RUDOLPH CONTRERAS, United States District Judge.
This case concerns the unfortunate and rather haphazard business dealings of several individuals seeking to jointly establish and operate a restaurant in the District of Columbia. Plaintiff Neway Alemayehu originally brought this action alleging that Belay Abere, Bekalu Bayabile, and Iyossias
In the spring of 2015, Mr. Alemayehu and Mr. Abere met to discuss a possible investment in a restaurant called the Amsterdam Café and Lounge, located in Washington, D.C. Compl. ¶ 7; Countercl. ¶ 9, ECF No. 4. Through their discussions, the parties ultimately came to an agreement. Although some of the details of the agreement are in dispute, the basic premise was that, in exchange for an initial investment, Mr. Alemayehu would receive an 80% ownership stake in a newly formed corporate entity, which would then be responsible for operating the restaurant. See Compl. ¶ 7; Countercl. ¶¶ 9-11, 16. For their part, Mr. Abere and Mr. Bayabile would each own five percent and fifteen percent of the business, respectively. See Compl. ¶ 7; Countercl. ¶ 10. The agreement also contemplated that Mr. Abere would assign a commercial lease to the newly formed entity and that an existing liquor license would also be transferred to the business. Compl. ¶ 7; Countercl. ¶¶ 9, 12. The parties dispute, however, whether these transfers were Mr. Abere's affirmative obligations or whether, instead, they were express conditions on the contract.
Nevertheless, Mr. Alemayehu claims that these promises and the prospect of owning 80% of the restaurant venture induced him to invest substantial sums of money into the business. Indeed, in addition to making an initial investment of approximately $80,000, see Compl. ¶ 32, Mr. Alemayehu claims that he also contributed funds to pay: back rents owed to the landlord, along with taxes and insurance, legal fees associated with the attempt to transfer the lease and liquor license, substantial construction and renovation work on the restaurant, the purchase and installation of new kitchen equipment, security and fire alarm systems, restaurant furnishings, a liquor and wine inventory, and a computerized cash register system. Compl. ¶¶ 8-9; see also Countercl. ¶ 17. In total, Mr. Alemayehu claims that he invested more than $460,000 in the restaurant. Compl. ¶ 32.
Unfortunately, the business arrangement did not unfold as the parties had intended. Indeed, despite their efforts to persuade the landlord of the building in which the restaurant was located, she ultimately refused to permit any assignment of the commercial lease from the current leaseholder, Mr. Abere individually, to the newly formed business entity. Compl. ¶ 10; Countercl. ¶ 20. Rather, she required that Mr. Abere — and only Mr. Abere — be responsible for the lease. See Compl. ¶ 10; Countercl. ¶ 20. Mr. Alemayehu alleges that, at some point, Mr. Abere represented to him that the only way the landlord would permit the assignment was if she were presented with an operating agreement showing that Mr. Abere was the only owner of the corporate entity. Compl. ¶ 11. Thus, Mr. Alemayehu allegedly agreed to be removed from the corporate documents, albeit temporarily, until the assignment could be accomplished. Compl. ¶ 11. But apparently the landlord was unwilling to
However, the parties dispute what exactly their future intentions were. Mr. Alemayehu claims that this Abere-centered operation was a temporary arrangement and that they had agreed that the corporate entity would manage the business until they could find a way to convince the landlord to substitute the corporate entity for Mr. Abere on the lease. See Compl. ¶ 12. Moreover, Mr. Alemayehu argues that, as an 80% owner, he was to act as the restaurant's executive manager, have daily access to financial records, participate in major business decisions, and would receive a power of attorney from Mr. Abere. See Compl. ¶ 12. Mr. Abere, on the other hand, claims that they modified their earlier agreement. See Countercl. ¶ 22. Specifically, he claims that they agreed that Mr. Abere would form, own, and operate the restaurant, but that he would employ Mr. Alemayehu as the restaurant's manager and compensate him with 80% of the business's profits in consideration for his initial investment. See Countercl. ¶ 22.
