THE ARMENIAN ASSEMBLY OF

AMERI CA, I

NC., et al. , Plaintiffs/Count er- Def endants,

v. GERARD L . CAFESJ I AN, et al. , Def endants/Counter-Plaintiffs.

UNITED STAT ES DIS TRICT COURT F OR THE DIS TRICT OF COLUM BIA

Civil Action Nos. 07-1259, 08- 255, 08-1254 (CKK)

MEMORAN DUM OP INION (May 9, 2011) The a bove-c aptioned consolidate d actions involve a se ries of c laims and counter claims relating to the pa

rties’ attempts to create a museum and me morial in Washington, D.C. devoted to the Armenia

n Genoc ide. Followinga twelve -day bench tr ial in November

2010, the Court 1 issued a Memora

ndum Opinion setting for th its findings of fa ct and c onclusions of law on J anuar y 26, 2011. See [193] Mem. Op. (Jan. 26, 2011). The Court found that none of the 2 parties’ substantive claims wer e mer itorious and dismiss ed all of the claims save one , holding that Def endants Ge rar d L . Cafesjian ( “Cafe sjian”) a nd J ohn J . Waters (“ Waters”) wer e entitled to indemnification fr om the Armenia n Genoc ide Museum and Me morial, Inc. (“ AGM& M”) f or leg al expenses incurr ed in def endingclaims asser

ted ag ainst them in their capa cities as for mer office rs of AG M&M. The Court also upheld the validity of a r ever sion clause in a G rant As the Court has pre viously noted, the use of

the term “ g enocide ” to desc ribe the 1 atroc ities that befell the Ar menians betwe en 1915 and 1923 is not without controver sy . The Court employ s the term used a s by the par ties, and the Court expresses no opinion on the propriety of that labe l. All docket number s ref

er to Civil Action No. 08-255. 2Ag ree ment executed betwe en De fenda nts Cafesjian and the Cafesjian F amily Foundation, I nc. (“CF F” ) and Plaintiff Ar

menian Assembly

of Amer ica, Inc. (the “Assembly”), r uling that CF F and Cafe sjian may

exercise their

rig hts under that cla

use ef fec tive Dec ember

31, 2010. The Court asked the pa

rties to submit additi onal brief ing r eg ardingtwo issues left unre solved by the Court’s prior Memora

ndum Opinion: (1) whether CFF should be requir ed to re imburse AGM& M for pa rt of the va lue of prope rties that shall be tra nsfer red to CFF under the terms of the Grant Ag ree ment; and (2) the amount of leg al expenses for which Cafe sjian and Waters a re e ntitled to be indemnified. The parties ha ve now c ompleted the additional brie fingon these issues as order ed by

the Court, and these issues are ripe for the Court’s re solution. This Memorandum Opinion contains the Court’s final f indings of f

act a nd conclusions of lawwith respec t to these issues. The par

ties have a lso filed a ser ies of pape rs with the Court reg ardingthe terms on which the prope rties must be transfe rre d to CFF. The Court shall address these filings in the c ontext of addre ssing the r eimbursement issue. Pending a lso before the Court are sever al additional motions filed by Def endants Cafesjian, Water s, and CFF (collec tively , “De fenda nts”). F irst, Defe ndants have filed a [198] Petition for I nvoluntary

Dissolution asking the Court to initiate proce dures to involuntarily dissolve AGM& M under D.C. law . Second, De fenda nts have filed a

[221] Motion Requesting Attorney s’ Fe es for

Vexatious L itigation. Third, De fenda nts have filed a

[214] Request for O rder to Show Cause as to Why Plaintiffs Shoul d Not Be Held In Contempt for alleg edly violating one of this Court’s orders. The Assembly and AGM& M (collec tively , “Plaintiffs”) ha ve filed oppositions t o eac h of these motions, and De fenda nts have filed r eplies. In addition, Plainti ffs’ former counsel, K& LGates L L P, has intervene d and filed a brief opposingDef

endants’ motion

2for attorney s’ fe es for vexatious l itigation. Ac cording ly , these motions are all ripe for resolution. For the re asons explained below, the Court finds that the Gr ant Ag ree ment does not impose any

obligation on CFF to re imburse AGM& M for the e x cess va lue of the pr operties ove r the amount of the f

unds orig inally

donated. The ref

ore, the Court shall enter f inal judgme nt on this iss ue and or der A GM& M to transfer the prope rties to CFF without further de lay . Wit h respe ct to the amount of leg al fe es and e x penses subjec t to the indemnification clause cover ing Cafesjian a

nd Waters, the Court shall ref er this issue to a mag istrate judg e for a re port and

rec ommendation. The Court shall deny -in-par t Defe ndants’ motion reque sting attorney s’ fe es for vexatious l itigation bec ause D efe ndants have mostly failed to de monstrate that Plaintiffs or their counsel a cted r eckle ssly

or in bad fa ith; however, the Court shall hold in abey ance Def endants’ motion with respect to Plaintiffs’ untimely production of doc uments on the eve of trial. The Court shall decline to exercise supplemental jurisdiction over De fenda nts’ petition for involuntary

dissoluti on of AGM& M, as this is a new cla im asserted a fter tr ial that is best left to be adjudicated by

the Superior Court of the District of Columbia. Finally , the Court shall deny Def endants’ r equest for

a show c ause or der be cause Def endants have not shown that Plaintiffs violated one of

this Court’s orders. I. BACKG ROUND The Court set out its factua l findings thoroughly in its Memorandum Opinion issued on J anuar y 26, 2011, and the Court assumes f amiliarity with that opinion and incorporates it here. See A rmenian Assembly

of Am., Inc. v . Cafesjian , ___ F. Supp. 2d ___, 2011 WL229354 (D.D.C. Jan. 26, 2011). The Court shall summarize the fa cts previously found by the Court to the extent they

are rele vant to the issues rema ining to be de cided.
3A. Initial Interest in an Armenian Genoc ide Museum and the Acquisition of the National Bank of W

ashington Buildi ng In the late 1990s, Caf

esjian and se vera l individuals i nvolved with the Assembly joined forc es in an e ffor

t to crea te a museum de voted to memorializing the Ar menian Ge nocide. On or about April 1, 1996, Hira ir Hovnania n (“H ovnanian” ), one of

the Assembly ’s founde rs, made a pledg e of a

bout $1.6 mill ion to establish the Armenian N ational Institut e (“ ANI ”) f or the study , rese arc h, and af

firmation of the A rmenian G enocide . Dr. Rouben Ada lian (“A dalian”) , a historical re sear cher , was hire d to become the direc tor of ANI . Inspired by Hovnanian’ s pledg e, Anoush Mathevosian ( “Mathe vosian”) de cided in 1996 to pledg e $3 million to be used for the purpose of

constructinga per

manent museum in Washington, D.C. dedic ated to the victims and survivors of the A rmenian G enocide . In 1996, the Assembly beg an to explore proper

ties in Washington, D.C. that would be suitable f or a museum. Ar ound this same time, Cafesjian wa s independe ntly

planning to build a memorial to the Armenia n Genoc ide. Through his trusted associate Waters, Cafe sjian contac ted the Assembly and expressed a

n interest in potentially associatinghis planned memorial with the Asse mbly ’s museum projec t. Be cause Cafesjian ha d not been involved in the Asse mbly , he invited Hovnania n, Adalian, a

nd Robert Ara

m Kaloosdian (“K aloosdian”) , another

of the Asse mbly ’s founde rs, to meet with him and discuss the museum projec t and the Assembly ’s advoc acy eff orts. Cafesjian of

ficially joined the Assembly

as a trustee in August 1998. At that point i n time, Cafesjian a nd Waters continued to sea rch separ ately for a location for a

memorial. In or about late 1999, the Assembly identified the National Ba nk of Washington, located at 619 14th Street, NW, Washington, D.C., as a possible site for the museum. Althoug h it was

4much larg er tha n the prope rties they

had bee n looking at to date, eve ryone involved in the sea rch was impresse d by

the National B ank of Washing ton building (the “ Ba nk Building ”). The Ba

nk Buildinghas a pr ime location—just blocks from the White House—and its exterior and pa rt of the interior have bee n desig nated a s historic landmarks in the D.C. Inventory of Historic Sites and the National Reg ister of Historic Plac es. The pr operty on which the B ank B uilding is locate d also includes a va cant ba ck lot which would allow f or the c onstruction of an a nnex. C afe sjian

was ve ry interested in the B ank B uilding, and he dispatched Water s to do due dilige nce on the proper ty . Be cause there was a

nother intere sted buy er, Caf esjian direc ted Waters to work quic kly to arra ng e the pur chase . Cafesjian a g ree d to donate $3.5 million to t he Assembly to cre ate a consolidated location at which the g enocide museum, the g enocide memorial, and of fice s for ANI could be located. Anoush Mathevosia n ag ree d to increa se her

pledg e to $3.5 million t o acquir e the pr operty
. The Asse mbly

closed on the B ank B uilding on F ebrua ry 16, 2000, purcha sing the building for

$7.25 milli on. The funds f or the purc hase w ere comprised of a $3.5 million pledge from Mathe vosian, a $2.5 million gra nt from CFF , and a $1 million gr ant from Caf esjian’s Vanguard Char itable Endowment Prog ram - Ca fesjian F amily Foundation Charitable Trust. Be cause Mathevosian c ould not acce ss funds in sufficient time to wire the m to the Assembly prior to the closing , CFF provided the A ssembly with a $4 million i ntere st-fre e bridg e loan to

cover Mathevosian’ s pledg e and to c omplete the tra nsaction. On Mar ch 8, 2000, af ter the Assembly had re ceive d Mathevosian’ s pledg ed donation, the Asse mbly repa id CFF $3.5 million by wire tra nsfer . On Marc h 17, 2000, the Assembly executed a pr omissory

note produc ed by

and for the be nefit of CF F f

or the re maining $500,000.

5After the closing , on Fe bruar

y 28, 2000, Anoush Mathevosian wrote a letter to the Assembly restatingthe purpose of

her ple dg e. The letter stated that the purpose of her g ift was to foster the development of an Ar menian Ge nocide museum with educ ational exhibit s, and Mathevosian e x presse d her de sire that the B ank B uilding be use d solely for the A ssembly , ANI , the museum, and the me morial. She wrote: To be cer tain that future g ener ations re m ai n t ru e to the intent of our donations, it shoul d b e clea

r that no chang es will be made to the purpose and usag e of the Museum; that no mortg ag es are taken ag ainst the p ro p er ty and that the Museum’s perpe tuation is not jeopar dized as such or encumbe red in any way ; and that there will be no subseque nt chang es to the name of the museum. PX-110. At her de position, Mathevosian expl ained that she wanted to e nsure that they paid for the prope rty

in full so that it would not be mortg ag ed or sold in the future . Mathevosian a sked that these unde rstanding s be incorpor ated into the per manent re cords of

the org anization. Howeve r, there is no evidence that Mathevosian’ s expressed desire s were ever formally incorpora ted by the Assembly

into a binding oblig ation. Mathevosian testified that Hovnanian ag ree d to her c onditions, but she did not rec all whether he had done so orally

or in writing . J ohn Waters testified that he did not see Mathevosian’ s letter until severa l y ear s later, in late 2003. I n any case , Mathevosian did not ask for a re versionar

y interest in her

donation, and ther efor e she does not have one. The pa rties ag ree d that as a c ondition of Cafesjian’s donation of funds for the purcha se of the B ank B uilding, the Asse mbly was re quired to include a memorial name d afte r Cafe sjian as part of the projec t. On Marc h 30, 2000, the Assembly sent Cafe sjian a letter c onfirming his donations and its obligation to build a memorial. The Assembly ag ree d to cooper ate with the desig n firm or a

rtist chosen by

CFF to complete the memor ial. The a nticipated completion date
6for the pr oject wa s Marc h 2002, and CFF ag ree d to make contr ibutions t o the Assembly to financ e the memor ial. Be cause of the size of the B ank B uilding (34,000 sq. f t) and the pr operty on which it sits, it was c ontemplated that the Asse mbly and ANI would move out of their exis ting of

fice s when their le ase e x pired in Mar ch 2002 and oc cupy space on the new site. Acc ording ly , it was ag ree d that the deve lopment of suitable offic e spac e on the pr operty would be a pr iority . Ross Vartian, then- Ex ecutive D irec tor for the Assembly , testified at trial that in retrospe ct, they

wer e naïve to think that the museum, the memorial, and off ices for the Assembly and ANI could all be house d within the Ba nk Building

. B. Acquisition of the Properties Adjacent to the Bank B uilding Once the B ank B uilding wa s acquire d by the Assembly , Cafesjian be g an to ac quire proper ties adjac ent to the B ank B uilding. Ultimately , Cafesjian de cided to donate the prope rties to the Assembly

for the pur

pose of e x pandingthe footprint of the museum pr oject. Cafesjian a cquire d four pa rce ls adjace nt to the Ba

nk Building : (1) 1342 G Stree t, NW; (2) 1340 G Street, NW; (3) 1338 G Stree t, NW; and (4) 1334-36 G Stree t, NW (collectively , the “Adjac ent Properties” ). Eac h of the prope rties was a cquire d in an ar ms-leng th transac tion by

one of Cafe sjian’s entities, TomKat L imited Partnership (“T omKat”) . TomKat executed a n ag ree ment to purcha se 1338 G Stree t for $1.2 million on March 10, 2000 and c losed on May 15, 2000. TomKat purc hased 1342 GStreet for $1.2 milli on on Marc h 16, 2000 and close d on September 30, 2000. O n October 24, 2000, TomKat ente red into an I nstallment Purchase a

nd Sale Ag ree ment to purcha se 1340 G Stree t for a total of $3 milli on. Under

the installment ag ree ment, pay

ments of $150,000 wer e due e ach year for a period of te n y ear s, with a final

