nrp v buffalo

8/6/2019 NRP v Buffalo

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UNITED STATES DISTRICT COURTFOR THE WESTERN DISTRICT OF NEW YORK

NRP HOLDINGS LLC and NRP PROPERTIES LLC

Plaintiffs,

v. Civil No.:

CITY OF BUFFALO, BYRON W. BROWN,DEMONE A. SMITH,RICHARD A. STENHOUSE, BUFFALOJEREMIAH PARTNERSHIP FOR COMMUNITYDEVELOPMENT, INC., JOHN DOE 1 10, andJOHN DOE COMPANIES 1 5.

Defendants.

COMPLAINT

through

their attorneys Webster Szanyi LLP, state as follows:

Introduction

1. This is an action seeking recovery for actual and treble damages

caused by the conduct of the individual defendants who participated in the affairs of the

defendant City of Buffalo through a pattern of racketeering activity in violation

et seq. This action also seeks recovery

breach of a contract concerning plans to develop, construct and manage (50) units

of single-family homes in the Masten Park and Cold Springs neighborhoods of the City of

Buffalo. Simply put, the individual defendants conspired to kill the project when NRP

refused to comply with their illegal demand to pay monies to Reverend Richard A.

Case 1:11-cv-00472-WMS Document 1 Filed 06/06/11 Page 1 of 22


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Stenhouse and/or affiliated organizations in order for the Project to proceed. The illegal

demands by the individual d

Parties

2. Plaintiff NRP Holdings LLC is an Ohio limited liability corporation with

its principal place of business in Ohio.

3. Plaintiff NRP Properties LLC is an Ohio limited liability corporation

with its principal place of business in Ohio.

4. Defendant City of Buffalo is a municipal corporation operating under

the laws of the State of New York.

5. Defendant

New York.

6. Defendant Brown was and is the Mayor of Buffalo.

7. Defendant Demone A.

New York.

8. Defendant Smith was and is a member of the Buffalo Common

Council.

9.

State of New York.

10. Defendant Buffalo Jeremiah Partnership for Community

rating under the

laws of the State of New York.



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11. Defendant Stenhouse was and is the president of the Jeremiah

Partnership.

12. Defendants John Doe 1 10 and John Doe Companies 1 5

represent individuals and entities which plaintiff believes exist and may have acted

individually, together, and/or in concert with the defendants herein. Defendants John Doe

1 10 include both individuals employed by the City of Buffalo and within the private

sector. The allegations set forth below are incorporated as and against each John Doe

and John Doe Company as if fully set forth against him, her, or it.

Jurisdiction and Venue

13. This Court has federal question jurisdiction under 28 U.S.C. 1331,

18 U.S.C. 1964(a), and 42 U.S.C. 1983.

14. This Court has jurisdiction based on diversity of citizenship pursuant

to 28 U.S.C. 1332.

15. Venue is proper in this judicial district pursuant to 28 U.S.C. 1391

and 18 U.S.C. 1965(a).

Factual Background

16. NRP are affiliates of the NRP Group LLC, an Ohio limited liability

corporation that develops, builds and manages apartments and housing across the

United States. Among other honors, the National Association of Home Builders named

the NRP Group LLC as the 2009 multifamily development firm of the year.

17. In November 2007, NRP was invited by representatives of Buffalo to

participate in a meeting to discuss affordable housing initiatives within the City of Buffalo.



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During this meeting, these representatives expressed their desire to work with NRP and

associated companies to build single family homes within the City of Buffalo.

18. Effective February 21, 2008, NRP entered into agreements with

associated companies to develop, construct and manage fifty (50) homes in the Masten

. (NRP and its

associated companies are hereafter )

19. By letter dated February 25, 2008, Buffalo agreed and committed

itself to participate in the Project by, among other things, extending to the Project its usual

Low Income Housing PILOT agreement, providing $1,600,000.00 of its HOME funds to

assist in the construction and, in addition, providing fifty-one (51) buildable vacant lots at

a price no greater than $2,000 per buildable lot, and not to exceed a total price of

$100,000.00.

20. to the Project was subject to

one condition -- Income Housing

Tax 5, 2008

21. In the February 25, 2008 agreement and commitment letter, Buffalo

development, which allows for homeownership conversion at the end of the tax required

compliance period. The lease to own component provides future homeownership

opportunities to residents who are not currently prepared to become homeowners, while

providing them with clean, state-of-the-art hou



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22. As of February 25, 2008, Buffalo knew that under applicable law, the

tax compliance period referenced in the February 25, 2008 agreement and commitment

was thirty (30) years.

