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DISTRICT OF COLUMBIA COURT OF APPEALS
Nos. 23-CV-0516 & 23-CV-0775
DCA CAPITOL HILL LTAC, LLC, et al., APPELLANTS,
v.
CAPITOL HILL GROUP, APPELLEE.
Appeal from the Superior Court of the District of Columbia (2015-CA-008166-B)
(Hon. John M. Campbell, Trial Judge) (Hon. Juliet J. McKenna, Motions Judge)
(Argued October 31, 2024 Decided March 6, 2025)
Michael J. Edney, with whom Mark Oakes was on the brief, for appellants.
Stephen M. Shepard, with whom Lexie G. White, Halley W. Josephs, and Christopher A. Glaser were on the brief, for appellee.
Before BECKWITH and SHANKER, Associate Judges, and RUIZ, Senior Judge.
SHANKER, Associate Judge: Appellants DCA Capitol Hill LTAC, LLC and
DCA Capitol Hill SNF, LLC (collectively, “DCA”) leased from appellee Capitol
Hill Group (“CHG”) a property in Northeast Washington, DC, for purposes of
operating a long-term acute care hospital and skilled nursing facility. In 2015, DCA
began withholding rent payments to CHG on the ground that DCA was unsatisfied 2
with CHG’s installation of a new heating, ventilation, and air conditioning
(“HVAC”) system and a new generator in the building. CHG sued in Superior Court,
claiming breach of contract by DCA, and DCA brought counterclaims for
declaratory relief, breach of contract, and fraud. DCA’s fraud counterclaims alleged
four misrepresentations made before it signed the lease and one misrepresentation
in the lease itself.
Before trial, the trial court granted summary judgment to CHG on the portions
of DCA’s fraud counterclaims pertaining to pre-lease-signing representations, on the
ground that those allegations failed as a matter of law due to integration clauses in
the lease. After a bench trial, the court entered judgment for CHG on CHG’s
breach-of-contract claim, DCA’s breach-of-contract counterclaim, and the portions
of DCA’s fraud counterclaims alleging a misrepresentation in the lease. The trial
court then awarded CHG its attorneys’ fees based on an attorneys’ fee provision in
the lease.
DCA now challenges all of those rulings. First, DCA asserts that the trial
court erred in granting CHG summary judgment on the aspects of DCA’s fraud
claims alleging misrepresentations before DCA entered into the lease because those
claims were not foreclosed by the lease’s integration clauses. Second, DCA
contends that it properly withheld rent from CHG pursuant to a lease provision 3
allowing DCA to withhold rent based on objections to the HVAC system and
generator work. Third, DCA argues that the trial court abused its discretion in
awarding CHG its attorneys’ fees because CHG did not prevail on its
damage-calculation theory, resulting in a lower damages award than CHG had
sought.
We affirm. We hold that DCA’s fraud claims alleging pre-lease-signing
misrepresentations that induced entry into the lease fail as a matter of law because
DCA’s reliance on any alleged misrepresentations was unreasonable. We then
conclude that DCA breached the lease by withholding rent because its objections to
the HVAC system and generator work pertained to issues outside the scope of the
work as both parties understood it; for the same reason, the trial court correctly
denied DCA’s fraud claims to the extent they alleged a within-lease
misrepresentation about the HVAC and generator work. Finally, we hold that the
trial court did not abuse its discretion in awarding CHG its attorneys’ fees, as CHG
was the prevailing party entitled to attorneys’ fees under the lease. We remand to
the trial court so that it can consider whether to award CHG attorneys’ fees
associated with this appeal. 4
I. Background
We begin with the relevant pre-lease conduct, which is pertinent to DCA’s
fraud claims and construction of the disputed lease terms. We then detail the
applicable lease provisions and recount the parties’ conduct after they entered into
the lease. Finally, we provide an overview of the procedural background, including
summary judgment, the post-bench trial findings of fact and conclusions of law, and
the attorneys’ fees award.
A. Pre-Lease Conduct
Certain matters relevant to this dispute arose between CHG and the property’s
previous tenant, Specialty Hospital of Washington. During Specialty Hospital’s
lease, CHG began replacing the hospital’s HVAC system and contracted with
Specialty Hospital to that end.
1. CHG plans to replace the HVAC system
When CHG bought the building located at 700 Constitution Avenue, NE, it
planned to develop half of the building into apartments, while the other half would
continue operating as a hospital. This plan had an unavoidable complication: the
building’s HVAC system—three gas-fired boilers, two chillers, and two water
pumps—was located in the apartment parcel’s basement. CHG needed to 5
“decouple[ ]” the HVAC system so that each building parcel would have its own
HVAC system.
In August 2013, CHG leased the apartment parcel to 700 LLC, which would
develop the apartments. At that time, Specialty Hospital was the tenant in the
hospital parcel, so CHG amended its original lease with Specialty Hospital to reflect
the apartment development’s impact on the HVAC system. The amendment stated
that CHG “shall cause to be installed a new HVAC system” in the hospital parcel
“serving only” the hospital parcel. The new HVAC system was described as the
“New Systems” and defined by “Rider A.” Rider A defined the new systems as a
list of seven components, including, among other things, a “[g]as-fired sectional or
fin-tube boiler(s),” “[a]ir cooled chillers,” “circulation pumps,” and “[p]iping and
fittings for proper operation and connection to the existing distribution system.”
