2217 Flagler Place, LLC v. Toorak Capital Partners, LLC

• Court: District Court, District of Columbia
• Decided: August 26, 2022
• Docket: Civil Action No. 2021-0399
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

2217 FLAGLER PLACE, LLC

Plaintiff, v. Civ. Action No. 21-399 TOORAK CAPITAL PARTNERS, et (EGS) al.,

Defendants.

Plaintiff 2217 Flagler Place, LLC (“Flagler”) brings this

lawsuit against Defendants Toorak Capital Partners, LLC

(“Toorak”) and Flatiron Realty Capital LLC (“Flatiron”)

alleging: (1) Violation of D.C. Act 23-328 against Toorak and

Flatiron; (2) Violation of D.C. Code §28-3301 against Flatiron;

and (3) Unjust enrichment against Toorak and Flatiron.

Pending before the Court is Toorak’s Motion to Dismiss, see

Toorak Mot. to Dismiss, ECF No. 15. Upon careful consideration

of the motion, opposition, reply, the applicable law, and for

the reasons explained below, Toorak’s Motion to Dismiss is

GRANTED.

I. Background

A. Factual

The Court assumes the following facts alleged in the

complaint to be true for the purposes of deciding this motion

and construes them in Flagler’s favor. See Baird v. Gotbaum, 792 F.3d 166, 169 n.2 (D.C. Cir. 2015). This case arises from a

dispute over real estate lending during the COVID-19 Pandemic.

Flagler is a District-based company that purchases real estate.

First Am. Compl. (“FAC”), ECF No. 12 ¶ 2. Toorak is a company

that lends money. Id. ¶ 3. On or around July 12, 2019, Flagler

executed a promissory note secured by mortgage/deed of trust for

2217 Flagler Place in Washington, DC (the “Note”) in the

original principal amount of $892,750.00, with an original

interest rate of 9.85%. Id. ¶¶ 9, 13. The Note was subsequently

sold to Toorak. Id. ¶ 14. On or about July 14, 2020, Defendant

Toorak informed Flagler that the Note was delinquent and was

“currently accruing late charges and default interest.” Id. ¶

15.

On or about August 3, 2020, Flagler informed Toorak that

due to the Covid-19 pandemic, its “business had been crippled”

and asked about a payment extension. Id. ¶ 16. Toorak asked what

length of extension Flagler sought, and Flagler responded with a

request for a three-month extension. Id. Thereafter, Toorak

advised that it would allow an extension only after Flagler

covered the two missed payments that were due on June 1, 2020

and July 1, 2020. Id. ¶ 18. For each of these two payments,

Toorak charged: (1) interest and fees of $7,327.99; (2) default

interest of $10,527, and (3) a late charge of $1,319.04. Id ¶

19.

2 On or about August 28, 2020, Toorak, through counsel,

advised that Flagler was in default under the Note due to

failure to timely make payments under the Note. Id. ¶ 20. Prior

to that notification, on or about August 17, 2020, Toorak sold

the Note to Flatiron, but Flagler did not receive notice from

Flatiron that it held the Note. Id. ¶ 25. On or about August 27,

2020, Special Service America, LLC (“SSA”) wrote to Flagler

informing it that SSA owned the Note and claimed default because

of a missed interest payment on June 1, 2020. Id. ¶ 22. On or

about December 17, 2020, SSA, “apparently on behalf of

Flatiron,” sent Flagler a payoff quote listing the following

alleged debts and fees owed by Flagler: (1) $57,402.59 in

accrued interest; (2) $68,074.67 in accrued default interest;

(3) $500 for a primary servicing fee; (4) $2,2500 [sic] for a

special servicing fee; (5) $750 for legal review; (6) $44,637.50

for late fees, and (7) $695 for a payoff preparation fee. Id. ¶

28.

The default interest reflected in the payoff quote was a

rate of 24% (9.85% + 14.15%) accruing from May 11, 2020, through

December 21, 2020. Id. ¶ 29. From May 11, 2020, through December

21, 2020, a public health emergency period declared by the Mayor

existed. Id. ¶ 30. Flagler paid all interest and fees claimed by

SSA. Id at ¶ 31.

3 B. Procedural

On May 10, 2021, Toorak filed its Motion to Dismiss. See

Toorak Mot. to Dismiss, ECF No. 15. Flagler filed its Opposition

brief on May 24, 2021, see Opp’n, ECF No. 16; and Toorak filed

its Reply brief on June 1, 2021, see Toorak Reply, ECF No. 21.

The motion is ripe and ready for the Court’s adjudication.

II. Standard of Review

A. Rule 12(b)(1)

A motion to dismiss for lack of standing is properly

considered a challenge to the Court's subject matter

jurisdiction and should be reviewed under Federal Rule of Civil

Procedure 12(b)(1). Haase v. Sessions, 835 F.2d 902, 906 (D.C.