Regardless, in October 2015, the restaurant opened for business and Mr. Alemayehu assumed the role of executive manager while Mr. Abere was traveling outside of the United States. See Compl. ¶ 13; Countercl. ¶¶ 23, 26. But no management agreement or power of attorney was ever executed, either before Mr. Abere left or after he returned. Compl. ¶¶ 13, 15. And, in fact, it appears that Mr. Alemayehu's time as executive manager was rather short lived. Mr. Alemayehu alleges that when Mr. Abere returned a month or two later, Mr. Abere suggested that he take over the management and operation of the business given his "superior liability protection and experience," but that this change would only last for "a few months." Compl. ¶ 14. Alemayehu relented, believing this course of action "to be beneficial ... as long as [the] management was performed in an inclusive, collaborative way." Compl. ¶ 14. But subsequently, according to Mr. Alemayehu, Mr. Abere took several actions meant to undermine his authority as executive manager and never restored Mr. Alemayehu to that position. Compl. ¶ 18 (Mr. Abere "has continued, up through the filing of this lawsuit, to strengthen his control of the business, its operation and planning, all designed to totally remove [Mr. Alemayehu] from any involvement or managerial oversight responsibilities for the restaurant enterprise."). Furthermore, Mr. Alemayehu claims that, even though he is entitled to 80% of the profits, he has received no profit distributions, Compl. ¶ 41, and Mr. Abere "has tried to make it appear that he is the legitimate sole owner of the business." Compl. ¶ 19. All of this seems to have culminated when, on March 4, 2016, Mr. Alemayehu disassociated himself from the venture. See Letter from Mr. Alemayehu to Mr. Abere, ECF No. 28-6. That same month, he brought this suit seeking what he believes is due to him.
Mr. Abere, however, has a somewhat different take. According to Mr. Abere, upon his return, he discovered that Mr. Alemayehu had abused his position of trust and failed to faithfully and fully perform his duties as manager. Countercl. ¶ 27. Specifically, he claims that Mr. Alemayehu failed or refused to pay certain taxes, salaries of employees, and invoices submitted by vendors and third parties. Countercl. ¶ 27. In addition, Mr. Abere learned that, while the business had generated approximately
In March 2016, Mr. Alemayehu filed a complaint initiating this lawsuit. See generally Compl. Mr. Alemayehu asserts six claims against Mr. Abere, including claims for unjust enrichment, promissory estoppel, and quantum meruit. See Compl. ¶¶ 26-32, 37-41. Mr. Abere, in turn, filed a counterclaim against Mr. Alemayehu. See generally Countercl. He asserts, among other things, claims for breach of fiduciary duty, breach of contract, quasi-contract/breach of agency contract, and unjust enrichment. See Countercl. ¶¶ 36-52. Both Mr. Abere and Mr. Alemayehu have since filed answers to the claims against them.
On May 8, 2017, Mr. Abere filed a partial motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. See Def.'s Mot. That same day, Mr. Alemayehu also filed a motion to dismiss, or in the alternative, for summary judgment. See Pl.'s Mot. Both motions have been fully briefed and are now ripe for decision. The Court therefore addresses each motion in turn.
Before turning to the merits of Mr. Abere's motion, the Court must first clear up a technical procedural issue. Mr. Abere styles his motion as a motion dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. See generally Def.'s Mot. Under the Federal Rules, such motions are only available to parties before they have filed a responsive pleading. See Fed. R. Civ. P. 12(b) ("A motion ... must be made before pleading if a responsive pleading is allowed."). Because Mr. Abere has already filed an answer in this case, he is not entitled to relief under Rule 12(b)(6). See id. However, under the circumstances, the proper course of action is to construe the motion to dismiss as a motion for judgment on the pleadings under Rule 12(c) because the standard under both rules is essentially same. See Bloom v. McHugh, 828 F.Supp.2d 43, 49 (D.D.C. 2011) ("Because, however, the standards for a Rule 12(b)(6) motion and a Rule 12(c) motion for judgment on the pleadings are identical, courts routinely construe motions to dismiss that are filed after a responsive pleading as motions for judgment on the pleadings, and this Court will do likewise."); Lockhart v. Coastal Intern. Sec., Inc., 905 F.Supp.2d 105, 112 (D.D.C. 2012) ("[W]hen not raised in a motion prior to filing a pleading, the legal defense[] of
Accordingly, Mr. Abere's motion will be granted only if the Complaint fails to plead "enough facts to state a claim for relief that is plausible on its face." Bell Atl. Corp v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). To state a plausible claim, the complaint need not contain detailed factual allegations, but it must recite facts sufficient to at least "raise a right to relief above the speculative level ... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. at 555, 127 S.Ct. 1955. A "pleading that offers `labels and conclusions' or `a formulaic recitation of the elements of a cause of action will not do.'" Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). In short, a complaint must contain sufficient factual matter that, accepted as true, would allow the Court "to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 678, 129 S.Ct. 1937.
