ASHTON GEN. PARTNERSHIP v. FEDERAL DATA

• Decision Date: 22 August 1996
• Docket Number: No. 95-CV-354,No. 95-CV-436,95-CV-354,95-CV-436
• Citation: 682 A.2d 629
• Parties: ASHTON GENERAL PARTNERSHIP, INC., Appellant/Cross-Appellee, v. FEDERAL DATA CORPORATION, Appellee/Cross-Appellant.
• Court: D.C. Court of Appeals

682 A.2d 629

ASHTON GENERAL PARTNERSHIP, INC., Appellant/Cross-Appellee, v. FEDERALDATA CORPORATION, Appellee/Cross-Appellant.

Nos. 95-CV-354, 95-CV-436.

District of Columbia Court of Appeals.

Argued March 14, 1996.

Decided August 22, 1996.

APPEAL FROM THE SUPERIOR COURT, PATRICIA A. WYNN, J.

William H. Bode, with whom Luis M. Acosta, Washington, DC, appeared on the brief, for appellant/cross-appellee.

Susan J. Rubin, New York City, for appellee/cross-appellant.

Before STEADMAN, KING, and REID, Associate Judges.

REID, Associate Judge:

Appellant/cross-appellee Ashton General Partnership, Inc. challenges various rulings of the trial court which resulted in dismissal of its lawsuit against appellee/cross-appellant Federal Data Corporation. In its cross-appeal, Federal Data contends that it was entitled to summary judgment regarding the contract and quantum meruit counts of Ashton's complaint and Ashton's claim for damages based on subcontracts allegedly promised to Federal Data. We affirm the trial court's dismissal of Ashton's amended complaint. We conclude that D.C. Code § 45-1926(c) (1990 Repl.) requires a plaintiff who files a claim for compensation for effecting the sale of a business or business assets, to allege that it (or he or she) possessed a real estate broker's license at the time of the transaction.

FACTUAL SUMMARY

This case grew out of a dispute between Federal Data and General Dynamics, two technology companies which competed for an Air Force Strategic War Planning System Contract (SWPS Contract). General Dynamics won the contract and Federal Data filed bid protests with the General Accounting Office. Federal Data sought to settle its dispute with General Dynamics by selling some or all of its assets to General Dynamics. Ashton General Partners, Inc. asserted that Federal Data retained it to mediate the dispute. Further, Ashton contended that it mediated the dispute by arranging for the sale of one of Federal Data's contracts, the I-80 Contract, to General Dynamics for two million dollars in cash and for future subcontracts worth twenty-five to forty million dollars. Ashton sued Federal Data on three theories: (1) breach of contract; (2) quantum meruit; and (3) fraudulent misrepresentation; and sought six hundred ninety thousand dollars in actual damages and five million dollars in punitive damages.

Less than a week prior to trial, Federal Data filed a motion to dismiss¹ Ashton's amended complaint on the ground of an alleged jurisdictional bar contained in D.C. Code § 45-1926(c) (1990 Repl.) which provides:

No person engaged in or conducting the business, or acting in the capacity of a real estate broker, real estate salesperson, or property manager within the District shall bring or maintain any action in the courts of the District for the collection of compensation for any services performed in that capacity, or for the enforcement of any contract relating to real estate or business without alleging that he or she was duly licensed under this chapter.

Federal Data maintained that Ashton was barred from bringing its lawsuit in the District's courts because it did not have a real estate broker's license. Ashton retorted thatunder D.C. Code § 45-1926(b)(1), it was not obligated to obtain a license because the statutory provision only applies to real estate businesses.

On March 25, 1994, the trial court granted Federal Data's motion to dismiss on the ground that it "[lacked] subject matter jurisdiction over the claim" because: "in order to bring an action to collect fees for conduct that comes within [the statute] . . . a party must allege that he, or she, or it is licensed under the statute. Ashton General Partners did not allege that it was so licensed." The trial court concluded that § 45-1926(c) creates a jurisdictional bar rather than a waivable affirmative defense, citing Laffey v. Northwest Airlines, Inc., 567 F.2d 429, 474, 185 U.S.App.D.C. 322, 367 (1976). It declined to follow a fifth circuit case, Backar v. Western States Producing Co., 547 F.2d 876 (5th Cir. 1977), which involved a New York statute that was virtually identical to § 45-1926(c). The court in Backar described the New York statutory provision as an "affirmative defense." Id. at 881.

