Wilchfort et al v. Knight et al

Motion to Dismiss for Failure to State a Claim

E.D.N.Y.June 19, 2017

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ____________________________________ ) ) ) ) No. 1:17-cv-01046-MKB-ST ) ) ) ) ) ) ) ) APPLE REIT DEFENDANTS’ MOTION TO DISMISS PLEASE TAKE NOTICE that upon the Apple REIT Defendants’ Memorandum of Law in Support of Their Motion to Dismiss, dated June 19, 2017, and all pleadings and proceedings in this action, Defendants Glade M. Knight, Apple REIT Eight, Inc., Apple Six Advisors, Inc., Apple REIT Seven, Inc., Apple Eight Advisors, Inc., Apple Fund Management, LLC, Apple Hospitality REIT, Inc., Glenn W. Bunting, Kent W. Colton, Lisa B. Kern, Bruce Matson, Michael S. Waters and Robert M. Wiley (the “Apple REIT Defendants,” collectively with BRE Select Hotels Group, the “Defendants”), will move the Court before Judge Margo K. Brodie at the United States District Court for the Eastern District of New York, located at 225 Cadman Plaza East, Brooklyn, New York, 11201 for an order pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure dismissing with prejudice all claims alleged in Plaintiff’s Complaint for failure to state a claim on which relief can be granted and because all of Plaintiff’s claims are untimely, and for such other and further relief as the Court may deem just and proper. MARSHA WILCHFORT, on behalf of herself and all others similarly situated, Plaintiff, v. GLADE M. KNIGHT, et al., Defendants. Case 1:17-cv-01046-MKB-ST Document 26 Filed 06/19/17 Page 1 of 3 PageID #: 129 2 Dated: June 19, 2017 Respectfully Submitted, /s/______________________ Marshall Beil McGUIREWOODS LLP 1345 Avenue of the Americas, 7th Floor New York, NY 10105-0106 Tel.: (212) 548-7004 mbeil@mcguirewoods.com Elizabeth F. Edwards (admitted pro hac vice) Stanley A. Roberts (pro hac vice application forthcoming) McGUIREWOODS LLP Gateway Plaza 800 East Canal St. Richmond, VA 23219 Tel.: (804) 775-1000 eedwards@mcguirewoods.com sroberts@mcguirewoods.com Counsel for the Apple REIT Defendants Case 1:17-cv-01046-MKB-ST Document 26 Filed 06/19/17 Page 2 of 3 PageID #: 130 CERTIFICATE OF SERVICE I certify that on June 19, 2017, I electronically filed the foregoing with the Clerk of this Court using the CM/ECF system, which will send notification of such filing (NEF) to all CM/ECF registered attorneys indicated on the NEF. _________/s/________________________ Elizabeth F. Edwards McGUIREWOODS LLP 901 East Cary Street Richmond, VA 23219-4030 Tel.: (804) 775-4390 Fax: (804) 698-2045 eedwards@mcguirewoods.com Case 1:17-cv-01046-MKB-ST Document 26 Filed 06/19/17 Page 3 of 3 PageID #: 131 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ____________________________________ ) ) ) ) No. 1:17-cv-01046-MKB-ST ) ) ) ) ) ) ) ) APPLE REIT DEFENDANTS’ MEMORANDUM OF LAW IN SUPPORT OF THEIR MOTION TO DISMISS MARSHA WILCHFORT, on behalf of herself and all others similarly situated, Plaintiff, v. GLADE M. KNIGHT, et al., Defendants. Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 1 of 32 PageID #: 132 TABLE OF CONTENTS Page i PRELIMINARY STATEMENT ................................................................................................... 1 FACTS ........................................................................................................................................... 3 ARGUMENT ................................................................................................................................. 5 I. PLAINTIFF FAILS TO ALLEGE THE BREACH OF ANY AGREEMENT CONCERNING THE DRIP AND, THEREFORE, HER BREACH OF CONTRACT CLAIM (COUNT I) SHOULD BE DISMISSED ....................................... 6 II. PLAINTIFF’S TORTIOUS INTERFERENCE CLAIM (COUNT II) FAILS TO STATE A CLAIM AND SHOULD BE DISMISSED .................................................... 11 A. New York Substantive Law Governs Count II .................................................... 12 B. Plaintiff Fails to Allege Any Action of Any Defendant to Intentionally and Improperly Procure a Breach of Any Agreement Concerning the DRIP ............ 13 C. Apple REIT Agents and Affiliates Cannot Tortiously Interfere with the Apple REITs’ Contracts or Business Expectations ............................................. 14 III. COUNT III SHOULD BE DISMISSED BECAUSE VIRGINIA LAW DOES NOT RECOGNIZE AN INDEPENDENT CLAIM FOR BREACH OF IMPLIED DUTY .............................................................................................................................. 15 IV. EVEN IF THEY STATE A CLAIM, PLAINTIFF’S CLAIMS ARE TIME- BARRED ......................................................................................................................... 16 A. Count I (Breach of Contract) is Time-Barred by the Five-Year Statute of Limitations ........................................................................................................... 17 B. Count II (Tortious Interference) is Time-Barred by the Three-Year Statute of Limitations ....................................................................................................... 19 C. Count III (Breach of Implied Duty) is Time-Barred by the Five-Year Statute of Limitations ........................................................................................... 19 D. Plaintiff Fails to Allege Equitable Tolling ........................................................... 20 E. Plaintiff’s Remaining Tolling Allegations are Meritless ..................................... 23 CONCLUSION ............................................................................................................................ 24 Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 2 of 32 PageID #: 133 ii TABLE OF AUTHORITIES Page(s) Cases Aldrich v. Old Point National, 35 Va. Cir. 545 (Va. Cir. Ct. 1993) .........................................................................................15 Allen v. Aetna Cas. & Sur. Co., 281 S.E. 2d 818 (Va. 1981) .......................................................................................................6 Matter of Allstate Ins. Co. (Stolarz-N.J. Mfrs. Ins. Co.), 613 N.E.2d 936 (N.Y. 1993) ...................................................................................................12 Alternative Electrodes, LLC v. Empi, Inc., 597 F. Supp. 2d 322 (E.D.N.Y. 2009) ....................................................................................14 American Pipe & Construction Co., et al. v. Utah, et al., 414 U.S. 538 (1974) ..............................................................................................20, 21, 22, 23 AMS Group LLC v. J.P. Morgan Chase Bank, 371 Fed. App’x 149 (2d Cir. 2010) .........................................................................................19 Andrews v. Orr, 851 F.2d 146 (6th Cir. 1988) ..................................................................................................21 Ashby v. ALM Media, LLC, 973 N.Y.S.2d 109 (N.Y. App. Div. 1st Dep’t 2013) ..............................................................14 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ............................................................................................................5, 14 Basch v. Ground Round, Inc., 139 F.3d 6 (1st Cir. 1998) .......................................................................................................21 BDI Constr. Co. v. Hartford Fire Ins. Co., 995 So. 2d 576 (Fla. Dist. Ct. App. 2008) ..............................................................................17 Beazer Homes Corp. v. VMIF/Anden Southbridge Venture, 235 F. Supp. 2d 485 (E.D. Va. 2002) .......................................................................................6 Beck v. Lazard Freres & Co., LLC, 175 F.3d 913 (11th Cir. 1999) ................................................................................................23 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ..................................................................................................................5 Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 3 of 32 PageID #: 134 iii Ben. Nat’l Bank v. Anderson, 539 U.S. 1 (2003) ....................................................................................................................12 Brass v. Am. Film Tech., Inc., 987 F.2d 142 (2d Cir. 1993) ......................................................................................................5 Casey v. Merck & Co., 678 F.3d 134 (2d Cir. 2012) ....................................................................................................23 Charles E. Brauer Co., Inc. v. NationsBank of Va., N.A., 466 S.E.2d 382 (Va. 1996) ......................................................................................................15 Clark v. Estate of Elrod, 61 So. 3d 416 (Fla. Dist. Ct. App. 2011) ................................................................................24 Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983) ..........................................................................................................21, 23 Diario El Pais, S.L. v. Nielsen Co., No. 07CV11295, 2008 U.S. Dist. LEXIS 92987 (S.D.N.Y. Nov. 6, 2008) ............................13 Dodge v. Trs. of Randolph-Macon Woman’s Coll., 661 S.E. 2d 801 (Va. 2008) .......................................................................................................6 Federal Ins. Co. v. Southwest Florida Retirement Center, Inc., 707 So. 2d 1119 (Fla. 1998) ....................................................................................................24 Genet Co. v. Anheuser-Busch, Inc., 498 So. 2d 683 (Fla. Dist. Ct. App. 1986) ..............................................................................14 Global Fin. Corp. v. Triarc Corp., 715 N.E.2d 482 (N.Y. 1999) ...................................................................................................17 GML, Inc. v. Cinque & Cinque, P.C., 877 N.E.2d 649 (N.Y. 2007) ...................................................................................................17 Harris v. Mills, 572 F.3d 66 (2d Cir. 2009) ........................................................................................................5 HCA Health Servs. of Fla., Inc. v. Hillman, 906 So. 2d 1094 (Fla. Dist. Ct. App. 2004) ............................................................................22 Holmes v. Air Line Pilots Ass’n, 745 F. Supp. 2d 176 (E.D.N.Y. 2010) ......................................................................................5 Jill Stuart (Asia) LLC v. Sanei Int’l Co., 548 Fed. App’x 20 (2d Cir. 2013) ...........................................................................................13 Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 4 of 32 PageID #: 135 iv Korwek v. Hunt, 827 F.2d 874 (2d Cir. 1987) ....................................................................................................21 Kronos, Inc. v. AVX Corp., 612 N.E.2d 289 (N.Y. 1993) ...................................................................................................19 Lama Holding Co. v. Smith Barney Inc., 668 N.E.2d 1370 (N.Y. 1996) .................................................................................................12 Legends Collision Ctr., LLC v. State Farm Mut. Auto. Ins. Co., No. 6:14-cv-6006-Orl-31TBS, 2016 U.S. Dist. LEXIS 178129 (M.D. Fla. Apr. 29, 2016) .......................................................................................................14 In re LIBOR-Based Fin. Instruments Antitrust Litig., No. 11 MDL 2262, 2015 U.S. Dist. LEXIS 147561 (S.D.N.Y. Oct. 19, 2015) .....................13 Lucy v. Zehmer, 84 S.E.2d 516 (Va. 1954) ..........................................................................................................6 Major League Baseball v. Morsani, 790 So. 2d 1071 (Fla. 2001) ....................................................................................................22 Margolis v. Andromides, 732 So. 2d 507 (Fla. Dist. Ct. App. 1999) ..............................................................................20 MasterCard Int’l Inc. v. Nike, Inc., 164 F. Supp. 3d 592 (S.D.N.Y. 2016) .....................................................................................12 Medical Jet, S.A. v. Signature Flight Support-Palm Beach, Inc., 941 So. 2d 576 (Fla. Dist. Ct. App. 2006) ..............................................................................18 Moffatt v JP Morgan Chase Bank, No. 651615/2010, 2012 N.Y. Misc. LEXIS 6240 (N.Y. Sup. Ct. Jan. 9, 2012) .....................19 Moorman v. Blackstock, Inc., 661 S.E.2d 404 (Va. 2008) ........................................................................................................6 Moses v. Apple Hospitality REIT Inc., No. 1:14-cv-3131, 2016 U.S. Dist. LEXIS 136611 (E.D.N.Y. Sept. 30, 2016) .....................10 Payman v. St. Mary’s Hosp., Inc., 72 Va. Cir. 582 (Va. Cir. Ct. Mar. 17, 2004) ..........................................................................15 RA Glob. Servs., Inc. v. Avicenna Overseas Corp., 817 F. Supp. 2d 274 (S.D.N.Y. 2011) .....................................................................................17 Robbin v. Fluor Corp., 835 F.2d 213 (9th Cir. 1987) ..................................................................................................21 Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 5 of 32 PageID #: 136 v Salazar-Calderon v. Presidio Valley Farmers Ass’n, 765 F.2d 1334 (5th Cir. 1985) ................................................................................................21 Sea Tow Servs. Int’l v. St. Paul Fire & Marine Ins. Co., 211 F. Supp. 3d 528 (E.D.N.Y. 2016) ....................................................................................12 Silicon Image, Inc. v. Genesis Microchip, Inc., 271 F. Supp. 2d 840 (E.D. Va. 2003) .......................................................................................6 Skillstorm, Inc. v. Elec. Data Sys., LLC, 666 F. Supp. 2d 610 (E.D. Va. 2009) .....................................................................................15 Sneed v. American Bank Stationary Co., 764 F. Supp. 65 (W.D. Va. 1991) ...........................................................................................15 Spiller v. James River Corp., 32 Va. Cir. 300 (Va. Cir. Ct. 1993) .........................................................................................15 Stuart v. Am. Cyanamid Co., 158 F.3d 622 (2d Cir. 1998) ..............................................................................................12, 16 Sunrise Continuing Care, LLC v. Wright, 671 S.E. 2d 132 (Va. 2009) .......................................................................................................6 Tilton v. Nynex, No. 99-9301, 2000 U.S. App. LEXIS 16258 (2d Cir. July 11, 2000) ....................................17 In re Vitamins Antitrust Litig., 183 Fed. App’x 1 (D.C. Cir. 2006) .........................................................................................22 Ward’s Equipment, Inc. v. New Holland N. Am 493 S.E.2d 516 (Va. 1997) ......................................................................................................15 Wenzel v. Knight, No. 3:14-cv-00432, 2015 U.S. Dist. LEXIS 70536 (E.D. Va. June 1, 2015) ................................................................................................... passim Wood v. Symantec Corp., 872 F. Supp. 2d 476 (E.D. Va. 2012) .......................................................................................8 Rules & Statutes Federal Rule of Civil Procedure Rule 12(b)(6) .........................................................................................................................1, 5 Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 6 of 32 PageID #: 137 vi Fla. Stat. § 95.11(2) ....................................................................................................................17, 19, 23 § 95.11(3) ................................................................................................................................19 § 95.031(1) ..............................................................................................................................20 § 95.051..............................................................................................................................22, 23 N.Y. C.P.L.R. Rule 202 .......................................................................................................................16, 17, 22 Rule 213 ............................................................................................................................17, 19 Rule 214 ...................................................................................................................................19 Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 7 of 32 PageID #: 138 1 Defendants Glade M. Knight, Apple REIT Eight, Inc., Apple Six Advisors, Inc., Apple REIT Seven, Inc., Apple Eight Advisors, Inc., Apple Fund Management, LLC, Apple Hospitality REIT, Inc., Glenn W. Bunting, Kent W. Colton, Lisa B. Kern, Bruce Matson, Michael S. Waters and Robert M. Wiley (the “Apple REIT Defendants,” collectively with BRE Select Hotels Group, the “Defendants”), by counsel, respectfully submit this memorandum of law in support of their motion to dismiss all claims against them pursuant to Federal Rule of Civil Procedure 12(b)(6). PRELIMINARY STATEMENT This case is the most recent in a series of lawsuits arising from a dividend reinvestment program, or “DRIP,” offered by the Apple REIT Defendants, pursuant to which investors could choose to receive additional Apple REIT shares for $11.00 per share instead of receiving cash dividends of the same amount. A similar class action, filed by the same counsel in