Here, Mr. Abere seeks to dismiss Mr. Alemayehu's claims for promissory estoppel, quantum meruit, and constructive trust. See generally Def.'s Mot. Only the first two claims, however, are worthy of any significant discussion. As the Court noted in a prior opinion, constructive trust is not an independent cause of action, but a remedy. Thus, the Court "construe[s] the request for a constructive trust as a request for injunctive relief," but "takes no position on whether this remedy would be appropriate in this case." Alemayehu, 199 F.Supp.3d at 87. As for Mr. Alemayehu's claims for promissory estoppel and quantum meruit, the Court finds that Mr. Alemayehu has alleged facts sufficient to state a plausible entitlement to relief. Accordingly, the Court denies Mr. Abere's motion.
The Court first addresses Mr. Abere's argument that the complaint fails to allege sufficient facts to state a claim for promissory estoppel. "To factually allege promissory estoppel, a plaintiff must establish (1) the existence of a promise, (2) that the promise reasonably induced reliance on it, and (3) that the promisee relied on the promise to his detriment." Osseiran v. Int'l Fin. Corp., 498 F.Supp.2d 139, 147 (D.D.C. 2007), aff'd, 552 F.3d 836 (D.C. Cir. 2009) (citing Daisley v. Riggs Bank, 372 F.Supp.2d 61, 71 (D.D.C. 2005)). Under the law, a plaintiff asserting a claim for promissory estoppel must allege that he or she relied on a promise that is sufficiently "definite" because "reliance on an indefinite promise is not reasonable." In re U.S. Office Prods. Co. Sec. Litig., 251 F.Supp.2d 58, 73 (D.D.C. 2003) (citations omitted). While the promise must have "definite terms on which the promisor would expect the promisee to rely," it "need not be as specific and definite as a contract." Id. (citing Bender v. Design Store Corp., 404 A.2d 194, 196 (D.C. 1979)). Based on this Court's prior opinion dismissing the promissory estoppel claim against Mr. Tilahun, Mr. Abere now argues that the same claim against him must fail because Mr. Alemayehu has not "allege[d] or identif[ied] an adequately definite promise" that Mr. Abere made. Def.'s Mot. at 4. Mr. Abere's argument, however, is misguided.
Although this Court previously held that Mr. Alemayehu's Complaint did not allege any sufficiently definite promise from Mr. Tilahun, the Court finds no such impediment with respect to his claim against Mr.
Furthermore, Mr. Alemayehu's Complaint also adequately alleges that Mr. Alemayehu reasonably relied upon Mr. Abere's promises to his detriment. According to the Complaint, Mr. Abere's promises not only induced Mr. Alemayehu to make an initial investment in the enterprise, they also convinced him to continue investing in the business on the belief that
The Court next considers Mr. Alemayehu's quantum meruit claim. Under D.C. law, to state a claim for quantum meruit, a plaintiff must allege: (1) "valuable services rendered by the plaintiff;" (2) "for the person from whom recovery is sought;" (3) "which services were accepted and enjoyed by that person;" and (4) "under circumstances which reasonably notified the person that the plaintiff, in performing such services, expected to be paid." Providence Hosp. v. Dorsey, 634 A.2d 1216, 1218 n.8 (D.C. 1993); see also TVL Assoc. v. A & M Constr. Corp., 474 A.2d 156, 159 (D.C. App. 1984). Defendant argues that none of these elements has been sufficiently plead. Def.'s Mot. at 5. Again, the Court disagrees.
