Wharf, Inc. v. Dist. of Columbia
Wharf, Inc. v. Dist. of Columbia
Opinion of the Court
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.
*66Plaintiffs 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,
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 *67Defendants") 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. ,
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. ,
*68III. 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.
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 that [they] are alter egos or co-conspirators" of the Initial Developer Defendants, and Plaintiffs do not plead sufficient facts to support conspiracy or alter ego claims. New Develop. Defs.' Mot. to Dismiss at 1-2.
The crux of the New Developer Defendants' Motion to Dismiss is a recitation of case law indicating what type of information/evidence Plaintiffs would be required to provide in order to state a claim for alter ego (which they maintain Plaintiffs have not done) as well as an argument that Plaintiffs have not adequately alleged a claim of conspiracy. The New Developer Defendants seem to focus on a footnote in the Plaintiffs' Third Amended Complaint, which states that "[d]iscovery will show whether the Developer Defendant entities conspired to commit [ ] illegal acts..., or whether the[y] are simply one and the same, such that no conspiracy between *69them was necessary. For the purpose of this Complaint, and based on the representations by Developer Defendant to the Plaintiffs, the entities are treated as alter egos." Third Am. Compl. at 2, n.1. See also Third Am. Compl. ¶ 32 (alleging that WDGPJV, WHR, HSW and WDJV are alter egos of WHRL and HMW, and giving examples of the interrelated ownership of the entities, common management, and sharing of corporate offices, telephone numbers and websites.)
In their Opposition, Plaintiffs present no counterargument with regard to the New Developer Defendants' discussion of alter ego and conspiracy; rather, they begin by clarifying that the New Developer Defendants are mistaken in their assumption that Plaintiffs are "relying exclusively upon a corporate veil piercing theory" or that such defendants were named "solely for satisfaction of judgment purposes." Pls.' Opp'n at 4. Plaintiffs assert that while they do incorporate the term "alter ego" into their Third Amended Complaint a few times, for the purpose of describing the relationship between defendants, those defendant entities "are part of a complex, interwoven corporate network in which they each 'play [ ] a role in advancing some aspect of the development, financing, construction and, when finished, the operation of the [Wharf] Project.' " Pls.' Opp'n at 4-5 (citing Third Am. Compl. ¶ 34).
To determine whether a complaint survives a Rule 12(b)(6) motion to dismiss, there is a " 'two-pronged approach' under which a court first identifies the factual allegations entitled to an assumption of truth and then determines 'whether they plausibly give rise to an entitlement for relief.' " See Matthews v. District of Columbia ,
Plaintiffs turn next to the exhibits attached to the Third Amended Complaint to demonstrate that there are sufficient facts to render their claims against the New Developer Defendants "plausible at the motion to dismiss stage."
*70Harris v. District of Columbia Water and Sewer Auth. ,
Plaintiffs ask this Court to accept as true several "reasonable factual inferences" derived from allegations in the Third Amended Complaint and the documents attached thereto. In re United Mine Workers ,
"A court's evaluation of a complaint to determine whether it states a plausible claim for relief is 'a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.' " Badwal v. Bd. of Trustees of Univ. of the District of Columbia,
IV. CONCLUSION
For the foregoing reasons, the Court DENIES the New Developer Defendants' Motion to Dismiss. A separate Order accompanies this Memorandum Opinion.
The District was the original lessor of the property at issue. WHRL and the District entered into a ground lease agreement, dated April 23, 2014, whereby the District leased to WHRL the Fish Market together with all development rights and entitlements for a 99-year term. On October 31, 2016, WHRL transferred its interest in the ground lease agreement to Wharf Fish Market REIT Leaseholder LLC. See Def. WHRL's [74] Unopp. Mot. to Add Countercl. Pl. and Def. at 2. Wharf Fish Market REIT Leaseholder, LLC ("WFMRL") is a limited liability company existing under Delaware law and transacting business in the District as the current landlord of the Municipal Fish Market tenants. See unsealed Third Amended Complaint, ECF No. 119 ("Third Am. Compl."), ¶¶ 26-27.
The Court has considered the following documents: Plaintiffs' Second Amended Complaint, ECF No. 82 ("Second Am. Compl."); the unsealed version of Plaintiffs' Third Amended Complaint, ECF No. 119 ("Third Am. Compl.") and the exhibits attached thereto; New Developer Defendants' Motion to Dismiss Plaintiffs' Third Amended Complaint, ECF No. 114 ("New Devel. Defs.' Mot. to Dismiss"); New Developer Defendants' Memorandum in support of Motion to Dismiss, ECF No. 114-1 ("New Devel. Defs.' Mem."); an unsealed version of Plaintiffs' Memorandum of Points and Authorities in Opposition to New Developer Defendants' Motion to Dismiss Plaintiffs' Third Amended Complaint, ECF No. 123 ("Pls.' Opp'n"); and New Developer Defendants' Reply Memorandum in support of Motion to Dismiss, ECF No. 121 ("New Devel. Defs.' Reply"). Because this Court relies on the unsealed versions of documents on the Court's docket, this Memorandum Opinion need not be filed under seal.
Plaintiffs assert that the chart shows that the Municipal Fish Market lease is held by WFMRL, which is 100% owned by WHR, which is in turn 100% owned by WDJV, which is in turn majority-owned by HSW, which is majority-owned by HMW, and accordingly, the entities are all affiliated. See Fish Market Organizational Chart, ECF No. 119-1, Ex. A.
Footnote 1 and Paragraph 32 of the Third Amended Complaint are the only references to the New Developer Defendants being alter egos. In footnote 1 and paragraphs 3 and 4 of the Third Amended Complaint, Plaintiffs use the term "conspiracy." See Third Am. Compl., ECF No. 119.
Reference
- Full Case Name
- WHARF, INC. v. DISTRICT OF COLUMBIA
- Status
- Published