7balloon pay ment of $1.5 million due in March 2011. The fina l adjace nt property , 1334-46 G 3 Street, NW, also known as the “ Families U.S.A.” building, wa s acquire d later by TomKat, which purcha sed the building from a third- party seller f or $6.5 million i n September 2003. C. Initial Effor ts to Deve lop the Museum and M emorial A planningcommittee was f ormed to handle the task of de veloping the B ank B uilding into a museum and memorial. The planningcommittee oper ated lar g ely by consensus, a

nd there

wer e about a

dozen differ ent individuals who beca me involved to vary

ing de g ree s in the planning for the pr oject. Althoug h the committee held se vera l meeting s in the spring of 2000 to discuss development plans a

nd fundra ising, ther e wa s no dedicated staff to shepherd the projec t along , and the lac k of a c entra l decision maker slowed the pa ce of

prog ress c onsiderably . In 2001, Ross Var tian took on the position of planning dire ctor for the projec t, but the committee was una ble to ag ree on critica l decisions such as how to g o about hiringprofe ssionals to work on the building and how to ra ise funds to cove r the c osts of construction and ope ration. The big g est obstacle w as disag ree ment over the siz e and sc ope of the projec t, including unc erta inty over howCafesjian’ s acquisition of the Adjac ent Properties w ould affe ct the deve lopment of the museum. I t was ar ound late summer 2001 whe n Cafesjian a g ree d to donate the Adja cent Prope rties to be used for

the g enocide museum project. No of ficial proposa l was made to the Assembly until October 15, 2001, whe n Cafesjian wrote a letter to Hovna

nian outlining the ter

ms of a proposed g rant of the three proper ties that had bee n acquir ed. This letter w as the fir st in a series of dra ft g rant a g ree ments that would ultim ately be exchang ed betwe en Cafe sjian and the

In a Status Report filed on May 5, 2011, Def

endants indicated that all pay ments had 3 been ma de under

the installment ag ree ment and that title had bee n transfe rre d to CFF. 8Assembly . The letter proposed that Caf

esjian and/or CF F dona

te $5.8 million t o the Assembly to purcha se the prope rties from TomKa t. The propose d g rant a g ree ment would require the Assembly to use the prope rties solely as par t of the g enocide museum project, subjec t to plans approve d by

the Assembly ’s planningcommittee. The le tter also propose d that if the Assembly failed to de velop the prope rty acc ordingto those plans, CFF would be entitled to a r eturn of either the g rant funds or

the prope rties. Cafe sjian expressed his frustration with the lack of prog ress that ha d been ma de, and he explained at trial that he wa nted to make c erta in that the museum was built during his lifetime. Cafesjian’ s proposal wa s g ener ally well re ceive d at the Assembly , althoug h the Assembly

never responde d in writing to Caf esjian’s letter . Howeve r, there was no mea ningf ul prog ress throug hout the rest of 2001. In 2002, the par ties continued to discuss various deve lopment proposals and the re w as some progress. In Marc h 2002, the Assembly deter mined that an independe nt entity

should be cre ated to deve lop and oper ate the muse um project. CFF and the Assembly also ag ree d to combine their c onditions wit h prior g ifting c ommitm ents, which the newly -for med independe nt entity

would be oblig ed to honor. CFF and the Asse mbly ag ree d to jointly desig n and appr ove the g overningdocuments for the new e ntity , which would bec ome known as the A rmenian G enocide Museum & Me morial, Inc. (“ AGM& M”). It was agree d that AGM& M would be incorpor ated a s a 501(c )(3) org anization as soon as it was possible to do so responsibly

and sustainably . The pa

rties also dec ided that the Assembly office s would not be housed within any

portion of the museum complex, in part to keep the muse um independent f rom any advoca cy org anization and in part bec ause it wa s thought that ther e would not be a dequate space in the complex for the Assembly . To ensure that the Assembly would g et suffic ient cre dit
9for launc hing the museum (and to combat the perc eption that the Assembly was a bandoningthe projec t), Cafe sjian and Hovna nian ag ree d to channe l their contributions throug h the Assembly

. In August 2002, the planningcommittee met and discusse d a re vised draf t gr ant ag ree ment letter fr om CFF. L ike the pre vious draft g rant a g ree ment sent in October 2001, it contained a

reve rsion clause stating that if the three adjac ent prope rties wer e not deve loped in

acc ordanc e with a plan a

pproved by

the AGM& M (with the nec essar y approva l of CFF ), CFF would be entitled to a r eturn of e ither those adja cent pr operties or the funds used to purc hase them. There was some discussion at the me etingthat such an ope n-ende d reve rsion clause would not be appr opriate. The museum proje ct was f acingsignific ant ca sh flow problems over the cour se of 2002, and Cafe sjian had agree d to advanc e funds ne cessa ry for wor k to be completed in that year . In October 2002, the museum planningcommittee conve ned a me eting in New Yor k and eng ag ed in an extensive discussion about the financ es for the projec t. Hovnanian e x presse d his conce rn that they would be unable to raise e noug h money to fund a proje ct with a $100 million budget, a nd he raised the possibili ty

of phasingin the projec t, with later expansion tied to better ec onomic circ umstances. Othe rs also expressed c oncer ns about the oper ating defic it. W ater s told the committee that Cafe sjian was optimisti c that the f unds could be ra ised from the c ommunity and that, if nec essar

y , Cafesjian w as pre pare d to donate $50-75 million to ensure that the pr oject wa s completed. Ac cordingto one dra ft summary of the mee ting, “ [a] ll felt that G. Cafe sjian’s commitment, chara cter ized as a ‘sa fety net,’ a lleviated the f

iscal conc erns.” DX-67 at 2. The planning committee member s did reac h some ag ree ments about how best to move for war d, but the committee re mained foc used on conse nsus-based de cision-making

. 10On J anuar y 22, 2003, CFF sent a re vised draf t gr ant letter to the A ssembly for r eview. A s with the previous dra fts, the letter c ontained a r ever sion clause, but this time it contained a trig g eringdate: if the thre e donate d adjac ent prope rties wer e not deve loped ac cordingto plans approve d by

AGM& M by

Dec ember

31, 2008, then those prope rties (or the cash use d to acquire them) would re vert to CFF . The letter also provided that a

new $500,000 pr omissory note would be issued to CFF by

the Assembly

to replac e the pr evious one, a nd that the obliga

tion may be transfe rre d to AGM& M. The letter proposed that de cisions of the AGM& M Boa rd of Tr ustees be dec ided by

an 80% a ffirmative vote. This draf t letter wa s discussed at a me eting in Delra y , Florida , wher e Hovna

nian, Var tian, Kaloosdian, a

nd Adalian we re pr esent. The Assembly Boa rd of Trustee s held another

annual mee ting in B oca Raton on March 1, 2003. By the time of this meeting , ever

y one agree d that AGM& M should be launche d as an inde pendent e ntity with a budg et of a

round $100 million and a new buildingconstructe d on the B ank B uilding and the three adjac ent prope rties to be donate d by Cafesjian. It was also agree d that ANI would reta in its status as an indepe ndent 501(c )(3) org anization, but that it would become a subsidiary of the ne w museum entity

. D. Final Negotiati on of the Grant Agreem ents and the Creation of AGM& M I t took seven months following the Marc h 2003 meetingto finalize the ag ree ments and g overningdocuments that would cr eate AGM& M. One re ason for the delay was the a cquisition of the four

th adjace nt property , the Fa milies U.S.A. buil ding. T hroug h TomKat, Cafe sjian enter ed into a purc hase a g ree ment to buy the prope rty

for $6.5 million on September 22, 2003. The c losing date was sc heduled f or Oc tober 30, 2003. The dra ft g rant a g ree ment from Cafe sjian continued to be discussed a nd neg otiated.

11Be cause Cafesjian ha d ag ree d to channe l his donations to AGM&M throug h the Assembly , it

was de cided that Caf

esjian would ente r a grant a g ree ment with the Assembly (her einaf ter, the “Gr ant Ag ree ment”), a

nd the Assembly

would transfe r all of the muse um-related assets a nd obligations to AGM&M in a sepa rate ag ree ment, to be known as the “Tra nsfer Agree ment.” The law firm of

Caplin & Dr

y sdale wa s hired to dra ft the Tra nsfer Ag ree ment as we ll as the org anic documents for

AGM& M, including the Articles of Incorpor ation, the B y -L aws, a nd a Una nimous Writt en Consent ag ree ment signe d by all of the initial trustees of A GM& M. The re cord shows that the languag e in the Gr ant Ag ree ment was re viewed by most of the major figures involved in AGM& M during the months leadingup to its ex ecution on Nove mber 1, 2003. On Octobe r 13, 2003, Waters e mailed an updated dra ft of the Gr ant Ag ree ment, which included the donation of the Fa milies U.S.A. buil ding, f

or re view. The revised dr aft a lso included a ne w trig g er date of De cembe r 31, 2010 for the re version cla

use; it was fe lt that seven y ear s was a r easona

ble timeline for the c ompletion of the projec t. The re version cla use wa s also expanded to cover

the B ank B uilding in addition to the four Adja cent Prope rties. B eca use the Families U.S.A. buil ding tr ansac tion was schedule d to close on Oc tober 30, Waters ur g ed

ever y one to ac t expediti ously

so that titl e to the building c ould be transf err ed dire ctly

to AGM& M, eliminating the ne ed to transf er the proper

ty from TomKat to AGM&M a nd saving hundreds of

thousands of dollars in transf er a nd rec ordation fe es. On Oc tober 28, 2003, a confe renc e ca ll was held with, inter alia , Hovnanian, Ca fesjian, Ka loosdian, Waters, and Va rtian to discuss the four ke y

documents: the Gra

nt Ag ree ment, the Article s of Incorpor ation for AGM& M, the AGM& M By -L aws, a nd the Unanimous Written Consent ag ree ment. Duringthis meeting , Kaloosdian sug g ested that the la ng uag e in the re version cla use in the Gra

nt Ag ree ment
12be cla

rified so a s to avoid ambig uity about when the rig ht of reve rsion might be tr igg ere d. The final languag e of the se docume nts was appr oved shortly afte r this confe renc e ca ll. The Court noted in its prior Memora ndum Opinion that severa l individuals i nvolved in these discussions, including Kaloosdian a nd Hovnanian, ha d a conve nient lack of memory with respe ct to what tra

nspired. The ref

ore, the Court relied he avily on documents that we re submitted as exhibit s to determine the e vents in question. The Court also noted that it appea red a s if these individuals did not take the time to fully understand the terms and c onditions of the ag ree ments. Any claim that these individuals had c erta in intentions wit h reg ard to these documents is disinge nuous and belied by the languag e of the documents themselves. The Ar ticles of Incorpor ation for AG M&M we re sig ned on Oc tober 29, 2003, a nd AGM& M officia lly

beca me incorpor ated a s a nonprof it corpora tion in the District of Columbi a. The Ar ticles of Incorpor ation and the B y -L aws for AGM& M were ratified a nd adopted, respe ctively , pursuant to the Una nimous W ritten Consent ag ree ment, which wa s executed on October 30, 2003. The Gr ant Ag ree ment and Tra nsfer Ag ree ment wer e sig ned on Nove mber 1, 2003 duringan Assembly g ala in Palm Dese rt, California. B eca use the c ontent of these documents is critica lly

important to disputed issues in t his lit iga tion, the Court shall review e ach of these doc uments in some detail.

1. The Gr ant Ag ree ment The Gr ant Ag ree ment was sig ned by Cafesjian on be half of himself a nd CFF and by Hovnanian a

nd Peter Vosbikian on be half of the Assembly

. SeeDX-2 ( here inafter , “Gr ant

13Ag ree ment”). The e leven- pag e docume nt sets forth the ter ms and conditions of the g rants made 4 by Cafesjian a

nd CFF to the Assembly

for the muse um project a nd obligates the Assembly to comply with those terms and c onditions. Pursuant to the Gra

nt Ag ree ment, Cafesjian a nd/or CFF (jointly

define d as the “ Gra

ntor”) ag ree d to donate $10.3 million for the purc hase of the Adjac ent Properties f rom TomKat and a

ny related transa ction costs. In addition, Cafesjian a nd/or CFF ag ree d to make the a nnual $150,000 pay ments under the installment agree ment for 1340 G Stre et and the f inal balloon pay

ment of $1.5 milli on due in Marc h 2011. SeeGra nt Ag ree ment §§ 2(D)- (E). The amounts paid under the Gra nt Ag ree ment wer e ca lculated ba sed on the purc hase pr ice pa id by TomKat for

the Adjac ent Properties, plus the holding costs paid by TomKat pending

transfe r minus any

rents ea rned duringthis period, plus the leg al costs associated with the transf er. For purposes of this litigation, the most critical feature of the Gra nt Ag ree ment is the

reve rsion clause . Under

§ 3.1 of the Gr ant Ag ree ment, the “Gr ant Property ”—def ined as the Ba nk Buildingand the Adja cent Prope rties—“may only be used a s part of the AGM& M, [5 ] subject to plans for the AGM& M approve d by the B oard of

Trustee s of the Amer ican Ge nocide Museum & Me morial, Inc. (the ‘Plans’) . . . .” Gra nt Ag ree ment § 3.1(A). T he next section

rea ds as follows: I f the Gra nt Property is not develope d prior to Dec ember 31, 2010 in acc ordanc e with the Plans, or if the Gra

nt Property is not develope d in substantial compliance with the Plans inclu d i n g with respe ct to the deadlines for completion of the construction, A duplicate c opy

of this exhi bit with som e handwriting on the second pa g e wa s 4 admitted as PX-112. As used in this context , “AGM& M” re fer s to the museum project, not the c orporate 5 entity

. 14renovation, inst allation and other phases de tailed in the Plans, then: (i) i n t h e event any portion of the Gra nts has not bee n fu n d ed , t h i s Ag ree ment terminates; (ii) to the deg ree any portion of the Gra nts has been funded, at the Gra ntor’s sole discretion, the Assembly shall return to the Gra ntor the Gra nt funds or transf

er to the G rantor the Gra

nt Property

. Id. § 3.1(B ). The phr ase “ Gra nt funds” as r efe renc ed in the re version cla use includes both the initial gra nt of $4 milli on that was used to a cquire the B ank B uilding as w ell as the $12.85 milli on pledg ed to ac quire the A djace nt Properties. Cafe sjian testified that the purpose of the

reve rsion clause was to provide a n incentive to complete the museum expeditiousl y , so that it might be built bef

ore Caf esjian died. Waters te stified that the re version cla use wa s most li kely his idea; he e x plained that CFF often inser ted re version cla

uses into its gra

nt agree ments. Section 3.3 of the Gr ant Ag ree ment require s the Assembly to use the “G rant funds only for purposes de scribed in Sec tion 501(c)( 3) of the I nterna l Revenue Code of

