Org. of Chinese Americans v. Damron

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ORGANIZATION OF CHINESE AMERICANS, INC. D/B/A OCA-ASIAN PACIFIC AMERICAN ADVOCATES et al., Plaintiffs, v. MICHAEL DOUGLAS DAMRON, et al., Defendants.

Civil Action No. 22-178 (BAH)

United States District Court, District of Columbia

March 1, 2023

MEMORANDUM OPINION

BERYL A. HOWELL Chief Judge

This case arises from a botched real estate transaction. The plaintiffs, Organization of Chinese Americans, Inc., d/b/a OCA-Asian Pacific American Advocates, and OCA Property LLC (collectively “OCA”), bring numerous state law claims against their real estate brokers and lawyers: (1) G&E Real Estate Inc., d/b/a Newmark, and its employees Michael Damron and Christopher Lucey (collectively “the Brokers”), and (2) Mark Moorstein and his law firm, Offit Kurman P.C. and P.A. (collectively “the Lawyers”). The Brokers allegedly misrepresented the rentable square footage of OCA's commercial property located at 18th Street N.W. in Washington, D.C., and the Lawyers allegedly committed malpractice in failing properly to advise OCA when OCA contracted to sell the property and in providing OCA conflicted representation in the ensuing litigation over that sale. Now, both groups of defendants seek dismissal of the Complaint with prejudice under Federal Rule of Civil Procedure 12(b)(6). See generally Defs. Brokers' Mot. Dismiss (“Brokers' Mot.”), ECF No. 20; Defs. Brokers' Mem. Supp. Mot. Dismiss (“Brokers' Mem.”), ECF No. 20-1; Defs Lawyers' Mot. Dismiss (“Lawyers' Mot.”) ECF No. 19; Defs. Lawyers' Mem. Supp. Mot. Dismiss (“Lawyers' Mem.”), ECF No. 19-1. For the reasons explained below, the Brokers' Motion is denied, and the Lawyers' Motion is granted in part and denied in part.

I. BACKGROUND

Plaintiffs are suing the professionals who brokered the 2017 sale of their historic Dupont Circle building located at 18th Street N.W. in downtown D.C., which sale resulted in plaintiffs receiving only two-thirds of the expected purchase price due to an apparent misunderstanding regarding the size of the building. In 2016, when deciding to sell the property, OCA had owned the building for approximately ten years. See Defs. Lawyers' Notice of Removal of a Civil Action (“Not. of Removal”), Ex. A (“Compl.”) ¶¶ 10, 12, ECF 1-1. To find a buyer, OCA retained the Brokers following discussions, in which Damron had represented that the Brokers would work to “maximize the sale price” and “devote all of [their] resources to get [OCA] the results [it] desire[s]” Id. ¶¶ 12-13.

In December of 2016, OCA and the Brokers executed both an Exclusive Representation Agreement and a Listing Agreement (together, the “Brokerage Agreements”).^[1]Id. ¶ 13. The listing agreement defined the Brokers' “Scope of Work” as including a duty to: (1) “analyze all reasonable options and make recommendations;” (2) “provide market data;” (3) “research and advise OCA in its negotiations with prospective purchasers;” (4) “conduct tours of the Property with prospective purchasers;” and (5) “work with legal counsel in the negotiations requested by OCA.” Id. ¶ 16. The listing agreement further laid out the Brokers' responsibilities to provide “deliverables” to OCA, including: (1) “sales and/or leasing package”; (2) “market analyses and surveys”; (3) “financial analyses”; (4) “correspondence”; (5) “requests for proposals”; (6) “letters of intent”; (7) “recommendation memoranda”; and (8) “any other work products reasonably requested by OCA.” Id. ¶ 17.

The alleged misunderstanding as to the building's true size stemmed from the Brokers' initial actions upon their retainer. The Brokers began their efforts by sending the property floor plans to a local architect, Justin Clark, with the request that he provide an “‘estimate' of the square footage on a pro bono basis.” Id. ¶ 24. An employee of Clark provided the requested information, estimating the property to be 18,796 square feet, and explaining to the Brokers that she had based the estimate on a perimeter site review that “relied solely on PDF floor plans” of the property that the Brokers had provided. Id. ¶¶ 25-27. In both her email transmitting the estimate to the Brokers and the attachment detailing her area calculations, she cautioned that the area estimates “should be verified in [the] field,” noting that she attempted to measure the “interiors of each unit” only without including “demising or exterior walls,” and that she “didn't have good scalable drawings of the 3rd floor” so instead copied the second-floor numbers for that floor. Id. ¶¶ 26-27. Despite these caveats, the Brokers ran with the estimate, creating and distributing marketing materials stating that the property contained 18,796 rentable square feet, which they also provided to OCA. Id. ¶¶ 30-31. The Brokers then listed the property for $9 million, once again representing that the building had 18,796 rentable square feet. Id. ¶ 34. At no point did the Brokers inform OCA that the square footage estimate was of gross square feet as opposed to rentable square feet, nor did they mention any of the disclaimers the Clark employee had communicated to them. Id. ¶ 33.

