Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-04-07010/USCOURTS-caDC-04-07010-0/pdf.json

Nature of Suit Code: 195
Nature of Suit: Contract Product Liability
Cause of Action: 

---

Notice: This opinion is subject to formal revision before publication in the

Federal Reporter or U.S.App.D.C. Reports. Users are requested to notify

the Clerk of any formal errors in order that corrections may be made

before the bound volumes go to press.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 15, 2004 Decided November 30, 2004

No. 04-7010

MICK’S AT PENNSYLVANIA AVENUE, INC. AND

MORTON’S RESTAURANT GROUP, INC.,

APPELLEES

v.

BOD, INC. AND

BARBARA O’DONNELL,

APPELLEES

PAT O’DONNELL

Appellant

Appeal from the United States District Court

for the District of Columbia

(No. 99cv03073)

————–

 Bills of costs must be filed within 14 days after entry of judgment.

The court looks with disfavor upon motions to file bills of costs out

of time.

USCA Case #04-7010 Document #862642 Filed: 11/30/2004 Page 1 of 10
2

Daniel M. Press argued the cause for the appellant Pat

O’Donnell.

Andrew J. Kline argued the cause for appellees Mick’s at

Pennsylvania Avenue, Inc. and Morton’s Restaurant Group,

Inc.

Before: GINSBURG, Chief Judge, and HENDERSON and

ROBERTS, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: Pat O’Donnell

(O’Donnell) appeals the district court’s summary judgment in

favor of appellees Mick’s at Pennsylvania Ave., Inc. (Mick’s)

and Morton’s Restaurant Group, Inc. (Morton’s). Mick’s was

the lessee of a restaurant property under a 15–year lease of

which Morton’s was a limited guarantor. Mick’s subleased

the property to BOD, Inc. (BOD) under a sublease signed by

Pat O’Donnell and his then-wife Barbara O’Donnell on behalf

of BOD. In addition, the O’Donnells both signed a guaranty

agreement assuring BOD’s performance under the sublease.

The district court concluded that the O’Donnells are liable

under the guaranty for rents and sales taxes BOD owes

Mick’s under the sublease. Having reviewed the district

court’s judgment de novo, we affirm because, as the district

court concluded, ‘‘there is no genuine issue as to any material

fact’’ and the appellees are ‘‘entitled to judgment as a matter

of law.’’ Fed. R. Civ. P. 56(c); see Mick’s at Pennsylvania

Ave., Inc. v. BOD, Inc., 99cv3073 (D.D.C. 2003) (Summary J.

Dec.).

I.

On December 12, 1997 the O’Donnells, on behalf of sublessee BOD, and Thomas J. Baldwin, Executive Vice President

and Chief Financial Officer of sublessor Mick’s, signed the

sublease for restaurant premises located at 2401 Pennsylvania

USCA Case #04-7010 Document #862642 Filed: 11/30/2004 Page 2 of 10
3

Ave. N.W., Washington, DC. Under the sublease, which ran

from December 15, 1997 to November 1, 2000, BOD was to

pay monthly ‘‘basic rent’’ of $14,085.05 and ‘‘additional rent’’

consisting of operating costs, taxes, utility costs, insurance

‘‘and all other items of Additional Rent payable by the

Sublessor under the Lease.’’ Sublease at 2, § 3B. The

sublease also provided for an initial three-month ‘‘Rent Concession Period,’’ for which BOD would be exempt from its

basic rent payment obligations provided it complied with all

other sublease terms. On the same day, both O’Donnells also

signed the guaranty, agreeing to guarantee BOD’s performance under the sublease and to indemnify Mick’s for any

losses arising from the sublease and BOD’s business operation.

BOD opened a restaurant at the subleased location and

operated it from about December 15, 1997 until March 1999,

when BOD abandoned the premises and ceased paying rent.

