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M Street LLC v. Mackell

December 31, 2007

M STREET LLC, MILLENNIUM PARTNERS LLC, MILLENNIUM PARTNERSMANAGEMENT, LLC AND MILLENNIUM MANAGER I, INC., APPELLANTS,
v.
CHERYL H. MACKELL, THOMAS J. MACKELL, BARBARAMCLEOD, ELWOODBRUCE MCLEOD, PAULINEJOHNSON-BROWN, LARAMICHELLEBROWN, AND ANGELA FOSTER, APPELLEES.



Appeals from the Superior Court of the District of Columbia (02-CA-5784, 03-CA-7312, 03-CA-7627, 04-CA-905) (Hon. Brook Hedge, Trial Judge).

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

Argued May 10, 2005

Before WASHINGTON, Chief Judge,*fn2 Ruiz, Associate Judge, and SCHWELB, Senior Judge.*fn3

The various appellees, who are all owners of condominium units in a building built and managed by appellants,*fn4 brought separate suits against appellants. They claim that defective construction of the building (specifically, utilities of the building including plumbing, ventilation, heating, air conditioning, and roofing) has caused the flooding of several condominium units, resulting in water damage to their units, personal health problems from eventual toxic mold growth throughout the building and in their individual units, and a decline in the resale value of their units as a result of the "negative publicity" the building has received. The suits claim fraud and misrepresentation in the sale of the units, breaches of warranty and of contract, tort liability based on intentional and negligent conduct as well as strict liability, and violation of the D.C. Consumer Protection Act, see D.C. Code § 28-390 et seq. All seek compensatory damages for personal injury and property loss, punitive damages, statutory treble damages, attorney fees and costs. All asked for a jury trial of their legal claims. Appellees Johnson-Brown and Brown also request injunctive relief to prevent what they allege are appellants' consumer fraud; the Mackell appellees seek equitable relief in the form of rescission of the purchase of their condominium unit.

Appellants filed motions in each case asking the Superior Court to compel arbitration, based on agreements entered into by appellees at the time of purchase that, appellants argued, mandate that appellees' claims be resolved through arbitration. The trial judge denied these motions, concluding that the contractual provisions relied on by appellants did not require arbitration of the claims at issue in appellees' lawsuits. Appeals have been taken from the Superior Court's denial of appellants' motions to compel arbitration,*fn5 which we affirm as to all appellees, except the Mackells, which we affirm in part, and reverse in part.*fn6

I.

Beginning in 1999, each of the appellees committed to buying a condominium residence in the building which was to be constructed and managed by appellants on the block bounded by 22nd and 23rd Streets, and L and M Streets, N.W., to be known as The Residences at the Ritz Carlton in Millennium Square. The building was affiliated with the Ritz-Carlton hotel chain, and promised the purchasers, in the words of the complaint filed by appellees Johnson-Brown and Johnson, "the new upper limit of refinement"; and in the Mackell appellees' complaint, as "the highest quality, most luxurious building in Washington, D.C."; or, to quote Irving Berlin, as a place "where fashion sits."*fn7 At the time appellees committed to purchasing their condominium units, they signed a standard Purchase Agreement, prepared by appellants, that provides in Paragraph 5(a):

Declarant's [Appellants'] Obligations: At settlement, [appellants] shall deliver the Unit and the appurtenances thereto substantially in accordance with the Plats and Plans, as the same may be modified and amended from time to time, with all fixtures, appliances, and equipment to be provided by [appellants]. Purchaser [appellee] acknowledges that measurements shown on the preliminary Plats and Plans are approximate and actual dimensions may not be exactly as shown. [Appellants] shall not be required to install or provide any fixtures or appliances not actually installed in the Unit at the time of inspection pursuant to Section 6 or otherwise agreed in writing to be installed by [appellants]. [Appellants] shall have the right to make nonmaterial changes in the dimensions of any portion of the Condominium and to substitute substantially equivalent materials for any of the same set forth in any sales or other documents and to make such modifications or substitutions as may be required by any governmental authorities asserting jurisdiction over the Condominium or any construction or permanent lender or as may be reasonably necessary. Any dispute involving delivery of the Unit in accordance with the Plans shall be submitted to Gary E. Handel & Associates, the project architect for a decision, which decision shall be binding. (Emphasis added.)

Appellees took delivery and possession of their respective condominium units in late 2000 or early 2001. At closing, a Certificate of Limited Warranty was delivered by appellants to the purchasers.*fn8 The Certificate recites that it "describes Declarant's [appellants'] obligations under District of Columbia Code Section 47-1856 [now § 42-1903.16 of the Condominium Act] to make adjustments to your Residential Unit . . ." In relevant part, Section I.A. of the Certificate guarantees:

A. Non-Consumer Products and Non-Consumer Goods -Structural Defect

1. Declarant [Appellants] will correct any structural defect, which shall be those defects in components constituting the Unit which reduces the stability or safety of the Unit below standards commonly accepted in the real estate market or restricts the normal intended use of all or part of the Unit and which requires repair, renovation, restoration or replacement, provided the defect occurs and is brought to [appellants'] attention in writing within two years from the Effective Date.*fn9

2. A judicial proceeding for breach of any obligation arising under paragraph one above must be commenced within five years after the date the warranty period begins.

Section V ("Warranty Procedures") spells out the procedures by which unit owners are to report covered structural defects in order "to permit maximum efficiency in administering work under warranty." First, each unit owner is given the "opportunity to inspect his Unit prior to settlement," and, at that time, should he or she discover any "incomplete items" or "defects readily visible to the human eye," the owner is to list them on the "Pre-Settlement Inspection Form." In addition, the warranty also provides procedures for addressing structural defects discovered after the owner takes delivery of the unit. Upon discovery of such defects, the unit owner must first send a written statement of claim to appellants, at which time a representative of the building would meet with the unit owner to collaboratively prepare a list of defects on a Warranty Inspection Form,*fn10 which is to be signed by both the unit owner and the representative of the building. Section V.B. governs disputes as to whether a claimed defect should be listed on the Inspection Form,*fn11 and provides:

If the Unit Owner and the [appellants'] representative fail to agree upon the defects to be noted on the Warranty Inspection Form or the workmanlike correction of such defects, [appellants] will, within five days after the date of the Unit Owner's request therefor, submit the disagreement to Gary E. Handel & Associates (the "Project Architect") for decision, and such decision shall be final and binding on the [appellants] and the Unit Owner. The Project Architect will render his decision based on the Public ...


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