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Armenian Genocide Museum and Memorial, Inc. v. Cafesjian Family Foundation

March 9, 2010

ARMENIAN GENOCIDE MUSEUM AND MEMORIAL, INC., PLAINTIFF,
v.
THE CAFESJIAN FAMILY FOUNDATION, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge

MEMORANDUM OPINION

This case arises out of a very bitter and very unfortunate dispute between Plaintiff The Armenian Genocide Museum & Memorial, Inc. ("AGM&M") and Defendants The Cafesjian Family Foundation, Inc. ("CFF"), John J. Waters Jr. ("Waters Jr."), John J. Waters Sr. ("Waters Sr.), and Gerard L. Cafesjian ("Cafesjian") (collectively, "Defendants"), relating to the construction of an Armenian genocide museum and memorial in Washington, D.C. Although the parties have reportedly expended significant time attempting to resolve their disputes, they continue to press forward with any and all grievances against each other in this and two other cases currently pending before this Court. In the above-captioned case, AGM&M has asserted claims for breach of fiduciary duty against Waters Jr., Waters Sr., and Cafesjian for their involvement in the filing of a Memorandum of Agreement that recorded a reversionary interest held by Cafesjian and CFF in certain properties owned by AGM&M, as well as the filing of a lis pendens. Plaintiff also seeks declaratory and injunctive relief relating to CFF and Cafesjian's reversionary interest, which exists pursuant to a series of agreements between AGM&M, CFF, Cafesjian, and the Armenian Assembly of America. CFF and Waters Jr. have filed a counterclaim asserting that the filing of this lawsuit was an ultra vires act by AGM&M.

Currently pending before the Court in this action are a series of motions for summary judgment. AGM&M has filed a [104] Motion for Partial Summary Judgment regarding its claims for breach of fiduciary duty against Waters Jr. and Cafesjian (Count I of the Second Amended Complaint) and against Waters Sr. (Count II), as well as the sole Counterclaim. Waters Sr. has filed a [105] Motion for Summary Judgment regarding the sole claim against him for breach of fiduciary duty (Count II). Waters Jr., Cafesjian, and CFF (collectively, the "Cafesjian Defendants") have filed a [107] Motion for Summary Judgment as to all counts. The parties have each filed oppositions and replies regarding these motions, and they are now ripe for adjudication. Also pending before the Court is a [111] Motion to Compel the Production of Documents, filed by AGM&M and other parties in the related actions, which were consolidated for purposes of discovery only.*fn1 The Court shall address that motion in a separate opinion.

For the reasons explained below, the Court shall DENY the parties' motions for summary judgment with respect to: (1) Count I of the Second Amended Complaint for breach of fiduciary duty against Waters Jr. and Cafesjian; (2) Count III of the Second Amended Complaint for declaratory relief regarding the enforceability of the reversion clause in the Grant Agreement; (3) Count IV of the Second Amended Complaint seeking quiet title and removal of the lis pendens; and (4) the Counterclaim for relief based on an alleged ultra vires act. The Court shall GRANT Waters Sr.'s motion for summary judgment regarding Count II of the Second Amended Complaint.

I. BACKGROUND

The following facts are drawn from the summary judgment record assembled by the parties and the parties' statements of material facts that are not in dispute.*fn2

A. The Armenian Assembly of America and the Origins of the AGM&M

The Armenian Assembly of America (the "Assembly") is an Armenian-American advocacy group that is incorporated in the District of Columbia as a non-profit corporation. Pl.'s Stmt. ¶ 5. In the mid-1990s, the Assembly received a pledge from Anoush Mathevosian, an Armenian-American philanthropist, for the purpose of constructing a permanent museum to the victims and survivors of the Armenian genocide.*fn3 Pl.'s Stmt. ¶ 6. Ms. Mathevosian's pledge was initially for $3.0 million but was subsequently raised to $3.5 million. Defs.' Resp. Stmt. ¶ 6.*fn4 Encouraged by Ms. Mathevosian's generosity, the Assembly began exploring possible sites for the museum in Washington, D.C., and solicited donations from the Armenian-American community for the purpose of establishing and constructing the museum. Pl.'s Stmt. ¶ 7. In 2000, the Assembly identified a possible site for the museum at the National Bank of Washington building (the "Bank Building") at 14th and G Streets, N.W. (619 14th Street, N.W.), Washington, D.C., located just a few blocks away from the White House. Pl.'s Stmt. ¶ 8.

