FIRST AMENDED COMPLAINT

Transcription

1 ELECTRONICALLY FILED 12/2/2014 5:31 PM 01-CV CIRCUIT COURT OF JEFFERSON COUNTY, ALABAMA ANNE-MARIE ADAMS, CLERK IN THE CIRCUIT COURT OF JEFFERSON COUNTY, ALABAMA BIRMINGHAM DIVISION Genesis USA Development, LLC, v. Plaintiff, Samuel H. Frazier, individually, as attorney for the Plaintiff, and doing business as Mitchell-Frazier Farms LLC and Mitchell-Frazier Farms Family Limited Partnership and Mitchell-Frazier Farms Limited Partnership and Mitchell-Frazier Farms, LLC, an Alabama limited liability company and Frazier Farms, LLC, an Alabama limited liability company; the fictitious parties A-P who are those persons, firms, or corporations whose names are otherwise unknown to the Plaintiff but will be added hereto by amendment as soon as their names are ascertained, and who are those persons, firms, or corporations who participated in the scheme to defraud the Plaintiff, Defendants. CIVIL ACTION NO.: JURY TRIAL DEMANDED FIRST AMENDED COMPLAINT COMES NOW the Plaintiff, Genesis USA Development, LLC, by and through its undersigned attorney of record, and pursuant to Rule 15(a, Ala.R.Civ.P., amended the 1

2 complaint heretofore filed by adding thereto Counts Four and Five, and states the first amended complaint include said Counts Four and Five as follows: I. PARTIES 1. The Plaintiff, Genesis USA Development, LLC, is a Delaware Limited Liability Company with its principal office located in Nashville, Tennessee. 2. Defendant, Samuel H. Frazier ( S. Frazier, is an attorney who is a member of the Alabama Bar Association, who practices law in Birmingham, Alabama, and whose address in Birmingham, Alabama is Spain & Gillon, LLC, 2117 Second Avenue North, The Zinszer Building, Birmingham, AL Mr. Frazier is the dominant and controlling person of the fictitious Defendants. 3. The fraudulent misrepresentations made by S. Frazier to the Plaintiff require the following explanation so that the Court can determine which apparent parties in interest based on S. Frazier s misrepresentations are in fact existing legal entities under Alabama law and which are fraudulent entities misrepresented by S. Frazier to be legally formed entities and the owners of the real estate at issue in this case, the central component of this litigation. The principal document in this case is a Real Estate Purchase and Sale Agreement executed on December 10, 2012 ( Agreement. The Agreement was prepared under S. Frazier s direction and control. The Agreement misrepresents the names and the legal status of the entities S. Frazier misrepresents as the owners of the said real property. Specifically, the fraudulent 2

3 representations of S. Frazier with regard to the purported owners of the real estate are as follows: a Mitchell-Frazier Farms Limited Partnership is not a legally formed Alabama limited partnership which S. Frazier fraudulently represented to the Plaintiff as a legally formed Alabama limited partnership having as its general partner, another illegally formed entity which S. Frazier fraudulently represented as Mitchell-Frazier Farms, LLC, an Alabama limited liability company, an entity which was unlawfully organized and does not legally exist. Nevertheless, S. Frazier misrepresented this illegally formed LLC as the general partner of the inconsistently named Mitchell-Frazier limited partnership. No other entity is represented by S. Frazier as the general partner of the alleged limited partnerships. Under Alabama law, a limited partnership, whatever their name may be, must have a general partner designated in order to qualify as an Alabama limited partnership. S. Frazier knew that the foregoing representation regarding the legal description and existence of the two (2 entities he fraudulently designated as limited partnership and owners of the real estate at issue were fraudulent misrepresentations. b S. Frazier fraudulently represented in the Agreement that the subject real estate was owned by an entity which he fraudulently described as Mitchell- Frazier Limited Partnership, not a lawfully formed limited partnership, but which entity is actually a general partnership or joint venture under 3

