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DEMOCRATIC NATL. COMM. v. MC CORD

June 18, 1976

DEMOCRATIC NATIONAL COMMITTEE, et al., Plaintiffs,
v.
JAMES W. Mc CORD, et al., Defendants



The opinion of the court was delivered by: RICHEY

 DISTRICT JUDGE CHARLES R. RICHEY

 This case is before the Court on a motion to dismiss or, in the alternative, for summary judgment, made by cross-claim defendants Potter, Dudley and Stans, trustees of and successors in interest to the Committee for the Re-Election of the President (CRP) and The Finance Committee to Re-Elect the President (FCRP). The cross-claims were filed by James W. McCord and McCord Associates, Inc. (hereinafter, "McCord"). For the reasons set forth below, the Court will dismiss the cross-claims.

 As background, the Court notes first that this case arises out of the now-famous break-in at the Watergate Office Building on June 17, 1972. The cross-claim defendants herein were also named as defendants in the principal action for damages, brought by the Democratic National Committee and various related parties. A settlement was reached in the principal suit; however, during the course of that litigation, defendant McCord filed six cross-claims, for indemnity and damages, against the aforementioned Committees and three of their officers, defendants Hunt, Liddy, and Magruder.

 By Order of April 23, 1975, this Court dismissed the first four cross-claims, which were grounded in indemnity for liability in the instant action. The Court reasoned that since the principal case had been settled and McCord was not responsible for making any of the settlement payments, the possibility of his civil liability had been precluded and he therefore had no further basis for his claims of indemnity. The remaining cross-claims are grounded in tort and allege damages to McCord's reputation and to his physical and mental well-being stemming from the cross-claim defendants' misrepresentation, to the effect that the proposed Watergate burglary was authorized by high officials of CRP and FCRP and, therefore, was legal.

 A. The Trustees, as Successors to the Committees, are not Proper Parties to this Suit.

 At the outset, the Court notes that even if it did not dismiss the remaining claims in their entirety, it would at least have to dismiss the defendant Trustees, successors to the Committees, from the action. This Court has already held in this case that the Committees, as unincorporated associations, cannot sue or be sued in their own names under District of Columbia law, which law is applicable to this case. See Fed.R.Civ.P. 17(b); Fennell v. Bache, 74 App. D.C. 247, 123 F.2d 905 (D.C. Cir. 1941); Matson v. Mackubin, 61 App. D.C. 102, 57 F.2d 941 (D.C. Cir. 1932); Day v. Sidley & Austin, 394 F. Supp. 986 (D.D.C. 1975); National Association for Community Development v. Hodgson, 356 F. Supp. 1399 (D.D.C. 1973); see also Memorandum Opinions in this case of August 11, 1972, and March 23, 1973. As successors to the Committees in this action, the Trustees stand in the same position as, and can assert defenses which would have been available to, the Committees. See Order in this case of June 10, 1974. See also Fed.R.Civ.P. 25(c); 67 C.J.S. Parties § 89 (1950). Cross-claimants have attempted to invoke the doctrine of corporation by estoppel in order to negate the Committees' assertion of legal incapacity. However, there is no such doctrine recognized in the District of Columbia. 29 D.C. Code § 921c; Robertson v. Levy, 197 A.2d 443 (D.C. App. 1964). Cross-claimants also claim that the Committees have somehow "waived" the defense of legal incapacity by participating in this and other litigation and attendant settlements. Claimants ignore, however, what this Court pointed out in both of the Memorandum Opinions previously cited: Fed.R.Civ.P. 17(b)(1) recognizes an exception to the general rule, that the federal courts will defer to state law regarding the legal capacity of unincorporated associations, when those associations sue or are sued in actions seeking vindication of constitutional or other federal substantive rights. Thus, when the Committees (through the Trustees) settled the principal case herein, they reached an accommodation as to the federal claims, on which they were properly subject to suit. See Memorandum Opinion of March 23, 1973.

