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Brian Wishneff & Associates v. 10 South Street Associates, LLC

United States District Court, W.D. Virginia, Roanoke Division

July 10, 2017

BRIAN WISHNEFF & ASSOCIATES, Plaintiff,
v.
10 SOUTH STREET ASSOCIATES, LLC, Defendant.

          MEMORANDUM OPINION

          Michael F. Urbanski Chief United States District Judge.

         Plaintiff Brian Wishneff & Associates brought this breach of contract action against 10 South Street Associates, LLC, alleging it is due a fee for services under the parties' 2009 Battery Maritime Building Historic Tax Credit Agreement. Finding issues of fact as to the amount of any fee due plaintiff under the Agreement and the payment schedule for such fee, the court denied defendant's motion for summary judgment and the case proceeded to trial. The court empanelled an advisory jury for the bench trial held on April 3-4, 2017. The jury returned a verdict in plaintiffs favor in the amount of $2, 800.00. The court will adopt that verdict and, based on the findings of fact and conclusions of law that follow, will enter judgment for plaintiff in the amount of $2, 800.00.

         FINDINGS OF FACT

         1. Plaintiff Brian Wishneff & Associates is a limited liability company that provides historic tax credit consulting services to real estate developers in order to help fund building renovation projects. Brian Wishneff is president and half-owner of the company. His son, Erik Wishneff, is in-house counsel.

         2. After reading in a newspaper article in 2008 about the potential renovation of the Battery Maritime Building (the "Project"), located at the southern tip of Manhattan, Brian Wishneff contacted then-developer BMB Associates, LLC[1] about the opportunity to use federal historic tax credits to help fund the Project. On August 6, 2008, plaintiff and BMB Associates entered into a Battery Maritime Building Historic Tax Credit Agreement, pursuant to which Brian Wishneff & Associates would work to secure an historic tax credit investor and "earn a fee in an amount equal to 10% of the equity payment by the historic tax credit investor, " to be paid "on the same schedule as the Developer receives payments and/or benefits from the Historic Tax Credit Investor." Pl's Ex. I.[2] This was the standard form agreement used by Brian Wishneff & Associates at the time and did not provide for a cap on the fee plaintiff could earn. Under the terms of this agreement, plaintiff would be paid a percentage of whatever the historic tax credit (HTC) investor paid into the project on the same schedule as the HTC investor made its payments to the developer. Brian Wishneff & Associates secured one or more term sheets from perspective HTC investors pursuant to this contract; however, the deal ultimately did not go through and BMB Associates did not proceed with development of the Project.

         3. Defendant 10 South Street Associates, LLC[3] was later designated by the City of New York for the redevelopment Project. Plaintiff and 10 South Street negotiated terms of a new Battery Maritime Building Historic Tax Credit Agreement (the "Agreement"), which was executed on October 26, 2009. Pl's Ex. 10. This Agreement, which is the subject of the instant lawsuit, reduces and caps the fee plaintiff could earn under the Agreement in exchange for a specific fee payment schedule tied to the phases of Project development. The Agreement provides that plaintiff "would earn a fee in an amount equal to 7% of the gross equity payment by the historic tax credit Investor, " not to exceed $1, 000, 000. The fee payment schedule reads as follows: "If sufficient funds are available from a credit investor and/or a bridge loan lender, the Consultant shall be paid 20% of its fee at closing, 20% halfway through to closing, 45% at certificate of occupancy or occupancy and 5% upon any final equity payment by the Investor."

         The Agreement also contains the following termination provision:

If the Consultant [Brian Wishneff & Associates] has not produced a term-sheet from a historic tax credit investor within 90 days, then after 90 days the Developer [10 South Street] may terminate this Agreement at any time for convenience. If at any point in the future the Developer withdraws from the project the Developer can terminate for convenience. In addition, at any time after the eighteen (18) month anniversary of execution of this Agreement, the Developer may terminate this Agreement for convenience. Upon such a termination, Consultant shall deliver a list of all potential investors ("Potential Investors") that it has contacted related to the HTCs being generated by the Project. If any [sic] anytime in the future, Developer proceeds with the Project and one of the Protected Investors becomes an investor in any [historic tax credits] generated by the Project, Consultant shall earn its full fee pursuant to the Fee and Schedule section above. If, however, Developer moves forward with a HTC investor that is not one of the Protected Investors, Consultant shall earn one-half (1/2) of the fee that it would have otherwise earned under the Fee and Schedule section above.

