ABU NASER HOSSAIN v. JMU PROPERTIES, LLC
147 A.3d 816
| D.C. | 2016Background
- PRI (Profound Radiance, Inc.) leased commercial space from JMU Properties (owned by Mickey Sood); Sood separately executed a franchise agreement with PRI under JMU Tax’s letterhead.
- PRI fell behind on rent, JMU Properties (and Sood) changed locks, and JMU Properties/Sood filed a counterclaim and third-party complaint alleging breach of lease, breach of franchise agreement, and fraud.
- PRI/Hossain argued JMU Tax (the franchisee entity) was not a proper party and sought dismissal; the trial court denied that motion and later allowed JMU Tax to be added nunc pro tunc.
- PRI/Hossain also moved to compel arbitration based on the franchise agreement’s arbitration clause; the trial court denied the motion as waived after evidence and a bench trial.
- The trial court entered judgment for $391,640.82 for appellees; on appeal the court affirmed waiver of arbitration, held Sood was an intended third-party beneficiary, but remanded to reform the judgment to allocate damages between JMU Properties and JMU Tax as appropriate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Sood could recover under the lease/franchise agreements (third-party beneficiary/real party in interest) | Sood not a named real party; cannot recover under franchise/lease | Sood is sole owner of JMU Properties and JMU Tax, negotiated and signed both agreements, and was an intended beneficiary | Sood was an intended third-party beneficiary of both agreements; may recover and sue to enforce them |
| Whether PRI waived the right to compel arbitration by litigation conduct | PRI: moved to compel arbitration (including during trial) and arbitration clause governs disputes | JMU Properties/Sood: PRI repeatedly opposed arbitration and litigated the case to and through trial, thereby waiving arbitration | Court: waiver by litigation conduct; trial judge properly decided waiver under a totality-of-circumstances standard (affirmed) |
| Who decides waiver by litigation conduct (court or arbitrator) | PRI: arbitration issues (including waiver) should be for arbitrator after gateway questions resolved | JMU Properties/Sood: waiver by litigation conduct is for the court to decide, especially when litigation conduct occurred and trial commenced | Held: In these circumstances (waiver by litigation conduct after trial began), the trial court properly determined waiver rather than an arbitrator |
| Whether judgment should be entered for JMU Tax though not originally named and allocation of damages | PRI: addition of JMU Tax prejudicial and Sood not an intended beneficiary | Appellees: JMU Tax is real party in interest; addition causes no prejudice; Sood is sole owner | Held: JMU Tax may be treated as a party; judgment must be reformed on remand to allocate damages between JMU Properties (lease claims) and JMU Tax (franchise/fraud claims) |
Key Cases Cited
- Fort Lincoln Civic Ass’n, Inc. v. Fort Lincoln New Town Corp., 944 A.2d 1055 (D.C. 2008) (contract interpretation and third‑party beneficiary principles)
- Fields v. Tillerson, 726 A.2d 670 (D.C. 1999) (third‑party may sue if contracting parties intended to benefit that third party)
- W. Union Tel. Co. v. Massman Constr. Co., 402 A.2d 1275 (D.C. 1979) (distinguishing intended vs. incidental beneficiaries)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (allocation of gateway arbitrability questions between courts and arbitrators)
- Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207 (3d Cir. 2007) (court decides waiver by litigation conduct)
- Marie v. Allied Home Mortg. Corp., 402 F.3d 1 (1st Cir. 2005) (waiver implicates judicial procedures and often is for court)
- Nat’l Found. for Cancer Research v. A.G. Edwards & Sons, 821 F.2d 772 (D.C. Cir. 1987) (totality‑of‑circumstances test for waiver; active participation in litigation can constitute waiver)
- Menna v. Plymouth Rock Assur. Corp., 987 A.2d 458 (D.C. 2010) (arbitrability allocation principles)
- Khan v. Parsons Global Servs., Ltd., 521 F.3d 421 (D.C. Cir. 2008) (prejudice relevant but not required in waiver analysis)