 B. Cross-claimant's Complaint Fails to State a Cognizable Claim Upon Which Relief can be Granted.

 Taking as conceded for purposes of the instant motion all of the allegations of cross-claimant's complaint, the Court has nonetheless concluded, for the reasons set forth below, that McCord has failed to state an actionable claim.

 In reaching the above conclusion, it was first necessary for the Court to fully understand the nature of cross-claimant's allegations. This was no simple task, for the complaint failed to set forth McCord's claims with clarity. Nonetheless, after long and careful scrutiny, the Court has concluded that the essential elements of McCord's claims are as follows: McCord alleges that he was an employee and agent of the defendant Committees and that he worked directly under defendants Magruder, Liddy, and Hunt. He alleges that "all actions" taken within the course of that employment, presumably including the actions relevant to this case relating to the Watergate burglary, were performed at the behest and control of the aforesaid defendants. These actions, he adds, were undertaken with the assurance provided by CRP and FRCP through its officers that "said acts were lawful, material and necessary for the protection of lives and property of personnel of CRP and FRCP." Amended Answer at Para. 45. He was also assured that these acts "had been previously approved and sanctioned by the highest ranking officials of CRP and FCRP." Id. at para. 46. McCord apparently alleges that those who directly provided him with said assurances, i.e., Magruder, Liddy, and Hunt, believed it probable "that they were rendering aid to McCord . . . for the purpose of committing acts which were tortious. . . ." Id. at para. 55. As a result of being deliberately misled, McCord claims, he took part in activities which led to great damage to his reputation (fifth cross-claim) and severe physical, mental, and emotional strain and mental anguish (sixth cross-claim).

 Without using the word "fraud," cross-claimant has thus pleaded a civil action sounding in tort, *fn1" specifically fraudulent misrepresentation. To encapsulate, McCord seems to be saying that on the basis of the facts that the acts in question had been authorized in the highest echelons of the Committees and that they were necessary for the protection of CRP and FCRP property and personnel, the defendants fraudulently assured McCord that the acts were therefore legal; as a result, McCord took part in the Watergate burglary and related activities, to his great detriment.

 The difficulties with maintaining the instant action are apparent on its face. McCord must first circumvent the "well-established rule that an agent will not be permitted to recover from his principal for . . . liabilities incurred in a transaction prohibited by law. . . ." 3 Am. Jur. 2d Agency § 245 (1962). Accordingly, cross-claimant invokes the exception to the general rule, available to an agent who "acts in good faith for his principal under the latter's direction, relying upon the principal's representations as to the legal propriety of the act to be done. . . ." Id. at § 244. His task is complicated, however, because the relevant misrepresentation in the instant case was not a misrepresentation of fact upon which McCord could base his belief in the legality of his acts; rather, the relevant assurance was a misrepresentation of law. As cases in this jurisdiction have held, "it is the general rule that misrepresentations as to matters of law do not ordinarily support an action for damages." Hembry v. Parreco, 81 A.2d 77, 79 (D.C. Mun. App. 1951). However, "where one has, or professes to have, a superior knowledge of the law, and particularly if there is a relationship of confidence between the parties, a misrepresentation of law may be actionable." Dixon v. Dodd, 80 A.2d 282, 284 (D.C. Mun. 1951). This latter rule and exception relates in turn to the more general requirement applicable to all misrepresentation actions:

 As the court of appeals for this circuit has succinctly put it, the "reliance must be reasonable." Isen v. Calvert Corp., 126 U.S. App. D.C. 349, 379 F.2d 126, 130 (D.C. Cir. 1967). See also Day v. Sidley & Austin, 394 F. Supp. 986, 990 (D.D.C. 1975); McCarthy v. Cahill, 249 F. Supp. 194, 198-99 (D.D.C. 1966). Thus, in the context of the instant motion, the issue is simply this: do sufficient allegations of fact appear in the pleadings and discovery such that, if they are proved, a finder of fact could reach the conclusion that, in light of all the circumstances of McCord's relationship with ...


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