Howard Town Ctr. Developer, LLC v. Howard Univ.

• Citation: 7 F.Supp.3d 64
• Decision Date: 19 December 2013
• Docket Number: Civil Action No. 13–1075BAH
• Parties: Howard Town Center Developer, LLC, Plaintiff–Counter Defendant, v. Howard University, Defendant–Counter Plaintiff–Third Party Plaintiff v. Castlerock Partners, LLC, Third Party Defendant.
• Court: U.S. District Court — District of Columbia

7 F.Supp.3d 64

Howard Town Center Developer, LLC, Plaintiff–Counter Defendant

v.Howard University, Defendant–Counter Plaintiff–Third Party Plaintiff

v.Castlerock Partners, LLC, Third Party Defendant.

Civil Action No. 13–1075BAH

United States District Court, District of Columbia.

December 19, 2013

Glenn C. Etelson, Shulman, Rogers, Gandal, Pordy & Ecker, Potomac, MD, for Plaintiff–Counter Defendant and Third Party Defendant.

Timothy F. McCormack, Ballard Spahr LLP, Baltimore, MD, for Defendant–Counter Plaintiff–Third Party Plaintiff.

MEMORANDUM OPINION

BERYL A. HOWELL, United States District Judge

For the past five years, the defendant/counter-plaintiff Howard University (“the defendant”) and the plaintiff/counter-defendant (“the plaintiff”) have attempted to develop a parcel of land owned by the defendant across from Howard University Hospital along Georgia Avenue and V Street in northwest Washington, D.C. See Compl. at 1–2, ECF No. 3 ; Def.'s Mem. Supp. Mot. Summ. J., (“Def.'s Mem.”) at 1, ECF No. 23 ; Def.'s MSJ. Ex. 3 (the “Ground Lease”) at D–1–D–2, ECF No. 23–3. Those efforts have broken down, resulting in each party accusing the other of contractual breaches and inequitable conduct. Pending before the Court are five motions: the plaintiff's Motion for Preliminary Injunction (“Pl.'s PI Mot.”) and Supplemental Motion for Preliminary Injunction (“Pl.'s Suppl. PI Mot.”), ECF Nos. 6 and 12;¹ the plaintiff's Amended Motion for Leave to File an Amended Complaint (“Pl.'s Mot. Leave to File”), ECF No. 21 ; the defendant's Motion for Summary Judgment (“Def. 's MSJ”), ECF No. 23 ; and the defendant's Motion for a Hearing (“Def.'s Mot. Hrg.”), ECF No. 36. For the reasons outlined below, the defendant's Motion for Summary Judgment is granted and the remaining motions are denied.

I. BACKGROUND

Although the parties have spilled considerable ink on the background facts and raised numerous legal arguments in this action, the plaintiff is correct that “the main issue [in] this suit is plain–whether [the defendant] improperly terminated agreements with [the plaintiff] before expiration of the applicable cure period for a default ....” Compl. at 2. Thus, only those facts necessary for resolution of this central issue are outlined here. Evaluation of the contractual terms for termination and the length of the applicable cure period requires examination of the key provisions in several agreements governing the parties' transactions.²

A. The Initial Agreements

The defendant and third party defendant CastleRock Partners, LLC (“the TPD”) agreed “to build certain mixed use improvements on property [the TPD] was to lease from [the defendant]” in December, 2008. Statement of Undisputed Material Facts in Supp. Mot. Summ. J. (“SOF”) ¶¶ 2–3.³ This agreement required the TPD “to commence construction within twenty-four (24) months after execution of the agreement, i.e., on or before December 11, 2010, and complete the Mandatory Initial Improvements, as defined in the agreement, within thirty-six (36) months after execution of the agreement, i.e., on or before December 10, 2011.” Id. ¶ 4.

On January 22, 2010, the TPD reached a series of agreements with the defendant that were subsequently assigned to the plaintiff, including a “ground lease for the real property and the terms of a replacement development agreement, with new, extended construction deadlines.” SOF ¶¶ 6; 11. Of those agreements, the three most relevant documents to resolution of the pending motions are (1) the Ground Lease; (2) the Development Agreement, Def.'s MSJ Ex. 4 (“the Development Agreement”), ECF No. 23–4; and (3) and the Amendment to the Development Agreement, Def.'s MSJ Ex. 7 (“Development Amendment”), ECF No. 23–7.⁴ The same day it signed these agreements with the defendant, the TPD assigned all or its rights and obligations to the plaintiff. See Assignment and Assumption of Ground Lease and Development Agreement, Def.'s MSJ Ex. 5 (“the Assignment”), ECF No. 23–5. These three agreements are described in more detail below.

