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McWilliams Ballard, Inc. v. Broadway Management Company

July 7, 2009


The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge


This case involves a dispute between a real estate development corporation and a firm hired to market and sell units in a new condominium development and the subsequent financial failure of that development. Plaintiff McWilliams Ballard, Inc. has moved to amend its complaint primarily for the purpose of adding new individual and corporate defendants based on the theory that they are the alter egos of the corporations involved in the contract and condominium project. Before the Court are plaintiff's motion, defendants' opposition, plaintiff's reply, defendants' surreply, and plaintiff's opposition to defendants' surreply.*fn1 For the reasons set forth herein, this Court grants plaintiff's motion.


Plaintiff originally named six corporations as defendants ("Original Broadway LLCs"), but it now seeks to amend its complaint to add as defendants twelve corporations ("New Broadway LLCs") (collectively, "the Broadway LLCs") and five individuals -- Charles Herzka, Lazar Muller, Joseph Neumann, Samuel Weiss, and David Weldler (collectively, the "Individual Defendants").*fn2

Pursuant to a Marketing Agreement ("the contract") between plaintiff and defendant Broadway Mass Associates, LLC (Am. Compl. ¶ 44 & Ex. 1 (McWilliams/Ballard, Inc. Marketing Agreement for Broadway Mass. Associates, LLC) ["Marketing Agreement"] at 1), plaintiff marketed units in a condominium development in northwest Washington, D.C. ("the Dumont Development") (id. ¶¶ 44, 45, 49), distributed contracts to prospective purchasers, and made substantial preparations to coordinate purchaser settlements. (Id. ¶ 60.) On September 18, 2008, plaintiff terminated the contract based on defendants' alleged misrepresentations as to the imminence of settlements with purchasers and the Dumont Development's finances and real estate tax documentation. (Id. ¶¶ 62-73.) Three months later, after defendants and the Dumont Development defaulted on the loans, lenders began foreclosure proceedings. (Id. ¶ 43.)

Plaintiff's amended complaint contains six counts against all defendants: breach of contract, fraud, negligent misrepresentation and constructive fraud, unjust enrichment, civil conspiracy to commit fraud, and aiding and abetting fraud. Plaintiff claims that defendants breached the contract by, inter alia, failing to keep plaintiff "reasonably and seasonably apprised of all material facts that would reasonably bear on [plaintiff's] marketing" of the Dumont Development units. (Am. Compl. ¶ 73; Marketing Agreement at 2.) Plaintiff also alleges fraud by the Broadway LLCs based on alleged misrepresentations by their agents. (Am.Compl. ¶¶ 20-24, 64, 92, 108-10,118-25.) Namely, plaintiff claims that Herzka and Weldler, as well as non-defendant employees of the Broadway LLCs, repeatedly told plaintiff to notify unit purchasers that settlements would occur according to a sixty-day schedule and that defendants had submitted the appropriate tax documents, despite knowing that the Dumont Development was failing and the tax documents, in fact, had not been submitted. (See Am. Compl. ¶¶ 62-65, 67, 69-71, 75, 119, 123.) Plaintiff also alleges that Herzka "informed Christopher Ballard... that Defendants were intentionally delaying the settlements of the Dumont Project to avoid Defendants risking financial losses." (Am. Compl. ¶ 71.) Plaintiff further alleges that the Individual Defendants and Broadway LLCs, (1) fail[ed] to maintain separate or adequate corporate records and books; (2) ha[d] Dumont Project invoices and notices addressed to different [Broadway LLCs], (3) pa[id] Dumont Project invoices from various accounts under different [Broadway LLCs'] names, (4) shar[ed] company staff and property, (5) shar[ed] bank accounts, (6) divert[ed] company funds to non-corporate uses, such as the personal uses of the Individual Defendants, and vice-versa, (7) transferr[ed] cash among [Broadway LLCs] and Individual Defendants... (8) fail[ed] to properly capitalize the [Broadway LLCs], and (9) us[ed] the same business location and mailing address for all [d]efendants[.] (Pl.'s Mem. at 9; Am. Compl. ¶¶ 25, 31-43, 61-72, 89-110.)

Plaintiff now seeks leave to amend its complaint to include the New Broadway LLCs and the Individual Defendants, as well as additional factual allegations regarding the Original Broadway LLCs. (Pl.'s Mem. at 1-2.) Plaintiff asserts two theories for suing the new defendants; 1) plaintiff seeks to pierce the corporate veil of the Broadway LLCs, alleging that they are alter egos of each other and of the Individual Defendants, and 2) plaintiff claims that each of the Individual Defendants should be held liable for his own tortious conduct as an officer of one or more of the Broadway LLCs. (Pl.'s Mem. at 8 & n.6, 12.)



After a defendant has filed a responsive pleading, "a plaintiff [must] first seek leave of court or obtain the opposing party's written consent before filing [an] amended complaint."

Banks v. York, 448 F. Supp. 2d 213, 215 (D.D.C. 2006); Fed. R. Civ. P. 15(a). "The decision to grant leave to amend a complaint is left to the court's discretion," Banks, 448 F. Supp. 2d at 215 (citing Firestone v. Firestone, 76 F.3d 1205, 1208 (D.C. Cir. 1996), but the court must "heed Rule 15's mandate that leave is to be 'freely given when justice so requires.'" Amore ex. rel. Amore v. Accor N. Am., Inc., 529 F. Supp. 2d 85, 92 (citing Firestone, 76 F.3d at 1208). "[I]t is an abuse of discretion to deny leave to amend unless there is sufficient reason, such as 'undue delay, bad faith or dilatory motive...[or] futility of amendment." Banks, 448 F. Supp. 2d at 215 (citing Firestone, 76 F.3d at 1208 (quoting Foman v. Davis, 371 U.S. 178, 182 (1962))). In this case, the only issue presented is futility, and defendants may prevail on this ground if they can show that "the proposed claim would not survive a motion to dismiss." Amore, 529 F. Supp. 2d at 92 (citing James Madison Ltd. v. Ludwig, 82 F.3d 1085, 1099 (D.C. Cir. 1996)).

To survive a motion to dismiss, a complaint must satisfy Federal Rule of Civil Procedure 8(a)(2)*fn3 or, when pleading fraud, Rule 9(b). See Bell Atlantic v. Twombly, 550 U.S. 544, 554-55, 570 (2007) (holding that a complaint must "state a claim to relief that is plausible on its face"). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556). Determining whether a complaint states a plausible claim for relief will... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense[,]... [b]ut where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged -- but it has not 'show[n]' -- 'that the pleader is entitled to relief.'

Id. at 1950 (citing Fed. R. Civ. P. 8(a)(2)).

Rule 9(b) requires a party "alleging fraud.[to] state with particularity the circumstances constituting fraud or mistake," but allows "[m]alice, intent, knowledge and other conditions of a person's ...

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