4 Alabama law because no legally existing entity is designated as the general partner, a necessary designation of a partner of a lawfully formed Alabama limited partnership. c S. Frazier further fraudulently misrepresented that Mitchell-Frazier Farms Family Limited Partnership was the owner of the subject real estate even though it is an entity that does not legally exist but which S. Frazier fraudulently misrepresented to the Plaintiff to be a lawfully formed entity under Alabama law that was an owner of the subject real estate. d At the time S. Frazier made the said misrepresentations, he claimed to be acting simultaneously as attorney for both the Plaintiff and the fictitious Defendants with an impermissible and unwaivable conflict of interest and has been doing so actively since at least December of S. Frazier was acting in violation of the Alabama Legal Services Liability Act ( ALSLA. 4. The Defendant, S. Frazier, is charged in this complaint in his individual capacity and as an attorney at law with representing the Plaintiff in violation of the Alabama Legal Services Liability Act, Ala.Code, 1975, , et seq. with doing business under the names of the entities he fraudulently misrepresented to the Plaintiff as entities independent from himself, but which, in truth and in fact, have no legal existence, and were merely used by him as entities to do business. 4

5 II. RELEVANT FACTS 5. Plaintiff adopts all of the allegations of this complaint as a part of these relevant facts as if fully set out herein. 6. In 1994, the one of the consultants to one of the eventual partners of Genesis, began to consider the real estate which is the subject matter and central component of this litigation for development purposes. TMM determined that the real estate was managed by a Birmingham attorney with family and business ties to Decatur, Alabama. The property is located on Highway 20, outside of Decatur, Alabama and is described in exhibit A attached to Exhibit 1 hereto. 7. Many years were spent in planning for and developing all aspects of the potential of this real estate. In 2005, the Plaintiff was formed by TMM and others to serve as the vehicle and instrument for the development of the subject real property, which was also known as Sweetwater. 8. Plaintiff was contacted in the summer of 2007 about the possibility of bringing a major national firm to the Sweetwater Development. The Sweetwater Development, under the direction and control of Plaintiff, set the goal of bringing the major national relationship in-house to have a better chance of completing the Sweetwater Development with the participation of the major national firm. From the summer of 2007 to July of 2008, Plaintiff worked with elected officials and city staff at the City of Decatur and bond underwriters, among others, to bring about a $52.5 million bond package to develop Sweetwater with financial assistance from the City of Decatur. 5

6 S. Frazier was at all times involved in the negotiations because of his control of the real estate, the essential component of the development. 9. The Sweetwater Development was put on hold during the national financial crisis in order to avoid a false start that might have damaged the project and the relationships involved. 10. On December 10, 2012, the fictitious Defendants, under the direction and control of S. Frazier, fraudulently agreed to enter into a third in a series of three (3 Real Estate Purchase and Sale Agreements ( Agreements with the Plaintiff (Exhibit 1. The Agreements involved the Frazier real estate described more particularly in exhibit A to Exhibit 1 attached hereto. The desirability of the Frazer real estate for development is obvious to any experienced real estate developer. There have been efforts other than Plaintiff s to develop the real estate which have been unsuccessful. S. Frazier has, of course, been centrally involved with these earlier development efforts because of his control of the real estate. Plaintiff and S. Frazier have thus negotiated and signed a total of three (3 Real Estate Purchase and Sale Agreements one in 2006, one in 2009, and one in 2012 which is the current agreement. The Agreements other than the 2012 Agreement were arms-length transactions. The 2012 Agreement stated it was the new Agreement. However, in December of 2011, S. Frazier informed Plaintiff that he had been acting as the attorney for Plaintiff in performing legal work for the Plaintiff in the ongoing Sweetwater Development work. He now demanded that Plaintiff immediately pay him $40,000 in attorney s fees or the negotiations that he was supposedly handling for Plaintiff as its attorney would be terminated by him. Since S. Frazier was essentially 6

7 negotiating with himself on behalf of the Plaintiff, this threat was very real. Plaintiff paid S. Frazier the demanded $40,000 charging it to legal fees rather than lose the years of work it had put in the Sweetwater Development. S. Frazier never submitted an itemized invoice for attorney s fees to the Plaintiff, never entered into a lawyer/client contract with the Plaintiff, and never consulted with or advised Plaintiff with regard to his conflict of interest in simultaneously representing himself, the fictitious Defendants, and the Plaintiff. 11. On November 10, 2014, the Plaintiff, through counsel, discovered that it had been fraudulently induced to sign the Agreement, Exhibit 1. The fraudulent representations by which Plaintiff were induced to sign the Agreement included, but were not limited to, the following: (a S. Frazier represented in the Agreement that two (2 separate entities named in the Agreement owned the real estate in question and would convey a fee simple title to Plaintiff. In the first paragraph to Exhibit 1, he represented that the Agreement was between, Mitchell-Frazier Farms Family Limited Partnership, an Alabama limited partnership, (hereinafter referred to as the Seller. In truth and in fact, there is no legally formed Alabama limited partnership named Mitchell-Frazier Farms Family Limited Partnership ; (b In the signature block on page 19 of the Agreement, S. Frazier and the fictitious Defendants represent that the Seller was a different entity than shown on page 1 of the Agreement. The signatory there is Mitchell- Frazier Family Limited Partnership, an Alabama limited partnership. 7

