Varnum Props., LLC v. Dist. of Columbia, 16-AA-734

• Decision Date: 14 March 2019
• Docket Number: No. 16-AA-734,16-AA-734
• Citation: 204 A.3d 117
• Parties: VARNUM PROPERTIES, LLC, Petitioner, v. District of Columbia, DEPARTMENT OF CONSUMER AND REGULATORY AFFAIRS, Respondent.
• Court: D.C. Court of Appeals

204 A.3d 117

VARNUM PROPERTIES, LLC, Petitioner,

v.District of Columbia, DEPARTMENT OF CONSUMER AND REGULATORY AFFAIRS, Respondent.

No. 16-AA-734

District of Columbia Court of Appeals.

Submitted March 1, 2018

Decided March 14, 2019

Phillip J. Collins was on the brief for petitioner.

Karl A. Racine, Attorney General for the District of Columbia, Todd S. Kim, Solicitor General at the time the brief was filed, Loren AliKhan, Deputy Solicitor General at the time the brief was filed, and Mary L. Wilson, Senior Assistant Attorney General at the time the brief was filed, were on the brief for respondent.

Before Glickman and Thompson, Associate Judges, and Nebeker, Senior Judge.

Thompson, Associate Judge:

On December 7, 2015, the District of Columbia Department of Consumer and Regulatory Affairs ("DCRA") revoked a building permit (Building Permit No. B1411058, hereafter "the Building Permit") that had been issued to Westend Development LLC ("Westend Development"), the trade name of Varnum Holdings, LLC ("Varnum Holdings"). Thereafter, petitioner Varnum Properties, LLC ("VP") petitioned the Office of Administrative Hearings ("OAH") for review of the DCRA revocation decision. After the OAH Administrative Law Judge ("ALJ") raised sua sponte the issue of whether VP had standing to appeal the revocation decision, VP responded by filing a motion to add Varnum Holdings as an additional petitioner whose participation was "necessary to ‘effectively and completely adjudicate the dispute.’ " In a May 9, 2016, Final Order (the "May 9 Order"), the OAH ALJ denied the motion to add Varnum Holdings as a party and dismissed VP's petition on the ground that VP lacked standing to challenge the revocation.¹ VP sought reconsideration of that ruling, and on July 8, 2016, the OAH ALJ issued an Order Denying Reconsideration of Final Order (the "July 8 Order"). VP now seeks review of the May 9 and July 8 Orders. We reverse and remand.

I.

The Building Permit authorized construction work at 1521 Varnum Street, N.W. (the "Property") (specifically, the conversion of a single family dwelling into two flats).² VP asserts that the "underlying zoning" has been changed since the Building Permit was issued, with the result that "any new permit application for the same project would no longer be permitted." VP further asserts that DCRA's counsel has informed VP that "the only change to the Building Permit that would be considered would be a new application under the revised zoning regulations." According to VP, this means that DCRA will not approve a request by VP to transfer the Building Permit to VP.³

In petitioning for review of the December 7, 2015, notice of revocation of the Building Permit, VP asserted that it was the "successor-in-interest to Varnum Holdings, LLC d/b/a Westend Development." However, in an April 1, 2016, order denying VP's first motion for summary judgment, the ALJ found that there was no record evidence that VP was the owner of the Property and no evidence of VP's standing to appeal the revocation notice. As part of a subsequent, renewed motion for summary adjudication, VP submitted the affidavit of its managing member, Michael Taylor, to support VP's assertion that VP was formerly known as AMT-Varnum, LLC ("AMT-Varnum"); that on or about November 12, 2015 (about three weeks prior to the notice of revocation), AMT-Varnum purchased the Property from Varnum Holdings, d/b/a Westend Development; and that VP therefore "is the current owner of the Property."

The ALJ ruled on VP's renewed motion for summary judgment on April 11, 2016. Citing 12A DCMR § 105.6.4.1 (2015) ("[t]he permit holder may appeal a notice of revocation ... no later than 10 business days after service of written notice of the revocation upon the permit holder[ ]"), the ALJ explained that "[p]etitioner's right to appeal the [n]otice of the proposed revocation is dependent on it being the holder of the permit." The ALJ acknowledged that DCRA, in its opposition to the renewed motion for summary judgment, did not dispute VP's ownership of the Property. What the ALJ found to be decisive, however, was that VP "ha[d] not alleged, let alone proved, that the permit in question was transferred to it by the permit holder." ⁴

The ALJ denied petitioner's renewed motion for summary judgment "since [p]etitioner ha[d] not demonstrated that it ha[d] standing to appeal the [n]otice and is entitled to the relief it request[s] as a matter of law."

