Opinion ID: 197592
Heading Depth: 1
Heading Rank: 1

Heading: trouble in paradise

Text: 3 Inasmuch as the appellants profess not to contest the facts as found by the lower court, we lean heavily upon the opinion below in recounting the relevant events. See id. at 28-35. 4 In 1991, plaintiffs-appellants Sierra Fria Corporation and Rodrigo Rocha (hereinafter collectively Rocha) acquired an option to purchase two Aruban resort hotels, the Divi Divi and the Divi Tamarijn, from Grape Holding N.V. (Grape) for approximately $35,000,000. Rocha engaged Goodwin, Procter as lead counsel, with overall responsibility for coordinating legal due diligence involved in the transaction. The law firm assigned a partner, Michael Glazer, and an associate, Minta Kay, to work on the acquisition. Both attorneys specialized in real estate law, but neither previously had handled an Aruban transaction. 5 Kay received a draft title memorandum based on Aruban land records from Ingrid Bleeker, an attorney affiliated with Smeets, Thesseling & Von Borkhorst (a firm that one of Rocha's joint venturers had hired for its familiarity with Aruban and Dutch law). Kay, who had hoped to obtain either title insurance or an as-built survey or both, expressed concern that the memorandum lacked solid title assurances. Bleeker informed her that title insurance was unavailable in Aruba and that Aruban real estate transactions customarily proceeded without as-built surveys. The prevailing practice, she said, was to requisition a title opinion from a local notary. Bleeker also informed Kay that, if an as-built survey could be obtained at all, it would necessitate an extremely costly and time-consuming process. Frank Zeven, a more senior member of the Smeets firm, spoke with Glazer and confirmed Bleeker's depiction of Aruban real estate practices. 6 Based on these conversations, Glazer and Kay understood that if Rocha purchased the hotels according to Aruban custom, he risked not knowing exactly what assets he was acquiring. Their concern heightened when they realized that a time-share complex (Dutch Village) adjoined the Divi Tamarijn Beach Resort and that no clearly visible dividing line separated the properties. Thus, Kay spoke to Christopher DeChiario, Rocha's long-time aide. She explained the hazards of proceeding without a survey, and DeChiario promised to discuss the matter with Rocha. Glazer later spoke directly to Rocha about the risks attendant to the absence of a survey. Rocha indicated that he was not particularly concerned. Consequently, Goodwin, Procter did not commission a survey and Kay continued to work with Bleeker to determine precisely what assets were located on the hotels' properties. 7 Bleeker eventually mailed several maps of the properties to Goodwin, Procter. Kay informed DeChiario that the maps did not answer the boundary questions and again explained that, without a survey, Rocha lacked assurance that he was purchasing all the improvements. DeChiario told Kay to press on with the transaction notwithstanding the absence of a survey, and to focus her efforts on securing a cross-use agreement with Dutch Village that would permit Divi Tamarijn guests to use Dutch Village's facilities, and vice-versa. 8 When Glazer and Kay met with Rocha and DeChiario to iron out some wrinkles in the proposed cross-use agreement, they once again explained that, absent a survey, a purchaser could not know whether the envisioned property encompassed all of the hotels' facilities. Rocha stated that he was not interested in obtaining a survey and that he was willing to consummate the seemingly lucrative transaction without one. Kay then drafted a memorandum detailing her concerns and sent copies to Rocha and DeChiario. 9 During a subsequent conference call with Rocha and other investors, Kay again voiced her worries about the location of various facilities. Rocha grew impatient and made it clear that speed was his highest priority. He expressed eagerness to take control of the hotels during the height of the 1991-1992 tourist season, and he indicated a willingness to rely on the cross-use agreement and the customary Aruban title assurances for protection. 10 Goodwin, Procter received a standard Aruban title opinion from Maria Eman, an Aruban notary, firmed up the cross-use agreement, and thereafter consummated the transaction on February 11, 1992. The closing did not bring closure: approximately one year later, Rocha learned that assets having an appraised value in excess of $4,000,000--tennis courts, parking spaces, and an administrative building housing the hotels' laundry facilities--lay on land belonging to Dutch Village. 11 After unsuccessfully attempting to gain title to the assets, Rocha invoked diversity jurisdiction, see 28 U.S.C. § 1332(a) (1994), and brought suit against Goodwin, Procter. In his complaint, Rocha accused the defendants of negligence and breach of a contractual obligation to perform legal services skillfully, prudently, and accurately. Goodwin, Procter denied Rocha's charges. 12 The United States District Court for the District of Massachusetts, Morris E. Lasker, District Judge, conducted a five-day bench trial. The judge then authored an opinion in which he identified the controlling issue as whether Goodwin, Procter informed Rocha of th[e] risk [of proceeding without a survey] with sufficient emphasis and particularity to make certain that his decision on whether to consummate the purchase was intelligent and knowing. Sierra Fria, 978 F.Supp. at 30. He resolved this issue in the defendants' favor, basing his decision primarily on an assessment of the relative credibility of Glazer, Kay, and Rocha. In particular, Judge Lasker credited the attorneys' testimony that they repeatedly had warned Rocha about the dangers attendant to purchasing the hotels without a survey and found incredible Rocha's denial that they had uttered such warnings. 1 See id. at 34-35.