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EDMONDSON & GALLAGHER v. ALBAN TOWERS TENANTS ASSN

July 30, 1993

EDMONDSON AND GALLAGHER, et al., Plaintiffs
v.
ALBAN TOWERS TENANTS ASSOCIATION, et al., Defendants.



The opinion of the court was delivered by: STANLEY SPORKIN

 This action is before the Court after being removed from the District of Columbia Superior Court. The complaint was brought by Edmondson & Gallagher ("E&G"), a Virginia real estate company, against the Alban Towers Tenants Association ("ATTA"), Vera Ruser, who is President of ATTA, and the partners of the law firm Foley, Hoag & Eliot ("Foley"). E&G alleges that Defendants wrongfully prevented it from buying the Alban Towers apartment building in Washington, D.C., through a carefully orchestrated scheme spanning almost three years.

 E&G's claims arise from its contract to buy the Alban Towers apartment building from Georgetown University. Under the District of Columbia Rental Housing Conversion and Sale Act, §§ 45-1601 et seq. (the "Act"), that contract was subject to ATTA's right of first refusal. ATTA attempted to exercise its right but failed to obtain the necessary financing. Georgetown sued ATTA in the Superior Court of the District of Columbia to clear title to the project and E&G intervened in Georgetown's action against ATTA. The Superior Court order was decisively determined in favor of Georgetown. On appeal, that decision was affirmed. Despite the favorable court decision, the "downturn" in the economy between the original contract and the favorable determination in court made it impossible for E&G to obtain financing and complete its purchase of Alban Towers.

 In this suit, E&G seeks to recover the profits it claims it lost because its contract with Georgetown fell through. E&G alleges (1) tortious interference with contractual relations, (2) two counts of abuse of process, (3) malicious prosecution, (4) violations of the federal Racketeer Influenced Corrupt Organization Act ("RICO"), 18 U.S.C. § 1962 et seq., and (5) conspiracy to commit RICO violations. E&G seeks compensatory damages of $ 6,000,000 and punitive damages of $ 20,000,000.

 Before the Court is Defendants' Motion to Dismiss, or in the Alternative, for summary Judgment. On July 21, 1993, a hearing was held on Defendants' motion. For the reasons stated below, Defendants' motion will be granted.

 I. FACTUAL BACKGROUND

 In 1986, E&G entered into a contract with Alban Towers Limited Partnership ("Georgetown") *fn1" to purchase Alban Towers, an apartment building in the District of Columbia. The contract acknowledged that under the D.C. Rental Housing Conversion and Sale Act the tenants had right of first refusal against any prospective purchaser of Alban Towers.

 That Act provides that "before an owner of a housing accommodation may sell the accommodation . . . the owner shall give the tenant an opportunity to purchase the accommodation at a price and terms which represent a bona fide offer of sale." D.C. Code § 45-1631(a). The purpose of this ordinance is to give tenants some rights to continue living in their apartments when the owners determine they want to convert a rental project to condominium housing. Under the Act, tenants are entitled to at least 120 days to negotiate a contract of sale, D.C. Code § 45-1640(2), and a 15-day period in which to exercise a right of first refusal, D.C. Code § 45-1637.

 After receiving Georgetown's offer of sale, the tenants of Alban Towers incorporated as the Alban Towers Tenants Association for the purpose of purchasing Alban Towers. ATTA retained Richard Gross, a partner in the law firm of Foley, Hoag & Eliot, to assist in negotiating and financing the deal. *fn2" ATTA also chose a development company, HDS, Inc., to devise a plan for redeveloping Alban Towers, obtain financing for the redevelopment, and secure the $ 650,000 deposit required by the proposed contract ultimately agreed upon between Georgetown and ATTA.

 The negotiation period for Alban Towers began on August 12, 1986, and ended on December 30, 1986. The final draft of the proposed contract between ATTA and Georgetown provided that:

 Sometime between the afternoon of December 30 and the close of business on December 31, 1986, a deposit check for $ 650,000 was delivered on behalf of ATTA to Real Title Company, Inc. for Georgetown. Because the check was unfunded, it did not satisfy ATTA's obligation under its proposed contract with Georgetown. Georgetown, informed of this development, treated the negotiations with the ATTA as over.

 On January 5, 1987, ATTA, through Mr. Gross, filed a Notice of Exercise of Rights of First Refusal with the District of Columbia Recorder of Deeds. This had the effect of clouding title on the project. On February 2, 1987, Georgetown filed a complaint in Superior Court of the District of Columbia seeking a declaration that Georgetown be permitted to sell Alban Towers to E&G. On February 6, 1987, the Recorder of Deeds expunged ATTA's Notice of Exercise of Rights of First Refusal. E&G intervened in Georgetown's suit against ATTA, seeking a declaratory judgment and asserting claims against ATTA for tortious interference with contractual relations and tortious interference with business relations.

 On October 6, 1988, Judge Henry Greene of the D.C. Superior Court granted summary judgment in favor of Georgetown and partial summary judgment in favor of E&G, *fn4" and held that those parties were "free to close on their third-party contract for the purchase of Alban Towers." Alban Towers Limited Partnership v. Alban Towers Tenants Association, No. 87-822, slip op. at 18. ATTA moved for reconsideration which Judge Greene denied. ATTA then appealed. On December 1, 1989, the Court of Appeals affirmed Judge Greene's order, Alban Towers Tenants Association v. Alban Towers Limited Partnership, No. 88-1488, slip op. at 2 (D.C. Ct. App.). By the time the Court of Appeals issued its opinion in December 1989, the real estate market had "turned down" and E&G could no longer obtain financing.

 Three years later, in December 1992, with new counsel, Plaintiff brought this action against ATTA, Ruser and Gross in the Superior Court of the District of Columbia, alleging tortious interference with contractual relations and abuse of process. The complaint was removed to this Court in June 1993 after Plaintiff amended its complaint, adding an additional claim for abuse of process and two counts under the Federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962 et seq.

 II. THE RICO CLAIMS

 E&G alleges that ATTA, Vera Ruser and Richard Gross engaged in an elaborate scheme of bribery and deceit "which was intended to delay or prevent the sale of Alban Towers to extort money from Edmondson & Gallegher and Georgetown." *fn5" Plaintiff ...


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