Columbia Plaza Associates, et al. v. Northeastern University (Lawyers Weekly No. 12-175-16)
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
COLUMBIA PLAZA ASSOCIATES, et al.
FINDINGS OF FACT, RULINGS OF LAW
AND ORDER OF JUDGMENT
This case arises from a series of agreements between the defendant Northeastern University (Northeastern) and the plaintiff Columbia Plaza Associates (CPA), a minority owned general partnership. The agreements related to the development of land known as Parcel 18 adjacent to Northeastern’s main campus. Northeastern owned the parcel, and plaintiffs held certain development rights. Plaintiffs allege that that Northeastern reaped unbargained for benefits in developing the parcel without adequately compensating them, and also convinced the Boston Redevelopment Authority (BRA) to approve plans needed to allow that development by misrepresenting to the BRA that it had the plaintiffs’ participation. This matter came before the Court in October 2016 for jury-waived trial on the sole remaining count of the Verified Complaint, Count VII, alleging a violation of Chapter 93A. This Court concludes that judgment should enter for the defendant.
FINDINGS OF FACT1
Parcel 18 is located in the Roxbury neighborhood of Boston next to Northeastern’s main campus. It consists of five sub parcels: 18-1A, 18-1B, 18-2, 18-3A and 18-3B. The BRA designated Parcel 18 as a Planned Development Area (PDA), specifically PDA 34. A PDA is a zoning overlay district and is one of the tools used by the BRA to impose certain controls on commercial development. Those tools include Cooperation Agreements, Sales and Construction Agreements, Master Plans and Development Plans.
In June 1989, the BRA adopted a Master Plan and a Development Plan for Parcel 18. The Master Plan provided for the development of multiple buildings on four of the sub parcels, 18-1A, 18-1B, 18-3A, and 18-3B (collectively the “Development Parcels”). The remaining sub parcel, 18-2, was to be the site of a parking garage (the “Garage Parcel”). At the time, Parcel 18 was owned by various government entities, although Northeastern would ultimately become the owner of all of Parcel 18.
CPA was formed for the purpose of participating in Boston’s “linkage plan,” a program created to promote development in areas of Boston in need of revitalization by linking together a commercial developer with a minority partner. CPA held certain development rights on Parcel 18. The commercial developer with whom CPA was paired was Metropolitan Structures, an Illinois-based general partnership.
From its inception until December 2008, CPA had two general partners: plaintiff Ruggles-Bedford Associates Limited Partnership, (Ruggles-Bedford LP) comprised primarily of
1 In ruling on a motion for summary judgment in this case, another Superior Court judge outlined in the “Background” section of his decision certain facts contained in the summary judgment record, with all inferences drawn in favor of the non-movant, CPA. Many of those same facts are set forth herein. To the extent that those facts differ from those contained in the earlier opinion, this Court’s findings are controlling.
investors from the Roxbury neighborhood; and Chinese Investment Limited Partnership (Chinese Investment LP) which consisted of investors from Boston’s Chinese community. Ruggles Bedford LP held a sixty percent interest in CPA, whereas Chinese Investment LP held a forty percent interest. Ruggles Bedford LP had 25 limited partners and one general partner, plaintiff Ruggles Bedford Associates Inc. (Ruggles Bedford, Inc.) The fourth plaintiff in this case is Columbia Ruggles Associates (CRA), a limited liability corporation created by CPA to participate in the development of the parking garage. 2 In 2008, Ruggles Bedford LP bought out Chinese Investment LP’s interest.