On November 17, 1999 Mick’s and Morton’s filed this action

against BOD and each of the O’Donnells, alleging breach of

the sublease by BOD and breach of the guaranty by the

O’Donnells.1

 The complaint sought to recover unpaid rent

under the sublease (both basic and additional) and sales taxes

for the months of February and March 1999, which Mick’s

had paid subject to reimbursement by BOD.

In a memorandum opinion and order filed December 11,

2003 (Summary J. Dec.) the district court granted summary

judgment in favor of Mick’s and Morton’s, ordering the

O’Donnells and BOD to pay $131,710.70,2

 including four

months’ basic rent ($56,340.20 for January to March 1998, the

Rent Concession Period, and for March 1999, the final month

1 The complaint alleged diversity jurisdiction under 28 U.S.C.

§ 1332.

2 The appellees claim total damages of $121,710.70, Appellees’ Br.

5, rather than the $131,710.70 figure calculated and ordered by the

district court, Summary J. Dec. at 1 & n.1. The district court made

an arithmetic error and should amend its order to reflect the proper

amount of $121,710.70.

USCA Case #04-7010 Document #862642 Filed: 11/30/2004 Page 3 of 10
4

of occupancy), additional rent in the form of operating costs

($53,160.72 for August 1998 to March 1999) and of trash

removal and parking costs ($1,422.11 for March 1999) and

sales tax reimbursements ($10,787.67 for February to March

1999). Pat O’Donnell timely appealed the district court’s

judgment.3

II.

We address each of Pat O’Donnell’s arguments separately.

A. Sales Taxes

First, O’Donnell disputes the award of $10,787.67 reflecting

sales taxes which Mick’s paid subject to reimbursement by

BOD for the months of February and March 1999. O’Donnell

asserts that, because BOD’s obligation to repay the funds

arose under a side oral agreement separate from the sublease, he is not required to cover the tax advances under the

guaranty. We disagree.

The sublease expressly requires that BOD pay as part of

its additional rent under the sublease ‘‘one hundred (100%)

percent [sic] of all items of ‘Additional Rent’, as defined under

Lease, which are payable by Sublessor under the Lease,

including without limitation, ‘Operating Costs’, ‘Taxes’, as

defined in the Lease, utility charges, insurance and all other

items of Additional Rent payable by Sublessor under the

Lease.’’ Sublease at 2, § 3B. The lease, in turn, requires

that the tenant

as Additional Rent, pay all business taxes, rates, duties,

levies, assessments and/or license fees imposed in respect

of any and every business conducted in, on or from the

Leased Premises or in respect of the use or occupancy

thereof, to the authorities having jurisdiction thereof

promptly when the same shall become due and payable,

and before the imposition of any fine or penalties.

3 Neither BOD, which defaulted in the district court, nor Barbara

O’Donnell filed a notice of appeal.

USCA Case #04-7010 Document #862642 Filed: 11/30/2004 Page 4 of 10
5

Lease at 25-26, § 11.02. We agree with the district court and

the appellees that sales taxes plainly come within the broad

category of ‘‘all business taxes, rates, duties, levies, assessments and/or license fees imposed in respect of every business conducted’’ by BOD at the leased premises.4

 BOD was

therefore required to pay them as additional rent under the

sublease. We further agree that the broad language of the

guaranty obliged O’Donnell to reimburse the sales taxes

Mick’s paid on BOD’s behalf. In the guaranty the O’Donnells

undertook both generally to ‘‘promptly cure any default in

any term covenant, or condition of the Sublease’’ (including

default of BOD’s obligation to pay sales taxes) and, specifically, to ‘‘indemnify and hold harmless Mick’s TTT from and

against any and all claims and liabilities, causes of action, and

damages, including but not limited to, tax liabilities.’’ Guaranty at 2, §§ 2, 3 (emphasis added).

