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

• Decision Date: 14 August 2017
• Docket Number: Civil Action No. 13–1075 (BAH)
• 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

278 F.Supp.3d 333

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. 13–1075 (BAH)

United States District Court, District of Columbia.

Signed August 14, 2017

Kenneth Charles Smurzynski, Masha Godina Hansford, Tanya M. Abrams, Williams & Connolly LLP, Washington, DC, for Plaintiff–Counter Defendant.

Michelle Marie McGeogh, Pro Hac Vice, Timothy F. McCormack Ballard Spahr LLP Baltimore, MD, for Defendant–Counter Plaintiff–Third Party Plaintiff.

MEMORANDUM OPINION SETTING FORTH FINDINGS OF FACT AND CONCLUSIONS OF LAW

BERYL A. HOWELL, Chief Judge

The plaintiff Howard Town Center Developer, LLC, (the "Developer") instituted this lawsuit against the defendant, Howard University (the "University"), over four years ago, on July 15, 2013. The parties' dispute, over which this Court possesses diversity jurisdiction, centers on a parcel of land (the "Property") located in the Shaw neighborhood of Washington, D.C., that was leased by the University to the Developer in January 2010, based on the Developer's contractual obligation to construct improvements at a cost of over $140,000,000. Instead, the Property has remained dormant for nearly eight years. Pending before the Court are the Developer's claim that the University breached its contract with the Developer and the University's claims that the Developer and the third-party defendant, CastleRock Partners, LLC, are in breach of contract. See Pl.'s Amended Complaint, ECF No. 72; Def.'s Counterclaim and Third–Party Complaint, ECF No. 15.¹ During an eight-day-long bench trial, the Court heard evidence on the parties' claims and counterclaims. For the reasons set forth below, the Court concludes that the University has sustained its burden of proof on its breach of contract claims, that judgment must be entered for the University, and that forfeiture is an appropriate remedy.

I. PROCEDURAL BACKGROUND

The parties' allegations, as well as significant issues raised and either resolved or deferred in pre-trial motions, are summarized below.

A. THE PARTIES' CLAIMS

The Developer's operative complaint in this action, Pl.'s Amended Complaint, asserts two counts, amounting to a single claim for relief. Count I claims breach of contract because the Developer "has performed its duties and responsibilities under the agreements," while the University "has breached the terms of the Ground Lease and the Development Agreement by issuing an improper notice of termination and purporting to terminate the Ground Lease" and "has breached the terms of the Term Sheet by refusing to negotiate in good faith over the Second Amendments to the Ground Lease and Development Agreement." Pl.'s Amended Complaint ¶¶ 88–91. In Count II, the Developer seeks declaratory relief, declaring that the Developer "was not and is not in default under the Ground Lease and the Development Agreement," "that no Event of Default occurred," "that [the University's] purported termination ... of June 17, 2013, is null and void," "that delays that result from the historic designation process constitutes an Unavoidable Delay under the Lease," and "that the construction deadlines contemplated by the parties will be shifted by at least the amount of time these proceedings are pending." Id. ¶¶ 95–100. The Developer seeks relief in the form of specific performance of the Term Sheet and "damages, including the lost value of the Lease during the period during which [the University's] actions interfered with [the Developer's] rights," or, alternatively, "damages for the period of the 99–year Ground Lease remaining at the time of breach"; declaratory relief; payment of "all of [the Developer's] costs and expenses, including attorney's fees"; and pre- and post-judgment interest. Id. at 100.

The University's operative counterclaim and third-party complaint in this action alleges one claim of breach of contract each against Howard Town Center Developer, LLC, and the third-party defendant, CastleRock Partners, LLC. As support, the University asserts that the Developer "breached the Ground Lease by failing to pay rent as and when due" and requests judgment in its favor "in the amount of $1,475,000, together with additional interest, attorneys' fees and costs recoverable under the applicable contracts." Def.'s Counterclaim and Third–Party Complaint ¶¶ 44, 47, 51, 54.