1986, as ame nded.” Id. § 3.3. The Gr ant Ag ree ment provides that the Asse mbly shall make available a

space for a memorial to be named the “G era rd L . Cafesjian Me morial” or a nother name appr oved by CFF , which shall be ope rate d and maintained in pe rpetuity by the Assembly

at its own cost. Gra

nt Ag ree ment § 3.2. The Gr ant Agree ment also provides that ne ither CFF nor Cafe sjian have a ny obligation to provide additional funding to the Assembly or to AGM& M. Id. § 3.8. The Gr ant Ag ree ment also contains a br eac h clause : (A) I f the Assembly fails to use the Gra nts solely for the purposes set out in this Ag ree m en t or if the Assembly fails to satisfy any of the conditions of this Ag ree ment, Gra

ntor is rele ased from an y re m aining obligation under this Ag ree ment to provide funds or pr operty to the Assembly

. (B ) I f the Assembly uses any portion of the Gra nts either for a purpose other than those set out in this Ag ree ment or for a purpose other than those descr ibed in
15Section 501(c) (3) of the [I nterna l Revenue ] Code, as amende d, the Assembly shall repa y the portion of the Gr ants so spent to Grantor , plus interest. (C) The reme dies set out in this Section 3.9 are in addition to any other reme dies that may be ava ilable to the Gra

ntor at law or

equity

. Gra nt Ag ree ment § 3.9. The Gr ant Ag ree ment also requir ed the Asse mbly to enter into a Tr ansfe r Ag ree ment with AGM& M to transfer

all of its interest in all cash, ple dg es, prope rty , and other assets beingheld by the Assembly

for the muse um project. Id. § 5.3(A). T he Tra nsfer Ag ree ment would obligate AGM& M to honor all exis ting donor require ments at the time of tra nsfer and to assume a ll obligations in t he Gr ant Ag ree ment relating to the Me morial. Id. § 5.3(B )-( C). The Gr ant Ag ree ment also provided that the A ssembly would assig n its right to appoint the Truste es of the Armenia n National Institut e to AGM& M. Id. § 5.5. 2. The Tr ansfe r Ag ree ment The Tr ansfe r Ag ree ment was e x ecute d on November 1, 2003 by

the Assembly

and the newly -incorpor ated AG M&M. SeePX-114 (her einaf ter, the “ Transf

er A g ree ment”). The Transf er A g ree ment require s the Assembly to contribute to AGM& M “all of its rig hts, tit le and interest in and to all ca sh, pledg es, re al prope rty , tang ible proper ty , intang ible proper

ty , and other assets contributed to the [Assembly ] and/or held by the [Assembly ] for the deve lopment,

renovation, and construction of the AGM& M.” Id. § 1.1. The a pproxi mate ag g reg ate va lue of the g rant wa s listed as $27.8 mill ion, including $7.25 million in property , over $19 million in pledg es, and a

pproxi mately

$670,000 in cash a

nd other a ssets. Id. § 1.1(C). Pursuant to § 1.2 of the Tra nsfer Ag ree ment, “AGM& M, Inc. must honor all of the [Assembly ]’s donor require ments exi sting at time of transfe r, or in the a lternative, obta in donor

16consent to the tra nsfer and any modification of donor te rms.” Tra nsfer Ag ree ment § 1.2(A). T he ag ree ment also expli citly

require s AGM& M to comply with the obligation to construct a memorial as se t out in the Grant Ag ree ment. Id. § 1.2(B ). The T ransf er A g ree ment also requir es AGM& M to use the funds and pr operty transfe rre d “solely

to develop, construc t and oper ate” the Armenia n Genoc ide Museum & Memorial. Id. § 1.3. The a g ree ment also contains an a rbitration clause

. SeeTransf

er A g ree ment § 5.3. Howeve r, as the Court noted in its prior Memor andum Opinion, none of the pa

rties is prese ntly

seekingto enforc e that ar bitration clause. 3. The AG M&M Ar ticles of Incorpor ation The Ar ticles of Incorpor ation for AG M&M we re e x ecute d on October 29, 2003. See PX121. The Ar

ticles provide that AG M&M is a nonpr ofit corpor ation org anized for c haritable purposes within the mea

ning of § 501(c) (3) of

the I nterna l Revenue Code. Id. , Art. IV(A) . The purpose of

the cor poration is define d as, inter alia , “to own, oper ate, a nd maintain a per

manent museum and memorial to the victims and survivors of the Arme nian Genoc ide.” Id. The Articles pr ovide that AGM& M has no member s and that the boa rd of dire ctors for

the corpor ation shall be re fer red to a s the Boa

rd of Tr ustees. See id. , Arts. V-V I . The manne r of elec tion or appointment to the Boa rd of Tr ustees is to be set for

th in the By -L aws of the corpor ation. Id. , Art. VI . The B oard of Trustee s must have at lea st three trustee s at all times, and the initial trustees are define d to be Ger ard L . Cafesjian, H irair Hovna nian, Anoush Mathevosia n, and Robert Ka loosdian. Id. , Art. IX. The A rticles also provide that “[n] o part of the net ea rning s of the Corporation shall inure to the benef it of or be distributed to any trustee, e mploy ee or

other individual, partnership, e state, trust or cor poration havinga per sonal or private intere st in the Corporation.” Id. , Art. IV(C).
174. The AG M&M B y -L aws

The B y -L aws of A GM& M set out rules that g overn the operation of the Boa rd of Trustee s. See PX-122 (her einaf ter, “ By -L aws” ). The B y -L aws provide that the term of of fice of

eac h of the initial trustees (i.e ., Cafesjian, Mathevosian, Hovna nian, and Ka loosdian) “sha ll be perpe tual.” B y -L aws § 2.4. Ea ch donor that electe d an initial trustee (CF F, Mathevosian, Hovnanian, a

nd the Assembly

) is entitled to appoint a succ essor trustee in the event that the initial trustee is unable to serve for a ny rea son. Id. Additional trustees may be ele cted to the Boa rd of Tr ustees by making a contr ibution of $5 mil lion to AGM&M, provide d that the B oard of Trustee s has ac cepte d the contribution by an 80% a ffirmative vote and the donor has appointed a suc cessor . Id. § 2.5. Eac h donor (includinginitial donors) is entitled to one vote on the B oard of

Trustee s for e ach $5 million contributed. Id. §§ 2.4-2.5. The B y -L aws prohibit AGM& M from eng ag ing in a ny activities or conduc t that would not be per mitted to a corpora

tion ex empt from fe dera l income tax under Section 501(c) (3) of the Interna l Revenue Code. See By -L aws § 3.3. Similarly , the B y -L aws provide that “[n] o part of the net ea rning s shall inure to the bene fit of, or be distributable to, the Trustee s, office rs or other s except that the Trustee s shall be authorized and e mpowere d, if they so elec t, to pay

to Trustees, office rs or other s rea sonable c ompensation for se rvice rende red a nd to make pay

ments and distribution i n further ance of the purpose s set forth in these B y -L aws.” Id. Pursuant to § 4.1 of the B y -L aws, Un l ess otherwise prohibited by law or sections 4.3 and 4.4 of these By -L aws, th e Corporation shall indemnify any Trustee o r o ff i ce r of the Corporation, any former Trustee or office r of the Corporation, or any person who may have serve d at i ts reque st as a trustee , direc tor or off icer of anothe r cor

poration or entity , whether for p rofit or not for profit, and may , by resolution of t he Board of Trustee s, indemnif y 18any employ ee or ag ent of the Corporation ag ainst any and all expenses and liabiliti es

actua lly and nece ssarily incurre d by him or her or imposed on h i m o r h er i n connec tion with any claim, action, suit or proce eding (whe ther actua l or threatened, civil, criminal, administrative or investigative, including appea ls) in which he or she is or may be made a party by rea son of havi n g been such Trustee , office r, person, employ ee or ag ent, subject to t h e limit ation, howeve r, that there shall be no indemnification in relation to matters as to which he or she shall be adjudg ed in such claim, action, suit or proce eding to be gu i l ty of a criminal offe nse or liable to the Corporation for

damag es ar ising out of his or her own neg lige nce or misconduct in the per formanc e of a

duty to the Corporation. The B y -L aws provide that indemnification shall include, but not be limited to, counsel fe es and other c osts. Section 4.3 of the By -L aws provide s that if AGM& M is ever de emed a private foundation within the meaningof Section 509 of the I nterna l Revenue Code, no inde mnification shall be paid if suc h pay

ment would constitute an ac t of self-de alingor a tax able e x penditure a s define d in Sections 4941(d) or 4945( d) of the I nterna l Revenue Code, r espec tively

. Id. § 4.3. 5. The Una

nimous W ritten Consent Ag ree ment On Octobe r 30, 2003, ea ch of the four initial trustees of A GM& M signe d a docume nt titled Unanimous W ritten Consent in L ieu of the O rg anization Meeting of the B oard of Trustee s of AGM& M. SeeDX-1 ( here inafter , “UWC”). B y unanimous written conse nt, the Boa rd of Trustee s adopted a

series of resolutions. First, the a ctions of the incor porators w ere ratified a

nd the B y -L aws we re a

pproved. Sec ond, the initial donors (and their a ppointed trustees) w ere

rec og nized to be CFF ( Cafesjian) , Hirair H ovnanian ( himself), Anoush Mathe vosian (her self), and the Asse mbly

(Ka loosdian). Cafe sjian was appointed Cha irman and Pre sident, Hovnanian

was a ppointed Vice Cha irman, and John W ater s was appointed Sec reta ry and Tre asure r. Throug h the Unanimous Written Consent ag ree ment, the AGM& M Boa rd of Tr ustees authorized the off

icer s to pay

all of the org anizational expenses of the cor poration. The a ctions

19of the Chairma n (Cafe sjian) and the Sec reta ry /Trea surer

(Waters) in ne g otiating the pur chase of the Adjac ent Properties w ere ratified a nd approve d, and the Sec reta ry /Trea surer

was a uthorized “to enter into and execute any

and all docume nts nece ssary to effe ct the purc hase” of the Adjace nt Properties and “ to take such othe r ac tion as deeme d nece ssary or desire d to effe ct such transac tions.” UWC at 3. The AGM& M Boa rd also appr oved and r atified the ne g otiation of g rant a g ree ments with donors and the Asse mbly , and the Sec reta ry /Trea surer

was a uthorized to neg otiate furthe r g rant a g ree ments with donors. The B oard a lso acc epted f rom the Assembly

its power to appoint trustees for

the Arme nian National Institut e. E. Efforts t o Dev elop An Arme nian GenocideMuseum Through AGM & M The fa cts surroundingwhat happe ned af ter AG M&M wa s formally cre ated we re thoroug hly

discussed in the Court’s prior Me morandum Opinion and ne ed not be r epeated her ein. The AG M&M B oard of

Trustee s was unable to rea ch conse nsus on the proper siz e and sc ope of the projec t, and tensions betwee n Cafesjian a nd Hovnanian inc rea sed over a ser ies of disag ree ments about the museum projec t and other policie s of the Assembly . By 2006, rela

tions betwee n the par

ties had complete ly

broken down, prompting Caf esjian to propose tha

t AGM& M be dissolved. Cafe sjian ultim ately resig ned fr om the AGM& M Boa rd of Tr ustees, desig nating Waters as his succ essor. Af ter Caf esjian sued the A ssembly for pa y ment on the promissory

note, the other A GM& M Trustees vote d to exclude Waters from par ticipation on all matters re lating to the museum projec t. This resulted in a ser ies of lawsuits filed by the par ties fig hting f

or control of AGM& M and alleg ing mismana g ement of the corpor ation. The thre e other AGM& M trustees attempted to move for

war d with the projec t without W ater s’s involvement, but they wer e unable to raise the f

unds nece ssary

to implement a development plan. A ccor dingly , the museum was not

20develope d by Dec ember

31, 2010, thus trigg eringthe re version cla use in the Gra

nt Ag ree ment. II. DISCUSS ION A. Findings of Fact and Conclusions of Law Regarding CFF’s Obligati on to Reimburse AG

M& M for the Value of Properties that Rev ert Under the G rant Agreem ent The Court ruled in its prior Memor andum Opinion that the re version cla use in the Gra

nt Ag ree ment was va lid and enfor cea ble and that CF F a

nd Cafesjian ma

y exercise their

rig hts under that clause eff

ective D ece mber 31, 2010. Caf esjian informe d the Court that only CFF will exercise its rig hts under the r ever sion clause a nd that CFF will elect to have the prope rties transfe rre d in lieu of the g rant funds. The Court indicated, howe ver, tha t Plainti ffs ha d raised questions about whether

returning the prope rties to CFF violates the rule—stated in the AGM& M By -L aws a

nd Articles of

Incorpor ation—that no part of A GM& M’s net ea rning s shall inure to the be nefit of a

ny trustee. The Court asked the pa rties to addre ss in further br iefing whether it would be inequitable to enf orce the re version cla

use without requiringCFF to reimburse AGM& M for a ny potential incre ased va lue over the amount of funds or igina lly donated by

CFF or Cafe sjian, and to addre ss whether it was the orig inal intent of the contra cting parties that the r ever sion would be a nonprof it transaction. Through supplemental brief ing, the parties ha ve cla rified their

positions on t hese issues. Plaintiffs argue that the r ever sion clause in the Gr ant Ag ree ment, when r ead in c ontext with the other provisions of the G rant Agree ment and the ter ms of the AGM& M By -L aws a nd Articles of

Incorpor ation, should be construe d as re quiring that CFF not rea liz e a pr ofit from the

reve rsion. Plaintiffs contend that CFF will profit from the re version bec ause the value of the proper ties beingtransfe rre d exceeds the va lue of the donation that CFF a nd Cafesjian ma de as

