Transmax Prods., LLC v. Swartzberg

• Decision Date: 28 August 2020
• Docket Number: Civil Action No. 1:19-cv-03568-SDG
• Parties: TRANSMAX PRODUCTIONS, LLC, Plaintiff, v. GREG SWARTZBERG and 448 RDA, LLC, Defendants.
• Court: U.S. District Court — Northern District of Georgia

TRANSMAX PRODUCTIONS, LLC, Plaintiff, v. GREG SWARTZBERG and 448 RDA, LLC, Defendants.

Civil Action No. 1:19-cv-03568-SDG

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

August 28, 2020

OPINION AND ORDER

This matter is before the Court on Defendants Greg Swartzberg and 448 RDA, LLC's ("RDA") motion to dismiss [ECF 16]. For the following reasons, Defendants' motion is GRANTED IN PART and DENIED IN PART.

I. BACKGROUND

The following facts are treated as true for the purposes of this motion.¹ Swartzberg is the owner and manager of RDA, a limited liability company organized under the laws of Georgia.² Defendants are collectively the owners ofreal property known as The Railyard—a 16-unit commercial development located in Atlanta, Georgia.³

On August 4, 2008, Plaintiff Transmax Productions, LLC—through its owner Christina Tran—entered into an agreement with Defendants to lease two suites at The Railyard (the "Lease").⁴ The Lease permitted Transmax to operate an events facility and nightclub—known as Rain Night Club and Lounge (the "Business")—at the property.⁵ The original term of the Lease was 36 months, but the parties later executed two amendments extending the Lease an additional 72 months, through July 31, 2017.⁶

In June 2016, Transmax notified Defendants that it intended to sell the Business and would need to assign the Lease to the purchaser.⁷ Section 9 of the Lease provided: "Lessee [i.e., Transmax] shall not, sublease or assign this [L]ease agreement without the prior written consent of the Lessor [i.e., RDA], which shall not be unreasonably withheld or delayed."⁸ Pursuant to this provision,Defendants informed Transmax that they would need to meet and approve any potential buyer.⁹

Between July 2016 and August 2018, Transmax identified six parties—in the form of sole individuals, groups of individuals, and a limited liability company—interested in purchasing the Business and assuming its obligations under the Lease.¹⁰ Despite receiving offers from each potential buyer, Defendants refused to approve assignment of the Lease, under the same terms, to any prospective purchaser.¹¹

On several occasions, Defendants allegedly made derogatory remarks about the potential buyers' race.¹² For instance, Transmax alleges Defendants informed it that they did not want to rent the property to a Black tenant, or a tenant that primarily catered to Black clientele, because Defendants "don't like them" and "straight [B]lack people are ghetto and shoot up places."¹³ Because of Defendants' refusal to approve assignment of the Lease, Transmax could not sell the Business.¹⁴

In June 2018, Transmax alleges Defendants speculated it was attempting to covertly sell the Business to a set of buyers—all of whom were Black—and began harassing and stalking Transmax and its employees.¹⁵ On July 20, 2018, Transmax, through its legal counsel, sent a letter to Defendants informing them that Transmax believed it was a victim of discrimination.¹⁶ In September 2018, Defendants prevented Transmax from hosting a Labor Day party in The Railyard's parking lot, despite previously approving the event in June.¹⁷ Transmax alleges this culminated in Defendants retaliating against it by terminating the Lease and filing a dispossessory action against Transmax.¹⁸

Transmax initiated this action against Defendants on August 7, 2019.¹⁹ On September 23, 2019, Transmax filed its Amended Complaint, asserting nine causes of action against both Defendants.²⁰ In Counts I and II, Transmax asserts claims under 42 U.S.C. § 1981 for the discriminatory and retaliatory refusal to make and enforce contracts (Count I) and § 1982 for the denial of property rights(Count II).²¹ In Counts III-V, Transmax asserts independent breach of contract claims premised on Defendants' alleged failure to approve assignment of the Lease (Count III); failure to extend the Lease (Count IV); and violation of the right of quiet enjoyment and bad faith breach (Count V).²² Counts VI-IX assert state law claims for unjust enrichment (Count VI); fraud (Count VII); tortious interference with contractual relationship (Count VIII); and tortious interference with business relationship (Count IX).²³ On October 3, 2019, Defendants filed the instant motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).²⁴ Transmax filed its response in opposition to Defendants' motion on October 17.²⁵ Defendants filed a reply in support of their motion on October 30.²⁶

II. LEGAL STANDARD

Federal Rule of Civil Procedure 8(a)(2) requires a pleading to contain a "short and plain statement of the claim showing that the pleader is entitled to relief." While this standard does not require "detailed factual allegations," theSupreme Court has held that "labels and conclusions" or "a formulaic recitation of the elements of a cause of action will not do." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

To withstand a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1289 (11th Cir. 2010) (quoting Twombly, 550 U.S. at 570). A complaint is plausible on its face when a plaintiff pleads sufficient factual content for the court to draw the reasonable inference that the defendant is liable for the conduct alleged. Am. Dental Ass'n, 605 F.3d at 1289 (citing Twombly, 550 U.S. at 556). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678. A complaint must also present sufficient facts to "'raise a reasonable expectation that discovery will reveal evidence' of the claim." Am. Dental Ass'n, 605 F.3d at 1289 (quoting Twombly, 550 U.S. at 556).

