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Monument Realty LLC v. Washington Metropolitan Area Transit Authority

February 27, 2008


The opinion of the court was delivered by: Emmet G. Sullivan United States District Judge

Memorandum Opinion

Monument Realty, LLC ("Monument"), and its affiliate MR Ballpark 7, LLC ("MRB 7"), collectively referred to as plaintiffs, commenced this action against the Washington Metropolitan Area Transit Authority ("WMATA") alleging that WMATA breached its contract to sell Monument real property, known as the Southeast Bus Garage ("Bus Garage"), located in the District of Columbia, and, in doing so, also committed fraud and breach of fiduciary duty. Plaintiffs also challenge WMATA's decision to accept a competitive bid from the John Akridge Company ("Akridge") to purchase the Bus Garage. Pending before the Court is defendant's motion to dismiss the amended complaint pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Defendant argues that plaintiffs fail to state a claim upon which relief can be granted and that the Court lacks subject matter jurisdiction because of WMATA's sovereign immunity. Upon consideration of the motion, the response and reply thereto, supplemental memoranda, the arguments made at the hearing on January 23, 2008, and the applicable law, the motion is GRANTED in part and DENIED in part.

I. Background

A. Parties

Monument and MRB 7 are limited liability companies doing business in the District of Columbia. Amend. Compl. ¶¶ 1-2. MRB 7 was created by Monument on July 18, 2007 for the purpose of purchasing the Southeast Bus Garage, which is located in the Ballpark District of Washington, D.C.*fn1 Amend. Compl. ¶ 2.

WMATA was created in 1966, when Congress, acting pursuant to the Compact Clause of the Constitution, U.S. Const. art. I, § 10, cl. 3, approved the Washington Metropolitan Area Transit Authority Compact between Maryland, Virginia, and the District of Columbia ("Compact") to deal with growing traffic problems in the Washington area. See Pub.L. No. 89-774, 80 Stat. 1324 (1966) (codified as amended at D.C. Code Ann. § 1-2431 (1992)); H. Rep. No. 89-1914, at 5-6 (1966). Responsible for creating a coordinated public transportation system for the region, WMATA now operates an extensive Metrobus and Metrorail system running throughout northern Virginia, the District, and two Maryland counties. Beebe v. WMATA, 129 F.3d 1283, 1285 (D.C. Cir. 1997). WMATA is the record owner of the real property at issue, the Bus Garage.

B. Procedural History

On October 26, 2007, plaintiffs filed a twelve-count amended complaint alleging that WMATA is liable for breach of contract, fraud, breach of fiduciary duty, failure to formulate and follow policies concerning the disposition of real property, and challenging WMATA's decision to award the bid for the Bus Garage to Akridge.*fn2 Plaintiffs seek a declaratory judgment, specific performance, injunctive relief, and imposition of a constructive trust. In response, WMATA filed a motion to dismiss all counts in the amended complaint based on plaintiffs' failure to state a claim upon which relief can be granted and arguing that WMATA's sovereign immunity precludes the Court from exercising subject matter jurisdiction over the tort claims.*fn3

C. Plaintiffs' Allegations

1. Master Development Plan for the Ballpark District

In response to Major League Baseball's 2004 announcement that the League was considering relocating the Montreal Expos baseball franchise to Washington, D.C., the District of Columbia government created the Anacostia Waterfront Corporation ("AWC"). Amend. Compl. ¶ 9. The AWC's mission was to develop and revitalize the underutilized public lands along the Anacostia River by: 1) developing a comprehensive "Master Development Plan" for the area surrounding the baseball team's new stadium ("the Ballpark District"); 2) acquiring property in the Ballpark District; and 3) conveying the acquired property to selected Master Developers. Id. ¶ 11.

WMATA owned several properties within the Half Street Area of the Ballpark District, including the Navy Yard Metro Station site and the Southeast Bus Garage, and the AWC sought to acquire and develop those properties as a part of its Master Development Plan. Id. ¶ 15. WMATA initially issued a Joint Development Solicitation ("JDS"), inviting real estate developers to jointly develop with WMATA the properties it owned in the Ballpark District. Id. ¶ 16. The District of Columbia, however, requested that WMATA cancel the JDS and participate in the master development process. Id. ¶ 17. WMATA subsequently withdrew the JDS, and thereafter coordinated with the AWC in implementing the Master Development Plan. Id.

2. Monument Designated as Master Developer of the Half Street Area of the Ballpark District

In December 2005, the AWC designated Monument as Master Developer for the Half Street Area of the Ballpark District, and Monument and the AWC signed a Letter of Intent memorializing their respective rights and duties. Id. ¶ 23. As Master Developer, Monument was given the opportunity to negotiate exclusively to acquire and develop projects within the Half Street Area, once the properties had been acquired by the District of Columbia. Id. ¶¶ 23-24. At the time that Monument and the AWC entered their agreement, the District of Columbia did not own any properties in the Half Street Area, but was seeking to acquire those properties from WMATA.*fn4 Id. Ex. F. at 1.

Plaintiffs allege that WMATA was aware that Monument had been awarded the right to negotiate exclusively with the AWC to purchase any properties the District of Columbia acquired within the Half Street Area of the Ballpark District. Amend. Compl. ¶¶ 25-28. Further, plaintiffs allege that, based on WMATA's policies and procedures, WMATA had an obligation to offer the District of Columbia the right of first refusal to purchase any property within the District of Columbia that WMATA intended to sell. Id. ¶ 62. In view of Monument's agreement with the District of Columbia, plaintiffs allege that Monument was an intended third-party beneficiary of WMATA's agreement to offer the District the right of first refusal to purchase WMATA-owned property located in the Ballpark District.