CHG was responsible for installing these new components, but Specialty Hospital
would reimburse CHG through increased rent.
Along with the lease amendment, CHG and Specialty Hospital established an
easement through a Declaration of Temporary Easements and Agreement. The
easement agreement gave the apartment developer (700 LLC) a right of access to
install the new HVAC components in the hospital parcel’s basement. Construction 6
on the new system began shortly after the lease amendment and easement agreement
were executed in August 2013.
2. Lease negotiations
In early 2014, Specialty Hospital was facing bankruptcy. After learning of
Specialty Hospital’s financial distress, Silver Point Capital, LLC (which owns
DCA’s parent company, BridgePoint HealthCare, LLC) began discussions with
Specialty Hospital to buy its assets in bankruptcy. Silver Point also began
negotiations with CHG for Silver Point to assume Specialty Hospital’s lease for the
hospital property. In connection with these negotiations, Silver Point began a due
diligence investigation, which included touring the hospital property and learning
about the ongoing construction for the new HVAC system project. During those
tours, Silver Point representatives were sometimes accompanied by Specialty
Hospital executives and other times by CHG’s personnel. Specialty Hospital’s CEO
testified that these tours included discussions about the hospital’s outdated air
distribution system, which needed to be replaced and would not be replaced by
Specialty Hospital or CHG.
By April 2014, CHG and Silver Point began negotiating the terms of a
landlord sale support agreement term sheet. That term sheet was a preliminary
agreement that “lock[ed] up” CHG’s support for Silver Point’s bid in Specialty 7
Hospital’s bankruptcy proceedings. The term sheet included a $4.5 million payment
to CHG to cure the debts that Specialty Hospital owed CHG and committed DCA
and CHG to signing a new lease. The term sheet’s provision relating to the $4.5
million cure payment does not refer to the HVAC system.
At trial, CHG’s founder explained that during the term sheet negotiations,
CHG clarified that the HVAC system project involved replacing only the HVAC
equipment that was located in the apartment parcel, to decouple the two parts of the
building. Also, before signing the term sheet, Silver Point received the lease
between Specialty Hospital and CHG, including the lease’s HVAC-system
amendment and Rider A to that amendment.
After CHG and Silver Point signed the term sheet, CHG sent Silver Point the
easement agreement, which described the scope of the HVAC work. CHG also took
a Silver Point executive on an in-depth tour of the hospital building, pointing out
problems with various components of the building’s air distribution system. During
negotiations over the lease with CHG, Silver Point considered inserting language
that required the new HVAC systems to “work with [the hospital’s] existing
systems,” but that language was not included in the final signed lease. 8
3. Fraud allegations
DCA alleges that, during the lease negotiations, CHG represented that the new
HVAC system for the hospital was costing it more than $5 million and was “state of
the art.” According to DCA, CHG’s HVAC-related costs were capped at $2.7
million based on CHG’s agreement with the apartment developer, which it had
entered into before its representations to DCA. After the representations by CHG,
DCA agreed to the term sheet, which provided for the $4.5 million cure payment to
CHG described above.
4. CHG installs a new generator and new HVAC system
While lease negotiations were ongoing and the HVAC system was being
decoupled, CHG also conducted work on one of the hospital’s generators. The
hospital had three generators to provide backup power in case of a general power
failure. Two of the generators, known as Generators #3 and #4, were not moved or
replaced. The third generator, Generator #5, was new and was installed in the
hospital by CHG. Before DCA and CHG signed the lease in mid-December 2014,
CHG sought reimbursement of the “generator costs” from DCA. DCA reimbursed
the cost for Generator #5 at closing. 9
CHG also installed a new HVAC system in the hospital parcel consisting of
three gas-fired boilers, two chillers, and two water pumps. CHG did not, however,
replace the existing distribution components that connected the new HVAC system
throughout the hospital parcel.
B. The Lease
At the end of 2014, CHG and DCA signed a lease agreement. The lease
explains that, as part of Specialty Hospital’s bankruptcy proceedings, Specialty
Hospital would assign the original lease (between it and CHG) to DCA. DCA, in
turn, “desire[d] to continue leasing” the hospital parcel from CHG, on the amended
and restated terms of the lease. This appeal primarily involves one lease term—
section 8.4—but three other sections of the lease merit discussion.
1. Section 8.4: New HVAC system & generator work
Section 8.4 describes four “construction projects” that CHG had “already
begun” when the lease was signed. Two of those projects are at issue here—the new
HVAC system and the generator work. Specifically, it was “agreed and understood
by the parties” that CHG “has installed a new HVAC system within the [b]uilding.”
