United States District Court, E.D. Missouri, Eastern Division
NTD I, LLC, NORTH TOWER DEVELOPMENT, LLC, and PAUL WEISMANN, Plaintiffs,
ALLIANT ASSET MANAGEMENT COMPANY, LLC, ALLIANT CAPITAL, LTD., ALLIANT CREDIT FACILITY ALP, LLC, and ALLIANT TAX CREDIT FUND 36, LTD, and ALLIANT TAX CREDIT 36, LLC., Defendants.
MEMORANDUM AND ORDER
RICHARD WEBBER SENIOR UNITED STATES DISTRICT JUDGE.
matter comes before the Court on Defendants' Motion to
Dismiss and Motion to Strike Jury Demand [ECF No. 17].
litigation arises out of a dispute between Plaintiffs NTD I,
LLC, North Tower Development, LLC, and Paul Weismann and
Defendants Alliant Asset Management Company, LLC ("Asset
Management"), Alliant Capital, Ltd.
("Capital"), Alliant Credit Facility, Ltd.
("Credit Facility"), Alliant Credit Facility ALP,
LLC ("Credit Facility ALP"), Alliant Tax Credit
Fund 36, Ltd. ("Fund 36 Ltd."), and Alliant Tax
Credit 36, LLC ("Fund 36 LLC, " and together with
Fund 36 Ltd., the "Limited Partners").
2006, Water Tower Place Limited Partnership (the
“Partnership”) was formed, pursuant to an Amended
and Restated Agreement of Limited Partnership (the
“LPA”), for the general purpose of constructing,
rehabilitating, and operating affordable housing apartment
units to qualify for federal and state low-income housing tax
credits. Water Tower Place is located in Saint Louis,
Missouri, and comprised of 178 residential housing units in
34 buildings. The project was financed by a 2006 issuance of
Multifamily Housing Revenue Bonds that provide the low-income
housing tax credits and Water Tower Place must meet
regulatory provisions through 2020 to remain housing tax
credit qualified. Housing tax credits are contingent on Water
Tower Place maintaining occupant eligibility, and/or unit
gross rent compliance.
NTD I, LLC, is the General Partner of the project
Partnership. Defendant Fund 36 LLC is the Partnership's
Administrative Limited Partner. Fund 36 LTD is the
Partnership's State Limited Partner and Investor Limited
Partner. Plaintiff North Tower Development, LLC (the
“Developer”), managed the construction and
rehabilitation of Water Tower Place, pursuant to a
Development Services Agreement. Plaintiff Paul Weismann is
the sole member and manager of both the General Partner and
the Developer. Plaintiffs Weismann and the Developer
guaranteed performance of the General Partner under the LPA,
pursuant to a Guaranty Agreement. Alliant Asset Management,
Alliant Capital, Alliant Credit Facility, Alliant Credit
Facility ALP, along with the Limited Partners are affiliates
that operate together under the corporate umbrella of the
Alliant Company (collectively, “Alliant”).
Duties and Obligations of the Parties
the LPA, the General Partner is responsible for overall
management and control of the Partnership business. The
General Partner is entitled to one one-hundredth of a percent
(0.01%) of the Federal housing tax credits. The General
Partner is obligated to make operating loans to the
Partnership as needed to fund operating deficits. The General
Partner's obligation to fund operating deficits expires
and is discharged on the “Sunset Date.” According
to the LPA, the Sunset Date occurs thirty-six months after
the date on which Water Tower Place attains a benchmark
entitled “Rental Achievement.” Weismann is
responsible for the management and control of the General
Partner and the Developer. Weismann's obligation to fund
Operating Deficits, as surety of the General Partner or
otherwise, expires and is discharged on the “Sunset
pursuant to the LPA, the Administrative Limited Partner's
duties include receiving and approving certain Partnership
reporting, giving its consents and/or approvals on various
Partnership decisions, and exercising discretion as to
certain LPA matters. The Administrative Limited Partner is
entitled to one one-hundredth of a percent (0.01%) of the
housing tax credits. The State Limited Partner's role is
to receive one hundred percent (100%) of the state housing
tax credits. The Investor Limited Partners role is to receive
ninety-nine and ninety-seven one hundredths percent (99.97%)
of the federal housing tax credits, as well as ninety-nine
and ninety-six one hundredths percent (99.96%) of all losses.
return, the State Limited Partner and the Investor Limited
Partner are obligated under the LPA to make capital
contributions to the Partnership upon the satisfaction of
defined conditions. One such benchmark is the “Rental
Achievement Test.” Under the LPA, the Rental
Achievement Test is: "the satisfaction of a level of
Occupancy sustained for a period of three (3) consecutive
months with actual rent levels and operating expenses which
produce a Debt Service Coverage Ratio of 1.15 to 1.00 with
respect to all projected permanent financing for each of such
three (3) consecutive months." As noted above, 36 months
after the date on which Water Tower Place attains Rental
Achievement, certain obligations of the General Partner and
Weismann (as surety of the General Partner) are discharged.
4.2 of the LPA states the General Partner was to attain
Rental Achievement by December 1, 2008. The General Partner
was five years late in meeting this deadline. Under the LPA,
failure to attain Rental Achievement by December 1, 2008,
provides a basis for rescission of the agreement. Neither the
Limited Partners nor Alliant have yet attempted to rescind
the contract. The Limited Partners have not paid $1, 015,
765.00 in capital contributions set forth under the LPA.
