UMC Development, LLC v. District of Columbia

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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 14-CV-543
UMC DEVELOPMENT, LLC, et al., APPELLANTS,
V.
DISTRICT OF COLUMBIA, et al., APPELLEES.
Appeal from the Superior Court
of the District of Columbia
(CA-3789-13)
(Hon. Frederick H. Weisberg, Trial Judge)
(Argued March 19, 2015 Decided July 9, 2015)
Derek L. Shaffer, with whom Jonathan G. Cooper was on the brief, for
appellants.
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.
2
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 District had injured their right to
develop the property.
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 D.C. Code § 12-309 (2012 Repl.). The court dismissed all of the
developers’ claims with prejudice.
3
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 created a private-public limited partnership between the District and
Specialty Hospitals of Washington-GSE Holdings, LLC (“SHW”), to purchase the
1
D.C. Act No. 17-168, 54 D.C. Reg. 10978 (Oct. 19, 2007).
4
failing hospital with up to $79 million in public funds. Pursuant to the District-
SHW Partnership Agreement, subsequently executed on November 7, 2007, the
District was designated the Limited Partner, and SHW the General Partner.
Notwithstanding its designation as General Partner, SHW’s powers were
constricted. Specifically, it neither had the authority to “obligate, bind[,] or
commit the Limited Partner in any way for any obligation,” nor to “cause the
Partnership to sell, transfer[,] or otherwise dispose of any property or assets in a
single transaction or series of related transactions,” without first obtaining prior
written approval of the Limited Partner.
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
5
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.
Meanwhile, SHW, on its own and without the participation of the District,
engaged in other business dealings related to the hospital and the development
land. On November 5, 2007, two days prior to the execution of the District-SHW
Partnership Agreement (and thus prior to execution of the Acquisition Loan
Agreement between the District-SHW Partnership and the CMCs), SHW entered
into an Operating Agreement with Jacksophie to create UMC Development. The
UMC Development Operating Agreement anticipated that CMC Realty, after
acquiring the hospital and development land, would transfer the development land
to UMC Development for the subdivision, development, and operation of the land.
The UMC Development Operating Agreement, however, also acknowledged that
CMC Realty would be bound to “the terms and conditions of the Acquisition Loan
Agreement” between it and the (anticipated) District-SHW Partnership. In March
2008, CMC Realty twice requested permission from the District to transfer title of
the development land to UMC Development. The District declined to approve the
transfer.
6
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
2
See D.C. Code §§ 44-951.01–.18 (2012 Repl.).
7
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 Five of these claims explicitly linked their
injury to the foreclosure,5 and the two that did not incorporated by reference prior
allegations that identified the foreclosure as the source of their injury.6
3
This assertion notwithstanding, the developers acknowledged in their
complaint that CMC Realty had written two letters to the District requesting
permission to transfer title in the development land, but that the District “did not
approve [such] transfer.”
4
We focus on the state law claims pled against the District because the
developers’ constitutional claims against the District were removed to federal
court, see note 7, infra, and because the District, Mayor Gray (in his official
capacity), and Not-For-Profit Hospital Corporation are the only appellees before
us. Moreover, there is no need to discuss separately the claims against Not-For-
Profit Hospital Corporation because the developers have not challenged the
Superior Court’s ruling that these claims were entirely derivative of the claims
against the District. See note 10, infra.
5
Count I (wrongful foreclosure), Count II (specific performance of the
Operating Agreement), Count III (tortious interference with prospective economic
(continued…)
8
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.
(…continued)
advantage), Count IV (breach of contract (third party beneficiary)), and Count IX
(constructive trust, the development land).
6
Count VIII (unjust enrichment) and Count X (quantum meruit).
7
This motion was originally filed in federal court after the District
successfully removed the case to the United States District Court for the District of
Columbia. It was re-filed after the developers’ state law claims were remanded
back to the Superior Court.