The HVAC system was at CHG’s “sole expense.” For the generator work, section
8.4 explains that CHG “has caused” the hospital parcel “to be served by the repair 10
and relocation of generators that [CHG] has caused to be installed, in the [hospital
parcel] in tandem with the installation of the new HVAC.” Unlike with the HVAC
system, section 8.4 states that DCA “shall reimburse” CHG “for the [g]enerator
[w]ork.”
The new HVAC system and generator work are described as
backward-looking statements of what had already happened—“has installed” and
“has caused.” These backward-looking statements contrast with the
forward-looking, promise-type language for the other two construction projects
described in section 8.4. For those two projects, CHG was to “construct a ramp and
awning” and “construct the auditorium.”
Under section 8.4, with respect to the HVAC system and the generator, DCA
was to “provide its acceptance of such installation or notify [CHG], in writing, of
any matters” to which DCA “objects in connection with such installation, no later
than the ninetieth (90th) day following” the lease’s execution. If DCA objected,
CHG could either dispute the matters to which DCA objected or “use commercially
reasonable efforts to correct” the matters. If CHG failed to dispute or correct the
matters, DCA could “correct such matters” and then withhold from its rent the costs
of correction. 11
Section 8.4 is an exception to section 8.1, which states that DCA accepts the
property in its “AS-IS, WHERE-IS, WITH ALL FAULTS condition, without
representation or warranty of any kind,” unless a lease provision stated otherwise.
Similarly, section 8.1 states that CHG “is under no obligation to make” any additions
or improvements to the property. Also, section 8.4’s rent-withholding provision is
an exception to section 14.4, which states that if “at any time during” the lease term,
DCA has “a claim against” CHG, DCA “shall not have the right to deduct the amount
allegedly owed to [it] from any rent or other sums payable to [CHG].”
2. Incorporated easement
The lease incorporated by reference the easement agreement between
Specialty Hospital and CHG. The easement agreement defines the term “New
HVAC and Generator System” as “the new mechanical and generator equipment and
system . . . generally conforming to the project scope” defined in an Exhibit D. 1
Exhibit D defines “[i]n general the HVAC system” with a list of seven components,
such as a “[g]as-fired sectional or fin-tube boiler(s),” “[a]ir cooled chillers,”
1 DCA points out that CHG omitted Exhibit D as an attachment when it sent the lease to DCA. The trial court, however, found that the easement agreement was recorded with the D.C. Recorder of Deeds and was “readily available” to DCA throughout its lease negotiations with CHG. The court concluded that it was “virtually impossible to believe” that DCA was not aware of Exhibit D before signing the lease. 12
circulation pumps, and piping and fittings “for proper operation and connection to
the existing distribution system.”
3. Integration clauses
The lease contains two integration clauses. These clauses state that DCA is
not relying on any prior oral or written representations by CHG and that the lease
supersedes all prior agreements, negotiations, and discussions between the parties.
4. Attorneys’ fees provision
The lease also contains an attorneys’ fees provision. That provision states:
If [CHG or DCA] is required or elects to take legal action against the other party to enforce the provisions of this Lease and a judgment is rendered in such action by a court of competent jurisdiction, then the prevailing party in such action shall be entitled to collect from the other party its reasonable costs and expenses in connection with such legal action (including reasonable attorneys’ fees and court costs).
C. Post-Lease Conduct
Under the lease’s section 8.4, DCA was obligated to either accept the
installation of the new HVAC system and generator work or notify CHG “of any
matters to which [DCA] objects in connection with such installation.” The lease
provided DCA with ninety days to make its decision to accept the HVAC system
and generator work or object. 13
Within the applicable ninety-day period, DCA expressed that it was “unable
to accept the Generator and HVAC projects at this time” because it was still
investigating the working condition of the units. Before DCA sent this notice, it
reported to CHG that Generator #5 was having mechanical issues, which it reiterated
in its notice. CHG arranged for Generator #5 to be fixed at no cost to DCA. Later,
DCA encountered problems with the two older generators (Generators #3 and #4).
But in various communications, DCA indicated that Generators #3 and #4 were its
responsibility to repair. With respect to the HVAC system, DCA asserted that it had
been unable to run certain tests due to cold weather.
Almost six months after stating that it was “unable” at that time to “accept”
the new HVAC system, DCA sent a letter to CHG complaining about issues with
the hospital’s HVAC distribution components, including the air handler units and
fan coil units. This was the first time that DCA expressed its position that the “new
HVAC system” included replacement of the distribution components.
Based on the issues with Generators #3 and #4 and the HVAC distribution
components, DCA began withholding rent. It withheld over $1.2 million—including
just over $53,000 for HVAC-related expenses and $131,000 for renting temporary
backup generators. 14
D. Procedural History
CHG filed this lawsuit against DCA in Superior Court. CHG alleged that
DCA breached the lease by improperly withholding rent. DCA answered that it was
entitled to withhold rent under the lease agreement based on CHG’s failure to replace
the HVAC distribution components. DCA also counterclaimed for declaratory
relief, breach of contract, and fraud. The breach-of-contract claim was based on
CHG’s alleged failure to upgrade all components (including the distribution
components) of the HVAC system. DCA presented two fraud-related
counterclaims—fraudulent misrepresentation and fraud against DCA and the
bankruptcy estate—but the counts were identical. The counts alleged five
misrepresentations by CHG, four of which were made before DCA signed the lease
and one of which (about the HVAC and generator work that had already been done)
was in the lease. DCA ultimately withdrew the counterclaim alleging fraud against
DCA and the bankruptcy estate, at least to the extent it alleged fraud against the
bankruptcy estate.