Virginia, was dismissed with prejudice in June 2015. See generally Wenzel v. Knight, No. 3:14-cv-00432 (E.D. Va.). Another similar case, albeit with a different theory of breach of contract, has settled in principle and the proposed settlement is currently pending before Judge Irizarry and Magistrate Judge Gold. See generally Moses v. Apple Hospitality REIT Inc., No. 1:14-cv-3131 (E.D.N.Y.). Plaintiff now files this Complaint, despite the prior dismissal of the same breach of contract and tortious interference claims in Virginia, and despite the fact that the proposed settlement in Moses stands poised to extinguish claims arising from two of the three DRIPs described in the Complaint. On the merits, Plaintiff’s Complaint, like its predecessor suit in Virginia, fails to state any claim upon which relief can be granted. First, Plaintiff’s breach of contract claim (Count I) fails to allege the breach of any agreement concerning the DRIP. Even assuming that the DRIP comprised an enforceable agreement between the Apple REITs and the DRIP participants, Plaintiff fails to allege any agreement whatsoever to value the shares in any way other than the way they Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 8 of 32 PageID #: 139 2 were valued-as disclosed in the publicly filed DRIP offering statement-at $11.00. Plaintiff insists that, notwithstanding the Apple REITs’ clear notice and explanation to would-be participants that it was pricing the shares in this manner, the Apple REITs must have somehow simultaneously, silently, and “[i]mplied[ly]” not only told but actually promised Plaintiff and plan participants that it would price the shares in some other manner. (Compl. ¶ 61.) Such allegations fail to state a plausible claim for any relief, and certainly not one for breach of contract. Second, Plaintiff’s tortious interference claim fails for the fundamental reason that a corporation’s agents acting on behalf of the corporation cannot “interfere” with the corporation’s contract-this is tantamount to interfering with one’s own contract, a legal impossibility. Here, Plaintiff attempts to assert just such an impossible claim, alleging against various Defendants that they all interfered with an agreement to price the shares at a level and in a manner different from that disclosed in the S-3 public filing. There is no allegation that any of these Defendants took any action whatsoever except in their capacity as Apple REIT officers, directors, or managers. They thus cannot be held liable for interfering with any agreement with the Apple REITs. Third, Plaintiff’s claim for breach of the implied duty of good faith and fair dealing fails for several reasons, not least of which is that Virginia law, which Plaintiff alleges is controlling, does not recognize such a cause of action outside of the context of the Uniform Commercial Code (“UCC”). And, even in the UCC context, breach of the implied duty gives rise only to a claim for breach of contract, not an independent, stand-alone cause of action. Further, even if Virginia did recognize such an independent cause of action, it would fail as alleged here because Plaintiff has alleged only that the Apple REIT Defendants violated the terms of a contract that governed the mechanism for pricing DRIP shares. The claim, if it exists at all, is therefore duplicative of Plaintiff’s breach of contract claim and should be dismissed with prejudice. Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 9 of 32 PageID #: 140 3 FACTS Apple REIT Six, Inc. (“A6”), Apple REIT Seven, Inc. (“A7”), and Apple REIT Eight, Inc. (“A8,” together with A7, the “Apple REITS”) were non-traded, real estate investment trusts that invested in income-producing real estate throughout the United States. (Compl. ¶¶ 9, 15, 16, 22 37.) A6 merged into BRE Select Hotels Corp. (“BRE”) in May 2013.1 (Id. ¶ 17.) In March 2014, A7 and A8 combined with Apple REIT Nine, Inc. to form Apple Hospitality REIT, Inc. (“AHR”). (Id. ¶ 13.) Apple Six Advisers, Inc. (“A6A”), Apple Seven Advisers, Inc. (“A7A”), and Apple Eight Advisers, Inc. (“A8A”) provided management services for A6, A7 and A8, respectively (id. ¶¶ 22-24), while Apple Fund Management (“AFM”) provided certain management services to each of A6, A7, and A8. (Id. ¶ 25.) The individual Defendants are former officers and directors of A6, A7, and A8, some of whom are now officers and directors of AHR. (Id. ¶¶ 18-21.) The Apple REITs initially sold shares at $10.50 a share, but later at $11.00 a share once a minimum offering was complete. (Id. ¶ 42.) Thus, the only price at which an Apple REIT share could ever be purchased from the Apple REITs was $11.00 per share-“after the first 5%” of the shares were sold. (Id.) The Apple REITS offered their investors the option of participating in a DRIP where investors could have their dividends reinvested in the Apple REITs through the purchase of additional shares. (Id. ¶ 43.) The price at which investors could purchase shares through the DRIP was fully disclosed in each REIT’s respective Form S-3 (the “Forms S-3”). (Id. ¶ 59.) The Forms S-3 recognize that “there is no established public trading market for [Apple REIT shares] on which [the Apple REITs] could readily rely in determining fair market value.” (Id. ¶ 50.) Thus, for the purposes of the DRIP, the fair market value was determined to be “the 1 Some of the individual Defendants have been sued in their capacity as directors of A6. (Compl. ¶ 19.) Accordingly, the Apple REIT Defendants incorporate by reference the arguments in the motion to dismiss filed by BRE, successor to A6. Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 10 of 32 PageID #: 141 4 most recent price at which an unrelated person has purchased [the Apple REIT] units.” (Id.) The Forms S-3 also disclosed that “[t]he most recent price paid by an unrelated person for a unit was $11.00.” (See A7 Form S-3 Registration Statement, July 17, 2007, available at https://www.sec.gov/Archives/edgar/data/1329011/000119312507156224/ds3d.htm; A8 Form S- 3 Registration Statement, Apr. 23, 2008, available at https://www.sec.gov/Archives/edgar/data/1387361/000119312508087581/ds3d.htm.) The Apple REIT boards had discretion to change the method of pricing DRIP shares, however, the boards did not exercise that discretion. (Compl. ¶ 103, 105.) As Plaintiff acknowledges, the Apple REITs disclosed that the $11.00 “per-unit offering prices have been established arbitrarily . . . and may not reflect the true value of the units . . . .” (Id. ¶ 58.) Plaintiff further acknowledges that the Apple REITs disclosed that there is no established market for their shares and, thus, there is no way to readily determine fair market value of the Apple REIT shares. (Id. ¶ 50.) Plaintiff alleges that the Apple REITs promised that DRIP participants would receive DRIP shares “whose fair market value was equivalent to the dollar amount of the dividend declared and paid.” (Id. ¶ 81.) Because this obligation is not reflected in the language of the alleged contract, Plaintiff alleges that it was “implied as part of the contract.” (Id.) Plaintiff also references “internal and third party analyses”; presentations from third-party investment banks regarding business strategy; and tender offers from a distressed asset purchaser, that allegedly suggest that the DRIP shares should have been valued below $11.00 per share. (Id. ¶¶ 10, 57, 59, 61, 71, 72.) Plaintiff alleges that these estimates, at least some of which showed the Apple REIT shares valued at $11.00 per share or more (id. ¶ 61), required changing the price of shares offered through the DRIP. (Id. ¶¶ 83, 107.) Despite the disclosure that the $11.00 price was “established arbitrarily” and “may not reflect the true value of the units” (see id. ¶ 58), Plaintiff Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 11 of 32 PageID #: 142 5 alleges that the Forms S-3 “fail[ed] to disclose the fact that the directors’ ‘determination’ of the ‘fair market value’ of the units involved no analysis or verification, or estimation or comparison to any objective or internal indicia or estimate of value and that that the $11 per unit could be substantially higher than fair market value.” (Id. ¶ 52.) Plaintiff also alleges, without citation to the alleged underlying contracts, that the Apple REITs “contractually undertook to utilize a fair and objective formula of calculations to determine fair market value for the DRIPS.” (Id. ¶ 82.) ARGUMENT It is well-established that a complaint is subject to dismissal under Rule 12(b)(6) if it does not contain sufficient allegations of fact to state a claim for relief that is “plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “[A]lthough ‘a court must accept as true all of the allegations contained in a complaint,’ that ‘tenet’ ‘is inapplicable to legal conclusions,’ and ‘[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.’” Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Further, in its analysis, the Court may refer “to documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may be taken, or to documents either in [a] plaintiff[’s] possession or of which [a] plaintiff[ ] had knowledge and relied on in bringing suit.” Brass v. Am. Film Tech., Inc., 987 F.2d 142, 150 (2d Cir. 1993). Moreover, when the documents properly before the Court on a motion to dismiss contradict plaintiff’s allegations, “the documents control and this Court need not accept as true the allegations in the amended complaint.” Holmes v. Air Line Pilots Ass’n, 745 F. Supp. 2d 176, 193-94 (E.D.N.Y. 2010). Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 12 of 32 PageID #: 143 6 I. PLAINTIFF FAILS TO ALLEGE THE BREACH OF ANY AGREEMENT CONCERNING THE DRIP AND, THEREFORE, HER BREACH OF CONTRACT CLAIM (COUNT I) SHOULD BE DISMISSED. Under Virginia law, which Plaintiff acknowledges as controlling (Compl. ¶ 101), “[t]he elements of a breach of contract action are (1) a legally enforceable obligation of a defendant to a plaintiff; (2) the defendant’s violation or breach of that obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation.” Sunrise Continuing Care, LLC v. Wright, 671 S.E. 2d 132, 135 (Va. 2009). In order to satisfy the first element of a “legally enforceable obligation,” it has long been held that “there must be mutual assent of the contracting parties to terms reasonably certain under the circumstances.” Allen v. Aetna Cas. & Sur. Co., 281 S.E. 2d 818, 820 (Va. 1981). As the Virginia Supreme Court has held, “it is fundamental that no person may be subjected by law to a contractual obligation, unless the character of the obligation is definitely fixed by an express or implied agreement of the parties.” Dodge v. Trs. of Randolph-Macon Woman’s Coll., 661 S.E.2d 801, 803 (Va. 2008) (internal quotations and citation omitted). Further, “in order to be binding, an agreement must be definite and certain as to its terms and requirements; it must identify the subject matter and spell out the essential commitments and agreements with respect thereto. The terms of the contract must be clear, definite, and explicit.” Id. (internal quotations and citation omitted) (emphasis added). Therefore, “the question presented on [a] motion to dismiss is whether the agreement as presented in the complaint . . . reflects the parties’ unambiguous intent to be bound.” Beazer Homes Corp. v. VMIF/Anden Southbridge Venture, 235 F. Supp. 2d 485, 490 (E.D. Va. 2002) (applying Virginia law). “Mutual assent is determined ‘exclusively from those expressions of [the parties’] intentions which are communicated between them.” Moorman v. Blackstock, Inc., 661 S.E.2d 404, 409 (Va. 2008) (citing Lucy v. Zehmer, 84 S.E.2d 516, 533 (Va. 1954)); see also Silicon Image, Inc. v. Genesis Microchip, Inc., 271 F. Supp. 2d 840, 851 (E.D. Va. 2003) (applying Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 13 of 32 PageID #: 144 7 California law) (“Assent is not mutual, unless the parties intend to agree upon the same thing in the same sense.” (emphasis added)). Here, Plaintiff fails to allege any contractual commitment at all on the part of any defendant concerning an affirmative obligation to revisit or adjust the price of the shares offered as part of the DRIP, much less an agreement with terms sufficiently “certain,” “clear, definite, [or] explicit” to serve as the basis of a breach of contract claim. Plaintiff states only that the Apple REITs “contracted with Plaintiff and the Class by offering to have A-6, A-7 and/or A-8 provide Plaintiff and Class members with an amount of A-6, A-7 and/or A-8 stock whose fair market value was equivalent to the dollar amount of the dividend declared and paid.” (Compl. ¶ 81.) Plaintiff also alleges, again with no support in the text of the alleged contracts, that the Apple REITs “agreed to value the units at ‘fair market value’ deemed to be the last arms-length transaction in the units and further agreed to re-evaluate the worth of the units in good faith and adjust same [sic] to be equal to fair market value.” (Id. ¶ 2.) At most, however, the Apple REITs’ S-3s constituted an offer to sell DRIP units to their respective shareholders at the $11.00 per unit price as stated in the S-3: 20. How are unit prices determined? The price of units purchased under the plan directly from us by dividend reinvestments will be based on the fair market value of our units as of the reinvestment date as determined in good faith by our board of directors from time to time. Our units are not publicly traded; consequently, there is no established public trading market for our units on which we could readily rely in determining fair market value. Nevertheless, the board has determined that, for purposes of this plan, at any given time the most recent price at which an unrelated person has purchased our units represents the fair market value of our units. Consequently, unless and until the board decides to use a different method for determining the fair market value of our units, the per unit price for the plan will be determined at all times based on the most recent price at which an unrelated person has purchased our units. . . . The most recent price paid by an unrelated person for a unit was $11.00 on April 15, 2008. Accordingly, our board of directors has determined that Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 14 of 32 PageID #: 145 8 the offering price for units purchased under the plan will initially be $11.00 per unit. (See A7 Form S-3 Registration Statement, July 17, 2007, available at https://www.sec.gov/Archives/edgar/data/1329011/000119312507156224/ds3d.htm; A8 Form S- 3 Registration Statement, Apr. 23, 2008, available at https://www.sec.gov/Archives/edgar/data/1387361/000119312508087581/ds3d.htm.).) Thus, the offer was to sell DRIP shares at a “fair market value” to be determined by the board of directors. Further, due to the absence of a public trading market, the offer made clear that the board determined the “fair market value” to be $11.00 because that was the last price paid to the Apple REITs for the purchase of their respective shares. Any contract that was formed occurred when a shareholder accepted the offer to purchase additional Apple REIT shares with their dividend proceeds at the price of $11.00 per share. There is no allegation that this contract, which finds clear textual support in the Forms S-3, was breached. Plaintiff goes on to assert, in conclusory fashion, that “[i]mplied as part of the contract was the agreement and undertaking to use a fair and accurate value for the A-6, A-7 and/or A-8 stock to be paid to Plaintiff and Class members in lieu of the dividend.” (Compl. ¶ 61 (emphasis added).) However, Plaintiff alleges no statement, no conduct, no course of dealing, no document, in short, nothing at all, to plausibly allege the existence of any such “agreement and undertaking” to value the shares in the manner Plaintiff demands, nor any basis of any meeting of the minds concerning what the parties are supposed to have agreed was a “fair and accurate value” for the untraded shares. Plaintiff alleges that the Apple REITs explicitly told DRIP participants how shares would be priced but then, at the same time, implied that it would price shares differently. It is well-settled that a contractual duty cannot be implied “contrary to the terms of the express contract.” Wood v. Symantec Corp., 872 F. Supp. 2d 476, 485 (E.D. Va. 2012) (applying Virginia law). Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 15 of 32 PageID #: 146 9 Even assuming that the DRIP could be construed as a contract between the Apple REITs and DRIP participants, there was no agreement to price the shares any differently from the way in which the Apple REITs did in fact price them. If they agreed to anything concerning share price, the Apple REITs agreed to price the shares according to the last price paid to the Apple REITs of $11.00, as disclosed in the Forms S-3, and not according to some other measure of market value now insisted upon by Plaintiff. Thus, even if the DRIP established a legally binding obligation, Plaintiff fails to allege a breach of that obligation-the Apple REITs, according to Plaintiff’s own allegations, did just what they said they would do. Notably, the Eastern District of Virginia dismissed a similar claim against A8 in another class action filed by Plaintiff’s counsel here, because, “[a]ssuming as true [plaintiff’s] allegation that A8 overvalued its shares at $11.00 in the face of numerous events that should have brought the valuation down, A8 was under no obligation to set the price differently.” Wenzel v. Knight, No. 3:14-cv-00432, 2015 U.S. Dist. LEXIS 70536, at *17 (E.D. Va. June 1, 2015). The court reasoned as follows: Wenzel argues that the agreement required the defendants to price the DRIP shares according to fair market value and reassess and alter the DRIP share price on a regular basis, but her argument ignores what the agreement says. Reading the entire contractual language together, the defendants explained that fair market value could not be readily ascertained because A8’s shares did not trade on any public market. Accordingly, the defendants determined, at least at the outset of the DRIP, that “fair market value” would be set according to the last price paid by an outsider. To make matters perfectly clear, the agreement identifies that amount: $11.00 per share. Wenzel may have believed that the $11.00 price was set based on the underlying value of the assets in the real estate investment trust, but that belief is not supported by any contractual language or factual statements in the first amended complaint. Any shareholder agreeing to participate in the DRIP did so knowing the price ($11.00 per share) and the basis for that amount (it was the last price paid by an outsider). The defendants priced the DRIP units precisely in the manner contemplated by the Form S-3 and, therefore, did not breach the agreement. Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 16 of 32 PageID #: 147 10 Id. at *19. The reasoning and analysis of a District Court judge applying Virginia law in Virginia should be persuasive here. Note, however, that Judge Irizarry denied a motion to dismiss a breach of contract claim in connection with the Apple REITs’ DRIP programs in a factually similar case. See Moses v. Apple Hospitality REIT Inc., No. 1:14-cv-3131, 2016 U.S. Dist. LEXIS 136611, at *12-19 (E.D.N.Y. Sept. 30, 2016). There is, however, a distinction between the theory of breach in Moses and the theory of breach here, which tracks back to the theory disposed of in Wenzel. Specifically, Plaintiff Moses alleged that the contract was breached when the Apple REITs did not reprice the DRIPs upon the occurrence of successful cash tender offers. See id. at *15-16 (citing Moses, Second Amended Complaint, ¶¶ 29-33 (at Moses, ECF No. 21)). Here, although Plaintiff alludes to those tender offers in her section describing “Information Establishing That Fair Market Value Of The Units Was Materially Less Than $11 Per Unit,” they are apparently offered as support for Plaintiff’s allegation that “the arbitrary $11.00 per unit price was no longer indicative of the actual fair market value of the units.” (Compl. ¶ 83.) This is consistent with Plaintiff’s alleged class period commencing July 17, 2007, rather than on the dates of the tender offers, years later. It is also consistent with Plaintiff’s assertion that “the last price at which an unrelated party purchased a unit” was not “related to actual fair market value.” (Id. ¶ 107.) Put another way, if Plaintiff intended those tender offers to be breach “triggers,” the class period would have been considerably shorter and she would not have conceded that “unrelated party purchase[s]” are not even “related to fair market value.” (See id.) Put yet another way, Plaintiff here, unlike Moses, has conceded that these tender offer values could not have informed an assessment of “fair market value” in any event, which renders them legally irrelevant under Plaintiff’s theory of breach. (See id.) Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 17 of 32 PageID #: 148 11 In sum, because the Apple REITs priced the DRIP shares exactly as described in the Forms S-3, there is no breach of contract. As noted by the Eastern District of Virginia, the Forms S-3 “gave the board discretionary power to change the valuation method for DRIP shares. That the board refused to exercise its discretion is not the basis for a breach of contract claim.” 2015 U.S. Dist. LEXIS 70536, at *21. Like Ms. Wenzel, Plaintiff here “may have felt swindled when she realized that the underlying value of [the Apple REITs] did not support an $11.00 per share valuation, but that comes as a consequence of knowingly investing in a trust that was not traded on the open market, not the result of a breach of contract . . . .” Id. Count I should be dismissed. II. PLAINTIFF’S TORTIOUS INTERFERENCE CLAIM (COUNT II) FAILS TO STATE A CLAIM AND SHOULD BE DISMISSED. In Count II, Plaintiff attempts to assert claims for “tortious interference with contract and tortious interference with business expectancy” against all Defendants except A6, A7, A8, BRE, and AHR. (Compl. ¶¶ 88-99.) More specifically, Plaintiff alleges that A6A, A7A, A8A, AFM, Glade Knight, Glenn Bunting, Kent Colton, Lisa Kern, Bruce Matson, Michael Waters, and Robert Wiley interfered with Plaintiff’s contract and/or business expectancy. Notably, and fatal to Plaintiff’s claim, Plaintiff defines these Defendants collectively as the “Interfering Defendants,” but makes no attempt whatsoever to allege what specific interfering conduct could be ascribed to any particular individual or entity. Plaintiff’s claim for tortious interference fails for at least two reasons. First, Plaintiff fails completely to offer any specific allegations regarding the vague and collective “Interfering Defendants,” offering instead only conclusory allegations of misconduct that track to the elements of the cause of action. (See Compl. ¶¶ 88-99.) Second, Plaintiff has alleged only that various agents or affiliated entities of A6, A7, A8, BRE, and/or AHR interfered with a business Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 18 of 32 PageID #: 149 12 relationship in which the “Interfering Defendants” were actively engaged. Each of these reasons warrants dismissal of Count II. A. New York Substantive Law Governs Count II. While Plaintiff concedes that Virginia law governs Counts I and III (see Compl. ¶ 101), the Complaint is silent as to Plaintiff’s view of the law governing Count II. “Where jurisdiction rests upon diversity of citizenship,[2] a federal court sitting in New York must apply the New York choice-of-law rules and statutes of limitations.” Stuart v. Am. Cyanamid Co., 158 F.3d 622, 626 (2d Cir. 1998). “The first step in any case presenting a potential choice of law issue is to determine whether there is an actual conflict between the laws of the jurisdictions involved.” Matter of Allstate Ins. Co. (Stolarz-N.J. Mfrs. Ins. Co.), 613 N.E.2d 936, 937 (N.Y. 1993). Because this Court has already held that “there is no material conflict between New York and Florida law with respect to tortious interference,” the Apple REIT Defendants will apply New York law. Sea Tow Servs. Int’l v. St. Paul Fire & Marine Ins. Co., 211 F. Supp. 3d 528, 549 (E.D.N.Y. 2016). The elements of a claim for tortious interference with a contract under New York law are “the existence of a valid contract between the plaintiff and a third party, defendant’s knowledge of that contract, defendant’s intentional procurement of the third-party’s breach of the contract without justification, actual breach of the contract, and damages resulting therefrom.” Lama Holding Co. v. Smith Barney Inc., 668 N.E.2d 1370, 1375 (N.Y. 1996). Notably, New York draws several meaningful distinctions between a claim for interference with contract versus business expectancy. See, e.g., MasterCard Int’l Inc. v. Nike, Inc., 164 F. Supp. 3d 592, 605 (S.D.N.Y. 2016) (“Whereas a plaintiff may recover damages for tortious interference with contract ‘even if 2 Plaintiff incorrectly asserts federal question jurisdiction in her civil cover sheet (ECF No. 1-1). Because the Complaint does not invoke federal law of any kind as a basis for relief, the Court cannot exercise federal question jurisdiction. See, e.g., Ben. Nat’l Bank v. Anderson, 539 U.S. 1, 12 (2003). In any event, the Complaint itself alleges diversity as the basis for this Court’s jurisdiction. (Compl. ¶ 27.) Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 19 of 32 PageID #: 150 13 the defendant was engaged in lawful behavior,’ tortious interference with prospective business relations requires a showing of ‘more culpable conduct on the part of the defendant.’”); In re LIBOR-Based Fin. Instruments Antitrust Litig., No. 11 MDL 2262, 2015 U.S. Dist. LEXIS 147561, at *302-08 (S.D.N.Y. Oct. 19, 2015) (distinguishing elements of two claims under New York law). Importantly, under New York law, “[t]ortious interference claims have a limited scope and an extremely high pleading standard.” Diario El Pais, S.L. v. Nielsen Co., No. 07CV11295, 2008 U.S. Dist. LEXIS 92987, at *22 (S.D.N.Y. Nov. 6, 2008) (applying New York law, emphasis added). B. Plaintiff Fails to Allege Any Action of Any Defendant to Intentionally and Improperly Procure a Breach of Any Agreement Concerning the DRIP. Under New York law, or the law of any jurisdiction for that matter, a plaintiff must do more than allege a formulaic recitation of the elements of its tortious interference claim. See, e.g., Jill Stuart (Asia) LLC v. Sanei Int’l Co., 548 Fed. App’x 20, 22 (2d Cir. 2013) (applying New York law) (affirming dismissal of tortious interference claim based on absence of “factual allegations” to “support the claim that [defendant] ‘intentionally and improperly procured a breach’ of the Agreement”). Plaintiff here must therefore allege what each “Interfering Defendant” did to induce or encourage the non-interfering defendants to damage Plaintiff’s contract or business expectancy. Plaintiff’s group pleading falls woefully short of her obligation in this regard. With the exception of the allegations identifying the “Interfering Defendants” as agents or affiliates of other defendants (see Compl. ¶¶ 18-25) and the threadbare and conclusory allegations summarizing the elements of the cause of action (see Compl. ¶¶ 88-99), there is not one single allegation of fact in the Complaint to suggest that any one, much less all, of the “Interfering Defendants” took any action to intentionally and unjustifiably interfere with Plaintiff’s rights as a participant in the DRIP program. See, e.g., Diario El Pais, S.L., 2008 U.S. Dist. LEXIS 92987, at *22-25; see also, e.g., Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 20 of 32 PageID #: 151 14 Legends Collision Ctr., LLC v. State Farm Mut. Auto. Ins. Co., No. 6:14-cv-6006-Orl-31TBS, 2016 U.S. Dist. LEXIS 178129 (M.D. Fla. Apr. 29, 2016) (applying Arizona law) (holding that “group pleading” of tortious interference claim is insufficient under Ashcroft v. Iqbal, 556 U.S. 662 (2009)); Alternative Electrodes, LLC v. Empi, Inc., 597 F. Supp. 2d 322, 340 (E.D.N.Y. 2009) (applying New York law) (“A plaintiff claiming tortious interference with contract is obligated to establish that intentional acts on the part of a defendant were a substantial factor in the disruption of the contract.”). Plaintiff’s Count III is insufficiently pled and should be therefore be dismissed. C. Apple REIT Agents and Affiliates Cannot Tortiously Interfere with the Apple REITs’ Contracts or Business Expectations. As an independently sufficient reason, Plaintiff’s tortious interference claim should also be dismissed because a party to a contract or business relationship cannot be held liable for interfering with its own contract or relationship.3 Under New York law, “[i]t is well established that only a stranger to a contract, such as a third party, can be liable for tortious interference with a contract.” Ashby v. ALM Media, LLC, 973 N.Y.S.2d 109, 110 (N.Y. App. Div. 1st Dep’t 2013) (dismissing claim of tortious interference against executive officer of one of the other defendants); see also Genet Co. v. Anheuser-Busch, Inc., 498 So. 2d 683, 684 (Fla. Dist. Ct. App. 1986) (“[A] cause of action for tortious interference does not exist against one who is himself a party to the business relationship allegedly interfered with.”). Here, Plaintiff has alleged only that agents and affiliates of various Apple REIT entities interfered with those same Apple REIT entities’ alleged contracts or business relationships. Plaintiff’s claim therefore fails as a matter of law and should be dismissed. 3 The Eastern District of Virginia dismissed a constructively identical claim on this basis in Wenzel v. Knight, No. 3:14-cv-432, 2015 U.S. Dist. LEXIS 70536, at *22-24 (E.D. Va. June 1, 2015). Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 21 of 32 PageID #: 152 15 III. COUNT III SHOULD BE DISMISSED BECAUSE VIRGINIA LAW DOES NOT RECOGNIZE AN INDEPENDENT CLAIM FOR BREACH OF IMPLIED DUTY. Virginia law, which Plaintiff acknowledges as controlling (Compl. ¶ 101), does not recognize a separate cause of action for breach of the implied duty of good faith and fair dealing. See, e.g., Ward’s Equipment, Inc. v. New Holland N. Am., Inc., 493 S.E.2d 516 (Va. 1997) (“[W]hen parties to a contract create valid and binding rights, an implied covenant of good faith and fair dealing is inapplicable to those rights.”); Spiller v. James River Corp., 32 Va. Cir. 300, 307 (Va. Cir. Ct. 1993) (Virginia law does not recognize a claim for breach of a covenant of good faith and fair dealing); Sneed v. American Bank Stationary Co., 764 F. Supp. 65, 67 (W.D. Va. 1991) (same).4 To be clear, some Virginia courts have recognized that the implied duty exists, but the alleged breach of that duty is not an independent cause of action. Cf. Payman v. St. Mary’s Hosp., Inc., 72 Va. Cir. 582, 584 (Va. Cir. Ct. Mar. 17, 2004) (“[I]mplied duty of good faith and fair dealing ‘prevents a party from evading the spirit of the contract, willfully rendering imperfect performance, or interfering with the other party’s performance.”). In any event, even if the duty exists as an academic matter, “no implied duty arises with respect to activity governed by express contractual terms.” Skillstorm, Inc. v. Elec. Data Sys., LLC, 666 F. Supp. 2d 610, 620 (E.D. Va. 2009) (applying Virginia law). “Likewise, a party does not breach implied duties where it exercises its rights created under the contract.” Skillstorm, Inc., 666 F. Supp. 2d at 620. As discussed in Section I supra, the DRIP prices were priced exactly as described in the Forms S-3 and there was no breach of contract. As noted by the court in Wenzel, the defendants behaved exactly as envisioned by the agreement, and, with respect to their obligations under the contract, Wenzel asserts no facts showing dishonesty. 4 The cases to consider such a claim in Virginia have done so in the context of a claim under the Uniform Commercial Code, which is inapplicable here. See, e.g., Charles E. Brauer Co., Inc. v. NationsBank of Va., N.A., 466 S.E.2d 382, 386 (Va. 1996). And, even under those circumstances, it is not a stand-alone cause of action. See, e.g., Aldrich v. Old Point National Bank, 35 Va. Cir. 545, 551 (Va. Cir. Ct. 1993) (Va. Code § 8.1-203 does not create an independent cause of action for breach of duty of good faith). Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 22 of 32 PageID #: 153 16 As to arbitrary or unfair exercises of discretion, because the board chose not to take action, Wenzel essentially asks the Court to recast the board’s discretion to change the DRIP pricing as an obligation to do so, which clearly is not supported by the language of the agreement. Wenzel v. Knight, No. 3:14-cv-00432, 2015 U.S. Dist. LEXIS 70536, at *21-22 n.6 (E.D. Va. June 1, 2015). Even if this were a viable stand-alone claim, Plaintiff again ignores the clear disclosures that the $11.00 price was set arbitrarily and that it was within the board’s discretion to revisit that price during the life of the DRIP, which of course means the board was not obligated to do so, as Plaintiff insists. Leaving aside Plaintiff’s conclusory allegations that the board acted “dishonestly, arbitrarily, and unfairly towards Plaintiff,” there are insufficient factual allegations to support a claim for breach of any implied duty, particularly under circumstances where the Apple REITs followed the pricing mechanism disclosed in the Forms S-3. Count III should be dismissed. IV. EVEN IF THEY STATE A CLAIM, PLAINTIFF’S CLAIMS ARE TIME- BARRED. A complaint may be dismissed as untimely under Rule 12(b)(6) when a plaintiff’s factual allegations demonstrate that relief would be barred by the applicable statute of limitations. See SOCAR (Societe Cameroonaise d’Assurance et de Reassurance) v. Boeing Co., 144 F. Supp. 3d 391, 395 (E.D.N.Y. 2015). While a defendant bears the burden of establishing that the statute of limitations period has run, see Overall v. Estate of Klotz, 52 F.3d 398, 403 (2d Cir. 1995), the plaintiff bears the burden of proving that a particular statute of limitation has been tolled. See Voiceone Commc’ns, LLC v. Google Inc., No. 12 CIV. 9433(PGG), 2014 WL 10936546, at *8 (S.D.N.Y. Mar. 31, 2014). Plaintiff is a resident of Sarasota County, Florida. (ECF No. 1-1.) In diversity cases filed in New York, the Court applies New York’s statute of limitations and choice of law rules, including New York’s borrowing statute. See N.Y. C.P.L.R. 202; Stuart, 158 F.3d at 626 (“Where Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 23 of 32 PageID #: 154 17 jurisdiction rests upon diversity of citizenship, a federal court sitting in New York must apply the New York choice-of-law rules and statutes of limitations.”). Under New York’s borrowing statute, “[w]hen a nonresident sues on a cause of action accruing outside New York, CPLR 202 requires the cause of action to be timely under the limitation periods of both New York and the jurisdiction where the cause of action accrued. This prevents nonresidents from shopping in New York for a favorable Statute of Limitations.” Global Fin. Corp. v. Triarc Corp., 715 N.E.2d 482, 484 (N.Y. 1999). In cases of economic injury, the place of accrual is where the plaintiff resides and sustains the economic impact of the loss. See Tilton v. Nynex, No. 99-9301, 2000 U.S. App. LEXIS 16258, *1-2 (2d Cir. July 11, 2000) (“Under New York’s borrowing statute, breach of contract claims accrue where the injury occurred, regardless of where the contract was ‘negotiated, executed, substantially performed and breached.’” (citation omitted)); RA Glob. Servs., Inc. v. Avicenna Overseas Corp., 817 F. Supp. 2d 274, 