The identity of those who held positions in CPA or purported to act on its behalf is important to the resolution of many of the issues in this case. Chief among them was Kenneth Guscott, a businessman who was the chairman of Ruggles Bedford LP. William Chin served as CPA’s legal counsel; Robert Gunderson, a Boston attorney, also provided legal advice to CPA. CPA’s President was John Cruz, the founder of a company that develops real estate and oversees constructions projects. Beginning in 1994 or 1995, Kevin Cohee, Chief Executive Officer of One United Bank, served as CPA’s treasurer. Up until 2007, Northeastern dealt exclusively with Guscott, Chin, and Gunderson from the Ruggles Bedford wing of CPA; neither Cruz nor Cohee had any communications with Northeastern before then. Paul Chan, the treasurer of Chinese Investment LP, acted on behalf of that group and was also in regular communication with Northeastern until it was bought out by the Ruggles Bedford group.
In 1991, CPA and Metropolitan Structures formed the Ruggles Center Joint Venture for the purpose of building on the Development Parcels. Guscott, Chin and Chan represented CPA in connection with that joint venture. An office building was constructed on sub parcel 18-1B
2 Because the interests of these four plaintiffs are essentially identical, the Court will refer to them collectively simply as CPA.
which briefly became the home for the Registry of Motor Vehicles. Sometime in the mid-1990s, the building was condemned, and the bank that had financed the construction foreclosed on the property, acquiring all four Development Parcels. In November 1997, Northeastern acquired the Development Parcels from the entity that had held title to them following the foreclosure.
Around that same time, Northeastern entered into discussions with CPA and the BRA about developing Parcel 18. Guscott and Chan represented CPA in these discussions. On November 12, 1997, both Guscott and Chan, on behalf of CPA, signed a Letter of Intent with Northeastern setting forth a framework for an agreement among the parties regarding that development. In late June 1999, Northeastern, CPA and the BRA (whose approval was needed for any development) formally entered into the arrangement contemplated by that Letter of Intent. The arrangement was memorialized in several contemporaneous agreements.
Three of those agreements related to acquisition and development of the Garage Parcel and are not directly relevant to the issues presented at trial. A fourth agreement dated June 29, 1999 (the Master Agreement) set forth the obligations of the parties with respect to both the Garage Parcel and future development on the Development Parcels. See Trial Exhibit 1. A fifth agreement (the Cooperation Agreement) documented the parties’ plan to develop the Garage Parcel and further stated that “Northeastern, individually and/or in partnership with CPA” planned to develop the remaining parcels. See Trial Exhibit 15. CPA was represented in the negotiation of these agreements by two attorneys, Chin and Gunderson. The agreements were all signed by Guscott and Chan on behalf of CPA and were approved by CPA’s board of directors.
Together, these agreements provided the following. Northeastern and CPA would form a limited liability company, Renaissance Park Garage LLC (the Garage LLC), with Northeastern
as its manager. Northeastern would make an initial contribution of $ 380,000 to the Garage LLC, which funds would be used to acquire Parcel 18-2 (the Garage Parcel) from the BRA after the BRA acquired the parcel from the MBTA. Northeastern would pay CPA $ 320,000 in cash in return for what the Master Agreement described as CPA’s “Personal Property.” That was defined to include “Garage Plans” and certain “Intangible Property” consisting of “all contract rights, licenses, permits and warranties” related to Parcel 18-2. Northeastern would make an additional payment of $ 100,000 as CPA’s capital contribution toward any joint venture formed between Northeastern and CPA to develop a building on Parcel 18-3A. Section 6.3 of the Master Agreement describes that contemplated joint venture and lies at the heart of the dispute now before the Court.
Significantly, neither Section 6.3 nor any other provision in the Master Agreement actually created a joint venture, nor did the Master Agreement require that either party actually enter into one. It did require that the parties work “diligently and in good faith” to negotiate terms “mutually satisfactory to both parties.” See Section 6.3.1 of Master Agreement. The Master Agreement also set forth a list of issues that any joint venture agreement should include. See Section 6.3.3 of Master Agreement. For example, although it was contemplated that Parcel 18-3A would be developed as a hotel or office building, the joint venture could decide to develop it for the “institutional purposes” of Northeastern, provided that Northeastern pay the joint venture the fair rental value of the building. Negotiations regarding the terms of any joint venture agreement was to commence within six months of the Closing Date on the Master Agreement, although that date could be extended by either party. Finally, the Master Agreement provided that Section 6.3 was to survive the Closing “until full execution of the Joint Venture
Agreement.” Any notices to CPA in relation to the Master Agreement were to be sent to Chin, CPA’s legal counsel.