1. The Ground Lease

The first agreement, the Ground Lease, governed the relationship, for a term of ninety-nine years, between the plaintiff and defendant pertaining to the property to be redeveloped. See Ground Lease, generally. Among its many provisions were those pertaining to the rent to be paid, on specific dates, to the defendant. See Ground Lease, Art. 2 § 2.1. Relevant to this action, the plaintiff was required to pay the defendant $525,000 in rent the day the Ground Lease was signed and $1,475,000 on the earlier of “the date on which [the plaintiff] shall make settlement upon a construction loan for the funding of the costs of constructing the Mandatory Project Improvements ... or March 15, 2011.” See id. (requiring payment of $1,475,000 in rent on the “Closing Date”); id. at 2 ¶ e (establishing definition of term “Closing Date”).

The Ground Lease also provided for a “cure period” of ten days “after written notice from [the defendant] to [the plaintiff]” in the event that the plaintiff was “at any time ... in default with respect to any rental payments or other charges payable by [the plaintiff] under” the Ground Lease. Id., Art. 16 § 16.2. If such a default occurred and was not cured, the Ground Lease allowed the defendant “to terminate [the Ground] Lease and to declare the [Ground] Lease term ended and ... [the plaintiff] shall have no further claim thereon or thereunder” subject to the defendant providing notice of its intent to do so. Id., Art. 16 § 16.2(a). That notice was to be in writing and “specifying IN BOLD CONSPICUOUS TYPE, that [the defendant] intends to terminate the [Ground] Lease if the Event of Default is not cured within ten (10) days.” Id., Art. 16 § 16.2. If the plaintiff failed to cure a default on rent payments within ten days, and written notice was provided, the defendant had “the right, at its sole option, thereafter to elect to terminate this [Ground] Lease and all of the rights of [the plaintiff] in or to the Premises, and in such case no additional notice to [the plaintiff] ... or right to cure shall be required except that [the defendant] shall give [the plaintiff] ... written notice of [the defendant's] election to terminate this [Ground] Lease on or before the effective date of such termination.” Id. Notably, for purposes of the relief sought in the defendant's Motion for Summary Judgment, the Ground Lease further provided that the defendant could recover from the plaintiff in damages, inter alia, “the worth at the time of award of any unpaid rent ... that had been earned and is outstanding at the time of such termination” and “the reasonable amount of any costs or expenses incurred by [the defendant] in enforcing its rights under this [Ground] Lease after such default.” Id., Art. 16 §§ 16.4(a, c).

2. The Development Agreement

The second agreement, the Development Agreement, governed the relationship between the plaintiff and the defendant as it pertained to the improvements to be constructed on the land covered by the Ground Lease. See Development Agreement at 1. Specifically, the Development Agreement “set forth their agreements and understandings concerning the planning, development and construction of the Project Improvements.” Id. Among the requirements set forth in the Development Agreement were that: all Project Costs would be borne by the plaintiff, id., Art. III § 3.4; the plaintiff must “commence construction ... in any event not later than March 15, 2011,” id., Art. III § 3.10(a); the development must be substantially complete by March 15, 2013, id., Art. III § 3.10(c)(ii); and payments were to be made to the defendant if certain construction deadlines were not met, id., Art. III § 3.10(c)(iii).

The Development Agreement also defined “Developer Event[s] of Default,” which established what constituted a default by the plaintiff. Two of the events constituting a default by the plaintiff are relevant: first, a default occurred if the plaintiff “fails to pay when due to the [defendant] any amount payable by [the plaintiff] hereunder within twenty (20) days after receipt of written notice of such failure,” id., Art. V § 5.1(g), and, second, a default under the Ground Lease also constituted a default under the Development Agreement, id., Art. V. § 5.1(h). The Development Agreement warranted that “[n]othing contained herein shall be construed to affect any obligations of [the plaintiff] accruing under the [Ground] Lease, including without limitation any provisions of the [Ground] Lease for the commencement or continuation of the obligation to pay any rentals thereunder.” Id., Art. V. § 5.2(a).

Of particular relevance to the instant action is the Development Agreement's § 5.4, which provided that “[i]n the event the Ground Lease shall be terminated for any reason prior to the Project Improvements Substantial Completion Date ... [the plaintiff] ... and the [defendant] ... each shall have the right, at its sole option, to terminate this [Development] Agreement by written notice to the other party.” There is no cure period associated with this provision of the Development Agreement. See id., Art. V. § 5.4. Unlike the Ground Lease, the Development Agreement does not contain any provision requiring payments from the plaintiff to the defendant, except as a penalty for certain defaults. See Development Agreement, Art. III § 3.10(c)(iii).

3. The Development Amendment

Finally, the Development Amendment addressed concerns among the parties as to the potential costs of environmental remediation that might be incurred in developing the property.See Development Amendment, generally. Toward that end, the Development Amendment established extensive and detailed requirements pertaining to how the plaintiff and defendant would prepare an investigation report, id. ¶ 2; prepare a remediation plan, id. ¶ 3; implement the remediation plan, id. ¶ 4; indemnify the defendant, id. ¶ 5; and how the parties would divide the cost of any...