First, Mr. Alemayehu plainly alleges that he rendered valuable services.
However, Mr. Abere might very well have been the beneficiary of Mr. Alemayehu's
But there are also circumstances under which Mr. Alemayehu would not be entitled to recover for services rendered to the business. Indeed, as described above, if the corporate entity were deemed to be running the business, then the benefits accrued to it, not Mr. Abere and, thus, Mr. Alemayehu would have no viable quantum meruit claim against him. Similarly, if Mr. Alemayehu were deemed to be a de facto partner of the business, then his services accrued, at least in part, to his own benefit. See D.C. Code § 29-604.01(b) ("Each partner shall be entitled to an equal share of the partnership profits."). And if that were the case, then he could not have expected to be paid for his services because, under D.C. law, "[a] partner shall not be entitled to remuneration for services performed for the partnership," except in certain situations not applicable here. Id. at § 29-604.01(k). Thus, to be successful on his claim, the finder of fact must necessarily determine that Mr. Abere was an owner of the business and that Mr. Alemayehu was not.
Although that theory may run counter to some of Mr. Alemayehu's other claims, it is well established that a plaintiff is allowed to plead in the alternative. See McNamara v. Picken, 950 F.Supp.2d 125, 128 (D.D.C. 2013) (holding that a plaintiff may plead claims based on two opposing theories of liability under Federal Rule of Civil Procedure 8(d)(2) and that "a plaintiff `need not use particular words to plead in the alternative as long as it can be reasonably inferred that this is what [it was] doing.'" (alteration in original) (citing G-I Holdings Inc. v. Baron & Budd, 238 F.Supp.2d 521, 536-37 (S.D.N.Y. 2002))). For example, in McNamara v. Picken, two physicians decided to merge their practices and effectuate a merger by leasing shared office space, sending out merger notifications to patients, and adding the plaintiff to the practice's bank account. See McNamara v. Picken, 866 F.Supp.2d 10, 13-14 (D.D.C. 2012). Thereafter, the relationship between the parties soured and the plaintiff claimed that he and the defendant were equal partners and that the defendant had breached their oral partnership agreement. See id. Alternatively, the plaintiff claimed that he was an employee of the defendant and that the defendant had breached his employment agreement.
If Mr. Abere does in fact own the business and Mr. Alemayehu does not, then Mr. Alemayehu may very well have a claim for quantum meruit. Under the circumstances alleged in the pleadings, it would seem reasonable to expect Mr. Abere to have known that Mr. Alemayehu anticipated compensation in one form or another for his work. Indeed, Mr. Abere himself claims that Mr. Alemayehu was "employ[ed] as the manager of Amsterdam Café." Countercl. ¶ 24; see also Compl. ¶ 20 (alleging that Mr. Tilahun informed employees that Mr. Alemayehu "works for Defendants Abere and Bayabile"). And there is no reason to believe that Mr. Alemayehu was conferring a benefit on the business gratuitously or officiously. Therefore, if Mr. Alemayehu did not have an interest in the restaurant enterprise, he has at least alleged sufficient facts to demonstrate that he has a plausible right to relief on his claim for quantum meruit. Based on the foregoing, the Court concludes that Mr. Abere is not entitled to judgment on the pleadings with respect to Mr. Alemayehu's quantum meruit claim.
The Court now turns to Mr. Alemayehu's motion. Like Mr. Abere, Mr. Alemayehu erroneously styles his motion as a motion to dismiss under Rule 12(b)(6) despite the fact that responsive pleadings have already been filed. However, unlike Mr. Abere, Mr. Alemayehu has alternatively moved for summary judgment and has attached materials outside of the pleadings. Because both parties rely on these materials, and both parties have had the opportunity to respond and have already taken discovery, the Court will treat Mr. Alemayehu's motion as a motion for summary judgment rather than a motion for judgment on the pleadings. See Langley, 677 F.Supp.2d at 264 ("the Court finds that the Secretary's motion should in fact be construed as a motion for summary judgment rather than a motion for judgment on the pleadings (or a motion to dismiss)" because, "[i]n filing her motion, the Secretary attached various exhibits to her filing that both parties have relied upon in their briefing.").
Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A "material" fact is one capable of affecting the substantive outcome of the litigation. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is "genuine" if there is enough evidence for a reasonable jury to return a verdict for the non-movant. See Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007).
The principal purpose of summary judgment is to streamline litigation by disposing
Mr. Alemayehu seeks summary judgment on each of Mr. Abere's five counterclaims. For the reasons stated below, the Court denies Mr. Alemayehu's motion.
The Court first considers Mr. Abere's breach of contract claim and finds that summary judgment is unwarranted. To establish a claim for breach of contract, a plaintiff must establish (1) a valid contract between the parties, (2) an obligation or duty arising out of the contract, and (3) a breach of that duty. See Tsintolas Realty Co. v. Mendez, 984 A.2d 181, 187 (D.C. 2009). Although decisions from the D.C. Courts frequently contain statements suggesting that a prima facie case for breach of contract also requires allegations of damages, it is settled in the District that nominal damages can suffice. See Alston v. Flagstar Bank, FSB, 609 Fed.Appx. 2, 3 (D.C. Cir. 2015).
Here, Mr. Abere claims that he and Mr. Alemayehu entered into a rather odd employment agreement whereby Mr. Abere would continue to own and operate the Amsterdam Café, but, if Mr. Alemayehu paid $100,000, Mr. Abere would make him the manager of the restaurant and compensate him with 80% of the business's net profits. See Countercl. ¶ 22. Mr. Abere claims that Mr. Alemayehu violated this agreement when he failed to pay the full consideration amount of $100,000, as he asserts was required under the contract. See Countercl. ¶¶ 22, 41-44. In addition, Mr. Abere suggests that Mr. Alemayehu breached the duty of good faith and fair dealing implicit in the agreement when he failed to pay taxes, invoices, and employee salaries and failed to account for approximately $110,422.81 in gross receipts while he was serving as manager of the restaurant. See Countercl. ¶¶ 28, 41-44.
In his motion, Mr. Alemayehu argues that he did not breach the contract by failing to pay the requisite consideration because the parties had, in fact, agreed to lower the price of the initial investment amount to $80,000, which Mr. Alemayehu paid. See Pl.'s Mot. at 12. But, this is not supported by the record currently before the Court. There is no dispute that Mr. Alemayehu paid a total of $80,000 — $50,000 directly to Mr. Abere and approximately $30,000 to Mr. Abere's landlord. See Abere Dep. at 61:22-62:4, ECF No. 28-10 ("From our agreement, I was supposed to receive [$]100,000, and from the [$]100,000 I receive[d] [$]50[,000] for me and [$]30[,000] — about [$]30[,000]-something to the landlord."). But there is no evidence in the record demonstrating any agreement between the parties to lower the contract price from $100,000 to
Mr. Alemayehu next argues that he is entitled to summary judgment because, regardless of whether he breached any contractual duties owed to Mr. Abere, Mr. Abere cannot make a showing of damages. The basis of Mr. Alemayehu's argument is not that the alleged breaches did not injure the business.
First and foremost, it is important to recognize that, even if Mr. Alemayehu was right — that Mr. Abere did not share the injuries suffered by the business — this would not preclude Mr. Abere's breach of contract claim. "[T]he settled rule in the District is that `[e]ven where monetary damages cannot be proved, a plaintiff who can establish a breach of contract is entitled to an award of nominal damages.'" Alston, 609 Fed.Appx. at 3 (quoting Wright v. Howard Univ., 60 A.3d 749, 753 (D.C. 2013)). For that reason alone, Mr. Alemayehu's argument for dismissal must fail.