At some point in the late 1990s, Cafesjian became involved with the Assembly's efforts to create an Armenian genocide museum.*fn5 With the help of donations from Cafesjian (through CFF), the Assembly purchased the Bank Building in early 2000. Pl.'s Stmt. ¶ 8. As part of the Bank Building transaction, which involved both grants and loans from CFF, the Assembly executed a promissory note to CFF for $500,000.*fn6 See Cafesjian Defs.' Br., Ex. 71 (3/23/00 Letter from Assembly to Cafesjian) at 1; Pl.'s Br., Ex. 4 (R. Kaloosdian Aff.) ¶ 9. According to Robert Kaloosdian, a founding member and long-time officer and Trustee of the Assembly, the Assembly eventually came to understand that this note would be forgiven. See Pl.'s Br., Ex. 4 (R. Kaloosdian Aff.) ¶ 9. Defendants, however, dispute this. See Defs.' Br., Ex. 1 (Waters Jr. Aff.) ¶ 86. CFF and the Assembly also agreed to include a memorial named after Cafesjian as part of the museum project. See Defs.' Br., Ex. 71.

Subsequent to the purchase of the Bank Building, Cafesjian, through an affiliated entity called The TomKat Limited Parternship ("TomKat LP"), acquired several lots adjacent to the Bank Building. Pl.'s Stmt. ¶ 9. Cafesjian ultimately decided to donate these lots to the museum project.*fn7 Cafesjian wanted the museum project to be run by an independent entity, and the Assembly eventually decided to create one. Pl.'s Stmt. ¶ 10; Cafesjian Defs.' Resp. Stmt. ¶ 10.*fn8

In October 2003, the Armenian Genocide Museum & Memorial, Inc. ("AGM&M") was incorporated as a District of Columbia nonprofit corporation. Pl.'s Stmt. ¶ 11. AGM&M was established for the purpose of constructing, owning, operating, and maintaining a permanent museum and memorial to the victims and survivors of the Armenian genocide. Pl.'s Stmt. ¶ 2.

The Articles of Incorporation and By-Laws of AGM&M were ratified and adopted, respectively, pursuant to a Unanimous Written Consent of the Initial Trustees of AGM&M executed on October 30, 2003. Pl.'s Stmt. ¶ 14. The parties agree that these three documents-the Articles, the By-Laws, and the Unanimous Written Consent-govern the operation of and organization of AGM&M. Pl.'s Stmt. ¶ 15. Pursuant to the By-Laws and Articles, AGM&M has no members. Pl.'s Stmt. ¶ 16. The Articles provide that AGM&M's "affairs shall be managed and controlled by the Board of Trustees." Pl.'s Stmt. ¶ 17. The Board of Trustees serves as the Board of Directors for purposes of the D.C. Non-Profit Corporations Act. Pl.'s Stmt. ¶ 19.

Under the Articles of Incorporation, there were four initial Trustees: Cafesjian, Hirair Hovnanian, Anoush Mathevosian, and Robert Kaloosdian. See Pl.'s Br., Ex. 1 (Articles of Incorporation of AGM&M) (hereinafter, "Articles"). Each initial Trustee was designated as a representative of one of the four major initial donors to AGM&M: CFF (designating Cafesjian), Hirair Hovnanian (designating himself), Anoush Mathevosian (designating herself), and the Assembly (designating Kaloosdian). See Pl.'s Br., Ex. 7 (Unanimous Written Consent) (hereinafter, "UWC") at 1-2. Pursuant to the By-Laws, the terms of these initial Trustees is perpetual, and each initial donor may appoint successor Trustees in the event that the initial Trustees are no longer able to serve. See Pl.'s Br., Ex. 6 (By-Laws) § 2.4. A donor may elect one Trustee for every $5 million contributed to AGM&M (or elect a single Trustee to control as many votes as the donor has contributed in multiples of $5 million). Id. § 2.5. Unless otherwise provided in the By-Laws or the Articles, all questions are to be decided by an 80% vote of the Trustees at a meeting where a quorum is present. Id. § 2.7. Persons representing one-half of the aggregate eligible votes constitute a quorum at a duly-called meeting of the Board of Trustees. Id. § 2.6. The By-Laws also establish notice requirements that must be followed to properly convene a Board meeting: Trustees much each be given personal notice of the time and place of the meeting at least five, and no more than thirty, days in advance. Pl.'s Stmt. ¶ 21.