As it turned out, no joint venture agreement was ever entered into among the parties. Indeed, neither Northeastern nor CPA submitted a draft proposal for such an arrangement. Over the next six years, however, Northeastern did explore the possibility of developing a hotel on Parcel 18-3A, even hiring an outside development firm, Newcastle, to look into its economic feasibility. Northeastern directed Newcastle to work with CPA as a partner in that development. Both Newcastle and Mel Shuman, outside counsel for Northeastern, discussed these plans with Guscott and Chin of CPA. Gunderson, CPA’s outside legal counsel, was also included in these discussions.
Around this same time period (1999-2005), there was growing concern in the surrounding community regarding Northeastern’s use of private housing to meet its institutional needs. In response to those concerns, discussions among the parties shifted away from using Parcel 18-3A as the site for a hotel and using it instead for a dormitory, with the hotel to be built on Parcel 18-1A instead. Northeastern consulted with various community groups, state legislators and city councilors as well as the BRA, whose approval was required for any change in plans. Northeastern also spearheaded the formation of a Community Task Force to broaden its outreach. Ultimately, the consensus in the community was that more dormitories were needed and that Parcel 18-1A was a better site for a hotel than Parcel 18-3A because it had greater visibility, bordering as it did on Melnea Cass Boulevard.
Guscott and Chin were not only aware of these public meetings but had numerous discussions with Vincent Lembo, Northeastern’s legal counsel, about the possibility of moving the hotel to Parcel 18-1A; there is no evidence that either of them expressed any reservations
about it. As late as August 2006, however, Northeastern was still exploring the possibility of building a hotel on Parcel 18-3A as originally contemplated. Newcastle drew up a letter outlining the basic terms of such an arrangement, which would have included CPA, and Newcastle representatives came to Boston to meet with both Gunderson and Chin, but no agreement could be reached as to the financial terms of CPA’s participation. At no time did Northeastern suggest that it would not participate with CPA in the development of a hotel; indeed, it was quite the opposite.
Ultimately Northeastern, in consultation with both Gunderson and Chin, decided to proceed with the proposal to use Parcel 18-3A for a dormitory and to place any hotel that would be constructed on Parcel 18-1A. To do that, however, it had to seek an amendment to the Master Plan and the Development Plan and to the related Cooperation Agreement for PDA 34. It also had to seek an amendment to its Institutional Plan or IMP. Both Guscott and Chin of CPA were fully informed as to the amendments that Northeastern was proposing.
These amendments required the approval of the BRA and the Zoning Commission. Before that could be obtained, Northeastern had to participate in an extensive public hearing process. Between December 2005 and December 2006, more than 40 public meetings were held, some of which were the subject of newspaper articles. In the summer of 2006, the BRA placed a public notice of Northeastern’s proposal to amend its IMP in local newspapers and invited public comment. On January 11, 2007, the BRA formally approved the Amended and Restated Development Plan so as to permit construction of a hotel on Parcel 18-1A. That Plan made it clear that Northeastern would construct that a building on that parcel “in partnership” with CPA, expressly identified in that document as the “Developer” together with Northeastern. At the same time, the BRA approved Northeastern’s application to add Parcels 18-3A and 18-3B to its
Institutional Plan. On October 2, 2007, the BRA approved an amendment to the Cooperation Agreement for PDA 34. That document confirmed that, as a result of the removal of Parcels 18-3A and 18-3B from the PDA, “CPA is neither an owner [n]nor a developer nor has a beneficial interest as owner or developer of any portion of the removed parcels.”