282 (S.D.N.Y. 2011) (“As a general rule, when an injury is purely economic, the place of injury is where the plaintiff resides and sustains the economic impact of the loss.”). Finally, “if a court borrows the statute of limitations of another state, it should also borrow that state’s rules as to accrual and tolling.” GML, Inc. v. Cinque & Cinque, P.C., 877 N.E.2d 649, 650 (N.Y. 2007). A. Count I (Breach of Contract) is Time-Barred by the Five-Year Statute of Limitations. Under New York law, a claim for breach of contract must be brought within six years of accrual. N.Y. C.P.L.R. 213 (2017). Under Florida law, a claim for breach of contract must be brought within five years of accrual. Fla. Stat. § 95.11(2)(b) (2017). This Court should therefore apply Florida’s statute of limitation and rules as to accrual. Under Florida law, “it is well- established that a statute of limitations runs from the time of the breach [of the relevant contract],” BDI Constr. Co. v. Hartford Fire Ins. Co., 995 So. 2d 576, 578 (Fla. Dist. Ct. App. 2008), “not Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 24 of 32 PageID #: 155 18 from the time when consequential damages result or become ascertained,” Medical Jet, S.A. v. Signature Flight Support-Palm Beach, Inc., 941 So. 2d 576, 578 (Fla. Dist. Ct. App. 2006). Although the Complaint is not entirely clear, Plaintiff appears to be alleging two distinct breaches of contract. First, Plaintiff alleges that a contract was breached when various Defendants “set[] the value” of the DRIP shares. (Compl. ¶ 85.) This breach, if at happened at all,5 occurred prior to when the DRIPs were first announced in 2007 (A7) and 2008 (A8), which renders Plaintiff’s claim untimely under any statute of limitations. Second, Plaintiff alleges that “A-6, A- 7, and A-8 breached their respective contracts by failing to change the price of units to be received in the DRIP when the arbitrary $11.00 per unit price was no longer indicative of the actual fair market value of the units, as required by the contract.” (Compl. ¶ 83.) So, according to Plaintiff, as soon as the Defendants had reason to believe the $11.00 price was too high, they breached the contract by not exercising their discretion to change the price. Giving the Complaint a generous read, this “failure to change the price” breach accrued at the point when, despite “receiv[ing] internal strategic planning analyses between late 2008 and 2011 that contradicted the REITs’ representations that $11.00 constituted the ‘fair market value,’” the relevant Defendants nevertheless maintained the DRIP price at $11.00. (See Compl. ¶ 59.) Plaintiff’s breach of contract claim therefore expired, at the very latest, on December 31, 2016 (i.e., five years from the latest alleged date on which Defendants had internal analyses suggesting the DRIP price should be changed). Because this action was not filed until February 24, 2017, it is untimely and should be dismissed. 5 It is difficult to imagine, and Plaintiff does not explain, how the decision to price DRIP shares at $11.00, which was later reflected in an alleged written contract, could itself be a breach. Put another way, the price was set before the offer was made so, at the time of the alleged misdeed, there was no contract. Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 25 of 32 PageID #: 156 19 B. Count II (Tortious Interference) is Time-Barred by the Three-Year Statute of Limitations. Under New York law, a claim for tortious interference must be brought within three years of accrual. N.Y. C.P.L.R. 214(4) (2017); see also AMS Group LLC v. J.P. Morgan Chase Bank, 371 Fed. App’x 149, 150 (2d Cir. 2010). Under Florida law, a claim for tortious interference must be brought within four years. Fla. Stat. § 95.11(3)(o) (2017). This Court should therefore apply New York’s shorter statute of limitation and rules as to accrual. Under New York law, tortious interference claims accrue “when the claim becomes enforceable, i.e., when all elements of the tort can be truthfully alleged in a complaint.” Kronos, Inc. v. AVX Corp., 612 N.E.2d 289, 292 (N.Y. 1993). As noted above, it is nearly impossible to tell from the Complaint what affirmative actions were allegedly taken by the “Interfering Defendants” that might constitute tortious interference. That said, working backwards three years from the date of filing, Plaintiff would have to somehow allege the cause of action accrued on or after February 24, 2014. This date is after Plaintiff’s proposed class period. (Compl.¶ 1.) It is also after the amended Forms S-3 were issued and after the DRIPs were suspended. (Id. ¶15, 29, 49.) In sum, Plaintiff offers no allegations of any kind to support a tortious interference claim after February 24, 2014. Plaintiff’s tortious interference claim is clearly time-barred and should be dismissed. C. Count III (Breach of Implied Duty) is Time-Barred by the Five-Year Statute of Limitations. Under New York law, a claim for breach of an implied contractual duty must be brought within six years of accrual. N.Y. C.P.L.R. 213 (2017); see also Moffatt v JP Morgan Chase Bank, No. 651615/2010, 2012 N.Y. Misc. LEXIS 6240, at *13-14 (N.Y. Sup. Ct. Jan. 9, 2012). Under Florida law, a claim for breach of the implied duty of good faith and fair dealing must be brought within five years of accrual. See Fla. Stat. § 95.11(2)(b) (2017). This Court should therefore apply Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 26 of 32 PageID #: 157 20 Florida’s statute of limitation and rules as to accrual. Under Florida law, a cause of action accrues when the last element necessary to complete it occurs. Fla. Stat § 95.031(1) (2017); see also Margolis v. Andromides, 732 So. 2d 507, 509 (Fla. Dist. Ct. App. 1999) (holding that breach of implied warranty action accrued upon principal’s repudiation, not when the plaintiff understood the extent of damages). The precise contours of this claim are even less clear than Plaintiff’s breach of contract theory. But, assuming that the alleged breach occurred when the Defendants failed to change the DRIP price in the face of alleged evidence that $11.00 was not fair market value, Plaintiff’s breach of implied duty claim accrued at the point when, despite “receiv[ing] internal strategic planning analyses between late 2008 and 2011 that contradicted the REITs’ representations that $11.00 constituted the ‘fair market value,’” the relevant Defendants nevertheless maintained the DRIP price at $11.00. (See Compl. ¶¶ 59 105.) Plaintiff’s breach of implied duty claim therefore expired, at the very latest, on December 31, 2016. Count III should be dismissed. D. Plaintiff Fails to Allege Equitable Tolling. Plaintiff appears to invoke American Pipe & Construction Co., et al. v. Utah, et al., 414 U.S. 538 (1974) to toll the applicable statutes of limitation discussed above. But, even if Florida and New York law allowed tolling based on the pendency of class actions in other jurisdictions (they do not), Plaintiff has failed to meet her burden. Plaintiff provides no detail regarding what similar “class action” and “derivative cases” toll her claims, nor does she include any factual allegations supporting her contention that these unnamed actions “alleg[e] the same misconduct.” See Hromyak v. Tyco Int’l Ltd., 942 So. 2d 1022, 1023 (Fla. Dist. Ct. App. 2006) (“requir[ing] that the claims in the later action be the same as those alleged in the earlier action”). She makes no specific mention of the facts, claims, or defendants involved in the unidentified cases. Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 27 of 32 PageID #: 158 21 Accordingly, Plaintiff’s otherwise untimely claims should not be revived by American Pipe or any other equitable tolling doctrine. By way of background, in Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983), the Supreme Court extended American Pipe to permit tolling not only for individual intervention in the named plaintiffs’ original suit, but also for individual filing of entirely new suits. See 462 U.S. at 350. By extension, courts to have considered whether American Pipe tolling should allow the filing of new but otherwise untimely class actions, have generally ruled in the negative. In a case where the same plaintiff filed successive class actions,6 for example, the First Circuit held: Plaintiffs may not stack one class action on top of another and continue to toll the statute of limitations indefinitely. Permitting such tactics would allow lawyers to file successive putative class actions with the hope of attracting more potential plaintiffs and perpetually tolling the statute of limitations as to all such potential litigants, regardless of how many times a court declines to certify the class. Basch v. Ground Round, Inc., 139 F.3d 6, 11 (1st Cir. 1998); see also Salazar-Calderon v. Presidio Valley Farmers Ass’n, 765 F.2d 1334, 1351 (5th Cir. 1985) (“Plaintiffs have no authority for their contention that putative