The trial court also made findings and conclusions regarding the applicability of § 45-1926 to Ashton. Ashton claimed that the statute did not apply to investment bankers and mediators or their services; and only covered real estate transactions. The trial court determined that "there is no getting around the fact that Ashton attempted to bring about (and indeed, did bring about) the sale of a major portion of Federal Data — known as the I-80 Contract — to General Dynamics," and that "Ashton's goal was to effect the sale of a business." Furthermore, in relying on Kassatly v. Yazbeck, 739 F. Supp. 651 (D.D.C. 1990), the trial judge concluded that "[t]he legislative history [of § 45-1926] makes it clear that the intent in removing references to business brokers was simply to combine the licensing of business brokers, business chance brokers, and real estate brokers under the same statute." Finally, the trial judge rejected Ashton's argument that the § 45-1926 is unconstitutional because it violates the Due Process Clause of the Fifth Amendment. She concluded:

[B]usiness brokers in the District of Columbia are on notice that their actions are regulated by statute [because] [t]he title of the statute specifically refers to "Business Chance Licenses;" the legislative history of the statute makes it clear that business brokers and business chance brokers are governed by the statute . . .; that history clearly defines the term business broker; references to business brokers and business licenses appear throughout the text of the statute; and finally, even the index to the Code refers readers who look up Business Chance Brokers to the statute at issue in the instant case.

ANALYSIS

Ashton contends that: (1) the trial court erred in ruling that D.C. Code § 45-1926(c) barred its lawsuit because (a) Ashton is engaged in investment banking and the statute only applies to real estate businesses; (b) if Ashton was required to obtain a real estate license for the services rendered to Federal Data, the statute is unconstitutionally vague; and (c) Federal Data waived its right to raise the statute; and (2) the trial court erred in ruling that Ashton failed to show damages with respect to its fraudulent misrepresentation claim. Federal Data argues that Ashton was required to obtain a real estate license; the statute is not unconstitutionally vague; and subject matter jurisdiction cannot be waived. Federal Data also asserts that the trial court properly dismissed Ashton's fraudulent misrepresentation claim and that it is entitled to summary judgment on Ashton's claim of punitive damages. With regard to its cross-appeal, Federal Data maintains that (1) it was entitled to summary judgment on the contract and quantum meruit counts of Ashton's complaint because no contract existed between it and Ashton; and (2) it was entitled to summary judgment with respect to Ashton's claim for damages based on twenty-five to forty million dollars in subcontracts allegedly promised to it.

Under Super. Ct. Civ. R. 12(b)(1), a party may move to dismiss a complaint on the basis of the trial court's "[l]ack of jurisdiction over the subject matter." Rule 12(h)(3) provides that "[w]henever it appears by suggestion of the parties or otherwise that the Court lacks jurisdiction of the subject matter, the Courtshall dismiss the action." The jurisdictional issue raised here cannot be resolved without an interpretation of D.C. Code § 45-1926. As we have stated previously, "[t]he construction of a statute raises a 'clear question of law,' and we review the trial court's ruling de novo." District of Columbia v. Morrissey, 668 A.2d 792, 796 (D.C. 1995) (referencing and quoting Office of People's Counsel v. Public Serv. Comm'n of the District of Columbia, 520 A.2d 677, 681 (D.C. 1987)).

The Jurisdictional Issue

Federal Data argues that § 45-1926 contains a jurisdictional bar to Ashton's suit, and the trial court agreed. We do not perceive this to be an issue of subject matter jurisdiction, however, but we do agree, for the reasons discussed below, that the trial court properly dismissed the amended complaint pursuant to Super. Ct. Civ. R. 12(b)(6). Section 45-1926(c) provides that "No person engaged in or conducting the business, or acting in the capacity of a real estate broker [business chance broker] . . . shall bring or maintain any action in the courts of the District for the collection of compensation for any services performed in that capacity, or for the enforcement of any contract relating to real estate or business without alleging that he or she was duly licensed under this chapter." The statute does not specify whether this provision constitutes a jurisdictional bar to a legal action, or whether it is designed as a mandatory pleading and proof requirement, or whether it is an affirmative defense.² The trial court concluded that § 45-1926(c) is a jurisdictional bar, and declined to rely on a Fifth Circuit case interpreting a New York statute, Real Property Law § 442-d that is virtually identical in language to § 45-1926(c), as an affirmative defense. See Backar v. Western States Producing Co., supra.³

The New York courts of highest jurisdiction interpret their statute differently from Backar, treating it as embodying a mandatory pleading and proof requirement. In NFS Services v. West 73rd Street Associates, 102 A.D.2d 388, 477 N.Y.S.2d 135, 137 (1984), aff'd, 64 N.Y.2d 919, 488 N.Y.S.2d 648, 477 N.E.2d 1102 (1985), the court concluded, "[s]ection 442-d bars any action to recover compensation except upon allegation and proof that the person was a duly licensed real estate broker on the date the cause of action accrued." (citations omitted). See also Philip...