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Banneker Ventures, LLC v. Graham

United States District Court, D. Columbia

December 11, 2013

BANNEKER VENTURES, LLC, Plaintiff,
v.
JIM GRAHAM, et al., Defendants

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For BANNEKER VENTURES, LLC, Plaintiff: Jerry L. Malone, PRO HAC VICE, LAW OFFICES OF JERRY L. MALONE, Rockville, MD; Brian Keith McDaniel, MCDANIEL & ASSOCIATES, Washington, DC.

For JIM GRAHAM, Defendant: John R. Hoellen, LEAD ATTORNEY, COUNCIL OF THE DISTRICT OF COLUMBIA, Office of the General Counsel, Washington, DC; Vladlen David Zvenyach, LEAD ATTORNEY, COUNCIL OF THE DISTRICT OF COLUMBIA, Office of Genral Counsel, Washington, DC.

For JOSHUA A. ADLER, ROBB M. LAKRITZ, LAKRITZ ADLER DEVELOPMENT, LLC, Defendants: Abbe David Lowell, LEAD ATTORNEY, CHADBOURNE & PARKE LLP, Washington, DC; Brian L Schwalb, Moxila A. Upadhyaya, Seth A. Rosenthal, VENABLE LLP, Washington, DC.

For WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Defendant: Bruce P. Heppen, LEAD ATTORNEY, Joshua W. Montague, WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Washington, DC; Douglas Morton Bregman, LEAD ATTORNEY, Geoffrey Townsend Hervey, BREGMAN, BERBERT, SCHWARTZ & GILDAY, LLC, Bethesda, MD.

OPINION

ROSEMARY M. COLLYER, United States District Judge.

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Banneker Ventures, LLC, is a developer who, despite an exclusive right to negotiate, failed to reach a final agreement with Washington Metropolitan Area Transit Authority for the lease and development of certain real property. Banneker sues alleging, inter alia, breach of contract and fraud. Washington Metropolitan Area Transit Authority moves to dismiss for lack of jurisdiction over the tort and quasi-contract claims due to its sovereign immunity and for failure to state a breach of contract claim. The motion will be granted.

I. FACTS

The Amended Complaint sets forth more than fifty pages of alleged facts, summarized here. Washington Metropolitan Area Transit Authority (WMATA) sought to improve certain real property located above the Shaw-Howard/Florida Avenue Metrorail Station (the Site), consisting of three lots located in the 700 and 800 blocks of Florida Avenue, NW, in Washington, D.C. Am. Compl. [Dkt. 18] ¶ ¶ 1, 22. In the spring of 2007, WMATA issued a Request for Expressions of Interest for development of the Site. Id. ¶ 22.

Banneker Ventures, LLC, (Banneker) is a firm that specializes in construction and property development. Banneker and eleven other developers submitted responses to the Request for Expressions of Interest. Id. ¶ 23. In August 2007, WMATA issued a Joint Development Solicitation to six of the developers, including Banneker and LaKritz Adler Development, LLC (LaKritz Adler), requesting that they submit more detailed proposals. The Joint Development Solicitation provided that a developer would be selected, a term sheet would be negotiated, and a Joint Development Agreement would be negotiated and completed within 150 days after the WMATA Board's approval of the selected developer and the term sheet. Id. ¶ 28.

Banneker proposed a project that would be known as " The Jazz at Florida Avenue" (Project), id. ¶ 50, and Banneker and WMATA staff negotiated a draft term sheet for presentation to the WMATA Board. Id. ¶ 59. On June 26, 2008, the WMATA Board chose Banneker as the " Selected Developer" for the Project. Id. ¶ ¶ 2, 92, 115. The Board simultaneously directed its staff to negotiate an affordable housing set aside as part of the Project. Id. ¶ 89.

