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Wharf, Inc. v. District of Columbia

United States District Court, District of Columbia

September 28, 2015

WHARF, INC., et al., Plaintiffs,
v.
DISTRICT OF COLUMBIA, et al. ., Defendants.

MEMORANDUM OPINION

COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE.

Plaintiffs filed suit on July 23, 2015, against the District of Columbia (“District”) as well as Hoffman-Madison Waterfront, LLC and Wharf Horizontal Reit Leaseholder, LLC (“Developer Defendants”). Plaintiffs allege that the Developer Defendants violated the terms of the parties’ lease agreements, and that the District violated the Takings Clause of the Fifth Amendment by impeding access to the leased property. Presently before the Court is Plaintiffs’ [18] Motion for Preliminary Injunction. Upon consideration of the pleadings, [1] the relevant legal authorities, and the record as a whole, the Court DENIES Plaintiffs’ [18] Motion for Preliminary Injunction.

I. BACKGROUND

This case concerns the Municipal Fish Market located at 1100 Maine Avenue, S.W., Washington, D.C. (“Municipal Fish Market” or “the Market”). Compl. ¶ 1. Plaintiffs, Wharf, Inc. (“The Wharf”), BRW, Inc. (“Captain White”), and Salt Water Seafood, Inc. (“Salt Water”), run three seafood businesses in the Municipal Fish Market and bring this action as lessees of property located within the Market. Id. ¶ 2. Each of the Plaintiffs’ businesses is owned and operated by members of the White family. Id. ¶ 34. Defendants are the District of Columbia (“the District”), the original lessor of the property at issue, and Hoffman-Madison Waterfront, LLC and Wharf Horizontal Reit Leaseholder, LLC (“Developer Defendants”), the private entities to which the District assigned its rights to the leases in question in 2014. Id. ¶¶ 1, 44.

The commercial leases at issue are: the agreement entered into by The Wharf and the District dated July 12, 2000, id. ¶ 35; the agreement entered into by Captain White and the District dated July 12, 2000, id. ¶ 37; and the agreement originally entered into by Pruitt’s Seafood, Inc., and the District dated April 1, 2001, and subsequently assumed by Salt Water (then doing business as W.D., Inc.) from DNM Seafood, Inc. on March 20, 2014, with the consent of then-lessor, the District, id. ¶ 40, Ex. D. The term of the lease agreements at issue is defined as “[t]he period that begins on the Commencement Date and ends thirty (30) Lease Years after the New Rent Commencement Date, unless sooner terminated pursuant to this Lease.”[2] Id., Ex. A at 7; id., Ex. C at 6; id., Ex. D at 16.[3] On April 23, 2014, the District assigned the leases at issue to Developer Defendants. Id. ¶ 44. Plaintiffs allege that Developer Defendants breached the terms of their lease agreements and otherwise interfered with their use of the leased property. See generally Id. ¶¶ 91- 160. Plaintiffs also bring a Fifth Amendment Takings Clause claim (Count I) against the District of Columbia. However, Plaintiffs only seek a preliminary injunction against the Developer Defendants and not against the District.

Plaintiffs seek a preliminary injunction against Developer Defendants based on the alleged breach of the parties’ lease agreements. Specifically, Plaintiffs seek an injunction from the Court ordering Developer Defendants to: (1) cease further construction and encroachments onto the Common Area of the Municipal Fish Market without meeting the conditions precedent in the Lease Agreements; and (2) to leave Plaintiffs to quietly enjoy their leased property by ending their wrongful efforts to evict Plaintiffs through proceedings in the Superior Court of the District of Columbia and otherwise harass Plaintiffs. Pls.’ Mem. in Supp. of PI at 11. Moreover, Plaintiffs request that this Court stay the pending eviction proceedings in D.C. Superior Court. Id.

II. LEGAL STANDARD

A temporary restraining order or preliminary injunction is “an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 21 (2008). A plaintiff seeking a preliminary injunction must establish (1) that he is likely to succeed on the merits, (2) that he is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of the equities tips in his favor, and (4) that an injunction would be in the public interest. Id. at 20. “The four factors have typically been evaluated on a ‘sliding scale.’” Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1291, (D.C. Cir. 2009). Under this sliding scale, “[i]f the movant makes an unusually strong showing on one of the factors, then it does not necessarily have to make as strong a showing on another factor.” Id. at 1291-92.