B. Concession Period Rent

Next, O’Donnell challenges the award of rent for the initial

three-month period, January to March 1998. The sublease

provides:

[P]rovided that Sublessee performs all other terms, covenants and conditions of this Sublease, then for the period

commencing on the Commencement Date up through

March 31, 1998 (‘‘Rent Concession Period’’), Sublessee

shall not be obligated to pay Basic Rent to Sublessor

hereunder.

Sublease at 2, § 3A. The district court concluded that under

this proviso the rent conceded during the initial three months

(January to March 1998) later became due when BOD ceased

4 O’Donnell argues that the sales tax is not a tax or fee upon the

business vendor but upon the purchaser because, as this court has

stated, ‘‘[t]he legal incidence of the District of Columbia sales tax is

on the purchaser,’’ United States v. District of Columbia, 669 F.2d

738, 744 (D.C. Cir. 1981). Reply Br. 3-4. In the cited opinion the

court also expressly states that ‘‘the sales tax is imposed on the

vendor,’’ 669 F.2d at 744 n.9 (emphasis added; citing D.C. Code

§ 47-2602), in this case on restaurateur BOD.

USCA Case #04-7010 Document #862642 Filed: 11/30/2004 Page 5 of 10
6

operating its restaurant in March 1999 in breach of section 14

of the sublease which required that BOD ‘‘continuously operate its restaurant business in a first-class manner’’ during the

sublease term which did not expire until November 2000. We

agree with the district court’s interpretation of the unambiguous language of the quoted provision. O’Donnell does not

dispute that BOD violated section 14 by abandoning the

restaurant prematurely but contends this breach did not

trigger liability for the conceded rent because the quoted

proviso required only that the sublessee not breach other

terms of the sublease during the Rent Concession Period and

did not authorize retroactive rent obligations based on

breaches after the period ends. We disagree. The proviso

contained no limitation on which sublease terms must be

performed or when in order to preserve the rent concession

but broadly required performance of ‘‘all other terms, covenants and conditions’’ of the sublease, which language unambiguously includes the continuous operation requirement in

section 14 (emphasis added).5

C. Equal Credit Opportunity Act

Third, O’Donnell resurrects the affirmative defenses, asserted summarily in his answer, of waiver/estoppel, unclean

hands and in pari delicto, each one premised on his theory

that the appellees violated the Equal Credit Opportunity Act,

15 U.S.C. §§ 1691 et seq. (Act). We conclude that, under the

undisputed facts, Mick’s did not violate the Act and that

O’Donnell’s defenses therefore fail.

The Equal Credit Opportunity Act provides in relevant

part:

5 O’Donnell argues for the first time in his reply brief that the

Rent Concession Period proviso, as construed by the appellees and

the district court, produces an unenforceable retroactive forfeiture.

Reply Br. 5 (citing Red Sage Ltd. P’ship v. Despa Deutsche

Sparkassen Immobilien-Anlage-Gasellschaft MBH, 254 F.3d 1120,

1129 (D.C. Cir. 2001)). Having failed to raise it earlier, O’Donnell

has waived this argument. See Amgen, Inc. v. Smith, 357 F.3d 103,

117 (D.C. Cir. 2004).

USCA Case #04-7010 Document #862642 Filed: 11/30/2004 Page 6 of 10
7

It shall be unlawful for any creditor to discriminate

against any applicant, with respect to any aspect of a

credit transaction—

(1) on the basis of race, color, religion, national origin,

sex or marital status, or age (provided the applicant has

the capacity to contract); TTTT

15 U.S.C. § 1691(a). To implement this provision, the Federal Reserve Board has promulgated the following regulation:

‘‘[A] creditor shall not require the signature of an applicant’s

spouse or other person, other than a joint applicant, on any

credit instrument if the applicant qualifies under the creditor’s standards of creditworthiness for the amount and terms

of the credit requested.’’ 12 C.F.R. § 202.7(d)(1). O’Donnell

claims the appellees violated the statute and the regulation by

requiring O’Donnell to co-sign the sublease and the guaranty

for his wife’s restaurant although O’Donnell was not himself a

principal of BOD. We reject O’Donnell’s Equal Credit Opportunity Act claim for two reasons.

