Delaware State Univ. Student Hous. v. Ambling Mgt.

Citation556 F.Supp.2d 367
Decision Date04 June 2008
Docket NumberC.A. No. 07-610-MPT.
PartiesDELAWARE STATE UNIVERSITY STUDENT HOUSING FOUNDATION, a Delaware corporation, Plaintiff, v. AMBLING MANAGEMENT COMPANY, Defendant.
CourtU.S. District Court — District of Delaware

Kathleen Furey McDonough, Sarah Elizabeth DiLuzio, Potter Anderson & Corroon, LLP, Wilmington, DE, for Plaintiff.

Anna Martina Linnea Tyreus, Womble Carlyle Sandridge Rice, Wilmington, DE, for Defendant.

MEMORANDUM ORDER

MARY PAT THYNGE, United States Magistrate Judge.

I. INTRODUCTION

On September 13, 2007, Delaware State University Student Housing foundation ("the Foundation"),1 filed suit against Ambling Management Company ("Ambling")2 in the Superior Court of the State of Delaware in Kent County, seeking a declaratory judgment (Count I), and damages for breach of contract (Count II) and tortious interference with business relations (Count III). On October 5, 2007 Ambling removed the action to this court on the basis of the parties' diversity of citizenship.3 On October 23, 2007, Ambling filed an Answer and Counterclaim.4 On the same day Ambling filed a motion to dismiss Counts I and III of Foundation's Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).5

A motion to dismiss is governed by Fed. R.Civ.P. 12(b)(6).6 Rule 12(b)(6) permits a party to move to dismiss a complaint for failure to state a claim upon which relief can be granted.7 The purpose of a motion to dismiss is to test the sufficiency of a complaint, not to resolve dispute facts or decide the merits of the case.8 To survive a motion to dismiss under Rule 12(b)(6), the factual allegations must be sufficient to 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.9 A plaintiff is obliged "to provide the `grounds' of his `entitle[ment] to relief beyond labels and conclusions."10 The court assumes that all factual allegations in a plaintiffs complaint are true and draws all reasonable factual inferences in the light most favorable to that plaintiff.11 The court, however, should reject unsupported allegations, "bald assertions," or "legal conclusions." 12 When a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint.13

II. BACKGROUND14

The Foundation is the leasehold owner of two properties, the University Courtyard Apartments (the "Courtyard") and the University Village (the "Village") (collectively, the "Apartments"), located on the main campus of Delaware State University ("DSU") in Dover, Delaware.15 On January 1, 2004, the Foundation entered into a management agreement with Ambling whereby Ambling was appointed as an independent contractor to manage and lease the Courtyard Apartments (the "Courtyard Agreement").16 On August 1, 2005, the Foundation entered into a second management agreement with Ambling whereby Ambling was appointed as an independent contractor to manage and lease the Village Apartments (the "Village Agreement") (collectively with the Courtyard Agreement, the "Management Agreements" or "Agreements").17

The Management Agreements are nearly identical in all relevant parts. Each provides that "[Ambling] shall provide all services reasonably necessary, proper, ... desirable or appropriate for the successful management and operation of the Premises in [a] First Class Manner."18 The Management Agreements define "First Class Manner" to mean "keeping the Premises in good condition and repair, free of dirt, rubbish, snow, ice, graffiti and unlawful obstructions, and in compliance with all applicable legal requirements."19 Under the Agreements, Ambling was specifically required to:

Offer space in the Premises and use its best efforts to cause the space in the Premises to be fully leased ... to Tenants which are Eligible Tenants who are Creditworthy on the best terms available for [the Foundation], acting in the best interest of [the Foundation]20

Prepare and ... execute on behalf of [the Foundation] all Contracts for water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone, fuel, cleaning, garbage removal, pest control, Internet access, cable television, Premises security and other utilities and services necessary or appropriate for the management and operation of the Premises in accordance with the Annual Budget....21

Purchase all supplies and equipment necessary or appropriate for the management and operation of the Premises in accordance with the Annual Budget....22

