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Gross v. Wright

United States District Court, District of Columbia

May 13, 2016

JAY GROSS, et al., Plaintiffs,
v.
STEPHEN C. WRIGHT, et al., Defendants.

MEMORANDUM OPINION

CHRISTOPHER R. COOPER United States District Judge.

As “a new community for a new sovereign, ” our nation’s capital gave architectural expression to the budding ideals of American constitutional government. James Sterling Young, The Washington Community, 1800-1828, at 1 (1966). But while Pierre L’Enfant’s blueprint for the city has endured, romanticism has yielded to reality: The District is a burgeoning metropolitan center striving to compete in the global economy. Like most cities, it endeavors to preserve its historical, cultural, and aesthetic heritage while adapting to the ever-changing demands of urban living. An entire chapter of the D.C. Code is therefore dedicated to reconciling economic growth with the protection of historic properties.

Defendants in this case, under the auspices of historical preservation, petitioned the local government to halt a property developer’s planned renovation of a rowhouse in Washington’s upward-trending Petworth neighborhood. The developer insists that two of these Defendants, who themselves profit from real-estate dealings and property improvements, are fair-weather conservationists exploiting local laws to drive him out of business. He brings several common-law tort claims that one would expect to find in a local development dispute. But he has also (literally) made a federal case out of this largely interpersonal feud by including a claim under the Sherman Antitrust Act, 15 U.S.C. § 1, contending that Defendants’ actions have unreasonably restrained trade in the market for renovation properties in Washington, D.C. Because the Sherman Act protects “competition, not competitors, ” Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962), and Plaintiffs have not plausibly pled a marketwide anticompetitive injury, the Court will grant Defendants’ motion to dismiss Plaintiffs’ Sherman Act claim. And because the case is still at an early stage and involves questions of D.C. law that are best resolved by the local courts, the Court will decline to exercise supplemental jurisdiction over Plaintiffs’ common-law claims.

I. Background

Plaintiff Jay Gross is a licensed real-estate agent who works to “renovate, remodel, modernize and improve dilapidated properties in the District of Columbia.” Pls.’ First Am. Compl. (“Compl.”) ¶ 26.[1] In November 2014, Gross purchased a single-family rowhouse at 7 Grant Circle in the Petworth neighborhood of Washington, D.C. with the intention of renovating it as a matter of right under the District’s then-existing zoning regulations. The planned renovation involved dividing the home into three units, which required “raising the roof a small amount.” Id. ¶ 29. By this time, Gross also owned a nearby rowhouse at 15 Grant Circle, as well as other investment property elsewhere in the city. Gross’s properties are held by LLCs corresponding to the address of each property, eight of which are Plaintiffs in this case.[2]

Defendants Stephen Wright and Thomas Woodruff reside at 6 Grant Circle, which shares a wall with Gross’s property at 7 Grant Circle. Wright is an architect and the managing partner of the Washington, D.C. office of Leo A Daly Company, an “architecture, planning, engineering, and interior design firm” that Gross has also named as a Defendant in this action. Id. ¶ 20. According to the Complaint, Wright and Leo A Daly together “design, remodel, modernize and improve buildings in the District, ” thereby “compet[ing] directly with the Plaintiffs’ business of buying properties [and] improving the structures.” Id. ¶ 33. Defendant Woodruff is a real-estate agent, partner, and principal of the D.C.-based real-estate firm Central Properties, LLC, another Defendant in this case. Woodruff and his employer are also alleged to “compete directly with Mr. Gross, a licensed real estate agent and landlord, by buying, selling, and renting residential properties throughout the District.” Id. ¶ 35.

While the main protagonists in this case own neighboring rowhouses, relations between them have been anything but neighborly. Tensions flared in December 2014, when Gross began renovating the unit at 7 Grant Circle. Gross contends that Wright and Woodruff had already “gut renovated” their own property by adding a second dwelling unit, id. ¶ 31, thereby exemplifying Wright’s “personal mantra: ‘I have little tolerance for people who hold onto the status quo. Change is neither good nor bad-it’s inevitable, ’” id. ¶ 1. Wright nonetheless verbally “berat[ed]” Gross and “insult[ed] [his] plans for 7 Grant Circle.” Id. ¶ 40. He purportedly attempted to “threaten and intimidate” Gross into abandoning his project, or at least to obtain Gross’s building plans in order to “investigate ways to obstruct the improvements.” Id. The reason, according to Gross? Wright believed that Gross was “intruding on his pool of renovation projects, ” and Woodruff similarly concluded that Gross was “intruding upon the commissions in his turf by purchasing directly from homeowners” and “competing in the residential rental market.” Id. ¶ 2.