23. By letter dated August 20, 2008, the Development Team received a

commitment from the New York State Division of Housing and Community Renewal

required

copy of the DHCR August 20, 2008 agreement and commitment is attached hereto at

24. By letter dated November 5, 2008, the DHCR notified the

Development Team that the amount of the LIHTC was increased from $794,363 to

$922,954. (A copy of the DHCR November 5, 2008 agreement and commitment is

25. By letter dated November 5, 2008, the New York State Housing Trust

low interest loan in the amount of $2,200,000.00 in support of the Project. (By letter

dated March 19, 2009, the HTFC issued its agreement and commitment for the loan. A

copy of the March 19, 2009 agreement and commitment is attached hereto at Exhibit

26. After receiving the agreements and commitments from Buffalo and

the DHCR, Buffalo moved forward with its participation in the Project in accordance with

its February 25, 2008 commitment and agreement.



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27. For example, Buffalo issued letters in support of the Project and the

application to the DHCR.

28. Buffalo also selected the sites to be used for the single-family homes.

29. I

, and elevations submitted by the Development Team.

30. In early 2009, however, Brown, Smith, Stenhouse and the Jeremiah

Partnership conspired and started demanding that the Development Team contract with

Stenhouse and/or organizations connected to Stenhouse (including the Jeremiah

Partnership) to participate in the Project.

31. The Development Team was told that the participation of Stenhouse

was required in order to assure adequate minority involvement in the Project.

32. The Development Team was specifically instructed by Brown, Smith,

and other employees of Buffalo

33. Initially, Stenhouse simply indicated an interest to make sure that

there was adequate minority involvement in the Project. Thereafter, Stenhouse

communicated a series of escalating demands. Instead of unofficial input, Stenhouse

then demanded a series of tasks involving ever increasing payments to him and later the

Jeremiah Partnership. Eventually, Stenhouse asked whether he could be a partner on

the Project similar to the arrangement he had on the Packard project, a previous project

in the City of Buffalo, Stenhouse then demanded



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that the Development Team accept his response to a Request for Proposal, discussed

below, even though it was grossly inferior to the bid selected by the Development Team.

34. The Development Team was told that, because Stenhouse did not

have an acceptable contract on the Project, several items promised by the City of Buffalo

were being held up in defen

35. Despite these threats and demands, the Development Team

believed that they should

need for an independent contractor on the Project devoted to minority involvement issues

even though members of the Development Team were already providing such services.

36. In April 2009, the Development Team issued the RFP for a provider

to assist it in maximizing participation in the Project by local minority business

enterprises, women-owned business enterprises and individuals.

37. The RFP was mailed to over thirty (30) organizations and an

advertisement was placed in the Buffalo News.

38. Stenhouse and the Jeremiah Partnership were advised of the RFP

and invited to respond.

39. The Development Team received three (3) proposals including one

from Stenhouse and the Jeremiah Partnership.

40. After a thorough review of the proposals, the Development Team

selected the proposal submitted by the University of Buffalo Center for Urban Studies in

conjunction with J.W. Pitts Planning .



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41. The proposal by the UB Team ranked far superior to the others and

was more reasonably priced.

42. In April 2009, the City of Buffalo issued site plan approval and a

permit ready letter for the Project.

43. In April 2009, the DHCR issued environmental and plan approvals for

the Project.

44. By April 2009, the Development Team had incurred considerable

expense and performed all tasks necessary to move forward with the Project.

45. The Development T included the selection of the UB

Team to satisfy the requests for additional minority participation and involvement in the

Project.

46.

DHCR were also performing their necessary functions for the Project to proceed.

47. However, after selecting the UB Team and rejecting the proposal

submitted by

to proceed with the project were stalled and ultimately killed by the defendants.

48. After supporting the Project for over eighteen months, Brown, Smith,

Stenhouse and the Jeremiah Partnership used their positions and influence to cause

Buffalo to breach its February 25, 2008 agreement and commitment to the Project by,

among other things, individually taking action to prevent completion of the project and by

directing City Departments, Agencies, and employees to either stop working on the

project or to take action to prevent the project from proceeding forward.



