UMC DEVELOPMENT, LLC, et al., Appellants, v. DISTRICT OF COLUMBIA, et al., Appellees.
No. 14-CV-543.
District of Columbia Court of Appeals.
Argued March 19, 2015. Decided July 9, 2015.
120 A.3d 37
Richard S. Love, Senior Assistant Attorney General, with whom Eugene A. Adams, Interim Attorney General for the District of Columbia, Todd S. Kim, Solicitor General, and Loren L. AliKhan, Deputy Solicitor General, were on the brief, for appellees District of Columbia and Mayor Vincent Gray.
Emil Hirsch, with whom Steven A. Pozefsky was on the brief, for appellee Not-For-Profit Hospital Corporation.
Before FISHER and EASTERLY, Associate Judges, and KING, Senior Judge.
EASTERLY, Associate Judge:
In 2010, the District—faced once again with a failing hospital in Anacostia and the specter of tens of thousands of District residents deprived of ready access to medical care—foreclosed on the United Medical Center and turned the property and the operation of the hospital over to the Not-For-Profit-Hospital Corporation. There were questions about the propriety of the foreclosure (as the District did not own the hospital or the surrounding property outright), and UMC Development, LLC and Jacksophie GSCH, LLC (collectively “the developers“) sued. The theory of their case was that foreclosure was wrongful, and that by foreclosing, the Dis
The developers’ right to develop the property was itself subject to question. They had agreements with third parties (who in turn had their own deals with the District) in which it was envisioned that the District would approve the third parties’ transfer of title to the developers. But the District never gave its approval. The Superior Court thus ruled that the developers lacked standing to challenge the foreclosure. The court also ruled that the developers had failed to satisfy the notice requirements of
The developers now appeal. We affirm the Superior Court‘s dismissal of all counts, determining that the developers lacked standing to raise any of their claims, and accordingly that this court lacked subject matter jurisdiction to hear them. To the extent that the court dismissed the developers’ claims with prejudice, however, we reverse. A lack of subject matter jurisdiction may only properly serve as the foundation for a dismissal without prejudice. Thus, we direct the Superior Court to amend the order accordingly.
I. Facts and Procedural History
To give necessary context, our narrative begins in 2007, when United Medical Center‘s predecessor, Greater Southeast Community Hospital, was in financial distress. As it was the only hospital serving the approximately 140,000 District residents east of the Anacostia River, its troubles were of great concern to the District. In October 2007, the Council of the District of Columbia enacted the “East of the River Hospital Revitalization Emergency Amendment Act of 2007.”1 The Act creat
Just before the District-SHW Partnership was established, SHW‘s parent company created two entities: Capitol Medical Center, LLC and CMC Realty, LLC (collectively, “the CMCs“). The District-SHW Partnership entered into an Acquisition Loan Agreement with the CMCs, by which it loaned them money for the purchase and ownership of the hospital and development land, as well as the operation of the hospital. The Acquisition Loan Agreement directed that CMC Realty, as purchaser and owner of the hospital and development land, “shall not . . . [d]ispose, convey, transfer, license the use of, or encumber, [n]or permit the conveyance, transfer or encumbrance of, any part of the Property” “[w]ithout [the Partnership‘s] prior approval (which may be given or withheld in [the Partnership‘s] sole and absolute discretion).” The loan was secured by a deed of trust that conferred on the District-SHW Partnership a right to foreclose on the property.