Cir. 1987)(“[T]he defect of standing is a defect in subject

matter jurisdiction.”). The Court must therefore consider the

defendant’s motion to dismiss pursuant to Rule 12(b)(1) before

reaching a merits challenge pursuant to Rule 12(b)(6). Sinochem

Int’l Co. v. Malay Int’l Shipping Corp., 549 U.S. 422, 430-31

(2007). To survive a Rule 12(b)(1) motion to dismiss, the

plaintiff bears the burden of establishing jurisdiction by a

preponderance of the evidence. Moran v. U.S. Capitol Police Bd.,

820 F. Supp. 2d 48, 53 (D.D.C. 2011) (citing Lujan v. Defenders

of Wildlife, 504 U.S. 555, 561 (1992)). “Because Rule 12(b)(1)

concerns a court's ability to hear a particular claim, the court

must scrutinize the plaintiff's allegations more closely when

4 considering a motion to dismiss pursuant to Rule 12(b)(1) than

it would under a motion to dismiss pursuant to Rule 12(b)(6).”

Schmidt v. U.S. Capitol Police Bd., 826 F. Supp. 2d 59, 65

(D.D.C. 2011). In so doing, the court must accept as true all of

the factual allegations in the complaint and draw all reasonable

inferences in favor of plaintiffs, but the court need not

“accept inferences unsupported by the facts alleged or legal

conclusions that are cast as factual allegations.” Rann v. Chao,

154 F. Supp. 2d 61, 63 (D.D.C. 2001).

III. Analysis

A. Flagler Lacks Standing to Sue Toorak

“Article III of the Constitution limits the jurisdiction of

the federal courts to ‘Cases’ and ‘Controversies.’” Susan B.

Anthony List v. Driehaus, 134 S. Ct. 2334, 2341 (2014) (quoting

U.S. Const. art. III, § 2). “‘One element of the case-or-

controversy requirement’ is that plaintiffs ‘must establish that

they have standing to sue.’” Clapper v. Amnesty Int’l USA, 568

U.S. 398, 408 (2013) (quoting Raines v. Byrd, 521 U.S. 811, 818

(1997)).

To establish standing, “a plaintiff must show (1) an

‘injury in fact,’ (2) a sufficient ‘causal connection between

the injury and the conduct complained of,’ and (3) a

‘likel[ihood]’ that the injury ‘will be redressed by a favorable

decision.’” Susan B. Anthony List, 134 S. Ct. at 2341 (quoting

5 Lujan, 504 U.S. at 560-61 (1992)); see also Hollingsworth v.

Perry, 570 U.S. 700, 705 (2013) (“To have standing, a litigant

must seek relief for an injury that affects him in a personal

and individual way.”). These requirements help to “assure that

the legal questions presented to the court will be resolved, not

in the rarified atmosphere of a debating society, but in a

concrete factual context conducive to a realistic appreciation

of the consequences of judicial action.” Valley Forge Christian

Coll. v. Ams. United for Separation of Church & State, Inc., 454

U.S. 464, 472 (1982).

“The party invoking federal jurisdiction bears the burden

of establishing these elements.” Lujan, 504 U.S. at 561. “Since

they are not mere pleading requirements but rather an

indispensable part of the plaintiff's case, each element must be

supported in the same way as any other matter on which the

plaintiff bears the burden of proof, i.e., with the manner and

degree of evidence required at the successive stages of the

litigation.” Id.

Toorak argues that Flagler lacks standing to sue on the

ground that Flagler “experienced no injury-in-fact at the hands

of Toorak” because Flagler did not repay the Note until sometime

after December 17, 2020 when Flatiron, not Toorak was the

noteholder. Toorak Mot. to Dismiss, ECF No. 15-1 at 9. Flagler

responds that since Toorak imposed the allegedly unlawful fees,

6 Flagler’s injury is traceable to Toorak even if Toorak did not

collect the fees. See Opp’n, ECF No. 16-1 at 6. Flagler cites no

caselaw in support of this argument. See id.

Flagler has failed to meet its burden of establishing that

it has standing to sue Toorak. As an initial matter, Flagler

provides no legal support for its argument. See Opp’n, ECF No.

16-1 at 6. Flagler’s burden is to allege “a causal connection

between the injury and the conduct complained of—the injury has

to be ‘fairly . . . traceable to the challenged action of the

defendant, and not . . . the result of the independent action of

some third party . . .’” Lujan, 504 U.S. at 560 (1992) (quoting

Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 41-42

(1976)). Here, Flager alleges that it paid SSA certain unlawful

fees and seeks to recover those fees. Specifically, Flagler

alleges that it “ultimately paid all interest and fees claimed

by SSA (apparently on behalf of Defendant Flatiron) for fear of

the further imposition of unlawful fees and interest, and was

financially harmed thereby.” FAC, ECF No. 12 ¶ 31. Flagler has

not alleged that it paid any unlawful fees or interest to

Toorak. See generally id. Flagler has failed to allege a causal

connection between its injury—the payment of the allegedly

unlawful interest and fees—and Toorak. See Lujan, 504 U.S. at

7 560. Accordingly, Toorak’s Motion to Dismiss is GRANTED, and

Toorak is DISMISSED from this action. 1

IV. Conclusion

For the foregoing reasons, Toorak’s Motion to Dismiss, ECF

No. 15, is GRANTED. An appropriate Order accompanies this

Memorandum Opinion.

SO ORDERED.

Signed: Emmet G. Sullivan United States District Judge DATE

1 Since Flagler lacks standing to sue Toorak, the Court need not reach Toorak’s additional arguments in support of dismissal. 8