Upon that ruling by the ALJ, DCRA on the same day filed a motion to dismiss VP's appeal, echoing the ALJ's finding that VP "ha[d] not established transfer of the permit from the permit holder to petitioner and therefore ... d[id] not have standing" to pursue the appeal from the revocation notice. VP responded the next day (April 12, 2016) by moving to add Varnum Holdings as a party. VP attached to its motion a "Bill of Sale" reflecting that on that same day, it had purchased all of the membership interests in Varnum Holdings.

In the May 9 Order, the ALJ denied VP's motion to add Varnum Holdings as a party. The ALJ reasoned that VP had not shown either that it acquired all the assets of Varnum Holdings, including the Building Permit, or that the Building Permit was properly transferred to it in accordance with 12A DCMR § 105.5.3. The ALJ concluded that because the "legal right to the permit" was not with VP, VP lacked standing to contest the revocation.

VP sought reconsideration of the ALJ's ruling. After a telephonic hearing on July 6, 2016, the ALJ issued the July 8 Order, denying the motion for reconsideration. Construing VP's motion as a motion "to add, or substitute" Varnum Holdings as a party,⁵ the ALJ found that VP had not stated grounds warranting reconsideration under OAH Rule 2828.5 (stating inter alia that an ALJ may change a final order if it "contains an error of law[,]" id. § 2828.5(c) (Apr. 2016). The ALJ reasoned that VP had "not shown how adding, or substituting, Varnum Holdings as a party[ ] would cure the standing issue: namely, by having the appeal brought by the owner of the Property holding in its name the building permit."

The instant petition for review followed. VP's primary contention is that the ALJ abused his discretion in declining to join Varnum Holdings, which VP asserts is "the real party in interest in this matter,"⁶ as a petitioner. VP also argues that the ALJ abused his discretion in dismissing the appeal for VP's lack of standing without the ALJ's having conducted an evidentiary hearing (to the extent one was necessary to test, for example, VP's claim of ownership of the Property and of 100% of the membership interests in Varnum Holdings). VP asserts that the rules of joinder "require[d] that the [ALJ] exercise his discretion to allow the joinder of the entity that owns the [B]uilding [P]ermit[.]" VP seeks a remand for Varnum Holdings to be joined as a party and the appeal to be heard on the merits.

We review an OAH decision to determine if it was "[a]rbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." D.C. Code § 2-510(a)(3)(A) (2012 Repl.).

II.

OAH Rule 2816.1 (2016) provides that "[a]fter proper notice and an opportunity to be heard, an Administrative Law Judge may substitute a person or entity for a named party, or may add parties to a case." The OAH Rules do not prescribe what criteria an ALJ is to use to determine whether to permit the addition or substitution of parties, but OAH Rule 2801.1 (2016) provides that "[w]here these Rules do not address a procedural issue, an Administrative Law Judge may be guided by the District of Columbia Superior Court Rules of Civil Procedure to decide the issue." Further, when one of the Superior Court's "procedural rules is nearly identical to or the functional equivalent of a federal procedural rule, [this court] look[s] to cases interpreting the federal rule for guidance on how to interpret our own." Estate of Patterson v. Sharek , 924 A.2d 1005, 1009-1010 (D.C. 2007) ; see also Springs v. United States , 311 A.2d 499, 500 (D.C. 1973) ("[B]oth the advisory note and the cases interpreting the federal rule provide guidance for the proper interpretation of the Superior Court rule.").

D.C. Super. Ct. R. Civ. P. 17(a) (2016) provides that " [e]very action shall be prosecuted in the name of the real party in interest."⁷ To that end, the Superior Court Rules of Civil Procedure "allow for liberal modification of the pleadings to ensure that the action is prosecuted in the name of the correct party[.]" Jones v. Brooks , 97 A.3d 97, 102 (D.C. 2014). In particular, D.C. Super. Ct. R. Civ. P. 17(a) (2016) states that:

No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest; and such ratification, joinder, or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.

Rule 17(a) is similar to its federal counterpart, FED. R. CIV. P. 17(a)(3), which "is intended to prevent forfeiture when determination of the proper party to sue is difficult or when an understandable mistake has been made" and to "insure against ... injustice." Fed. R. Civ. P. 17 advisory committee's note to 1966 Amendment (observing that "[m]odern decisions are inclined to be lenient when an honest mistake has been made in choosing the party in whose name the action is to be filed"). "The real party in interest is the person holding the substantive right sought to be enforced, and not necessarily the person who will ultimately benefit from the recovery." United States ex rel. Spicer v. Westbrook , 751 F.3d 354, 362 (5th Cir. 2014) (internal quotation marks omitted); see also Gantman v. United Pac. Ins. Co. , 232 Cal.App.3d 1560, 284 Cal.Rptr. 188, 191 (1991) ("Generally, the person possessing the right sued upon...