First, under the Act the sublease is not a ‘‘credit instrument’’ subject to 12 C.F.R. § 202.7(d)(1). The Act defines

‘‘credit’’ as ‘‘the right granted by a creditor to a debtor to

defer payment of debt or to incur debts and defer its payment

[sic] or to purchase property or services and defer payment

therefor.’’ 15 U.S.C. § 1691a(d) (emphasis added). Mick’s

did not grant any credit right to BOD under the sublease but

acted simply as a sublessor of the restaurant property entitled to receive monthly rent payments for the term of the

sublease.6

 Further, neither Mick’s nor Morton’s falls within

6 In contrast, Brothers v. First Leasing, 724 F.2d 789 (9th Cir.

1984), cited by O’Donnell, involved a consumer automobile lease

which the Ninth Circuit concluded fit within the Act’s definition of

‘‘credit transaction’’ because it required the consumer lessee to pay

a fixed sum in equal installment payments at fixed intervals. See

724 F.2d at 793 n.8. The court there based its holding on the

premise that the anti-discrimination provisions of the Act apply to

all transactions covered by the Consumer Leasing Act, 15 U.S.C.

§§ 1667-1667e. See id. at 791-94. The reasoning in Brothers, therefore, has no application to a commercial real estate lease.

USCA Case #04-7010 Document #862642 Filed: 11/30/2004 Page 7 of 10
8

the Act’s definition of ‘‘creditor’’ as ‘‘any person who regularly extends, renews, or continues credit; any person who

regularly arranges for the extension, renewal, or continuation

of credit; or any assignee of an original creditor who participates in the decision to extend, renew, or continue credit.’’

15 U.S.C. § 1691a(e) (emphasis added). There is no evidence

that either Mick’s or Morton’s, each of which is in the

restaurant business, ‘‘regularly’’ extends or arranges credit,

which, as an element of O’Donnell’s affirmative defenses, he

must demonstrate on summary judgment. See Celotex Corp.

v. Catrett, 477 U.S. 317, 322-23 (1986) (‘‘[T]he plain language

of Rule 56(c) mandates the entry of summary judgment, after

adequate time for discovery and upon motion, against a party

who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on

which that party will bear the burden of proof at trial.’’).

Second, the assertion made before the district court and on

appeal that O’Donnell was not a principal involved in BOD’s

operations is at odds with O’Donnell’s own representations at

the time he signed the sublease and the guaranty. The two

documents variously characterize O’Donnell as one of BOD’s

‘‘principals,’’ Sublease at 5, § 7A, the ‘‘Sublessee,’’ id. at 9

(under O’Donnell’s signature), BOD’s ‘‘President’’ or ‘‘Vice

President,’’ id. at 10 (in ‘‘Acknowledgements’’ by notaries

public), one of BOD’s two ‘‘sole shareholders, directors and

officers’’ and one ‘‘hav[ing] a material business interest in the

Sublessor [sic],’’ Guaranty at 1. Having represented himself

to Mick’s and Morton’s when he signed the sublease and the

guaranty as an officer and shareholder of BOD in order to

secure the sublease for BOD, O’Donnell is equitably estopped

from claiming otherwise now to avoid liability under the

guaranty. See First Am. Disc. Corp. v. Commodity Futures

Trading Comm’n, 222 F.3d 1008, 1016 (D.C. Cir. 2000) (‘‘Under the doctrine of equitable estoppel, ‘a party with full

knowledge of the facts, which accepts the benefits of a

transaction, contract, statute, regulation, or order may not

subsequently take an inconsistent position to avoid the corresponding obligations or effects.’ ’’ (quoting Kaneb Servs. v.

FSLIC, 650 F.2d 78, 81 (5th Cir. 1981))).