As of October 31, 2003, Cafesjian became the Chairman and President of AGM&M and Waters Jr. became the Secretary and Treasurer of AGM&M. Pl.'s Stmt. ¶¶ 23-24. Hirair Hovnanian became Vice Chairman of AGM&M. See UWC at 2.

B. The Grant Agreement & Transfer Agreement

On November 1, 2003, the Assembly executed a Grant Agreement with CFF and Cafesjian.*fn9 Pl.'s Stmt. ¶ 25; see Pl.'s Br., Ex. 11 (Grant Agreement). The Grant Agreement is signed by Hirair Hovnanian and Peter Voskibian on behalf of the Assembly and by Cafesjian on behalf of himself and CFF. See Grant Agreement at 11. The Grant Agreement memorialized CFF/Cafesjian's $3.5 million donation to the Assembly in 2000 for the purchase of the Bank Building (the "First Grant"). It states that the Assembly shall use the First Grant funds solely to purchase the Bank Building, pay any related transaction costs, and construct the "Gerard L. Cafesjian Memorial," which is described in section 3.2 of the Grant Agreement. See Grant Agreement §§ 1.2, 3.2. The Grant Agreement also memorialized a second donation (the "Second Grant") of $12.85 million for the purchase of four parcels of real estate surrounding the Bank Building: 1334-36, 1338, 1340, and 1342 G Street, N.W., Washington, D.C. (the "Adjacent Properties"). See id. § 2.2. These are the properties that Cafesjian had purchased through TomKat LP. See Defs.' Br. at 10. Collectively, the Bank Building and the Adjacent Properties shall be referred to as the "Grant Property" or "the Properties."

The Grant Agreement also describes several conditions imposed on the use of the grant funds. First, the Grant Agreement provides that the Grant Property "may only be used as part of the AGM&M, subject to plans for the AGM&M approved by the Board of Trustees of Armenian Genocide Museum & Memorial, Inc. (the 'Plans')...." See Grant Agreement § 3.1.*fn10 Second, the Grant Agreement contains a termination and reversion clause:

If the Grant Property is not developed prior to December 31, 2010 in accordance with the Plans, or if the Grant Property is not developed in substantial compliance with the Plans including with respect to deadlines for completion of the construction, renovation, installation and other phases detailed in the Plans, then:

(i) in the event any portion of the Grants has not been funded, this Agreement terminates; and

(ii) to the degree any portion of the Grants has been funded, at the Grantor's sole discretion, the Assembly shall return to the Grantor the Grant funds or transfer to the Grantor the Grant Property.*fn11

Grant Agreement § 3.1(B). The Agreement states that the Assembly is in breach if it fails to use the Grants solely for the purposes set out in the Agreement or if it fails to satisfy any of the conditions set forth in the Agreement. Id. § 3.9. One of the conditions related to the Assembly was that it must have received "actual grants or firm pledges to support the AGM&M, including the Grants [from CFF/Cafesjian], totaling at least $20,000,000." Id. § 4.1.

In addition, the Grant Agreement conditions the gift of funds on the creation of AGM&M, Inc. as a separate entity. See Grant Agreement § 5.1. The Grant Agreement calls for the Assembly to enter into a "Transfer Agreement" with AGM&M, Inc. whereby the Assembly would transfer to AGM&M all of its "right, title, and interest" in assets and pledges contributed for the museum and memorial project. Id. § 5.3. The Grant Agreement calls for the Transfer Agreement to oblige AGM&M to honor all of the existing donor requirements at the time of transfer and to assume and agree to comply with the Assembly's obligations relating to the construction of the Cafesjian memorial. Id.

The Grant Agreement also provides that the Assembly "must issue a new promissory note... to replace the promissory note issued on March 17, 2000 by the Assembly in favor of [CFF] in the amount of $500,000." Grant Agreement § 5.4(A). If the promissory note is still outstanding when the Transfer Agreement is executed, the Agreement requires it to be transferred to AGM&M as part of the transfer of the Assembly's assets. Id. § 5.4(C). The Grant Agreement also contains a merger clause stating that the Grant Agreement represents the entire agreement between CFF/Cafesjian and the Assembly. See id. § 7.5.