B. LITIGATION HISTORY

This case's extensive litigation history includes two memorandum opinions by this Court, as well as a decision of the D.C. Circuit. Upon instituting this action on July 15, 2013, the Developer filed a motion for a temporary restraining order, which motion was denied. See Pl.'s Mot. Temp. Restraining Order, ECF No. 5; Order, dated July 16, 2013, ECF No. 7. The Developer also requested a preliminary injunction. See Pl.'s Mem. Supp. Mot. TRO and/or Prelim. Inj., ECF No. 6–1. With the consent of the University, the Developer requested an extended briefing schedule on its injunction motion, which request this Court granted. See Min. Order, dated July 30, 2013. The University then filed a counterclaim seeking $1,475,000 for the second rental payment, originally due under the lease agreement by March 15, 2011, and moved for summary judgment on October 15, 2013, which motion this Court granted on December 19, 2013, while denying the Developer's motion for injunctive relief. See Order, ECF No. 38. Relevant here, the Court's decision was based in part on (1) the parties' representations that a Term Sheet executed by the parties was "immaterial," an "agreement to agree and not enforceable," Pl.'s & Third–Party Def.'s Mem. P. & A. Opp'n Def.'s Mot. Summ. J. at 7–8 & n.8, ECF No. 31; see Howard Town Ctr. Developer, LLC v. Howard Univ. (HTC I) , 7 F.Supp.3d 64, 72–73 (D.D.C. 2013) ; (2) the conclusion that the parties had agreed that the overdue rental payment was to be made by May 30, 2013, or the parties' relationship would terminate, see HTC I , 7 F.Supp.3d at 73–74 ; and (3) a determination that the University properly terminated the parties' agreements and the Developer's deposit of $1,475,000 on June 19, 2013, in an account held by its third-party agent, Closeline Settlements, did not cure its default, see id. at 80–83. The Court also concluded that in addition to the $1,475,000 payment due to the University, forfeiture of the Developer's rights in the lease was an appropriate remedy. See id. at 83–87.

On appeal, the D.C. Circuit vacated the grant of summary judgment to the University, concluding "[t]here is a genuine dispute whether the Developer was required to pay the University $1,475,000 by May 30, 2013, and, therefore, whether the University was entitled to terminate the Ground Lease and to collect $1,475,000 in damages," and remanded for the Court to determine "whether the Term Sheet is a legally enforceable contract under D.C. law and, if so, how the Term Sheet affects both the Developer's claim ... and the University's counterclaim." Howard Town Ctr. Developer, LLC v. Howard Univ. (HTC II) , 788 F.3d 321, 329–30 (D.C. Cir. 2015). The Circuit declined to address three other arguments raised by the Developer: (1) whether "it was impossible to make the $1,475,000 rental payment in accordance with the terms of the Ground Lease because the parties had terminated the escrow account designated to receive the payment"; (2) whether "the Developer cured the alleged breach by depositing $1,475,000 into an escrow account on June 19, 2013"; and (3) whether "the district court erred by allowing the University to terminate the lease in addition to requiring the Developer to pay rent." Id.

On remand, the parties filed cross-motions for summary judgment, which motions were denied. See Order, dated Jan. 31, 2017, ECF No. 93. Concluding the Term Sheet was a binding preliminary agreement, requiring the parties to fulfill the terms contained in the Term Sheet and negotiate toward the amendments to the Ground Lease and Development Agreement in good faith, the motions nevertheless were denied because the parties' good faith in negotiating presented questions of fact as to which there was a genuine dispute. See Howard Town Ctr. Developer, LLC v. Howard Univ. (HTC III) , No. 13-1075 (BAH), 267 F.Supp.3d 229, 241–43, 2017 WL 421909, at *8–9 (D.D.C. Jan. 31, 2017). The Developer's argument that payment of the $1,475,000 was impossible was also addressed and rejected as a matter of law. See id. at 242–45, 2017 WL 421909 at *9–10. Finally, while dropping its contention that the deposit of funds with its own third-party agent cured any default, the Developer argued on remand that the University's notices to the defendant were insufficient, relying upon the D.C. Circuit's observation that "the Ground Lease provides the University must send two notices to the Developer before it may terminate the lease." HTC II , 788 F.3d at 328. Noting that "the Developer received multiple notices of default over the course of the parties' business relationship," the merits of the Developer's arguments regarding notice were left to be resolved following trial. HTC III , 267 F.Supp.3d at 245, 2017 WL 421909, at *11.

C. BENCH TRIAL

Over the course of the eight-day bench trial, the Developer presented the testimony of eight witnesses: Ronald Cohen, Manager of Howard Town Center Developer, LLC; Dr. Sidney Ribeau, Ph.D., former President of Howard University; Steven Callcott, Deputy Historic Preservation Office for the District of Columbia; Robert Tarola, former Chief Financial Officer of Howard University; Eric Siegel, Vice Manager of Howard Town Center Developer, LLC; Kurt Schmoke, former General Counsel and Vice President of Governmental Affairs for Howard University; Fabrice Vasques, Managing Director of Phillips Realty Capital; and Dennis Duffy, Certified General Real Estate Appraiser, testifying as an expert on damages. The University also called eight...