United States District Court, M.D. Florida, Tampa Division
PHILIP KURLANDER, M.D. BAKER HILL HOLDING, a New York limited liability company, EDWIN M. STANTON, and STANTON HOLDINGS, LLC, Plaintiffs,
ROBERT R KAPLAN, ROBERT R. KAPLAN, JR., and KAPLAN VOEKLER CUNNINGHAM & FRANK, PLC, Defendants.
ORDER GRANTING DEFENDANTS' MOTIONS TO
WILLIAM F. JUNG UNITED STATES DISTRICT JUDGE
matter comes to the Court on Defendants' Motions to
Dismiss Plaintiffs' Complaint from Robert R. Kaplan and
Robert R. Kaplan, Jr. (collectively “the
Kaplans”), and Kaplan Voekler Cunningham & Frank
PLC (the “Kaplan Firm”). Dkts. 19 & 23.
Plaintiffs have filed oppositions in response, Dkts. 31 &
33, to which Defendants have replied, Dkts. 36 & 38. The
Court took extensive argument from counsel at a hearing on
these matters on August 7, 2019. The Court grants
Defendants' Motions to Dismiss without prejudice.
facts alleged here in large part mirror the allegations in a
related case, No. 8:19-cv-00644-T-02CPT. As there, for
purposes of this motion the Court accepts the factual
allegations in the Complaint as true.
Stanton is an experienced real estate professional in the
business of acquiring properties for the purposes of
government leases. Dkt. 1 ¶¶ 13-15. In 2006, Mr.
Stanton began using the legal services of his friend Mr.
Kaplan Jr. and Mr. Kaplan Jr.'s law firm, a predecessor
entity to the Kaplan Firm, for his real estate investment
business. Dkt. 1 ¶ 17. From this point forward Mr.
Kaplan Jr. and his father-and partner at the Kaplan Firm-were
Mr. Stanton's “go-to attorneys.” Dkt. 1
¶ 19. At some point during this relationship, the
Kaplans and Mr. Stanton entered into a fee arrangement where
the Kaplans would receive an equal share of the profits for
transactions and ventures that they provided legal services
for. Id. This included Mr. Stanton's new
investment vehicle, EMS-CHI, LLC. Id. According to
the Complaint, This relationship was not memorized in writing
nor was Mr. Stanton encouraged to seek outside counsel's
opinion regarding this arrangement. Id.
2012, Mr. Stanton was in the process of acquiring a number of
properties but was in need of additional capital. Dkt. 1
¶ 20. The Kaplans, in addition to providing the legal
services related to this acquisition, introduced Mr. Stanton
to another client of theirs, Dr. Kurlander. Id. Dr.
Kurlander, a medical doctor, was able to provide the capital
necessary to fund this project. Id.
point Dr. Kurlander, Mr. Stanton, and the Kaplans decided to
formalize this arrangement-Dr. Kurlander providing financing,
Mr. Stanton providing real estate know-how, and the Kaplans
providing legal services. Dkt. 1 ¶ 21. Mr. Stanton's
investment vehicle EMC-CHI was changed to Holmwood Capital
LLC and the four men were made equity partners in the
arrangement by an agreement drafted by Mr. Kaplan. Dkt. 1
¶ 20. The Complaint alleges that the Kaplans never
encouraged Mr. Stanton or Dr. Kurlander to pursue outside
counsel regarding this arrangement. Dkt. 1 ¶ 22. As the
years went on this arrangement sprouted a number of related
ventures-all with the goal to acquire property and with the
Kaplans providing legal services. Dkt. 1 ¶ 23.
in 2014 the Kaplans began to push Mr. Stanton and Dr.
Kurlander to form a real estate investment trust. Dkt. 1
¶ 24. Mr. Stanton and Dr. Kurlander acquiesced to an
arrangement where the management of the forthcoming real
estate investment trust was separated out into an entity
called Holmwood Capital Advisors, LLC (“HCA”).
