Schafer Corporation v. Virginia Square Office Corporation

Filing 21

MEMORANDUM OPINION in re 5 MOTION to Expedite Consideration of Declaratory Judgment Claim and 7 MOTION to Dismiss for Failure to State a Claim. Signed by District Judge James C. Cacheris on 01/22/2013. (jlan)

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division

SCHAFER CORPORATION,

)
)
)
)
)
)
)
)
)
)
)

Plaintiff,
v.
VIRGINIA SQUARE OFFICE
CORPORATION,

Defendant.

1:12cv1204 (JCC/IDD)

M E M O R A N D U M

O P I N I O N

This matter is before the Court on Plaintiff Schafer
Corporation’s (“Plaintiff” or “Schafer”) Motion for Expedited
Consideration of Declaratory Judgment Claim (the “Motion for
Expedited Consideration”) [Dkt. 5] and Defendant Virginia Square
Office Corporation’s (“Defendant” or “Virginia Square”) Motion
to Dismiss for Failure to State a Claim (the “Motion to
Dismiss”) [Dkt. 7].

For the following reasons, the Court will

deny Plaintiff’s Motion for Expedited Consideration and deny
Defendant’s Motion to Dismiss.
I. Background
A.

Factual Background

Plaintiff Schafer is the tenant, and Defendant
Virginia Square is the current landlord and successor-in1

interest to the original landlord (New Boston/Meridian, L.L.C.,
a non-party), under an lease agreement dated June 23, 2000
(“Original Lease”) and amended by a First Amendment to Lease
dated August 31, 2009 (“First Amendment”) (collectively, the
“Lease”).

(Compl. [Dkt. 1] ¶ 3-4; Original Lease [Dkt. 1-1];

First Amendment [Dkt. 1-2].)
August 31, 2014.

The term of the Lease expires on

(First Amendment at 1, § 5.)

Section XXI of the Original Lease provides that the
Lease cannot “be assigned, mortgaged, pledged, encumbered or
otherwise transferred, and that neither the Premises, nor any
part thereof, will be . . . used or occupied or utilized for
desk space or for mailing privileges, by anyone other than
[Plaintiff] (except that [Plaintiff]’s affiliates may also
occupy or use the Premises) . . . or be sublet” without
Defendant’s prior written consent.

(Compl. ¶ 9; Original Lease,

§ XXI.)
Plaintiff is a subcontractor to the Defense Advanced
Research Projects Agency (“DARPA”) through DARPA’s contract with
Booz Allen Hamilton, Inc., the prime contractor.
12.]

[Compl. ¶ 11-

Section 9 of the First Amendment provides Plaintiff with a

“Limited Right of Termination,” stating that:
In the event (i) the Defense Advanced Research
Projects Agency (“DARPA”) relocates from its current
location to a new location (the “New DARPA Building),
(ii) Tenant leases space (“Tenant’s New Location”)
either at the New DARPA Building or in a building that
2

is closer then (sic) the Building to the New DARPA
Building (measured by direct linear distance, without
regard to the location of streets or other buildings
or improvements, from the primary building entrance of
each such building), and (iii) Tenant relocates all or
substantially all of its employees then working at the
New Premises [the space in the Building demised to
Plaintiff under the Lease] to Tenant’s New Location,
Tenant shall have the conditional right to terminate
this Lease . . . .
(First Amendment, § 9.)

Section 9 states that Plaintiff may

exercise this limited right of termination by providing
Defendant with written notice of its election to terminate,
notice which includes identification of Plaintiff’s new
location, and by paying a termination fee.

(Id.)

The section

provides that the Lease’s termination will become effective on
the date nine months after the termination notice and fee are
delivered to Defendant, provided that Plaintiff is not in
default at that time or at the time of the termination notice.
(Id.)

The section also requires Plaintiff to provide Defendant

with a fully executed copy of its new lease to Defendant “at
least thirty (30) days prior to the effective date of
termination so that [Defendant] may verify that [Plaintiff] has
satisfied the termination conditions set forth herein.”