1. Summary judgment
After DCA unsuccessfully sought to remove the case to federal bankruptcy
court, the parties cross-moved for summary judgment on several claims. As relevant
here, CHG moved for summary judgment on DCA’s fraud-related claims, which 15
were premised on CHG’s alleged misrepresentations about the cost of the HVAC
work. CHG argued that those claims failed as a matter of law based on the lease’s
integration clauses.
At a hearing, the trial court indicated that it would “be concluding that the
integration clauses in the contract do take care of and eliminate any arguments about
fraud in the inducement given the sophistication of the parties” and “the detail in
those clauses,” and that it would “be granting summary judgment to [CHG] on that
fraud claim.” The trial court reiterated this conclusion just before trial started, noting
that it had previously ruled that “the fraud counterclaims based on alleged
misrepresentations before the lease was signed in December of 2014” were “handled
by the integration clauses in the contract” and that “the fraud counterclaim, at least
as it pertains to misrepresentations before the lease was signed, is out of the case as
a matter of law” and “handled by the integration clauses in the contract.” It appears
that the trial court declined to rule as a matter of law on the aspect of DCA’s fraud
claims relating to the representation in the lease itself about the HVAC and generator
work. 2
2 Although the trial court made clear just before trial that portions of DCA’s fraud claims were out of the case as a matter of law, it did not enter a separate summary judgment order as to those portions of the claims and instead denied the counterclaims in their entirety in its final judgment after trial. 16
2. Bench trial
The trial court held a five-day bench trial on the breach-of-contract claims and
the remaining aspect of DCA’s fraudulent misrepresentation claim. The court
admitted approximately 125 exhibits and heard testimony from twelve witnesses—
five for CHG and seven for DCA. Trial testimony revolved around whether CHG
fulfilled its obligation to install a “new HVAC system” when it installed new
gas-fired boilers, chillers, and water pumps, or if it was also obligated to replace the
existing distribution components. If the “new HVAC system” did not encompass
the distribution components, then DCA had breached by improperly withholding
rent based on complaints about those components. DCA also raised, for the first
time, 3 that CHG was responsible for all three generators, including Generators #3
and #4. Because CHG had replaced only Generator #5, DCA argued that CHG had
not fulfilled its obligation to complete the required generator work.
Over three years after the bench trial concluded, the trial court ruled in CHG’s
favor on every claim and counterclaim. In findings of fact and conclusions of law,
the court noted that the lease did not contemplate a future installation of a “new
HVAC system” but rather said that CHG had already installed the system, and that
“[a]s used and as understood by the parties, this phrase did not include the air
3 DCA referenced only a single (“a” or “the”) generator in its counterclaims. 17
distribution components . . . .” The court observed that DCA knew or should have
known what CHG had and had not installed, both from its visual inspections and the
relevant documents. Similarly, the trial court found that CHG had fulfilled its
generator-related obligation under section 8.4 by installing a new generator—
Generator #5. The court emphasized that DCA had effectively acknowledged that
Generators #3 and #4 were its responsibility to repair.
The trial court reiterated in its findings of fact and conclusions of law that
DCA’s fraud claims related to misrepresentations before DCA entered into the lease
were “barred by the lease’s integration clauses,” adding that “the parties here were
sophisticated players.” The court then denied the remaining aspects of DCA’s fraud
claims—alleging a misrepresentation in the lease itself—for the same reasons the
court ruled in CHG’s favor on the contract claims:
The evidence at trial was overwhelming that the HVAC project was effectively defined in documents attached to or referenced in the final lease; that Silver Point representatives had actual notice of the scope of the new HVAC project; that Silver Point had ample opportunity, and every incentive, to conduct an independent investigation into the scope and cost of the HVAC system project; and that CHG did not have exclusive access to this information.
The trial court also concluded that the lease provided for late fees and interest,
and that the late charges were to be calculated monthly, on the entire amount due, 18
including on previously accumulated late charges. And the court determined that
CHG was “the prevailing party” in the lawsuit and was entitled to reasonable
attorneys’ fees.
3. Post-trial motions
DCA moved for reconsideration of the court’s late-fees and interest
determination. The trial court granted the motion to reconsider, concluding that
CHG was entitled to only a single late fee and that interest accrues only on the late
fee. Accordingly, the court reduced the late fees and interest owed from $4,484,000
to $1,002,943, and declined to impose over $57 million in penalty payments, as
requested by CHG. The trial court also granted CHG’s motion for attorneys’ fees,
expenses, and costs, totaling roughly $2.7 million.
