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Alemayehu v. Abere

United States District Court, District of Columbia

February 26, 2018

BELAY ABERE, et al., Defendants.




         This case concerns the unfortunate and rather haphazard business dealings of several individuals seeking to jointly establish and operate a restaurant in the District of Columbia. Plaintiff Neway Alemayehu originally brought this action alleging that Belay Abere, Bekalu Bayabile, and Iyossias Tilahun worked together to defraud him out of a $460, 000 investment. See generally Compl., ECF No. 1. Mr. Abere denied the allegations, claiming that the contemplated business arrangement never came to fruition and that, in fact, it was Mr. Alemayehu who had acted wrongfully by breaching certain duties he owed to Mr. Abere as his agent and employee. This case now comes before the Court on Mr. Abere's partial motion to dismiss and Mr. Alemayehu's motion to dismiss or, in the alternative, summary judgment. See Def.'s Mot. Dismiss (“Def.'s Mot.”) at 1, ECF No. 25, Pl.'s Mot. Dismiss Alt. Summ. J. (“Pl.'s Mot.”) at 1, ECF No. 26. For the reasons stated below, the Court denies both motions.


         In the spring of 2015, Mr. Alemayehu and Mr. Abere met to discuss a possible investment in a restaurant called the Amsterdam Café and Lounge, located in Washington, D.C. Compl. ¶ 7; Countercl. ¶ 9, ECF No. 4. Through their discussions, the parties ultimately came to an agreement. Although some of the details of the agreement are in dispute, the basic premise was that, in exchange for an initial investment, Mr. Alemayehu would receive an 80% ownership stake in a newly formed corporate entity, which would then be responsible for operating the restaurant. See Compl. ¶ 7; Countercl. ¶¶ 9-11, 16. For their part, Mr. Abere and Mr. Bayabile would each own five percent and fifteen percent of the business, respectively. See Compl. ¶ 7; Countercl. ¶ 10. The agreement also contemplated that Mr. Abere would assign a commercial lease to the newly formed entity and that an existing liquor license would also be transferred to the business. Compl. ¶ 7; Countercl. ¶¶ 9, 12. The parties dispute, however, whether these transfers were Mr. Abere's affirmative obligations or whether, instead, they were express conditions on the contract.

         Nevertheless, Mr. Alemayehu claims that these promises and the prospect of owning 80% of the restaurant venture induced him to invest substantial sums of money into the business. Indeed, in addition to making an initial investment of approximately $80, 000, see Compl. ¶ 32, Mr. Alemayehu claims that he also contributed funds to pay: back rents owed to the landlord, along with taxes and insurance, legal fees associated with the attempt to transfer the lease and liquor license, substantial construction and renovation work on the restaurant, the purchase and installation of new kitchen equipment, security and fire alarm systems, restaurant furnishings, a liquor and wine inventory, and a computerized cash register system. Compl. ¶¶ 8-9; see also Countercl. ¶ 17. In total, Mr. Alemayehu claims that he invested more than $460, 000 in the restaurant. Compl. ¶ 32.

         Unfortunately, the business arrangement did not unfold as the parties had intended. Indeed, despite their efforts to persuade the landlord of the building in which the restaurant was located, she ultimately refused to permit any assignment of the commercial lease from the current leaseholder, Mr. Abere individually, to the newly formed business entity. Compl. ¶ 10; Countercl. ¶ 20. Rather, she required that Mr. Abere-and only Mr. Abere-be responsible for the lease. See Compl. ¶ 10; Countercl. ¶ 20. Mr. Alemayehu alleges that, at some point, Mr. Abere represented to him that the only way the landlord would permit the assignment was if she were presented with an operating agreement showing that Mr. Abere was the only owner of the corporate entity. Compl. ¶ 11. Thus, Mr. Alemayehu allegedly agreed to be removed from the corporate documents, albeit temporarily, until the assignment could be accomplished. Compl. ¶ 11. But apparently the landlord was unwilling to assign the lease even to an entity solely owned by Mr. Abere. Compl. ¶ 12; Countercl. ¶ 20. Given the circumstances, Mr. Alemayehu and Mr. Abere believed that the only realistic way forward was to keep the lease, liquor license, and business license in the name of Mr. Abere in his personal capacity. See Compl. ¶ 12; Countercl. ¶ 21.

