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Lewis v. AimCo Properties, L.P.

Court of Chancery of Delaware

February 10, 2015

ROBERT LEWIS and ANDREW FRIEDMAN, individually and on behalf of all others similarly situated, Plaintiffs,
v.
AIMCO PROPERTIES, L.P., CONCAP EQUITIES, INC., CENTURY PROPERTIES FUND XVII, LP, ANGELES PARTNERS XII, LP, CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3, LP, CONSOLIDATED CAPITAL PROPERTIES IV, LP, ANGELES REALTY CORPORATION II, FOX CAPITAL MANAGEMENT CORPORATION, TERRY CONSIDINE, STEVEN D. CORDES, and JOHN E. BEZZANT, Defendants.

Submitted: January 14, 2015

Norman M. Monhait, Esq., Carmella P. Keener, Esq., P. Bradford deLeeuw, Esq., ROSENTHAL, MONHAIT & GODDESS, P.A., Wilmington, Delaware, Lionel Z. Glancy, Esq., Kara M. Wolke, Esq., Louis N. Boyarsky, Esq., GLANCY BINKOW & GOLDBERG LLP, Los Angeles, California; Jeffrey S. Abraham, Esq., Lawrence D. Levit, Esq., ABRAHAM, FRUCHTER & TWERSKY, LLP, New York, New York; Attorneys for Plaintiffs.

Paul J. Lockwood, Esq., Ronald N. Brown, III, Esq., SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Wilmington, Delaware; Attorneys for Defendants.

MEMORANDUM OPINION

PARSONS, Vice Chancellor.

Before the Court is a motion by one group of the defendants to dismiss the claims against them for lack of subject matter jurisdiction, and a motion by a second group of the defendants to dismiss the claims against them for failure to state a claim upon which relief could be granted. I have considered the parties' briefing and arguments, and the relevant documents as to those motions. For the reasons stated in this Memorandum Opinion, I grant both motions in large part. In particular, I order the Complaint stayed pending arbitration as it relates to the first set of moving defendants. As to the second group, I grant the motion to dismiss.

I. BACKGROUND[1]

A. The Parties

Plaintiffs, Robert Lewis and Andrew Friedman, are holders of limited partnership units in four Delaware limited partnerships, which together are the "Limited Partnership or LP Defendants-: (1) Angeles Partners XII, LP ("AP XII"); (2) Century Properties Fund XVII, LP ("CPF XVII"); (3) Consolidated Capital Institutional Properties/3 LP ("CCIP/3"); and (4) Consolidated Capital Properties IV, LP ("CCP IV"). The LP Defendants were formed to own and operate residential real estate properties. Each of the LP Defendants had a corporate entity as its general partner, and each of those general partners was indirectly owned by non-party Apartment Investment and Management Company ("AimCo"), a publicly traded Maryland Real Estate Investment Trust or REIT. AimCo also indirectly held a majority of the limited partnership units in each of the LP Defendants. The Plaintiffs are minority owners of the limited partnership units not owned by AimCo.

As relevant here, AimCo has three subsidiaries that also are named Defendants: (1) ConCap Equities, Inc. ("ConCap"), a Delaware corporation; (2) Angeles Realty Corporation II ("ARC II"), a California corporation; and (3) Fox Capital Management Corporation ("FCMC"), also a California corporation. ConCap is the managing general partner of LP Defendants CCIP/3 and CCP IV. ARC II and FCMC are the managing general partners, respectively, of LP Defendants AP XII and CPF XVII. Together, ConCap, ARC II, and FCMC are the "General Partner or GP Defendants."

Defendant Aimco Properties, L.P. ("Aimco OP") is a Delaware limited partnership and an affiliate of AimCo. Defendants John E. Bezzant and Steven D. Cordes are officers of AimCo and also officers and directors of ARC II and FCMC. Bezzant, but not Cordes, additionally is an officer and director of ConCap. Defendant Terry Considine is an officer of AimCo.

B. The Mergers

On July 28, 2011, AimCo announced the "Mergers" that gave rise to this action, and filed Schedule 13e-3 and Form S-4 documentation with the Securities and Exchange Commission ("SEC"). Through the Mergers, the LP Defendants were merged into a subsidiary of Aimco OP. The Mergers were executed without a separate vote from the unaffiliated, minority unitholders of the LP Defendants, including Plaintiffs. In the Complaint, Plaintiffs allege that the Mergers amounted to freeze-out transactions in which they received insufficient consideration for their units in the LP Defendants. In particular, they aver that AimCo relied on faulty appraisals that unfairly undervalued the LP Defendants and the real estate assets they owned, and therefore prevented Plaintiffs from being able to assess the true value of their limited partnership units. Plaintiffs also charge Defendants with allowing certain of the Properties held by the LP Defendants to fall into disrepair so that their appraised value would be depressed even further.

C. Parties' Contentions

Plaintiffs filed their Complaint on July 23, 2014, asserting a single cause of action for breach of fiduciary duty against the "AimCo Defendants, " which includes the GP Defendants, Aimco OP, Bezzant, Cordes, and Considine.[2] They purport to sue on behalf of a class of all minority or unaffiliated unitholders in the four LP Defendants. Plaintiffs assert that the Mergers were self-dealing transactions that were ...


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