DCA moved to alter or amend the attorneys’ fee order. DCA argued that
CHG’s attorneys’ fee award should be reduced because CHG did not prevail on its
damages calculation. The trial court denied reconsideration of the attorneys’ fee
award, explaining:
The fact that [DCA] prevailed on a post-trial sub-issue concerning the proper calculation of late fees and interest does not dictate a reduction of the fee award, particularly where, as here, the litigation on this issue consumed a relatively insignificant amount of attorney time over the almost eight-year lifespan of this case and was related to 19
the claims on which [CHG] prevailed, namely [DCA’s] breach of the lease agreement by withholding rent.
II. Analysis
On appeal, DCA argues first that the trial court improperly granted summary
judgment against it on the pre-lease-signing aspects of its fraud-related
counterclaims because those claims were not barred by the lease’s integration
clauses. Second, DCA argues that the trial court incorrectly interpreted the phrases
“new HVAC system” and “generator work” in the lease. Third, DCA asserts that
the trial court abused its discretion in awarding CHG the full amount of its requested
attorneys’ fees and costs. We address each argument in turn.
A. Summary Judgment on Aspects of DCA’s Fraud-Related Counterclaims
DCA’s fraud-related counterclaims (fraudulent misrepresentation and fraud
against DCA, with DCA having withdrawn the claim of fraud against the bankruptcy
estate) rested on the allegation that CHG represented that it was spending $5 million
to repair the HVAC system when CHG’s costs were in fact capped at $2.7 million.
According to DCA, CHG’s misrepresentation about the cost and its assertion that
the system was “state of the art” drove DCA to “make a $4.5 million payment” to
CHG as part of the term sheet. DCA alleged five misrepresentations, four of which
CHG allegedly made before entry into the lease and one of which was in the lease. 20
The trial court granted CHG summary judgment only as to “misrepresentations
before the lease was signed,” based on the lease’s integration clauses. 4 We find no
error.
1. Standard of review
“We review a grant of summary judgment de novo and apply the same
standard used by the trial court.” Nixon v. Ippolito, 320 A.3d 1059, 1064 (D.C.
2024). “Under this standard, the moving party has the burden of demonstrating that
there is no genuine issue of material fact, after the evidence and all inferences from
the evidence are drawn in favor of the non-moving party.” Id. (quoting Mancuso v.
Chapel Valley Landscape Co., 318 A.3d 547, 553 (D.C. 2024)). Our role is not to
resolve factual issues as factfinder, “but rather to review the record to determine if
there is a genuine issue of material fact on which a jury could find for the
non-moving party.” Id. (quoting Mancuso, 318 A.3d at 553).
DCA’s fifth alleged misrepresentation was in the lease itself; integration 4
clauses in the lease thus had no bearing on DCA’s reliance on the misrepresentation. That alleged misrepresentation, about what the HVAC and generator work entailed, was tied up with the contractual claims, which is presumably why the trial court ruled on it after trial. 21
2. Discussion
“We have time and again imposed a ‘very high standard’ on sophisticated
business entities” bringing fraud claims related to “arms-length transactions.” See
Wash. Inv. Partners of Del., LLC v. Sec. House, K.S.C.C., 28 A.3d 566, 575-76 (D.C.
2011) (footnote omitted) (quoting Hercules & Co. v. Shama Rest. Corp., 613 A.2d
916, 931-33 (D.C. 1992)). It is “fundamental that in ‘a business transaction between
two sophisticated entities involving substantial sums,’ as was this transaction,
‘parties are bound by what they sign.’” Id. at 576 (quoting GLM P’ship v. Hartford
Cas. Ins. Co., 753 A.2d 995, 999 (D.C. 2000)). Our decisions make clear that to
prevail, DCA must establish that CHG made (1) a false representation (2) in
reference to a material fact, (3) with knowledge of its falsity and (4) with the intent
to deceive, and that (5) an action was taken in reliance upon the representation.
Drake v. McNair, 993 A.2d 607, 622 (D.C. 2010). DCA’s fraud claims allege that
the fifth element—the action that DCA took in reliance on CHG’s alleged fraud and
misrepresentations—was entering the term sheet and lease, thus essentially alleging
fraud in the inducement of those contracts. Because those fraud claims involve a
commercial contract negotiated at arm’s length, there is a sixth element: “(6) that the
defrauded party’s reliance [was] reasonable.” Id. (quoting Hercules, 613 A.2d at
923). 22
DCA’s fraud claims turn on this sixth element—reasonable reliance. In the
trial court’s view, DCA’s reliance on CHG’s representation that the HVAC system
was “state of the art” and cost $5 million was unreasonable because that
representation did not appear in the lease, which contained two integration clauses.
We have held that “an integration clause does not provide a blanket exception to
claims of fraud in the inducement.” Id. at 624. That is because such a rule would
“leave swindlers free to extinguish their victims’ remedies simply by sticking in a
bit of boilerplate.” Id. (quoting Whelan v. Abell, 48 F.3d 1247, 1258 (D.C. Cir.
