EXHIBIT (C)(6)
IN THE CIRCUIT COURT FOR MONTGOMERY COUNTY, MARYLAND
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MITCHEL R. MONTGOMERY, 9000 Regency Square
Blvd., Suite 201, Jacksonville, FL 32211,
and PETER J. BURNHAM, 3623 Edgewood Road,
Columbus, GA 31907,
in their individual capacity and on behalf
of SPRINGHILL LAKE INVESTORS
LIMITED PARTNERSHIP, and THEODORE N.
LERNER, 11501 Huff Court, North Bethesda,
MD 20895-1094, in his individual capacity
and on behalf of FIRST SPRINGHILL LAKE
LIMITED PARTNERSHIP, SECOND SPRINGHILL LAKE
LIMITED PARTNERSHIP, THIRD SPRINGHILL LAKE
LIMITED PARTNERSHIP, FOURTH SPRINGHILL LAKE
LIMITED PARTNERSHIP, FIFTH SPRINGHILL LAKE
LIMITED PARTNERSHIP, SIXTH SPRINGHILL LAKE
LIMITED PARTNERSHIP, SEVENTH SPRINGHILL LAKE
LIMITED PARTNERSHIP, EIGHTH SPRINGHILL LAKE
LIMITED PARTNERSHIP, NINTH SPRINGHILL LAKE
LIMITED PARTNERSHIP, AND SPRINGHILL
COMMERCIAL LIMITED PARTNERSHIP,
Plaintiffs,
v. No. 132222
THREE WINTHROP PROPERTIES, INC. filed 2-7-95
One International Place
Boston, Massachusetts 02110
Defendant.
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COMPLAINT FOR BREACH OF FIDUCIARY DUTY
Plaintiffs, by the undersigned attorneys, for their Complaint against the
above-named defendant state as follows.
A. THE PARTIES
1. Springhill Lake Investors Limited Partnership ("Springhill LP") is a
limited partnership organized and
existing under the laws of the State of Maryland, with a usual place of
business at One International Place, Boston, Massachusetts.
2. Plaintiff Mitchell R. Montgomery currently resides in Jacksonville,
Florida and is a citizen of the State of Florida. Plaintiff Peter J. Burnham
currently resides in Columbus, Georgia and is a citizen of the State of
Georgia. Plaintiffs Montgomery and Burnham bring this action in their
individual capacity and derivatively on behalf of Springhill LP.
3. Plaintiff Theodore N. Lerner currently resides in Montgomery County,
Maryland and is a citizen of the State of Maryland. Lerner brings this action
in his individual capacity and derivatively on behalf of ten limited
partnerships organized under the laws of the State of Maryland: First
Springhill Lake Limited Partnership, Second Springhill Lake Limited
Partnership, Third Springhill Lake Limited Partnership, Fourth Springhill
Lake Limited Partnership, Fifth Springhill Lake Limited Partnership, Sixth
Springhill Lake Limited Partnership, Seventh Springhill Lake Limited
Partnership, Eighth Springhill Lake Limited Partnership, Ninth Springhill
Lake Limited Partnership, and Springhill Commercial Limited Partnership
(collectively the "Operating Partnerships").
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4. Defendant Three Winthrop Properties, Inc., ("Three Winthrop") is a
corporation organized under the laws of the State of Massachusetts with its
principal place of business at One International Place, Boston,
Massachusetts.
B. JURISDICTION AND VENUE
5. This Court has subject matter jurisdiction over this case pursuant to
Md. Cts. & Jud. Proc. Code Ann. Section 1-501.
6. Venue is proper in this Court pursuant to Md. Cts. & Jud. Proc. Code
Ann. Section 6-201(a).
C. BACKGROUND INFORMATION
7. This case concerns the Springhill Lake Apartments in Greenbelt,
Maryland (the "Project"). The Project consists of a 96 building, 2,899 unit
garden apartment complex, approximately 154 acres of land, an eight-story
shopping center, a day care center, two swimming pools, six tennis courts and
a clubhouse.
8. The day to day operations of the Project are run by a managing agent,
Lerner Corporation.
9. The Project is owned by the Operating Partnerships.
10. Springhill LP is the general partner of each of the Operating
Partnerships. Springhill LP owns a 90% interest in each of the Operating
Partnerships. Subject to certain special allocations contained in the
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partnership agreements of the Operating Partnerships, the remaining interest
in each of the Operating Partnerships has, since 1985, been owned by Theodore
Lerner, as limited partner.
11. Three Winthrop is the managing general partner of Springhill LP and is
charged with the responsibility for carrying out the business of Springhill
LP.
