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March 23, 1993

BEULAH JONES, et al., Plaintiffs,

The opinion of the court was delivered by: HARRIS


 Before the Court are defendants' motion for summary judgment on statute of limitations grounds, plaintiffs' motion for leave to amend and to supplement their opposition to defendants' summary judgment motion, defendants' motion to dismiss the amended complaint, defendants John D. Hagner's and William M. Harvey's motion to dismiss, and the oppositions and replies thereto. *fn1" Upon consideration of the entire record, the Court grants plaintiffs' motion to amend and to supplement their opposition and finds that a supplemental reply by defendants is unnecessary to resolve the motion for summary judgment. *fn2" The Court also denies defendants' motion for summary judgment, denies their motion to dismiss the amended complaint, and grants in part and denies in part the motion of defendants Hagner and Harvey to dismiss. Although "findings of fact and conclusions of law are unnecessary on decisions of motions under Rule 12 or 56," the Court nonetheless sets forth its analysis. Fed. R. Civ. P. 52(a).


 Plaintiffs bring this action alleging fraud, conspiracy to defraud, violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. ยงยง 1961-1968, breach of contract, rescission, and tortious interference with contract. *fn3" These allegations stem from the conversion into condominiums of a building at 2112 New Hampshire Avenue, N.W., in Washington, D.C., ("the building"), in which plaintiffs were, and plaintiffs Foster and Lanning still are, tenants. Until 1980, the building was a 173-unit rental apartment building subject to the District of Columbia rent control laws. Defendants are Meridian Towers Apartments, Inc. ("MTA"), the contract seller of the condominium units at issue here; Dreyfuss Brothers, Inc. ("Dreyfuss"), the managing agent for MTA and for the owners of units in the building; and several individuals. The individual defendants are Joseph R. Schuble, Sr., a shareholder, officer, and director of MTA and an employee of Dreyfuss; Richard M. Aronoff, a shareholder, officer, and director of MTA and, during the relevant times, a partner in the law firm of Aronoff, David, Harvey & Hagner and successor firms representing MTA ("the law firm"); Richard G. David, the managing general partner of Meridian David Associates ("MDA") and a partner in the law firm; Harvey, a partner in the law firm at the times relevant to the amended complaint; Hagner, a partner in the law firm at the times relevant to the amended complaint; and Stanley J. Wrobel, a partner in the law firm at the times relevant to the amended complaint.

 Plaintiffs allege that, in or about 1979, defendants devised a plan to convert the building into condominiums in the hope of making significant profits by removing the building from the strictures of the District of Columbia rent control laws. To accomplish this, the amended complaint alleges, defendants induced the tenant-plaintiffs to agree to the conversion by promising them the chance to purchase their units and by entering into purchase agreements with plaintiffs on which defendants never intended to close. In addition, the amended complaint alleges that defendants fraudulently induced plaintiffs to relinquish their rights under the law and their agreements with defendants.


 In the summer of 1979, the tenants of the building formed a tenants association, the Meridian Towers Tenants Association, Inc., ("Tenants Association"), to represent their interests in the building's conversion. The Tenants Association was the authorized representative of the tenants and all of the plaintiffs were members. See Am. Compl., P 36. The Tenants Association solicited offers from a number of developers to join it in converting the building into a cooperative apartment building or a condominium. MTA sent a proposal to the Tenants Association on October 8, 1979. Pursuant to a contract dated November 26, 1979, and its amendments dated June 30, 1980, and July 2, 1980, (referred to collectively as "the 1979 contract"), MTA and the Tenants Association entered into an agreement regarding the building's conversion into condominiums. Under this agreement, each participating tenant (defined as referring "to all persons entitled to legal occupancy of a single Apartment Unit at the Property as of November 1, 1979") had "an exclusive right to purchase an Apartment Unit at the Property." Defs.' Statement of Undisputed Facts, Ex. 3, PP IB, IIIA. The 1979 contract also states that:


The Tenants Association and each Participating Tenant, by execution of this Agreement, hereby consents to the conversion of the Property to a condominium . . . and the Tenants Association shall . . . submit to . . . District of Columbia public authorities . . . an affidavit stating that the Tenants Association, acting on behalf of its members . . . , has agreed to the conversion of the Property to a condominium.