(Id.)

Finally, the section states that if Plaintiff assigned or
subleased the premises in whole or part, Plaintiff’s limited
right of termination would be terminated automatically.

3

(Id.)

Subsequent to the execution of the First Amendment,
Plaintiff entered into two “facility use agreements” with Booz
Allen Hamilton, Inc. (“Booz Allen”) and the Potomac Institute
for Policy Studies (“Potomac”) for the purpose of facilitating
performance of a DARPA contract and related subcontracts.
(Compl. ¶ 11-13, 17-19; Booz Allen Facility Use Agreement [Dkt.
1-3]; Potomac Facility Use Agreement [Dkt. 1-6].)

The facility

use agreements provided limited use of certain portions of
Plaintiff’s premises to Booz Allen and Potomac in exchange for
use costs, payable monthly, and operating costs as billed by the
landlord, and subject to all of the building’s rules and
regulations as incorporated by the facility use agreements.
(Compl. ¶¶ 13, 18; Booz Allen Facility Use Agreement, §§ 1-2, 5;
Potomac Facility Use Agreement, §§ 1-2, 5.)

The agreements

limited Booz Allen’s and Potomac’s use and access to the
premises “solely for general office purposes related to the
scope of work under the [DARPA] Prime Contract and Subcontract
which require access to the Office, during normal business hours
of” Plaintiff.

(Booz Allen Facility Use Agreement, § 7; Potomac

Facility Use Agreement, § 7.)
Prior to entering into the first of these facility use
agreements, Plaintiff advised Defendant’s agent and property
manager of the facility use agreement (with Booz Allen), stated
that it was “not a sublease, assignment or transfer of the
4

[L]ease or the obligations thereunder but is a condition whereby
‘desk space’ has (sic) described in Lease Section XXI will be
shared for the purposes of the referenced [DARPA] contract,” and
requested Defendant’s consent pursuant to Section XXI of the
Lease.

(Compl. ¶ 15.)

Defendant, Plaintiff, and Booz Allen

executed a “Consent to Use” agreement whereby Defendant
consented to the Booz Allen Facility Use Agreement.
Consent to Use Agreement [Dkt. 1-5].)

(Booz Allen

That consent agreement

noted that “[n]otwithstanding anything herein to the contrary,
this Consent Agreement is not a consent to or approval of or an
agreement by Landlord to the particular terms and conditions of
the [Booz Allen Facility Use] Agreement, but only [Defendant]’s
consent to [Plaintiff]’s subleasing the Office to [Booz Allen].”
(Id. § 4.)

Soon after entering into the second facility use

agreement (with Potomac), Plaintiff advised Defendant’s agent
and property manager of that agreement, presented Defendant with
a second “Consent to Use” agreement in the same form as the Booz
Allen Consent to Use Agreement, and requested that Defendant
sign that consent agreement.
Use Agreement [Dkt. 1-8].)

(Compl. ¶ 20; Potomac Consent to
Defendant, Plaintiff, and Potomac

executed the Potomac Consent to Use Agreement, which contained
the same terms as the Booz Allen Consent to Use Agreement.
(Compl. ¶ 21; Potomac Consent to Use Agreement [Dkt. 1-8].)

5

On May 1, 2012, DARPA relocated to a new building.
(Compl. ¶ 23.)

Following this relocation, Plaintiff negotiated

for new office space closer to DARPA and communicated with
Defendant’s agent concerning Plaintiff’s intent to terminate the
Lease pursuant to Section 9.

(Id. ¶¶ 23-24, 28.)

Plaintiff

alleges that the agent, in consultation with Defendant, provided
Plaintiff with information concerning calculation of the
termination fee and, over the course of four months, never
challenged or raised any objections to Plaintiff’s right to
terminate.

(Id.; Emails between Plaintiff and Defendant’s

agent, Ex. I [Dkt. 9].)

On September 28, 2012, Plaintiff

provided Defendant with the termination fee and notice of its
exercise of its right to terminate.
2012 Letter [Dkt. 1-10].)