1995)). But that does not mean that integration clauses are irrelevant when
determining whether a party reasonably relied on a false representation. Instead,
when “a written contract contains an incorporation clause, any alleged prior
representations that a party will or will not do something in the future that are not
included in that written contract generally do not support a fraud-in-the-inducement
claim.” Id. On the other hand, when the representations “conceal prior fraudulent
conduct,” a fraud claim may survive in the face of an integration clause. See id.
CHG’s alleged misrepresentations—about how much it was spending on the
HVAC system and the system being “state of the art”—were arguably
representations about prior fraudulent conduct. But our analysis does not end there.
We are mindful that in this case, “[b]oth parties were represented by counsel, and
‘[e]ach side presumably had the opportunity to make a variety of representations, 23
promises, and offers . . . [and] could have conditioned its agreement on the explicit
inclusion of those representations in the contract.’” Wash. Inv. Partners, 28 A.3d at
575-76 (alterations in original) (quoting Hercules, 613 A.2d at 923). If DCA
considered the $5 million and “state of the art” assurances “important enough to
induce it to agree to the contract,” it could have conditioned its agreement on those
assurances being included in the term sheet and lease. Hercules, 613 A.2d at 932.
Given these circumstances, on the undisputed facts (including those reflecting
extensive pre-lease discussions and negotiations), DCA cannot show that it
reasonably relied on CHG’s allegedly false representations. We hold that the pre-
lease-signing aspects DCA’s fraud-related claims fail as a matter of law and
therefore affirm the trial court’s grant of summary judgment.
B. Breach of Contract and Remaining Aspect of DCA’s Fraud-Related Counterclaims
Both parties’ contract claims—CHG’s claim that DCA breached the lease by
improperly withholding rent and DCA’s claim that CHG breached the lease by
failing to meet its obligations—as well as DCA’s fraud claims related to lease
section 8.4 turn on whether the “new HVAC system” included distribution
components and whether “generator work” included replacement of all three
generators. 24
After a bench trial, we review a trial court’s factual findings for clear error
and its legal conclusions de novo. Caesar v. Westchester Corp., 280 A.3d 176, 190
(D.C. 2022). “The proper interpretation of a contract term is a question of law,”
which we review de novo. BSA 77 P St. LLC v. Hawkins, 983 A.2d 988, 993 (D.C.
2009). 5
5 DCA argues that the “three-and-a-half years between trial and verdict rebuts any deference the trial court might receive for any factual aspects and counsels full de novo review on the record.” We disagree. Although refined through common- law reasoning, our scope of review is statutory under D.C. Code § 17-305(a). That statute states that in reviewing a judgment after a bench trial, we review both “the facts and the law,” but only set aside a factual finding that is “plainly wrong or without evidence to support it.” D.C. Code § 17-305(a). There is no statutory exception to that standard of review when a trial court delays a verdict after a bench trial. DCA cites no binding authority for the proposition that an extended decision- making delay warrants de novo review. Instead, DCA cites two federal appellate decisions: Keller v. United States, 38 F.3d 16, 21-22 (1st Cir. 1994), and Hollis v. United States, 323 F.3d 330, 338 (5th Cir. 2003). But Keller and Hollis both involved much longer delays (eight and thirteen years, respectively). Keller, 38 F.3d at 21-22; Hollis, 323 F.3d at 338. In Keller, the court opted for “careful de novo scrutiny” so that it could determine whether the “prolonged delay in reaching a decision rendered the trial court’s findings of fact unreliable.” Keller, 38 F.3d at 21. But in Hollis, the court declined to review the record de novo. Hollis, 323 F.3d at 338. We similarly decline to read into the statute establishing our standard of review an unwritten exception for delayed trial court decisions. 25
We construe leases of real property under established principles of contract
law. 2301 M St. Coop. Assoc. v. Chromium LLC, 209 A.3d 82, 86 (D.C. 2019) (per
curiam). We first assess the contract’s plain language, giving reasonable effect to
the contract’s parts and avoiding an interpretation that would render any part of it
meaningless or incompatible with the contract as a whole. Rose’s 1, LLC v. Erie Ins.
Exch., 290 A.3d 52, 60 (D.C. 2023). We analyze disputed terms in light of “what a
reasonable person in the position of the parties would have thought the disputed
language meant.” BSA 77 P St., 983 A.2d at 993 (quoting 1010 Potomac Assocs. v.
Grocery Mfrs., 485 A.2d 199, 205 (D.C. 1984)); Carome v. Carome, 293 A.3d 1122,
1127 (D.C. 2023). Our endeavor to “ascertain what a reasonable person in the
position of the parties would have thought the words of a contract meant applies
whether the language is ambiguous or not.” Akassy v. William Penn Apartments Ltd.