On July 17, 2008, WMATA and Banneker signed a Term Sheet, which provided that Banneker had the exclusive right, for a limited period of time, to negotiate a Joint Development Agreement with WMATA for development of the Site. Id. ¶ ¶ 2, 18, 116; see WMATA Mot. [Dkt. 22], Ex. 3 [Dkt. 22-5] (Term Sheet). The Term Sheet provided: " This Term Sheet will have no binding effect on the parties except that [Banneker] shall have the exclusive right to negotiate a Definitive Agreement with WMATA for a period of five (5) months from the date of this Term Sheet." Term Sheet at 11. Through March 2010, Banneker and WMATA staff continued to negotiate and revise the Term Sheet, but the WMATA Board did not approve a revised Term Sheet and the parties never agreed on a final Joint Development Agreement. Am. Compl. ¶ ¶ 3, 154-176. Despite three extensions of time, Banneker's exclusive right to negotiate expired on March 31, 2010. Id. ¶ ¶ 12, 18, 176.

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Banneker alleges that Jim Graham, a District of Columbia Council member and then a voting member of the WMATA Board of Directors, engaged in " bid suppression and bid rigging," i.e., he objected to the decision to choose Banneker as the Selected Developer and interfered with Banneker's attempts to finalize the Term Sheet and a Joint Development Agreement. Id. ¶ ¶ 4-11, 127. Mr. Graham's alleged goal was to designated LaKritz Adler as the Selected Developer for the Project. Id. ¶ 7. LaKritz Adler was a major contributor to Mr. Graham's campaign and constituent services fund. Id. ¶ ¶ 5, 26.

Specifically, Banneker alleges that Mr. Graham interfered with Banneker's exclusive right to negotiate a Joint Development Agreement by offering his vote as a member of the D.C. Council to approve a D.C. lottery contract that would benefit one of Banneker's then principals, Warren Williams, in exchange for Banneker's withdrawal as the Selected Developer for the Project. Id. ¶ ¶ 7, 98, 109. Mr. Williams refused. Id. ¶ 8. Mr. Graham also allegedly interfered by falsely reporting to the WMATA Board that Banneker did not have the capability to develop the Site, id. ¶ 65, and questioning whether the deal was financially viable, id. ¶ ¶ 93, 137. In addition, it was Mr. Graham who allegedly convinced the WMATA Board to add affordable housing requirements to the Project, decreasing the value of the Project to the detriment of Banneker. Id. ¶ 10, 89, 111. Further, Mr. Graham allegedly pressured Banneker to include LaKritz Adler on the Project as a co-developer, id. ¶ ¶ 11, 70-71, 111, and to purchase a high-priced option on adjacent property from LaKritz Adler, id. ¶ ¶ 119, 127. Also, Mr. Graham allegedly pressured Banneker to help fund a U Street Business Improvement District. Id. ¶ ¶ 111, 121.

Mr. Graham's actions to frustrate Banneker's efforts and to advance LaKritz Adler's financial interests were found to have violated the WMATA Standards of Conduct [1] and the D.C. Code of Conduct. Id. ¶ ¶ 6, 18, 131. In February 2012, the WMATA Board launched an independent investigation into allegations that Mr. Graham had offered to support Mr. Williams' bid for the D.C. lottery contract in exchange for Banneker's withdrawal from the Project. Id. ¶ ¶ 181-82. Bradley Bondi, a partner in the law firm of Cadwalader, Wickersham & Taft LLP, led the investigation. In October 2012, Mr. Bondi issued a Report of Investigation for the Board of Directors for WMATA, i.e., the " Cadwalader Report." See WMATA Mot., Ex. 1 [Dkt. 22-3] (Cadwalader Report). The Cadwalader Report described why Banneker and WMATA were unable to negotiate a final contract:

Metro and Banneker Ventures confronted numerous obstacles to finalizing a term sheet, including Banneker's lack of development experience, the absence of a clear Metro policy on key aspects of the term sheet, concerns and inquiries raised by Metro Board Members, and the financial and economic crisis that impacted the real estate market. The inability of Banneker and Metro to anticipate and solve these problems caused numerous delays that ultimately prevented the parties from presenting a final term sheet to the Metro Board before Banneker Ventures's exclusive negotiation period expired.