class members may piggyback one class action onto another and thus toll the statute of limitations indefinitely, nor have we found any.”); Andrews v. Orr, 851 F.2d 146, 149 (6th Cir. 1988) (class action tolls statute of limitations only for subsequent individual actions, not for subsequent class action alleging similar class and similar claims); Robbin v. Fluor Corp., 835 F.2d 213, 214 (9th Cir. 1987) (same); Korwek v. Hunt, 827 F.2d 874, 879 (2d Cir. 1987) (same). Some Courts, including this one, have held that the doctrine is simply inapplicable to new claims-whether they be class or individual claims-that are filed before a ruling on class 6 While this appears to be Plaintiff’s first time bringing suit against the Apple REIT Defendants, her counsel alleged practically identical class claims against various Apple REIT entities and personnel in 2014. The claims in that lawsuit were dismissed with prejudice. See Wenzel v. Knight, No. 3:14-cv-432, 2015 U.S. Dist. LEXIS 70536, at *22-24 (E.D. Va. June 1, 2015). Ms. Wilchfort is also a member of the putative class in Moses v. Apple Hospitality REIT Inc., No. 1:14-cv-3131, (E.D.N.Y.), the proposed settlement of which is currently before Judge Irizarry and Magistrate Judge Gold. To the extent Plaintiff is relying on those matters as triggering tolling, the cases cited in this discussion are relevant and persuasive, and should serve to bar tolling on the basis of Wenzel or Moses. Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 28 of 32 PageID #: 159 22 certification in the earlier case. See, e.g., In re Ciprofloxacin Hydrochloride Antitrust Litig., 261 F. Supp. 2d 188, 221 (E.D.N.Y. 2003) (finding that filing of a subsequent class action claim before the court determines class certification in the initial action undermines the policy behind the class action tolling doctrine); Rahr v. Grant Thornton LLP, 142 F. Supp. 2d 793, 800 (N.D. Tex. 2000) (finding class action tolling doctrine was never intended to apply to plaintiffs who file separate suits prior to a decision being reached on the class certification issue). Accordingly, Plaintiff is not entitled to American Pipe tolling and all of her claims should be dismissed as time-barred. As to Counts I and III, there is the additional question of whether this Court, sitting in New York, can apply American Pipe to claims governed by Florida’s tolling laws. As noted above, due to the application of N.Y. C.P.L.R. 202, this Court must look to Florida’s laws of tolling as to Plaintiff’s breach of contract and breach of the implied duty claims. See discussion supra Sections IV(A) & (C). The only case outside of Florida that appears to have addressed the specific question of whether to apply American Pipe to the timeliness of a claim under Florida law has ruled emphatically against such an extraterritorial application. Specifically, the D.C. Circuit affirmed the district court’s rejection of application of American Pipe to Florida claims based on the following succinct reasoning: The Florida legislature has enumerated eight scenarios in which the applicable statute of limitations is tolled, and a pending class action is not one of them. Fla. Stat. § 95.051(1). The statute itself makes clear that “[n]o disability or other reason shall toll the running of any statute of limitations except those specified in this section [or in certain other sections not relevant here].” Fla. Stat. § 95.051(2) (emphasis added). Also, the Florida Supreme Court has plainly stated this list represents the “exclusive list of conditions that can ‘toll’ the running of the statute of limitations.” Implicit in the [Supreme Court’s] holding is the conclusion that in order for a doctrine to ‘toll’ the statute of limitations, it must be included in the exclusive list of conditions set forth in section 95.051(1). In re Vitamins Antitrust Litig., 183 Fed. App’x 1, 2 (D.C. Cir. May 15, 2006) (quoting Major League Baseball v. Morsani, 790 So. 2d 1071, 1075 (Fla. 2001) and HCA Health Servs. of Fla., Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 29 of 32 PageID #: 160 23 Inc. v. Hillman, 906 So. 2d 1094, 1100 (Fla. Dist. Ct. App. 2004)). The Second Circuit reached the same functional conclusion after certifying the question to the Supreme Court of Virginia. See Casey v. Merck & Co., 678 F.3d 134, 137 (2d Cir. 2012) (quoting the Supreme Court’s conclusion that “there is no authority in Virginia jurisprudence for the equitable tolling of a statute of limitations based upon the pendency of a putative class action in another jurisdiction”). Based on these holdings, and the apparent absence of any precedent to the contrary, this Court should follow suit and hold that American Pipe cannot be applied to save Plaintiff’s untimely claims for breach of contract and breach of implied duty, both of which are governed by Florida law on tolling.7 E. Plaintiff’s Remaining Tolling Allegations are Meritless. Plaintiff alleges that the statute of limitations should be tolled because she could not and did not discover Defendants’ alleged misconduct “until the SEC’s February [12], 2014 Consent Order.” (Compl. ¶ 110.) For Plaintiff’s breach of contract and implied duty claims, the tolling (or not) of which is governed by Florida law, there appears to be no basis in Florida statutory or case law to toll that period based on Plaintiff’s claim that she was unable to discover the breach until the SEC Order. See Fla. Stat. § 95.051 (statutory bases for tolling); see also Beck v. Lazard Freres & Co., LLC, 175 F.3d 913, 914 (11th Cir. 1999) (“[T]here is no discovery rule in section 95.11(2)(b) and . . . actions for breach of contract are barred five years after the cause of action 7 There are potentially other reasons why American Pipe should not be applied to Plaintiff’s claims. For example, the unidentified “other similar class actions” may have been based on a different factual theory, in which case it would not apply. See, e.g., Crown, Cork & Seal Co., 462 U.S. at 462. There may also be variations in the potentially relevant class definitions that defeat application of the doctrine. To the extent Plaintiff is able to identify with any more specificity the other class actions she has in mind, the Apple REIT Defendants will address any additional grounds for rejecting application of American Pipe on reply or in due course. Further, it is unclear from the Complaint whether American Pipe applies to toll the New York statute of limitations on a Florida plaintiff’s tortious interference claim. The law of New York appears to be unsettled on this question. See, e.g., In re Bear Stearns Cos., Secs., Derivative, & ERISA Litig., 995 F. Supp. 2d 291, 311 (S.D.N.Y. Feb. 3, 2014) (holding that “American Pipe tolling does not apply to SRM’s state claims because it only applies to federal law causes of action); but see id. at 311-12 (discussing varying views of New York state courts and noting that “New York courts have not yet spoken authoritatively on this issue” (citation and internal quotation marks omitted)). The Apple REIT Defendants therefore reserve their rights to further challenge that claim as untimely on reply or in due course. Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 30 of 32 PageID #: 161 24 accrued regardless of whether the plaintiff knew that it had a claim.” (quoting Federal Ins. Co. v. Southwest Florida Retirement Center, Inc., 707 So. 2d 1119, 1122 (Fla. 1998)); Clark v. Estate of Elrod, 61 So. 3d 416, 418 (Fla. Dist. Ct. App. 2011) (reversing tolling of breach of contract claim because no applicable exception in Fla. Stat. § 95.051). These claims are untimely and should be dismissed with prejudice. CONCLUSION For the reasons stated above, Defendants respectfully request that the Court dismiss all claims against the Apple REIT Defendants with prejudice, and grant such other relief as may be just and proper. Dated: June 19, 2017 Respectfully Submitted, /s/______________________ Marshall Beil McGUIREWOODS LLP 1345 Avenue of the Americas, 7th Floor New York, NY 10105-0106 Tel.: (212) 548-7004 mbeil@mcguirewoods.com Elizabeth F. Edwards (admitted pro hac vice) Stanley A. Roberts (pro hac vice application forthcoming) McGUIREWOODS LLP Gateway Plaza 800 East Canal St. Richmond, VA 23219 Tel.: (804) 775-1000 eedwards@mcguirewoods.com sroberts@mcguirewoods.com Counsel for the Apple REIT Defendants Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 31 of 32 PageID #: 162 25 CERTIFICATE OF SERVICE I certify that on June 19, 2017, I electronically filed the foregoing with the Clerk of this Court using the CM/ECF system, which will send notification of such filing (NEF) to all CM/ECF registered attorneys indicated on the NEF. _________/s/________________________ Elizabeth F. Edwards McGUIREWOODS LLP 901 East Cary Street Richmond, VA 23219-4030 Tel.: (804) 775-4390 Fax: (804) 698-2045 eedwards@mcguirewoods.com Case 1:17-cv-01046-MKB-ST Document 26-1 Filed 06/19/17 Page 32 of 32 PageID #: 163