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Wharf, Inc. v. District of Columbia

United States District Court, District of Columbia

December 14, 2017

WHARF, INC., et al., Plaintiffs,
v.
DISTRICT OF COLUMBIA, et al., Defendants

          MEMORANDUM OPINION

          COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE.

         Plaintiffs Wharf, Inc., (“The Wharf”), BRW, Inc. (“Captain White”), and Salt Water Seafood, Inc. (“Salt Water”) (collectively, the “Plaintiffs”) filed their initial suit on July 23, 2015, against the District of Columbia (“the District”), Hoffman-Madison Waterfront, LLC (“HMW”) and Wharf Horizontal Reit Leaseholder, LLC (“WHRL”) (HMW and WHRL are collectively referred to as the “Initial Developer Defendants”). See generally Compl., ECF No. 1. Plaintiffs alleged that the Initial 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 property leased to Plaintiffs at the Southwest Waterfront of the District of Columbia. Id.

         The Initial Developer Defendants moved to dismiss the Complaint and Plaintiffs thereafter filed their First Amended Complaint, which all the defendants moved to dismiss. See Initial Developer Defs.' Mot. to Dismiss, ECF No. 20; District's Mot. to Dismiss, ECF No. 25. This Court denied both motions to dismiss, and the Initial Developer Defendants filed their Answer to the Plaintiffs' First Amended Complaint, in which Defendant WHRL also filed a counterclaim alleging that Plaintiffs breached their lease agreement and were unjustly enriched as a result of WHRL's improvement of the premises. See Memorandum Opinion, ECF No. 45 and Order, ECF No. 44; Initial Developer Defs.' Answer and Countercl., ECF No. 54. WHRL filed a subsequent [74] unopposed motion for joinder to add Wharf Fish Market REIT Leaseholder LLC (“WFMRL”) as an additional party, which was granted by the Court, with the effect that WFMRL was added as a Defendant and counterclaim Plaintiff.[1] See Order, ECF No. 75.

         Plaintiffs moved for leave to file a Second Amended Complaint, which was consented to by the District, unopposed by the other three Defendants, and granted by the Court. See Pls.' Mot. for Leave to File Second Am. Compl., ECF No. 80; see also April 26, 2017 Minute Order. Plaintiffs' [82] Second Amended Complaint added the following Defendants: Wharf District GP Joint Venture LLC (“WDGJV”); Wharf Horizontal REIT, LLC (“WHR”); Hoffman-Struever Waterfront, LLC (“HSW”); and the Wharf District Joint Venture, L.P. (“WDJV”) (collectively, the “New Developer Defendants”). Subsequently, the New Developer Defendants filed a [92] Motion to Dismiss the claims asserted against them in the Second Amended Complaint. This Court held in abeyance the New Developer Defendants' Motion to Dismiss and allowed the Plaintiffs to file a Third Amended Complaint. See Memorandum Opinion, ECF No. 103 and Order, ECF No. 102.

         After Plaintiffs filed the sealed version of their [109] Third Amended Complaint, the New Developer Defendants filed the instant [114] Motion to Dismiss the Claims Asserted [against them] in the Third Amended Complaint, arguing that Plaintiffs have not asserted facts sufficient to establish a plausible relationship between the Initial Developer Defendants and the New Developer Defendants as alter egos or co-conspirators. Upon consideration of the pleadings, [2] the relevant legal authorities, and the record as a whole, the Court DENIES the New Developer Defendants' Motion to Dismiss and lets stand the Plaintiffs' Third Amended Complaint for the reasons described herein.

         I. BACKGROUND

         This case concerns the Municipal Fish Market located at 1100 Maine Avenue, S.W., Washington, D.C. (“Municipal Fish Market” or “the Market”). Third Am. Compl. ¶ 1. Plaintiffs run three seafood businesses in the Municipal Fish Market and bring this action as lessees of property located within the Market. Id. ¶ 2. As previously noted, Plaintiffs initially named as defendants the District, which was the original leaseholder for the properties, and HMW and WHRL, with WFMRL subsequently added as a defendant by WHRL (these three defendants are collectively referred to as “Initial Developer Defendants”). Plaintiffs' Second Amended Complaint also added WDGJV, WHR, HSW, and WDJV (collectively, the “New Developer Defendants”) as additional defendants. See Second Am. Compl. ¶¶ 1, 23-29, 58 (noting that all the Developer Defendants are “affiliated” entities and further, that “the District assigned Plaintiffs' leases to [the] Developer Defendants, acting through WHRL[, ] [which in turn] assigned the leases to WFMRL.”) The commercial leases at issue are: the agreement entered into by The Wharf and the District dated July 12, 2000; the agreement entered into by Captain White and the District dated July 12, 2000; and the agreement originally entered into by Pruitt's Seafood, Inc. and the District, and subsequently assumed by Salt Water (then doing business as W.D., Inc.) from DNM Seafood, Inc. on March 14, 2001, with the consent of then-lessor, the District. Third Am. Compl. ¶¶ 47, 49, 51-52.

