Capitol Services Management Inc. v. Vesta Corporation

• Court: District Court, District of Columbia
• Decided: July 25, 2018
• Docket: Civil Action No. 2017-1756
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ________________________________ ) CAPITOL SERVICES MANAGEMENT, ) ) Plaintiff, ) ) v. ) Civil Action No. 17-1756 (EGS) ) VESTA CORPORATION, ) ) Defendant. ) ________________________________)

MEMORANDUM OPINION AND ORDER

Plaintiff Capitol Services Management, Inc. (“CSMI”) brings

suit against Defendant VESTA Corporation (“Vesta”) for: (1)

intentional interference with business relations; and (2)

tortious interference with a reasonable expectation of

prospective economic advantage. CSMI alleges that Vesta

interfered with its contract to manage an apartment property in

the District of Columbia, causing CSMI to lose the contract.

Pending before the Court is Vesta’s motion to dismiss the

complaint. See ECF No. 6. Upon consideration of the motion, the

response and reply thereto, and the relevant law, the Court

GRANTS Vesta’s motion and DISMISSES CSMI’s complaint.

I. Background

CSMI is a property management corporation located in the

District of Columbia. Compl., ECF No. 1 ¶ 3. Vesta is a property

management corporation located in Connecticut. Id. ¶ 4. At

1 different times, both corporations managed the Park Southern

Apartments, an apartment property located in Southeast District

of Columbia. Id. ¶¶ 3, 8, 9. This property was owned by the Park

Southern Neighborhood Corporation (“PSNC”) under a Deed of Trust

with the District of Columbia, “acting by and through DHCD [the

District of Columbia Department of Housing and Community

Development].” Id. ¶ 5. The Deed of Trust stated that PSNC was

indebted to the District of Columbia for over three million

dollars. Id. ¶ 6. The Deed of Trust required PSNC to repay the

debt with interest and perform certain duties. Id. ¶ 7.

PSNC contracted with Vesta to manage the Park Southern

Apartments. Id. ¶ 8. However, on March 17, 2014, PSNC terminated

the contract because it was “not satisfied” with Vesta’s

services. Id. The same day, PSNC entered into an “exclusive”

management agreement with CSMI. Id. ¶¶ 9, 10. Pursuant to that

agreement, CSMI was to manage the Park Southern Apartment for a

year with the option to continue the contract on a year-to-year

basis thereafter. Id. ¶ 10. If the contract was terminated

without cause within the first year, CSMI would be entitled to

the compensation owed for the time remaining under the contract.

Id. ¶ 12.

Less than a month after PSNC entered into the management

contract with CSMI, DHCD sent PSNC a “notice of default” and

gave PSNC a month to cure the default. Id. ¶ 26. When PSNC did

2 not cure the default by May 2, 2014, DHCD “implemented the

default process.” 1 Id. ¶ 27. The same day, DHCD entered into an

“emergency contract” with Vesta to manage the Park Southern

Apartments. Id. ¶ 28. The emergency contract “authorized Vesta

to take over the management of the Park Southern Apartments on

May 3, 2014 without any notice of termination to CSMI.” Id. ¶

29.

CSMI alleges that Vesta knew about its business relationship

and contractual expectancy, yet interfered with its management

agreement. See id. ¶¶ 36-51. CSMI alleges that Vesta had been in

frequent communication with DHCD regarding DHCD’s “intention to

default” PSNC and remove CSMI as property manager. Id. ¶ 14; see

also id. ¶¶ 15-25. According to CSMI, Vesta told DHCD that it

“was going to continue to manage the property and to provide

(DHCD) whatever assistance we need with respect to the ongoing

condition of the property,” despite having been terminated by

PSNC. Id. ¶¶ 16, 41. CSMI alleges that “its relationship with

PSNC was broken and CSMI lost any income it should have received

for its management services” as a “direct and proximate result

of Vesta performing the management contract.” Id. ¶ 45. CSMI

requests $100,000 in compensatory and economic damages, as well

as punitive damages. Id. ¶¶ 45, 51.