Northeastern continued to have sporadic communications with CPA (specifically Gunderson) about CPA’s participation in a hotel development into the fall of 2007. At some point thereafter, however, Lembo of Northeastern was informed that Cruz was taking over a representative role. Up until then, no one at Northeastern had had any dealings with either Cruz or Cohee.
On March 26, 2008, Lembo sent a letter to Cruz stating that he had recently learned that Cruz was taking a leadership position in CPA and that he looked forward to working with him “as we continue the long term partnership between CPA and Northeastern University.” He also noted in the letter, however, that several months had passed without any contact with CPA and that, if the project to develop the hotel was to go forward, it was important they get together “at the earliest possible moment.” Cruz responded in a letter dated April 2, 1008 in which he remarked that “there have been so many meetings and interactions concerning these two land holdings that I have difficulty keeping them orderly in my mind.” He stated that he understood that CPA had certain agreements with Northeastern concerning Parcel 18 and that members of CPA intended to review the “appropriate documents” in an expeditious fashion so that they could have an “informed dialogue.” Cruz signed the letter as president of Ruggles Bedford Inc. and copied Guscott and Cohee.
Before those letters were exchanged, Cruz was aware that Northeastern had already begun the construction of a dormitory on Parcel 18-3A. He knew this because his business office
was near the site and sometime in 2007, he saw that excavation had begun there. When Cruz noticed this, he realized that Northeastern was constructing a dormitory there and that CPA was not part of that project. Thus, by the time he wrote to Lembo, Cruz by his own admission knew that CPA, to the extent it had any development rights to Parcel 18-3A, was being harmed.
In May 2008, Lembo sent another letter to Cruz, noting that, although Northeastern had worked closely with Chin and Guscott concerning the hotel development, Northeastern had heard nothing from CPA since Cruz’s last communication with Lembo in April. The letter explained that Northeastern had paid for three studies regarding the hotel project and had selected Newcastle as the developer. Newcastle had in turn engaged a design firm and was working to put together financing. Lembo stated that Northeastern’s inability to have any substantive discussion with CPA, however, was placing the project in jeopardy. He received no reply. Lembo sent a third letter on March 18, 2009 describing a time limited opportunity regarding funding for the proposed hotel project but this too went nowhere.
On April 13, 2009, the law firm of Goodwin Procter, on behalf of CPA, sent a Chapter 93A demand letter to Northeastern. The letter complained that Northeastern’s development of the dormitory on Parcel 18-3A without the involvement of CPA violated the parties’ 1999 agreements, specifically Section 6.3.1 of the Master Agreement. The letter also accused Northeastern of falsely representing to the BRA that it was acting in “partnership” with the CPA in order to obtain the necessary BRA approvals for the dormitory project. CPA paid Goodwin Procter for these legal services.
The instant case was filed on July 1, 2013.
CONCLUSIONS OF LAW
Northeastern makes several arguments as to why plaintiffs’ claim fails – either as a matter of law or as a matter of fact. This Court finds that at least two of those arguments support the conclusion that judgment should enter in favor of Northeastern. Although either is dispositive of the case, this Court will discuss both.
A. Plaintiffs have not proved that Northeastern engaged in any unfair or deceptive practice
Count VII alleges a violation of G.L.c. 93A §11, which requires proof, by a preponderance of the evidence, that the defendant, while engaged in the conduct of trade or commerce, committed an unfair or deceptive act or practice. In determining whether an act or practice violates Chapter 93A, courts consider: “(1) whether the practice…is within at least the penumbra of some common-law, statutory or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive or unscrupulous [and] (3) whether it causes substantial injury to consumers (or competitors or other businessmen).” PMP Assoc.’s Inc. v. Globe Newspaper Co., 366 Mass. 593, 596 (1975) (quoting a definition adopted by the Federal Trade Commission). “The objectionable conduct must attain a level of rascality that would raise an eyebrow of someone inured to the rough and tumble of the world of commerce.” Levings v. Forbes & Wallace, Inc. 8 Mass.App.Ct. 498 504 (1979). As to the conduct at issue here, CPA contends that Section 6.3.1 of the Master Agreement compelled Northeastern to act together with CPA in any development of Parcel 18-3A and that Northeastern’s decision to build the dormitory on its own wrongfully deprived CPA of certain valuable development rights. Northeastern accomplished this (it is argued) by not only keeping CPA in the dark as to its intentions but also by falsely representing to the BRA that it remained in a partnership with
the CPA so as to obtain necessary BRA approvals. CPA’s position, however, is simply not supported by the facts as found by this Court.