(Compl. ¶¶ 28-29; Sept. 28,

At that time and as of the present

date, Plaintiff had not executed a lease for new space (Compl. ¶
24) or moved any of its employees to the proposed new space (id.
¶ 26).

On October 5, 2012, Defendant by letter asserted that

Plaintiff did not have the right to terminate under Section 9
because (a) Plaintiff had entered into subleases with Booz Allen
and Potomac Institute and (b) Plaintiff had not performed the
two conditions precedent to the exercise of the right to
terminate, the leasing of a space at a location closer to the
new DARPA building’s location and the relocation of all or
substantially all of Plaintiff’s employees to Plaintiff’s new
6

leased space.

(Id. ¶ 30; Oct. 5, 2012 Letter [Dkt. 1-11].)

Defendant therefore rejected Plaintiff’s termination notice,
marked Plaintiff’s check in payment of the termination fee
“VOID,” and returned the check to Plaintiff.
B.

(Compl. ¶ 30.)

Procedural Background

Plaintiff filed suit in this Court on October 25,
2012.

[Dkt. 1.]

The Complaint contains two counts: (1) a

declaratory judgment claim (Count I); and (2) in the
alternative, a breach of contract claim (Count II). 1
On November 9, 2012, Plaintiff filed its Motion for
Expedited Consideration and accompanying memorandum of law.
[Dkts. 5-6.]
2012.

Defendant filed its opposition on November 22,

[Dkt. 10.]

After this Court granted Plaintiff an

extension [Dkt. 12], Plaintiff filed its reply brief on November
30, 2012.

[Dkt. 13.]
Defendant filed its Motion to Dismiss and accompanying

brief on November 22, 2012.

[Dkts. 7-8.]

Plaintiff filed its

opposition on December 4, 2012 [Dkt. 14], and Defendant replied
on December 10, 2012 [Dkt. 15].

1

Plaintiff attaches 14 exhibits, Exhibits A-K. In considering a motion to
dismiss, the Court may consider not only the pleadings but also documents
attached to the pleadings, documents integral to, relied on, or referenced to
within the pleadings, and official public records pertinent to the
plaintiff’s claims. See Philips v. Pitt County Memorial Hosp., 572 F.3d 176
(4th Cir. 2009); Witthohn v. Fed. Ins. Co., 164 F. App’x 395, 396 (4th Cir.
2006); Gasner v. County of Dinwiddie, 162 F.R.D. 280, 282 (E.D. Va. 1995).
The Court therefore may consider these exhibits attached to the complaint
without converting this motion to dismiss to a motion for summary judgment.

7

Plaintiff’s Motion for Expedited Consideration and
Defendant’s Motion to Dismiss are before the Court.
II.

Standard of Review

Federal Rule of Civil Procedure 12(b)(6) allows a
court to dismiss those allegations which fail “to state a claim
upon which relief can be granted.”

Fed. R. Civ. P. 12(b)(6).

A

Rule 12(b)(6) motion tests the legal sufficiency of the
complaint.
2008).

Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir.

A court reviewing a complaint on a Rule 12(b)(6) motion

must accept well-pleaded allegations as true and must construe
factual allegations in favor of the plaintiff.

See Randall v.

United States, 30 F.3d 518, 522 (4th Cir. 1994).
A court must also be mindful of the liberal pleading
standards under Rule 8, which require only “a short and plain
statement of the claim showing that the pleader is entitled to
relief.”

Fed. R. Civ. P. 8.

While Rule 8 does not require

“detailed factual allegations,” a plaintiff must still provide
“more than labels and conclusions” because “a formulaic
recitation of the elements of a cause of action will not do.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56 (2007)
(citation omitted).
To survive a Rule 12(b)(6) motion, “a complaint must
contain sufficient factual matter, accepted as true, to ‘state a
claim to relief that is plausible on its face.’”
8

Ashcroft v.

Iqbal, 556 U.S. 662 (2009) (quoting Twombly, 550 U.S. at 570).
“A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.”

