United States District Court, District of Columbia
PHILADELPHIA INDEMNITY INSURANCE COMPANY, A/S/O 1441 RHODE ISLAND AVENUE CONDOMINIUM ASSOCIATION, Plaintiff,
LEND LEASE U.S. CONSTRUCTION, INC., Defendant.
G. Sullivan, United States District Judge.
January 2014, a water sprinkler burst inside the condominium
property located at 1441 Rhode Island Avenue, N.W. in the
District of Columbia. The insurer of the 1441 Rhode Island
Avenue Condominium Association ("Association"),
plaintiff Philadelphia Indemnity Insurance Company
("Philadelphia Indemnity"), compensated the
Association for its losses. Philadelphia Indemnity, as
subrogee of the Association, then filed this action against
defendant Lend Lease (U.S.) Construction, Inc. ("Lend
Lease") for negligence due to its alleged faulty
construction of the condominium building.
March 18, 2016, the Court ordered limited discovery on the
question of whether the Association should be deemed a
successor of the building's original owner, Fairfield
D.C. Limited Partnership ("Fairfield"). See
Philadelphia Indem. Ins. Co. v. Lend Lease (U.S.) Constr.,
Inc., 170 F.Supp.3d 190, 194 (D.D.C. 2016) ("March
18 Order"). The parties subsequently engaged in
discovery on this limited issue. Lend Lease now moves for
summary judgment on the ground that Philadelphia
Indemnity's insured - the Association - is a successor of
Fairfield, and therefore, Philadelphia Indemnity's action
is barred by the waiver-of-subrogation clause contained in
the contract between Lend Lease and Fairfield. See
generally Def.'s Mot. for Summ. J., ECF No. 22. As
set forth below, because a genuine dispute of material fact
remains as to whether the Association is a successor to
Fairfield, Lend Lease's motion for summary judgment is
DENIED. I. BACKGROUND The
following facts are undisputed unless otherwise
19, 2002, Lend Lease entered into a contract with Fairfield to
construct a nine-story apartment building and refurbish an
adjacent townhouse located at 1441 Rhode Island Avenue, NW.
See Def.'s Mot. for Summ. J. Ex. A, Standard
Form Agreement Between Owner and Contractor ("Standard
Form Agreement") and General Conditions of the Contract
for Construction ("General Conditions Contract")
(collectively, "Contract"), ECF No. 22-3;
Def.'s Statement of Material Facts ("Def.'s
SMF") ¶ 1, ECF No. 22; Pl.'s Opp. to Def.'s
Mot. for Summ. J. ("Pl.'s Opp.") at 2, ECF No.
General Conditions Contract contains a waiver of subrogation
clause that provides that the Owner and Lend Lease
"waive all rights" against one another "for
damages caused by fire or other causes of loss to the extent
covered by property insurance." General Conditions
Contract ¶ 11.4.7. The General Conditions Contract also
specifies that the waiver-of-subrogation applies to insurance
policies purchased after the construction period.
Id. ¶ 11.4.5. Finally, the General Conditions
Contract includes a clause expressly stating that the
contract "shall not be construed to create a contractual
relationship of any kind . . . between any persons or
entities other than the Owner and Contractor."
Id. § 1.1.2. It creates an exception to this
provision through the "Successors and Assigns"
provision that states:
The Owner and Contractor respectively bind themselves, their
partners, successors, assigns and legal representatives to
the other party hereto and to partners, successors, assigns
and legal representatives of such other party in respect to
covenants, agreements and obligations contained in the
Conditions Contract § 13.2.1. The first page of the
Standard Form Agreement identifies Fairfield as the
"Owner." Standard Form Agreement at 1.
