Stanford Hotels Corp. v. Potomac Creek Associates, L.P.
2011 D.C. App. LEXIS 213
| D.C. | 2011Background
- Preliminary Agreement Oct 30, 1997 required good faith negotiations to sign a Definitive Agreement within 10 days.
- Negotiations extended for months; delays caused by Sarakreek-Westbrook buyout and financing restructuring.
- Rutishauser controlled Sarakreek via A-director role, steering Potomac Creek’s actions.
- Definitive Agreement was drafted and Stanford signed it, but Potomac Creek never signed.
- Credit Suisse refinancing (Aug–Sept 1998) completed; Hotel deeded to lender; Stanford learned of refinancing later and alleged breach.
- Judge Braman found Potomac Creek breached the Preliminary Agreement by abandoning negotiations and negotiating for the entire Plaza property; Judge Hedge granted summary judgment against Stanford on specific performance, which this court reverses on remand.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether specific performance is an available remedy for breach of the Preliminary Agreement. | Stanford seeks specific performance to compel signing of the Definitive Agreement. | Potomac Creek contends the Preliminary Agreement cannot be specifically enforced. | Yes; specific performance available, remand for remedy feasibility. |
| Does the Preliminary Agreement create an enforceable obligation to negotiate in good faith and sign when terms are agreed? | Parties intended to sign the Definitive Agreement if terms were agreed. | Preliminary Agreement was Type II, not obligating signing. | Preliminary Agreement creates enforceable duty to negotiate in good faith toward signing. |
| Are damages an adequate remedy, or does equity favor specific performance? | Damages would not compensate Stanford for lost opportunity and unique hotel asset. | Damages could suffice; specific performance unnecessary. | Damages inadequate; equity favors consideration of specific performance on remand. |
| Was Stanford ready, willing, and able to perform; does that affect availability of specific performance? | Stanford was ready, willing, and able, with financing arranged. | Not dispositive since the issue is remedy for breach of Preliminary Agreement. | Stanford showed ability to perform; remand to assess current ability in light of ongoing conditions. |
Key Cases Cited
- Flack v. Laster, 417 A.2d 393 (D.C.1980) (equity jurisdiction over specific performance of contracts)
- City Stores Co. v. Ammerman, 266 F. Supp. 766 (D.D.C.1967) (land or unique chattel contracts; damages inadequate)
- Independence Mgmt. Co. v. Anderson & Summers, LLC, 874 A.2d 862 (D.C.2005) (specific performance appropriate when damages inadequate; equitable factors)
- Drazin v. American Oil Co., 395 A.2d 32 (D.C.1978) (limitations and prerequisites for specific performance)