By 2010, the hospital had once again become financially unstable, prompting the District to initiate foreclosure of the hospital and development land. It then purchased the property at the foreclosure sale in July, and soon thereafter transferred the hospital and the development land to a new, statutorily-created entity, Not-For-Profit-Hospital Corporation.2
The developers filed a complaint in Superior Court against the District and Not-For-Profit-Hospital Corporation as well as Mayor Gray, SHW, and CMC Realty. The developers’ complaint centered on the District‘s decision to foreclose on property which they asserted they owned. In the first paragraph of their complaint, the developers stated that their “action follow[ed] the District‘s wrongful foreclosure on the United Medical Center . . . and its surrounding real property (the ‘[d]evelopment [l]and‘) and the improprieties that tainted those proceedings.” In the second paragraph the developers referred to agreements they had made, which allegedly assured that UMC Development would “becom[e] the rightful owner of the development land[,] as was known, understood and agreed to by the District and CMC Realty,” and further alleged that, “[k]nowing that it had no authority to foreclose on the development land, in 2010, the District purported to exercise rights that it did not actually hold, and wrongfully foreclosed on the [d]evelopment [l]and at the direct expense of the developers.” In the third paragraph the developers asserted even more explicitly that, “[a]t the time of the District‘s purported foreclosure, UMC Development was the rightful owner of the Development Land as known to and approved by the District and acknowledged by D.C. Courts.” The developers then alleged that, “[a]s a result of the District‘s actions,” i.e., the foreclosure, they were “effectively stripped of any and all rights to this valuable land.”3 The developers subsequently enumerated seven state-law claims against the District.4
The District responded by filing a motion to dismiss7 that, among other things, disputed the developers’ ownership or any other legally cognizable interest in the land and generally contested the developers’ standing to challenge the foreclosure or to raise any of the claims in their complaint. The District argued that the developers at most had a “future, conditional, property interest for which the necessary conditions were never fulfilled,” and that the developers suffered no injury to this interest by virtue of the foreclosure. Rather, “the real impediment to the ability to undertake development activities vis-à-vis the [d]evelopment [l]and was CMC Realty‘s inability to procure the necessary approval to transfer the [d]evelopment [l]and to UMC Development.” To substantiate its standing challenge, the District attached to its pleading copies of documents referenced in (but not attached to) the developers’ complaint, namely, the District-SHW Partnership Agreement, the Acquisition Loan Agreement, and the UMC Development Operating Agreement.
In their opposition to the District‘s motion to dismiss, the developers acknowledged that “[o]ne theme permeates the District‘s entire motion: its recurring refrain that Plaintiffs lack a property interest sufficient to ground any complaint.” In response, the developers retreated from their assertion of “ownership.” Instead, the developers asserted that the District had “enlisted and engaged” them “as commercial real-estate developers“; that it had “tapped [them] to play an essential role in developing [the hospital] property“; and that, as they “proceeded accordingly, per written contracts that the District presided over and blessed,” the District “repeatedly encouraged [them] onward[,] and assured them . . . that their investments and resulting rights would be recognized and rewarded, per agreement and understanding.” Even as the developers revised some of their factual allegations, however, they did not retreat from their assertion that the foreclosure was the source of their injury. They asserted that, “although [they] did everything that was asked of them for the benefit of the District . . . [t]he District reneged on the deal and denied the [developers] the benefit of the bargain struck based on one thing and one thing only: [the District‘s] unilateral decision to foreclose on the Hospital and the Land.”8
II. Analysis
On appeal, the developers argue that they did in fact have standing to sue. “Whether appellants have standing is a question of law which we consider on appeal de novo.” Randolph v. ING Life Ins. & Annuity Co., 973 A.2d 702, 705 (D.C. 2009) (internal quotation marks omitted).
