United States District Court, District of Columbia
MEMORANDUM OPINION [DKTS. ## 33, 34]
RICHARD J. LEON, UNITED STATES DISTRICT JUDGE
Management, LLC ("plaintiff or "Winkal")
brings this action against the Federal Deposit Insurance
Corporation ("defendant" or "FDIC") in
its capacity as the Receiver for now-defunct Washington
Mutual Bank ("WaMu"). Winkal seeks compensation
under 12 U.S.C. § 1821 for damages it allegedly suffered
when the FDIC repudiated a lease agreement between Winkal and
WaMu and turned the leased property ("Premises")
back over to Winkal in a state of disrepair. See
First Am. Compl. [Dkt. #15].
before the Court are the parties' cross-motions for
summary judgment. See Dkts. ##33, 34. Upon
consideration of the parties' submissions and the entire
record, Winkal's Motion for Summary Judgment is GRANTED
IN PART and DENIED IN PART without prejudice, and the
FDIC's Motion for Summary Judgment is GRANTED IN PART and
DENIED IN PART. In particular, I conclude that Winkal is
entitled to summary judgment on its "unpaid rent"
claim for the expenses associated with repairing the
Premises. The particular amount of damages owed to Winkal,
however, remains an open question, and I thus deny Winkal
summary judgment on the issue of damages without prejudice.
With respect to the FDIC's summary judgment motion, I
conclude that the FDIC has shown, under 12 U.S.C. §
1821, that it is entitled to prevail on Winkal's claims
for "Landlord's Work" expenses and the costs to
complete WaMu's "Tenant's Work."
The Winkal-WaMu Lease
December 17, 2007, Winkal entered into a ten-year lease
agreement (the "Lease") with WaMu for commercial
retail space at a property located in San Gabriel,
California. See Decl. of Richard Yarmy ("Yarmy
Decl.") [Dkt. # 34-3] Ex. A ("Lease"). The
Lease contemplated that WaMu would lease the Premises from
Winkal for the purposes of operating a bank branch. Lease
art. I, § 3. The Lease set forth the mutual rights and
obligations of Winkal and WaMu, as well as provisions
governing the rent due to Winkal from WaMu. Three portions of
the Lease are particularly relevant here.
in Article XXV of the Lease, Winkal agreed to perform certain
"Landlord's Work" prior to turning over the
property to WaMu. Specifically, Winkal agreed to: 1) install
a new roof; 2) install a new HVAC system; and 3) resurface
the parking lot. Id. art. XXV. Winkal completed its
Landlord's Work at a cost of $130, 633 and granted WaMu
possession of the Premises in May 2008. Yarmy Decl.
Article VI of the Lease establishes Winkal's and
WaMu's obligations with respect to "Maintenance and
Repair of the Premises." Lease art. VI. The provision
specifies that "[a]s additional rent and at the sole
cost and expense of Tenant, Tenant shall at all times keep
all parts of the Premises ... in suitable condition for
Tenant's conduct of business and in good order, good
condition and good repair." Id. The provision
further vests WaMu with the responsibility to "permit no
injury to the Premises" and, "at its own cost and
expense, replace as necessary all systems, appurtenances,
equipment and components on the Premises which may be broken
or damaged." Id. Finally, the provision states
that at the "expiration or earlier termination of the
Term, Tenant shall surrender the Premises ... in as good
condition as the same is on the Commencement Date" with
"reasonable wear and tear excepted." Id.
In short, Article VI of the Lease obligates WaMu, with
limited exceptions, to maintain and repair the Premises.
in a section of Article VII entitled "Alterations and
Improvements, " the Lease contains provisions governing
any "Tenant's Work" that WaMu elected to
perform. Id. art. VII, § 2. The provisions
specify that WaMu, as tenant, "shall bear the expense of
all permits, alterations and improvements which are necessary
in order to make the Premises suitable for Tenant's
occupancy and use before and during the Term."
Id. Article VII further specifies that WaMu
"shall commence and thereafter complete with due
diligence, all of Tenant's Work, " cause such work
"to be done in a good and workmanlike manner, " and
"obtain and furnish Landlord at Tenant's expense all
certificates and approvals with respect to Tenant's
WaMu's Commencement of "Tenant's Work" and
anticipation of its occupancy, WaMu contracted with an
architectural firm to develop plans for WaMu's
"Tenant's Work" on the Premises. See
Decl. of Donald J. Rethman ("Rethman Decl.") [Dkt.