         However, the parties dispute what exactly their future intentions were. Mr. Alemayehu claims that this Abere-centered operation was a temporary arrangement and that they had agreed that the corporate entity would manage the business until they could find a way to convince the landlord to substitute the corporate entity for Mr. Abere on the lease. See Compl. ¶ 12. Moreover, Mr. Alemayehu argues that, as an 80% owner, he was to act as the restaurant's executive manager, have daily access to financial records, participate in major business decisions, and would receive a power of attorney from Mr. Abere. See Compl. ¶ 12. Mr. Abere, on the other hand, claims that they modified their earlier agreement. See Countercl. ¶ 22. Specifically, he claims that they agreed that Mr. Abere would form, own, and operate the restaurant, but that he would employ Mr. Alemayehu as the restaurant's manager and compensate him with 80% of the business's profits in consideration for his initial investment. See Countercl. ¶ 22.

         Regardless, in October 2015, the restaurant opened for business and Mr. Alemayehu assumed the role of executive manager while Mr. Abere was traveling outside of the United States. See Compl. ¶ 13; Countercl. ¶¶ 23, 26. But no management agreement or power of attorney was ever executed, either before Mr. Abere left or after he returned. Compl. ¶¶ 13, 15. And, in fact, it appears that Mr. Alemayehu's time as executive manager was rather short lived. Mr. Alemayehu alleges that when Mr. Abere returned a month or two later, Mr. Abere suggested that he take over the management and operation of the business given his “superior liability protection and experience, ” but that this change would only last for “a few months.” Compl. ¶ 14. Alemayehu relented, believing this course of action “to be beneficial . . . as long as [the] management was performed in an inclusive, collaborative way.” Compl. ¶ 14. But subsequently, according to Mr. Alemayehu, Mr. Abere took several actions meant to undermine his authority as executive manager and never restored Mr. Alemayehu to that position. Compl. ¶ 18 (Mr. Abere “has continued, up through the filing of this lawsuit, to strengthen his control of the business, its operation and planning, all designed to totally remove [Mr. Alemayehu] from any involvement or managerial oversight responsibilities for the restaurant enterprise.”). Furthermore, Mr. Alemayehu claims that, even though he is entitled to 80% of the profits, he has received no profit distributions, Compl. ¶ 41, and Mr. Abere “has tried to make it appear that he is the legitimate sole owner of the business.” Compl. ¶ 19. All of this seems to have culminated when, on March 4, 2016, Mr. Alemayehu disassociated himself from the venture. See Letter from Mr. Alemayehu to Mr. Abere, ECF No. 28-6. That same month, he brought this suit seeking what he believes is due to him.

         Mr. Abere, however, has a somewhat different take. According to Mr. Abere, upon his return, he discovered that Mr. Alemayehu had abused his position of trust and failed to faithfully and fully perform his duties as manager. Countercl. ¶ 27. Specifically, he claims that Mr. Alemayehu failed or refused to pay certain taxes, salaries of employees, and invoices submitted by vendors and third parties. Countercl. ¶ 27. In addition, Mr. Abere learned that, while the business had generated approximately $110, 422.81 in gross receipts, that money went unaccounted for. Countercl. ¶ 28. Mr. Alemayehu allegedly admitted that he took approximately $13, 000 from the business to pay a personal debt, but could not account for the remaining balance. Countercl. ¶ 28. Furthermore, Mr. Abere learned that, before the opening of the restaurant, Mr. Alemayehu had signed a purported Settlement Agreement and Mutual General Release (the “Settlement Agreement”) on Mr. Abere's behalf, but without his knowledge or consent. Countercl. ¶ 30. The Settlement Agreement purports to release potential claims that Mr. Abere had against Mr. Abere's former sub-tenant, Wilson Concepts, LLC (“Wilson Concepts”), and its proprietor, Garnell Wilson, for, among other things, previous unpaid rent. Countercl. ¶ 30. According to Mr. Abere, it was for all of these reasons that he ultimately decided to remove Mr. Alemayehu as the manager of the restaurant. Countercl. ¶ 32.

         In March 2016, Mr. Alemayehu filed a complaint initiating this lawsuit. See generally Compl. Mr. Alemayehu asserts six claims against Mr. Abere, including claims for unjust enrichment, promissory estoppel, and quantum meruit. See Compl. ¶¶ 26-32, 37-41. Mr. Abere, in turn, filed a counterclaim against Mr. Alemayehu. See generally Countercl. He asserts, among other things, claims for breach of fiduciary duty, breach of contract, quasi-contract/breach of agency contract, and unjust enrichment. See Countercl. ¶¶ 36-52. Both Mr. Abere and Mr. Alemayehu have since filed answers to the claims against them.[1]

         On May 8, 2017, Mr. Abere filed a partial motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. See Def.'s Mot. That same day, Mr. Alemayehu also filed a motion to dismiss, or in the alternative, for summary judgment. See Pl.'s Mot. Both motions have been fully briefed and are now ripe for decision. The Court therefore addresses each motion in turn.


