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Wharf, Inc. v. District of Columbia

United States District Court, District of Columbia

January 12, 2017

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 (“the District”) as well as Hoffman-Madison Waterfront, LLC (“HMW”) and Wharf Horizontal REIT Leaseholder, LLC (“WHRL”), collectively, the “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. On May 9, 2016, Defendant WHRL filed its First Amended Counterclaim against Plaintiffs for unjust enrichment, quantum meruit, and ejectment under a theory of breach of contract or, in the alternative, as tenants at sufferance.

         Presently before the Court are: Plaintiffs' [61] Motion to Dismiss Wharf Horizontal REIT Leaseholder LLC's Amended Counterclaims; Developer Defendants' [58] Motion to Strike Plaintiffs' Demand for Jury Trial; Defendants' [57] Motion to Set a Rule 16 Initial Scheduling Conference; and Plaintiffs' [62] Motion for Leave to File a Surreply to Developer Defendants' Reply in Further Support of their Motion to Set a Rule 16 Initial Scheduling Conference. Upon consideration of the pleadings, [1] the relevant legal authorities, and the record as a whole, the Court: DENIES Plaintiffs' [61] Motion to Dismiss Wharf Horizontal REIT Leaseholder LLC's Amended Counterclaims; DENIES WITHOUT PREJUDICE Developer Defendants' [58] Motion to Strike Plaintiffs' Demand for Jury Trial; DENIES AS MOOT Defendants' [57] Motion to Set a Rule 16 Initial Scheduling Conference; and DENIES AS MOOT Plaintiffs' [62] Motion for Leave to File a Surreply to Developer Defendants' Reply in Further Support of their Motion to Set a Rule 16 Initial Scheduling Conference for the reasons described herein.

         I. BACKGROUND

         A. Factual Background

         By way of background, the Court shall briefly set out the facts as alleged in Plaintiffs' First Amended Complaint, reserving further presentation of the facts alleged in WHRL's First Amended Counterclaim for the discussion of the individual issues below. 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 the Developer Defendants HMW and WHRL, 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 (allegedly 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.

         In their Complaint, Plaintiffs raise one claim against the District, a Fifth Amendment Takings Clause claim (Count I), related to access to the leased property. Plaintiffs also raise eight state and common law claims against the Developer Defendants: declaratory judgment (Count II); specific performance and injunctive relief based on breach of lease (Count III); damages based on breach of lease (Count IV); breach of the covenant of good faith and fair dealings (Count V); trespass and conversion (Count VI); nuisance (Count VII); tortious interference with prospective business advantage (Count VIII); and unjust enrichment (Count IX). Plaintiffs “request a jury trial for the appropriate claims for which a jury is permissible.” Compl. at 38. Defendants now move the Court to strike Plaintiffs' jury demand on the grounds that the lease agreements contain a binding waiver of jury trial.

         Defendant WHRL filed its First Amended Counterclaim against Plaintiffs. Specifically, WHRL seeks to recover from Plaintiffs on the ground of unjust enrichment and quantum meruit. Defendant WHRL also asserts that it is entitled to immediate possession of the leased premises either on the grounds of breach of contract or because Plaintiffs are tenants at sufferance. Plaintiffs now seek to dismiss all of WHRL's counterclaims against them.

         B. Procedural Background

         On August 12, 2015, Plaintiffs filed a Motion for Preliminary Injunction against Developer Defendants based on the Developer Defendants' alleged breaches of the parties' lease agreements. Specifically, Plaintiffs sought an order from the Court directing 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. Plaintiffs also requested that this Court stay the pending eviction proceedings in the Superior Court of the District of Columbia.[4]

         On August 13, 2015 and August 19, 2015, respectively, Developer Defendants and the District filed motions to dismiss Plaintiffs' First Amended Complaint. Defendants asserted that Plaintiffs did not hold valid leases to the property in question because the leases were terminated. As such, the Developer Defendants contended that the Court should dismiss Plaintiffs' claims against them in their entirety. Developer Defs.' Mot. to Dismiss at 6, ECF No. [20-1]. The District also asserted that Plaintiffs did not have legally enforceable interests in the property and, consequently, could not establish that the District had taken their property without just compensation. Def. D.C.'s Mot. to Dismiss at 6, ECF No. [25-1]. Alternatively, the District argued that Plaintiffs' Takings Clause claim was time-barred by the applicable statute of limitations. Id. at 4-6.