8 Frazier was still acting as counsel for Plaintiff under the $40,000 fee paid in December of In truth and in fact, there is no Alabama limited partnership named Mitchell-Frazier Family Limited Partnership ; (c The signature block of page 19 of the Agreement states that Mitchell- Frazier Farms, LLC, is the general partner of Mitchell-Frazier Family Limited Partnership, an Alabama limited partnership. In the notarization following this signature, Mitchell-Frazier Farms, LLC is shown to be an Alabama limited liability company. In truth and in fact, there is no legally organized Alabama limited liability company named Mitchell-Frazier Farms, LLC. There is a record of Articles of Organization of Mitchell- Frazier Farms, LLC in the office of the probate judge of Limestone County, Alabama, but that is not effective under Alabama law to form the LLC. The provisions of Ala.Code, 1975, 10A , provide that, One or more persons may form a limited liability company by filing a certificate of formation for the limited liability company with the judge of probate of the county in which the initial registered office of the limited liability company is located pursuant to Article 3, Chapter 1. (emphasis added. This section was effective in 1993 and will remain effective until January 1, According to the Article of Incorporation filed in Limestone County, Alabama, the initial registered office of Mitchell-Frazier Farms, LLC was listed as the address of the Spain & Gillon law firm where S. Frazier practices law, which is in Birmingham, Jefferson County, Alabama. 8

9 No Certificate of Formation for Mitchell-Frazier Farms, LLC has, prior to November 19, 2014, been filed in the office of the probate judge of Jefferson County, Alabama. Therefore, Mitchell-Frazier Farms, LLC has never been formed in accordance with Alabama law. (d Paragraph 4.1 on page 7 of Exhibit 1, reads as follows: Seller agrees to convey to Purchaser on the Closing Date a good and marketable undivided fee simple interest in the Property, free and clear of any liens and mortgages and subject only to current property taxes, rights of way, leases (as set forth on the attached Exhibit B, restrictions, encumbrances, and easements of record (collectively, the permitted Exception. S. Frazier knew when the foregoing representations were made that none of the entities named in the Agreement could keep this promise. S. Frazier knew when these representations where made that they were promises that could not be kept so that they constituted promissory fraud. (e The records of the Alabama Secretary of State show that there is no Alabama limited liability company named Mitchell-Frazier Farms, LLC registered with the Secretary of State. Therefore, regardless of the name under which an Alabama limited partnership operates, it cannot act except through a named general partner, to convey real estate of otherwise. The only entity referenced in the Agreement as a general partner is Mitchell- Frazier Farms, LLC. Thus, neither of the so-called limited partnerships are lawfully organized. 9

10 III. CAUSE OF ACTION Count I 12. Plaintiff adopts all of the allegations of this complaint as a part of this count as if fully set out herein. 13. Plaintiff avers that it relied on the foregoing fraudulent representations and that as a proximate result of the said reliance; the Plaintiff has been injured and damaged in the amount of $10 million. Relying on the false representations in the Agreement, the Plaintiff has incurred huge expenses in an effort to complete the project and has lost the value of the time of its employees and representatives which were expended in attempting to bring the project to a successful conclusion. 14. The Plaintiff contends that it has earned, obtained and acquired an equity interest in the real estate which is the subject of the Agreement because the work it has done on developing this specific real estate has been extremely valuable and greatly increased the value of the real estate. The addition to the value of the real estate has been the result of large sums of money and many years of effort spent by the Plaintiff in an effort to develop the real estate. The work it has done and the money it has spent in attempting to develop this specific real estate, it has been caused to do by means of the fraud, fraudulent inducements and misrepresentations of S. Frazier and the fictitious Defendants. S. Frazier and the fictitious Defendants have fraudulently induced the Plaintiff to use its influence and contacts in the real estate development world to consistently promote the value of this real estate so that, as a result of Plaintiff s efforts, 10

