Three properties along Rockville Pike, including a shopping center assessed at more than $37 million, will be up for auction this week as part of a long-running legal dispute between the former owner of a different Rockville office building and one its tenants.
Tower Oaks Boulevard LLC attached the three properties — including The Shops at Congressional Village — after obtaining an $8 million verdict against two companies that it said twice forced it into foreclosure over a rent dispute: Ronald Cohen Investments and Ronald Cohen Management Companies.
Eric Siegel, principal and legal counsel for Cohen Siegel Investors LLC, has said the defendant Cohen companies have no ownership stake in any of the properties, which are owned by Cohen family members through holding companies. The property owners subsequently filed third-party motions to remove the writs.
Not only did Montgomery County Circuit Court Judge Ronald B. Rubin deny those motions, but he “pierced the corporate veil,” describing the holding companies as “shells” and “a conduit to keep control of money” and ruling that they belong to the defendants.
“This is nothing more than Ronald Cohen’s instrumentality to do his business,” Rubin said in his bench ruling last week. “He is the wizard behind the curtain. There’s no question in my mind.”
The judge acknowledged that people can legitimately use entities and set up disbursing agents for business purposes, but said “the level of actual control and direction” by the defendant Cohen companies was clear.
“The level of control, the level of absolute ability to manipulate and to run levers of power go beyond frankly anything that I’ve seen in the civil courtroom in a long time,” Rubin said.
Christopher C. Fogleman, a lawyer for Tower Oaks, praised Rubin’s decision.
“He simply believed this was a sham and a way for them to avoid legal obligations,” said Fogleman, of Gleason, Flynn, Emig & Fogleman Chtd. in Rockville.
Piercing the corporate veil is done for one of two reasons, most commonly for fraud. But Rubin said he was doing it to enforce a paramount equity, which Fogleman said means “the conduct was so bad it was appropriate to go behind the corporate façade.”
The judge noted that the Court of Appeals has never weighed in on what constitutes a paramount equity, but said the Tower Oaks case “meets the nonfraud exception.”
Fogleman called all three properties “pretty substantial.”
The Shops at Congressional Village have been assessed at $37.5 million but could sell for much more, he said. The strip shopping center includes outdoor retailer REI.
The second property, on Rollins Avenue, houses a post office; the third property is an office building in the 1500 block of East Jefferson Street, according to court records.
Siegel, of Cohen Siegel Investors, did not respond to requests for comment.
Glenn C. Etelson, a lawyer for the third-party properties, also did not respond to a request for comment. Etelson is a senior shareholder with Shulman Rogers Gandal Pordy & Ecker P.A. in Potomac.
The auctions are scheduled for Wednesday in Rockville, according to Fogleman.
In the underlying case, a Montgomery County jury in January awarded Tower Oaks more than $4.5 million in compensatory damages. That was in addition to $600,000 for unpaid rent that Tower Oaks had won in a pretrial summary judgment motion.
The jury also found that Tower Oaks was entitled to punitive damages but did not determine the amount.
Four months later, following a bench trial, Rubin awarded Tower Oaks punitive damages of $2.2 million as well as attorneys’ fees.
The case is Tower Oaks Boulevard LLC, et al. v. CWCapital Asset Management LLC, et al., 368256V.