21part of the Gra nt Ag ree ment. Fur

thermore , Plaintiffs argue that a r ever sion without som e for m of reimburse ment would violate fe dera l tax laws applica ble to nonprofit org anizations under § 501(c) (3) of

the Interna l Revenue Code. D efe ndants, by contra st, claim that the languag e in the Gra nt Ag ree ment is unambiguous a nd place s no restrictions on the rig ht of CFF to elect a

reve rsion of the prope rties rather than the g rant funds. The y also dispute Plaintiffs’ claim that the

reve rsion runs af

oul of the tax laws. The Court shall addre ss these ar g uments below. 1. The Gr ant Ag ree ment Ultimately , the issue bef

ore the Court is a straig htforwa rd question of c ontrac t interpre tation: does the Gra nt Ag ree ment require CFF to reimburse A GM& M for the e x tent to which the va lue of the pr operties to be tr ansfe rre d exceeds the va lue of the grant funds donated to acquir e them? The District of Columbia adhe res to an “ objective” law of c ontrac ts, meaningthat “the written languag e embody ing the terms of a

n ag ree ment will gove rn the rights and liabiliti es of the parties [reg ardle ss] of the intent of the pa rties at the time they

enter ed into the contra ct, unless the written languag e is not susceptible of a clea r and de finite undertaking, or unless there is fraud, duress, or mutual mistake.” Dye r v. Bilaal , 983 A.2d 349, 354-55 (D .C. 2009) (citation omitted; brac kets in orig inal). “I f the c ourt finds that the contra ct has more than one r easona ble interpre tation and there fore is ambiguous, then the court–a fter a dmitti ng probative e x trinsic evidenc e–must determine what a r easona ble per son in the position of the parties would have thought the disputed la

ng uag e mea

nt.” Till ery v . D.C. Contract Appeals Bd. , 912 A.2d 1169, 1176 (D.C. 2006) (quoting In re Bailey , 883 A.2d 106, 118 (D.C. 2005)) . “Ambiguity exis ts only if the cour

t determines that the pr oper inter pretation of the contra ct ca nnot be der ived from

22the contra ctual languag e exclusively , and re quires conside ration of e vidence outside the contra ct

itself.” Steele F

oundations, Inc. v. Clark Constr. Grp., Inc. , 937 A.2d 148, 153 (D.C. 2007). “[C] ontrac ts are not r ender ed ambiguous by the mere fac t that the parties do not agree upon their proper construction.” Id. In deter mining whe ther a

contra ct is ambig uous, courts examine the document on its fac e and g ive the languag e its plain meaning

. Till ery , 912 A.2d at 1176. The fir st step in interpretinga contr act is to deter mine “what a re asonable person in the position of the parties would have thought the disputed la ng uag e mea

nt.” Steele F

oundations , 937 A.2d at 154 (quoting Dodek v. CF 16 Corp. , 537 A.2d 1086, 1092 (D.C. 1988)) . “The meaningmust be asce rtained in lig ht of all the circ umstances surr ounding the parties at the time the contra ct was ma de,” a nd “[t] he wr iting must be interpr eted a s a whole, g iving a rea sonable, lawful, a nd eff ective me aningto all its t erms.” 1010 Potomac Assocs. v . Groce ry Mfrs. of Am., Inc. , 485 A.2d 199, 205 (D.C. 1984) ( internal c itations omi tted). The languag e in the Gr ant Ag ree ment is unambiguous: if the c onditions t rig g ering the

reve rsion are met, “at the G rantor’ s sole discretion, the Asse mbly shall return to the G rantor the Gra nt funds or transf

er to the G rantor the Gra

nt Property .” It is clear f

rom this langua g e that the Gra ntor (CFF and Cafe sjian) may choose be tween a

return of the funds donate d and a tr ansfe r of the prope rties. Ther e is no languag e in the re version cla use or a ny wher e else in the Gra

nt Ag ree ment that restric ts the Grantor ’s right to rece ive the Gr ant Property . The Court pre sumes that if the par

ties had intended to plac e any restric tions of the Gra

ntor’s rig ht to elect a tr ansfe r of the Gra nt Property , they

would have me morialized that intent in t he Gr ant Ag ree ment itself, particula rly in light of the f

act that the G rant Agree ment contains an integration cla use. See Luther W illiams, Jr., Inc. v. J

ohnson , 229 A.2d 163, 165 (D.C. 1967) ( “[I ]thas alwa y s been
23presumed that a written c ontrac t is the final repository of the a g ree ment of the pa rties. . . . [A] n integ ration cla

use mere ly

streng thens this presumption.”) (inter nal citation omitted). Plaintiffs argue that the two options in the reve rsion clause , “whe n rea d toge ther a nd with the balanc e of the Gra

nt Ag ree ment, signify

that the exercise of

the re version would be a nonprofit transa ction.” See Pls.’ Br. Reg ardingReimbursement at 3. How ever , that is not a natura l construction of the pla in lang uag e of the Gra nt Ag ree ment. All parties knew at the time they enter ed into the ag ree ment that the value of the Gra nt Property , which included the Ba nk Buildingand the Adja cent Prope rties, would be potentially much g reater than the value of the Gra nt funds, which cove red the purcha se of the A djace nt Properties and only about half the cost of the B ank B uilding (the other ha lf beingcover ed by Anoush Mathevosian) . There fore , even at the outset, the Gra

ntor’s choic e wa s not betwee n two options that were e qual in value. It is implausible that the parties would have intended the options to be equal seve n y ear s later on the

reve rsion date of

Dec ember

31, 2010, for this would eff ectively eliminate the Gr antor’s r ight to elec t the most valuable re medy

. I t is even more inc onceiva ble that the par

ties would have intende d for the tr ansfe r of the Gra nt Property

to be a nonpr ofit transac tion without s pecif ying a ny provisions for dete rmining the value of

the Gra nt Property

at the time of tra

nsfer . Valuingproper

ty in the absenc e of a

n arms-le ng th market tra

nsaction is inhere ntly

uncer tain, and the r ecor d at trial indicate d that there

wer e widely

vary ing a ppraisals of the proper

ties dependingon whether they would be used to build a museum or sold to a commerc ial develope r, with no definite va luation. See Trial Tr. (11/16 PM) at 85-87; DX- 513N. Any valuation offe red by

the par ties at this tim e would be speculative. Since the Court has de termined that ther e ar e no “string s” attac hed to CFF ’s use of

24the prope rties once transfe rre d, how would the Court dec ide what method of valuation was appropr iate to ensure that CFF did not realize a prof it? Such uncer

tainty over howto implement a “nonpr ofit” transf

er is a sig nificant re ason to assume that this was not what the parties intended. Plaintiffs argue that their inter pretation of the options as equal in value is supported by the limiti ng phrase in the reve rsion clause : “to the degree any portion of the Gr ants has bee n funded . . . .” They

argue that this phrase must be rea d as limiti ng the Gra ntor’s right of

reve rsion to the extent that the Grants have actua lly been f unded, and the y

argue that De fenda

nts’ construction “w ould allow the g rantors to take back the entire grant prope rties eve n if they had not fulfilled their pay

ment obligations under the pledg e.” Pl.’s B r. Reg ardingReimbursement at 7. But Plaintiffs over look the fac t that under the Grant Agree ment, the Gra nt funds had to be used to purcha se the Gr ant Property , meaningthat if Cafe sjian and CFF had not fulfilled their pledg es, AGM& M would never have a cquire d all of the prope rties that now must be transf err ed. There fore , there was ne ver a ny risk that Cafesjian a

nd CFF would rec eive a

windfall, for example, by

paying f or the a cquisition of only

one of the Adjace nt Properties and the n rec eiving all four of them under the reve rsion clause . Ultimately , the Court is not persuade d that the phra se “to the degree any

portion of the Gr ants has bee n funded” place s any restric tion on the Grantor’ s rig ht to elect a tr ansfe r of the G rant Proper ty , particula

rly wher e the r ecor d demonstrates that Cafesjian a

nd CFF have f

ulfilled their obligations under the Gr ant Agree ment. 6

The re cord at trial indicated that the A ssembly , actingon behalf of AGM& M, ref

used to 6 cash CF F’ s chec k for its annua l pay ment of $150,000 for

the 1340 G Stree t property in 2007. The Court found that a lthough the pa y ment was made a fe w day s late, there was no re ason that the Assembly

could not have c ashed the chec k and cr edited CFF with the pay ment. Acc ording ly , the Court finds that CFF and Cafe sjian satisfied their oblig ation to make the a nnual pay ment in 25Plaintiffs also argue that the r equire ment in § 3.3 of the Gra nt Ag ree ment that the Gra nt funds be use d “only

for pur poses desc ribed in Section 501(c )(3) of the Interna l Revenue Code” supports their position. By its own terms, this provision acts as a limitation only on the use of the Gra nt funds; it say s nothing a bout transfe rringthe Gra

nt Property . Even a ssuming that § 3.3 applied to the tra

nsfer of the Gr ant Property , the g ener al languag e in § 3.3 ca nnot be fa irly

rea d to implicitl y restric t the more spec ific languag e conta ined in the re version cla use. Ther efor e, the Court finds that § 3.3 does not impose any reimburse ment require ment on the transf er of the Gra nt Property

. Plaintiffs complain that without a reimburseme nt require ment, CFF will be allowed to reta in the benef

it of the appre ciated va lue of the pr operties, Anoush Mathevosian’s $3.5 million donation, and more than seve n y ear s of ca rry ing c osts, tax es, and insura nce that were paid for the proper ties, with the result beingthat AGM& M is stripped of nea rly all its assets. Plainti ffs a rgue that the par

ties could not have intende d such an ine quitable re sult. But this was a for esee able conseque nce a

t the time the parties e ntere d into the ag ree ment. The re version cla use in the Gra

nt Ag ree ment was intende d to cre ate a meaning ful incentive f

or the pa rties to substantially

complete the museum projec t by

Dec ember

31, 2010. Since the par

ties failed to re ach that milestone, Plaintiffs must l ive with the conse quence s of their ba rg ained- for a g ree ment. The Court ca nnot ref orm the plain terms of the Gra nt Ag ree ment simply

beca use Plaintiffs belatedly

rea liz ed how dire those c onsequenc es would be.

2007, and ther e wa s no other evide nce at trial sugg estingthat CFF and Cafe sjian did not perform their fundingobligations under the Gr ant Ag ree ment. 262. The AG M&M B y -L aws a nd Articles of

Incorpor ation Plaintiffs argue that the Court should look beyond the four c orner s of the Gr ant Ag ree ment to the AGM& M By-L aws a nd Articles of

Incorpor ation in determiningthe meaning of the re version cla

use. Howe ver, the Court has no occ asion to sear ch beyond the text of the Gra nt Ag ree ment beca

use the ter

ms of the re version cla

use ar e cle ar a

nd unambig uous. See 1010 Potomac Assocs. , 485 A.2d at 205 (“ Ex trinsic evidenc e of the parties’ subjective intent may be

resor ted to only

if the docume nt is ambiguous.”) . Although the Court may consider the se documents as pa

rt of the c ircumstance s surroundingthe formation of the Gra nt Ag ree ment, see id. , the execution of these doc uments does not alter the Court’s interpre tation of the Gra nt Ag ree ment. Plaintiffs contend that the a doption of the AGM& M Articles of I ncorpor ation and By -L aws a

round the same time as the Gra nt Ag ree ment and Tra

nsfer Ag ree ment demonstrates that the par

ties intended for

the private inurement re strictions contained in the B y -L aws a nd the Articles to apply

to the Gra

nt Ag ree ment. Ag ain, howeve r, the spec ific and dire ct languag e in the re version cla

use is the best evide nce of the par ties’ intent. The Court is not persuade d that the par ties would have intende d to restrict the G rantor’ s reve rsion rig hts through mor e g ener al languag e conta ined in entirely separ ate doc uments. See W ashington Automotive Co. v. 1828 L Street Assocs. , 906 A.2d 869, 880 (D.C. 2006) ( “[I t is] a fa miliar principle of c ontrac t interpre tation[ ] t hat ‘spec ific terms a nd exact terms ar e g iven g rea ter we ight than g ener al languag e.’” ) (quotingRestatement (Sec ond) of Contrac ts § 203(c) ( 1981)). The lack of any expli cit restric tion on the transfe r in the Gra nt Ag ree ment strong ly

sug g ests that the par

ties did not intend to subject the transfe r to any private inure ment regulations. Plaintiffs argue that the Court should not construe the reve rsion clause in a manner that
27could re sult in adverse tax conseque nces f or AGM& M, sugg esting that the par ties would not have intende d such a r esult. Howeve r, there is no reason to a ssume that the par ties expected AGM& M to survive if the re version cla use wa s exercised; to the contra ry , it is reasonable to assume that the pa

rties expected the r ever sion of either the Gra nt funds or the Gr ant Property to be the de ath knell for the org anization. The parties in this litigation cr eate d AGM& M for the express purpose of c reating a museum and memorial de voted to the Arme nian Genoc ide on the site of the B ank B uilding and the Adjace nt Properties. Without those proper ties, it is unclear how AGM& M could be e x pecte d to fulfill its mission and survive as an or g anization. Theref ore, the Court is not persuade d that the par ties intended to spare AGM& M from any adver se tax conseque nces that might re sult from the transfe r of the G rant Proper ty
. Plaintiffs claim that construingthe re version cla use as r equiringno reimburse ment for appre ciated va lue would cr eate “a ve hicle for tax fraud” be cause it would allow wealthy donors to put cash into a cha

rity for the a cquisition of rea l estate, wa it for the value of that re al estate to incre ase ove r time, and then se ek the r eturn of the appre ciated r eal e state pursua nt to some unmet condition, thereby

g aining the appr eciated prope rty without any

conseque nce. See Pls.’ Br. Reg ardingReimbursement at 7. It is unclear why Plaintiffs believe ther e would be no tax conseque nces to the donor in this hy pothetical, and Plaintiffs c ite no authority to expl ain their theory of this “vehicle for tax fraud.” In any event, the c ollection and re cover y of fe dera l tax es is the sole re sponsibili ty

of the United States g overnme nt; Pl aintiffs ca nnot compel Def

endants to comply with the tax code throug h this li tigation. See 26 U.S.C. § 7401 (“No civil ac tion for the collection or r ecove ry

of taxes, or of any

fine, pe nalty , or for feiture , shall be commenc ed unless the Secr etar

y [of the Trea sury ] authoriz es or sa nctions the proce eding s and the Attorne y Gene ral
28or his deleg ate dire cts that the ac tion be commence d.”). F urthermor e, the Court has no pow er to

chang e the ter

ms of the Gra

nt Ag ree ment mere ly

beca use enf orcingthe re version cla

use ca n be expected to have adver se tax consequenc es for the par ties. 3. Tax Regulations Prohibiting Private B enef it Plaintiffs have pre sented the Court with a r ather complicated se t of arguments as to why they believe that allowing CF F to prof it from the transf

er of the Gra nt Property

will violate fede ral tax laws perta ining to tax-exempt orga nizations . As the Court has explained, these arguments are essentially irrele vant bec ause the Gra nt Ag ree ment clea

rly and unambiguously require s AGM& M to transfer the prope rties without reg ard to the tax conseque nces of the transfe r. In any

event, the Court is not persua ded that the tra nsfer of the prope rties to CFF violates the tax laws as Plaintiffs claim. Plaintiffs’ centr al ar g ument is that by transfe rringthe Gra

nt Property

to CFF, A GM& M will be violating r egulations that require § 501(c) (3) or g anizations to be operate d exclusively for tax-ex empt purposes. Pursuant to 26 C.F.R. § 1.501(c )(3) -1(c )(2) , “[a]n orga nization i s not operated exclusively

for one or more e x empt purposes if its net ea rning s inure in whole or

in part to the benef

it of private sha

reholde rs or individuals.” A pr ivate shar eholder or individual is define d as a pe rson havinga per sonal and private intere st in the activities of the org anization. 26 C.F.R. § 1.501(a) -1(c ). The pur pose of the inur ement provision is “to preve nt the siphoning of char itable re ceipts to insiders of the c harity .” United Cancer Council, Inc . v. Comm’r , 165 F.3d 1173, 1176 (7th Cir. 1999); see also I .R.S. P riv. L tr. Rul. 201047033 (Nov. 3, 2010) (“ Inureme nt is any transfe r of c haritable assets to the org anization’s insiders for whic h the org anization does not rec eive a dequate considera tion. I nureme nt can take many forms.”)