12. Except for certain ownership interests held by Three Winthrop and by
an affiliated company, Linnaeus-Lexington Associates Limited Partnership
("Linnaeus"), Springhill LP is owned by individuals or entities who own as
limited partners approximately 649 units of interest in Springhill LP (the
"Investor Limited Partners"). The Investor Limited Partners purchased their
interests in Springhill LP through a confidential offering memorandum dated
January 16, 1985.
13. Plaintiff Mitchell R. Montgomery owns a one unit (.146379%) limited
partnership share of Springhill LP. Montgomery acquired this interest on
February 28, 1985, and has owned the interest continuously since then.
14. Plaintiff Peter J. Burnham owns a one unit (.146379%) limited
partnership share of Springhill LP. Burnham acquired this interest prior to
1986, and has owned the interest continuously since then.
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15. Three Winthrop, acting as managing general partner of Springhill LP
(which in turn is general partner of the Operating Partnerships), has certain
fiduciary obligations to the Investor Limited Partners, to Springhill LP, to
the Operating Partnerships, and to Theodore Lerner.
D. THREE WINTHROP'S MISCONDUCT
16. Three Winthrop has a fiduciary responsibility to assure that a
suitable managing agent is appointed for the Project under appropriate terms
and conditions. In addition, section 2.4(vi) of the limited partnership
agreement for each of the Operating Partnerships requires that, if Three
Winthrop appoints a managing agent to manage the Project, it may only pay
that managing agent "reasonable compensation" for its services.
17. In October 1994, in breach of these fiduciary and other obligations,
Three Winthrop embarked on a scheme to enrich itself at the expense of
Springhill LP and the Operating Partnerships, by moving to discharge the
current managing agent, Lerner Corporation, and to appoint Winthrop
Management, an affiliate of Three Winthrop, as the new managing agent of the
Project. As part of that scheme, Three Winthrop has refused to open the
managing agent position to competitive bidding, and has refused to employ any
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mechanism to insure that the compensation of the managing agent is
reasonable.
18. It is in the best interests of Springhill LP and the Operating
Partnerships to have the Property managed by an entity controlled by a person
with an economic interest in the performance of the Property. Lerner
Corporation meets this requirement; Winthrop Management does not.
19. There is a contest underway for ownership of the Property. It is
disruptive, irresponsible and incompatible with the best interests of
Springhill LP and the Operating Partnerships to appoint a new managing agent
for the Property before the ownership of the Property is resolved.
FIRST CAUSE OF ACTION
BREACH OF FIDUCIARY DUTY TO
MONTGOMERY, BURNHAM AND SPRINGHILL LP
20. Plaintiffs repeat and reallege the allegations of paragraphs 1 to 19.
21. Three Winthrop, acting as managing general partner of Springhill LP,
has breached its fiduciary duty to Montgomery, Burnham and to Springhill LP
in various ways, including by moving to appoint its affiliate as managing
agent of the Property, without opening the position to competitive bidding.
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SECOND CAUSE OF ACTION
BREACH OF FIDUCIARY DUTY TO
THEODORE LERNER AND THE OPERATING PARTNERSHIPS
22. Plaintiffs repeat and reallege the allegations of paragraphs 1 to 19.
23. Three Winthrop, acting as managing general partner of Springhill LP
which is in turn the general partner of the Operating Partnerships, has
breached its fiduciary duty to Theodore Lerner and the Operating Partnerships
in various ways, including by moving to appoint its affiliate as managing
agent of the Property, without opening the position to competitive bidding.
WHEREFORE, plaintiffs respectfully request that this Court:
(1) enjoin Three Winthrop from appointing itself or an affiliate as
managing agent of the Property;
(2) order Three Winthrop to pay damages to plaintiffs for its breaches of
fiduciary duty in an amount to be determined at trial; and
(3) award plaintiffs such other relief as the Court deems just and proper.
Respectfully submitted,
/s/ Mitchell R. Montgomery
Mitchell R. Montgomery, pro se
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/s/ Peter J. Burnham
Peter J. Burnham, pro se
/s/ Albert D. Brault
BRAULT, GRAHAM, SCOTT & BRAULT
Albert D. Brault (#01041)
101 S. Washington St.
Rockville, MD 20850
(301) 424-1060
Counsel for Theodore Lerner
OF COUNSEL:
Stephen M. Sacks
George E. Covucci
Peter G. Neiman
ARNOLD & PORTER
1200 New Hampshire Ave., N.W.
Washington, D.C. 20036
(202) 872-6681
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