Defs.' Statement of Undisputed Facts, Ex. 3, P VIB.

 On various dates in 1981 and 1982, plaintiffs entered into purchase agreements with defendant MTA regarding their respective condominium units. See Defs.' Statement of Undisputed Facts, Ex. 6. These agreements provide in part that:


7. Delay of Closing on Unit. In the event that title is not closed hereunder within 12 months from date of acceptance hereof by Declarant [MTA] then either Purchaser or Declarant may cancel this Agreement by written notice to the other. If Purchaser or Declarant exercises such option, all sums paid hereunder by Purchaser, including interest earned on the Deposit, shall be returned to Purchaser, this Agreement shall terminate, and neither party shall have any further rights against or obligations to the other. In no such event will Declarant be liable to Purchaser for delays in the closing of title.


Defs.' Statement of Undisputed Facts, Ex. 6., P 7.

  In February 1982, an officer of the Tenants Association phoned defendant Schuble inquiring about an extension of the one-year purchase rights. See Defs.' Statement of Undisputed Facts, Ex. 14 (Letter from Joseph R. Schuble to Richard M. Aronoff, dated Feb. 12, 1992). In a letter to defendant Aronoff, defendant Schuble communicated this conversation and stated that he felt "we should generate whatever amendments are necessary to extend the purchase rights of those tenants who took the necessary steps to contract and qualify even though we have not gone to settlement." Id. On April 24, 1992, Steve Otero, sales manager for defendant Dreyfuss Brothers, sent two copies of an addendum to all the contract purchasers with a letter that explained how to execute the addendum and that stated "this addendum extends the date of closing on your unit." See Defs.' Statement of Undisputed Facts, Ex. 16 (Letter from Steve Otero to 2112 Contract Purchasers, dated April 24, 1992). The addendum contained language that modified paragraph 7 above to add the following sentence after the first sentence:


Declarant shall not be entitled to exercise the right of cancellation specified in the prior sentence until after Declarant has notified Purchaser that Declarant is prepared to close on the Unit, and has offered Purchaser an opportunity to close thereon in accordance with the terms of the Unit Purchase Agreement.


Defs.' Statement of Undisputed Facts, Ex. 17.

 Only four plaintiffs executed and returned the addendum: Bentley, Hampton, Smith, and Young.

 Subsequent to these purchase agreements, MTA entered into a purchase agreement with MDA, dated July 1, 1982, ("the MTA-MDA contract") that transferred to MDA 33 units in the building in exchange for a non-recourse purchase money note in the amount of $ 2,186,000. See Defs.' Statement of Undisputed Facts, Ex. 7. This group of 33 units included the units on which plaintiffs had entered purchase agreements. Defendants concede, at least for the purposes of the summary judgment motion, that "none of them told the tenants about this sale." See Defs.' Motion for Summary Judgment, at 6. The MTA-MDA contract provided in part that "the Deed will not be immediately recorded. Instead, the Deed will be retained by Declarant in escrow as security for the payment of the Purchase Money Note . . . ." Id. at Ex. 7, addendum at 4. In addition, it also provided that:


Certain of the Apartment Units comprising the Unit [the units sold under the MTA-MDA contract] are occupied by "Participating Tenants" or "Special Tenants" and are subject to the rental and occupancy rights of the Special Tenants and the purchase rights of the Participating Tenants in accordance with the provisions of the Tenant Agreement of November 26, 1979, as modified by the Modifications dated June 30, 1980. These Apartment Units are sold by Declarant and accepted by Purchaser subject to the rental, occupancy, and/or purchase rights of these Participating Tenants or Special Tenants.


Id. at Ex. 7, addendum at 6.

 The purchase agreement also provides a mechanism, at least after January 1, 1984, by which MTA could repurchase units to sell to purchaser-tenants:


If any Participating Tenant elects to purchase and qualifies to purchase any Apartment Unit (the "Optioned Apartment Unit"), then and in such event Purchaser [MDA] agrees to resell and reconvey to Declarant [MTA], and Declarant agrees to repurchase from Purchaser, the Optioned Apartment Unit, at a price equal to one hundred five percent (105%) of the purchase price paid by Purchaser for the Optioned Apartment Unit, provided that such repurchase may not occur prior to January 1, 1984.