On November 1, 2003, the Assembly and AGM&M entered into the Transfer Agreement. See Pl.'s Br., Ex. 12 (Transfer Agreement). The Transfer Agreement provides that the Assembly shall contribute to AGM&M all of its rights, title, and interest to all assets contributed to the Assembly or held by the Assembly for the development, renovation, and construction of the museum and memorial project-valued at approximately $28 million. See Transfer Agreement § 1.1. As part of the Transfer, AGM&M must honor all of the Assembly's donor requirements existing at the time of transfer (or obtain donor consent to modification of any terms). Id. § 1.2(A). The Transfer Agreement explicitly states that AGM&M "assumes and agrees to comply with the [Assembly's] obligations relating to the memorial commemorating the Armenian Genocide under the [Grant Agreement]," which was attached as an exhibit. Id. § 1.2(B). The AGM&M also agreed to use the assets "solely to develop, construct, and operate the AGM&M." Id. § 1.3.

Subsequent to the execution of the Grant and Transfer Agreements, AGM&M entered into various agreements with TomKat LP, the Assembly, and a third party seller to obtain title to the Adjacent Properties. Pl.'s Stmt. ¶ 32. AGM&M claims that Waters Sr. was retained by Waters Jr. to perform legal services regarding the transfer of properties. See Pl.'s Stmt. ¶ 33. Waters Sr. admits that he was retained by Waters Jr. but asserts that he represented TomKat LP, not AGM&M, with respect to the transfer of title to the Properties. See Waters Sr.'s Resp. Stmt. ¶ 33; Pl.'s Br., Ex. 14 (Waters Sr.'s Answers to Interrogatories) at 6-7. Following the completion of the property transactions, Waters Sr. was not engaged to represent CFF, Cafesjian, TomKat LP, or Waters Jr. with regard to their interaction with others associated with AGM&M until 2006. Waters Sr. Stmt. ¶ 44.

C. Governance of AGM&M by Cafesjian

The AGM&M Board of Trustees held its first meeting in New York on June 9, 2004. Cafesjian Defs.' Stmt. ¶ 28. The meeting was attended by Messrs. Hovnanian, Cafesjian, Kaloosdian, Waters Jr., and Mr. Rouben Adalian (on behalf of Ms. Mathevosian). Id. At the meeting, there was a review of the Museum formation documents, a property and financial report, and two proposals: (1) the selection of an architect, and (2) the selection of an executive director. Id. The parties dispute what happened at this meeting, although it is clear that no architect or executive director was selected by the Board. See Cafesjian Defs.' Stmt. ¶ 29; Pl.'s Resp. Stmt. ¶ 29. Messrs. Hovnanian and Kaloosdian expressed some skepticism about the architect proposals that were put forward at the meeting, but Plaintiff contends that the proposals were never put up for a vote. See Cafesjian Defs.' Stmt. ¶ 29; Pl.'s Resp. Stmt. ¶ 29.

The second AGM&M Board of Trustees meeting was held in New York on February 10, 2005. Cafesjian Defs.' Stmt. ¶ 30. This meeting had the same attendees as the first meeting, and the agenda for the meeting was: (1) a financial and property status report; (2) selection of an executive director; (3) selection of an architect; and (4) an ANI status report*fn12 by Mr. Adalian. Id. The parties also dispute what transpired at this meeting, although the record indicates that Edgar Papazian, a young Armenian architect, gave a presentation to the Board about his vision for the project. See Cafesjian Defs.' Stmt. ¶ 31; Pl.'s Resp. Stmt. ¶ 31. Some of the Board members were highly critical of Mr. Papazian's proposals for the museum. See Cafesjian Defs.' Stmt. ¶ 31; Pl.'s Resp. Stmt. ¶ 31. Mr. Kaloosdian suggested that the proposed design was too aggressive and might not satisfy zoning or historic preservation regulations, saying "it looked as if a dirigible had crashed into a building." See Pl.'s Opp'n, Ex. 10 (R. Kaloosdian Dep. Tr.) at 93-95. There is a dispute as to whether the Board also discussed the possibility of having a competition to select a world-class architect. See Cafesjian Defs.' Stmt. ¶ 32; Pl.'s Resp. Stmt. ¶ 32. No architect was selected by the Board at this meeting. The Board did approve retaining the services of one executive director candidate, Ms. Deborah Devedjian, although the details about her engagement and what was disclosed to the Board about it are disputed by the parties. See Cafesjian Defs.' Stmt. ¶ 33; Pl.'s Resp. Stmt. ¶ 33.