. 29Def endants a rgue that ther e ca

n be no violation of the inure ment provision beca use the proper ty is being transfe rre d to CFF, a nother 501(c )(3) org anization which is neither a share holder of A GM& M nor a pr ivate individual. Be cause CFF itself must operate e x clusively for tax-exempt purposes, Def endants a rgue that ther e will be no “pr ivate” be nefit fr om the transfe r of pr operty

that would frustrate the purpose s of § 501(c )(3) . Plaintiffs do not directly respond to this argument in their brief ing, a nd they have c ited no case s in which it was deter mined that a 501(c )(3) org anization was a private share holder or individual for purposes of the inureme nt provision. I n fac t, Plainti ffs’ c ounsel essentially conce ded the point duringa Status Hearingon Fe bruar y 24, 2011, noting that “ by desig nating the ac tual acquir ing e ntity as CFF , that . . . avoids some of the limitations in the private inureme nt law.” 2/24/11 Hr’ g Tr. at 16. Acc ording ly , the Court is not persuade d that the transf er of the prope rties to CFF will violate the prohibition on private inure ment as stated in the f eder al tax laws and incorpor ated into the B y -L aws a

nd Articles of

Incorpor ation of AGM& M. 7 Moreove r, base d on a re view of the substance of the transa ction as a whole, the Court is not persuade d that the transf er of the prope rty

under the Gra

nt Ag ree ment qualifies as pr ivate inurement. Contrar

y to Plainti ffs’ c hara cter ization, t his is not a case where a we althy donor g ave money to an org anization to buy proper ty and then the c orporation gave the pr operty back to the donor af ter it had substantially

appre ciated. T his is a case wher e a donor made a conditional g ift of funds to be use d for a

specific purpose, a

nd afte r AGM& M was unable to fulfill the require d

Plaintiffs sugg ested duringthe Fe bruar y 24, 2011 Status Hearing

that beca use the Gr ant 7 Ag ree ment define s the “Gr antor” as Cafe sjian and CFF , there must be a private benef it to Cafesjian. H oweve r, Cafe sjian has re linquished his right to rec eive the pr operty in favor of

CFF , and Plaintiffs have not demonstrated how Ca fesjian will bene fit from the tra nsfer

. 30conditions, it was compelled to allow the donor to rec over the proper

ties acquire d with the g ifted funds. Def

endants re ly

heavily on Underwood v. United States , 461 F. Supp. 1382 (N.D . Tex. 1978), which a lso involved the return of a conditional g ift. In Underwood , the plaintiff had ag ree d to donate $1 million to t he Southern Methodist University School of L aw through a char itable foundation with the understandingthat all of his donations would be deduc tible for fede ral income tax purposes. See id. at 1384. Afte r the I RS di sallowed some of Under wood’s deductions to the cha

ritable foundation, Underwood r eac hed an a g ree ment with the foundation to return his donations so that he could g ive the money direc tly to the law school. Id. at 1385. The I RS determined that the re turn of funds f rom the foundation amounted to self-de aling in violation of 26 U.S.C. § 4941, which imposes a tax on any act of self-de aling betwee n a private foundation and any “disqualified pe rson” suc h as a substantial c ontributor to the foundation. See 26 U.S.C. §§ 4941, 4946(a) (1). Howeve r, the Underwood court he ld that the return of funds by the 8 foundation wa s not an ac t of self-de aling beca use it was simply

the re turn of a c onditional gift. 461 F. Supp. at 1389. Underwood

is disti ng uishable fr om this case, primar ily beca use the donor in that c ase

rec eived a

n exact ref

und of the amount he had donate d. By contra st, CFF is g oing to r ece ive proper ties that were purcha sed for $3.5 milli on more than CF F a nd Cafesjian donated to acquir e them (the amount of Mathevosian’s c ontribution) and that may or may not have a

pprec iated in value since then. Ther efor e, it could be a rgued that CFF will “profit” f rom the transf

er of the Plaintiffs argue that AGM& M is now a private foundation and the ref ore ma y be subjec t 8 to this t ax if it transfe rs the Gr ant Property to CFF. A s expl ained be low, the Court does not believe that the transfe r ca n be cha rac terized as an a ct of self -dea ling within the mea

ning of § 4941. Fur

thermore , Plaintiffs assume without discussion that C FF falls within the definition of “disqualified pe rson” unde r the statute, but this is not clear. 31proper

ties. Howeve r, pec uniary g ain does not automatica lly equate to inurement; the question is whether the profit is rea sonable in lig ht of the bene fits to AGM&M. Cf. Chur ch By Mail, Inc. v

. Comm’r , 765 F.2d 1387, 1392- 93 (9th Cir. 1985) (notingthat pay ment of excessive sala

ries to employ ees ma

y constitute inurement to the bene fit of a pr ivate per son). The c ircumstance s surroundingthe Gra

nt Ag ree ment and the f

ormation of AGM& M demonstrate that the reve rsion clause was a

n essential par

t of the bar g ain that ena

bled AGM& M to obtain the funds nec essar y to acquir e the pr operties. Caf esjian and CF F we re unw illing to donate a dditional mil lions of dollars to the g enocide museum and memorial pr oject unless they could be r easona

bly assure d that the projec t would be substantially completed in a timely

manner . There fore , they demande d a

reve rsion clause that would enable them to ge t control of the pr operties in ca se AGM& M was

unsucce ssful. This was not a sham tra nsaction for

AGM& M to shelter asse ts for Cafe sjian and CFF ; it was an agree ment that g ave A GM& M a financ ial incentive to be suc cessf ul with the money donated by

Cafesjian a

nd CFF . The Court has a lrea dy found that Cafe sjian and the CFF

desig nated trustee s of AGM& M acte d in good f aith to try to develop the g enocide museum and memorial bef

ore the reve rsion date of

Dec ember

31, 2010. In that reg ard, it is unfair a nd without support to char acte rize the Gra nt Ag ree ment as an a ct of self -dea ling or

to state that AGM& M was ope ratingfor the pr ivate bene fit of Cafe sjian or CFF

. 9

Plaintiffs errone ously

claim that Cafe sjian was entitled to four vote s on the AGM& M 9 Boa rd of Tr ustees by virtue of his pledg e of more than $15 million. See Pls.’ Reimbursement Br

. at 14. At most, Cafesjian would have been e ntitled to three votes under the AGM& M By -L aws. Howeve r, bec ause of

the 80% vote r equire ment, Cafesjian w ould have ha d veto power over the Boa rd’s de cisions even if he wer e only rec og nized as havingone vote. In any event, the Court has alre ady

reje cted Plaintiffs’ a

rgument that Cafesjian a cted in bad f aith throug h his manag ement of A GM& M. 324. I mplementing the Transf er For all of the a fore mentioned re asons, the Court finds that the Gr ant Ag ree ment clea rly and unambiguously

require s AGM& M to transfer the Gra nt Property

to CFF w ithout reg ard to any tax consequence s that flow there from. To date, AGM& M has fa iled to transfe r the Gr ant Property , citing c oncer

ns about the tax consequenc es of the tr ansfe r and de manding that sever al restric tions be place d on the transf er. Now that the Court has a ddresse d Plaintiffs’ arg uments 1 0 relating to the tax conseque nces of the transf

er, the re should be no r eason f or fur ther de laying the transfe r of the pr operties. De fenda nts have a sked the Court to order the trustees of

AGM& M to sign c erta in documents prepa red by Def endants to complete the transf er. The Court declines at this ti me to order

the trustees to sig n the spec ific docume nts drafte d by Def endants’ c ounsel. Instead, the Court shall orde r the AG M&M trustee s to transfer the prope rty

to CFF in a ccor dance with D.C. law by

no later tha

n May 23, 2011. B. Findings of Fact and Conclusions of Law Regarding AGM&

M’s Inde mnification of Cafesjian and W

aters The Court ruled in its prior Memor andum Opinion that Def endants Caf

esjian and Water s

wer e entitled to indemnification under § 4.1 of the A GM& M By -L aws for expenses actua lly

and

nece ssarily

incurre d by

them in defe nse of c laims broug ht ag ainst them by Plaintiffs. The indemnification re quirement e x tends only to claims that arose out of Cafe sjian’s or Waters’ s duties as offic ers or

direc tors of AGM& M, which ar e asse rted in Count One of the Consolidated Complaint. Ex penses r elatingto the Assembly ’s claims ag ainst Cafesjian a nd Waters for br eac h Among the conditions that the AGM& M trustees see k to impose is an ag ree ment that 1 0 CFF will forfe it the Grant Proper ty to the Assembly

if a pe rmane nt museum and memorial devoted to the Ar

menian Ge nocide is not construc ted within five y ear s. See [212] Pls.’ St atus Report at 4. 33of fiducia

ry duty or misappropriation of trade se cre ts are not c overe d by the indemnification clause in the AGM& M By -L aws. The Court previously indicated that it would deter mine the amount of indemnification in post -trial proc eeding s. Cafesjian a nd Waters have submitt ed a brief w ith supporting docume ntation that sets forth the amount of the ir expenses. Plaintiffs have filed an opposition contestingthe re asonable ness and va lidity of those expenses, and D efe ndants have f iled a re ply . Plaintiffs raise a series of objections to Defe ndants’ re quest for indemnification, and the Court shall address e ach be low. “[O]nce a contr actua l entitlement to attorney ’s fe es has be en asc erta ined, the deter mination of a re asonable fee awa rd is for the tr ial court in lig ht of the re levant circ umstances.” Ideal Elec tronic Sec. Co. v. I nt’l Fid. Ins. Co. , 129 F.3d 143, 150 ( D.C. Cir. 1997). “[T]he rea sonablene ss of an attorney ’s fe es aw ard is within the sound discre tion of the trial court a

nd is reviewe d only

for a buse of discr etion.” Id. The Court has discr etion to deter mine the nature and amount of pr oof nec essar y to determine r easona

bleness and ma

y fix the amount of the fe e without hearing a ny evidenc e at a ll. FDIC v. Be nder , 127 F.3d 58, 64 ( D.C. Cir. 1997). 1. Self-De aling Although the y

did not raise this argument befor e the Court issued its Memorandum Opinion, Plainti ffs now c ontend that indemnification is not require d under the By -L aws be cause AGM& M has bee n deeme d a private foundation within t he mea ning of § 509 of the I

nterna l Revenue Code and the pa y ment of leg al expenses to Cafesjian a nd Waters would amount to an act of self-de aling under § 4941( d) of the I nterna l Revenue Code. See By -L aws § 4.3 (“ [I ]f at any time the Corporation is deeme d to be a pr ivate foundation within t he mea ning of Section 509
34of the Code then, dur ing suc h time, no pay ment shall be made under this Article if such pay ment would constitute an ac t of self-de aling or a tax able e x penditure, a s defined in Sec tion 4941(d) or Section 4945(d), r espec tively , of the Code.” ). De fenda nts dispute whether A GM& M has bee n “dee med to be a private founda tion,” since ther e is no evidenc e that the IRS has y et made suc h a deter mination. Pl aintiffs have submitt ed fina ncial docume nts to the Court under sea l purportedly showing that AGM& M lost it s status as a public cha rity in fiscal y ear

2010, when its public support fra ction dropped be low the level r equire d to maintain public char ity status. See [217] Pls.’ St atus Report to the Court at 3-5. How ever , there is no evidence befor e the Court indicating that the I RS has made any deter mination that AGM&M qua lifies as a pr ivate foundation. Section 4.3 provides that indemnification shall not be paid “duringsuch time” that “ the Corporation is deeme d to be private foundation,” sug g esting that until a determination is made by the I RS, i ndemnifica

tion mustbe paid. Even a ssuming that AGM& M is deemed a private f oundation, howeve r, Tre asury regulations provide that indemnification of former office rs does not amount to an a ct of self

dealingfor pur

poses of § 4941(d) . Pursuant to 26 C.F.R. § 53.4941(d)-2( f)( 3), section 4941(d)( 1) shall not apply to the indemnification by a private foundation of a foundation manag er, with respe ct to the manag er’ s defe nse in any civil judicial or civil administrative proce eding arising out of the manag er’ s perf ormanc e of service s (o r failure to perf

orm service s) on behalf of the foundation, ag ainst all exp en s es (other than taxes, including tax es i mposed by ch apter 42, penalties, or expenses of corr ection) inc luding a

ttorney s’ fe es, judg ments and settlement expenditures if— (A) Such expenses are rea sonably incurre d by the manag er in connec tion with such proc eeding ; and (B ) The manag er has not acted w illfully and without rea sonable cause with respe ct to the act or failure to act which led to such proce eding or to liability for tax under c hapter