         On September 28, 2015, the Court issued two Memorandum Opinions and Orders denying the motions to dismiss filed by the District and the Developer Defendants as well as Plaintiffs' motion for a preliminary injunction. Notably, the Court found that the language of the lease agreements was ambiguous and susceptible to different interpretations, one which would render the leases valid at this time and one which would render the leases expired. As such, the Court explained: “In order to determine the appropriate interpretation of the ambiguous provision, the Court must examine the parties' intention in light of the circumstances surrounding their execution of the agreements and/or by applying rules of construction.” Wharf, Inc. v. District of Columbia, 133 F.Supp.3d 29, 42 (D.D.C. 2015). The Court shall summarize the basis for this holding because it is relevant to the Court's analysis of the instant motions.

         In reaching this holding, the Court focused on the operation of two different lease provisions. As the Court explained, the parties' lease agreements contemplate two distinct time periods in the lease, one occurring prior to the completion of the “Landlord's Work” and one commencing upon completion of the “Landlord's Work.” See Compl., Ex. A at 4-5; id., Ex. C at 4-5; id., Ex. D at 14-15. Specifically, the leases set annual minimum rent “Before New Rent Commencement Date” and the annual minimum rent “After New Rent Commencement Date.” Id., Ex. A at 4-5; id., Ex. C at 4-5; id., Ex. D at 14-15. The “New Rent Commencement Date” is the date upon which the “Landlord's Work” is substantially completed, as signaled by the receipt of a Certificate of Substantial Completion from the Corps of Engineers. Id., Ex. A at 5; id., Ex. C at 5; id., Ex. D at 15. The “Landwork's Work” is defined in the lease agreements as certain improvements that the parties agree should be made to the Municipal Fish Wharf with $3, 000, 000 appropriated from the federal government and from other sources of funding available to the landlord. Id., Ex. A at 8-9; id., Ex. C at 8; id., Ex. D at 17-18. The lease agreements further provided that: “Landlord shall use reasonable commercial efforts to complete Landlord's Work by June 30, 2001, but shall have no liability to Tenant if it is unable to complete Landlord's Work by that date or by any other date.” Id., Ex. A at 9 (emphasis added); id., Ex. C at 8 (emphasis added); id., Ex. D at 18 (emphasis added).

         Here, the parties agree that the Landlord's Work has not been completed. In light of this fact, the parties presented different arguments in their briefing on the motions to dismiss about the operation of Provision 38.E of the leases that provides:

Rule Against Perpetuities. Notwithstanding any provision in this Lease to the contrary, if the Lease Term has not commenced within three (3) years after the date of this Lease, this Lease shall automatically terminate on the third (3rd) anniversary of the date hereof. The sole purpose of this provision is to avoid any possible interpretation that this Lease violates the Rule Against Perpetuities or other rule of law against restraints on alienation.

Id., Ex. A at 26; id., Ex. C at 24; id., Ex. D at 34. In their motion to dismiss, Developer Defendants asserted that this provision provides that the leases would terminate if after three years of the date of their execution, the New Rent Commencement Date had not been triggered by the completion of the Landlord's Work. As such, it was the Developer Defendants' contention that the leases expired in light of the fact that the Landlord's Work was not completed within three years of the execution the lease. Plaintiffs argued that the provision provides that the leases would terminate if the “Lease Term, ” or the date of the lease agreement, had not commenced within three years. While “Lease Term” was not defined in the lease, “Term” 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.” Id., Ex. A at 7; id., Ex. C at 6; id., Ex. D at 16. The “Commencement Date” is defined as “[t]he date of this lease.” Id., Ex. A at 4; id., Ex. C at 4; id., Ex. D at 14. As such, it was Plaintiffs' position that the “Lease Term” commenced on the date of each lease and, accordingly, the three commencement dates fall within the three-year window provided by Provision 38.E.

         The Court found that Provision 38.E is ambiguous and that each party offered a reasonable interpretation of the provision. The Court declined to interpret Provision 38.E at this early stage of the proceeding, noting “‘interpretation of ambiguous contract language, particularly if it requires consideration of extrinsic evidence, is a question of fact . . . .'” Wharf, Inc., 133 F.Supp.3d at 42 (quoting Flynn v. Dick Corp., 481 F.3d 824, 831 n.7 (D.C. Cir. 2007)). The Court further summarized its holding in addressing Plaintiffs' motion for a preliminary injunction:

[T]he 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.

Mem. Op. (Sept. 28, 2015), at 6, ECF No. [47]. The Court now turns to the parties' instant motions.

         II. LEGAL STANDARD

         Pursuant to Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss a complaint on the grounds it “fail[s] to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). The Federal Rules of Civil Procedure require that a complaint contain “‘a short and plain statement of the claim showing that the pleader is entitled to relief, ' in order to ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); accord Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam). “[A] complaint [does not] suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557). Rather, a complaint must contain sufficient factual allegations that, if accepted as true, ‚Äústate a claim to relief that is plausible ...


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