9
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
8
Elsewhere in their opposition, the developers similarly asserted that
foreclosure was the “only impediment” to UMC Development’s full ownership,
and that UMC Development’s interests in the development land were “destroyed”
by foreclosure; that “formal approval [of title transfer] was wrongfully withheld by
(continued…)
10
The Superior Court understood that the District’s standing challenge was
broadly directed at all claims the developers made against the District. Indeed, the
court noted in its standing analysis that the allegation that the District “wrongfully
foreclosed upon the [development] property . . . effectively stripp[ing] the
plaintiffs of any and all . . . rights to this valuable land . . . . is the underpinning of
all of plaintiffs’ claims.” The court ruled that this theory did not give the
developers standing because the “injury plaintiffs claim was not caused by the . . .
foreclosure, even if that foreclosure was wrongful,” and relatedly, “any injury
suffered by plaintiffs will not be redressed if the court were to declare the
foreclosure wrongful.”9 But the court ultimately ruled that only Counts I-IV & IX,
see note 5, supra, should be dismissed as to the District on this ground; it dismissed
(…continued)
the District via its wrongful foreclosure,” which it characterized as the District’s
“ultimate and sole mechanism for declining to approve the transfer”; that the
developers were “slated to develop the [l]and at issue and to receive formal transfer
of title as a matter of course, but for the District’s wrongful foreclosure now at
issue”; that the District “stood upon the wrongful foreclosure as its only basis for
denying [the developers] title and other valuable rights”; and that the District
“rendered valuable rights to develop the land altogether valueless when it
purported to extinguish them pursuant to its . . . foreclosure.”
9
Although the Superior Court found that the developers had solely
challenged the foreclosure and had not separately challenged the District’s refusal
to approve the developers’ acquisition of the development property, it also
determined, in the alternative, that “even if [the developers] had pled the District’s
refusal to approve the conveyance” of the development property, “sovereign
immunity would bar any claims based on the District’s refusal to approve their
acquisition of the development property.”
11
the remaining two claims against the District, Counts VIII and X, see supra note 6,
because the developers had failed to provide the District with notice pursuant to
D.C. Code § 12-309.10
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
10
The Superior Court dismissed the claims against Not-For-Profit-Hospital
Corporation as well, explaining that “[i]f plaintiffs are not entitled to relief against
the District, a fortiorari they are not entitled to relief against Not-For-Profit.” The
claims against SHW and CMC Realty were subsequently dismissed in May 2014,
pursuant to the terms of a private settlement.
11
Grayson v. AT&T Corp., 15 A.3d 219, 229 (D.C. 2011) (en banc)
(internal quotation marks omitted).
12
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,” and (3) the injury will
likely be “redressed” by a favorable decision.13 A “defect of standing is [likewise]
a defect in subject matter jurisdiction.”14 Thus, a challenge to a plaintiff’s standing
is properly raised as a challenge to the court’s subject matter jurisdiction via a
motion to dismiss under Super. Ct. Civ. R. 12 (b)(1).
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
12
District of Columbia Appleseed Ctr. for Law & Justice, Inc. v. District of
Columbia Dep’t of Ins., Sec., & Banking, 54 A.3d 1188, 1199-1200 (D.C. 2012);
accord Padou v. District of Columbia Alcoholic Beverage Control Bd., 70 A.3d
208, 211 (D.C. 2013); Daley v. Alpha Kappa Alpha Sorority, Inc., 26 A.3d 723,
729 (D.C. 2011); Grayson, 15 A.3d at 233-35.
13
Daley, 26 A.3d at 728-29 (citing Lujan v. Defenders of Wildlife, 504 U.S.
555, 560-61 (1992)).
14
Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir. 1987) (citing Bender v.
Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986)); accord, Grayson, 15
A.3d at 247 (holding that one plaintiff’s claim was properly dismissed for want of
subject matter jurisdiction where he failed to demonstrate he had standing to bring
suit).
15
Grayson, 15 A.3d at 246.
