United States District Court, D. Arizona
DOUGLAS L. RAYES UNITED STATES DISTRICT JUDGE
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
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.
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.
Michael Paskett is the principal of Defendant Venture Group
Unlimited LLC (“Venture Group”).
Todd Hines is the principal of Defendant Cascade Land
Holdings, LLC (“Cascade”).
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.
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.
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
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.
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.
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.
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.
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
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.
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.
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 ...