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SHENANDOAH ASSOCIATES LTD. PARTNERSHIP v. TIRANA

August 15, 2001

SHENANDOAH ASSOCIATES LIMITED PARTNERSHIP ET AL., PLAINTIFFS,
V.
BARDYL D. TIRANA, ESQ., DEFENDANT.



The opinion of the court was delivered by: Urbina, District Judge.

    MEMORANDUM OPINION
Granting in Part and Denying in Part the Defendant's Motion to Dismiss; Denying the Defendant's Motion to Transfer Venue

I. INTRODUCTION

This matter comes before the court upon defendant Bardyl Tirana's motion to dismiss for failure to state a claim and motion to transfer venue. The plaintiffs. Shenandoah Associates Limited Partnership, Jefferson House Associates Limited Partnership, and Leesburg Manor Associates Limited Partnership ("the partnerships"), seek relief under four separate counts, each of which the defendant contests as insufficient to state a claim. The defendant also contends that the plaintiffs, as limited partnerships. are precluded from bringing their claims because they do not have the capacity to sue in their own name pursuant to Federal Rule of Civil Procedure Rule 17(b), and because they lack privity with the defendant. Lastly, the defendant contends that venue is improper in the District of Columbia, and moves to transfer this case to a federal district court in Virginia or Maryland.

After careful consideration of the parties' submissions and the applicable law, the court concludes that the plaintiffs meet the requirements of Rule 17(b) and thus can sue in their own names. The plaintiffs do not need to show that they are in privity with the defendant. As to count I, tortious interference with contractual rights, the plaintiffs have stated a claim on which relief can be granted. With respect to count II, conspiracy to convert the plaintiffs' property, the plaintiffs' claim is a mere restatement of count I. On count III, unjust enrichment, the plaintiffs have failed to establish, as a matter of law, that they conferred a benefit on the defendant. As to count IV, creation of a constructive trust, the plaintiffs are not entitled to this equitable remedy. Finally, for the reasons stated below, the court denies the defendant's motion to transfer venue.

II. BACKGROUND

This case arises out of a contract dispute between three limited partnerships registered in Virginia, and the Community Management Corporation of Maryland ("CMC") represented by defendant Tirana. Each limited-partnership plaintiff owns, as its only asset, one apartment building in Virginia. See Compl. ¶ 8. Between 1982 and 1989, each of the three partnerships entered into an exclusive management agreement with CMC. See id. ¶¶ 9-11. The agreements required CMC to deposit rents and other funds into a separate, government-insured account designated in the names of the partnerships' respective house-operating accounts. See id. ¶ 13. The agreements also specified the precise uses of the house-operating accounts and required the management agent to turn over all accounts, trust funds and records immediately, but in no event more then thirty days after the termination of the agreements. See id. ¶¶ 13-16. Two of the agreements required CMC to comply with the U.S. Department of Housing and Urban Development Regulatory Agreement that all funds collected by CMC be kept in trust, separate and apart from CMC's other funds. See id. ¶ 15.

In late 1997, the three partnerships terminated their agreements with CMC, effective January 1998. See id. ¶ 17. In accordance with the terms of the contracts, the partnerships then sought to retrieve the funds and relevant records from all the trusts and accounts. See id. At this time, according to the plaintiffs, CMC was in poor financial shape and owed the defendant about $300,000 in legal fees. See id. ¶ 25. Allegedly acting on the advice of its counsel, Mr. Tirana, CMC transferred the partnerships' funds from the escrow account into its own general fund and used the general fund to pay Mr. Tirana's outstanding legal fees. See id. ¶¶ 26-53.

The plaintiffs allege three counts of wrongdoing by the defendant: (1) tortious interference with the plaintiffs' contractual rights; (2) conspiracy to convert the plaintiffs' property; and (3) unjust enrichment through acceptance of payment from CMC's general fund. The plaintiffs also ask the court to create a constructive trust to prevent the defendant from being unjustly enriched by the plaintiffs' funds. In his motion to dismiss, the defendant contends that the plaintiffs, as limited partnerships, lack the capacity to sue in their own name and lack privity with the defendant. In addition, the defendant argues that each of the four counts pled in the complaint fails to state a claim on which relief can be granted. Finally, the defendant moves to transfer venue to a federal district court in Maryland or Virginia pursuant to 28 U.S.C. § 1404 (a).

III. ANALYSIS

A. Legal Standard

A motion to dismiss for failure to state a claim tests not whether the plaintiffs will prevail on the merits, but whether the complaint has properly stated a claim. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); FED. R.CIV.P. 12(b)(6). The court may dismiss a complaint for failure to state a claim "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." See Hishon v. Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). In deciding such motions, the court must accept as true all well-pleaded factual allegations and draw all reasonable inferences in the plaintiffs' favor. See Antonelli v. Sheahan, 81 F.3d 1422, 1427 (7th Cir. 1996) (citing Arazie v. Mullane, 2 F.3d 1456, 1465 (7th Cir. 1993)). However, the court need not accept as true the plaintiffs legal conclusions. See Taylor v. FDIC, 132 F.3d 753, 762 (D.C.Cir. 1997).

B. Conflict of Laws

Because the basis for jurisdiction in this case is diversity,*fn1 see 28 U.S.C. § 1332 (a), the court must determine which choice-of-law principles to apply. This court has held that "[i]n a diversity action, this Court sitting in the District of Columbia is obligated under Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), to apply the choice of law rules prevailing in this jurisdiction." Dowd v. Calabrese, 589 F. Supp. 1206, 1210 (D.D.C. 1984) (applying Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)).

The District of Columbia's choice-of-law principles utilize the" "governmental interests' analysis, under which [the court] evaluate[s] the governmental policies underlying the applicable laws and determine[s] which jurisdiction's policy would be more advanced by the application of its law to the facts of the case under review.' District of Columbia v. Coleman, 667 A.2d 811, 816 (D.C. 1995) (citing Hercules & Co. v. Shama Restaurant, 566 A.2d 31, 40-41 (D.C. 1989)). As part of this analysis, the court also may look to factors contained within the Restatement (Second) of Conflicts of Laws § 145, including: "(a) the place where the injury occurred; (b) the place where the conduct causing the injury occurred; (c) the domicile, residence, nationality, place of incorporation and place of business of the parties; and (d) the place where the relationship is centered." See id. (citing Estrada v. Potomac Elec. Power Co., 488 A.2d 1359, 1361 n. 2 (D.C. 1985)).

In this case, the weight of the governmental interests lies with the Commonwealth of Virginia. All three partnerships, as well as the physical assets of those partnerships, are located in Virginia. The contracts in dispute were written and executed pursuant to Virginia law. Virginia. therefore, has a significant interest in seeing its substantive law applied in this case.

By contrast, with respect to the plaintiffs' capacity to sue under Rule 17(b), the district court must use the law of the jurisdiction in which the district court sits, in this case the District of Columbia. See FED.R.CIV.P. 17(b) (". . . capacity to sue or be sued shall be determined by the law of the state in which the district court is held

C. Capacity of a Limited Partnership to Sue In Eo Nomine

The law governing partnerships is contained within Title 41 of the D.C.Code. Title 41 contains three chapters: Chapter 1A, the Uniform Partnership Act of 1996 ("UPA"); Chapter 3, the Dissolution and Payment of Debts; and Chapter 4, the Uniform Limited Partnership Act of 1987 ("ULPA"). The plaintiffs contend that they have capacity to sue because Chapter 1A allows for "a partnership to sue or be sued in the name of the partnership." See Pl.'s Reply at 4 (citing D.C.Code ยง ...


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