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Foster v. Attias

United States District Court, E.D. Pennsylvania

December 11, 2019

RACHEL FOSTER, ET AL., Plaintiffs,
v.
MOSHE ATTIAS, ET AL., Defendants.

          MEMORANDUM

          Goldberg, J.

         Plaintiffs Rachel Foster, 532 Brooklyn, LLC (“532 Brooklyn”), and DEMK, LLC (“DEMK”) (collectively, “Plaintiffs”) have brought suit against Defendants Moshe Attias and Unity Loft, LLC (“Unity”) alleging liability arising out of a series of failed real estate development transactions among the parties. Plaintiffs set forth federal claims under the Racketeer Influenced and Corrupt Organization Act (“RICO”), 18 U.S.C. § 1962, as well as state law claims for fraud, breach of fiduciary duty, and breach of contract. Defendants have filed the current Motion to Dismiss the RICO causes of action, which, for the following reasons, will be denied.

         I. FACTS IN THE AMENDED COMPLAINT

         The following facts are taken from Plaintiff's Amended Complaint:[1]

         In February 2015, Defendant Attias, acting as general contractor for a construction project on a Philadelphia property, became acquainted with Plaintiff Foster's husband, Alain Kodsi (“Kodsi”). (Am. Compl. ¶¶ 14-16.) Attias explained that he owned or could acquire several parcels of real property that could be rehabilitated or developed for a profit, if Kodsi could provide the necessary capital. (Id. ¶ 17.) Kodsi advised that his wife, Foster, and Plaintiff DEMK (a limited liability company owned by Kodsi and/or Foster) would be able to provide the capital for the properties. (Id. ¶ 18.) Accordingly, Attias, DEMK, and Foster, entered into a verbal agreement whereby DEMK and Foster would provide Attias with the capital necessary to acquire, rehabilitate, and/or develop properties in exchange for DEMK's and Foster's receipt of a percentage return on their capital and at least fifty percent of the profits (the “Agreement”).

         Pursuant to the Agreement, the following properties were acquired: (a) 1328-34 Unity Street Philadelphia, PA (“Unity Street”); (b) 2016 2024-34 West Lippincot Street and 3101-19 North 21st Street (the “Lippincott Street Property”); (c) 704-718, 720 Locust Avenue, Philadelphia, PA (the “Locust Avenue Properties”); and (d) 2230 East Clearfield Street, 2051 North 9th Street, 749 Locust Avenue, 15 North Rittenhouse Street, 35 North Peach Street, 117 North 57th Street, 60 Manheim Street, and 1109 State Street, Philadelphia, PA (the “Small Properties”). (Id. ¶ 20.)

         A. Unity Street

         In December 2016, Foster agreed to provide Attis with $350, 000 in capital to acquire and develop Unity Street. Foster and Attias further agreed that Unity Street would be titled in Foster's name and she would receive a 12% return on her capital, plus 50% of the profits upon sale of Unity Street. Attias represented to Foster, through Kodsi, that he would use the funds to purchase the property in Foster's name. Foster later learned that Attias acquired Unity Street in the name of Defendant Unity, which Attias solely owns and controls. Plaintiffs allege that Attias has taken no action to develop Unity Street and refuses to repay Foster. (Id. ¶¶ 21-27.)

         B. The Lippincott Properties

         In July 2016, Attias and Foster agreed that Foster would provide Attias with $365, 000 in capital for the acquisition and development of the Lippincott Properties. Attias represented that he intended to use the funds to purchase title to the Lippincott Properties in Foster's name and that she would receive a 12% return on her capital, plus 50% of the profits upon the sale of the Properties. In reliance on Attias's representation, Foster provided him with $365, 000. Subsequently, Foster learned that Attias acquired the Lippincott Properties in the name of an entity called Lippincott Lofts, LLC, which Attias solely owns, and that Attias failed to develop the Lippincott Properties. (Id. ¶¶ 28-34.)

         C. The Locust Avenue Properties

         In May 2016, Attias advised Kodsi that he could acquire the Locust Avenue Properties for development, and DEMK agreed to provide $200, 000 in capital for their acquisition and development. Attias represented to Kodsi, as a representative of DEMK, that he would use the funds to purchase the Locust Avenue Properties in the name of a limited liability company to be owned by both Attias and DEMK. In reliance on this representation, DEMK provided $200, 000 to Attias. Thereafter, DEMK learned that Attias had acquired the Locust Avenue Properties in his own name and had taken no action to develop the properties. (Id. ¶¶ 35-40.)

         D. The Small Properties

         Attias represented to Kodsi that he was skilled at selecting and acquiring properties at sheriff sales and auctions. Accordingly, DEMK agreed to provide $400, 000 to Attias for the acquisition of suitable properties. Attias and DEMK further agreed that DEMK would receive a 12% return on the capital, with the remaining profits being split 75% to DEMK and 25% to Attias, and that title to the properties (the “Small Properties”) would be held by AEM Investments, LLC (“AEM”), a company wholly-owned by DEMK. Attias claimed to have used $320, 000 to purchase and rehabilitate the Small Properties, but has refused to return the remaining $80, 000 and has not provided an accounting. In addition, Attias has collected rent from tenants without providing that income to DEMK. In unwinding these transactions, Attias corrected title issues on all of the Small Properties, except for 749 Locust Avenue, which he continues to own in his own name using proceeds received from DEMK. (Id. ¶¶ 41-50.)

         E. The 13th Street Properties

         Attias advised Kodsi that he owned 5824-5438 North 13th Street and 5840-5850 North 13th Street in Philadelphia (the “13th Street Properties”), which consisted of two virtually identical buildings in shell condition. Kodsi advised Attias that he controlled an entity, 532 Brooklyn, that was in need of such properties for a like kind exchange. Thus, Attias entered into a joint venture agreement with 532 Brooklyn, whereby Attias would sell the 13th Street Properties to 532 Brooklyn. Under this agreement, 532 Brooklyn agreed to invest $3.8 million in capital for a joint venture in developing the 13th Street Properties, in exchange for title to such properties.

         On July 27, 2016, 532 Brooklyn and another entity controlled by Attias entered into a verbal agreement for sale of the 13th Street Properties (the “Agreement of Sale”). Under the Agreement of Sale, 532 Brooklyn agreed to purchase the 13th Street Properties for $3, 800, 000. $2, 2445, 504.59 of the purchase price was allocated as follows: $600, 000 to the cost of land, and $1, 845, 504.59 for the construction of the properties. The remainder of the purchase price would come in the form of a promissory note that would be held by Attias. In turn, Attias agreed to diligently pursue work on the project and ...


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