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BROWN v. ARTERY ORG.

February 24, 1987

RENA BROWN, et al., Plaintiffs,
v.
ARTERY ORGANIZATION, INC., et. al., Defendants



The opinion of the court was delivered by: GREENE

 The Fair Housing Act (42 U.S.C. §§ 3601 et seq.) prohibits discrimination with respect to housing, inter alia, on the basis of race or national origin. The most basic substantive issue involved in this case -- one of first impression in this Circuit -- is whether under the Act the overwhelmingly black and Hispanic tenants of a low-rent apartment complex have the right to secure injunctive relief against the conversion of such housing to high-rent units if they are able to establish that (1) the owners are engaging in the conversion for the purpose of displacing the minority tenants or (2) the displacement of these tenants will be the conversion's predictable and inevitable effect. The Court previously issued a short-term temporary restraining order against the threatened eviction of the tenants, *fn1" and the dispute is now here on a more substantial basis under the rubric of plaintiffs' application for a preliminary injunction and defendants' motions to dismiss.

 I

 Facts

 Plaintiffs, tenants in the Dominion Gardens and Bruce Street apartment complexes *fn2" in Alexandria, Virginia, *fn3" filed this suit challenging the renovation of those complexes and the consequent displacement of its tenants, overwhelmingly black and Hispanic, as a violation of the federal Fair Housing Act. See also note 16, infra. Plaintiffs seek preliminary and permanent relief, that is, injunctions to restrain the defendants from taking any action to oust tenants who have already received 120-day eviction notices *fn4" and from issuing any further notices to vacate. *fn5" In addition, although following the institution of this action the private defendants withdrew earlier applications for co-insurance with the United States Department of Housing and Urban Development (HUD), plaintiffs also seek injunctive relief against HUD. That relief would require the Department to delete from its governing "Handbook" *fn6" a provision which delegates to banks and other lenders HUD's own statutory responsibility to minimize the involuntary displacement of tenants. *fn7"

 The case is presently before the Court on the following motions: (1) plaintiffs' motion for a preliminary injunction; (2) motions to dismiss for lack of personal jurisdiction filed by defendants Artery Organization, Dominion Gardens Arlandria Limited Partnership, Henry H. Goldberg, Alan Geller, and Jack I. Luria (collectively referred to herein as the Artery defendants or Artery); *fn8" (3) motions to dismiss for improper venue filed by defendants Conrad Cafritz, Jr., TIG-RFA, Inc., Potomac Village Limited Partnership and Potomac Real Estate Group, Inc. (collectively referred to herein as the Cafritz defendants or Cafritz) *fn9" as well as by the Artery defendants, defendant ABG Financial Services, and defendant Patrician Mortgage Company; and (4) motions to dismiss for failure to state a claim upon which relief may be granted filed by the Artery defendants, the Cafritz defendants, ABG, and Patrician. *fn10"

 The Court will address defendants' procedural motions before reaching the substantive issues raised in plaintiffs' motion for a preliminary injunction and defendants' motions to dismiss for failure to state a claim.

 II

 Jurisdiction

 As indicated, the Artery defendants challenge the Court's jurisdiction with respect to them. That challenge will be rejected.

 Personal jurisdiction is authorized by the "transacting business" clause of the D.C. long-arm statute, D.C. Code § 13-423(a)(1) (1981), and it is also consistent here with notions of fair play and substantial justice embodied in the Due Process Clause of the Constitution.

 In order to establish jurisdiction over the Artery defendants, none of whom is a resident of the District of Columbia, plaintiffs must demonstrate that these defendants have "transacted business" in the District within the meaning of D.C. Code § 13-423(a)(1) and that plaintiffs' claims for relief arose from specific District of Columbia transactions. LaBrier v. A. H. Robins Co., Inc., 551 F. Supp. 53, 55 (D.D.C. 1982); D.C. Code § 13-423(b).

 It has long been established that the transacting business clause of the District's long-arm statute grants jurisdiction to the fullest extent permissible under the Due Process Clause. See, e.g., Chase v. Pan-Pacific Broadcasting, Inc., 617 F. Supp. 1414, 1420 (D.D.C. 1985); Environmental Research International, Inc. v. Lockwood Greene Engineers, Inc., 355 A.2d 808, 810-11 (D.C. 1976) (en banc). Moreover, as the District of Columbia Court of Appeals has noted, section 13-423(a)(1) requires only "some affirmative act by which the defendant brings itself within the jurisdiction and establishes minimum contacts." Cohane v. Arpeja-California, Inc., 385 A.2d 153, 158 (D.C. Ct. App. 1978). *fn11"

 Plaintiffs allege that the Artery defendants have "transacted business" in the District within the meaning of the D.C. long-arm statute on the basis both of its direct contacts with the District and of the indirect contacts imputed to it as a result of its constructive agency or co-venturer relationship with Cafritz. *fn12" The Artery defendants claim in response that personal jurisdiction cannot be premised either upon their direct contacts with the District because the so-called "government contacts" doctrine precludes consideration of some or most of those contacts, or upon the contacts of the Cafritz defendants with the District because Artery and Cafritz had merely an arm's length, buyer-seller relationship, not a coventurer relationship, with each other.