Dkt. 1 ¶ 25. HCA was created as a limited liability
company, with each of the partners maintaining an equal share
of the company. Id. The Complaint alleges the
Kaplans drafted all corporate documents: including the
operating agreement for HCA. Id. Then, instead of
advising the Plaintiffs to seek independent counsel, the
Kaplans advised the Plaintiffs that the documents were
standard and were the way the Kaplans had been drafting
similar documents for over twenty-five years. Id.
The Plaintiffs claim they agreed to these documents at the
behest of their counsel, the Kaplans. This venture
successfully continued with Dr. Kurlander providing
financing, Mr. Stanton acquiring properties, and the Kaplans
providing legal services into 2015. Dkt. 1 ¶ 26.
Plaintiffs state by the end of its first year in existence
HCA had a real estate portfolio worth upward of
thirty-million dollars. Dkt. 1 ¶ 26.
Kaplans then began to push the Plaintiffs toward a new
organizational structure. Dkt. 1 ¶ 27. They advised that
a new entity should be formed for purposes of taking
advantage of Regulation “A” to raise capital.
Id. The Kaplans pitched this organizational
structure as being key to raising capital without becoming a
publicly traded company. Id. The Kaplans portrayed
this legal and strategic advice as being particularly
valuable because, in addition to being securities experts,
the Kaplans “played a significant role in the enactment
of certain legislation involving Regulation
forth in the Complaint, the Plaintiffs and the Kaplans, at
the urging of and with the legal advice of the Kaplans, then
formed two new entities: HC Government Realty Trust, Inc.
(“HC REIT”) and HC Government Realty Holdings,
L.P. (“HC Holdings”). Dkt. 1 ¶ 28. As
arranged by the Kaplans, HC REIT was a general partner of the
operating partnership, HC Holdings, with its limited partners
Holmwood Portfolio Holdings LLC (“Holmwood
Portfolio”) and Holmwood Capital. Id. HC REIT
was and continues to be managed by HCA pursuant to a
management agreement drafted by the Defendants. Dkt. 1 ¶
29. As alleged, the Kaplans then advised the Plaintiffs that
it was imperative that HC REIT have a board of directors that
was composed mostly of independent directors. Dkt. 1 ¶
31. The Kaplans expressed that the board would be helpful in
raising capital and would not interfere with the level of
control possessed by the Plaintiffs because the board would
be “independent” in name only and would be bound
to the pre-existing management agreement between HC REIT and
Plaintiffs agreed to this new arrangement and Dr. Kurlander,
Mr. Kaplan, and Mr. Stanton served as directors of HC REIT
with four independent directors who were all selected by the
Kaplans. Dkt. 1 ¶ 32. In addition to the new board, Mr.
Stanton was elected to serve as the chief executive officer,
Mr. Kaplan Jr. appointed himself to serve as the president,
Mr. Kaplan was elected to serve as secretary, and Dr.
Kurlander was elected to serve as treasurer. Id. The
Complaint alleges for all of the legal advice necessary for
these changes to the corporate structure of the ventures, the
Defendants received more than $500, 000 in attorneys'
fees from the Plaintiffs. Dkt. 1 ¶ 35.
efforts to procure new capital through this structure began
to fail, the Kaplans began counseling the Plaintiffs that
securing an institutional investor was the only viable option
moving forward-seemingly the opposite of their legal advice
less than a year earlier. Dkt. 1 ¶ 38-39. To avoid this
the Plaintiffs suggested that they could invest additional
capital into HCA in exchange for additional equity. Dkt. 1
¶ 39. At this point the Kaplans explained that this
would be impossible because the organizational documents that
they drafted and then advised the Plaintiffs to sign
contained an anti-dilution provision that they had not
pointed out to the Plaintiffs. Id. This provision
protected the Kaplans' interest in HCA from being
Plaintiffs allege they were upset at this revelation and then
refused to go along with any further business changes
proposed by the Kaplans. Dkt. 1 ¶ 39-40. Without help or
permission from the Plaintiffs, the Kaplans began to seek an
institutional investor for HC REIT and eventually found an
investment group principled by Steve Hale (collectively, the
"Hale Partnership"). Dkt. 1 ¶ 40. Over the
course of several months the Kaplans negotiated with the Hale
Partnership concerning a large investment-against the wishes
of the Plaintiffs. Id. These negotiations resulted
in the “Hale Package.” Id. The Kaplans,
at the objection of the Plaintiffs, put down a “good
faith” deposit of their personal funds in order to
secure the Hale Package and the Hale Partnership's
interest in assuming control over HC REIT. Id.