1 It is unclear why PSNC “defaulted” or what the “default process” entailed. 3 II. Standard of Review

A motion to dismiss pursuant to Federal Rule of Civil

Procedure 12(b)(6) tests the legal sufficiency of a complaint.

Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). To

survive a motion to dismiss, a complaint “must contain

sufficient factual matter, accepted as true, to state a claim to

relief that is plausible on its face.” Ashcroft v. Iqbal, 556

U.S. 662, 678 (2009) (internal quotations and citations

omitted). A claim is facially plausible when the facts pled in

the complaint allow the court to “draw the reasonable inference

that the defendant is liable for the misconduct alleged.” Id.

The standard does not amount to a “probability requirement,” but

it does require more than a “sheer possibility that a defendant

has acted unlawfully.” Id.

“[W]hen ruling on a defendant’s motion to dismiss [pursuant

to Rule 12(b)(6)], a judge must accept as true all of the

factual allegations contained in the complaint.” Atherton v.

D.C. Office of the Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009)

(internal quotations and citations omitted). In addition, the

court must give the plaintiff the “benefit of all inferences

that can be derived from the facts alleged.” Kowal v. MCI

Commc’ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). Even so,

“[t]hreadbare recitals of the elements of a cause of action,

4 supported by mere conclusory statements” are not sufficient to

state a claim. Iqbal, 556 U.S. at 678.

III. Analysis

Vesta moves to dismiss CSMI’s complaint pursuant to Federal

Rule of Civil Procedure 12(b)(6). See Def.’s Mot., ECF No. 6. It

makes three arguments: (1) CSMI’s complaint must be dismissed as

time-barred; (2) CSMI is collaterally estopped from bringing its

case against Vesta because the same issues were already

litigated against the District of Columbia in the Superior Court

of the District of Columbia; 2 and (3) CSMI’s complaint must be

dismissed because it fails to state claims of tortious

interference. See id. at 3. 3 Because the Court agrees that CSMI’s

2 CSMI sued the District of Columbia in the Superior Court for the District of Columbia, claiming breach of contract, a breach of the covenant of good faith, tortious interference with contractual relations, and tortious interference with a business opportunity. See Ex. A, ECF No. 6-1 (Civil Case Number 2014-cv- 4551). Judge Mott granted the District of Columbia’s motion for summary judgment, finding that the District of Columbia was entitled to sovereign immunity. See Ex. B, ECF No. 6-1 at 22 (Civil Case Number 2014-cv-4551). Judge Mott also found that “CSMI cannot establish a prima facie case of tortious interference with contractual or business relationship” because “no evidence exists that the District of Columbia actually interfered with CSMI’s contract” because “CSMI voluntarily decided not to enforce its claimed rights under the Management Agreement after DHCD entered the property.” Id. CSMI argues that Judge Mott’s findings related to its tortious interference claim are dicta. Pl.’s Opp’n, ECF No. 9 at 7-8. Because the Court finds that CSMI’s complaint is time-barred, it need not resolve the significance of Judge Mott’s second finding. 3 When citing electronic filings throughout this Opinion, the

Court cites to the ECF page number, not the page number of the filed document. 5 complaint is time-barred, it need not consider Vesta’s

additional arguments.

A. CSMI’s Claims are Time-Barred

Vesta argues that CSMI was aware of its alleged tortious

actions on May 3, 2014—the date that DHCD took control of the

Park Southern Apartments and contracted with Vesta, thereby

terminating CSMI’s contract. Def.’s Mot., ECF No. 6 at 5-7.

Because the statute of limitations for tortious interference

claims is three years under District of Columbia law, Vesta

contends that CSMI’s complaint—filed on August 28, 2017—is time-

barred. Id. at 6 (citing D.C. Code. § 12-301(8)).

It is undisputed that CSMI’s claims are subject to a three-

year statute of limitations pursuant to D.C. Code § 12-301(8).