First, Northeastern kept CPA fully informed about its plans following the execution of the 1999 Agreements right up until the time that it began building the dormitory on Parcel 18-3A. Northeastern representatives were in regular contact with Chan (representing the Chinese investors), Chin and Guscott, all of whom played central roles in representing CPA’s interests in connection with Parcel 18. Plaintiffs’ arguments notwithstanding, all of these individuals had actual authority to represent CPA. Guscott as chairman of Ruggles Bedford LP and Chan as treasurer of Chinese Investment LP (the two general partners in CPA) signed the 1997 Letter of Intent as well as the 1999 agreements on behalf of CPA. The Master Agreement designated Chin, CPA’s legal counsel, as the person to whom any notices had be sent in order to keep CPA informed. In addition to Guscott and Chan, Northeastern also consulted regularly with Gunderson, who acted as CPA’s outside legal counsel.3 When Limbo learned that Cruz was taking on some leadership role at CPA in 2007, he immediately wrote Cruz requesting that they meet to discuss the hotel project, which by that time, with CPA’s full knowledge, had been moved to Parcel 18-1A.
That Northeastern kept CPA fully apprised about Parcel 18 also highlights a second flaw in plaintiffs’ position. CPA claims that it was wrongfully deprived of certain bargained for benefits in connection with Parcel 18-3A. Even assuming that it had such rights, however, this Court concludes that CPA’s complete failure to do anything to exercise those rights or to respond to Northeastern’s invitation to work with it in connection with the construction of a
3 Significantly, none of these individuals were called by the plaintiffs to testify, so that the testimony offered by Northeastern’s witnesses as to their communications with Guscott, Chan, Chin and Gunderson is uncontradicted.
hotel meant that they lost whatever rights they had had. As McCann from the BRA described these development rights, they were not much better than a fishing license: they essentially gave CPA the opportunity to become a developer on a project provided that it met the BRA’s rigorous prerequisites, which included a demonstration that it had a specific and economically feasible development plan. There was no evidence that CPA presented such a plan, much less that it was ready and willing to enter into one with Northeastern. Certainly, Northeastern did not in any way attempt to hinder CPA in exercising those development rights: indeed, it specifically directed Newcastle to work with CPA when it was still exploring the possibility of locating the hotel on Parcel 18-3A. CPA not only failed to take Northeastern up on its invitation but did not offer any proposal of its own to participate in the development. And when Northeastern sought amendments to various plans which had the effect of extinguishing whatever inchoate rights CPA had in connection with Parcel 18-3A, CPA representatives (through Guscott and Chin) were not only aware of those proposed amendments but also, with that knowledge, voiced no objection to anyone, seemingly content with the prospect of still becoming a development partner for a hotel on Parcel 18-1A.
As to the claim that Northeastern misrepresented that it was in partnership with CPA, this too is not supported by the facts. In connection with proposed amendments to the Master Plan that were necessary to allow for construction of a dormitory on Parcel 18-3A, Northeastern stated that both CPA and Northeastern would be the “Developer” for any hotel located on Parcel 18-1A. This was a true statement. Northeastern agrees, even today, that CPA has certain rights in connection with development of that parcel and does not seek any order that would extinguish them.