42. There fore , the B y -L aws provision pre cluding pay ment of indemnification where it constitut es 35self-de aling does not prec lude the Court from or deringAGM& M to pay Cafesjian a

nd Waters for the re asonable expenses they incurre d in defe nding the ir claims. 2. Arbitration Plaintiffs nex t argue that the Court should reje ct Def endants’ r equest for

indemnification beca use the leg al expenses associa ted with this li tiga

tion could have be en avoide d had Cafe sjian and Waters a g ree d to arbitrate this disput e. Plaintiffs had filed a demand f

or ar bitration with the Americ an Ar

bitration Association on September 13, 2007 r elatingto the first lawsuit filed by Cafesjian a

nd CFF ag ainst the Assembly in Minnesota. On Octobe r 10, 2007, Cafe sjian and Waters, inter alia , filed a la wsuit in Minnesota to enjoin the arbitration. The pa rties ultimately stipulated to the dismis sal of that lawsuit in September 2007. T here fore , Plaintiffs have long since a bandoned a

ny attempt to compel ar

bitration of the issues conte sted in these ac tions, and there is nothing in the ar

bitration provisions of the AGM& M By -L aws that re quires Cafe sjian and Waters to agree to arbitration. Most signific antly , the indemnification provision in t he AGM& M By -L aws doe s not require Cafesjian or Waters to submit t o arbitration. Accor dingly , there is no basis for conc luding that Caf esjian’s a nd Waters’s leg al expenses ar e unre asonable or

unnece ssary

based on the ir dec ision to l itigate in fede ral c ourt. The Court also notes that Plaintiffs did not i nclude this argument in their proposed c onclusions of law or othe rwise pr esent this argument to the Court during the trial; this is an independent re ason for reje ctingPlaintiffs’ argument. 3. Ex penses Incurr ed by CFF Plaintiffs nex t claim that CFF has paid the le g al expenses for this litigation on behalf of Cafesjian a

nd Waters, and since CFF is not subject to indemnification under the A GM& M By

36L aws, they claim that no indemnification is owed. I n response to Plainti ffs’ c laim, Defe ndants state that they

have r emoved a

ny expenses paid by

CFF from their r equest for indemnification, leavingonly

expenses paid by

Cafesjian. Def

endants have produc ed a de clar ation with 1 1 supporting doc umentation demonstratingthat Cafesjian pe rsonally paid for the leg al expenses that wer e not cove red by

CFF

. See Def

s.’ Reply in Support of Br. Q uantify ing A ttorney s’ Fe es for Indemnification, Ex . E (Suppl. Decl. of Wil liam G. L axton, J r.). Ac cording ly , the Court shall consider only

these e x penses that we re inc urre d by Cafesjian in de termining the amount of indemnification re quired unde r the AG M&M B y -L aws.

4. I dentification of Ex penses Subject to I ndemnification Be cause the scope of indemnification under the AG M&M B y -L aws is limited to the expenses incurre d by

Cafesjian a

nd Waters in defe nding the claims asser ted ag ainst them as former office rs and trustee s of AGM& M, Defe ndants must identify which expenses ar e re lated to these c laims and separ ate a ny expenses that they

incurre d asser

ting c ounterc laims ag ainst Plaintiffs or defe nding a g ainst separ ate c laims asserted by the Assembly . In order

to acc omplish this task, Defe ndants have identified three cate g ories of e x penses: (1) those that are clea rly related to the def

ense of claims asser

ted ag ainst Waters and Caf esjian in their ca

pacities a s fiduciar ies of AGM& M; (2) those that ar e cle arly related to other c laims asserted in the litig ation; and (3) those expenses that ca nnot easily

be sepa rate d betwee n these two c ateg ories of c laims (“ble nded expenses”) . Def endants see k indemnity

for the a mount of expenses in the first cate g ory and 67% of

the blended e x penses, ba sed on De fenda nts’ estimate of the pr oportion of

Waters testified at tria l that he had not paid f or any leg al expenses. See Trial Tr. ( 11/15 1 1 AM) at 36- 37. 37those expenses that ca n be fa irly

attributed to the def

ense of claims that are subject to indemnification. Plaintiffs do not take issue with Def endants’ de cisions about which expenses belongin eac h cate g ory . Howeve r, Plaintiffs argue that none of the blended e x penses should be

awa rded be cause they

cannot c lear ly

be linked to the cla ims that must be indemnified. Alternatively , Plaintiffs argue that De fenda nts’ proposed pe rce ntag e is too high a nd should be g reatly reduc ed to 19%. The pa rties have cited only

a fe w ca ses to support their ar g uments reg ardingthe prope r allocation of attorney s’ fe es, all of whic h involve application of a fee -shifting statute rathe r than a contra ctual indemnification clause. In Hensley v. Ec kerhart , 461 U.S. 424 (1983), the Supre me Court addre ssed how fe es should be aw arde d to a pre vailing pa rty wher e the pa

rty preva iled on only some of the c laims asserted in the litig ation. The Court noted that in such c ases, “ [m ]uch of counsel’s time will be de voted g ener ally to the litigation as a

whole, makingit difficult to divide the hours expended on a

claim-by-cla im basis,” and ther efor e cour ts “should focus on the signific ance of the ove rall re lief obtained by the plaintiff in re lation to the hours rea sonably expended on the litigation.” 461 U.S. at 435; accord Thomas v. Nat’l Football League Playe rs Ass’n , 273 F.3d 1124, 1128- 29 (D.C. Cir. 2001). The most ana logous c ase c ited by the par ties is Alpo Petfoods, Inc. v . Ralson Purina Co. , No. Civ. A. 86-2728, 1991 WL1292963 (D.D.C. De c. 4, 1991), in which the c ourt awa rded attorney s’ fe es that we re limited to the costs of prose cuting

succe ssful aspec ts of the pre vailing pa rty ’s ca se-in-c hief. See id. at *12-13. In that case , the party seekingan aw ard unde rtook a thre e-step me thodology to calculate the time attributable to its successful c ounterc laim: first, it ex cluded time cle arly unrelated to the succ essful cla im; then, it seg reg ated the r emainingleg al fe es into various subject matter cate g ories base d on the nature
38of the re lationship to t he succ essful cla im; and finally it estimated the perc entag e of time in ea ch cate g ory that could fa irly

be attributed to a

succe ssful result. Id. at *12. The c ourt ac cepte d this methodology

as a va lid means of provingthe amount of fe es that should be aw arde d. Id. These c ases a

re somewhat in tension with the D.C. Court of Appea ls’s decision in Safeway Stores, Inc . v. Chamberlain ProtectiveServic es, Inc

. , 451 A.2d 66 (D.C. 1982). In that

case , the cour

t affir med the denia l of attorney s’ fe es and e x penses to a pa rty wher e the c ourt deter mined that it was impossibl e to allocate the fe es and e x penses among thr ee c laims, only one of which w as subject to indemnity

. Id. at 72-73. How ever , in that case , the par ty ’s rig ht to indemnification wa s based on the limited exception to the Americ an Rule that allows a pa rty wrong fully

involved in liti g ation with a third party to rec over the expenses of such litigation from the wrong doer. See id. at 68-69. It is therefor e uncle ar whether Safeway Stores controls beyond its core holdingthat “an inde mnitee may be denie d rec overy

of attorne y ’s fe es fr om his codef endant indemnitor whe re the fee s incurre d in establishing his rig ht to indemnity are considere d insepara

ble from those inc urre d in defe nding the alleg ed neg lige nce.” Id. at 73. The Court finds that it is unnecessa ry to resolve this issue at this time because Def endants may be able to break down many of their “ blended” expenses in a manner that more c lear ly identifies whethe r the c osts incurred or the work pe rfor

med wer e ac tually

related to the claims subject to indemnification. More over, be y ond criticizing De fenda nts’ approa ch to ca lculating a perc entag e for

the blended e x penses, Plaintiffs also conte nd that many of the e x penses c laimed by Def endants a re unr easona

ble. Plaintiffs complain that Def endants’ le g al bills are bloate d by excessive time devoted to ordina ry tasks, appea

ranc es by multipl e attorne y s where only one wa s

nece ssary , and other

unnece ssary

expenses. In order

to expedite resolution of these disputes over
39the nec essity of par ticular e x penses, the Court sha ll refe r this issue to a mag istrate judg e for a repor t and re commendation pursua nt to Fede ral Rule of Civil Procedure 72(b) a nd L ocal Civil Rule 72.3(a) . The mag istrate judg e may revie w Def

endants’ c ateg orization of “blended” expenses and dete rmine whe ther ther e is a more appropr iate methodolog y for se parating whic h expenses should be indemnified and which should not. The mag istrate judg e may also revie w Plaintiffs’ objections to particular expenses and make decisions about which e x penses we re “ac tually and nec essar ily

incurre d” within the meaningof the indemnification provision of the AGM& M By -L aws. Upon r eview of the mag istrate judg e’s r eport a nd rec ommendation, the Court shall determine, if ne cessa ry , whether

Def endants’ pr oposed blende d expenses approa ch is appropr iate and what per centa g e should be a pplied to those expenses. C. Defendants’ M

otion for Att orneys’

Fee s for Vexatious Liti

gation Apar t from their c laim for indemnification, Defe ndants have filed a [221] Mot ion Requesting Attorney s’ Fe es for Vexatious L itigation. De fenda nts argue that the Court should

awa rd attorne y s’ fe es under

its inherent authority

to sanction parties f

or vexatious conduct or, alternatively , under 28 U .S.C. § 1927, which provides that “[a]ny attorney or other pe rson . . . who so multipl ies the proc eeding s in any case unrea sonably

and vexatiously

may be re quired to satisfy persona lly

the excess costs, expenses, and attorney s’ fe es re asonably incurre d beca

use of such conduc t.” Def

endants c ontend that they should be awa

rded attorney s’ fe es base d on: (1) Plaintiffs’ pursuit of a c laim for equitable disgor g ement of Caf esjian’s investments in Armenia that was ultimately

withdrawn be fore trial; (2) Plaintiffs’ re fusal to disclose its theories of damag es duringdiscovery ; (3) Plaintiffs’ use of alleg edly obstructive tac tics during discovery ; (4) Plaintiffs’ f

iling unnec essar

y motions i n the cour se of the litig ation; and (5) Plaintiffs’ f ailure
40to produce a substantial number of documents until the eve of trial. Plaintiffs have f

iled an opposition t o Def

endants’ motion, and Plaintiffs’ tria l counsel, K& LGates L L P, have interve ned for the pur

pose of f iling an opposition to Defe ndants’ motion. Defe ndants have responde d to both of these oppositions, and the motion is now ripe for a djudication. Although the Americ an Rule g ener ally provides that ea ch par

ty must bears its own leg al costs, the fe dera l courts have inhere nt power to a ssess attorney s’ fe es whe n a par ty has “a cted in bad fa ith, vex atiously , wantonly , or for oppressive r easons.” Chambers v. NASCO, Inc

. , 501 U.S. 32, 45-46 (1991) ( quoting Alyesk a Pipeline Serv . Co. v. W ilderness Soc’y , 421 U.S. 240, 258-59 (1975) ). “A s old as the judiciary itself, the inhere nt power e nables c ourts to protect their instit utional integr ity

and to guard a g ainst abuses of the judicial proce ss with contempt citations, fines, aw ards of

attorney s’ fe es, and suc h other orde rs and sa nctions as they

find nec essar

y .” Shepherd v . Am. Broad. Cos. , 62 F.3d 1469, 1472 ( D.C. Cir. 1995). To support a sanc tion under this inherent authority , “the c ourt must make a f inding by clea r and c onvincing evidenc e that [the [sanctioned party ] commi tted sanctionable misconduct that is tantamount to bad faith.” Ali v. Tolbert , ___ F.3d ____, 2011 WL691364, at *5 (D.C. Cir. Mar. 1, 2011)

. The Court may

also awa rd attorne y s’ fe es base d on vexatious conduct pursuant to 28 U.S.C. § 1927. The purpose of § 1927 is to allow the Court “to assess attorne y ’s fe es ag ainst an attorney who frustrates the prog ress of judicia l proce eding s.” United States v. W allace , 964 F.2d 1214, 1218 (D.C. Cir. 1992). B efor e imposing sa nctions on an attorne y , the Court must evaluate whether the attorne y ’s conduc t was “ at least rec kless[.] ” Id. at 1217. Reckle ssness is a “hig h threshold . . . and in g ener al re quires deliber ate a ction in the fac e of a known risk, the likelihood or impact of which the ac tor inexcusably ignor es.” Id. at 1219-20. “ The powe r to assess c osts on
41the attorne y involved is a power

which the c ourts should ex erc ise onlyin instances of se rious and studied disreg ard f

or the orde rly

proce ss of justice.” Id. at 1220 (quotation marks a nd citations omitted). “[U] nintended, inadve rtent, and ne g lige nt acts will not support an impositi on of sanctions under

section 1927.” Id. at 1219 (quoting Cruz v. Savage , 896 F.2d 626, 631 ( 1st Cir. 1990)). The Court notes at the outse t that the majority of De fenda

nts’ reque sts for fe es re late to disputes that arose in the c ourse of discovery

over what evidenc e should be produc ed in re lation to particular

claims asser

ted by Plaintiffs. The Fe dera l Rules of Civil Procedur e provide a mecha nism for awa

rdingexpenses to parties who incur expenses as a r esult of unnec essar y discovery , and that is the pre fer red a pproac h for a

war ding e x penses a s a re sult of misconduct duringdiscovery

. See Fe d. R. Civ. P . 26(c) (3) & 37(a) (5). De fenda nts did not seek expenses duringthe cour se of discove ry , and De fenda nts do not rely

on the Fe dera l Rules in asking the Court to awar d fee s for ve x atious liti g ation.

