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Zuver v. Sprigg

United States District Court, District of Columbia

June 13, 2018

WERTH MARC V. ZUVER, Plaintiff,
v.
GREGORY SPRIGG, Defendant.

          MEMORANDUM OPINION

          DABNEY L. FRIEDRICH, UNITED STATES DISTRICT JUDGE

         After defaulting on a real estate purchase, Werth Marc V. Zuver sued the seller, Gregory Sprigg. After Sprigg moved to dismiss Zuver's complaint, Dkt. 7, the previously assigned judge allowed limited discovery to facilitate mediation, Minute Order of July 31, 2017, but the parties' attempt at mediation failed. Because discovery revealed significant inconsistencies between the complaint and Zuver's own account, Sprigg moved for Rule 11 sanctions. Dkt. 24. In responding to the Rule 11 motion, Zuver's pro bono counsel breached the confidentiality provision of the parties' mediation agreement by disclosing to the Court that Sprigg had rejected a proposal from the mediator at the end of mediation. Dkt. 33 at 8, 45.

         For the reasons that follow, the Court will dismiss five of the complaint's eight counts for failure to state a claim, grant summary judgment to Sprigg with respect to the other three counts, deny the Rule 11 motion, and require Zuver's counsel to reimburse Sprigg for fees incurred as a result of the breach of the mediation agreement.

         I. BACKGROUND

         For decades, Zuver ran a non-profit art company named Fondo del Sol and operated a home-based art center out of his residence in the Dupont Circle neighborhood of Washington, D.C. Compl. ¶¶ 2, 16, 19-20, Dkt. 1. Zuver rented the home for several decades until 2000, when Fondo purchased it. Id. ¶¶ 18, 23. In 2010, Zuver, more than eighty years old, was diagnosed with colon cancer. Id. ¶ 25. Thereafter, Fondo began to experience financial difficulty and sold the Dupont Circle property in September 2012. Id. ¶ 26. The purchase agreement allowed Zuver to remain in the home for one year after the sale but required him to find a new place to live (and to store Fondo's art collection) by September 2013. Id. ¶ 29.

         Zuver accordingly approached Sprigg, a next-door neighbor who happened to be a real estate broker, about renting Sprigg's property. Id. ¶¶ 22, 34. Sprigg, who had lived at the property since 1997, planned to move to Virginia and was open to selling-but not renting-his property to Zuver. Id. ¶¶ 4, 22, 34. In fall 2013, Zuver and Sprigg entered into an agreement in which Zuver paid Sprigg $20, 000 in exchange for Sprigg keeping portions of his property vacant and off the market from November 1 through December 31 while the parties discussed the potential purchase. Id. ¶ 38. The agreement allowed Zuver to credit the $20, 000 to the prospective purchase. Id. ¶ 40.

         In late December 2013, Zuver and Sprigg entered into a sales contract for the purchase of the property at $1, 845, 000 (a $1, 200, 000 down payment plus $645, 000 in seller-provided financing with a fifteen-year mortgage) with a settlement date of April 30, 2014. Id. ¶¶ 49-50. The contract required Zuver to deliver a $200, 000 earnest-money deposit to an escrow account; the deposit was credited to the purchase price. Id. ¶ 51; First Sales Contract at 3, Dkt. 1-2. The contract also included a pre-settlement occupancy agreement that allowed Zuver to occupy the ground floor of the property for the first four months of 2014 in exchange for a nonrefundable $40, 000 lump-sum payment. Compl. ¶ 56. The pre-settlement occupancy agreement disclaimed any tenancy relationship, stated that Sprigg would credit Zuver $50, 000 at settlement, and noted that the per-month payment would increase to $12, 000 if settlement did not occur by April 30 and Zuver failed to vacate the property. Id. ¶¶ 56-57. Sprigg later agreed to extend settlement and the $10, 000 monthly rate to September 21, 2014. Id. ¶ 60.

         But Zuver failed to raise the funds necessary to complete the purchase. Id. ¶ 63. On September 22, 2014, Zuver and Sprigg signed a release of the sales contract that nullified the contract, released both parties from liability in connection with the sales contract, authorized Sprigg to sell the property to another party, and directed the escrow agent to disburse the $200, 000 earnest-money deposit to Sprigg. First Release Agreement, Dkt. 1-3.

         In October 2014, Zuver and Sprigg signed a second sales contract for purchase of the property with a settlement date of December 31, 2014. Compl. ¶ 72. The sales price was $1, 600, 000 ($245, 000 less than the sales price in the first contract), with a $1, 000, 000 down payment and $600, 000 in seller-provided financing. Id. ¶ 74. The second sales contract required Zuver to deliver $5, 000 to the escrow account. Id. ¶ 75. It also included a pre-settlement occupancy agreement with the same terms as the first except that it required Zuver to pay a lump sum of $30, 000 for October, November, and December, omitted the clause crediting Zuver $50, 000 toward settlement, and increased the monthly payment to $12, 000 if settlement did not occur by December 31, 2014 and Zuver failed to vacate. Id. ¶¶ 76-77. In early January 2015, the parties extended the settlement date through the month in exchange for a $10, 000 payment from Zuver to Sprigg. Id. ¶ 79.

         Zuver again failed to raise sufficient funds, and on January 30, 2015, the parties signed another release agreement. The agreement nullified the second sales contract, released both parties from liability relating to the second sales contract, authorized Sprigg to sell the property to another party, and directed the escrow agent to disburse the $5, 000 deposit to Sprigg. Id. ¶¶ 80-81; Second Release Agreement, Dkt. 1-5.