Id. at Ex. 7, addendum at 6.

 Although MDA did not record the deed, it filed rent control registrations with the Rental Accommodation Office (RAO) for 33 units in 1983, 1986, and 1990. These registrations specifically identified by number the units that MDA had purchased. See Defs.' Statement of Undisputed Facts, Ex. A to Ex. 30. Also, according to the building manager, a business license reflecting MDA's ownership of 33 units has been posted on the building notice board since early 1983. See Defs.' Statement of Undisputed Facts, Ex. 29 (Decl. of Polly R. Green), P 3. The notices do not reflect which 33 units MDA owned. See id. at Ex. A, B to Ex. 29 (copies of licenses).


The notice board contains notices of all kinds that are of interest to tenants (e.g., tenant buy and sell notices, management notices to tenants; notices of neighborhood events; notices of Tenants Association meetings). From 1979 to 1985, the building notice board . . . was located in the basement of the building in a 6' x 16' space between two halls . . . . This relatively small area . . . was heavily trafficked by building residents because it also contained the only soda machine in the building, the only cigarette machine in the building, and the only public telephone in the building . . . . In addition, the apartment building's only multi-machine laundromat is located about 50 feet down the hall.


See id. at P 5.

 In 1985 the notice board was moved to the first floor and placed next to the mailboxes and the secondary entrance to the building. See id. at P 6. According to plaintiffs' affidavit, however, plaintiffs did not see these licenses. See Pls.' Affidavit, P 6.

 In addition, beginning in May 1981, contracts on other units were going to closing. By November 1982, at least all but four units had been sold to investors. See Pls.' Opposition to Motion for Summary Judgment, Ex. 2, P 5 (Decl. of Karen L. Conant). Except for the 33 units sold to MDA and 30 units sold to 2112 Associates, the other units were sold to investors in blocks of four or less. See id. at P 5, P 7. *fn4" Most of these sales were reflected in the records at the RAO by November of 1982. See id. at P 9. Plaintiffs claim that these investors did not record their ownership with the Recorder of Deeds, but defendants admit only to MDA's lack of recording. Compare Am. Compl., P 47 with Answer to Am. Compl., P 47. In any event, at least some plaintiffs had actual notice of at least the existence, if not the extent, of these sales. By letter dated September 22, 1981, defendant Wrobel wrote Robert Kendrick, the President of the Tenants Association, to confirm that MTA would pay $ 1,000 into the replacement reserve of the Unit Owners Association "for each Apartment Unit sold and settled on to the public within six months following the opening of sales to the public." Defs.' Statement of Undisputed Facts, Ex. 12. The letter also noted that at the July 20, 1981, meeting of the Tenants Association, the Association was advised that public sales had begun on May 15, 1981. Id. at Ex. 12.

 Furthermore, according to the deposition of plaintiff Carolyn Agonafer, she learned in the latter part of 1983 that investors had closed on some units. A tenant at a Tenants Association meeting wanted to know


why were some of the apartments were [sic] purchased and closed on when he could, when he or she, whoever that tenant was, and Mr. Ike Kendrick mentioned that the [Tenants Association] has nothing to do with so many apartments that were set aside for investors. I think for the public, investors, whatever, the phrase that he used.


Defs.' Statement of Undisputed Facts, Ex. 13, at 281, lines 19-22; at 282, lines 1-3; see Interrogatory Answer 46(i) from Carolyn and Dereje Agonafer.

 No participating tenant ever closed on a unit in the building. Most of the plaintiffs believed that closing should have occurred at least by or in 1983 or within a "reasonable time" after the contract was entered. See Defs.' Reply In Support of Motion for Summary Judgment, Table 1 (plaintiffs' individual interrogatory responses to question concerning the date they were entitled to close). In their interrogatories, plaintiffs Carolyn Agonafer, Bentley, Foster, Hampton, McFadden, Smith, and Young state that closing should have occurred by July 1, 1982, and plaintiff Sesay states that closing should have occurred in 1983. See id.; Defs.' Statement of Undisputed Facts, P 21. In May and June of 1984, plaintiffs Agonafers and tenant Dorothy Evans hired an attorney to attempt to force closing on their respective units or to negotiate the sale of their purchase rights.