1. Plaintiffs’ Pursuit of a Claim for Disg org ement of Caf esjian’s I nvestments Def endants a rgue that they

should be awa

rded the fee s they

incurre d in defe nding a

claim

asser ted by the Assembly

for disg org ement of Caf

esjian’s business intere sts based on his failure to disclose those interests to the Assembly under its conf

licts of interest policy . The Asse mbly did not ex plicitly

asser t such a c laim in its orig inal complaint in Civi l Action No. 08-255. Howeve r, the Asse mbly

did pursue discove ry

based on a

disgor g ement theor

y of dama g es in

connec tion with it s claims for br eac h of fiducia ry duty and violation of the c onflicts of intere st policy . Def

endants re fused to re spond to the Assembly ’s re quests for discove ry on rele vancy g rounds, and the Court de nied the Assembly ’s motion to compel this di scover y . The Asse mbly

42ultimately dropped this claim prior to tria l. Defe ndants complain that they wer e for ced to investigate the Assembly ’s disg org ement theor y and devote resour ces to de feating it duringthe

course of the litigation. Defe ndants essentially argue that the disg org ement cla im was frivolous and that Plaintiffs wer e asse rting it for the improper purpose of

hara ssing Caf

esjian with improper discove ry

reque sts. Although the leg al basis for the Assembly ’s disg org ement cla im has never been c lear

to the Court and the c laim was ultimately dropped a s lackingmerit, the Court is not persuade d that Plaintiffs’ pursuit of that theory demonstrates r eckle ssness or bad f aith. It is often the ca se that the contours of

a par ty ’s claims evolve throug hout the discovery proce ss, particular ly

with respe ct to damag es and r emedies. The fac t that Plainti ffs propounde d overbr oad discove ry reque sts related to this claim does not wa rra nt imposi tion of sanctions for ve x atious liti g ation, even thoug h it may

have be en suff

icient to justify

an aw ard of

expenses under Rule 26( c) if Def endants ha d moved for a

protec tive order

. See Fe d. R. Civ. P . 26(c) (3) & 37(a) (5) ( providing that expenses may

be aw arde d if a motion for prote ctive orde r is g rante d). The f act that Def endants did not move for

discovery

sanctions sug g ests that Plaintiffs’ eff orts to pursue their disgor g ement cla im were not more vexatious than their pursuit of other c laims that were ultimately

found to be mer itless. I n fac t, the rec ord shows that Plaintiffs’ attempts to litigate a disgor g ement cla im were limit ed to identifying disg org ement as a potential reme dy

in their

answe rs to interrog atories, r equestingdiscovery rela ting to Cafe sjian’s business interests (whic h the Court denied) , and asse rting this argument duringthe deposition of Edele Hovnanian. While Def endants c omplain that they wer e for ced to c onduct leg al re sear ch to deter mine the viability

of Plaintiffs’ theory , that is part of the or dinary costs of civil litigation. Ac cording ly , the Court
43declines to e x erc ise its discretion to awar d leg al expenses to Def endants ba sed on Plaintiffs’ attempts to pursue a disg org ement cla im.

2. Plaintiffs’ Fa ilure to Disclose The ories of D amag es DuringDiscover y Def endants c ontend that they should be awa

rded e x penses a s a re sult of Plainti ffs’ f ailure to disclose various theor ies of dama g es duringdiscovery . The Court pre viously g rante d Def endants’ motion to strike any theories of

damag es that we re not suff iciently disclosed during discovery

. See Pretrial Confer ence Mem. Op. & Orde r (Oc t. 22, 2010) at 13-27. How ever , Def endants a sk for the a dditional sanction of attorne y s’ fe es, ar g uing that Plainti ffs ve x atiously avoided their

obligations to di sclose their the ories of da mag es. De fenda

nts rely on the fa ct that Plaintiffs failed to provide a computation of their da

mag es at the outset of

discovery

as re quired by Rule 26(a) (1)( A)(iii), instructe d Dr. Rouben Ada lian not to answer que stions relating to damag es duringhis deposition, and provided incomplete or vague re sponses to Defe ndants’ interrog atories a

bout damag es. De fenda

nts also rely

on the fa ct that Plaintiffs’ Rule 30(b)( 6) witness, Van Kr ikorian, wa s unable to answe r questions rela ting to the c alculation of da mag es duringhis deposition. Krikorian testified duringthat deposition that Pl aintiffs would produc e an expert witness to address the subje ct of damag es, but Plaintiffs never desig nated a

ny expert witnesses. I t is clear f

rom the re cord that Plainti ffs we re le ss than forthcomingabout their theor ies of damag es duringdiscovery , and that is the basis upon which the Court gr anted De fenda nts’ motion to s trike those cla ims. However , the Court is not persuade d that Plaintiffs’ conduct amounts to reckle ssness or bad f aith sufficie nt to just ify

a sanc tion under § 1927 or the Court’ s inhere nt authority . The re cord indicates that Plaintiffs did supplement their disclosures with

44estimates of their da mag es, and it appe ars that they may have ha d a g ood faith basis for asser ting those claims at the time. Ultimately , Plaintiffs were unable to come up with evidence in support of those cla ims, and theref ore the y wer e unable to give satisfac tory response s to Defe ndants’ discovery demands. The Court is not convinced that Plaintiffs wer e ac ting ve x atiously by

asser ting their damag es cla ims during discove ry and then be ing c aug ht without evidence to support them. There fore , the Court finds that its pretrial sanc tion precludingPlaintiffs from proce edingbased on undisclose d damag es wa s sufficient, a nd it declines to awa

rd attorne y s’ fe es based on this conduc t.

3. Plaintiffs’ Alleg ed Gamesmanship DuringDiscover y Def endants ne x t argue that they should be awa

rded f ees a s a re sult of what they call “unnec essar

y discovery

and obstructive ta ctics” by Plaintiffs relatingto two depositions taken duringdiscovery . First, De fenda nts complain about the fa ct that Plaintiffs’ counse l instructed Adalian not to answe r questions about dama g es duringhis deposition, si nce this wa s not a proper instruction. See Fe d. R. Civ. P . 30(c) (2) ( “A pe rson may instruct a depone nt not to answer only when ne cessa

ry to preser ve a pr ivilege , to enforc e a limitation ordere d by the cour t, or to prese nt a motion under Rule 30(d) (3).” ) Second, D efe ndants complain about the f act that two da

y s prior to Anoush Mathevosian’s sc heduled de position, P laintiffs filed an e merg ency motion for a protec tive order

to proce ed with the deposition by written questions in lieu of an or al examination pursuant to Rul e 31. Althoug h Plaintiffs based their motion on Mathevosian’ s poor health, De fenda

nts argue that it was made for pur ely strateg ic re asons bec ause Plaintiffs nee ded additional time to prepar e Mathe vosian to testify reg ardingthe May

7, 2007 meetingof the AGM& M Boa

rd of Tr ustees.
45Wit h respe ct to deposition of Adalian, the Court grante d Def endants’ motion to compel his testimony

on the subject of da

mag es. See [59] Orde r (Ma y 7, 2009). Plaintiffs’ counse l had instructed Ada lian not to answer que stions about damag es bec ause a Rule 30(b)(6) witness was beingdesig nated f

or that purpose . Duringa telephone confe renc e on the r ecor d with the Court, Plaintiffs’ counsel a g ree d that this was an inappr opriate ba sis upon which to instruct Adalian not to answer questions. Accor dingly , the Court order ed that Dr . Adalian’ s deposition be continued so that Defe ndants could ask him questions relating to dama g es. De fenda nts did not request any sanctions at the time, and the Court did not award a ny sanctions. Wit h respe ct to the deposition of Mathevosian, the Court denied Plaintiffs’ eme rg ency motion to proceed upon written questions rather than by oral e x amination. See [64] Orde r (June 23, 2009). The Court he ld that Defe ndants had e stablished that it was important to depose he r and that Plaintiffs had not substantiated their c laims that she was too ill to be deposed. Def endants ultimately

deposed Ma

thevosian at he r home, a

nd the videotape of that deposition was pre sented to the Court as pa rt of the r ecor d at trial. It is appare nt from that video that she was in poor he alth, and g iven the limited scope of the questioning f rom Def endants duringthat deposition, it was rea sonable for Plaintiffs to ask the Court to lim it the method of questioning. Def endants have seized upon these two inc idents during discovery as evide nce of Plaintiffs’ vexatiousness. However , the Court is not persuade d that Plaintiffs’ counsel a cted

rec klessly or in bad fa ith in taking these actions. Ac cording ly , the Court declines to a war d a sanction of attorney s’ fe es base d on this conduct.

4. Unnec essar

y Motions P rac tice Def endants ne x t argue that they should be awa

rded e x penses be cause Plaintiffs filed
46sever al unnec essar y “motions” duringthe cour se of the litig ation. First, De fenda nts complain about a r equest for

entry of def ault that was filed 35 da

y s after Def endants fa iled to file an a nswer to Plainti ffs’ Sec ond Amended Complaint in Civil Action No. 07-1259. The Court denied Plaintiffs’ reque st for entry of def ault, ag ree ing w ith Defe ndants that defa ult was inappropr iate in light of the ir participation in the lawsuit and the related ac tions pending be fore the Court. Def endants a rgue that Plaintiffs filed their r equest only for the pur

pose of de lay

and har assment, but they conce de that Plaintiffs’ ac tion was allowed by Rule 55. The Court dec lines to sanction Plaintiffs for takingan ac tion that is ex plicitly authorized by

the Fe dera l Rules of Civil Procedur e. Def endants ne x t complain about Plaintiffs’ re fer ence to Rule 11 in a footnote of their reply brief in support of

summary judgme nt. See [79] Pls.’ Reply Mem. at 5 n.5. In that footnote, Plaintiffs sug g ested that De fenda nts had improperly

cited De lawar e ca se law a nd seconda ry source s in support of their bre ach of fiduciar y duty claims. Wit h leave of the Court, Def endants filed a

surre ply to respond to Plaintiffs’ sug g estion. See [82] Def s.’ Surreply . The Court ag ree s with Defe ndants that the re fer ence to Rule 11 was unnec essar y , but Defe ndants also did not need to file a

surre ply to respond to Plaintiffs’ footnote. The Court shall not sanction 1 2 Plaintiffs for asse rting a leg al ar gument that Def endants’ c ited source s are not controlling authority

. Finally , Def

endants c omplain about a motion filed by Plaintiffs on the eve of

trial asking

Plaintiffs did not file a motion for sanctions under Rule 11, and the Court did not 1 2 construe Plaintiffs’ f

ootnote as re questing that sanctions be imposed. In any event, it was obvious to the Court that Defenda nts’ citation of per suasive author ity was not sanc tionable conduct. 47Def

endants to ce rtify

that they had complied with ce rtain discover y obligations. See [152] Pls.’ Mot. for Orde r RequiringDef s.’ Confirmation of Compliance w ith Discovery Obliga tions. Plaintiffs were seekingconfirmation that Defe ndants had sea rche d all of Cafe sjian’s email addre sses for discove rable information in light of ne w evidenc e of a dditional email acc ounts that surfa ced be fore trial. Def endants a rgue that Plaintiffs’ motion was unnec essar y and vexatious beca use the pa rties wer e eng ag ed in discussion about producingany outstanding materials bef ore trial. The Court ultimately denied the motion without prejudice afte r the pa rties appe are d to have resolved the dispute throug h neg otiation. W hile Plaintiffs should have bee n able to re solve their disag ree ment with Defe ndants befor e filinga motion with the Court, the Court does not find that Plaintiffs’ motion was vexatious. The parties had le g itimate disputes about last-minute discovery obligations, and Plainti ffs’ de cision to file a motion with the Court was not clea rly inappropriate. There fore , the Court shall not sanction Plaintiffs based on this conduct.

5. Production of Docume nts on the Eve of Tr ial Def endants’ f inal reque st for attorne y s’ fe es is based on the fac t that Plainti ffs produc ed a larg e number

of docume nts—some 12,000 pag es of e mails—less than two wee ks befor e the star t of the trial. Plaintiffs’ late production is troubling be cause these e mails—many of which w ere ultimately

used by Def endants a s important exhi bits at trial—should have bee n produce d prior to the close of

discovery

pursuant to the Court’s sche duling or der a nd prior ruling s relatingto the consolidated discove ry

in these ac tions. By

producingthese doc uments on the eve of trial, Plaintiffs force d Def

endants to spend a

signific ant amount of time and r esourc es re viewingthese materia ls instead of pre paringtheir witnesses, r ehea rsing their ar g uments, and otherw ise prepa ringfor a leng thy bench tr ial. Ultimately , it is unclear what impact Plaintiffs’ late

48production had on D efe ndants’ ability to prepa re f or trial. De fenda

nts did not ask for a continuance based on Plaintiffs’ late produc tion, but it was not in Def endants’ inter est to delay the trial, so the Court ca

nnot assume that Def

endants we re not pre

judiced by

the untimely disclosures. Ba sed on the damning c ontents of many of the doc uments, Defe ndants specula te that Plaintiffs acted in ba d faith and a bused the discove ry

proce ss by

waitinguntil before tr ial to produce them. Plaintiffs indicated to the Court that a c omputer problem ha d inadver tently cause d these doc uments to be omitted from its prior production of doc uments during discovery

