Francis v. Rehman

• Decision Date: 26 February 2015
• Docket Number: No. 14–CV–190.,14–CV–190.
• Parties: Michael FRANCIS and Queue, LLC, Appellants, v. Munir REHMAN and HAK, LLC, Appellees.
• Court: D.C. Court of Appeals

110 A.3d 615

Michael FRANCIS and Queue, LLC, Appellants

v.Munir REHMAN and HAK, LLC, Appellees.

No. 14–CV–190.

District of Columbia Court of Appeals.

Submitted Nov. 6, 2014.

Decided Feb. 26, 2015.

Earl “Trey” Mayfield and Michael P. Lewis, Washington, DC, were on the brief for appellants.

Matthew August LeFande, Arlington, VA, was on the brief for appellees.

Before GLICKMAN and THOMPSON, Associate Judges, and PRYOR, Senior Judge.

Opinion

THOMPSON, Associate Judge:

In January 2013, plaintiffs/appellants Michael Francis and Queue, LLC (“Queue”) brought suit against defendants/appellees Munir Rehman and HAK, LLC (“HAK”), alleging breach of contract, unjust enrichment, breach of fiduciary duties, and fraud and seeking an accounting. After the Superior Court dismissed certain of the claims and afforded appellants leave to amend their fraud claim, appellants voluntarily dismissed the remaining claims, positioning themselves to bring this appeal challenging the court's order that granted in part appellees' motion to dismiss. Although a developed record might show that appellees are entitled to judgment on the ground that the underlying contract (for “design services”) was unenforceable because appellant Francis lacked a license to practice architecture in the District of Columbia, we are persuaded that the court could not so determine at the motion-to-dismiss stage. Accordingly, we reverse the judgment and remand for further proceedings.

I. Background

Appellants alleged the following in their First Amended Complaint. Appellant Francis is the owner and operator of appellant Queue and is a minority owner of HAK. Appellee Rehman is a nightclub and restaurant developer and the controlling owner of HAK, which operates a bar/restaurant/nightclub establishment at 1219 Connecticut Avenue, N.W. (“1219 Connecticut”).

In 2008, Francis and Queue agreed to provide “design services” for Rehman's then-new 1219 Connecticut venture. Appellants were “to be compensated through profits obtained with Mr. Francis as a co-owner of the business. Specifically, Francis and Rehman agreed that Francis would be reimbursed for his actual expenses in obtaining the various services, would be paid a fee of $25,000, and would have a 2.5% ownership interest in HAK. The “design services consisted of ... obtaining design services from a licensed architect and third party consultant services[,]” such as those of lighting designers and structural engineers. The First Amended Complaint further alleges that, “[w]ith [Rehman's] knowledge and consent,” Francis “obtained those designs from Jerald Clark, a licensed architect in the District of Columbia.” It avers that “[a]ll design drawings provided for Mr. Rehman's projects by Architect Clark were prepared under his direct supervision and responsibility [and] bore his seal[.]” Appended to the First Amended Complaint is a copy of a March 2009 Joint Ownership Agreement, under which, in exchange for receiving a 2.5% ownership interest in HAK, appellant Francis was to “contribute his time, talent, and resources to performing the architectural work in designing and building out any space or spaces in the premises at 1219 Connecticut Avenue[.]”

According to the First Amended Complaint, Francis obtained the services of Clark and “advanced the expenses for[ ] third party consultants[,]” and design work on the 1219 Connecticut project was completed by late 2009, but Rehman paid Francis only a $15,000 fee, failed to pay Francis any of the profits of HAK or to provide its financial records, and failed to reimburse Francis for expenses.

The First Amended Complaint further alleges that Rehman and Francis entered into another agreement, which was never memorialized in writing, under which Francis would provide similar services in connection with a Rehman establishment located at 1223 Connecticut Ave., N.W. (“1223 Connecticut”). Under the agreement, Rehman was to “cover expenses [Francis] incurred in the design” and Francis was to receive “a 5% ownership interest in [the 1223 Connecticut establishment] in exchange for over $125,000.00 in services obtaining the designs from Architect Clark and procuring third party consultants for those designs.” The Complaint avers that appellants provide the contracted-for services, that Francis “loaned funds to [Rehman] in the form of payments to third party consultants for [the project] ... with the express agreement that [Rehman] would reimburse those loans[,]” and that the 1223 Connecticut establishment opened in 2010, but that Rehman has not repaid the loans and Francis has not been paid any profits owed to him.