A third Board meeting was held on July 26, 2005. Cafesjian Defs.' Stmt. ¶ 34. Ms. Devedjian gave a presentation to the Board regarding her business plan for the Museum, in which she proposed calling it "The Bank of Moral Courage." See Defs.' Br., Ex. 26 (Business Plan). Several Trustees were put off by the name proposed by Ms. Devedjian as well as her proposed budget. See Pl.'s Opp'n, Ex. 10 (R. Kaloosdian Dep. Tr.) at 103-08; Pl.'s Opp'n, Ex. 5 (G. Cafesjian Dep. Tr.) at 255 ("I would be embarrassed by a name like that."). The parties dispute whether Ms. Devedjian was re-engaged to continue her consulting. See Cafesjian Defs.' Stmt. ¶ 36; Pl.'s Resp. Stmt. ¶ 36. However, the record shows that Ms. Devedjian ultimately billed AGM&M for additional work performed after the July 2005 meeting. See Pl.'s Opp'n, Ex. 22 (filed under seal) (Letter from Devedjian to AGM&M Re: Outstanding Payments).

On September 9, 2005, Waters Jr. emailed the Board of Trustees requesting a meeting at the end of September to reach agreement on the scope, budget, management, and timing for the next phase of development. Cafesjian Defs.' Stmt. ¶ 35. Mr. Hovnanian replied that he did not believe it was necessary to attend a meeting to discuss these details: "I have not been involved in those things up to this point and have expressed a desire not to be involved with them. I continue my support and belief in this project." Cafesjian Defs.' Stmt. ¶ 36; Cafesjian Defs.' Br., Ex. 27 (9/12/2005 Email from H. Hovnanian). Mr. Hovnanian has testified that his involvement in the museum project was limited to approving or disapproving the final concept and then soliciting a large donation from a multi-billionaire. Cafesjian Defs.' Stmt. ¶ 37. No Board meeting was held in the fall of 2005. Id. ¶ 36.

In February 2006, Cafesjian sent a memo to Messrs. Hovnanian, Kaloosdian, and Adalian stating that his goal was to push the project forward. Cafesjian Defs.' Stmt. ¶ 38. Cafesjian proposed to start by approaching targeted major donors and endorsed the selection of Papazian as the project design architect. Id. Cafesjian called for the Board to have its fourth meeting on April 25, 2006. Id. ¶ 39. The proposed agenda for the meeting included: (1) a fundraising campaign consisting of a "Phase I" $75 million "quiet" campaign from major donors and then a "Phase II" $75 million worldwide public fundraising campaign; (2) a proposed structure for AGM&M during its development phase; an "Honorary Committee Prospect List"; (4) a senior staff recruiting plan; and (5) the selection of Mr. Papazian as the design architect. Id. Waters Jr. circulated this agenda with accompanying materials, including a financial overview for 2005 and 2006. Id.

During the April 2006 meeting, the Board discussed Ms. Devedjian's demand for payment for additional work that she had performed regarding the business plan for the Museum. Id. ¶ 40. The Board also discussed Mr. Papazian's proposed design: Messrs. Hovnanian and Kaloosdian criticized the plans and thought they would turn off potential donors. Id. ¶ 41. Cafesjian responded by noting that Messrs. Hovnanian and Kaloosdian had the votes to block the selection of Papazian, and that if they were against it, it would not happen. Id. There was no decision taken on how to proceed in selecting an architect. Id. During the meeting, Mr. Hovnanian "inquired about a likely fallback position in the event Phase I targets were not reached." Id. ¶ 42. Mr. Kaloosdian "proposed considering the renovation of the bank building as one option." Id. Testimony in the record indicates that there was an "impasse" between Cafesjian and the other Trustees regarding the proper budget for the Museum. Id.

Mr. Adalian testified that by May 2006 "it was becoming apparent that there were issues at the Board level." Cafesjian Defs.' Stmt. ΒΆ 50. Mr. Kaloosdian testified that in the summer of 2006, the relationship among the Board members was "disintegrating." Id. Ms. Mathevosian testified that there were arguments between Cafesjian on the one hand and Messrs. Hovnanian and Kaloosdian on the other. Id. On May 24, 2006, Cafesjian sent a letter, through counsel, to the other three Board members stating that the problem has been one of two competing visions for AGM&M neither of which has commanded a consensus among the Trustees. His [Cafesjian's] has been a more ambitious, more expensive and, almost certainly, a more controversial vision. It is certainly a vision more difficult to achieve. The other, and doubtless more readily ...


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