P’ship, 891 A.2d 291, 299 (D.C. 2006). A reasonable person “is: (1) presumed to
know all the circumstances surrounding the contract’s making; and (2) bound by
usages of the terms which either party knows or has reason to know.” Id. “Extrinsic
evidence may be used to ‘determine the circumstances surrounding the making of
the contract,’ [but] it may not be relied upon to show the subjective intent of the
parties absent ambiguity in the contract’s language.” Debnam v. Crane Co., 976
A.2d 193, 197 (D.C. 2009) (quoting 1010 Potomac, 485 A.3d at 205-06). 26
Section 8.4 of the lease states that CHG had already (a) “installed a new
HVAC system” and (b) “caused” the hospital parcel “to be served by the repair and
relocation of generators that [CHG] has caused to be installed.” We address each
provision in turn.
a. New HVAC system
Section 8.4 of the lease states that CHG has “installed a new HVAC system”
within the hospital parcel. The parties agree that CHG installed new boilers, chillers,
and pumps. But in DCA’s view, the term “new HVAC system” also included the
distribution components, specifically air handler units and fan coil units, which work
together to distribute heated or cooled air throughout the hospital building, including
to individual hospital rooms. DCA argues in the alternative that, at a minimum, the
term required CHG to replace enough components of the system to make the system
properly heat, cool, and ventilate the hospital. CHG responds that the term “new
HVAC system” must be understood in the context of the conduct and documents
related to the HVAC project. We agree with CHG and conclude that a reasonable
person would have understood “new HVAC system” to include only new boilers,
chillers, and pumps and not the distribution components.
To be sure, the term “new HVAC system,” read in isolation, could include
distribution components. HVAC means heating, ventilating, and air conditioning; 27
system means “a regularly interacting or interdependent group of items forming a
unified whole.” System, Merriam-Webster, https://www.merriam-webster.com/
dictionary/system; https://perma.cc/92JC-YTY2. So the term “new HVAC system”
could encompass every item that forms a unified HVAC system, which could
include a system’s distribution components. We are tasked, however, not with
determining what the phrase could mean as a general matter but with what it means
in the contract at issue.
We begin with the lease itself. Section 8.4 does not define “new HVAC
system,” but the lease incorporates the easement agreement, which provided an
easement for contractors to access the property “to install the new HVAC and
Generator System.” The easement agreement, in turn, defined “New HVAC and
Generator System” in Exhibit D. Exhibit D defined “the HVAC System” to include
boilers, chillers, and pumps, with no mention of distribution components. 6
Moreover, the lease states that CHG “has installed” the new HVAC system, which
6 DCA argues that it was error for the trial court to consider Exhibit D because CHG inadvertently omitted the document when it sent the lease to DCA. We disagree. As noted above, the trial court found that the easement agreement was “readily available” to DCA throughout its lease negotiations with CHG and that it was “virtually impossible to believe” that DCA was not aware of Exhibit D before signing the lease. We see no basis to disturb these findings on appeal, as they are supported by the record. See Lynch v. Ghaida, 319 A.3d 1008, 1014 (D.C. 2024) (explaining that we defer to the trial court’s factual findings if they are supported by the record). 28
is a backward-looking statement of what had already happened. So the components
that CHG had already installed by the lease’s signing—which did not include the
distribution components—necessarily constituted the definition of “new HVAC
system.” And DCA knew or should have known what CHG had already installed.
We turn next to the circumstances surrounding the lease’s making. The new
HVAC system was installed because CHG needed to decouple the hospital and
apartment parcels. That decoupling work required CHG to provide the hospital
parcel with its own HVAC components that it used to share with the apartment
parcel. These circumstances were clear to DCA when it toured the hospital parcel
and saw the ongoing construction to replace the boilers, chillers, and pumps but not
the distribution components. In addition, before signing the lease, DCA received
Specialty Hospital and CHG’s lease, including all amendments. One of those
amendments stated that CHG “shall cause to be installed a new HVAC system” in
the hospital parcel “serving only” the hospital parcel. The term “new HVAC
system” was described as the “New Systems,” which in turn, was defined in Rider
A. Rider A defines the new systems as boilers, chillers, and pumps, with no mention
of distribution components.
Accordingly, a reasonable person in the position of the parties would have
understood the term “new HVAC system” to include only boilers, chillers, and 29
pumps and not distribution components. CHG had installed what the lease described
as a “new HVAC system” by replacing the boilers, chillers, and pumps. Because
CHG was not obligated to replace and had not replaced the distribution components,
section 8.4 of the lease did not give DCA the right to withhold rent based on
complaints about those components. We therefore affirm the trial court’s
determinations that CHG did not breach the lease, that DCA did breach the lease by
withholding rent, and that DCA could not have been defrauded by section 8.4. 7
b. Generator work
Section 8.4 of the lease stated that the parties “agreed and understood” that
CHG had “caused” the hospital parcel “to be served by the repair and relocation of
generators that [CHG] has caused to be installed.” DCA argues that section 8.4’s
reference to “generators,” plural, means that CHG was responsible for repairing all
three of the hospital’s generators. It is undisputed that CHG replaced Generator #5
but did not replace Generators #3 and #4. CHG argues that its obligation under
section 8.4 was limited to the generator it replaced—Generator #5.