 The Court has concluded that the contacts of the Artery defendants with the District of Columbia, directly and through the Cafritz defendants, are fully adequate to establish jurisdiction under the "transacting business" clause of the D.C. long-arm statute.

 Artery's direct forum contacts include the following: (1) some of the negotiations for, and the settlement of, the assignment of the Dominion Gardens purchase contract from Cafritz to Artery took place in the District of Columbia; (2) a meeting between Michael McGinn of Artery and John Freeman of Cafritz occurred at Freeman's house in the District of Columbia, McGinn delivered a draft Assignment Agreement there, and the two there also discussed the Dominion Gardens project as well as the transfer of 152 units to the Alexandria Redevelopment Housing Authority for maintenance as low-income housing; (3) a meeting was held at the Riggs Bank in the District of Columbia between tenant representatives and Artery, at which Artery declined to sell Dominion Gardens to the tenants; (4) Artery hired ABG, Patrician, and Krooth & Altman, all District of Columbia firms, as its agents to arrange HUD mortgage co-insurance for Dominion Gardens; and (5) Artery applied in the District (through its D.C. agents ABG, Patrician, and Krooth & Altman) to HUD for mortgage co-insurance.

 Artery claims that its engagement of ABG, Patrician, and Krooth & Altman incident to the HUD application is in the same category as the HUD application itself. But it is clear that the transaction of business in the District of Columbia between a principal and its agent is itself jurisdictionally significant, even though the contacts between either or both of them and the government are excludable under the government contacts doctrine. See Chase, 617 F. Supp. at 1427. Beyond that, Artery's remaining forum contacts do not involve the government at all; they pertain to the negotiation, creation, and settlement of binding legal obligations out of which plaintiffs' claims arise. These direct contacts, in addition to the direct forum contacts resulting from Artery's engagement of ABG, Patrician, and Krooth & Altman alone support the existence of personal jurisdiction over Artery in this Court.

 This finding of personal jurisdiction is strengthened by Artery's indirect forum contacts, imputed to it as a result of its relationship with Cafritz. *fn13" The D.C. long-arm statute recognizes that jurisdiction may be predicated upon the acts of an agent as well as those of the principal, and that such an agency may be created expressly or constructively, by a co-venturing or a conspiratorial relationship. Mandelkorn v. Patrick, 359 F. Supp. 692, 696 (D.D.C. 1973).

 Upon the facts as they are before this Court, the conclusion is inescapable that Cafritz and Artery embarked on a concerted venture to rehabilitate Dominion Gardens and Bruce Street, and that they consistently coordinated their efforts in such a manner that an agency or co-venturer relationship exists between them.

 Cafritz initially executed contracts for various portions of the Layton Estate, the situs of both the Dominion Gardens and the Bruce Street apartment complexes. Thereafter, it refused to entertain tenant offers for either apartment complex, instead assigning the Dominion Gardens purchase contract to Artery. In order for Artery to close on the purchase of Dominion Gardens, Cafritz arranged for and guaranteed an interim loan of $12,150,000, while taking back $150,000 in short-term financing, and it paid all but one-half point in loan fees. Cafritz acquired a one per cent limited partnership interest in the Artery ownership entity and a one hundred per cent security interest in the remaining partnership interests. Cafritz and Artery agreed as to the schedule for eviction and construction the latter should follow, and Cafritz agreed to make good faith efforts to obtain a dispensation from the Layton Estate to begin the emptying of the entire property before closing.

 Artery and Cafritz also pursued identical financing strategies: both engaged ABG and Patrician to seek federally-assisted financing. While negotiating the Dominion Gardens deal, Artery and Cafritz agreed that Cafritz would transfer certain other Arlandria properties to the Alexandria Redevelopment Housing Authority for maintenance as low-income housing. Finally, Artery has publicly claimed credit with Cafritz for maintaining these units as low-income housing.

 The Court concludes that Artery's direct contacts with the District, and its indirect contacts, imputed as a result of its relationship with Cafritz, are sufficient to bring Artery within the purview of the D.C. long-arm statute, and that personal ...


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