         4. Plaintiff secured term sheets for the Project from three potential HTC investors, one of which was PNC Investment Company, LLC. PNC's projected capital contributions exceeded $37, 000, 000.

         5. On July 1, 2012, a 10 SSA Master Tenant, LLC Amended and Restated Operating Agreement was executed, pursuant to which PNC was admitted as an investor member of the company. Def.'s Ex. 1. Under the terms of this Amended and Restated Operating Agreement, PNC was obligated to make a capital contribution to the company for purposes of developing the Project; in return, it expected to receive certain tax benefits. See Id. at Art. V. PNC's capital contribution was payable in three installments. The first installment of $200, 000 was to be paid on the date the Amended and Restated Operating Agreement was executed. The second projected payment of $32, 575, 534 and third projected payment of $5, 783, 918 were payable after certain other conditions were met. Def.'s Ex. 1, at Ex. G. PNC paid its first installment payment of $200, 000 on July 1, 2012.

         6. The following day, Brian Wishneff emailed Stephen Benjamin of 10 South Street, congratulating him on the HTC closing and inquiring as to whether 10 South Street was in a position to pay plaintiffs invoice with the construction loan in place. Benjamin took the position that "[t]he money is not payable until we have received the funds [from PNC]. Several years from now." Pl's Ex. 11. In an email dated July 31, 2012, Brian Wishneff sent wiring instructions along with an invoice for $200, 000, noting "[a]ccording to our agreement we are to be paid $200, 000 of our fee at Closing or June 2012."[4] Pl's Ex. 12. Drew Spider of the Dermot Company responded: "The agreement is clear that die schedule of payments is conditioned on sufficient funds being available. . . . We will be in touch with you when the funds from pnc are expected to be sent to us." Id. By letter dated January 2, 2013, counsel for 10 South Street informed plaintiff that it was not entitled to the invoiced amount of $211, 809.33[5] at that time, as, under the Agreement, plaintiff "may be entitled to payment when and if the Developer receives payment from PNC." Pl's Ex. 15. By letter dated April 20, 2015, 10 South Street continued to take the position that sufficient funds were not available to trigger payment of plaintiff s fee under the terms of the parties' Agreement:[6]"There are not sufficient funds at this time. Furthermore, there may never be sufficient funds as the project is over-budget and may not be completed at all. Since funds are only due to you "[i]f sufficient funds ate available", no funds are due at this time. You also claim interest is due, but none is due since there have never been sufficient funds available." Pl's Ex. 16.

         7. 10 South Street commenced construction on the Project.

         8. Two subsequent events impeded the development progress. The first was a ruling handed down on August 27, 2012 in the case of Historic Boardwalk Hall. LLC v. Commissioner of Internal Revenue, 694 F.3d 425 (3d Cir. 2012), cert, denied, 133 S.Ct. 2734 (2013), which affected PNC's qualification as an HTC investor on the Project given the way its investment had been structured. See Aff. of Stephen Benjamin, ECF No. 45-2, at ¶ 23. The second event was Hurricane Sandy, which hit the New York area in late October 2012 and flooded lower Manhattan, bringing construction on the Project to a complete halt for nearly a year.

         9. The Project ultimately became economically unfeasible, and 10 South Street discontinued development. On June 25, 2015, 10 South Street returned PNC's $200, 000 payment and paid PNC an additional $183, 117.05 in legal fees, costs and expenses, pursuant to the repurchase obligation set forth in the Amended and Restated Operating Agreement dated July 1, 2012. Def.'s ...


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