 On December 7, 1982, plaintiff Hampton and other nonplaintiff tenants met with defendants Aronoff, Hampton, Schuble, and Wrobel. Hampton, who was representing the tenant-purchasers, inquired about when closing would occur. See Am. Compl., P 83; Answer to Am. Compl., P 83. According to plaintiffs, he was told by defendants that market conditions had to improve before closing could occur. See Am. Compl., P 84. He was also told that no rent increases after June 30, 1982, would be credited to the purchase price. See Am. Compl., P 84; Answer to Am. Compl., P 84. According to plaintiffs, and conceded by defendants for the purposes of the summary judgment motion, he was not told that on July 1, 1992, MDA had purchased the units. See Am. Compl., P 86. At the meeting, or soon thereafter, MTA offered to repurchase the tenants' purchase rights. See Am. Compl., P 84; Answer to Am. Compl., P 84.

 On January 20, 1983, MTA offered to repurchase the purchase rights from the participating tenants. After several meetings of the Tenants Association to discuss the issue, the Tenants Association made a counteroffer pursuant to which all tenants would sell their rights. See Defs.' Statement of Undisputed Facts, Ex. 21. On May 3, 1983, defendant Schuble wrote to at least plaintiffs Sesay and Lanning and, for the purposes of this motion, the Court assumes to all of the plaintiffs, offering to buy their purchase rights, contingent upon all of the tenant-purchasers' accepting the offer before June 10, 1983. See Defs.' Statement of Undisputed Facts, Ex. 21; see Am. Compl., P 50. This letter did not disclose that MDA had already purchased the plaintiffs' units. See id.

 Then, on July 27, 1983, defendant Schuble wrote a letter to plaintiffs Agonafer, Bentley, Foster, Hampton, Johnson, Jones, Lanning, McFadden, Sesay, Smith, Snipe, Wolfe, and Young proposing a new repurchase agreement that was not contingent upon all purchasers' participation. See Defs.' Statement of Undisputed Facts, Ex. 22. This letter also did not disclose MDA's ownership. See id. Then, on October 23, 1987, defendant Schuble wrote plaintiffs Bentley, Foster, Jones, Lanning, McFadden, Sesay, Smith, Snipe, and Young making a "limited final offer" to repurchase their purchase rights. See Defs.' Statement of Undisputed Facts, Ex. 25. The letter stated that "an economically feasible sellout could not be attained" and that "the ownership has decided to indefinitely defer any plan to market the apartments to individual owner/occupants." Id. It also provided that the offered amount would decrease by 1/12 each month for a year until the payment for relinquishing the purchase rights would be zero (except for the return of the initial deposit plus interest). See id. The letter also informed plaintiffs that they had a right under District of Columbia law to remain in their units as long as they continued to meet the terms of their lease agreements. The letter did not disclose MDA's ownership of the units. See id. On December 11, 1987, defendant Schuble again wrote a letter to plaintiffs Bentley, Foster, Jones, Lanning, and McFadden reaffirming the previous offer. See Defs.' Statement of Undisputed Facts, Ex. 26. Over the course of these offers, between the years of 1984 and 1988, all of the plaintiffs except Foster and Lanning executed releases of their rights to purchase in exchange for sums ranging from $ 7,327.00 to $ 20,485.83. n5 n5 Plaintiffs executed releases on the following dates for the amount indicated, which includes return of a $ 1,000 downpayment and interest thereon: Date Plaintiff Amount 8/5/84 Agonafer $ 11,622.42 12/18/86 Hampton $ 20,092.00 3/16/87 Lawrence $ 11,804.00 9/17/87 Young(904) $ 7,327.00 11/20/87 Smith $ 16,569.83 12/87 Snipe $ 19,839.00 12/9/87 Young(905) $ 20,029.83 12/23/87 Sesay $ 20,485.83 12/28/87 McFadden $ 18,964.00 12/30/87 Bentley $ 18,329.00 6/88 Jones $ 14,752.97 unknown Johnson $ 9,229.17


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