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49. Brown, Smith, Stenhouse and the Jeremiah Partnership conspired to

cause Buffalo to breach its agreement and commitment to the Project because the

Development Team refused to comply with the illegal demand that they pay monies to

Stenhouse and/or affiliated organizations in order for the Project to proceed.

50. During the course of these events and in making the illegal demand,

Brown saidIf you do not hire the right company [i.e. Stenhouse and/or the Jeremiah

51. Brown also said Make Stenhouse happy or the deal will not go

the East S

52. After the Development Team selected the UB Team instead of

Stenhouse, Brown said

53. Smith made similar statements as those attributable to Brown in the

preceding paragraphs.

54. All of the defendants made certain statements in furtherance of their

illegal scheme, to each other and others, by U.S. mail, wire, telephonic, email, and/or

other electronic means.

55. Upon information and belief, Stenhouse and the Jeremiah

Partnership demanded a role on the project because of their past endorsement of Brown

as Mayor and in consideration for their future endorsement of Brown.



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56. Upon information and belief, Brown and the other defendants

intended to reward Stenhouse and the Jeremiah Partnership for their past endorsement

and support and, because of their position in the community, viewed the continuing

-

election efforts in 2009.

57. Calendar Year 2009 was an election year for Brown.

58. The illegal schemes developed and implemented by Brown, Smith,

Stenhouse and the Jeremiah Partnership are and

scheme.

59. Upon information and belief, Brown, Smith, Stenhouse and the

Jeremiah Partnership other development projects that

proceeded within the City of Buffalo on those projects finding a role for and/or the

payment of monies to Stenhouse, the Jeremiah Partnership, and/or companies

associated with Stenhouse.

60. Upon information and belief, in situations where development

projects found a role for Stenhouse and/or the Jeremiah Partnership on their teams,

Buffalo honored its agreements and commitments on those projects.

61. Upon information and belief, the role of Stenhouse and/or the

Jeremiah Partnership in certain otherdevelopme

job where Stenhouse and/or the Jeremiah Partnership added little or no value to the

projects.



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62. Upon information and belief, Stenhouse did not have development

experience. As a result, ted City employees to work directly

with Stenhouse at City expense to provide the expertise that he lacked and to perform

services that Stenhouse was being paid to perform on these otherdevelopment projects.

63. Upon information and belief, the Packard project, commenced in or

about 2006, is another example where the individual defendants conspired to demand a

role for Stenhouse as a condition for approving a development project in Buffalo. In the

Packard nt project and earned a

despite his lack of qualifications as a developer. Indeed, upon

information and belief, Stenhouse provide no services of value to the Packard project.

64. Upon information and belief, East Side Housing Opportunities, Phase

I is another example of where the individual defendants conspired to demand a role for

Stenhouse and/or his affiliated companies as a condition for approving a development

project in Buffalo. NRP was not involved in this Phase I project but has learned that

meaningful contribution to this project, Stenhouse was paid a significant fee at the

insistence of the defendants.

65. Prior to filing this complaint, NRP submitted a Freedom of

Information Law request to Buffalo requesting, among other things, documents in

. This request

was intended to determine the precise involvement of Stenhouse and the Jeremiah

Partnership concerning other development projects in Buffalo.



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66. In response, Buffalo first delayed and then failed and refused to

produce documents in its possession concerning Stenhouse and the Jeremiah

Partnership.

67. Discovery is necessary to determine the full extent of the precise role

played by Stenhouse and the Jeremiah Partnership in the Packard project, East Side

Housing Opportunities Phase I, and other development projects in Buffalo.

68. As a direct and proximate result of the tortious and illegal conduct of

Buffalo, Brown, Smith, Stenhouse, and the Jeremiah Partnership, NRP was no longer

able to claim the benefits of their agreements with members of the Development Team,

the DHCR, the HTFC and others who issued loan commitments and, in turn, the City of

Buffalo.

69. Buffalo, Brown, Smith, Stenhouse and the Jeremiah Partnership

have failed to offer any good faith or legitimate reason for causing Buffalo to breach its

agreement and commitment to the Project.

70. In statements to the media, Brown claims that he refused to support

the Project when he learned of the thirty (30) year rental time period before the single-

family homes would be made available for home ownership.

71. refusing to support the project is

patently false.