Id.

However, “[t]hreadbare recitals of the elements

of a cause of action, supported by mere conclusory statements,
do not suffice” to meet this standard, id., and a plaintiff's
“[f]actual allegations must be enough to raise a right to relief
above the speculative level . . . .”

Twombly, 550 U.S. at 555.

Moreover, a court “is not bound to accept as true a legal
conclusion couched as a factual allegation.”

Iqbal, 129 S.Ct.

at 1949–50.
III.
A.

Analysis

Plaintiff’s Motion for Expedited Consideration

In its motion, Plaintiff requests that this Court
grant expedited consideration of this matter.

In support,

Plaintiff cites to Rule 57 of the Federal Rules of Civil
Procedure and 28 U.S.C. § 2201, noting that Rule 57 provides
that a court “may order a speedy hearing of a declaratoryjudgment action.”)
6] at 4.)

(Pl. Mem. Mot. for Expedited Consid. [Dkt.

Plaintiff argues that expedited resolution will

fulfill the Federal Rule’s mandates by minimizing the danger of
avoidable loss and the unnecessary accrual of damages and that
Plaintiff will suffer severe prejudice if the dispute is not
9

promptly resolved.

(Id. at 4-5.)

Plaintiff also asserts that

expedited consideration is warranted because this dispute
involves straightforward issues of contract interpretation that
may be resolved with limited discovery and expedited review.
(Id. at 5.)
In response, Defendant argues that the requested
relief is both unnecessary and prejudicial.

First, Defendant

asserts that expedited consideration is unnecessary because this
district is one of the fastest moving districts in the United
States and, if this Court denies Defendant’s Motion to Dismiss,
either party can move for summary judgment and this Court’s
standard motions procedures will provide for an already speedy
hearing.
3-4.)

(Def. Opp. to Mot. for Expedited Consid. [Dkt. 10] at

Second, Defendant argues that if Plaintiff’s request for

expedited consideration is equivalent to requesting a trial on
the merits via a hearing as on a motion, then such relief would
be prejudicial to Defendant.

(Id. at 4.)

In its reply,

however, Plaintiff clarifies that it did not seek to avoid
discovery or to obtain summary judgment on its claims through
its Motion to Expedite, but rather only requests that the Court
expedite the timetable for consideration and adjudication of
this matter by accelerating the timetable to a matter of weeks
rather than months.

(Pl. Reply re Mot. for Expedited Consid.

[Dkt. 13] at 1, 4.)

As a result, Defendant’s first objection to
10

expedited consideration of this matter –- that the relief is
unnecessary -- remains its primary argument in opposition to
Plaintiff’s motion.
The Court concludes that expedited consideration of
this matter is unnecessary because, as noted by Defendant, this
Court already provides for significantly accelerated
consideration of cases under the local rules and procedures in
this district.

Plaintiff has not demonstrated a sufficient need

for further acceleration of the adjudication of this matter
beyond that ordinarily provided in this district.

As a result,

the Court will deny Plaintiff’s Motion for Expedited
Consideration.
B.

Defendant’s Motion to Dismiss

Defendant argues that Plaintiff’s complaint should be
dismissed because Plaintiff had no right to terminate the Lease
because (1) Plaintiff voided its limited right to terminate by
subleasing its premises and (2) even if Plaintiff did not void
its right to terminate, it has not performed all the conditions
precedent to the exercise of that right.

(Def. MTD Mem. [Dkt.

8] at 4.)
First, Defendant asserts that Plaintiff voided its
right to terminate by subleasing a portion of its premises to
Booz Allen and Potomac via the facility use agreements.

In

support, Defendant argues that these agreements, while titled
11

“facility use agreements,” in substance have all of the defining
features of a sublease: under the agreement, Plaintiff is
obligated to permit Booz Allen and Potomac to use a portion of
the premises, and in turn they are required to make monthly
payments for use and operating costs as well as required to
abide by the building’s rules and regulations.

(Id. at 4-5.)