         On the same day, Zuver and Sprigg signed a third sales contract with a settlement date of September 30, 2015 and a sales price of $1, 700, 000 with a $1, 000, 000 down payment and $700, 000 in seller-provided financing. Compl. ¶ 82-83. The third sales contract required Zuver to deliver another $5, 000 deposit to the escrow account. Id. ¶ 84. The pre-settlement occupancy agreement this time required Zuver to pay $20, 000 for February 2015 and $15, 000 per month thereafter with $5, 000 per month credited to Zuver upon settlement. Id. ¶¶ 85-86.

         Zuver again failed to close, and the parties signed a third release agreement on February 26, 2016. Third Release Agreement, Dkt. 7-3.[1] Like the others, the agreement nullified the third sales contract, released both parties from liability relating to the third sales contract, and authorized Sprigg to sell the property to another party. Unlike the others, the release directed the escrow agent to disburse the $5, 000 deposit to Zuver instead of Sprigg. Id. The parties signed another agreement that allowed Zuver to store the artwork at the property during the month of March for $10, 000. Compl. ¶ 100. In early April, Sprigg demanded that Zuver vacate the property entirely. Id. ¶ 101.

         Zuver sued Sprigg in this Court in December 2016. Zuver alleges that Sprigg took advantage of his old age and vulnerability in several ways:

• Sprigg misled Zuver into believing that the initial $20, 000 paid for keeping the property available for two months while the parties discussed the prospective purchase would be credited toward the purchase price as in a rent-to-buy agreement, id. ¶ 36;
• Sprigg misrepresented the sales contracts as boilerplate, id. ¶ 43;
• Although encouraging Zuver to retain a lawyer, Sprigg also told Zuver that attorneys were unnecessary and would “muck things up, ” id. ¶ 46;
• Sprigg misrepresented the pre-settlement occupancy agreements as similar to rent-to-buy arrangements, id. ¶ 54;
• To obtain the first release agreement, Sprigg isolated Zuver by meeting with him alone without Zuver's girlfriend Delfa Castillo, an attorney who had communicated with both Zuver and Sprigg about the purchase, id. ¶ 68;
• Sprigg continued to press forward with the property sale despite knowing that Zuver was elderly, did not have the support of family members or lawyers, and did not have sufficient funds to complete the purchase, id. ¶¶ 47, 48, 63, 64, 73, 78, 81, 88-89.

         Zuver asserts counts of unconscionability, unjust enrichment, fraud, negligent representation, and breach of fiduciary duty. See id. ¶¶ 105-162. The complaint seeks $450, 000 in damages plus treble damages, punitive damages, attorneys' fees and costs, rescission of the contracts, and other relief. Id. at 28-29.

         After Sprigg moved to dismiss, the judge previously assigned to this case allowed limited discovery, consisting of document exchanges and depositions of key witnesses, for the purpose of facilitating mediation. Minute Order of July 31, 2017. During Zuver's deposition, he repeatedly denied having seen the complaint before affirming after a break that he had in fact read the complaint. See Mem. in Supp. of Mot. for Sanctions at 2-3, Dkt. 24-1. Zuver also undermined the claims of undue influence and breach of fiduciary duty by recounting that he and Sprigg “never had any relationship” before they began negotiating the purchase. Id. at 14. Citing these and other incongruities between the complaint and discovery evidence, Sprigg filed a motion for sanctions under Rule 11 of the Federal Rules of Civil Procedure. See Id. at 1; Fed.R.Civ.P. 11. In its opposition to Sprigg's motion for Rule 11 sanctions, Zuver's counsel conceded-consistent with Zuver's testimony-that Zuver and Sprigg had no “close personal relationship prior to the signing of the First Sales Contract.” Opp'n to Mot. for Sanctions at 23, Dkt. 33 (emphasis omitted). Zuver's counsel also revealed that the mediator made a proposal that Sprigg rejected. Id. at 8, 45. The case was reassigned to the undersigned judge on December 5, 2017.

         II. LEGAL STANDARDS

         Rule 12(b)(6) of the Federal Rules of Civil Procedure allows a defendant to move to dismiss the complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). To survive a Rule 12(b)(6) motion, a complaint must contain factual matter sufficient to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A facially plausible claim is one 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). This standard does not amount to a specific probability requirement, but it does require “more than a sheer possibility that a defendant has acted unlawfully.” Id.; see also Twombly, 550 U.S. at 557 (“Factual allegations must be enough to raise a right to relief above the speculative level.”). A complaint alleging facts that are “merely consistent with a defendant's liability . . . stops short of the line between possibility and plausibility.” Iqbal, 556 U.S. at 678 (internal quotation marks omitted).

         Well-pleaded factual allegations are “entitled to [an] assumption of truth, ” id. at 679, and the court construes the complaint “in favor of the plaintiff, who must be granted the benefit of all inferences that can be derived from the facts alleged, ” Hettinga v. United States, 677 F.3d 471, 476 (D.C. Cir. 2012) (internal quotation marks omitted). The assumption of truth does not apply, however, to a “legal conclusion couched as a factual allegation.” Iqbal, 556 U.S. at 678 (quotation marks omitted). An “unadorned, the defendant-unlawfully-harmed-me accusation” is not credited; likewise, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id.

         A court grants summary judgment if the moving party “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). A “material” fact is one with potential to change the substantive outcome of the ...


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