72. Brown was aware that the thirty (30) year durational requirement was

mandatory under applicable law February 25, 2008 agreement and

commitment for the Project.



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73. Stenhouse is quoted by the media as stating that he never thought

the Project was worthwhile.

74. both incredible and false as reflected by his

relentless and persistent efforts in 2009 to have a role on the Project including the

submission of a proposal in response to the RFP.

75. Simply put, Brown, Smith, Stenhouse and the Jeremiah Partnership

conspired to tortiously and illegally kill the Project because the Development Team

refused to comply with the illegal demand that it pay Stenhouse and/or the Jeremiah

Partnership money as a condition for their role in determining whether Buffalo would

honor the February 25, 2008 agreement and commitment.76. A notice of claim was filed and served upon the municipal defendants

on June 14, 2010, and more than 30 days have passed since the filing of the notice of

claim with the municipal defendants failing to adjust or otherwise pay for the damages

identified within the notice of claim. A copy of the notice of claim is attached as Exhibit

.

77. On November 18, 2010 the municipal defendants conducted the

examination of plaintiffs pursuant to the terms of the General Municipal Law.

78. Plaintiffs have satisfied all conditions precedent under the General

Municipal Law for commencing an action against the municipal defendants.

79. Upon information and belief, the limitations of liability set forth in

Article 16 of the CPLR do not apply to this action.



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COUNT II

Tort Claims Against Buffalo, Brown,Smith, Stenhouse and the Jeremiah Partnership

86. NRP repeats and re-alleges the allegations set forth in paragraphs 1

through 85 above.

87. NRP is a party to agreements with associated companies concerning

the development, construction and management of homes in connection with the Project.

88. NRP is the assignee of all rights and benefits concerning the

agreements and commitments that are attached hereto


knew or should have known of the agreements secured by the Development Team in

order to perform the Project.


employed and otherwise engaged in

wrongful and illegal conduct designed

entered into in connection with the Project, and the economic advantages that would

have been realized under all such agreements.

91. Brown, Smith, Stenhouse and the Jeremiah Partnership intentionally

all defendants

expected and understood that all other contracts referenced herein would not be

performed as a result of their intentional and wrongful conduct set forth in detail above, all

without justification.



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92. The defendants caused an actual breach of the contracts and/or non-

performance thereof and NRP sustained damages as a result.

93. Through their course of dealing with NRP and the Development

Team, the defendants were all aware of prospective contractual and business

relationships by and between plaintiffs and Buffalo and third-parties, and with this

awareness interfered with the business relationships with the sole purpose of harming

NRP or by means that were unlawful or improper.

94. Each defendant, in pursuance of a common plan or design to commit

a tortious act, actively took part in it, or furthered it by cooperation or request, or provided

aid and encouragement to each of the other defendants, or ratified and adopted each of

the other defendantle with each of the

defendants. Each defendant acted tortiously and one or more of the defendants

committed an act in pursuance of the common plan, design or agreement which

constitutes a tort.

95. The wrongful and illegal actions and conduct of Buffalo, Brown,

Smith, Stenhouse and the Jeremiah Partnership described in detail above are actionable

under the common law theories of tortious interference with contract and/or prospective

contractual relations, tortious interference with prospective economic advantage and/or

economic relations, and concerted action theory and/or civil conspiracy.

96. Buffalo is not responsible for the claims set forth in paragraph 94

agreement. Buffalo is responsible for the claims set forth in paragraph 94 above



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and the

agreements entered into between NRP and other members of the Development Team.

Buffalo is also responsible for the acts of Brown, Smith, and its other employees pursuant

to the doctrine ofrespondeat superior.

97. Consequently, NRP is entitled to recover compensatory damages of

at least $1,000,000.00 as permitted by law against Buffalo, Brown, Smith, Stenhouse

and the Jeremiah Partnership.

98. The conduct described herein was reckless, wanton, and carried out

in total disregard for the rights of NRP. As a result, NRP is entitled to recover punitive

damages against Brown, Smith, Stenhouse and the Jeremiah Partnership in an amount

to be determined.

COUNT III

RICO Claims Against Brown,Smith, Stenhouse, and the Jeremiah Partnership


through 98 above.

100. As described above, Brown, Smith, Stenhouse and the Jeremiah

Partnership conspired in various respects including to illegally demand a role for

Stenhouse on certain projects and later to decide whether to cause Buffalo to breach its

agreements and commitments for land development projects depending on whether the

subject land developer complied with their unlawful and illegal demands to pay monies to

Stenhouse and/or affiliated organizations in order for such projects to proceed.