As to plaintiffs’ assertion that Northeastern’s conduct was in violation of the 1999 Agreements that is not supported by the language of the agreements themselves. The Master Agreement did not compel either party to actually enter into a joint venture agreement if Parcel 18-3A were to be developed. Rather, it required Northeastern to negotiate in good faith in an effort to reach an agreement, placing a time period upon the length of that negotiation, subject to mutually agreed upon extensions. If a joint venture was formed, then Northeastern would make a $ 100,000 payment as a credit toward CPA’s capital contribution. Similarly, if the joint venture that was formed decided to use Parcel 18-3A for a dormitory, then Northeastern was required to pay the joint venture fair rental value of the building. But no joint venture was ever entered into. Therefore, Northeastern had no contractual obligation to pay CPA anything. 4
B. Plaintiffs ‘Claim is Time-Barred
An action arising under Chapter 93A must be filed within four years after the cause of action
accrues. G.L.c. 260 §5A. A cause of action accrues for purposes of the statute of limitations when “the plaintiff knows or reasonably should have known that it sustained appreciable harm” as a result of the defendant’s conduct. Int’l Mobiles Corp. v. Corroon & Black/Fairfield & Ellis, Inc. 29 Mass.App.Ct 215, 217-218 (1990). “Reasonable notice that …a particular act of another person may have been a cause of harm to a plaintiff creates a duty of inquiry and starts the running of the statute of limitations.” Bowen v. Eli Lilly & Co., 408 Mass. 204, 210 (1990). It is not necessary that the plaintiff know the full extent of harm or loss or know precisely in what manner and what harmful after-effects flow from the defendant’s wrongful conduct. Frankston
4 Indeed, another Superior Court judge (Connors, J.) using similar reasoning, already dismissed the breach of contract claims from this case that were based on these allegations. See Memorandum of Decision on Defendants’ Motion to Dismiss, dated January 28, 2014. Their legal viability is no better simply because they have been recast as a 93A violation.
v. Denniston, 74 Mass. App. Ct. 366, 374, rev. den., 455 Mass. 1102 (2009). Appreciable harm encompasses the incurring of legal expenses. Id.
In order for the instant case to fall within the statute of limitations, it must not have “accrued” before July 1, 2009, four years before this case was filed. As this Court’s fact findings make clear, however, CPA knew well before that date about the claim now before the Court. As a result of Northeastern’s discussions with Guscott and Chan in 2005 and 2006, CPA was well aware of Northeastern’s plan to develop a dormitory on Parcel 18-3A without CPA’s involvement. Sometime in the fall of 2007, Cruz saw that excavation for the dormitory was occurring on that site and knew that CPA was not part of that; to the extent that CPA clams it was deprived of valuable development rights, Cruz knew as of that date that CPA had suffered some appreciable harm. It is not necessary that he know the full extent of that harm or that the harm be fully realized in order for the limitations period to begin running.
With regard to proceedings before the BRA, the evidence is uncontradicted that Guscott and Chin were aware of Northeastern’s filings. Indeed, the BRA’s approval of Northeastern’s proposal was preceded by extensive public hearings and a broad public outreach to leaders in the Roxbury community. It strains credulity to believe that CPA members had no knowledge that the topic of discussion at those hearings and meetings was Northeastern’s plan to build a dormitory on Parcel 18-3A, and in connection therewith, to filed amendments to PDA 34 which would extinguish CPA’s rights to that parcel. At the very least, CPA had reason to know. Certainly, plaintiffs had full knowledge of all the details of their claim when Goodwin Procter sent the Chapter 93A demand letter to Northeastern. The date of that letter was April 3, 2009, more than four years before this action was filed.
CONCLUSION AND ORDER
For all the foregoing reasons, it is hereby ORDERED that judgment enter in favor of the defendant Northeastern University and that Count VII, the sole remaining count in this case, be DISMISSED with prejudice.
Janet L. Sanders
Justice of the Superior Court
Dated: December 15, 2016