13
“construe[d] . . . in favor of the complaining party.”16 But we also acknowledged
that a trial court’s jurisdictional inquiry under Rule 12 (b)(1) may extend beyond
the facts pled in the complaint.17 Thus, when a defendant makes a “factual” (as
opposed to a “facial”) attack on the plaintiff’s complaint under Super. Ct. Civ. R.
12 (b)(1),18 the trial court may “conduct an independent review of the evidence
submitted by the parties, including affidavits, to resolve factual disputes
concerning whether subject-matter jurisdiction exists.”19 In Grayson, this court
16
Id. at 232 (quoting Warth v. Seldin, 422 U.S. 490, 501 (1975)).
17
Id. at 232 n.28 (“[I]t has long been accepted that the judiciary may make
appropriate inquiry beyond the pleadings to satisfy itself on authority to entertain
the case.”) (quoting Haase, 835 F.2d at 906).
18
Heard v. Johnson, 810 A.2d 871, 877-78 (D.C. 2002).
19
Matthews v. Automated Bus. Sys. & Servs., Inc., 558 A.2d 1175, 1179
(D.C. 1989). See Grayson, 15 A.3d at 232 (observing that “it is within the trial
court’s power to allow or to require the plaintiff to supply, by amendment to the
complaint or by affidavits, further particularized allegations of fact deemed
supportive of plaintiff’s standing”) (quoting Warth, 422 U.S. at 501, and citing
Haase, 835 F.2d at 806).
We explained in Matthews that, unlike in the 12 (b)(6) context, “[t]he
submission of affidavits . . . does not convert a Rule 12 (b)(1) motion to one for
summary judgment.” 558 A.2d at 1179. Rather, “the determination of
jurisdictional facts is [generally] a matter for the court, . . . and the court has broad
discretion in determining how to proceed in finding such facts, including basing its
decision on affidavits.” Id. at 1179-80 (citations omitted); see Heard, 810 A.2d at
878 (stating that a “factual” attack on the court’s jurisdiction under Rule 12 (b)(1)
“may occur at any stage of the proceedings[,] and plaintiff bears the burden of
proof that jurisdiction does in fact exist. Perforce, no presumptions of truthfulness
adhere to the allegations of the complaint” (internal citations and quotation marks
omitted)).
14
suggested that a court should not resolve factual disputes without holding an
evidentiary hearing.20 We have never questioned, however, a trial court’s
consideration of facts outside the pleadings that are undisputed by the plaintiff.21
Such is the scope of a trial court’s review, and “[i]f . . . the plaintiff’s standing does
not adequately appear from all materials of record, the complaint must be
dismissed.”22
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
20
15 A.3d at 232. We noted that “[s]ome federal circuits have determined
that a district court cannot decide disputed factual questions or make findings of
credibility essential to the question of standing on the paper record alone but must
hold an evidentiary hearing,” and that “[t]his practice is consistent with the
Supreme Court’s pronouncement in Warth,” which we favorably cited throughout
Grayson. Id. (internal quotation marks omitted).
21
See, e.g., Bible Way Church of Our Lord Jesus Christ of Apostolic Faith
of Wash., D.C. v. Beards, 680 A.2d 419, 430 (D.C. 1996) (relying on an
uncontested affidavit presented by the defendants to decide a factual attack under
Rule 12 (b)(1)); see also Herbert v. Nat’l Acad. of Scis., 974 F.2d 192, 197 (D.C.
Cir. 1992) (“[W]here necessary, the court may consider the complaint
supplemented by undisputed facts evidenced in the record.”).
22
See Grayson, 15 A.3d at 232 (quoting Warth, 422 U.S. at 502).
15
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
23
The developers suggested at oral argument that, since standing may be
raised as an issue at any time, they could inject new facts to support their standing
at any time. But, where, as here, the developers’ standing was challenged in the
District’s motion to dismiss, the time and place for factual development was in the
litigation of that motion in the Superior Court.