August 1, 2016, Plaintiffs filed their complaint. The claims
asserted by Plaintiffs are: Count I, for declaratory judgment
reducing the Limited Partners' interests to zero; Count
II, for declaratory judgment excusing Weismann from surety
obligations; Count III, for breach of contract to recover the
Limited Partners' Capital Contributions; Count IV,
excusing Weismann from surety obligations due to the Limited
Partners' contract breach; Count V, for damages for the
Limited Partners' breach of the implied covenant of good
faith and fair dealing; Count VI, for damages for
Defendants' tortious interference with, and their
inducement of a contract breach; Count VII, for equitable
contribution and restitution to Weismann; and Count VIII, for
punitive damages. Defendants moved for an Order pursuant to
Fed.R.Civ.P. 12(b)(6) dismissing those claims, and striking
Plaintiffs' jury demand. [ECF No. 17 and 18]. Both
parties requested oral argument related to Defendants'
Motion to Dismiss. A hearing was held on December 14, 2016.
Court accepts as true the following well-pleaded facts
alleged in Plaintiffs' complaint. By December 31, 2015
the General Partner had made operating loans totaling $2,
439, 283.00 to keep Water Tower Place in compliance and
generate housing tax credits. Pursuant to the Guaranty,
Weismann funded these operating deficits through the General
Partner, in performance of his surety obligation.
Weismann's obligation to fund operating deficits as
surety of the General Partner is limited to $500, 000.00. The
Limited Partners, and by extension, Alliant, have received
more than twelve million in benefits from Water Tower
Place--over $8 million in housing tax credits, and over $4.4
million of losses.
the satisfaction of certain conditions and the Rental
Achievement Test, the Limited Partners were obligated to pay
capital contributions to the Partnership. Even though Rental
Achievement was delayed for five years, the General Partner
cured its failure and Rental Achievement was attained on
December 31, 2013. The Limited Partners never declared any
breach of the LPA for delayed Rental Achievement. Although
all conditions were satisfied on December 31, 2013, to
trigger the Limited Partners' capital contributions, and
the Partnership gave notice to the Limited Partners and
Alliant, the Limited Partners did not make the required
contribution. The Limited Partners' decision was in
actuality made by Alliant management. As an excuse for the
Limited Partners' failure to contribute, Alliant disputed
that Water Tower Place had attained Rental Achievement.
Alliant's challenge was unsupported and designed to delay
or avoid payment of the capital contributions.
the Limited Partners funded only $5 million of their $6.2
million in capital contributions, they now owe at least $1,
015, 765.00 in capital contributions. Since October 1, 2007,
the Developer has been entitled to a $1, 250, 000 development
fee, pursuant to the Development Services Agreement.
FRCP 12(b)(6), a party may move to dismiss a claim for
“failure to state a claim upon which relief can be
granted.” The notice pleading standard of FRCP 8(a)(2)
requires a plaintiff to give “a short and plain
statement showing that the pleader is entitled to
relief.” To meet this standard and to survive a FRCP
12(b)(6) motion to dismiss, “a complaint must contain
sufficient factual matter, accepted as true, to state a claim
to relief that is plausible on its face.” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotations
and citation omitted). This requirement of facial
plausibility means the factual content of the plaintiff's
allegations must “allow the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.” Cole v. Homier Distrib.
Co., 599 F.3d 856, 861 (8th Cir. 2010) (quoting
Iqbal, 556 U.S. at 678). Courts must assess the
plausibility of a given claim with reference to the
plaintiff's allegations as a whole, not in terms of the
plausibility of each individual allegation. Zoltek Corp.
v. Structural Polymer Group, 592 F.3d 893, 896 n.4 (8th
Cir. 2010) (internal citation omitted). This inquiry is
“a context-specific task that requires the reviewing
court to draw on its judicial experience and common
sense.” Iqbal, 556 U.S. at 679. The Court must
grant all reasonable inferences in favor of the nonmoving
party. Lustgraaf v. Behrens, 619 F.3d 867, 872-73
(8th Cir. 2010).
a complaint attacked by a [FRCP] 12(b)(6) motion to dismiss
does not need detailed factual allegations, a plaintiff's
obligation to provide the ‘grounds' of his
‘entitlement to relief' requires more than labels
and conclusions, and a formulaic recitation of the elements
of a cause of action will not do.” Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal
alterations and citations omitted); see also Iqbal,
556 U.S. at 679 (“[W]here the well-pleaded facts do not
permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged - but it has not
‘shown' - ‘that the pleader is entitled to
relief.'”) (quoting Fed.R.Civ.P. 8(a)(2)).
Nevertheless, although the “plausibility standard
requires a plaintiff to show at the pleading stage that
success on the merits is more than a sheer possibility,
” it is not a “probability requirement.”
Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594
(8th Cir. 2009) (citing Iqbal, 556 U.S. 678). As
such, “a well-pleaded complaint may proceed even if it
strikes a savvy judge that actual proof of the facts alleged
is improbable, and that a recovery is very remote and
unlikely, ” Id. (quoting Twombly, 550
U.S. at 556) (internal quotations omitted), provided that the
complaint contains sufficient facts to “give the
defendant fair notice of what the . . . claim is and the
grounds upon which it rests.” Erickson v.
Pardus, 551 U.S. 89, 93 (2007) (quoting
Twombly, 550 U.S. at 555) (internal quotations
contend Plaintiffs have failed to state a claim upon which
relief can be granted and the case should be dismissed.
Defendants set forth several arguments in support of their
Motion; they will be addressed individually below.
Claims III and V are precluded because the General Partner
was the first to breach the LPA.
their complaint, Plaintiffs allege Defendants failed to make
over $1, 000, 000 in capital contributions to the Partnership
in breach of the LPA. Plaintiffs seek to recover the Limited
Partners' capital contributions in Count III. Plaintiffs
also seek damages for the Limited ...