“It is particularly important for the [movant] to demonstrate a substantial likelihood of success on the merits.” Barton v. District of Columbia, 131 F.Supp.2d 236, 242 (D.D.C. 2001) (citing Benten v. Kessler, 505 U.S. 1084, 1085 (1992)). If the movant fails to do so, inquiry into the remaining factors is unnecessary, for the injunctive relief must be denied on that ground alone. See Transohio Sav. Bank v. Dir., Off. of Thrift Supervision, 967 F.2d 598, 614 (D.C. Cir. 1992) (affirming denial of preliminary injunction where the district court properly concluded that the plaintiff had “no likelihood of success on the merits”); Katz v. Georgetown Univ., 246 F.3d 685, 688 (D.C. Cir. 2001) (“[A]lthough we apply a four-factor test in weighing a request for a preliminary injunction, such relief never will be granted unless a claimant can demonstrate ‘a fair ground for litigation.’”) (quoting Wash. Metro. Area Transit Comm’n v. Holiday Tours, Inc., 559 F.2d 841, 844 (D.C. Cir. 1977)); Taylor v. Resolution Trust Corp., 56 F.3d 1497, 1507 (D.C. Cir. 1995) (“Given the inadequacy of [plaintiff]’s prospects for success on the merits, there may be no showing of irreparable injury that would entitle him to injunctive relief.”), amended on other grounds on reh’g, 66 F.3d 1226 (D.C. Cir. 1995). In addition, the movant must establish that irreparable injury is likely, “not just a possibility.” Winter, 555 U.S. at 21.

Historically, these four factors have been evaluated on a “sliding scale” in this Circuit, such that a stronger showing on one factor could make up for a weaker showing on another. See Davenport v. Int’l Bhd. of Teamsters, AFL-CIO, 166 F.3d 356, 360-61 (D.C. Cir. 1999). The continued viability of that approach has recently been called into some doubt, as the United States Court of Appeals for the District of Columbia Circuit has suggested, without holding, that a likelihood of success on the merits is an independent, free-standing requirement for a preliminary injunction. See Sherley v. Sebelius, 644 F.3d 388, 392-93 (D.C. Cir. 2011); Davis v. PBGC, 571 F.3d 1288, 1292 (D.C. Cir. 2009). However, absent binding authority or clear guidance from the Court of Appeals, the Court considers the most prudent course to bypass this unresolved issue and proceed to explain why a preliminary injunction in this case is not appropriate under the “sliding scale” framework. If a plaintiff cannot meet the less demanding “sliding scale” standard, then it certainly could not satisfy the more stringent standard alluded to by the Court of Appeals.

III. DISCUSSION A. Likelihood of Success on the Merits

As Plaintiffs explain in their briefing, their request for a preliminary injunction is premised solely on Developer Defendants’ alleged breaches of the parties’ lease agreements. Pls.’ Mem. in Supp. of PI at 13-14, 14 n.14. As such, Plaintiffs must demonstrate that they are likely to succeed on their merits of their breach of contract claims. See Id. In order to prevail on a breach of contract claim under D.C. law, [4] Plaintiffs must establish: “(1) a valid contract between the parties; (2) an obligation or duty arising out of the contract; (3) a breach of that duty; and (4) damages caused by breach.” Tsintolas Realty Co. v. Mendez, 984 A.2d 181, 187 (D.C. 2009). Here, Plaintiffs have failed to establish a substantial likelihood of success on the merits of their breach of contract claims because: the Court has left open the issue of whether valid contracts exist between the parties; and, even if the Court finds that the contracts are enforceable, it is unclear whether the conduct constitutes current or potential future breaches of the parties’ agreements.

Defendants in the instant action sought dismissal of all of Plaintiffs’ claims on the basis that Plaintiffs’ leases had terminated. See Developer Defs.’ Br. in Supp. of Mot. to Dismiss at 2, ECF No. [20-1]; Def. D.C.’s Memo. in Supp. of Mot. to Dismiss at 6, ECF No. [25-1]. In rendering its decision on those motions in a separate opinion, the Court examined the language of the provision at issue and ultimately found that it was ambiguous. See generally Memo. Op. (Sept. 28, 2015) at 15-21, ECF No. [45]. Notably, the Court found that “both parties have presented fair interpretations of Provision 38.E in light of the language in the Provision and the lease agreements as a whole.” Id. at 20. The Court concluded that interpretation of ambiguous contract language is a question of fact. As such, the Court declined to interpret the provision during the motion to dismiss stage and instead determined that the issue would be best decided on an expanded factual record.[5] Id. at 20-21. In so ruling, the Court left open the issue of whether Plaintiffs have valid leasehold interests in the property at issue until the factual record in this action is further developed. Relatedly, the Court has not yet addressed the merits of either party’s arguments regarding the alleged breaches of the lease agreements or Plaintiffs’ argument that if the leases have terminated, then the Court should apply certain equitable principles. In sum, the Court’s only holding at this time with respect to the parties’ lease agreements is that the language of Provision 38.E is ambiguous.

Indeed, while at this juncture the Court found that the Plaintiffs’ argument regarding the validity of the leases based on their interpretation of the provision had merit, the Court also found that Defendants advanced a conflicting interpretation that also had merit. In light of this holding and without the benefit of a more complete factual record, the Court cannot conclude which party is substantially likely to succeed with respect to the validity of the lease at this time. Moreover, the Court cannot conclude that Plaintiffs are substantially likely to prevail on their breach ...


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