Furthermore, we reject the developers’ argument that they were given
insufficient opportunity “to address and fill any perceived gaps in the[ir]
allegations.” The developers assert that, following remand of the case to Superior
Court, they were “never invited [to submit] further briefing,” on the District’s
already fully briefed standing challenge, and that they expected the Superior Court
to hold a hearing on the District’s motion to dismiss before ruling. But in the four
months that the District’s motion to dismiss was pending in Superior Court post-
remand, the developers never asked to submit further briefing on the issue of
standing or for an evidentiary hearing (although they did file supplemental
pleadings addressing unrelated issues). Nor did they, after the court ruled that they
lacked standing, seek reconsideration under Super. Ct. Civ. R. 59 or 60 and ask for
a hearing in conjunction with that motion. As noted above, the developers bore the
burden of proof to establish their standing to sue; if they wanted additional
opportunity to develop evidence or present their arguments, it was their obligation
to request it.
24
We emphasize that we are not deciding the merits of this dispute. In
particular, we do not decide whether the District wrongfully foreclosed on the
property. Nor do we decide whether the developers in fact suffered any injury.
We merely conclude that the developers did not succeed in demonstrating in
Superior Court that they have standing to pursue their claims as pled in their
complaint.
16
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
25
Having devoted pages of their pleading to their explication of their future
contingent interest in the property, on which they based their standing, the
developers reminded the court that “in any event” they had pled in the complaint
that they “were in actuality the rightful owners.” But once the developers admitted
that they only had an expectation of transfer of title, the Superior Court was no
longer obligated to credit that bare assertion, nor did the court have an obligation to
(continued…)
17
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.
(…continued)
schedule an evidentiary hearing sua sponte on this undisputed issue of fact before
ruling on the District’s Rule 12 (b)(1) motion.
18
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
19
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 Corporation, and
conveyed the property to that newly established entity. In other words, the District
unambiguously and definitively demonstrated its disinterest in fulfilling the
contingency on which the developers’ property interest was based both before and
after the foreclosure.26
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
26
We are likewise unpersuaded by the developers’ argument that their
injury was traceable to the foreclosure because CMC Realty remained
contractually obligated to convey the development land to UMC Development
under the Operating Agreement and the District would have been compelled to
negotiate with UMC Development “in order to obtain unclouded title and rights” to
the development land. This argument simply ignores both the provisions in the
UMC Development Operating Agreement, which acknowledged that the Loan
Acquisition Agreement was controlling, and the provision in the Loan Acquisition
Agreement, which left the decision whether or not to withhold consent to any
request by CMC Realty to transfer title “in [the District-SHW Partnership]’s sole
and absolute discretion.”
20
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
27
The developers also argued that they had standing to sue because they lost
the chance to either “profit from” or participate in the foreclosure auction. The
first assertion appears to be based on an ownership right they did not possess, and a
contingent future interest that was, by that time, defunct. Likewise, their second
assertion, a generalized grievance that the auction (in which they did not
participate) was rigged, does not give them standing to challenge the foreclosure
sale. See Lujan, 504 U.S. at 573-74 (“We have consistently held that a plaintiff
raising only a generally available grievance about government—claiming only
harm to his and every citizen’s interest in proper application of the Constitution
and laws, and seeking relief that no more directly and tangibly benefits him than it
does the public at large—does not [have standing to sue].”).
21
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]evelopment [l]and prior to the foreclosure,” we cannot ignore
the word, “expectation.” We further note that there is no mention of any “rental
income,” let alone existing rental income that was cut off by the foreclosure. There
is also no discussion of any alleged “development interests” that existed
independent of the developers’ anticipated receipt of title.
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
22
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 Realty in a 2009 lawsuit “for failing to account for and remit
to [the developers] certain rental payments arising from a leasehold interest held by
SHW[] and CMC Realty.” As this sentence indicates only that SHW and CMC
held “leasehold interests” in the property, it fails to substantiate the developers’
assertion on appeal that, because of the foreclosure, they were deprived of an
active stream of rental income.