101. Pursuant to Buffalo.



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102. Pursuant to the RICO, Brown, Smith, Stenhouse and the Jeremiah

Partnership committed , as set forth above, in

furtherance of the illegal scheme. Such activities, as described in detail above, involved

interstate commerce and include, but are not limited to, violations of the Hobbs Act, 18

U.S.C. 1951, 18 U.S.C. 1341, 18 U.S.C. 1343, and New York Penal Law 200 et

seq.

103. Pursuant to the RICO, the illegal activities of Brown, Smith,

Stenhouse and the Jeremiah Partnership constitute a pattern of racketeering activity as a

closed ended and/or open ended continuity and/or because they were used on NRP and,

upon information and belief, other developers involved in certain other projects that

proceeded within the City of Buffalo.

104. Even assuming arguendo

practice has ended, Brown, Smith, Stenhouse and the Jeremiah Partnership developed

and implemented this practice against NRP and, upon information and belief, others

through numerous threats and demands over a period of more than two years.

105. The illegal activities of Brown, Smith, Stenhouse and the Jeremiah

Partnership constitute a pattern of racketeering activity because, left unchecked, it is

reasonable to expect that such acts were the regular manner in which such persons

exercised their authority within the enterprise and implied a threat of continuing improper

activity. Moreover, left unchecked, the illegal activities of defendants are likely to occur in

the future.



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106. In addition, the illegal activities of Brown, Smith, Stenhouse and the

Jeremiah Partnership constitute a pattern of racketeering activity based on the escalating

demands concerning the role of Stenhouse and the Jeremiah Partnership on the Project

and other development projects in Buffalo. Such escalating demands implied a threat of

continuing criminal activity.

107. Pursuant to the RICO, Brown, Smith, Stenhouse and the Jeremiah

Partnership participated in the affairs of the enterprise through the pattern of racketeering

activity described above.

108. By reason ofdemands and

pay to play scheme employed by Brown, Smith, Stenhouse and the Jeremiah

Partnership, NRP has been injured in its business and property in the amount of at least

$1,000,000.00.

109. By reason of the foregoing, NRP is entitled to a judgment against

Brown, Smith, Stenhouse and the Jeremiah Partnership for their monetary damages, plus

prosecuting this action.



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COUNT IV

42 U.S.C. 1983 Against Buffalo, Brown and Smith


109 above.

111. Buffalo had and/or has an official custom or policy established by

Brown and/or Smith that required NRP to comply with the illegal demand to pay monies to

Stenhouse and/or affiliated organizations in order for the Project to proceed.

112. In applying this official custom or policy to NRP, Buffalo, Brown and

Smith were acting under color of state or local law.

113. Application of this official custom or policy to NRP resulted in

depriving them of their rights protected by the Equal Protection and Due Process clauses

of the United States Constitution.

114. NRP was treated differently than other developers of projects in

Buffalo. When other developers found a way to pay monies to Stenhouse and/or

affiliated organizations, Buffalo, Brown and Smith allowed their projects to proceed to

completion. Because NRP refused to make such payments, Buffalo, Brown and Smith

maliciously and in bad faith intended to injure NRP and actively took steps to kill the

Project.

115. NRP had a binding agreement with Buffalo concerning the Project

pursuant to the February 25, 2008 agreement and commitment. In reliance on that

agreement, NRP fulfilled all necessary conditions and expended considerable sums, time

and resources in order for the Project to proceed. After supporting the Project for over



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$1,000,000.00 together with prejudgment interest, an award of treble damages and

and costs pursuant to the RICO;

d) On Count IV: Enter judgment on behalf of NRP against Buffalo,

Brown and Smith for compensatory damages in excess of $1,000,000

and punitive damages;

e) Awarding NRP its costs, disbursem

f) Awarding NRP such other and further relief as the Court deems just

and proper.

DEMAND IS HEREBY MADE, for a trial by Jury.

Dated: June 3, 2011

WEBSTERSZANYI LLPAttorneys for Plaintiffs

By: s/ Thomas S. Lane

Thomas S. LaneNelson Perel

1400 Liberty BuildingBuffalo, New York 14202Telephone: (716) [email protected]@websterszanyi.com

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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