USCA Case #04-7010 Document #862642 Filed: 11/30/2004 Page 8 of 10
9

D. Prior Breach of Lease

Finally, O’Donnell claims any breach of his obligations

under the sublease or the guaranty is excused because Mick’s

itself first breached its implied obligation under the sublease

to cooperate with BOD in transferring the restaurant’s liquor

license into BOD’s name. O’Donnell contends that, by failing

to pay taxes owed to the District of Columbia for a period

preceding the sublease term, Mick’s impeded BOD’s ability to

effect the transfer in breach of this implied obligation. We

reject O’Donnell’s prior breach theory which, as the district

court observed, rests on ‘‘an attenuated chain of events.’’

Summary J. Dec. at 5.

It is true that the sublease required BOD to transfer the

liquor license to its own name by May 31, 1998, after which

time, if it had not, Mick’s had ‘‘the option, in its sole and

absolute discretion, to cancel th[e] Sublease by sending written notice to Sublessee no later than June 7, 1998 in which

event th[e] Sublease shall be cancelled.’’ Sublease at 4, § 5B.

If no timely notice was sent, BOD was to continue its efforts

to change the license name while retaining ‘‘the right to

continue to operate under Sublessor’s Alcoholic Beverage

License,’’ subject to Mick’s’ continuing option to cancel upon

30 days’ notice. Id. We find no breach, however, of any

obligation on the part of Mick’s to assist in securing the

license change. As BOD acknowledges, the sublease imposes

no such express obligation on Mick’s. Further Mick’s took no

affirmative step to prevent BOD from obtaining the license in

its own name in breach of an implied obligation.7

 See R. A.

7 Nor did Mick’s make any attempt to take advantage of the

contractual consequence of BOD’s failure to transfer the license by

invoking section 5B to cancel the sublease. O’Donnell nonetheless

claims that by failing to pay the taxes, and thereby preventing the

license transfer, Mick’s harmed BOD in two ways. First, O’Donnell

points to the assertion in Barbara O’Donnell’s affidavit below that

this failure ‘‘put BOD’s restaurant in serious risk of being shut

down by the D.C. Government,’’ Affidavit of Barbara O’Donnell at 2,

¶ 5, but this risk never materialized. Second, O’Donnell claims that

‘‘the lack of a liquor license required BOD to pay cash (COD) to

alcoholic beverage distributors,’’ Reply Br. 8, but O’Donnell may not

USCA Case #04-7010 Document #862642 Filed: 11/30/2004 Page 9 of 10
10

Weaver & Assocs. v. Haas & Haynie Corp., 663 F.2d 168, 177

n.67 (D.C. Cir. 1980) (‘‘The prohibition against active interference is an implied contractual term.’’ (emphasis added; citing

Karrick v. Rosslyn Steel & Cement Co., 25 F.2d 216, 217-18

(1928); Minmar Builders Inc. v. Beltway Excavators, Inc.,

246 A.2d 784, 787 (D.C. App. 1968); Matthew A. Welch &

Sons, Inc. v. Bird, 193 A.2d 736, 738 (D.C. Mun. App. 1963);

Horlick v. Wright, 104 A.2d 825, 827 (D.C. Mun. App. 1954))).

* * *

In light of our foregoing analyses, we conclude that additional discovery would not alter the undisputed material facts

or the disposition of O’Donnell’s claims and that, therefore,

the district court did not abuse its discretion in denying

O’Donnell’s discovery request. See Paquin v. Fed. Nat’l

Mortgage Ass’n, 119 F.3d 23, 28 (D.C. Cir. 1997). Accordingly, for the reasons set forth above, we affirm the judgment of

the district court.

So ordered.

rely on this allegation first raised in his reply brief. Amgen, Inc. v.

Smith, 357 F.3d at 117.

USCA Case #04-7010 Document #862642 Filed: 11/30/2004 Page 10 of 10