11 this real estate is acknowledged as some of the most valuable development property in the Southeastern United States. Plaintiff would not have made the efforts and spend the money that has so increased the value of this real estate if it had not been led to do so by the fraudulent promises and misrepresentations of S. Frazier and the fictitious Defendants that Plaintiff would have the opportunity to participate in the resulting profits from its efforts. Plaintiff avers that S. Frazier and the fictitious Defendants never intended to allow Plaintiff to participate in the profits from the increased value of the real estate, but always intended to break off negotiations with Plaintiff and to take advantage of the increased value of the real estate only for themselves. Plaintiff avers that S. Frazier and the fictitious Defendants should not be allowed to enjoy the unjust enrichment they have fraudulently schemed to take from the Plaintiff. Plaintiff avers that the only adequate remedy is for this Court to award an equitable interest in the real estate to the Plaintiff in recognition of its efforts resulting in the increase to the value of the real estate. 15. Plaintiff claims that in addition to the $10 million in compensatory damages due from S. Frazier and the fictitious Defendants it is entitled to punitive damages against S. Frazier and the fictitious Defendants for the willful and deliberate fraud as set forth above in the maximum amount recoverable under Alabama law. 16. Plaintiff prays that the Court will award it such other and further relief as it may in the premises be entitled. Count Two 17. Plaintiff adopts all of the allegations of this complaint as a part of this count as if fully set out herein. 11

12 18. On or about December 10, 2012, S. Frazier and the fictitious Defendants fraudulently induced the Plaintiff to enter into a Real Estate Purchase and Sale Agreement ( Agreement. The fraudulent means by which the Plaintiff was induced to enter into the Real Estate Purchase and Sale Agreement was the misrepresentation to the Plaintiff made by S. Frazier that entities named in the Agreement owned approximately acres of real estate located in Limestone County, Alabama and more particularly described on exhibit A to Exhibit 1 attached hereto and that they would deliver a marketable fee simple title to the real estate to the Plaintiff. The fraudulent means by which S. Frazier and the fictitious Defendants induced the Plaintiff to sign the Agreement was that they misrepresented that the real estate was owned by the limited partnerships listed above when, in truth and in fact, those limited partnerships did not exist nor did they own the real estate, and accordingly could not sell it. 19. Plaintiff avers that it relied on the foregoing fraudulent misrepresentations and that as a proximate result of the said reliance; the Plaintiff has been injured and damaged in the amount of $10 million in compensatory damages. Relying on the misrepresentations in the Agreement, the Plaintiff has incurred expenses in an effort to complete the project and has lost the value of the time of its employees and representatives in attempting to bring the project to a successful conclusion. Moreover, S. Frazier has learned and benefitted enormously from observing the work and techniques of the Plaintiff in attempting to develop the Sweetwater Development. The Plaintiff contends that it has acquired an equity interest in the real estate shown in exhibit A to Exhibit 1 by means of the fraudulent inducements and representations of S. Frazier and 12

13 the fictitious Defendants and that the Plaintiff is entitled to an equitable division of the ownership of the real estate which is referenced herein. Plaintiff prays that the Court will, on the trial of this case, decide that the Plaintiff is entitled to an equitable ownership interest in the said property without further costs or charge to it and will apportion and divide the real estate amongst and between the claimants thereto as equity requires. 20. Plaintiff claims that in addition to the compensatory damages, it is entitled to punitive damages against S. Frazier and the fictitious Defendants for their willful and deliberate fraud in the maximum amount allowed by Alabama law. 21. Plaintiff prays that the Court will award it such other and further relief as it may in the premises be entitled. Count Three 22. Plaintiff adopts all of the allegations of this complaint as a part of this count as if fully set out herein. 23. Plaintiff avers that in December of 2011, the Defendant, Sam Frazier ( S. Frazier, at his insistence, entered into an attorney/client relationship with the Plaintiff while he was also serving as attorney for the fictitious Defendants and, moreover, while he was a party to the same transactions in which he undertook to represent the Plaintiff. Therefore, Plaintiff avers that Frazier was in a non-waivable conflict of interest. Instead of representing the Plaintiff as he had agreed to do, he rather served the interests of himself and the fictitious Defendants and acted against the interests of the Plaintiff, all in violation of the ALSLA. S. Frazier s conduct fell below the standard of care exercised by attorneys representing clients in the same general area and performing the same type 13

