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UMC Dev., LLC v. District of Columbia

Court of Appeals of Columbia District

July 9, 2015

UMC DEVELOPMENT, LLC, et al., APPELLANTS,
v.
DISTRICT OF COLUMBIA, et al., APPELLEES

Argued March 19, 2015

Appeal from the Superior Court of the District of Columbia. (CA-3789-13). (Hon. Frederick H. Weisberg, Trial Judge).

Derek L. Shaffer, with whom Jonathan G. Cooper was on the brief, for appellants.

Richard S. Love, Senior Assistant Attorney General, with whom Eugene A. Adams, Interim Attorney General for the District of Columbia, Todd S. Kim, Solicitor General, and Loren L. AliKhan, Deputy Solicitor General, were on the brief, for appellees District of Columbia and Mayor Vincent Gray.

Emil Hirsch, with whom Steven A. Pozefsky was on the brief, for appellee Not-For-Profit Hospital Corporation.

Before FISHER and EASTERLY, Associate Judges, and KING, Senior Judge.

OPINION

Page 38

EASTERLY, Associate Judge

In 2010, the District--faced once again with a failing hospital in Anacostia and the specter of tens of thousands of District residents deprived of ready access to medical care--foreclosed on the United Medical Center and turned the property and the operation of the hospital over to the Not-For-Profit-Hospital Corporation. There were questions about the propriety of the foreclosure (as the District did not own the hospital or the surrounding property outright), and UMC Development, LLC and Jacksophie GSCH, LLC (collectively " the developers" ) sued. The theory of their case was that foreclosure was wrongful, and that by foreclosing, the District

Page 39

had injured their right to develop the property.

The developers' right to develop the property was itself subject to question. They had agreements with third parties (who in turn had their own deals with the District) in which it was envisioned that the District would approve the third parties' transfer of title to the developers. But the District never gave its approval. The Superior Court thus ruled that the developers lacked standing to challenge the foreclosure. The court also ruled that the developers had failed to satisfy the notice requirements of D.C. Code § 12-309 (2012 Repl.). The court dismissed all of the developers' claims with prejudice.

The developers now appeal. We affirm the Superior Court's dismissal of all counts, determining that the developers lacked standing to raise any of their claims, and accordingly that this court lacked subject matter jurisdiction to hear them. To the extent that the court dismissed the developers' claims with prejudice, however, we reverse. A lack of subject matter jurisdiction may only properly serve as the foundation for a dismissal without prejudice. Thus, we direct the Superior Court to amend the order accordingly.

I. Facts and Procedural History

To give necessary context, our narrative begins in 2007, when United Medical Center's predecessor, Greater Southeast Community Hospital, was in financial distress. As it was the only hospital serving the approximately 140,000 District residents east of the Anacostia River, its troubles were of great concern to the District. In October 2007, the Council of the District of Columbia enacted the " East of the River Hospital Revitalization Emergency Amendment Act of 2007." [1] The Act created a private-public limited partnership between the District and Specialty Hospitals of Washington-GSE Holdings, LLC (" SHW" ), to purchase the failing hospital with up to $79 million in public funds. Pursuant to the District-SHW Partnership Agreement, subsequently executed on November 7, 2007, the District was designated the Limited Partner, and SHW the General Partner. Notwithstanding its designation as General Partner, SHW's powers were constricted. Specifically, it neither had the authority to " obligate, bind[,] or commit the Limited Partner in any way for any obligation," nor to " cause the Partnership to sell, transfer[,] or otherwise dispose of any property or assets in a single transaction or series of related transactions," without first obtaining prior written approval of the Limited Partner.

Just before the District-SHW Partnership was established, SHW's parent company created two entities: Capitol Medical Center, LLC and CMC Realty, LLC (collectively, " the CMCs" ). The District-SHW Partnership entered into an Acquisition Loan Agreement with the CMCs, by which it loaned them money for the purchase and ownership of the hospital and development land, as well as the operation of the hospital. The Acquisition Loan Agreement directed that CMC Realty, as purchaser and owner of the hospital and development land, " shall not . . . [d]ispose, convey, transfer, license the use of, or encumber, [n]or permit the conveyance, transfer or encumbrance of, any part of the Property" " [w]ithout [the Partnership's] prior approval (which may be given or withheld in [the Partnership's] sole and absolute discretion)." The loan was secured by a deed of trust that conferred on the District-SHW Partnership a right to foreclose on the property.

Page 40

Meanwhile, SHW, on its own and without the participation of the District, engaged in other business dealings related to the hospital and the development land. On November 5, 2007, two days prior to the execution of the District-SHW Partnership Agreement (and thus prior to execution of the Acquisition Loan Agreement between the District-SHW Partnership and the CMCs), SHW entered into an Operating Agreement with Jacksophie to create UMC Development. The UMC Development Operating Agreement anticipated that CMC Realty, after acquiring the hospital and development land, would transfer the development land to UMC Development for the subdivision, development, and operation of the land. The UMC Development Operating Agreement, however, also acknowledged that CMC Realty would be bound to " the terms and conditions of the Acquisition Loan Agreement" between it and the (anticipated) District-SHW Partnership. In March 2008, CMC Realty twice requested permission from the District to transfer title of the development land to UMC Development. The District declined to approve the transfer.

By 2010, the hospital had once again become financially unstable, prompting the District to initiate foreclosure of the hospital and development land. It then purchased the property at the foreclosure sale in July, and soon thereafter transferred the hospital and the development land to a new, statutorily-created entity, Not-For-Profit-Hospital Corporation.[2]

The developers filed a complaint in Superior Court against the District and Not-For-Profit-Hospital Corporation as well as Mayor Gray, SHW, and CMC Realty. The developers' complaint centered on the District's decision to foreclose on property which they asserted they owned. In the first paragraph of their complaint, the developers stated that their " action follow[ed] the District's wrongful foreclosure on the United Medical Center . . . and its surrounding real property (the '[d]evelopment [l]and') and the improprieties that tainted those proceedings." In the second paragraph the developers referred to agreements they had made, which allegedly assured that UMC Development would " becom[e] the rightful owner of the development land[,] as was known, understood and agreed to by the District and CMC Realty," and further alleged that, " [k]nowing that it had no authority to foreclose on the development land, in 2010, the District purported to exercise rights that it did not actually hold, and wrongfully foreclosed on the [d]evelopment [l]and at the direct expense of the developers." In the third paragraph the developers asserted even more explicitly that, " [a]t the time of the District's purported foreclosure, UMC Development was the rightful owner of the Development Land as known to and approved by the District and acknowledged by D.C. ...


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