At the motion to dismiss stage, "all well-pleaded facts are accepted as true, and the reasonable inferences therefrom are construed in the light most favorable to the plaintiff." FindWhat Inv'r Grp. v. FindWhat.com, 658 F.3d 1282, 1296 (11th Cir. 2011) (quoting Garfield v. NDC Health Corp., 466 F.3d 1255, 1261 (11th Cir. 2006)). This principle, however, does not apply to legal conclusions. Iqbal, 556 U.S. at 678.

III. DISCUSSION

Defendants contend each Count in the Amended Complaint must be dismissed as a matter of law. The Court addresses Transmax's claims in turn.

A. Transmax's Constitutional Claims (Counts I and II)

In Counts I and II, Transmax asserts Defendants violated 42 U.S.C. §§ 1981 and 1982, respectively, for interfering with Transmax's ability to sell the Business and assign the Lease by discriminating against the potential buyers because of their race.

Section 1981 addresses racial discrimination in contractual relationships: "All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts . . . as is enjoyed by white citizens." See also Little v. United Techs., Carrier Transicold Div., 103 F.3d 956, 961 (11th Cir. 1997) ("It is well-established that § 1981 is concerned with racial discrimination in the making and enforcement of contracts."). Section 1981 encompasses "all phases and incidents of the contractual relationship." Rivers v. Roadway Exp., Inc., 511 U.S. 298, 302 (1994). Generally, the elements for a cause of action under § 1981 are: "(1) that the plaintiff is a member of a racial minority; (2) that the defendant intended to discriminate on the basis of race; and (3) that the discrimination concerned one or more of the activities enumerated in the statute." Kinnon v. Arcoub, Gopman & Assocs., Inc., 490 F.3d 886, 891 (11th Cir. 2007) (citing Jackson v. BellSouth Telecomms, 372 F.3d 1250, 1270 (11th Cir. 2004)). Section 1982 similarly addresses racial discrimination in property transactions. See id. ("All citizens of the United States shall have the same right, in every State and Territory, as is enjoyed by white citizens thereof to inherit, purchase, lease, sell, hold, and convey real and personal property."). A § 1982 claim arises "when a citizen is not allowed to acquire property . . . because of color." Comcast Corp. v. Nat'l Ass'n of African Am.-Owned Media, 140 S. Ct. 1009, 1016 (2020). See also Long v. Aronov Realty Mgmt., Inc., 645 F. Supp. 2d 1008, 1023-24 (M.D. Ala. 2009) ("[T]he Supreme Court has broadly construed § 1982 to protect not merely the enforceability of property interests acquired by [B]lack citizens but also their right to acquire and use property on an equal basis with white citizens. . . . Section 1982 covers every racially motivated refusal to sell or rent.") (citing City of Memphis v. Greene, 451 U.S. 100, 120 (1981) (emphasis in original)).

Courts construe sections 1981 and 1982 in the same manner. CBOCS W., Inc. v. Humphries, 553 U.S. 442, 448 (2008) ("[T]he Court has construed §§ 1981 and 1982 alike because it has recognized the sister statutes' common language, origin, and purposes. Like § 1981, § 1982 traces its origin to § 1 of the Civil Rights Act of 1866."). The elements of a § 1982 claim are "parallel" to those required for a § 1981 claim: "A plaintiff must show the same first two elements, and interference with the rights or benefits connected with the ownership of property." Long, 645 F. Supp. 2d at 1017 (citing CBOCS, 553 U.S. at 448; Daniels v. Dillard's, Inc., 373 F.3d 885, 887 (8th Cir. 2004); Lawrence v. Courtyards at Deerwood Ass'n, 318 F. Supp. 2d 1133, 1150 (S.D. Fla. 2004)). See also Todd v. Ala. Power, No. CIV.A. 09-0746-WS-N, 2010 WL 749334, at *3 (S.D. Ala. Mar. 1, 2010) ("The three elements Plaintiff must show to state a claim under 42 U.S.C. § 1982, mirror the elements for a cause of action under 42 U.S.C. § 1981, with the exception of the third element. These two statutes are considered 'sister' statutes,...