14 of legal services and as a proximate result, Plaintiff suffered a more unfavorable result that it would have otherwise obtained. S. Frazier required the Plaintiff to pay him $40,000 as an attorney s fee even though the Plaintiff had not agreed to employ him as an attorney in the matter in question. S. Frazier insisted that unless he was paid the sum of $40,000 as attorney s fees, that he would cease negotiating and therefore deprive the Plaintiff of the opportunity to conclude the matter favorably to it. As a result of the conflict of interest of S. Frazier, he failed to represent the interests of the Plaintiff as he agreed to do, and as he had been paid to do, so that the matter ended more unfavorably to the Plaintiff than it would have but for S. Frazier s violation of the standards of the ALSLA. 24. Plaintiff claims compensatory damages of S. Frazier in the amount of $10 million and punitive damages in the amount of $30 million as a proximate result of S. Frazier s violation of the ALSLA. Count Four 25. Plaintiff adopts all of the allegations of this complaint as a part of this count as if fully set out herein. 26. Following the service of the complaint on S. Frazier on November 20, 2014, S. Frazier elected to publicly answer the complaint by giving an interview to the Decatur, Alabama Daily. S. Frazier s interview was published on December 1, In this interview, S. Frazier made several statements with regard to the real property which is the subject of the December 10, 2012 Real Estate Purchase and Sale Agreement ( Agreement. S. Frazier s statements to the newspaper as reported by the newspaper 14

15 are as follows: Who owns the property? I do. S. Frazier said, And I signed the contract to sell it, which they ve now allowed to expire. But that contract was binding upon me, whether in my individual capacity or in my representative capacity. The newspaper further reported with regard to the charge that S. Frazier acted unlawfully in requiring an attorney s fee for his claimed legal representation of the Plaintiff, Frazier said Genesis paid him $40,000, but that he never represented Genesis. The newspaper also reported S. Frazier as saying, That was just money they agreed to pay us to extend the contract so they d have more time to close it. S. Frazier continued, They re calling it attorney s fee, but that isn t what it was. Frazier also told the newspaper that he was, Birmingham s chief development lawyer for 35 years. S. Frazier told the newspaper that the present lawsuit could be significant to the future development by a different developer of the 3500 undeveloped acres. Plaintiff avers that S. Frazier disclosed his end result of his fraudulent scheme to sell the property to another developer for a greater profit. I have been approached by a number of other developers. I have not signed anything, Frazier said. This lawsuit was probably the shoe that everybody was waiting to drop. Now that it s dropped, maybe we ll do something. The newspaper reported that, those involved in Sweetwater hold out hope that [major national retailer] might remain receptive to a deal with another developer. 27. Plaintiff avers that S. Frazier and the fictitious Defendants A-P formed a fraudulent scheme to defraud and deceive the Plaintiff by entering into a contract for the sale of the subject real estate known as Sweetwater by listing parties to the Real Estate Purchase and Sale Agreement as owners of the real estate that did not in fact own the real 15

16 estate and that were not in fact legally organized under Alabama law. S. Frazier subsequently claimed that he individually owned the real estate and he could sell it as he chose. S. Frazier and Defendants A-P fraudulently obtained payments from the Plaintiff in the amount of several hundreds of thousands of dollars to extend the Agreement. During the period of time that the Agreement was in force and effect, including extensions, for which Plaintiff paid large sums of money, S. Frazier and Defendants A-P acted in bad faith and in violation of the duties of good faith under the Agreement by talking to other developers with the goal of receiving an increased price and increased role in the developers plans. As S. Frazier said, This lawsuit was probably the shoe that everybody was waiting to drop. Now that it s dropped, maybe we ll do something. The foregoing clearly shows that S. Frazier and Defendants A-P, and the developers with whom S. Frazier was meeting and talking anticipated that the fraudulent conduct of S. Frazier and Defendants A-P would eventually leave the Plaintiff with no alternative except to file suit which could then be used by the scheming parties as a basis to breach the contract. In any event, as a proximate result of the fraudulent conduct of S. Frazier and Defendants A-P, the Plaintiff did not have a contract with any entity that had the right or power to perform the Agreement and to sell the real estate. 28. Plaintiff relied upon the misrepresentations and fraudulent conduct of S. Frazier and Defendants A-P, and as a proximate result of such reliance has been injured and damaged in the amount of $30 million as compensatory damages, and is entitled to receive punitive damages for the deliberate and intentional fraud of S. Frazier and 16