7 Because we decide this issue on contract interpretation alone, we need not reach whether DCA’s notice that the HVAC system was not working satisfied the lease’s notice requirement, which was an alternative ground relied on by the trial court. 30
The circumstances surrounding the lease’s making reveal that the parties
understood that CHG had replaced only one generator (Generator #5) and not the
other two generators (Generators #3 and #4). Before the parties signed the lease,
CHG sought reimbursement for the “generator costs” from DCA. DCA reimbursed
the cost for Generator #5 (but not Generators #3 and #4) at closing. And after the
lease was signed, DCA admitted its understanding that it was responsible for
Generators #3 and #4. So the circumstances surrounding the contract’s making
reveal that the parties understood section 8.4’s generator term to mean only the
replacement of Generator #5. Indeed, DCA did not assert that Generators #3 and #4
were CHG’s responsibility until trial.
As with the HVAC system, the lease also described the generator work as a
backward-looking statement of what had already happened, stating that CHG “has
caused to be installed.” This language supports the conclusion that the generator
work referred to the generator that CHG had already installed, instead of imposing
a future obligation with respect to the other two generators.
Given these circumstances surrounding the contract’s making, the parties’
conduct after the lease, and the backward-looking statement describing the generator
work, a reasonable person in the parties’ position would have understood that CHG
had replaced only a single generator. By replacing that generator, CHG completed 31
what the lease describes as “generator work,” rendering DCA’s withholding of rent
for costs relating to the two other generators improper. We therefore affirm the trial
court’s conclusions that DCA breached the lease by improperly withholding rent for
generator-related costs and that DCA could not have been defrauded by section 8.4’s
representations about the generator work.
C. Attorneys’ Fees
DCA argues that we should reverse the Superior Court’s attorneys’ fee award
because CHG did not prevail on its damage-calculation theory. Specifically, DCA
asserts that the trial court was required to reduce CHG’s fee award because CHG
only partially succeeded with respect to the damages that it sought. CHG counters
by arguing that it is the prevailing party and therefore, under the lease’s attorneys’
fees provision, it is entitled to its fees. CHG explains that its failure to prevail on
one post-trial sub-issue—the proper calculation of late fees and interest—does not
warrant reducing the attorneys’ fees award.
We review a trial court’s attorneys’ fees award for abuse of discretion.
Campbell-Crane & Assocs., Inc. v. Stamenkovic, 44 A.3d 924, 947 (D.C. 2012); see
also James G. Davis Constr. Corp. v. HRGM Corp., 147 A.3d 332 (D.C. 2016). 32
“In interpreting contractual provisions for attorney[s’] fees, courts ‘normally
limit such right to the successful or prevailing party.’” Wash. Nat’ls Stadium, LLC
v. Arenas, Parks & Stadium Solns., Inc., 192 A.3d 581, 589 (D.C. 2018) (quoting
Fleming v. Carroll Publ’g Co., 581 A.2d 1219, 1228 (D.C. 1990)). When a party
achieves only partial success, trial courts have the discretion to “adjust the fee to
reflect” a party’s level of success. Id. (internal quotation marks omitted).
DCA and CHG’s lease provides for “reasonable attorneys’ fees and court
costs” to the “prevailing party” in a legal action to enforce the provisions of the lease.
The trial court twice rejected DCA’s argument that CHG was not the prevailing
party. Because CHG prevailed on all of its claims and on all of DCA’s
counterclaims, we agree that CHG is the prevailing party and, under the terms of the
lease, is entitled to reasonable attorneys’ fees.
We find unpersuasive DCA’s argument that the trial court applied the wrong
legal standard because “[a] trial court must reduce a fee award for partial success”
and the trial court here “was required to account for [CHG’s] failure to obtain the
staggering majority of its claimed damages in its attorneys’ fees award.” It is true
that “even contractually based provisions for attorney’s fees are subject to reduction
where the defendant has successfully asserted defenses or counterclaims” and that 33
trial courts “must also take into consideration” whether a plaintiff’s suit “was only
partially successful.” Fleming v. Carroll Publ’g Co., 621 A.2d 829, 837 (D.C.
1993). But the trial court was not required to reduce CHG’s attorneys’ fee award
based on partial success because CHG prevailed on all of its claims and on all of
DCA’s counterclaims. To be sure, the court was permitted to reduce CHG’s
attorneys’ fee award, but it acknowledged that discretion and declined to exercise it
because “the litigation on this issue consumed a relatively insignificant amount of
attorney time over the almost eight-year lifespan of this case and was related to the
claims on which [CHG] prevailed, namely [DCA’s] breach of the lease agreement
by withholding rent.” That determination was within “the sound discretion of the
trial court.” Wash. Nat’ls Stadium, 192 A.3d at 587 (internal quotation marks
omitted).
In sum, we perceive neither legal error nor an abuse of discretion by the trial
court. We remand for the trial court to determine whether to award CHG its
attorneys’ fees, expenses, and costs for this appeal, under the lease’s attorneys’ fees
provision and Jacobson v. Clack, 309 A.3d 571, 585 (D.C. 2024) (remanding for the
trial court to consider whether prevailing party is entitled to additional attorneys’
fees for appeal). 34
III. Conclusion
We affirm the judgment of the trial court and remand for the court to
determine whether to award CHG its attorneys’ fees, expenses, and costs associated
with litigating this appeal.
So ordered.