PNC Bank NA et al v. 2013 Travis Oak Creek GP LLC et al

REPLY to Response to Motion

W.D. Tex.July 19, 2018

2013 Travis Oak Creek, GP, LLC’s Reply In Support of its Motion for Leave to File Third-Party Complaint Page 1 of 6 2761638.1 UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION PNC BANK, N.A. and COLUMBIA HOUSING SLP CORPORATION, as partners in 2013 Travis Oak Creek LP, and 2013 TRAVIS OAK CREEK, LP Plaintiffs, v. 2013 TRAVIS OAK CREEK GP, LLC, 2013 TRAVIS OAK CREEK DEVELOPER, INC., CHULA INVESTMENTS, LTD., and RENE O. CAMPOS Defendants. § § § § § § § § § § § § § § § Civil Action No. 1:17-cv-00584-RP 2013 TRAVIS OAK CREEK GP, LLC and 2013 TRAVIS OAK CREEK, LP, Plaintiffs, v. PNC BANK, N.A. and COLUMBIA HOUSING SLP CORPORATION Defendants. § § § § § § § § § § § § Consolidated with Case No. 1:17-CV-00560-RP 2013 TRAVIS OAK CREEK, GP, LLC’S REPLY IN SUPPORT OF ITS MOTION FOR LEAVE TO FILE THIRD-PARTY COMPLAINT Defendant and Third-Party Plaintiff 2013 Travis Oak Creek GP, LLC (“GP”) files this Reply to Plaintiff’s’ Response In Opposition to Motion for Leave to File Third-Party Complaint [Doc 147], and in support of its Motion for Leave to File Third-Party Complaint (“GP’s Motion for Leave”) [Doc 140]. Case 1:17-cv-00584-RP Document 151 Filed 07/19/18 Page 1 of 6 2013 Travis Oak Creek, GP, LLC’s Reply In Support of its Motion for Leave to File Third-Party Complaint Page 2 of 6 2761638.1 I. SUMMARY OF ARGUMENT 1. Plaintiffs PNC Bank, N.A. (“PNC Bank”) and Columbia Housing SLP Corporation (“Columbia”), and Travis Oak Creek LP’s (the “Partnership” and collectively “Plaintiffs”) Response in Opposition to Motion for Leave to File Third-Party Complaint (the “Opposition”) does not deny, and therefore concedes, that the proposed third party defendant PNC Capital Markets, LLC (“PNC Capital Markets”) took the actions GP alleged in its Motion and Third Party Complaint: (a) PNC Capital Markets played an active role in PNC Bank’s termination of the Forward Commitment; (b) PNC Bank’s pre-termination claim for penalties against GP was for the benefit of PNC Capital Markets; and (c) a contract between PNC Bank and PNC Capital Markets required PNC Bank to demand GP (not the Partnership, but GP) pay in excess of $7 million non-delivery fee. The Opposition equally does not deny that such actions interfered with the Partnership Agreement, negatively affected GP, and caused liability to GP, not to the Partnership. 2. The Opposition does not deny that one of the GP’s failures to comply with of the Partnership Agreement was the termination of the Forward Commitment. Indeed, ¶ 24 of Plaintiffs’ proposed Second Amended Complaint alleges that “... GP’s failure to comply with its duties and obligations under the Partnership Agreement has resulted in numerous Events of Default. These include the failure to satisfy the following provisions of the Partnership Agreement: … (ii) … allowing multiple events to occur … including … (ii)b. ... [d]efault under and termination of the Forward Commitment....” 3. Based on the concession of the PNC Capital Market actions taken that directly affected GP, coupled with Plaintiffs’ allegations that the default was based on GP’s failure to Case 1:17-cv-00584-RP Document 151 Filed 07/19/18 Page 2 of 6 2013 Travis Oak Creek, GP, LLC’s Reply In Support of its Motion for Leave to File Third-Party Complaint Page 3 of 6 2761638.1 comply with its duties and obligations, the argument that GP does not have standing to bring the claims it asserts is misplaced. 4. The Court should grant GP’s Motion for Leave to join PNC Capital Markets as a party and assert claims against it for (a) tortious interference with contract and prospective relations, (b) aiding, abetting, assisting and encouraging breach of fiduciary duty by current parties PNC Bank and Columbia, ( c) aiding, abetting, assisting and encouraging fraud by current parties PNC Bank and Columbia, and (d) engaging in an actionable conspiracy with current parties PNC Bank and Columbia. II. ARGUMENTS AND AUTHORITIES A. The legal standard for joining a third party under Rule 14. 5. The Opposition does not dispute the legal standard for joining a third party set forth in the Motion for Leave. The causes of action alleged in the Third-Party Complaint against PNC Capital Markets fall squarely within the purview of Rule 14. The factors set forth in GP’s cited cases weigh in favor of granting GP’s Motion for Leave. The joinder of PNC Capital Markets and claims against it are timely, and within the confines of the scheduling order in this case. Further, the addition of PNC Capital Markets will not prejudice any other parties to this case nor will it complicate the trial issues. Rather, the joinder of PNC Capital Markets to this lawsuit furthers the goals of judicial economy and eliminates potentially duplicative satellite litigation. B. The tortious interference with contract and prospective relations are valid. 