“Standing is a threshold jurisdictional question which must be addressed prior to and independent[ly] of the merits of a party‘s claims.”11 Although the District of Columbia courts were created under Article I of the U.S. Constitution, we generally adhere to the case and controversy requirement of Article III, and look to federal standing jurisprudence when considering the issue of a plaintiff‘s standing.12 To satisfy the requirements of “constitutional” standing, a plaintiff in our local courts must adequately allege that (1) she suffered an injury in fact, (2) the injury is fairly “traceable to the defendant‘s action,”
The plaintiff bears the burden to establish standing.15 In our en banc decision in Grayson, this court said that when a plaintiff‘s standing is called into question, the facts in the complaint must be accepted as true and must be “construe[d] . . . in favor of the complaining party.”16 But we also acknowledged that a trial court‘s ju
For the reasons set forth below, we conclude that the developers did not establish that they had standing to sue on any of their claims. We consider and find wanting the standing argument that the developers ultimately settled on in Superior Court. We acknowledge that the developers have sought to advance alternative standing arguments on appeal; but these were not claims they advanced or supported below, and we hold that the developers may not on appeal rewrite the record they created below.23 Thus we conclude that the Superior Court properly dismissed the developers’ complaint; however, because the court lacked subject matter jurisdiction over all the developers’ claims, the appropriate remedy was dismissal without prejudice.24
1. The standing argument the developers advanced in Superior Court
We begin our analysis by examining the developers’ precise interest in the development land as pled in Superior Court. The developers initially asserted in their complaint that they were, pursuant to certain written agreements, the rightful owners of the land and had been injured by the wrongful foreclosure. But they abandoned that claim when the District moved to dismiss and attached the relevant agreements to its motion. In their opposition to the District‘s motion to dismiss, the developers never argued that the Superior Court had to disregard these attachments and rely solely on the developers’ representation of the rights created by these documents as pled in the complaint. Rather, in their opposition, the developers affirmatively relied on the District-SHW Partnership Agreement supplied by the District. Equally important, the developers substantially scaled back their description of their interest in the property and explicitly acknowledged that, as these documents reflected, they only had a contingent future interest in the development land.25
Pursuant to the UMC Development Operating Agreement, the developers had a pledge from CMC Realty that it would convey title to the development land to UMC Development. This pledge was made before CMC Realty had the land to give and was limited by “the terms and conditions of the Acquisition Loan.” The subsequently executed Acquisition Loan Agreement between CMC Realty and the District-SHW Partnership required the latter‘s “prior approval (which [could] be given or withheld in [its] sole and absolute discretion),” before CMC Realty could dispose, convey, transfer, license the use of, encumber, or permit the conveyance, transfer, or encumbrance of any part of the property. The District-SHW Partnership Agreement in turn provided that the District and the District alone had the authority to control the sale of the property, at least for ten years. Thus, UMC Development‘s interest (and by extension Jacksophie‘s interest) was a contingent future interest that could not mature into an actual present interest without the District‘s consent to the transfer of title from CMC Realty to the developers—consent which the District had no obligation to CMC Realty, or the developers, to give.
The allegations of the developers’ complaint, and the documents on which they relied in an effort to demonstrate standing, failed to connect the foreclosure to their loss of this contingent future interest, and thus failed to satisfy the traceability element of standing. To begin with, the contingent future interest in the transfer of title appears to have been lost long before the foreclosure. As the developers acknowledged in the complaint, only four months after the UMC Development Operating Agreement was signed, CMC Realty twice requested that the District approve a transfer of title to UMC Development. The District denied the request. Another two years passed before the District foreclosed.
The developers argue, however, that they continued to receive assurances from the District that transfer of title would eventually be approved. Such assurances are nowhere to be found in the developers’ recitation of facts in their complaint and are at best only vaguely alluded to in one paragraph of Count II seeking specific performance of the UMC Development Operating Agreement (to which the District was not a party). But assuming, for the sake of argument, these assurances were adequately pled, we still cannot trace the developers’ loss of their contingent future interest to the foreclosure. The key point is that the District never consented to transfer title to the developers. Even after the foreclosure, the District still could have done so. By means of the foreclosure the District had exercised (rightfully or wrongfully) ownership rights in the property, and conceivably it could have given UMC Development title directly. Instead, it charted a different course, created the Not-For-Profit-Hospital Cor
Having determined that the developers did not demonstrate that any injury they suffered was traceable to the foreclosure on the hospital by the District, we need not analyze whether the developers’ alleged injuries constituted an injury in fact, nor whether the injury would be redressed by a favorable decision, under the first and third required elements of standing.27
2. The developers’ standing argument on appeal
The developers’ standing argument has evolved on appeal. They now argue that their interest in the hospital property, at least in part, was not merely contingent or future, but also grounded in their actual receipt of “development fees, rental payments, and other profit,” income which was cut off with the foreclosure. The record does not support their argument.