But Mr. Alemayehu's argument is also wrong for another reason. Answering the question of whether Mr. Abere made capital contributions to the business does not resolve the issue of whether Mr. Abere was personally injured by Mr. Alemayehu's actions. Indeed, whether Mr. Abere was injured turns instead on the ownership structure of the business. If Mr. Abere is the sole proprietor, as he contends, any injury to the business is also an injury felt by him because the identity of a sole proprietorship is "the same as that of its owner." Pritchett v. Stillwell, 604 A.2d 886 (D.C. 1992); see also York Grp., Inc. v. Wuxi Taihu Tractor Co., 632 F.3d 399, 403 (7th Cir. 2011) (noting that a sole proprietorship
The Court next considers Mr. Abere's unjust enrichment claim. Unjust enrichment is "an obligation which the law creates, in the absence of any agreement, when and because the acts of the parties or others have placed in the possession of one person money, or its equivalent, under such circumstances that in equity and good conscience he ought not to retain it ... [d]uty, and not a promise or agreement or intention of the person sought to be charged, defines it." Jordan Keys & Jessamy, LLP v. St. Paul Fire & Marine Ins. Co., 870 A.2d 58, 64 (D.C. 2005) (citing Miller v. Schloss, 218 N.Y. 400, 113 N.E. 337, 339 (N.Y. Ct. App. 1916)). Under D.C. law, "unjust enrichment has three elements: (1) the plaintiff conferred a benefit upon the defendant; (2) the defendant accepted and retained the benefit; and (3) it would be unjust for the defendant not to pay the plaintiff the value of the benefit." Sununu v. Philippine Airlines, Inc., 792 F.Supp.2d 39, 53-54 (D.D.C. 2011) (internal citation omitted). Here, Mr. Abere claims that Mr. Alemayehu was unjustly enriched when he diverted or retained over $110,422.81 from the restaurant's gross receipts. See Countercl. ¶¶ 28, 50-52.
Mr. Alemayehu again argues that he is entitled to judgment because Mr. Abere did not contribute funds to the business venture and because the business was not yet profitable such that Mr. Abere might have claim to a undistributed profits. See Pl.'s Mot. at 12-13; Pl.'s Reply at 8-9. In essence, Mr. Alemayehu argues that Mr. Abere cannot claim to have conferred a benefit on Mr. Alemayehu when the alleged monies actually came from the business. But, once again, one of the central disputes in this case is over who owns the business. If Mr. Abere owns the business as a sole proprietorship, as he claims, then any money taken from the coffers of the restaurant is money taken out of Mr. Abere's pockets. Because the ownership issue is disputed, Mr. Alemayehu cannot obtain summary judgment merely by arguing that he took money from the business, not Mr. Abere himself.
Finally, the Court addresses Mr. Abere's breach of fiduciary duty and breach of agency contract claims. Mr. Abere claims Mr. Alemayehu owed him fiduciary duties as an employee of the restaurant or duties based on some agency contract.
Mr. Alemayehu argues that he is entitled to summary judgment on these claims because Mr. Abere cannot make a showing that he suffered any harm.
Unfortunately, this argument raises a complication. Specifically, this argument calls into question not only the rights of Mr. Abere, but also Wilson Concepts
In this case, there is good reason to believe that Wilson Concepts and Mr. Wilson may be required parties. Although "Rule 19 precedent is admittedly scant," Nanko Shipping, USA, 850 F.3d at 465, in "actions involving contractual rights, courts have frequently found that the parties to a contract are required parties within the meaning of Rule 19," Eco Tour Adventures, Inc. v. Zinke, 249 F.Supp.3d 360, 390 (D.D.C. 2017) (collecting cases); see also 5C Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 1613 (3d ed. 2017) ("In cases seeking reformation, cancellation, rescission, or otherwise challenging the validity of a contract, all parties to the contract probably will have a substantial interest in the outcome of the litigation and their joinder will be required."). Here, the argument advanced by Mr. Alemayehu concerns the enforceability of the Settlement Agreement with Wilson Concepts and Mr. Wilson. If the Court were to give credence to that argument, it would necessarily "impair or impede" their interests in that agreement. Yet, those contractual rights are being considered without their participation.
For the foregoing reasons, Mr. Abere's Motion to Dismiss (ECF No. 25) is