17 Defendants A-P in the maximum amount of punitive damages allowable under Alabama law and the Constitution of the United States. Count Five 29. Plaintiff adopts all of the allegations of this complaint as a part of this count as if fully set out herein. 30. Plaintiff prays that the Court will impose an interest on the real estate described in exhibit A to the Agreement and will impose an interest in favor of the Plaintiff on said real estate in the nature of a constructive trust. The Plaintiff avers that according to the statement made by S. Frazier in the Decatur Daily as reported above, he is not claiming to be the owner of the real estate described above and has disclosed plans to form agreements regarding the real estate with other developers with whom he has been meeting, talking, and planning such action. The Plaintiff avers that it has put millions of dollars into marketing and improving the market for the sale of the real estate, thereby substantially increased the value thereof. Plaintiff avers that the Defendant S. Frazier is now claiming that he individually owns the real estate and publicly stating that since the filing of this lawsuit he and other developers intend to enter into new agreements regarding said real estate which will have the effect of depriving the Plaintiff of all of its investments in the agreements made in connection with the potential development of the real estate since at least 2006, including the Agreement reached in December of The Plaintiff further avers that S. Frazier and Defendants A-P intend to enter into new agreements that will recognize the increase in the value of the real estate 17

18 and take that value created by the Plaintiff s efforts and investments for themselves by depriving Plaintiff thereof. Accordingly, the Plaintiff prays that the Court will impose a constructive trust on the real estate ordering S. Frazier and Defendants A-P to protect Plaintiff s investment in time, money, and expertise in the development of the real estate which is reflected in the increased value of the real estate at issue. Plaintiff prays that the Court will upon hearing and the receipt of evidence appoint the Plaintiff and S. Frazier as joint trustees of the constructive trust charged with the duty of administering the real estate subject to the trust for the benefit of the Plaintiff and whoever the Court determines at said hearings to also have an interest in the real estate with the Plaintiff; and Plaintiff prays that the Court will determine the amount of interest in the real estate which the Plaintiff is entitled to hold and the interest of any other person or entity entitled to share in the ownership of the real estate. Plaintiff prays that the Court will then equitably divide the real estate among Plaintiffs and those other entities, if any, that the Court determines are entitled to an ownership interest in the real estate. The Plaintiff prays that the Court will enter an order granting fee simple title to the Plaintiff and such other person or entities, if any, that the Court finds are entitled to an interest to the real estate and will grant a fee simple title to the Plaintiff and such others as the Court may determine their interest bear to the whole. 32. Plaintiff prays for such further, other, and different relief as it may in the premises be entitled both at law and in equity. 18

19 Respectfully submitted, /s/ William E. Rutledge William Eugene Rutledge (RUT001 ATTORNEY FOR THE PLAINTIFF OF COUNSEL: Rutledge & Yaghmai Two Chase Corporate Drive Suite 460 Birmingham, AL / T. 205/ F. CERTIFICATE OF SERVICE I HEREBY CERTIFY that I have this December 2, 2014, filed the above and foregoing using the Alafile system and by U.S. Postal Service, certified mail, return receipt requested, on the following: Samuel H. Frazier c/o Spain & Gillon, LLC 2117 Second Avenue North The Zinszer Building Birmingham, AL Mitchell-Frazier Farms, LLC c/o Samuel H. Frazier, Registered Agent 2117 Second Avenue North Birmingham, AL Mitchell-Frazier Farms Family Limited Partnership c/o Samuel H. Frazier 2117 Second Avenue North Birmingham, AL Mitchell-Frazier Farms Limited Partnership c/o Samuel H. Frazier 2117 Second Avenue North Birmingham, AL

20 Frazier Farms, LLC c/o Samuel H. Frazier 2117 Second Avenue North Birmingham, AL