[C]onsult with, and make recommendations to, [the Foundation] concerning the condition of the Premises and the necessity for maintenance, repair, alteration or Restoration thereof including the preparation of an annual schedule for maintenance and repair; contract for all work, labor and services necessary or appropriate to maintain and repair the Premises ... promptly notify [the Foundation] upon learning that the condition of the Premises materially fails to meet any standard of maintenance and repair required under any Contract, Legal Requirement or Insurance Requirement .... 23

The Agreements also provide that Ambling "shall not commit or permit waste of the Premises." 24 Ambling was to ensure that each tenant of the Apartments: signs a written lease; abides by the terms of that lease; and that the tenants do not violate their lease by, for example, permitting unauthorized people to live in the Apartments or having pets.25

Each of the Management Agreements had a July 31, 2016 expiration date.26 The Foundation, however, had a right to terminate the Agreements if any one or more "Events of Default" occurred and was continuing.27 The Agreements recite several Events of Default, including "gross negligence, willful misconduct, fraud, malfeasance or breach of fiduciary duty"; "fail[ure] to follow any reasonable written direction of [the Foundation] with respect to the Premises"; and/or "fail[ure] to comply with any provision of th[e] Agreement[s]."28 If an Event of Default arose, Ambling was to be provided with written notice and a fifteen-day cure period.29 Failure to cure the defaults within the requisite period permitted the Foundation to terminate the Agreements.30

At some period of time during 2007, the Foundation became aware of problems with Ambling's management of the Apartments; advised Ambling of its dissatisfaction with its performance (both orally and in writing); identified specific problems to Ambling; and attempted to work towards resolution of those problems.31 In early August 2007, DSU facilities personnel conducted inspections of the Apartments in connection with the budgeting process for an anticipated capital campaign. During those inspections, it was discovered that: many safety and security devices were inoperable; several doors were damaged such that they did not properly or securely close; and that several units had unclean air vents.32 On August 10, 2007, Foundation President Amir Mohammadi wrote a letter to the President of Ambling, William Blackwell, listing the problems discovered during the inspections and notifying Ambling of its obligation to rectify those problems. Mohammadi's letter also, advised Ambling that its recent practice of obtaining waivers from students allowing them to move into unsafe and unsanitary units was unacceptable and that Ambling must cease the practice.33

During further inspections, DSU personnel found additional problems, including the presence of black mold in several apartments. DSU hired an independent contractor, Environmental Testing, Inc. ("Environmental Testing"), to inspect the mold, evaluate healths risks therefrom, and recommend a remediation plan. Environmental Testing's report stated that the mold growth was attributable to water damage adjacent to HVAC air handling units and sinks in the affected apartments. The water damage adjacent to the HVAC units was the consequence of improper maintenance leading to excess condensation from the units' heat exchanger coils and refrigerant lines. Mold found behind the backsplash boards of sinks was the result of water damage due to improper sealing between those components. Environmental Testing recommended several specific steps for solving the mold problem and warned against "quick fixes" which would not remedy the underlying mold growth. DSU and the Foundation advised Ambling of the results of Environmental Testing's report and demanded Ambling immediately remediate the mold.34

Additional problems" observed by DSU personnel included: many apartments having toilets, sinks, and/or appliances which did not work properly or were damaged or broken; visibly damaged drywall and carpets in obvious need of replacement; and failure to enforce the terms of individual leases (including non-DSU students — and one infant — living in the apartments as well as the presence of pets).35 After discovering these additional problems, Mohammadi wrote an August 17, 2007 letter to Blackwell putting Ambling on Notice, as that term is defined in the Management Agreements, that it was in default of the Agreements, as defined by Section 7.2(h). That letter identified specific examples of default, which conflicted with Ambling's obligation under Section 2.2 to successfully manage and operate the "Premises in a First Class Manner" and constituted waste of the Premises, in violation of Section 3.1(g).36 It also advised that Ambling had not provided the Foundation with a required maintenance plan and was in further default of Article IV of the Agreements for failure to adequately administer its leasing duties.37 The August 17, 2007 letter was a Notice of Default triggering a fifteen-day cure period during which Ambling was required to remedy the breaches identified therein.38

On August 22, 2007, Blackwell, answered via letter that promised to "honor all of [Ambling's] obligations under the management agreement."39 In a letter of August 31,...

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