Pl.’s Opp’n, ECF No. 9 at 4 (“Defendant is correct that the

statute of limitations for tortious interference is three (3)

years.”). At issue, then, is when the three-year statute of

limitations began to run. CSMI contends that the statute of

limitations did not begin to run until it had “actual notice” of

Vesta’s offending conduct, which did not occur until July 14,

2016. Id. at 5. Therefore, CSMI concludes that its August 28,

2017 complaint was timely.

Federal Rule of Civil Procedure 12(b)(6) “is the vehicle

for asserting the affirmative defense of statutory time

limitation.” Peart v. Latham & Watkins LLP, 985 F. Supp. 2d 72,

6 80 (D.D.C. 2013). “[B]ecause statute of limitations issues often

depend on contested questions of fact, dismissal is appropriate

only if the complaint on its face is conclusively time-barred.”

Bregman v. Perles, 747 F.3d 873, 875-76 (D.C. Cir. 2014)

(quoting de Csepel v. Republic of Hungary, 714 F.3d 591, 603

(D.C. Cir. 2013)). “As a general matter, a statute of

limitations begins to run when the cause of action ‘accrues’—

that is, when the plaintiff can file suit and obtain relief.”

Heimeshoff v. Hartford Life & Accident Ins. Co., 571 U.S. 99,

105 (2013)(quotations omitted). “The statute of limitations on a

tort claim ordinarily begins to run when the plaintiff sustains

[the] tortious injury.” Beard v. Edmonson, 790 A.2d 541, 546

(D.C. 2002) (discussing a tortious interference claim under

District of Columbia law). Based on the facts alleged in the

complaint, CSMI was injured on May 3, 2014, when DHCD terminated

CSMI’s management contract due to Vesta’s purported influence

and interference. Compl., ECF No. 1 ¶¶ 29-30, 36-51. Thus, CSMI

should have filed its claim by no later than May 3, 2017.

However, CSMI argues that the discovery rule applies and

thus, its claims are not barred. Pl.’s Opp’n, ECF No. 9 at 4-7.

The discovery rule applies when “the relationship between the

fact of injury and the alleged tortious conduct is obscure.”

Beard, 790 A.2d at 546 (quoting Colbert v. Georgetown Univ., 641

A.2d 469, 472 (D.C.1994) (en banc)). “Under the discovery rule,

7 a claim does not accrue until a plaintiff knows, or by the

exercise of reasonable diligence should know, of (1) an injury,

(2) its cause, and (3) some evidence of wrongdoing.” Bradley v.

Nat’l Ass’n of Secs. Dealers Dispute Resolution, Inc., 433 F.3d

846, 849 (D.C. Cir. 2005).

CSMI alleges that it did not have “actual notice” of the

“predicate facts” until July 14, 2016. Pl.’s Opp’n, ECF No. 9 at

5. On July 14, 2016, CSMI received “considerable evidence” of

Vesta’s alleged tortious interference by way of discovery in the

Superior Court litigation against the District of Columbia. Id.

Prior to discovery, CSMI states that it “had no direct

relationship with Vesta nor any basis to know the depth and

breadth of Vesta’s involvement and communications with the

District.” Id. While the Court must accept CSMI’s factual

allegations as true, the complaint makes clear that CSMI had

“reason to suspect that [Vesta] did some wrong,” Bradley, 433

F.3d at 849, when it was injured in May 2014, long before CSMI

had access to discovery in the Superior Court case. For example,

CSMI knew on May 3, 2014 that DHCD issued an immediate

“emergency contract,” allowing Vesta to manage the Park Southern

Apartments. Compl., ECF No. 1 ¶ 30. Vesta’s “emergency contract”

“inappropriately terminated” CSMI’s property management

agreement and “precluded [CSMI’s] opportunity to bid upon and

continue its contractual management of the property contract.”

8 Id. Furthermore, CSMI alleges that when Vesta began “performing

the management contract” on May 3, 2014, Vesta ended “CSMI’s

relationship with PSNC” and caused CSMI to lose the income that

“it should have received for its management services.” Id. ¶ 45.

