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Kornhauser v. Notting Hill, LLC

United States District Court, S.D. Ohio, Western Division

May 14, 2018


          Barrett, J.


         Karen L. Litkovitz, United States Magistrate Judge

         Plaintiff Samuel Kornhauser, proceeding pro se, brings this civil action against defendants Notting Hill, LLC, its unnamed members, and William Skillman, III (collectively, "Notting Hill"). This matter is before the Court on Notting Hill's motion to dismiss the complaint (Doc. 4), plaintiffs opposing memorandum and errata to the memorandum (Docs. 10, 11), and defendants' reply memorandum (Doc. 12).

         I. Background

         Plaintiffs claims arise out of a real estate purchase agreement between plaintiff, a citizen of the State of California, and defendants. Plaintiff alleges that defendant Skillman is a citizen of Ohio; Notting Hill, LLC is a limited liability company organized under the laws of the State of Ohio which conducts business and has its principal place of business in Ohio; and the unnamed members of Notting Hill, LLC are citizens of Ohio. (Doc. 1 at 3). Plaintiff makes the following factual allegations in the complaint:

         On or about August 9, 2016, Skillman made an unsolicited offer to plaintiff to buy a six-story building located at 607 Main Street, Cincinnati Ohio ("the Property") so that Skillman and "his group" could develop it. (Id., ¶ 10). Between August 9 and September 20, 2016, Skillman informed plaintiff that he and his group wanted to purchase the Property to develop it into residential condominiums and that they had a S3 million budget to develop the Property. (Id., ¶ 11). Skillman informed plaintiff several times in telephone conversations between August 9 and October 10, 2016 that Skillman knew he and his group would have to gut the interior of the Property and address several fire suppression and building code violations; however, these were not problems because the improvements would be necessary as part of the proposed development and were included in the S3 million budget. (Id., ¶ 12).

         On October 6, 2016, plaintiff informed Skillman that the purchase was "as is where is" and made defendants aware of certain conditions regarding the Property. (Id., ¶ 13). These included negotiations plaintiff had just completed with the City of Cincinnati and certain City departments for electrical and water system improvements. (Id., ¶ 13). Skillman informed plaintiff that these required improvements were not an issue since he and his group knew of these and other alleged code violations and necessary improvements and had budgeted for them. (Id.).

         On September 20 and October 6, 2016, defendants Skillman and Notting Hill, LLC entered into an Addendum and Contract to Purchase Commercial Industrial Investment ("Purchase Agreement") whereby Notting Hill would purchase the Property from Kornhauser in an "as is where is" for a price of $900, 000 payable in cash at the closing, with $25, 000 in earnest money to be deposited with a title agency.[1] (Id., ¶¶ 14, 16, 17, 18). The deposit would be applied to the purchase price upon closing of the sale. (Id., ¶ 17). Implicit in the Purchase Agreement was a covenant of good faith and fair dealing. (Id., ¶ 24).

         Several times during the 30-day inspection period, defendants received physical access to the Property. (Id., ¶ 26). On November 4, 2016, defendants sent plaintiff an email requesting a 30-day extension of the inspection period regarding issues previously disclosed by plaintiff. (Id., ¶ 27). The next day, defendants sent plaintiff a "Notice of Termination of the Purchase Agreement."[2] (Id., ¶ 29). Plaintiff alleges defendants requested the extension and terminated the Purchase Agreement in bad faith. (Id., ¶¶ 28, 31).