6. The Opposition mischaracterizes the tortious interference with contract and prospective relations claims, both of which are valid. The third party complaint is against PNC Markets, not PNC Bank, and the cases cited in the Opposition are therefore not controlling. GP Case 1:17-cv-00584-RP Document 151 Filed 07/19/18 Page 3 of 6 2013 Travis Oak Creek, GP, LLC’s Reply In Support of its Motion for Leave to File Third-Party Complaint Page 4 of 6 2761638.1 is a party to that certain Partnership Agreement and PNC Capital Markets tortiously interfered with such agreement when PNC Capital Markets’ actions resulted in Plaintiffs’ claiming GP failed to comply with the Partnership Agreement. Unlike the contract obligor in AKB Hendrick, LP v. Musgrave Enters., Inc., 380 S.W.3d 221, 236 (Tex. App. – Dallas 2012, no pet.), PNC Capital Markets had no right to interfere with the Partnership Agreement. One of the ways that GP allegedly failed to comply was based on the default and termination of the Forward Commitment Agreement. PNC Capital Market’s actions of interference ultimately inferred with the Partnership Agreement, and the interference claim is therefore valid. C. Aiding and Abetting Claims are Valid. 7. The Opposition concedes that PNC Bank and Columbia owed a fiduciary duty to the Partnership based on their ability to control the Partnership’s actions. PNC Bank and Columbia owed the same duties to GP (as well as to the other limited partners). Texas law recognizes obligations between limited partners, applying the same partnership principles that govern the relationship between a general partner and limited partners. Making no distinction between the fiduciary duties of general and limited partners, the Texas Supreme Court has stated that “[f]iduciary duties arise as a matter of law in certain formal relationships, including attorney-client, partnership, and trustee relationships.” Ins. Co. of No. Am. v. Morris, 981 S.W.2d 667, 674 (Tex. 1998) (emphasis added) (evaluating claims involving limited partnerships). More specifically, in determining the liability of partners, Texas courts have applied the general principles of partnership noting that partners have a duty to one another to make full disclosure of all matters affecting the partnership and to account for all partnership profits and property. McBeth v. Carpenter, 565 F.3d 171, 177–78 (5th Cir. 2009). Texas further recognizes damage awards for breach of fiduciary duties owed by limited partners. See Case 1:17-cv-00584-RP Document 151 Filed 07/19/18 Page 4 of 6 2013 Travis Oak Creek, GP, LLC’s Reply In Support of its Motion for Leave to File Third-Party Complaint Page 5 of 6 2761638.1 Dunnagan v. Watson, 204 S.W.3d 30, 46–47 (Tex. App. 2006) (affirming judgment awarding damages to limited partnership based on limited partner’s breach of fiduciary duty). 8. Under Texas law, PNC Bank and Columbia owed the same fiduciary duties to the GP and therefore a claim for aiding and abetting such breach must stand. Likewise, fraud was committed on the GP both as a general partner and well as an entity. The misrepresentations made by PNC Markets to the GP as an entity were made to induce GP to act in such a manner that would allow PNC Bank and Columbia to allege defaults under the Partnership Agreement. PNC Markets cleverly alleges that the misrepresentations were made only to the GP in its capacity as a general partner, which is false. The misrepresentations were made to the GP in order to result in the GP’s removal as the general partner. GP’s Motion for Leave should be granted. D. Conspiracy Claim. 9. Because the tort claims are viable, the conspiracy claim can be pled. III. CONCLUSION AND PRAYER 10. Based on the above, the Motion for Leave should be granted. WHEREFORE, PREMISES CONSIDERED, GP asks that the Court grant all its Motion for Leave and enter an order filing the Third Party Complaint. Respectfully submitted, /s/ Millicent Lundburg Kenneth B. Chaiken State Bar No. 04057800 kchaiken@chaikenlaw.com CHAIKEN & CHAIKEN, P.C. Legacy Town Center III 5801 Tennyson Parkway Plano, Texas 75024 (214) 265-0250 telephone (214) 265-1537 facsimile Case 1:17-cv-00584-RP Document 151 Filed 07/19/18 Page 5 of 6 2013 Travis Oak Creek, GP, LLC’s Reply In Support of its Motion for Leave to File Third-Party Complaint Page 6 of 6 2761638.1 William S. Rhea State Bar No. 16807100 brhea@dbcllp.com Millicent Lundburg State Bar No. 24042737 mlundburg@dbcllp.com DuBOIS, BRYANT & CAMPBELL, LLP 303 Colorado Street, Suite 2300 Austin, TX 78701 (512) 457-8000 (512) 457-8008 (Facsimile) Karl S. Stern State Bar No. 19175665 karlstern@quinnemanuel.com QUINN EMANUEL URQUHART & SULLIVAN, LLP 711 Louisiana Street, Suite 500 Houston, Texas 77002 (713) 221-7000 (713) 221-7100 (Facsimile) ATTORNEYS FOR DEFENDANTS 2013 TRAVIS OAK CREEK GP, LLC, 2013 TRAVIS OAK CREEK DEVELOPER, INC., CHULA INVESTMENTS, LTD., AND RENE O. CAMPOS CERTIFICATE OF SERVICE I hereby certify that the foregoing document was served on all counsel of record via the Court’s electronic filing system on this 19th day of July, 2018. /s/ Millicent Lundburg Millicent Lundburg Case 1:17-cv-00584-RP Document 151 Filed 07/19/18 Page 6 of 6