A. Defendants’ Successful Historic-District Application for 4-33 Grant Circle

According to Gross, Wright and Woodruff jointly devised a multi-pronged strategy to “snuff out Plaintiffs’ competing business by freezing permitting and renovation at all of Plaintiffs’ property all over D.C.” Id. He contends that Wright and Woodruff knew that the D.C. Zoning Commission would soon decide whether to amend the District’s zoning regulations to begin requiring permits to convert buildings like 7 Grant Circle into three-unit structures. In the meantime, they endeavored to prevent Gross from altering his properties at 7 and 15 Grant Circle by petitioning D.C.’s Historic Preservation Office (“HPO”) to declare 4-33 Grant Circle a historic district.[3]

In early January 2015, according to Gross, Wright and Woodruff initiated a “surreptitious campaign to foment animosity and resistance” to Gross’s renovations among Grant Circle residents and members of the local Advisory Neighborhood Council (“ANC”). Id. ¶ 46. They convened an ANC meeting at which they made “false and disparaging” claims about Gross and his projects. Id. ¶ 47. Gross claims that neither he nor the owner of 16 Grant Circle (another property undergoing alterations) was invited. Later that month, Wright emailed an HPO employee to explain that he was “fearful and furious” about Gross’s work in Grant Circle. Id. ¶ 48. Gross contends that Wright then requested an in-person meeting “to learn what we can do to slow the permitting process.” Id. Five days later, Wright and Woodruff met with three D.C. Office of Planning employees, where they again allegedly “made false claims about Plaintiffs and their work.” Id. ¶ 49.

On February 13, 2015, Wright and Woodruff submitted an application to D.C.’s Historic Preservation Review Board (“HPRB”) to designate the set of properties situated at 4-33 Grant Circle as a historic district. The application was authored by Defendants Oscar Beisert, an advocate for historical preservation who lent his expertise to Wright and Woodruff, and Off Boundary Preservation Brigade (“Off Boundary”), Beisert’s nonprofit entity. Beisert and Off Boundary “specialize in making applications . . . to designate certain real properties as historic districts and/or historic landmarks.” Id. ¶ 21. Gross alleges that Defendants gerrymandered their historic-district application to “a small portion of the periphery of Grant Circle” for the sole purpose of “obstruct[ing] Plaintiffs’ projects in that area.” Id. ¶¶ 51-52.

Next, according to Gross, Wright and Woodruff “orchestrat[ed] an exaggerated and false sense of unanimity” among Grant Circle residents. Id. ¶ 54. At an informal neighborhood meeting on February 23-of which neither Gross nor the pastor of an affected church had been notified-two D.C. Office of Planning employees highlighted the merits of the city’s historical-preservation processes, as they had been recruited to do. The local ANC then met on March 11 to deliberate on Defendants’ historic-district application. After Wright, Woodruff, and Beisert allegedly “drum[med] up support” among attendees by “making false representations about Plaintiffs and disparaging their projects, ” the ANC voted to express its support for the application. Id. ¶ 56.

On April 2, the HPRB held a public hearing on Defendants’ historic-district application. Wright warned that Gross was engaged in “predatory development, ” and both Wright and Beisert are said to have exaggerated the level of support that the application had received among neighborhood residents. Id. ¶¶ 65-66. According “great weight” to the ANC’s nonbinding recommendation, the HPRB formally granted Defendants’ application to designate 4-33 Grant Circle as a historic district. Id. ¶ 67. External alterations to these properties would thereafter require prior governmental approval; Gross could no longer expand 7 and 15 Grant Circle as a matter of right, regardless of what generally applicable zoning regulations might permit.

B. Defendants’ Interim Historic-Landmark Applications for 7 and 16 Grant Circle

Gross also contends that Defendants implemented a more immediate means of stifling development in Grant Circle. In February 2015, before the HPRB approved their historic-district application, they filed historic-landmark applications for 7 and 16 Grant Circle. Under local law, no structure for which a landmark application is pending may be altered without prior mayoral approval. D.C. Code Ch. 11, §§ 6-1102(6)(B), 6-1105(a). So Defendants’ landmark applications temporarily halted matter-of-right improvements to both properties-which Gross and the owner of 16 Grant Circle were preparing to undertake-until the historic district’s approval did so permanently.

Gross maintains that Defendants did not actually intend for their landmark applications to succeed: They knew that 16 Grant Circle was “neither architecturally nor culturally significant” and “did not merit a landmark designation.” Compl. ¶ 73. The same was true of Gross’s property at 7 Grant Circle, given its status as “a ubiquitous and entirely indistinct rowhouse.” Id. ¶ 76. Even before Defendants filed these two historic-landmark applications, Gross alleges, D.C. government officials had told them that their efforts were “desperate” and “a stretch.” Id. ¶ 74. Beisert responded, “Well, how much time will this nomination buy me?” Id. Defendants’ landmark applications rendered the owners of 7 and 16 Grant Circle “unable to . . . continue their work at their properties.” Id. ¶ 77.

The HPRB held a public hearing on the 16 Grant Circle application on March 26, 2015. In advance of the hearing, the HPO recommended that Defendants’ application be denied; at the hearing itself, an Office of Planning employee testified that 16 Grant Circle was “not an outlier in either Petworth or the city.” Id. ¶ 86. At the close of discussion, the Board unanimously denied the application. This action left little hope that Defendants’ historic-landmark application for 7 Grant Circle would be approved. Yet they failed to withdraw it until after the surrounding historic district had been finalized, at which time the zoning regulations’ matter-of-right regime ceased to govern 4-33 Grant Circle. Even so, the HPO released the report it would have submitted to the HPRB, recommending that the 7 Grant Circle application be denied: “The landmark application claims too great an architectural significance for this single building- oddly without nominating its attached twin, 6 Grant Circle, which shares much of its ...


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