28
The developers’ Opposition to SHW’s and CMC Realty’s motion to
dismiss responded to arguments that (1) the developers’ claims were time-barred,
(2) the developers’ claims were barred by res judicata, and (3) the developers had
failed to state a claim against SHW for (a) tortious interference with prospective
economic advantage or (b) breach of fiduciary duty.
23
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
29
The Superior Court dismissed these claims for the developers’ failure to
provide notice under D.C. Code § 12-309, which requires plaintiffs bringing an
action “against the District of Columbia for unliquidated damages to person or
property” to, “within six months after the injury or damage was sustained,” give
“notice in writing to the Mayor of the District of Columbia of the approximate
time, place, cause, and circumstances of the alleged injury or damage.”
30
See Randolph, 973 A.2d at 705 (noting that where our review is de novo,
“we are not limited to reviewing the legal adequacy of the grounds the trial court
relied on for its ruling; if there is an alternative basis that dictates the same result, a
correct judgment must be affirmed on appeal” (quoting Nicola v. Wash. Times
Corp., 947 A.2d 1164, 1176 n.9 (D.C. 2008))); Gov’t Emps. Ins. Co. v. Grp.
Hospitalization Med. Servs., Inc., 602 A.2d 1083, 1086 (D.C. 1992); see also
Riverside Hosp. v. District of Columbia Dep’t of Health, 944 A.2d 1098, 1103
(D.C. 2008) (“Questions of standing may be raised sua sponte by this . . . court.”).
We take no position on the developers’ obligations under § 12-309. Indeed,
we find we cannot, because timely notice under the statute is tied to injury, see
supra note 29, and, as explained above, we cannot identify an injury traceable to
the District.
24
The injury the developers allegedly endured under the theories of unjust
enrichment and quantum meruit31 was, in essence, the unfairness of the District
benefiting from the developers’ vaguely asserted “significant pre-development
investment[s],” and its undertaking of “significant and valuable pre-development
efforts and services” without receiving compensation. Since the developers never
explained with any specificity what these pre-development investments or efforts
and services were, it is unclear how the District benefitted from them or how the
developers were deprived of something of value. But our focus is not on whether
the developers failed to state claims for unjust enrichment and quantum meruit.
Whatever these investments or efforts and services were, the developers’ only
attempt to connect their injury to the actions of the District, with these claims as
with all others, was to point to the District’s foreclosure of the hospital and
development land. In the complaint, the developers asserted that the District
31
An unjust enrichment claim requires the plaintiff to demonstrate that “(1)
the plaintiff conferred a benefit on the defendant; (2) the defendant retains the
benefit; and (3) under the circumstances, the defendant’s retention of the benefit is
unjust.” Euclid St., LLC v. District of Columbia Water & Sewer Auth., 41 A.3d
453, 463 n.10 (D.C. 2012) (internal quotation marks omitted).
A quantum meruit claim requires the plaintiff to demonstrate that (1)
valuable services were rendered by the plaintiff; (2) for the defendant; (3) that said
services were accepted and enjoyed by the defendant; and (4) under such
circumstances has reasonably notified the defendant that the plaintiff, in
performing such services, expected to be paid. New Econ. Capital, LLC v. New
Markets Capital Grp., 881 A.2d 1087, 1095 (D.C. 2005) (citing Fred Ezra Co. v.
Pedas, 682 A.2d 173, 176 (D.C. 1996)).
25
claimed “valuable benefits . . . for itself when it acquired the [d]evelopment [l]and”
via foreclosure; and in their opposition to the District’s motion to dismiss, the
developers allege “that the District knew at the time specifically that (1) its
foreclosure was wrongful; and (2) it was thereby injuring” the developers.
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 “retain[ed],” 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 D.C. Code § 12-309.
