Covenant plaintiffs allege misconduct, breach of contract
A group of residents at the former Covenant at South Hills have filed a class-action lawsuit against B’nai B’rith International, B’nai B’rith Housing, Inc, and its officers and directors, seeking to recover hundreds of thousands of dollars in entrance fee deposits.
Other defendants named in the suit, filed last week in the Allegheny County Court of Common Pleas, are Greystone Development Company, LLC and Greystone Management Services Company, LLC, the firms responsible for helping market and develop the B’nai B’rith-sponsored Continuing Care Retirement Community, or CCRC, located off Bower Hill Road in Mt. Lebanon.
The 59-page complaint, filed by attorneys Theodore Goldberg, Howard Louik and Michael Plummer, alleges 13 counts of misconduct on the part of B’nai B’rith and its officers, including breach of contract, breach of fiduciary duty and fraud.
So far, 28 resident units have joined the suit. Louik says he expects many more residents to join the suit as the case progresses.
The facility, which B’nai B’rith opened in 2002 as its first foray into the private senior housing market, consists of 126 one- and two-bedroom independent living apartments, 48 assisted living units, 12 memory-support units and 46 skilled nursing beds.
The Covenant struggled financially for years, defaulting on its payments to its bondholders. Finally, to avoid foreclosure proceedings initiated by some of its creditors last year, the institution filed for bankruptcy this past January.
At a court-ordered auction in September, Concordia Lutheran Ministries bought the facility for $15 million. It is now called Concordia of the South Hills.
The complaint alleges that the Greystone defendants approached B’nai B’rith in the late 1990s with a plan for developing a CCRC in Pittsburgh, promising B’nai B’rith “a substantial sum of money” in return for help in developing and operating that facility.
The complaint claims that B’nai B’rith incorporated The Covenant at South Hills, Inc. as a “shell corporation” that would act as the agent of B’nai B’rith in operating the Covenant.
According to the complaint, “B’nai B’rith received or was expected to receive a ‘development fee’ of $1 million in consideration of its sponsorship of the Covenant.” Moreover, the complaint asserts that B’nai B’rith was to receive a “‘license fee’ equal to 50 percent of the net income derived from revenues of the Covenant as the result of the association and its name with Covenant.”
In addition, the complaint alleges that residents were required to submit substantial entrance fee deposits in order to occupy an apartment in the Covenant, up to 95 percent of which were to be refunded when the resident vacated his unit and upon the unit being re-occupied. Concordia did not assume the obligation of refunding the residents’ deposits when it purchased the facility.
“For many residents, the entrance fees paid to the facility represented lifetime savings intended for their heirs,” the complaint claims.
“It’s striking in this case,” Louik said, “that the universal sentiment of the residents is that they purchased their apartment homes on the basis of B’nai B’rith’s good name and felt they were dealing with B’nai B’rith. They believed that B’nai B’rith would be looking out for their best interests and honor the Covenant’s commitments to them.”
Louik added that B’nai B’rith’s name is “all over the documents that either were given to the residents or that they signed. In addition, B’nai B’rith’s name appeared on the signage in front of the property, and B’nai B’rith’s logo was on the Covenant’s letterhead.”
B’nai B’rith issued the following statement in response to inquiries from The Chronicle: “B’nai B’rith Housing, Inc. deeply regrets the impact that the Covenant at South Hills, Inc. bankruptcy has had upon the residents of that community. When we formed the Covenant of South Hills, Inc. the intent was to provide a superior living experience consistent with B’nai B’rith Housing’s long record of service to seniors. B’nai B’rith Housing, Inc. has not had an opportunity to review the complaint, and so therefore has no further comment on it at this time.”
(Toby Tabachnick can be reached at firstname.lastname@example.org.)