Howard Town Center Developer, LLC v. Howard University

Argued: November 10, 2014.

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Appeals from the United States District Court for the District of Columbia. (No. 1:13-cv-01075).

Kenneth C. Smurzynski argued the cause for appellants. With him on the briefs were John E. Schmidtlein and Masha G. Hansford.

Timothy F. McCormack argued the cause for appellee. With him on the brief was Michelle M. McGeogh.

Before: BROWN, Circuit Judge, and WILLIAMS and GINSBURG, Senior Circuit Judges.

OPINION

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Ginsburg, Senior Circuit Judge.

Howard University leased a parcel of land in Washington, D.C. to Howard Town Center Developer, LLC. After the Developer failed to make a rental payment of $1,475,000 on May 30, 2013, the University terminated the lease agreement. The Developer sued, and the district court entered a summary judgment in favor of the University. Because we agree with the Developer that there is a genuine dispute whether a rental payment was due on May 30, 2013, we vacate the judgment of the district court and remand this case for further proceedings in that court.

I. Background

Howard University owns a " long-neglected" parcel of land in Washington, D.C. that it sought to transform into an upscale " mixed-use residential/retail development." In 2010 the University entered into several related agreements with Castlerock Partners, LLC, which later assigned its interest in the agreements to Howard Town Center Developer, LLC. Three of those agreements are relevant to this appeal: the Ground Lease, the Development Agreement, and the Amendment to the Development Agreement.

The Ground Lease provides that the University will lease the property to the Developer for 99 years. In exchange, the Developer will make rental payments of $525,000 on January 22, 2010 and of $1,475,000 on March 15, 2011, followed by periodic rental payments in an amount to be determined by a formula specified in the lease. Section 16.2 of the Ground Lease describes the process by which the University may terminate the lease if the Developer fails to pay rent:

Should Tenant at any time be in default with respect to any rental payments or other charges payable by Tenant under this Lease, and should such default continue for a period of ten (10) days after written notice from Landlord to Tenant ... then Landlord may treat the occurrence ... as a breach of this Lease (an " Event of Default" ), and in addition to any or all other rights or remedies of Landlord under this Lease or as otherwise permitted by law, it shall be, at the option of Landlord

...

[t]he right of landlord to terminate this Lease and to declare the Lease term ended ....

...

[P]rior to exercising any right to terminate this Lease on account of any Event of Default, Landlord shall provide Tenant and each Leasehold Mortgagee with a written notice (in addition to any notice of default provided for in this Section 16.2 ... ), specifying IN BOLD FACE CONSPICUOUS TYPE, that

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Landlord intends to terminate the Lease if the Event of Default is not cured within ten (10) days. Upon the expiration of such ten (10) day period, and if such Event of Default has not been cured, Landlord shall have the right, at its sole option, thereafter to elect to terminate this Lease ....

The Development Agreement outlines the plans for developing the parcel. It describes, among other things, the type of buildings the Developer must construct on the property and the timeline for doing so.

The Amendment to the Development Agreement allocates the cost of cleaning up environmental toxins discovered on the site. It modifies the Ground Lease by directing the Developer to make the first two rental payments -- of $525,000 and $1,475,000 -- to an escrow account rather than to the University directly. The money in the escrow account will be used to satisfy the University's obligation to cover its ...