         Before turning to the merits of Mr. Abere's motion, the Court must first clear up a technical procedural issue. Mr. Abere styles his motion as a motion dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. See generally Def.'s Mot. Under the Federal Rules, such motions are only available to parties before they have filed a responsive pleading. See Fed. R. Civ. P. 12(b) (“A motion . . . must be made before pleading if a responsive pleading is allowed.”). Because Mr. Abere has already filed an answer in this case, he is not entitled to relief under Rule 12(b)(6). See Id. However, under the circumstances, the proper course of action is to construe the motion to dismiss as a motion for judgment on the pleadings under Rule 12(c) because the standard under both rules is essentially same. See Bloom v. McHugh, 828 F.Supp.2d 43, 49 (D.D.C. 2011) (“Because, however, the standards for a Rule 12(b)(6) motion and a Rule 12(c) motion for judgment on the pleadings are identical, courts routinely construe motions to dismiss that are filed after a responsive pleading as motions for judgment on the pleadings, and this Court will do likewise.”); Lockhart v. Coastal Intern. Sec., Inc., 905 F.Supp.2d 105, 112 (“[W]hen not raised in a motion prior to filing a pleading, the legal defense[] of failure to . . . state a claim upon which relief can be granted may be made by a motion under Rule 12(c).”) (internal citation omitted); Langley v. Napolitano, 677 F.Supp.2d 261, 262-63 (D.D.C. 2010).

         Accordingly, Mr. Abere's motion will be granted only if the Complaint fails to plead “enough facts to state a claim for relief that is plausible on its face.” Bell Atl. Corp v. Twombly, 550 U.S. 554, 570 (2007). To state a plausible claim, the complaint need not contain detailed factual allegations, but it must recite facts sufficient to at least “raise a right to relief above the speculative level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Id. at 555. A “pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.'” Ashcroft v. Iqbal, 556 U.S. 662 (2009) (quoting Twombly, 550 U.S. at 555). In short, a complaint must contain sufficient factual matter that, accepted as true, would allow the Court “to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 678.

         Here, Mr. Abere seeks to dismiss Mr. Alemayehu's claims for promissory estoppel, quantum meruit, and constructive trust. See generally Def.'s Mot. Only the first two claims, however, are worthy of any significant discussion. As the Court noted in a prior opinion, constructive trust is not an independent cause of action, but a remedy. Thus, the Court “construe[s] the request for a constructive trust as a request for injunctive relief, ” but “takes no position on whether this remedy would be appropriate in this case.” Alemayehu, 199 F.Supp.3d at 87. As for Mr. Alemayehu's claims for promissory estoppel and quantum meruit, the Court finds that Mr. Alemayehu has alleged facts sufficient to state a plausible entitlement to relief. Accordingly, the Court denies Mr. Abere's motion.

         A. Promissory Estoppel (Count III)

         The Court first addresses Mr. Abere's argument that the complaint fails to allege sufficient facts to state a claim for promissory estoppel. “To factually allege promissory estoppel, a plaintiff must establish (1) the existence of a promise, (2) that the promise reasonably induced reliance on it, and (3) that the promisee relied on the promise to his detriment.” Osseiran v. Int'l Fin. Corp., 498 F.Supp.2d 139, 147 (D.D.C. 2007), aff'd, 522 F.3d 836 (D.C. Cir. 2009) (citing Daisley v. Riggs Bank, 372 F.Supp.2d 61, 71 (D.D.C. 2005)). Under the law, a plaintiff asserting a claim for promissory estoppel must allege that he or she relied on a promise that is sufficiently “definite” because “reliance on an indefinite promise is not reasonable.” In re U.S. Office Prods. Co. Sec. Litig., 251 F.Supp.2d 58, 73 (D.D.C. 2003) (citations omitted). While the promise must have “definite terms on which the promisor would expect the promisee to rely, ” it “need not be as specific and definite as a contract.” Id. (citing Bender v. Design Store Corp., 404 A.2d 194, 196 (D.C. 1979)). Based on this Court's prior opinion ...

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