil conspiracy, and tortious interference claims in connection with Kaplin and Spaeder's alleged interference in Parke Bank's receipt of rents from Eckerd (the “Kaplin-Spaeder Litigation”).

         Subsequently, on June 19, 2015, Spaeder, Rhoads LP, Shea, and five other limited partnerships controlled by Spaeder and Bruce Earle filed a third suit against Defendant Parke Bank and two of its employees, alleging violations of the Racketeer Influence and Corrupt Organizations Act (“RICO”), 18 U.S.C §§ 1961, et seq. in connection with a series of substantial commercial loans and related transactions. In addition to three RICO claims, the plaintiffs in that matter also asserted state law claims for fraud, conversion and civil conspiracy. Devon Drive Lionville LP, et al. v. Parke Bankcorp, Inc., et al. (Civil Action No. 15-3435) (“Devon Drive Action”).[1]

         On May 1, 2015, a No. of entities that were affiliates of Rhoads LP entered into an agreement (the “Resolution of Authority”) to facilitate negotiations with Parke Bank. The Resolution designated George Spaeder with settlement authority, stating:

The below signed Limited Partners [of Rhoads Avenue Newtown Square, LP] hereby authorize George Spaeder to negotiate a resolution of all claims on behalf of the Rhoads Avenue Newtown Square, LP, against Parke Bancorp, Inc., Parke Bank, Vito Pantilione, and Ralph Gallo. Before a resolution of the claims on behalf of the Rhoads Avenue Newtown Square, LP, is entered into, however, all the terms and conditions of such resolution must be reviewed and unanimously approved by the following Limited Partners: [George Spaeder, Limited Partner; Amy Spaeder, Limited Partner; Joseph Fox for Shelbourne NSQ Associates, LP, Limited Partner].

(Spaeder Supp. Memo, Civ. A. No. 13-4752, ECF No. 255, Ex. 9.)

         E. Shelbourne's Notice Exercise of Rights ...


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