It is not necessary that CSMI have “actual notice” of the

full extent of Vesta’s involvement, as CSMI contends. See Pl.’s

Opp’n, ECF No. 9 at 4-5. “Indeed, a right of action may accrue

before the plaintiff becomes aware of all of the relevant

facts.” Hendel v. World Plan Executive Council, 705 A.2d 656,

661 (D.C. 1997). A plaintiff is on “inquiry notice” pursuant to

the discovery rule “when ‘the plaintiff has reason to suspect

that the defendant did some wrong, even if the full extent of

the wrongdoing is not yet known.’” Bradley, 433 F.3d at 849

(quoting Wagner v. Sellinger, 847 A.2d 1151, 1154 (D.C. 2004)).

To that end, CSMI had reason to suspect that Vesta did “some

wrong,” id., when it was the “immediate” recipient of an

“emergency contract” after having been terminated weeks before,

see generally Compl., ECF No. 1. The complaint establishes that

CSMI knew, “or by the exercise of reasonable diligence should

know” that Vesta contributed in some way to its injury. See

Beard, 790 A.2d at 546 (quotations omitted). CSMI “does not have

‘carte blanche to defer legal action indefinitely if [it] knows

or should know that [it] may have suffered injury and that the

9 defendant may have caused [its] harm.’” Id. (quoting Hendel, 705

A.2d at 660-61).

The Court’s conclusion is bolstered by CSMI’s allegations

against the District of Columbia in the Superior Court

litigation. See Civil Case Number 2014-cv-4551 (filed July 24,

2014). In claiming tortious interference against the city, CSMI

alleges that the District of Columbia “collaborated with Vesta

regarding the government’s actions in advance of Defendant’s May

3, [2014] takeover of the property.” Ex. A, ECF No. 6-1 ¶ 18. 4

According to CSMI, DHCD terminated CSMI’s contract in order to

award the emergency management contract to Vesta “because of

political and personal connections on the pretense of an

‘emergency contract’ award.” Id. CSMI also alleged that the

District of Columbia conspired with “non-government private

parties” by entering into an agreement to “sabotage [CSMI’s]

contract and/or business relationship and opportunities in an

unlawful manner.” Id. ¶ 53. Such allegations regarding Vesta’s

and DHCD’s tortious collaboration were made well before CSMI had

access to the 2016 discovery. Compare id., with Pl.’s Opp’n, ECF

No. 9 at 5 (arguing that CSMI required discovery to uncover

4 The Court may take judicial notice of public records on a motion to dismiss. Kaempe v. Myers, 367 F.3d 958, 965 (D.C. Cir. 2004); see also Covad Commc’ns Co. v. Bell Atlantic Corp., 407 F.3d 1220, 1222 (D.C. Cir. 2005) (permitting judicial notice of facts in public records of other proceedings). 10 Vesta’s alleged wrongdoing and as such, CSMI “did not have

notice of the cause . . . [or] actual evidence of Vesta’s

actionable conduct until July 14, 2016”). CSMI does not address

its 2014 allegations that Vesta had collaborated with DHCD to

interfere with CSMI’s management contract, nor does it address

that it made such allegations well before receiving discovery.

The Court finds that CSMI knew or had reason to know about

Vesta’s alleged tortious conduct more than three years before it

filed its claim in this Court. The Court therefore denies CSMI’s

request for “limited discovery on the narrow issue of when CSMI

knew or should have known about Vesta’s tortious conduct.” Pl.’s

Opp’n, ECF No. 9 at 6-7.

IV. Conclusion and Order

The Court finds that CSMI had reason to know of Vesta’s

alleged tortious conduct in May 2014. Because it is undisputed

that the applicable statute of limitations is three years and

CSMI did not file its claim until August 2017, the Court must

GRANT Vesta’s motion to dismiss and DISMISS CSMI’s claims as

time-barred. This is a final, appealable Order.

SO ORDERED.

Signed: Emmet G. Sullivan United States District Judge July 25, 2018