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Boston Post Partners II LLP v. Paskett

United States District Court, D. Arizona

August 28, 2017

Boston Post Partners II LLP, Plaintiff,
v.
Michael Paskett, Todd Hines, FTW LLC, Cascade Land Holdings LLC, and Venture Group Unlimited LLC, Defendants.

          ORDER

          DOUGLAS L. RAYES UNITED STATES DISTRICT JUDGE

         This case arises out of the sale of farmland located in Maricopa County, Arizona (“Property”) and the convoluted efforts to raise capital for that purchase. At issue is Defendants' Motion for Summary Judgment, which is fully briefed. (Docs. 123, 131, 138.) For the following reasons, the motion is granted in part and denied in part.[1]

         I. The Parties

         Plaintiff is Boston Post Partners II LLP (“BPP”). Herberden Ryan is the principal of BPP, and Timothy Kulka is a partner. Neither is a party to this action.

         Former Defendants Nopal Cactus Farms LLC (“Nopal”) and Golden Sands Partnership (“Golden Sands”) owned the Property during the relevant time period. Former Defendant Charles Newman is the principal of Nopal and Golden Sands. The Court will refer to these parties collectively as “Sellers” for purposes of this order. BPP and Sellers settled the claims between them on August 16, 2017. (Doc. 146.)

         Defendant Michael Paskett is the principal of Defendant Venture Group Unlimited LLC (“Venture Group”).

         Defendant Todd Hines is the principal of Defendant Cascade Land Holdings, LLC (“Cascade”).

         Venture Group and non-parties Douglas Larsen, Northwest Gypsum LLC (“Northwest”), and Venture Capital Group, Inc. (“Venture Capital”) are members of non-party GSJV, LLC, an Arizona limited liability company. Non-party John Boley is GSJV's statutory agent.

         Cascade, Venture Group, and non-party Stahl Hutterian Brethren (“SHB”) are each members of Defendant FTW, LLC, an Arizona limited liability company. Non-party John Stahl is the president of SHB.

         II. Factual Background[2]

         Paskett, Hines, Ryan, and Kulka had a working relationship throughout 2014. During that time, Paskett worked as a consultant for one of Hines' companies, and he and Hines worked with Ryan and Kulka on a separate transaction. Paskett also talked to Ryan and Kulka about plans to purchase the Property. Though Paskett stopped working for Hines in January 2015, he cannot recall whether he informed Ryan and Kulka of this separation.

         On February 13, 2015, Paskett organized GSJV. That same day, GSJV entered into an agreement with Sellers to purchase the Property for over $10 million (“GSJV Contract”). GSJV was required to make an initial deposit of $500, 000 toward the purchase price. Of that, Paskett paid $150, 000 in the form of a credit from Sellers, another party paid $50, 000, and Hines-though not identified as a member of GSJV- paid $300, 000. The GSJV Contract had a closing deadline of March 31, 2015.

         During the following week, Paskett and Hines communicated with Ryan and Kulka via text message about BPP's involvement in the purchase of the Property and a potential equity sharing arrangement. These negotiations culminated and were memorialized in a February 24, 2015 agreement under which, in exchange for an equal share in the equity compensation received from the Property, BPP agreed to identify and source third-party capital, on an exclusive basis, to fund the purchase and development of the Property (“Letter Agreement”). The Letter Agreement was to expire 75 days after execution (May 10, 2015), unless the parties agreed in writing to extend the term or the closing date of the GSJV Contract was extended.

         Thereafter, BPP worked to raise capital to fund the purchase. BPP solicited investors to raise between $25 and $28 million, and several investors were willing to proceed if given sufficient time for due diligence. On March 10, 2015, BPP asked Sellers for a 90-day due diligence extension for potential third-party capital investors, but this request was not granted. On April 1, 2015, Sellers cancelled the GSJV Contract for lack of funding.

         All parties nonetheless continued negotiations after the cancellation of the GSJV Contract. On April 7, 2015, BPP, Paskett, and Sellers met to again discuss a possible 90-day due diligence extension. BPP offered Sellers a 5% equity interest in the Property in exchange for an extension. The parties failed, however, to reach an agreement at the meeting. On April 13, 2015, BPP sent Sellers an email renewing its request for a 90-day extension. BPP also sent the email to Paskett. Although no agreement was reached, Paskett responded approvingly to BPP's proposal. Paskett also alluded to a possible alternative purchasing arrangement involving Stahl. Paskett assured BPP that he would close the transaction and that the parties could then “run down the road together without worry.” Paskett continued to make similar representations to BPP in the following weeks.

         On April 13, 2015, however, Paskett organized FTW, which then contracted with Sellers on April 20, 2015 to purchase the Property (“FTW Contract”). The FTW Contract had the same sale price as the GSJV Contract, but required a $1.5 million payment at closing. Of this, Stahl paid $1 million and GSJV's deposit was credited toward the remaining $500, 000.

         Paskett represented to BPP that SHB was making a bridge loan through FTW, and that it could be bought out for recovery of its investment plus a reasonable return. Unbeknownst to BPP, however, Paskett's discussions with Stahl contemplated that he would be a long-term investor in the Property. When the FTW Contract closed on May 1, 2015, none of the governing documents included a provision for BPP to purchase SHB's interest or otherwise invest in the Property.

         In November 2015, BPP initiated this action in the District of Massachusetts. The initial complaint and first amended complaints allege claims against Paskett, Hines, Newman, Nopal, and Golden Sands, only. In addition to damages, BPP demanded that a constructive trust be created “over the assets of BPP held by Defendants.” (Doc. 1 at 20; Doc. 7 at 20; Doc. 79 at 19.) To that end, in January 2016 BPP recorded Notice of Lis Pendens against the Property, which at the time was owned by FTW, with the Maricopa County Recorder.

         In April 2016, the Massachusetts court transferred the case to this Court. Several months later, Nopal and Golden Sands noticed a Trustee's Sale of the Property on the basis that BPP's recordation of the lis pendens breached the deed of trust encumbering the Property. FTW obtained a preliminary injunction enjoining the trustee's sale from the Maricopa County Superior Court, and that state court action remains ongoing. After FTW became involved ...


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