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Washington Tennis & Education Foundation, Inc. v. Clark Nexsen, Inc.

United States District Court, District of Columbia

September 13, 2017

WASHINGTON TENNIS & EDUCATION FOUNDATION, INC., Plaintiff,
v.
CLARK NEXSEN, INC., et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Amit P. Mehta United States District Judge.

         I. INTRODUCTION

         This lawsuit arises out of a contract between Plaintiff Washington Tennis & Education Foundation, Inc., and Defendant Clark Nexsen, Inc., in which Defendant agreed to design and oversee construction of a $10 million tennis and education facility in southeast Washington, D.C. (“Architect Agreement”). A little more than a year after entering into the Architect Agreement, Plaintiff assigned “all of [its] right, title and interest” in the agreement to a related but separate entity, Washington Tennis & Education Foundation East, Inc. (“WTEF East”), which is not a party to this suit. After discovering various alleged design flaws in the facility, Plaintiff filed this action against Defendant, alleging breach of the Architect Agreement and violation of the common law duty of professional care. Defendant responded by filing a counterclaim for breach of contract.

         Before the court are three related motions. The first is Defendant's Motion for Summary Judgment. Defendant seeks entry of judgment in its favor on a host of grounds, but its primary argument is that Plaintiff lacks standing to sue because Plaintiff assigned all contractual rights it possessed under the Architect Agreement to WTEF East. The second motion is Defendant's Motion in Limine to Strike the Expert Reports and Opinion Testimony of Jeffrey Stoiber and John Farrell. The third motion before the court is Plaintiff's Motion to Add WTEF East as a Co-Plaintiff. Although Plaintiff insists that it has standing to pursue its claims, it nevertheless moves to add WTEF East as a co-plaintiff in order to preemptively cure any purported jurisdictional defect.

         The court has considered the parties' pleadings and accompanying materials, and it agrees that Plaintiff lacks standing in light of its assignment of all of its contractual interests to WTEF East. Further, because the court lacks subject matter jurisdiction over Plaintiff's original claims, the court correspondingly lacks authority to add WTEF East as a party. Accordingly, the court grants Defendant's Motion for Summary Judgment and denies Plaintiff's Motion to Add WTEF East as a Co-Plaintiff. Defendant's Motion in Limine is denied as moot.

         II. BACKGROUND

         A. Factual Background

         Plaintiff Washington Tennis & Education Foundation, Inc., is a nonprofit organization operating in the District of Columbia that provides athletic and academic programs for children from low-income families in the region. Pl.'s Opp'n to Defs.' Mot. for Summ. J. & Mot. in Limine, ECF No. 50 [hereinafter Pl.'s Opp'n], at 1. In October 2010, Plaintiff entered into a contract (“Architect Agreement”) with Defendant Clark Nexsen, Inc., [1] an architecture and engineering firm, under which Defendant agreed to provide architectural design and construction oversight services for Plaintiff's new tennis and education campus in southeast Washington, D.C. (“East Capitol Campus”). Defs.' Ex. N, ECF No. 47 [hereinafter Architect Agreement], at 1-2, 6-7. Plaintiff raised nearly $8 million to build the new facility. Pl.'s Opp'n, Pl.'s Stmt. of Material Facts in Dispute, ECF No. 50-1 [hereinafter Pl.'s Stmt.], ¶ 2.

         In December 2011, Plaintiff formed a new entity, Washington Tennis & Education Foundation East, Inc. (“WTEF East”). Pl.'s Opp'n, Ex. 2, ECF No. 50-3 [hereinafter Pl.'s Ex. 2], at 2-3.[2] WTEF East was incorporated as a non-stock corporation under Delaware law, and established as a “supporting organization” under Internal Revenue Code Section 509(a)(3), for the purpose of supporting Plaintiff's charitable and educational purposes. Id. at 3, 5; 26 U.S.C. § 509(a)(3). Plaintiff is the sole member of WTEF East. Pl.'s Ex. 2 at 5. The formation of WTEF East enabled Plaintiff to obtain an additional $2 million in financing for the East Capitol Campus under the federal New Markets Tax Credit program, which provides federal tax credits to private investors who finance community development projects in low-income neighborhoods. Pl.'s Mot. to Add WTEF East as a Co-Plaintiff, ECF No. 49 [hereinafter Pl.'s Mot.], at 2 n.1; Defs.' Mot. for Summ. J., ECF No. 46 [hereinafter Defs.' Mot.], Ex. L, ECF No. 46-15 [hereinafter Defs.' Ex. L], at 2. WTEF East had to be created as a separate entity to secure the New Markets Tax Credits. Defs.' Mot., Ex. G, ECF No. 46-10 [hereinafter Grand Dep.], at 60-61.

         In early 2012, due to the project's financing structure and the creation of WTEF East, the parties to the Architect Agreement changed. Plaintiff and WTEF East entered into an agreement, made effective December 30, 2011, in which Plaintiff assigned “all of [its] right, title and interest” in the Architect Agreement to WTEF East (“Assignment Agreement”). Defs.' Mot., Ex. O, ECF No. 46-18 [hereinafter Assignment Agreement]. The Architect Agreement, however, required Defendant's consent to the assignment. Architect Agreement at 16 (Art. 10, § 10.3). Thus, in a letter dated February 13, 2012, Plaintiff's President, Eleni Rossides, sought Defendant's consent to assign Plaintiff's rights to WTEF East and explained the need for the assignment as follows:

In order to obtain financing for the project, [Plaintiff's] lender, Capital One (“Lender”), stipulated that [Plaintiff] transfer its leasehold interests to a new entity which is known as [WTEF East]. . . .
Moving forward, all documents including, but not limited to[, ] amendments, change orders and so forth, must be submitted to the Lender for approval. So that our team is not utilizing an entity name which is no longer applicable to this project and otherwise creating confusion with the Lender, [Plaintiff] would like to formalize an assignment of its interests under the [Architect] Agreement to [WTEF East].

         Defs.' Mot., Ex. P, ECF No. 46-19 [hereinafter Defs.' Ex. P]; see also Defs.' Mot., Ex. Q, ECF No. 46-20 (E-mail from Maria Graziano to Adrian Lazaro, Feb. 13, 2012, with Defs.' Ex. P attached) (stating that “WTEF East Inc[.] is the entity created to fund and manage the new site [and] [t]hus, we will need to adjust the [Architect Agreement] with similar information”); Defs.' Mot., Ex. K, at 7. Defendant consented to the assignment and, consistent with the agreement's new structure, future amendments to the Architect Agreement identified WTEF East as the project's “Owner.” See Assignment Agreement at 1, 3; Defs.' Mot., Ex. S, ECF No. 46-22.

         B. Procedural History

         Numerous problems with the construction of the East Capitol Campus led to the instant suit. In November 2015, Plaintiff filed this action alleging various design defects in the East Capitol Campus that it believed were attributable to Defendant, including a defective HVAC system, a mis-located wall that left the building's foundation exposed, and buckling tile flooring. See Notice of Removal, ECF No. 1, Compl., ECF No. 1-3, ¶ 9. Plaintiff's Complaint advances two theories of liability. In Count I, WTEF alleges Defendant breached the Architect Agreement through errors and shortcomings in its design of the East Capitol Campus and its oversight of the construction process. Id. ¶¶ 11-13. In Count II, WTEF alleges that Defendant vio lated its commo n law duty of professional care by failing to perform its work with the skill and care ordinarily provided by architects in this locality, and violated industry standards. Id. ΒΆΒΆ 14-17. Defendant responded by filing a ...


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