Sale of Property to 1441 LLC and Completion of
2003, "about three quarters of the way into the project,
" Fairfield informed Lend Lease that it intended to sell
the property to 1441 Rhode Island, LLC ("1441
LLC"), a limited liability company formed by Neil
Gehani, Robert Berry, and Enrico Plati for the purpose of
purchasing the property. Def.'s SMF ¶¶ 5-6, 8;
Pl.'s Opp. at 2; Def.'s Mot. for Summ. J. Ex. B,
Deposition of Kenneth O'Grodnick ("O'Grodnick
Dep.") 13:15-20, ECF No. 22-4.
and 1441 LLC entered into the initial Purchase and Sale
Agreement on September 12, 2003. See Def.'s SMF
¶ 8; Pl.'s Opp. at 5. There is no evidence that any
of the members of 1441 LLC received a copy of the Contract
between Fairfield and Lend Lease either prior to or after the
sale. See Pl.'s Opp. Ex. 6, Deposition of Robert
Berry ("Pl.'s Berry Dep.") 114:19-22, ECF No.
23-6; Pl.'s Opp. Ex. 9, Deposition of Neil Gehani
40:22-41:2, 42:5-6, ECF No. 23-9; Def.'s Mot. for Summ.
J. Ex. R, Deposition of Lawrence Bogard 17:11-17, ECF No.
and 1441 LLC closed on the property at the end of February
2004. See Def.'s SMF ¶ 9 (stating that
property closing occurred on February 28, 2004); Pl.'s
Opp. at 4 (stating that 1441 LLC became the deeded owner of
the property on February 26, 2004). 1441 LLC's
involvement with the property began prior to closing, when
construction was "nearly complete." See
Def.'s SMF ¶ 10. The parties dispute the level of
involvement 1441 LLC had in the property during this period.
According to plaintiff, 1441 LLC's involvement was
"limited" to exercising "what ever rights
Fairfield and Defendant saw fit to grant [it], " which
only included participation in the "punch list
process" and nothing more. Pl.'s Opp. at 10-11.
Lend Lease, on the other hand, contends that 1441 LLC took an
"active role" in inspecting the property "in
an effort to identify any 'imperfections' it wanted
Lend Lease to fix." Def.'s SMF ¶¶ 9,
12-18. For example, according to Lend Lease, as part of the
punch-list process, a representative from 1441 LLC inspected
each of the 157 condominium units in the building and,
together with a representative from Fairfield, signed a
"New Construction Interior Acceptance Letter" to
confirm inspection and note any outstanding deficiencies.
Def.'s SMF ¶¶ 12-18.
Contract included a one-year warranty that was made to
Fairfield. Def.'s SMF ¶ 25. Fairfield subsequently
assigned its warranty rights to 1441 LLC. Id. ¶
26; Pl.'s Opp. at 11 (agreeing that "1441 LLC
acquired Fairfield's one-year warranty from [Lend Lease]
by assignment"). The parties dispute the mechanism
through which that one-year warranty was assigned. Plaintiff
points to a copy of an agreement titled Assignment of
Warranties and Other Contractual Rights ("Assignment
Agreement"). Pl.'s Opp. at 11 (citing Def.'s
Mot. for Summ. J. Ex. E, ECF No. 22-7). Lend Lease asserts
that the assignment of warranty rights was made through a
Public Offering Statement issued in connection with forming
the condominium. Def.'s SMF ¶ 26.
one-year warranty provision in the Contract obligated Lend
Lease to "require each Subcontractor to assume the
obligations [of the one-year warranty] at Subcontractor's
sole cost and expense with respect to work performed by each
Subcontractor." General Conditions Contract §
22.214.171.124. Because 1441 LLC was in the process of purchasing
the building, all of Lend Lease's subcontractors issued
their standard one-year warranties to 1441 LLC instead of
Fairfield. Def.'s SMF ¶ 28; Pl.'s Opp. at 11
(acknowledging that, "between December 18, 2003 and May
5, 2004, subcontractors issued one-year warranties on
Defendant form warranties listing the Property owner as
B&P Development, LLC" and that "B&P
Development, LLC is a place holder for 1441 LLC"). In
addition, 1441 LLC paid Lend Lease $40, 846.71 for an
extended warranty from each subcontractor. Def.'s SMF
¶ 30; Pl.'s Opp. at 5 ("Prior to the expiration
of the one-year warranties under the contract between
Fairfield and Defendant, 1441 LLC purchased an extended
warranty on April 14, 2004.").