# 34-4] ¶ 3. The planned work included, among other
things, the addition of new bathroom facilities, storage
areas, administrative offices, and a sprinkler system;
upgrades to the floors, doors, and lighting; and complete
replacement of all plumbing and electrical and mechanical
systems. Id. ¶ 5. Pursuant to the
"Tenant's Work" provision of the Lease, Winkal
approved WaMu's proposals for the work on the Premises.
See Yarmy Decl. ¶ 8.
approval of the "Tenant's Work" plans, WaMu
contracted with Metro Construction Company to complete the
planned construction activities. See Decl. of George
Lomeli ("Lomeli Decl.") [Dkt. # 34-5] ¶¶
3-4. The agreement projected that the work would cost $547,
170 in total. Id. ¶ 5. Metro Construction
commenced construction on the Premises toward the end of
August 2008 and immediately began demolition work to prepare
the Premises for the planned additions and renovations.
Id. ¶¶ 6-7. A little over one month after
Metro Construction began work, however, WaMu directed the
company to stop all construction activities.
Id.¶l. Although Metro Construction never
completed the full scope of the "Tenant's Work,
" the company did receive over $200, 000 from WaMu for
the work it performed in August and September of 2008.
Id. ¶¶ 8-9; see Lomeli Decl. Ex.
stop-work order to Metro Construction was not a coincidence:
The now-defunct bank was in the process of entering into
receivership. On September 25, 2008, the FDIC was appointed
WaMu's Receiver and assumed responsibility for WaMu's
financial dealings and contracts. See Compl. Ex. 2
[Dkt. # 1-2]. WaMu never opened for business on the Premises.
Yarmy Decl. ¶ 9.
The FDIC's Surrender of the Premises and Repudiation of
January 2009, the FDIC, acting in its capacity as Receiver
for WaMu, surrendered the Premises to Winkal. Id.
¶ 10. A few months later, the FDIC exercised its
statutory authority to repudiate the Winkal-WaMu Lease. Yarmy
Decl. Ex. H; see 12 U.S.C. § 1821(e).
surprisingly, considering that Metro Construction had already
performed over $200, 000 worth of demolition and preparation
work on the Premises, the evidence demonstrates that the
Premises was in a state of disrepair when surrendered. Yarmy
Decl. ¶¶ 8-11; Decl. of David Mouck ("Mouck
Decl.") [Dkt. # 34-6] Ex. A, at 7. According to
David Mouck, a contractor who was involved in repair work on
the Premises, "[a]ll interior walls, flooring, ceilings,
thermal insulation, plumbing, electrical, and HVAC ducting
had been removed" from the Premises and the concrete
floor had been partially excavated. Mouck Decl. Ex. A, at 7.
In order to make the Premises safe and ready to be occupied
by another tenant, Winkal hired various contractors to repair
and restore the Premises. Id. at 7-8; see
also Yarmy Decl. Ex. I ("Proof of Claim").
Contractors performed that work between June and September
2009. Yarmy Decl. ¶ 11. In all, Winkal alleges that it
paid $101, 046.85 to finance the required repair and
restoration work. Id.
2009, Winkal entered into a lease with a company called Nails
Supply House, Inc. ("Nails Supply"). Id.
¶ 12. In addition to the construction work contracted
and paid for by Winkal, Nails Supply also performed work to
restore and repair the Premises. Id. ¶ 13.
According to Winkal, that work, which included ceiling and
door installation, painting, and fire sprinkler installation,
cost $86, 352.95 in total. See Winkal Statement of
Material Facts ("Winkal SOMF") ¶¶ 37-39.
Together, the completed repair work restored the Premises to
"a baseline level"; it did not produce the upgraded
Premises contemplated by the scope of WaMu's original
"Tenant's Work" plans. Yarmy Decl. ¶ 18.
Winkal's Proof of Claim and Judicial Action
mid-2009, as it was performing work to restore the Premises,
Winkal filed a Proof of Claim with the FDIC. See
Proof of Claim. The Proof of Claim sought a total of $427,
499.33 from the FDIC, which comprised: 1) $50, 655.33 in
"[u]npaid rental due under the lease through the date of
[the] Notice of Lease Repudiation"; 2) $130, 633 in
"[a]ctual direct compensatory damages in the form of
out-of-pocket costs incurred by Winkal" to "prepare
space for tenant occupancy" - that is, the amount Winkal
spent to perform its "Landlord's Work"; and 3)
$246, 211 in "[a]ctual direct compensatory damages
caused by the Tenant as a result of its ...