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Simon v. Circle Associates

June 08, 2000


Before Farrell, Reid, and Glickman, Associate Judges.

The opinion of the court was delivered by: Glickman, Associate Judge

Appeal from the Superior Court of the District of Columbia (Hon. Richard A. Levie, Trial Judge)

(Argued January 6, 2000 Decided June 8, 2000)

Appellants Geary S. Simon (Simon) and United States First National Corporation (USFN) appeal from the entry of monetary judgments against them on motions to enforce a settlement agreement to which they claim they were not parties. We vacate the judgments against Simon and USFN and remand for further proceedings.


In 1993, Dupont Down Under Associates, Inc. (DDUA), contracted with the District of Columbia to develop District-owned space underneath Dupont Circle pursuant to a ten-year master lease agreement. Simon allegedly negotiated this master lease as the sole shareholder, officer, and director of DDUA. DDUA then entered into subleases with a number of retail food outlets, planning to line the Dupont Circle underground tunnels with food carts shaped like old trolley cars. DDUA allegedly failed, however, to make various improvements to the Dupont Circle underground space as required by its leases, and the project did not meet the expectations of either the city or the food court tenants.

In 1995, the tenants instituted a rent strike, and DDUA sued the tenants for breach of their leases. Several of the tenants sued DDUA and Simon for fraud and (as to DDUA alone) breach of their subleases and the master lease. The lawsuits were consolidated for trial. Shortly before the start of trial, the tenants were permitted to amend their complaint to add a claim that Simon was liable to the same extent as DDUA under an alter ego theory.

In the middle of trial before Superior Court Judge Richard A. Levie, the parties to the litigation entered into settlement talks under the supervision of Judge Rufus G. King, III. On March 7, 1996, the parties and their counsel (with the exception of one tenant who was not ready to settle) appeared before Judge King. Counsel representing defendants DDUA and Simon announced "[o]n behalf of" both his clients that "we are here because we have reached a resolution of this case." He then undertook to read into the record what he referred to as the "elements" of a "complicated and technical" settlement. The parties agreed that the transcript of the proceeding before Judge King would be the sole memorandum of their settlement agreement.

Among other things, the settlement as spelled out in the transcript obligated "the landlord" to make monthly payments to the tenants out of operating revenues. A failure to pay at least $7,000 per month starting eleven months following the date of the settlement would "result in a judgment being entered against the landlord for the amount that is owed and still outstanding." The term "landlord" is not defined in the transcript of the proceeding before Judge King; left unspoken at the hearing was whether the landlord's payment obligation was imposed solely on DDUA or also on Simon. *fn1

During the proceeding before Judge King, the tenants asked that DDUA not make any assignment of its master lease for the Dupont Circle underground space, because such an assignment could deprive DDUA of the cash flow from operations necessary to fund the landlord's required payments to the tenants. Counsel representing the tenants stated that he had learned of "a collateral premise surrender and assumption agreement" between DDUA and USFN which, he evidently surmised, might result in a transfer of the master lease to USFN. Tenants' counsel asked Simon and his counsel to confirm that the agreement with USFN "is no longer valid, and . . . the . . . Dupont Down Under asset is in [DDUA's] possession and control and will remain there subject to the terms of this settlement."

In response, counsel for DDUA and Simon deflected the question, stating that "as I understand it, the whole reason why the landlord is willing to pay what he is willing to pay was to get possession of the property back. He doesn't want that encumbered, his ability to sublease it, or do whatever he wants to do with his own property." In the colloquy which followed, no one specifically answered the tenants' inquiry as to DDUA's agreement with USFN and its control of the master lease at that time. That an assignment of the master lease to USFN had already occurred was not disclosed. When tenants' counsel stated, "I don't want to get in the situation 6 months down the [road] Dupont Down Under says . . . I no longer lease or control the food court," Judge King responded, "I saw a head nod that would satisfy that concern." Discussion ensued about appropriate restrictions on any future transfer of DDUA's interest in the master lease. Judge King observed that "clearly contemplated in this agreement is there won't be any transfers to an entity controlled or in which the defendant has a substantial interest," and he then suggested other provisions to protect the tenants' rights to payment. Simon responded that "[w]e have to hammer out the details." *fn2 At no point did Simon or his counsel dissent from Judge King's statements or reveal that DDUA had already assigned its master lease to USFN (which was, it is alleged, an entity controlled by Simon).

At the conclusion of the March 7, 1996, session with Judge King, the parties present concurred that they had a binding settlement agreement. Judge King confirmed with all parties individually (including Simon) that "going forward from today . . . the transcript of this proceeding rather than any other legal rights or obligations will control what happens between the plaintiffs and the defendants." The parties exchanged "general mutual release[s]" as to all prior obligations and dismissed their respective lawsuits. The parties agreed that their settlement would be subject to supervision and enforcement by Judge Levie.

On May 2, 1996, the tenants filed their first Motion to Enforce Settlement Agreement, complaining that DDUA and Simon were improperly preventing the tenants from removing their equipment and were calculating operating revenues incorrectly so as to withhold monies to which the tenants were entitled. In a pro se response, Simon contended that the settlement agreement could not be enforced against him personally, but only against DDUA. Following argument, the trial court (Judge Levie) entered an order granting the tenants' motion. The order required DDUA and Simon to permit the tenants to remove their equipment without interference and to produce relevant financial records so that the amounts due to the tenants could be determined. In addition, the order held DDUA and Simon jointly and severally liable for the counsel fees and costs which the tenants had incurred in moving to enforce the settlement. *fn3

On February 13, 1997, the tenants filed a Second Motion to Enforce Settlement Agreement and for Entry of a Final Money Judgment. In that motion, the tenants claimed that DDUA and Simon were in default of their obligation to start making minimum monthly payments of $7,000. The motion was not answered, and the trial court entered an order dated March 12, 1997, ...

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