In addition, Defendant notes that the consent to use agreements
stated that the facility use agreements provided for Defendant’s
“consent to [Plaintiff]’s subleasing the Office” to Booz Allen
and Potomac.

(Id. at 5.)

Second, Defendant claims that even if Plaintiff did
not void its limited right to terminate, Plaintiff still cannot
exercise that right because it has not fulfilled all the
conditions precedent to its exercise.

Defendant argues that

Section 9 sets out three conditions precedent to the exercise of
the limited right of termination: (1) DARPA moves to a new
location; (2) Plaintiff “leases space” in a new location closer
to DARPA’s new building; and (3) Plaintiff “relocates” its
employees to the new location.

As a result, Defendant argues

that Plaintiff’s intent to lease a new location and intent to
relocate its employees to that new location do not fulfill the
second and third conditions precedent.

(Id. at 5-6.)

In response, Plaintiff argues that in the Motion to
Dismiss, Defendant seeks to have this Court resolve the key
12

issues upon which Plaintiff’s declaratory judgment action is
based, and therefore Defendant’s requested relief exceeds what
is appropriate at the motion to dismiss stage of litigation.
(Pl. MTD Opp. [Dkt. 14] at 5-6.)
In addition, Plaintiff asserts that the facts alleged,
as well as the plain language of the First Amendment to the
Lease, indicate that Plaintiff has a right to terminate the
Lease.

First, Plaintiff argues that under the facts alleged and

the terms of the facility use agreements, it did not sublease a
portion of the premises to Booz Allen and Potomac.

In support,

Plaintiff asserts that the terms of the agreements provided that
Booz Allen and Potomac had limited use and access to the
premises and that Plaintiff retained management and control over
this use and access, as well as notes that it indicated in its
communications with Defendant that the facility use agreements
did not constitute a “sublease, assignment, or transfer” of the
Lease but rather were “a condition whereby ‘desk space’ has
[sic] described in Lease Section XXI will be shared for the
purpose of” the DARPA contract.”

(Id. at 5-7.)

Plaintiff

therefore characterizes the facility use agreements as licenses
to Booz Allen and Potomac instead of subleases.

As a result,

Plaintiff argues that it has properly alleged that it retains
the limited right to terminate the Lease.

13

Second, Plaintiff argues that Defendant incorrectly
interprets the circumstances under which Plaintiff could
exercise the limited right to terminate the lease provided in
Section 9.

Instead, Plaintiff claims that the entirety of

Section 9 indicates that the parties’ intent was that upon
DARPA’s relocation, Plaintiff could identify a new location
closer to DARPA, provide Defendant with the requisite written
termination notice and fee, and then have nine months to execute
the new lease and relocate its employees prior to the effective
termination date of the Lease, so long as it gave Defendant a
fully executed copy of the new location lease at least 30 days
prior to that date.

(Id. at 8-10.)

Under this interpretation

of the Lease and Section 9 in particular, Plaintiff argues that
it has properly alleged that it has met the conditions necessary
to exercise its right to terminate the Lease.

(Id. at 10.)

Both parties’ arguments regarding the Motion to
Dismiss turn on their particular interpretation of Section 9 and
of the parties’ intent expressed in that section.

In

particular, through its arguments in support of its assertion
that Plaintiff has failed to state a claim, Defendant seeks to
have this Court resolve the interpretation of Lease and the very
issues which Plaintiff seeks to be resolved ultimately via its
declaratory judgment claim.
judgment on the pleadings.

In effect, Defendant seeks a
This is premature.
14

The Court finds

that summary disposition of this case is not appropriate at this
stage of the litigation, but rather should occur after some
discovery has been conducted and after one or both of the
parties have filed a motion for summary judgment.

Accordingly,

the Court concludes that Defendant’s Motion to Dismiss should be
denied.
IV.

Conclusion

For the foregoing reasons, the Court will deny
Plaintiff’s Motion for Expedited Consideration and deny
Defendant’s Motion to Dismiss.

January 22, 2013
Alexandria, Virginia

/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE

15