3. WMATA's Agreement with Monument

In addition to plaintiffs' allegation that Monument was a third-party beneficiary of WMATA's agreement with the District of Columbia, plaintiffs also allege that a contractual relationship existed between Monument and WMATA. According to plaintiffs, in May 2006, Monument and WMATA became frustrated at the slow pace of the AWC's progress in implementing the Master Development Plan and began engaging in direct negotiations to convey WMATA's property in the Half Street Area to Monument. Id. ¶ 30. Plaintiffs contend that, during these direct negotiations and at WMATA's request, Monument agreed that the conveyance could take place in three phases to accommodate WMATA's immediate need to sell the Navy Yard Metro Station site and to give WMATA time to determine how and where to relocate the Bus Garage. Id. ¶ 30.

In December 2006, Monument implemented what it considered to be Phase One of the multi-phased agreement with WMATA and submitted an unsolicited offer to WMATA to purchase the Navy Yard Metro Station. Id. ¶ 35. After receiving Monument's unsolicited offer, WMATA issued an Invitation for Bids ("IFB") for the Navy Yard Metro Station. Id. ¶¶ 34-36. Monument was the only developer to respond to the IFB. In December 2006, WMATA sold the Navy Yard Metro Station to Monument. Id. Plaintiffs allege that it was understood by the AWC, the District of Columbia, and WMATA that Monument would continue to have exclusive rights to negotiate for the remaining property owned by WMATA in the Ballpark District, namely the Bus Garage. Id. ¶¶ 38-39.

After purchasing the Navy Yard Metro Station, Monument began what it considered to be Phase Two, taking steps that conferred benefits to WMATA, including: agreeing to complete the WMATA Navy Yard Metro Station expansion in time for opening day of the 2008 Washington Nationals' baseball season; accommodating WMATA's employee parking requirements; closing alleyways in the Half Street Area to benefit WMATA; and ensuring the WMATA Bus Garage was not designated as a historical site, thereby enhancing the fair market value of the property. Id. ¶¶ 41-42. These benefits were allegedly given in reliance on, and in consideration for, Monument's right to negotiate exclusively to purchase WMATA's Bus Garage. Id. ¶¶ 40-45, 51-54.

In April 2007, Monument learned that WMATA had secured an alternative location for the Bus Garage. Because the precondition to acquiring the Bus Garage had been satisfied, Monument initiated Phase Three and delivered to WMATA an unsolicited bid to purchase the Bus Garage. Id. ¶¶ 55-56.

4. WMATA Issues IFBs for the Bus Garage

After receiving Monument's unsolicited bid to purchase the Bus Garage, WMATA obtained authorization from its Board of Directors to dispose of the property. WMATA then issued IFB 07-3, with a bid deadline of July 23, 2007, for the sale of the Bus Garage. Id. ¶¶ 59-60. According to Monument, before the bidding closed, the District of Columbia exercised its right of first refusal and informed WMATA that it was interested in purchasing the Bus Garage. Id. ¶ 61. In deference to the District's request, WMATA withdrew the IFB and initially agreed to sell the property to the District. Id. ¶ 62. Plaintiffs allege that "when the District explained that it wanted to assign its rights to Monument or have WMATA sell the property directly to Monument, WMATA [] reneged on its commitments," and did not consummate the sale. Id. ¶ 62.

WMATA then issued IFB 08-1 for the sale of the Bus Garage, with a bid deadline of August 28, 2007. Id. ¶¶ 65-68. The IFB stated that the sole criterion for the winning bid would be: "The bid which represents the best net return to WMATA after leaseback monthly rent for WMATA's anticipated lease term (which may, in WMATA's sole discretion be less than 36 months) is deducted from the Bid Amount." Id. ¶ 66.

Monument protested the issuance of the IFB, arguing that the IFB breached WMATA's agreement to negotiate exclusively with Monument for the sale of the Bus Garage. Id. ¶¶ 68, 82, 102; see also id. Ex. K. In order to protect its interest in the Bus Garage, however, Monument's affiliate, MRB 7, submitted two bids. Id. ¶¶ 68-70. The first bid was for the minimum price of $60 million, with no charge for leaseback rental. Id. ¶ 71. The second bid contained an escalating bid clause, in which MRB 7 agreed to pay $250,000 more than any other qualified bidder. Id. ¶ 72.

Two other bidders responded to the IFB, one of which was the John Akridge Company. Id. ¶ 75. Akridge submitted a bid for $69.25 million, and offered to charge $110,000 per month in rent for months 1-12 to lease back the Bus Garage, and $430,000 per month for months 13-36. Id. ¶ 76. Akridge also included in its bid an offer to commence negotiations with WMATA to temporarily relocate the Bus Garage onto Akridge property. Akridge's bid was accompanied by a cover letter from Akridge's counsel, stating that the bid was "submitted conditionally." Id. On September 24, 2007, WMATA staff publically posted its recommendation that the Board accept the Akridge bid. Id. ¶ 80.

After WMATA announced its recommendation to award the bid to Akridge, plaintiffs filed another protest with WMATA objecting to the bid process itself and alleging that WMATA violated its Procurement Procedures Manual ("PPM"). Specifically, plaintiffs contend that WMATA improperly considered the Akridge bid on the grounds that the bid was submitted conditionally and offered terms other than those sought by the IFB, i.e. an offer to help WMATA relocate its Bus Garage, thereby rendering the bid non-responsive. Id. ¶¶ 76-82.

In response to plaintiffs' concerns that WMATA breached its agreement with Monument, Carol O'Keeffe, WMATA's General Counsel, sent a letter to Jeffrey Neal, the president of Monument, denying the existence of a contractual obligation to sell the Bus Garage to Monument. Id. Ex. L. In response to plaintiffs' challenge to the bid process, representatives of WMATA allegedly ...

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