April 9, 2004, Fairfield made the final payment for under the
Contract to Lend Lease. Def.'s SMF ¶¶ 32-33;
Pl.'s Opp. at 5.
Formation of the Condominium Association and Dissolution of
March 2004, 1441 LLC filed a Condominium Declaration that
ultimately formed the 1441 Rhode Island Avenue Condominium
and the related Condominium Association. Def.'s SMF
¶ 34; Pl.'s Opp. at 6. The Condominium Bylaws were
also filed at this time. Pl.'s Opp. at 2. The Declaration
and Bylaws together "conveyed all of 1441 LLC's
rights and responsibilities to the Unit Owners
Association." Id. Subsequently, the Association
purchased property-damage insurance from plaintiff
Philadelphia Indemnity. Id. at 2-3.
Mr. Gehani and Mr. Berry purchased condominium units in the
building and, when the Association created a Board in July
2004, Mr. Gehani was elected as one of its five founding
members. Def.'s SMF ¶¶ 35-36; Pl.'s Opp. at
6. According to the Association's representative, Mr.
Gehani was elected in part because the Association thought it
useful to have someone associated with 1441 LLC on the Board.
Def.'s SMF ¶ 37; Pl.'s Opp. at 6 (conceding
there was managerial overlap between 1441 LLC and the
Association, but characterizing that overlap as
"deminimis"). After Mr. Gehani sold his unit and
resigned from the Board in the spring of 2006, he was
immediately replaced by Mr. Berry, who served on the Board
until June 2010. Def.'s SMF ¶¶ 36-39.
1441 LLC had been created for the purpose of marketing,
selling, and delivering the condominium units and then
transitioning the property - and because those condominiums
were sold "very, very quickly" - 1441 LLC's
business was wrapped up by 2005. Def.'s SMF ¶¶
55-56; Def.'s Mot. for Summ. J. Ex. D, Deposition of Neil
Gehani 58:20-59:20, ECF No. 22-6. By January 28, 2006, 1441
LLC had been involuntarily dissolved. Def.'s SMF ¶
The Association's Management of the Building
member of the Association's Board, Mr. Berry served as
the "middle man or intermediary" between the Board
and Lend Lease when repairs needed to be made in accordance
with the warranties. Def.'s SMF ¶ 40. In so doing,
Mr. Berry testified that he sometimes acted on behalf of 1441
LLC and at other times acted on behalf of the Board.
Id. Indeed, even in 2009 - several years after 1441
LLC had been dissolved - Mr. Berry continued to communicate
with Lend Lease and its subcontractors on behalf of both the
Board and 1441 LLC. Id. ¶¶ 49-50.
one year of completion of construction, three leaks were
found in the building. Id. ¶ 41. In each of
those instances, Mr. Berry requested repairs in accordance
with the warranties assigned to or purchased by 1441 LLC, and
Lend Lease agreed to coordinate and oversee the repair work
done by its subcontractors. Id. ¶ 42. In each
instance, neither 1441 LLC nor the Association paid for any
of the repair work. Id. Likewise, when additional
repair work was required in 2005 and 2006 with respect to
water heaters and water pumps, Mr. Berry contacted Lend Lease
and its subcontractors who addressed the problems in
accordance with the extended warranties purchased by 1441
LLC. Id. ¶¶ 43-46.
January 2014, a water sprinkler line burst on the property,
allegedly causing water to flow into multiple units and the
common area. See Complaint ¶¶ 7-11.
According to an engineer hired by Philadelphia Indemnity to
examine the site, the water intrusion stemmed "from
inadequate insulation surrounding the sprinkler system pipe
and/or other protective devices to maintain the temperature
above freezing." Id. ¶ 9. As a result of
the burst pipe, the Association incurred losses in the amount
of $107, 552.74, which were paid by Philadelphia Indemnity.
Id. ¶ 11.