         Based on these allegations, plaintiff brings claims for (1) specific performance of the Purchase Agreement, which includes defendants' immediate payment of $900, 000 cash plus an additional payment of $138, 786 in construction costs that plaintiff has incurred to remediate code violations; (2) breach of contract, alleging damages in an amount equal to the difference between $1, 038, 786 (purchase price and expenses plaintiff incurred), less the value of the property on November 4, 2016, the date of defendants' breach, plus attorney fees and costs; (3) breach of implied covenant of good faith and fair dealing, for which plaintiff claims damages in excess of $1, 038, 786 and punitive damages; (4) fraud based on defendants' representations they would purchase the property "as is where is" for $900, 000, resulting in damages in excess of $962, 000; (5) negligent misrepresentation, for which plaintiff claims damages in excess of $1, 038, 786; (6) a declaratory judgment declaring that plaintiff fulfilled all of his obligations under the Purchase Agreement, defendants have breached the Purchase Agreement by failing to pay the agreed purchase price of $900, 000, defendants are not entitled to recover the $25, 000 earnest money deposit, and plaintiff is entitled to specific and complete performance of defendants' obligations under the Purchase Agreement and payment of $1, 038, 786 as necessary for performance of the contract and closing of the sale of the property; and (7) piercing the corporate veil of Notting Hill, LLC so that joint and several liability can be imposed for the corporation's allegedly unlawful actions. Plaintiff seeks to hold the members of Notting Hill, LLC jointly and severally liable for monetary damages of $1, 038, 786, prejudgment and post-judgment interest, reasonable attorney fees and costs under the parties' Purchase Agreement, and punitive damages.

         Before Kornhauser filed this lawsuit, Notting Hill, LLC had filed a complaint for breach of contract in the Hamilton County, Ohio Court of Common Pleas against Kornhauser on December 9, 2016, arising out of the parties' Purchase Agreement. (Doc. 4; Exh. I, Notting Hill, LLC v. Samuel Kornhauser, No. A1606763 (Ham. Cnty. Ct. C.P.). Notting Hill, LLC sought the return of the $25, 000 earnest money deposit, prejudgment and post-judgment interest, attorney fees and costs, and a declaratory judgment under Ohio law interpreting the contract in Notting Hill, LLC's favor. (Id.). Kornhauser removed the case to this Court on January 9, 2017. (Doc. 4, Exh. 2, No. 1:17-cv-00016). On that same date, Kornhauser filed an answer and a counterclaim against Notting Hill (Skillman, Notting Hill, LLC, and the individual members of the company) for specific performance, breach of contract, breach of the covenant of good faith and fair dealing, fraud, negligent misrepresentation, declaratory relief, and piercing the corporate veil to allow joint and several liability. Notting Hill, LLC, No. 1:17-cv-00016, Doc. 3. The district court sua sponte remanded the case to state court on September 25, 2017 because it found the amount in controversy requirement of 28 U.S.C. § 1332 was not met and the Court therefore lacked subject matter jurisdiction. (Id., Doc. 22). In making its determination, the Court rejected Kornhauser s argument that his counterclaims created federal jurisdiction because he sought specific performance of a $900, 000 real estate contract and his damages therefore exceeded $75, 000.00. The Court found that Kornhauser's counterclaims were not properly considered in determining removal jurisdiction and the amount in controversy. The state court case remains pending in the Court of Common Pleas.

         II. Motion to Dismiss (Doc. 4)

         Notting Hill moves to dismiss plaintiff Kornhausers complaint on the ground the same action, which has already been remanded to the state court once by this District Court, is currently pending in the Hamilton County Court of Common Pleas. (Doc. 4). Notting Hill argues that both the state court action, which Notting Hill, LLC filed first, and this subsequently filed lawsuit involve the same real estate contract between the parties. Defendants argue that plaintiff is bound to bring any claims he has arising out of the parties' contract as compulsory counterclaims in the state court action. (Id. at 4, citing Fed.R.Civ.P. 13(a)). Defendants allege that by instead filing an entirely new lawsuit in federal court, plaintiff is improperly attempting to evade the state court's jurisdiction.

         Plaintiff disagrees and argues that this Court has diversity jurisdiction over his claims against defendants because plaintiff is a resident of California and defendants are residents of Ohio, and the $960, 000 in damages plaintiff claims exceeds the $75, 000 amount in controversy requirement. (Doc. 10 at 2). Plaintiff contends that defendants do not dispute that this Court has subject matter jurisdiction over his lawsuit. Further, plaintiff argues that the pending state court litigation does not require dismissal of this federal lawsuit. (Id. at 4, citing Colorado River Water Conservation Dist. v. United States,424 U.S. 800 (1976)). Plaintiff alleges that defendants cite no legal authority to support their argument to the contrary, and ...

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