         In their Third Amended Complaint, Plaintiffs include three claims against the District, including two Fifth Amendment Takings Clause claims (Counts I and II) and a violation of procedural due process claim (Count III). Plaintiffs also raise the following eight claims against all of the Developer Defendants: declaratory judgment (Count IV); specific performance and injunctive relief based on breach of lease (Count V); breach of lease (Count VI); breach of covenant of good faith and fair dealing (Count VII), trespass and conversion (Count VIII); nuisance (Count IX); tortious interference with prospective business advantage (Count X); and unjust enrichment (Count XI).

         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). A motion to dismiss under Rule 12(b)(6) is “intended to test the sufficiency of the complaint.” DSMC, Inc. v. Convera Corp., 273 F.Supp.2d 14, 23 (D.D.C. 2002). To survive a Rule 12(b)(6) motion, a complaint must contain sufficient factual allegations that, if accepted as true, “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). “[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).

         In evaluating a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court must construe the complaint in the light most favorable to the plaintiff and must accept as true all reasonable factual inferences drawn from well-pleaded factual allegations. In re United Mine Workers of Am. Employee Benefit Plans Litig., 854 F.Supp. 914, 915 (D.D.C. 1994) (citation omitted). In deciding a Rule 12(b)(6) motion, a court may consider “the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint, ” or “documents upon which the plaintiff's complaint necessarily relies even if the document is produced not by the plaintiff in the complaint but by the defendant in a motion to dismiss.” Ward v. District of Columbia Dep't of Youth Rehab. Servs., 768 F.Supp.2d 117, 119 (D.D.C. 2011) (internal quotation marks omitted). The court may also consider documents in the public record of which the court may take judicial notice. Abhe & Svoboda, Inc. v. Chao, 508 F.3d 1052, 1059 (D.C. Cir. 2007).

         III. DISCUSSION

         Before discussing the allegations against the New Developer Defendants that are contained in Plaintiffs' Third Amended Complaint, it is perhaps useful to examine the triggering event that led the Plaintiffs to add these parties as defendants. Plaintiffs assert that “shortly after the parties commenced discovery in March 2017, Plaintiffs learned of the existence of additional, affiliated entities associated with the Wharf Project development.” Pls.' Opp'n. at 2. This occurred after the Initial Developer Defendants produced to Plaintiffs an organizational chart, which not only showed that the New Developer Defendants owned and controlled or were owned and controlled by the Initial Developer Defendants but also that all defendants were “part of a complex, interwoven corporate network - all working towards the development, financing, and construction of the Wharf Project.” Pls.' Opp'n. at 2-3; see Fish Market Organizational Chart, ECF No.119-1, Ex. A. The Fish Market Organizational Chart begins with Initial Developer Defendant HMW, a joint venture and the developer selected for the redevelopment project at issue in this case, and it ends with the other Initial Developer Defendants - WHRL, a limited liability company and former landlord of the Plaintiffs, and WFMRL, a limited liability company and current landlord of the Plaintiffs. Following the Chart from start to finish necessitates movement through three levels of other organizations, all of whom are affiliated with the Initial Developer Defendants and involved in some way with the redevelopment project, and who have been named as New Developer Defendants.[3]

         The New Developer Defendants concede that Plaintiffs' Third Amended Complaint adds new factual allegations relevant to them, but they argue that while such allegations may demonstrate overlapping ownership with the Initial Developer Defendants, which encompasses some common officers, directors, office space and management, this is not enough to support alter ego or conspiracy claims. Nor do Plaintiffs allege that such entities were “formed to perpetrate a fraud on them” or is there “any reason to believe that the Original Developer Defendants would be unable to satisfy any judgment” the Plaintiffs may obtain. New Developer Defs.' Mem. at 3. These New Developer Defendants assert therefore that the claims against them should be dismissed because they are “premised solely upon Plaintiffs' allegations ...


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