effort to avoid losing control of these business ventures,
the Plaintiffs put together a competing capital package (the
“Baker Hill Package”). Dkt. 1 ¶ 42. The
board met to discuss these two competing packages and was
deadlocked. Dkt. 1 ¶ 44. The Plaintiffs then approached
the Hale Partnership for separate negotiations about a
buy-out for the Plaintiffs. Dkt. 1 ¶ 45. The Hale
Partnership agreed to redeem the equity interest of the
Plaintiffs as part of moving forward with the Hale Package.
Id. In January 2019, the HC REIT Board approved the
terms of this new package, subject to a fairness opinion by
an independent investment bank to support the proposed
redemption price for the Plaintiffs. Id. The
independent investment bank review eventually determined that
the proposed redemption price was significantly higher than a
fair price. Dkt. 1 ¶ 47. This determination was made
orally to the independent directors of HC REIT and was only
relayed orally by Mr. Kaplan Jr. to the Plaintiffs.
March 11, 2019, an independent director forwarded to the HC
REIT Board a memorandum prepared by Elizabeth Watson, the
former CFO of HC REIT. According to the Complaint, the Watson
memorandum describes in detail why the Hale Package is not
favorable for HC REIT, for common stock shareholders, or for
any other constituencies. Dkt. 1 ¶ 51. The next day at
10:43 a.m. Mr. Kaplan, on behalf of the HC REIT Board,
provided a notice of a meeting of the HC REIT Board set for
11:15 a.m. the following day. Dkt. 1 ¶ 52. This notice
was thirty-two minutes more than the minimum required notice
under the organization documents. Id. According to
the meeting agenda-provided to the Plaintiffs later in the
day on March 12th-the board would be voting on the Hale
package without any buy-out provisions for the Plaintiffs.
Dkt. 1 ¶ 53.
next morning, Mr. Kaplan convened the board meeting, at which
Mr. Stanton and all the independent directors appeared. Dkt.
1 ¶ 56. Dr. Kurlander was in surgery and unable to
attend; this conflict was relayed to Mr. Kaplan the night
before. Id. At the meeting Mr. Stanton objected to
the short-notice and asked for a continuance in order to
allow Dr. Kurlander to attend. Dkt. 1 ¶ 57. This was
ignored. Dkt. 1 ¶ 57-58. The board then voted to adopt
the Hale Package with Mr. Stanton as the sole dissent. Dkt. 1
Hale Package was then implemented. Dkt. 1 ¶ 58. As a
result, the HCA management contract was being terminated, Mr.
Stanton and Dr. Kurlander were removed from their executive
positions with HC REIT, and the Plaintiffs' equity was
significantly diluted. Dkt. 1 ¶ 59-61.
alleging as fact the history recited above, Plaintiffs bring
ten causes of action: (1) breach of fiduciary duty; (2) fraud
in the inducement; (3) civil conspiracy to defraud; (4)
negligent representation; (5) professional malpractice; (6)
fraudulent omission; (7) constructive fraud; (8) violations
of Florida's Deceptive and Unfair Trade Practices Act;
(9) Civil RICO; and (10) Civil RICO conspiracy.
survive a Rule 12(b)(6) motion to dismiss, a plaintiff must
plead sufficient facts to state a claim that is
“plausible on its face.” Ashcroft v.
Iqbal,556 U.S. 662, 678 (2009) (citation omitted). When
considering a Rule 12(b)(6) motion, the court accepts all
factual allegations of the complaint as true and construes
them in the light most favorable to the plaintiff.
Pielage v. McConnell, 516 F.3d 1282, 1284 (11th Cir.
2008) (citation omitted). Courts should limit their
“consideration to the well-pleaded factual allegations,
documents central to or ...