Once buyers began approaching with offers to purchase the property, OCA engaged the services of Mark Moorstein and his firm to help with the potential sale. Id. ¶¶ 35-36, 52. OCA's first serious offer came from Urban Realty Advisers LLC (“URA”) in March 2017. Id. ¶ 35. This potential sale fell through within a matter of months, however, because after investigating the size of the building itself, URA sought to reduce the purchase price by $1.25 million, explaining that “the [dollar] number [the parties] had contracted for really was based on a larger building” and that it would be “‘highly unlikely' URA would be able to use the Property as it had hoped.” Id. ¶¶ 38-39 (first alteration in original). OCA was “unwilling to agree to a building-size reduction to the purchase price,” and declined URA's new offer. Id. ¶ 40.

Shortly thereafter, OCA entered negotiations with a second potential buyer, Richard Gersten, who initially offered $6.5 million for the property. Id. ¶ 43. Gersten sent the Brokers an initial draft contract, which the Brokers passed along to OCA a mere 15 minutes later with the note that “‘we reviewed' it and it ‘looks in order.'” Id. ¶¶ 45-46. The Brokers did not inform OCA that the contract described the property as containing 15,000 rentable square feet-a number that neither reflected the Broker's estimate of 18,796 gross square feet nor any other calculation known to the Brokers that would have determined the rentable square footage of the building. Id. ¶¶ 47-48. The Brokers likewise did not flag for OCA the fact that the contract averred that “there is no asbestos or asbestos containing material in the Building or the Property,” even though this is “not a standard term for the sale of a historic property.” Id. ¶¶ 4950. OCA sent the draft contract to Moorstein to review as well; he likewise did not flag or propose edits to the language in the draft, but rather drafted a letter that was then sent to Gersten informing him that only “minor areas” needed “additional consideration.” Id. ¶¶ 53-56.

As negotiations with Gersten progressed, edits were made to the provisions regarding the square footage and purchase price of the property that would dramatically reduce the ultimate purchase price, allegedly without either the Lawyers or the Brokers bringing those modifications to OCA's attention. Gersten responded to Moorstein's letter forwarding a revised contract, with three critical differences from the original version. Id. ¶ 57. First, the revised contract now stated that the Property contained “approximately 18,796 rentable square feet,” rather than the 15,000 number included in the original draft. Id. Second, an entirely new “price adjustment provision” was added that tied the final purchase price to the actual rentable area of the property. Id. ¶ 57. In particular, this provision provided that the proposed $6.5 million purchase price was “based upon rentable area in the Building of 18,796 square feet,” which area must be “measured by a licensed architect in accordance with the Standard Method for Measuring Floor Area in Office Buildings, 1996 (‘BOMA'),” and that “the Purchase Price shall be reduced” upon receipt of the BOMA measurement “based on a per rentable sq. ft. price of $346.31.” Id. ¶ 58. Finally, the revised draft contained language that allowed Gersten-but not OCA-unilaterally to terminate the contract upon completion of due diligence. Id. ¶ 67. After reviewing the revised contract, neither the Brokers nor Moorstein discussed the implications of these changes with OCA. See id. ¶¶ 59, 62. In fact, Moorstein advised OCA that it was a “good agreement,” advised OCA to accept the price adjustment provision, and prepared a letter to send to Gersten on OCA's behalf explaining that the latter “remain[s] pleased with” the revised contract. Id. ¶¶ 62-64 (alteration in original).

While Moorstein offered some changes to the crucial provisions in the ensuing negotiations, none addressed the core issue that the $6.5 million purchase price was now premised on a square footage estimate that was unlikely to stand. His letter to Gersten noted that “the reduction of $346.31 per square foot is fine,” provided that “the same figure is used for any increases in the square footage” as well. Id. ¶ 64 (emphasis omitted). While the letter went on to explain that “[i]t might be simpler . . . to leave the price alone because the building is not being sold or purchased on a per square foot basis,” Moorstein seemingly did not pursue this suggestion any further and contented himself with making the purchase price adjustable in both directions, without seeking to limit the extent to which the purchase price could fall...