981 F. Supp. 2d 19
D.D.C.2013Background
- Sarah Slinski contracted in Oct 2010 to buy her rental condominium from Freddie Mac under the D.C. Tenant Opportunity to Purchase Act; she paid a $20,000 deposit and the contract set a closing deadline and required third‑party financing.
- Slinski applied to Bank of America for a mortgage; BofA issued conditional approvals and required a cosigner; closing dates were repeatedly extended.
- Freddie Mac purchased the property at a foreclosure sale in June 2010; plaintiffs allege Freddie Mac was a “straw man” for Bank of America or had an agreement that BofA would repurchase if Freddie Mac couldn’t sell.
- Plaintiffs allege BofA intentionally delayed financing, Freddie Mac never intended to sell to Slinski, and BofA later owned the property and sought possession; suit filed seeking specific performance, damages, fraud, conversion, tortious interference, CPPA relief, declaratory judgment, and other claims.
- On motions to dismiss, the court: allowed only (1) Slinski’s claim for the contract’s liquidated damages ($1,000) against Freddie Mac to proceed and (2) plaintiffs’ tortious‑interference claim against Bank of America; dismissed most other claims (fraud, CPPA, conversion, TPOA, declaratory relief, contract claims against BofA, Paul Slinski’s contract claims, etc.).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of $1,000 liquidated‑damages clause | Clause unenforceable as a penalty because it fixes a single small sum for any breach | Clause is a valid bargained‑for liquidated‑damages term under D.C. law | Clause enforceable; damages above $1,000 and specific performance barred; $1,000 claim survives against Freddie Mac |
| Whether Freddie Mac committed fraud/fraudulent inducement by never intending to sell | Freddie Mac signed contract while intending to sell to BofA, so misrepresentation induced the deal | Allegations are contract breach dressed as fraud; no independent injury pleaded; Rule 9(b) defects | Fraud/fraudulent inducement claims dismissed for failure to plead independent tort and Rule 9(b) deficiencies |
| Whether Bank of America was agent/principal with Freddie Mac (making BofA liable on the sale contract) | Plaintiffs allege an agreement/option or straw‑man agency such that BofA was party to the sale | BofA says allegations show at best an option to repurchase, not an agency relationship | No plausible agency pleaded; contract claims against BofA dismissed |
| Tortious interference with contract by BofA via loan delays | BofA intentionally delayed financing knowing lack of funds would prevent closing | BofA: a party cannot interfere with its own contract; contract not contingent on financing so delays couldn’t cause breach | Tortious‑interference claim against BofA survives (pleaded in the alternative and plausibly alleges causation) |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must state a plausible claim)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for complaints)
- Davy v. Crawford, 147 F.2d 574 (D.C. Cir. 1945) (test for when liquidated‑damages provisions are penalties)
- Ashcraft & Gerel v. Coady, 244 F.3d 948 (D.C. Cir. 2001) (enforceability of liquidated‑damages clauses under D.C. law)
- Choharis v. State Farm Fire & Cas. Co., 961 A.2d 1080 (D.C. 2008) (fraud claim requires injury independent of contract breach)
- Patton Boggs LLP v. Chevron Corp., 683 F.3d 397 (D.C. Cir. 2012) (elements of tortious interference under D.C. law)