32
It was not necessary for the District to foreclose to enjoy these alleged
benefits. The District’s interest in the hospital and surrounding land was not based
upon its legal possession of the property, but rather, as the developers
acknowledge, in having a functional, financially stable hospital to serve the
140,000 District residents east of the Anacostia River.
26
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 court which lacks subject matter jurisdiction
may not issue a ruling on the merits.34
33
9 Wright & Miller, Fed. Prac. & Proc. § 2373 (3d ed. 2008) (noting “that
dismissals that do not reach the merits because of a lack of jurisdiction, because the
action was premature, or because it was brought by the wrong plaintiff, must be
considered to have been dismissed without prejudice” (footnotes omitted));
34
See, e.g., In re Brown, 974 A.2d 884, 886 (D.C. 2009) (“We do not reach
the merits of the appeals because we lack subject matter jurisdiction. Therefore,
we dismiss the instant appeals without prejudice to possible future challenges after
[the defect is cured].”); Simmons v. Cent. Charge Serv., Inc., 269 A.2d 850, 852
n.7 (D.C. 1970) (“Dismissal of appellant’s complaint for lack of jurisdiction . . .
will not, of course, prejudice her should she file a new complaint with proper
jurisdictional allegations.”); S. Walk at Broadlands Homeowner’s Ass’n, Inc. v.
OpenBand at Broadlands, LLC, 713 F.3d 175, 185 (4th Cir. 2013) (“A dismissal
for lack of standing—or any other defect in subject matter jurisdiction—must be
one without prejudice, because a court that lacks jurisdiction has no power to
adjudicate and dispose of a claim on the merits.”); see also Rural Water Sewer &
Solid Waste Mgmt., Dist. No. 1, Logan Cty., Okla. v. City of Guthrie, 654 F.3d
1058, 1069 n.9 (10th Cir. 2011); Brereton v. Bountiful City Corp., 434 F.3d 1213,
1216 (10th Cir. 2006); Murray v. Conseco, Inc., 467 F.3d 602, 605 (7th Cir. 2006);
Frederiksen v. City of Lockport, 384 F.3d 437, 438 (7th Cir. 2004); Figueroa v.
Buccaneer Hotel Inc., 188 F.3d 172, 182 (3d Cir. 1999); cf. Super. Ct. Civ. R. 41
(b) (noting, in discussion of the effect of involuntary dismissals, that “a dismissal
(continued…)
27
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 contrary. In that case, we determined that
(…continued)
under this subdivision and any dismissal not provided for in this Rule, other than a
dismissal for lack of jurisdiction, . . . operates as an adjudication upon the merits”
(emphasis added)).
35
See, e.g., Brereton, 434 F.3d at 1217 (“[O]nce a court determines it lacks
jurisdiction over a claim, it perforce lacks jurisdiction to make any determination
of the merits of the underlying claim.” (citations omitted)).
36
Cf. Brereton, 434 F.3d at 1219 (where trial court lacked subject matter
jurisdiction due to its determination that plaintiff lacked standing, it was error for
the trial court to dismiss the case with prejudice because it thought it would be
futile to grant the motion to amend).
28
“the trial judge did not commit reversible error in dismissing Dorsey’s complaint
with prejudice” where “any re-filed complaint would not have been viable because
. . . the statute of limitations period governing Dorsey’s claim expired three days
after the complaint was filed.” Id. at 669. Unlike here, the trial court in Dorsey
dismissed the case for failure to serve counsel for the District, i.e., for failure to
comply with court rules. Although mandatory, rules regarding service do not
implicate the court’s subject matter jurisdiction.37 Dorsey thus does not support
the District’s argument that any error in dismissing this case with prejudice was
similarly harmless.
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 prejudice. We remand to the Superior Court
to amend its dismissal order accordingly.
So ordered.
37
See Neill v. District of Columbia Pub. Emp. Relations Bd., 93 A.3d 229,
239-40 (D.C. 2014) (distinguishing the concepts of subject matter jurisdiction and
service of process).