In addition to UMC Development‘s contingent future interest in title to the development land, the developers assert that they pursued a theory of standing in Superior Court based on assertions that UMC Development was already earning, and had the “right to earn development fees, rental payments, and other profit” from its development of the land, “irrespective of whether they held title” at the time of the foreclosure. The developers point to a sentence in the “Factual Background” of their complaint, in which they noted that they “had every reasonable expectation of deriving fair returns on their investment and contributions over the course of the ensuing life of the property, which was expected to appreciate in value and to throw off continuing returns over the course of decades.” Whereas the developers place great weight on the phrase “continuing returns” as proof that they had argued that they had already “been collecting rental income from the [d]evelop
Apart from their complaint, the developers direct our attention to their opposition to the District‘s motion to dismiss, to which they appended their memorandum of points and authorities in opposition to then-defendants SHW‘s and CMC Realty‘s separately litigated motion to dismiss. Specifically, they include in their brief a citation to this other pleading, with the explanatory parenthetical: “describing some of the rental payments.” This court cannot find where the developers asked the Superior Court to consider this other pleading—directed to a different motion filed by different defendants, raising different issues28—as support for an argument that they were actually receiving rental income from the development land prior to the foreclosure and thus had standing to sue the District. But, in any event, in this other twenty-four-page pleading, we see only a single possibly relevant sentence in which developers noted that they had sued SHW and CMC
3. Lack of standing undermines all the developers’ claims
The Superior Court determined that it did not have subject matter jurisdiction to hear Counts I through IV, nor Count IX, but dismissed Counts VIII (unjust enrichment) and X (quantum meruit) on other grounds.29 We conclude, however, that the developers lacked standing to bring all of their claims, and that dismissal of the developers’ complaint may be affirmed on that basis.30
The injury the developers allegedly endured under the theories of unjust enrichment and quantum meruit31
However, the injuries claimed in Counts VIII and X, as with the rest, could not have been a result of the foreclosure. The benefit of the developers’ pre-development investments (if any) was wrongfully “retained,” and “accepted and enjoyed” by the District, to the developers’ detriment, when the District did not approve CMC Realty‘s request to transfer title (which the District had no obligation to do).32 We thus affirm dismissal of Counts VIII and X, determining that the developers lacked standing to bring these claims and the Superior Court thus lacked subject matter jurisdiction to hear them; we need not and do not address the developers’ challenges to the Superior Court‘s finding that their unjust enrichment and quantum meruit claims were barred by both sovereign immunity and
4. Dismissal without prejudice
While it was proper for the Superior Court to dismiss all the counts in the developers’ complaint, the dismissal should have been made without prejudice. Where a litigant lacks standing to pursue his claims, the defect is one of subject matter jurisdiction. See supra note 14. Such defects may only result in a dismissal without prejudice.33 In other words, a
The lack of subject matter jurisdiction likewise precludes us from determining that the court‘s decision to dismiss with prejudice was error, but harmless, as the District urges us to do. Having concluded that the Superior Court lacked subject matter jurisdiction to hear the developers’ claims, we cannot reach beyond that determination to consider whether those claims would be meritorious if the defect in standing were cured—that is, were the developers’ complaint dismissed without prejudice and were they to utilize the opportunity (assuming such opportunity still exists) to file a new complaint.35 Moreover, in this case, where no motion to amend the complaint was filed, it would be entirely speculative and thus unwise for us to make such a peremptory ruling.36
Our decision in Dorsey v. District of Columbia, 839 A.2d 667 (D.C.2003), on which the District relies, is not to the
For the foregoing reasons, we affirm the Superior Court‘s order dismissing the developers’ suit in its entirety, but we reverse to the extent that the order dismissed the developers’ claims with preju
So ordered.