Appellants filed their Initial Complaint on January 22, 2013, and their First Amended Complaint on May 8, 2013. Count I of the First Amended Complaint alleges that appellees breached the contract relating to 1219 Connecticut. Count II alleges that appellees breached the contract relating to 1223 Connecticut. Although captioned “Unjust Enrichment (1223 Connecticut),” Count III alleges that appellants conferred benefits on appellees by providing services and advancing expenses for both the 1219 Connecticut and 1223 Connecticut ventures and that appellees have been unjustly enriched by retaining those benefits. Counts IV and V allege breach of fiduciary duty. Count IV is based on Rehman's failure to reimburse Francis in connection with the 1219 Connecticut project and to pay him his share of HAK profits. Count V is premised on appellees' failure to reimburse appellants and to pay Francis profits in connection with the 1223 Connecticut project. Count VI alleges fraud based on appellees' false representations that Francis and Queue would be compensated and reimbursed as described above.

Appellees moved to dismiss the First Amended Complaint pursuant to Super. Ct. Civ. R. 12(b)(6) for failure to state a claim upon which relief may be granted. On July 17, 2013, the Superior Court judge (the Honorable Natalia M. Combs Greene) granted the motion to dismiss Count I, reasoning that “Plaintiff Francis is not a licensed architect” and that “negotiat[ing] a contract to provide architectural services while not licensed as an architect is sufficient to void [a] contract.¹ For the same reason, Judge Combs Greene also dismissed Count IV, reasoning that the breach of fiduciary duty claim for the 1219 Connecticut project arose out of the “void and unenforceable” contract for architectural and design services. Judge Combs Greene declined to dismiss Count II and related Count V, reasoning that she could not determine whether the terms of the oral agreement related to the 1223 Connecticut project were the same as the terms of the “void and unenforceable” 1219 Connecticut agreement. In addressing the Count III unjust enrichment claims for “[b]oth [p]rojects,” Judge Combs Greene stated that an unlicensed architect or interior designer “cannot collect monies due on a quasi-contractual basis[,]” but declined to dismiss the count because the “circumstances under which the money was loaned ... are unclear.”² Finally, Judge Combs Greene determined that appellants had not pled their fraud count (Count VI) with specificity, and ruled that appellants would be afforded the opportunity to submit a more definite statement as to that count.

Subsequently, appellants filed a Second Amended Complaint, eliminating the dismissed counts, renumbering the remaining counts, and providing specificity regarding the fraud claim. Appellees again moved to dismiss. Judge Combs Greene denied the motion to dismiss. However, explaining that the court's July 17, 2013, ruling had “effectively gutted” their case, and in order to expedite an appeal of the portions of that ruling that dismissed the claims that appellants assert are their “primary claims,” appellants thereafter moved to voluntarily dismiss without prejudice all the counts set forth in their Second Amended Complaint.³ On January 10, 2014, the Honorable Robert Okun, to whom the matter had been reassigned, granted the motion, and this appeal from Judge Combs Greene's July 17, 2013, ruling followed.⁴

Because appellants voluntarily dismissed the counts included in the Second Amended Complaint, the only issues on appeal are whether Judge Combs Greene erred in dismissing appellants' claims for breach of contract, for unjust enrichment insofar as that claim was based on appellants' services (rather than advances of money), and for breach of fiduciary duty in connection with the 1219 Connecticut project, all as set out in the First Amended Complaint.⁵ Our review is de novo. See Chamberlain v. American Honda Fin. Corp., 931 A.2d 1018, 1022 (D.C.2007).

II. Applicable Law

A court considering a Rule 12(b)(6) motion must “construe the complaint in the light most favorable to the plaintiff by taking the facts alleged in the complaint as true.” Pietrangelo v. Wilmer Cutler Pickering Hale & Dorr, LLP, 68 A.3d 697, 709 (D.C.2013). “[A] defendant raising a 12(b)(6) defense cannot assert any facts which do not appear on the face of the complaint itself.” Carey v. Edgewood Mgmt. Corp., 754 A.2d 951, 954 (D.C.2000). “When the trial court decides a Rule 12(b)(6) motion by considering factual material outside the complaint, the motion shall be treated as if filed pursuant to Rule 56, which permits the grant of summary judgment if there are no material facts in dispute and the movant is entitled to judgment as a matter of law.” Kitt v. Pathmakers, Inc., 672 A.2d 76, 79 (D.C.1996). However, “when treating a Rule 12(b)(6) motion as a motion for summary judgment, where outside factual material is not excluded, the trial court must give the parties notice of its intention to consider summary judgment and an adequate opportunity to present affidavits or other matters appropriate to a ruling on such a motion.” Washkoviak v. Sallie Mae, 900 A.2d 168, 178 (D.C.2006) (internal quotation marks omitted); see also Herbin v. Hoeffel, 727 A.2d 883, 886–87 (D.C.1999) (“[F]or the trial court to have relied on those facts...