Cadwalader Report at 21-22. The Cadwalader Report also explained that after Banneker was told to include affordable housing

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in the Project, Banneker reduced its bid from $14 million to $5.8 million, below the bids of other proposed developers and below the Site's $7.5 million appraised value. Id. at 23. In May 2009, the Site was reappraised at a lower value, which caused Banneker to reduce its bid even further. Id. Banneker was unable to retain an experienced development partner, as required by WMATA from the outset, and was unable to make a financial offer acceptable to the WMATA Board. Id. at 51-52. Mr. Bondi concluded that " [i]n the two years that Banneker Ventures spent negotiating with Metro, Banneker Ventures did not adequately address the concerns raised by the Metro Board and did not solve various other problems that it faced." Id. at 50.

Despite finding business reasons for the failure of Banneker and WMATA to reach a final contract, the Cadwalader Report also determined that Mr. Graham violated Article III § A of the WMATA Standards of Conduct, which provides:

Public funds must be expended in a manner which assures the highest degree of confidence and public trust in WMATA. It is imperative that Board Members in their private financial relationships and in their official conduct strictly avoid engaging in actions which create conflicts of interest or the appearance of a conflict of interest. It is likewise imperative that Board Members act impartially in their official conduct by avoiding any actions which might result in favored treatment or appearances thereof toward any individual, private organization, consultant, contractor or potential consultant or contractor. Each Board Member while acting in his/her capacity as a WMATA Board Member, has a duty to place the public interest foremost in any dealings involving WMATA.

Id. at 53. Mr. Graham violated Article III § A in two ways: by telling Mr. Williams that he would support his bid for the lottery contract if Banneker withdrew as Selected Developer for the Project, Mr. Graham " pitted the interests" of the D.C. Council against the interests of WMATA, thereby creating a conflict of interest, or at least the appearance of one; and by supporting LaKritz Adler's inclusion in the Project and opposing Banneker's participation in the Project, Mr. Graham breached his duty to remain impartial. Id.; see also Am. Compl. ¶ 190.

WMATA did not sell or lease the Site to LaKritz Adler. In July 2011, WMATA sold the Site to JBG Construction for $10.2 million. Cadwalader Report at 28. As of October 2012, the Site remained undeveloped and JBG Construction was awaiting the requisite approval from the D.C. Historic Preservation Review Board. Cadwalader Report at 28 n.103.

After the Cadwalader Report was issued, the D.C. Board of Ethics and Government Accountability initiated an investigation and issued an Ethics Report. The Ethics Report allegedly found that Mr. Graham violated the D.C. Code of Conduct by inappropriately favoring his campaign contributor, LaKritz Adler, over Banneker in the negotiation for development of the Site. Am. Compl. ¶ 195. On February 25, 2013, the D.C. Council adopted a resolution reprimanding Mr. Graham for improperly offering to support Mr. Williams' bid for the D.C. lottery contract in exchange for Banneker's withdrawal from the Project. Id. ¶ ¶ 197-202.

As a result, Banneker filed suit against WMATA, Mr. Graham, Mr. LaKritz, Mr. Adler, and LaKritz Adler. The Amended Complaint alleges eight counts:

Count I--Breach of Contract (against WMATA);

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Count II--Breach of Covenant of Fair Dealing (against WMATA);
Count III--Tortious Interference with a Prospective Economic Advantage (against Messrs. Graham, LaKritz, Adler, and LaKritz Adler);
Count IV--Tortious Interference with a Contract (against Messrs. Graham, LaKritz, Adler, and LaKritz Adler);
Count V--Unjust Enrichment (against WMATA);
Count VI--Unlawful Restraint of Trade (against Messrs. Graham, LaKritz, and Adler);
Count VII--Fraud, Constructive Fraud, and Negligent Misrepresentation (against WMATA); and
Count VIII--Civil Conspiracy (against all ...

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