. See [170] Pls.’ Resp. to Defs.’ Mot. to Amend the JointPretrial Stmt. at 2. Pl aintiffs’ f ormer c ounsel has pre sented the Court with a de clar ation indicating that he wa s unawa re until Octobe r 2010 that additional emails exist ed that had not be en produc ed. See Dec l. of Arnold E. Rosenfe ld ¶ 11. Whil e the Court is willing to ac cept the de clar ation of Plaintiffs’ for mer c ounsel as an of

fice r of the Court that documents we re not de liberate ly withheld until the eve of tria l by leg al counse l, it is unclear whether Plaintiffs acted r eckle ssly or otherw ise brea ched the ir obligation to ti mely supplement their discove ry response s. There fore , the Court shall require Plaintiffs to provide the Court with a more spec ific explanation as to why they did not produce the se docume nts during discovery . The Court may order pay ment of re asonable expenses cause d by Plaintiffs’ untimely production pursua

nt to Rul e 26(c )(1) if the Court is not satisfied with Pl aintiffs’ r esponse. The Court shall hold in abey ance Def endants’ motion for attorney s’ fe es with respe ct to the untimely production of these documents. D. Defendants’ P etition for Involuntaril y Dissolution On Fe bruar

y 16, 2011, Def

endants filed a

[198] Petition for I nvoluntary Dissolution
49askingthis Court t o beg in the involuntarily dissoluti on of AGM& M pursuant to the proc edure s in the District of Columbia Nonprofit Corporation Act, D.C. Code §§ 29-301.01 to 301.114. Pursuant to D.C. Code § 29-301.55, the Ac t provides in pertinent pa rt: The c ourt shall have f

ull power to liquidate the a ssets and af fairs of a cor poration: (1) In any action by a member

or direc tor when it is made to appe ar: (A) That the direc tors are d eadloc ked in the manag ement of the corpor ate aff airs and that irrepa

rable injury to the corpor ation is being suffe red or is threatened by rea son there of, and either that the members are unable to brea k the dea dlock or ther e ar e no member s havingvoting r ights; (B ) That the acts of the direc tors or those in control of the co rp o ration are illega l, oppressive, or f

raudule nt; (C) That the c orporate assets a re be ing misapplied or

wasted; or (D) T hat the cor

poration is unable to ca

rry out its purposes[ .] D.C. Code § 29-301.55(a ). The N onprofit Corporation Act sets out specific pr ocedur es for liquidation procee dings. See id. §§ 29-301.55 to 301.60. As the Court explained in a Memora ndum Opinion and Orde r issued on F ebrua ry 17, 2011, following passag e of the District of Columbia Court Reform and Criminal Procedur e Ac t, Pub. L . No. 91-358, 84 Stat. 473 (1970), a ll powers over nonprofit cor

poration liquidation are vested in the Superior

Court of the District of Columbia. See [202] Mem. Op. & Orde r at 5-6. The Court sug g ested, howe ver, that it mi g ht be appr opriate to e x erc ise supplemental jurisdiction over D efe ndants’ petition for involuntary dissoluti on, and the Court aske d the par ties to submit briefingon this iss ue. De fenda nts filed a re sponse to the Court’s orde r addr essing the issue of jurisdiction, and Plaintiffs have filed a n opposition t o Def

endants’ pe tition, t o which De fenda nts filed a r eply . There fore , the issue is ripe for the Court’s re solution.
50The supplementa l jurisdiction st atute, 28 U.S.C. § 1367, provides that “the district courts

shall have suppleme ntal jurisdiction over all other c laims that are so r elated to c laims in the action within [t he cour

ts’] original jurisdiction that they form par t of the same c ase or controve rsy

under A rticle I I I

of the United States Constitution.” 28 U.S.C . § 1367(a) . Howeve r, the statute provides that a cour t may decline to e x erc ise supplemental jurisdiction wher e (1) the claim ra ises a novel or

complex is sue of state law; (2) the claim substantially predominate s over the claim or c laims over which the district court has or igina l jurisdiction; (3) the court ha s dismiss ed all cla ims over which it has orig inal jurisdiction; or (4) in exceptional circ umstances, there are other c ompelling r easons f or dec lining jurisdiction. Id. § 1367(c)

. Many fede ral c ourts have r ecognized that claims for cor porate dissoluti on involve specia l state intere sts that may

be disrupted or

frustrated by

the exercise of

fede ral jurisdiction, and the exis tence of state pr ocedur es for dissoluti on may

require fede ral c ourts to abstain from e x erc ising jurisdiction. See, e .g. , Pennsylv ania v. W illiams , 294 U.S. 176, 185 (1935) (“ I t has long been

acc epted pr actice for the f eder al cour

ts to relinquish their jurisdiction in favor of the state courts, wher e its exercise would involve c ontrol of or interf ere nce w ith the internal af fairs of a domestic corpor ation of the state.” ); Caudill v. Eubank

s Farms, Inc. , 301 F.3d 658, 661- 65 (6th Cir. 2002) (af firming district court’s a

bstention from jurisdiction over cor porate dissoluti on claim under Burford v. Sun Oil Co. , 319 U.S. 315 (1943)); Friedman v. R eve nue Mgm t. of N.Y ., Inc. , 38 F.3d 668, 671 (2d Cir. 1994) (r ecognizi ng that the compre hensive re g ulation of corpor ate g overna nce and existence by

the state may

war rant a bstention under Burford

); In re English Seafood ( USA) Inc. , 743 F. Supp. 281, 288-89 (D . Del. 1990) ( “We find that abstention is requir ed in this case. The state of

Delaw are has a strong

interest in the for

mation and termination of c orporations
51under its laws a nd in the uniform deve lopment and application of the statutory scheme that the state leg islature and c ourts have c reated to regulate those c orporations.”); see also Kermanshah v

. Kermanshah , 580 F. Supp. 2d 247, 271 (S.D.N.Y. 2008) (citingcase s). Althoug h there is some question whether

simil ar pr inciples should apply to the District of Columbia, see Silve rman v. Barry , 727 F.2d 1121, 1123 n.4 ( D.C. Cir. 1984), there is some basis for conside ringthe Superior Court’s expertise in resolving these loca l issues, see H andy v. Shaw, Bransford, Veilleux & Roth , 325 F.3d 346, 351- 52 (D.C. Cir. 2003). Ac cording ly , the Court is reluctant to asse rt jurisdiction

over a matter that is nea

rly alway s handled e x clusively by the local c ourts of the District of Columbi a. Def endants a rgue that the Court should exercise suppleme ntal jurisdiction over the petition because the Court has alre ady invested a substantial amount of time in thi s liti g ation and is familiar with the problems fa cingAGM& M. Howeve r, while the Court may be fa miliar with some of the f

acts that a re r eleva nt to Defe ndants’ petition, Def endants did not asser

t this claim for r elief in their Stre amlined Countercla ims or any of their pr etrial brie fs, and this claim wa s not litigated by

the par ties at trial. Resolution of Defe ndants’ petition would require additional

1 3 finding s of fa ct by

the Court following “a he aringhad upon such notice as the c ourt may direc t to be g iven to all parties to the pr ocee dings a nd to any other pa rties in interest designated by the court.” D.C. Code § 29-301.56(b) . Such proce eding s would likely occur afte r the Court has 1 4 By contra st, the plaintiffs in Miller v. Up I n Smoke , Inc. , 738 F. Supp. 2d 878 (N.D

. 1 3 Ind. 2010), upon which D efe ndants rely , pled their a lternative c laim for judicial dissolution in t he complaint. See id. at 866. The Court notes that none of the pre sent trustees of

AGM& M were parties to this 1 4 litigation duringthe trial. Hira ir Hovnania n was dismissed as a pa

rty at the summary

judgme nt stag e. Anoush Mathe vosian and Va n Krikorian ha

ve neve r bee n parties, a lthough Va n Krikorian 52finally

disposed of the pa

rties’ orig inal claims, which is an a dditional reason to dec line the exercise of

supplemental jurisdiction. See 28 U.S.C. § 1367(c)(3) . I t is one thing to have the Court exercise supplementa l jurisdiction over a c laim in the interest of judicial e conomy ; it is another thing e ntirely

to seek to extend the Court’s jurisdiction by addinga complete ly

new c laim afte r the trial ha s been he ld. For the fore g oing r easons, the Court de clines to exercise suppleme ntal jurisdiction over Def endants’ [198] P etition for Involuntary Dissolution. Defenda

nts should seek appropriate relief from the Super ior Court for the D istrict of Columbia. E. Defendants’ M

otion for Order to Show C ause as to W

hy Plaintiffs Shoul d Not Be Held in Comtempt On Marc h 21, 2011, Def

endants filed a

[214] Request for O rder

to Show Cause as to Why Plaintiffs Shoul d Not Be Held in Contempt. Defe ndants contend that Plainti ffs have violated one of

this Court’s orders by

reloc ating cer

tain materia ls maintained by the Arme nian National Institut e (“ ANI ”) of f the pre mises of the F amilies U.S.A. building. Plaintiffs do not dispute that ANI

has moved its materia ls out of the Families U.S.A. buil ding, but they contend that they should not be held in contempt bec ause A NI is a separ ate leg al entity

that is not a party to this l itigation and the Court did not ex pressly order it to keep its belong ings in the F amilies U.S.A. building. The Court ag ree s with Pl aintiffs that there is no basis for findingthem in contempt. Followingthe completion of c losing a rguments at trial, the Court aske d the par ties if they

attended the trial as the c orporate re prese ntative of the A ssembly . Acc ordingto Defe ndants, the CFF -desig nated trustee of AGM& M is now J ohn Wil liams, Defe ndants’ trial c ounsel. I t is unclea r whe ther Mr. Williams could continue to repre sent Def endants through any

dissoluti on proce eding s in light of his prese nt status as a trustee
. 53would ag ree not to take any actions with respe ct to the prope rties pendingthe Court’s ruling

. Be cause the re version date of De cembe r 31, 2010 wa s approa chingsoon after trial, the Court wanted a ssuranc es that the pa rties would not attempt to enforc e the Gr ant Ag ree ment or cha ng e the status quo while the Court was in the pr ocess of decidingthe ca se. Plaintiffs ag ree d that they would wait until the Court’s ruling be fore taking action. De fenda nts also ag ree d that they

would not take any

actions with respe ct to the buildings, but they raised a conce rn about “ the ANI situation,” ref

err ing to the ma

terials beingstored in the F amilies U.S.A. building and the staff workingthere

. See Trial Tr. ( 11/29) at 168. In response , the Court stated: I would hope that while we awa it my decisions that nothing happens to them or they g et moved or any

thing else. I ’d pref

er not to enter an order beca use I ’m sure—unless y ou can rea ch an agree ment about what both sides need to do. I f y ou can rea ch some stipulation or some sort of consent order , I ’d be happy to sign something until I make a dec ision. Id. at 168-69. De fenda

nts complained about the la ck of a n enfor ceme nt mechanism and a sked for a rig ht of inspection. See id. at 170-71. The Court then inquired as to whe ther ther e wa s inventory of the mate rials kept by

ANI , and Plaintiffs’ counse l informed the Court (a fter confe rringwith Dr. Rouben Ada lian, who was pr esent in the c ourtroom), that ther e wa s not a prec ise inventory

. Id. at 171. Plaintiffs’ counse l told the Court that nothi ng had happe ned to the materia ls for a longtime since the litigation beg an, and Plaintiffs a g ree d that nothing should happen to them pe nding the Court’s decision. The Court then told the pa rties seve ral times that they should try

to rea ch an a g ree ment about this issue before askingthe Court to enter a n order : L et me make the sug g estion, in order to e nter some sort of order y ou either have to ag ree to it or y ou need to file something in ter ms of what my authority would be. ANI , technica lly , is not a party , althoug h they are under y ou, it’s under the umbrella of [AGM&M], I ’d have to take a look at that more car efully

. So, I ’m just saying that t his is not something I would do off the top of my head. I f y ou can rea ch s o m e 54ag ree ment that just simply say s nothi n g get s moved by any body that relates to this until I make this decision, that would be helpful. Once I make a decision, I will bring y ou back to ha

ve some discussion furthe r.

. . . [I ]f y o u ca n agree to something, that would be mos t helpful. J ust leave ever y body with nobody

moving or

doing a ny thing, that would be helpf ul. I f you can’ t do that and y ou still fee l strong ly , then file something and then I ’ll take a look at it. I pref er not to put my

resour ces into that. B ut why don’t y ou have a

discussion about it.

. . . As I said, I would pref

er that y ou have discussion about i t , s ee if y ou can resolve somethi n g. I f y ou want me to sign something, fine. Reac h a stipulation, howeve r y ou want to do it. I f y ou can’ t, then y ou need to file something. I ’m not g oing to do it today without y our filing something in wr iting.

. . . [W ]hat I ’m ask i n g is nobody move any thing. I mean, in other words, we’ ve been—you’ve been on pause while we’ ve been waiting for this for at least—at least for a couple of y ear s at the end [of the] y ear . So, don’t chang e any thing. I mean, y ou can acc ept new donations, but don’t move the proper ty or make chang es to the thing. To the extent that y ou want to put something—stipulate that nobody —either side is g oing to do any

thing, then that would be helpful. But I ’ll do this as fast as I can. But if y ou’re not satisfied, then file something in writing and I ’ll litigate it. But I would sug g est that y ou talk and see whether y ou can do it on a mor e amica ble basis. Id. at 171-75. The parties did not pre sent any stipulation or ag ree ment to the Court for ratifica tion, nor did the parties file a ny motions asking the Court to enter an Or der. Def endants a rgue that the r emoval of the ANI materia ls from the F amilies U.S.A. building, which a

ppare ntly occur red a fter the Court issued its Memorandum Opinion on J anuar y 26, 2011, violated the Court’s ora l admonition that “nobody move any

thing.” Howeve r, as should have be en cle ar f

rom the conte x t, the Court’s statement wa s not intended to constitute a

55binding or der on A NI

. Even if the Court ha d intended to impose a bindingobligation, ANI ’s 1 5 actions would not justify

a findingof conte mpt. The rec ord pre sented by Plaintiffs demonstrates that ANI waited until afte r the Court issued its J anuar y 26, 2011 Memorandum Opinion bef ore moving its materia ls to an offsite storag e fa cility , wher e they rema in under the supe rvision of Dr. Adalian. See Dec l. of Dr. Rouben A dalian ¶¶ 3-6, 11, 14. Ther efor e, ther e is no basis to conclude that ANI ’s assets have bee n wasted. For these re asons, the Court finds that there is no basis for holdingPlaintiffs in contempt, and the Court shall deny

Def endants’ r equest for

a show c ause or der. III. CONCLUSION For the fore g oing r easons, the Court f inds that the Grant Agree ment clea rly and unambig uously

require s AGM& M to transfer the B ank B uilding and the Adjace nt Properties to CFF without any

reimburse ment require ment and without reg ard to a ny tax consequence s that might re sult from the transfe r. Ther efor e, the Court shall orde r AGM& M to effe ct the tra nsfer of the prope rties without further delay in compliance w ith D.C. law. The Court re aff irms its ruling that Cafesjian a

nd Waters ar e entitled to indemnification from AGM& M for their attorney s’ fe es in defe nding the claims asser ted ag ainst them for bre aching their fiducia

ry duty to AGM& M, but the Court shall ref

er this issue to a mag istrate judg e for a re port and re commendation. The mag istrate judg e shall re view the e x penses submitted by Def endants a nd make r ecommenda

tions as to which of the claimed e x penses should be subjec t to indemnification; the Court shall review the mag istrate judg e’s r eport a nd rec ommendation and make a fina l ruling a s to the amount of the

This Court has never

deter mined that ANI

is a party to this l itigation or that AGM& M 1 5 or the Asse mbly

has control ove r ANI . The re cord at trial indicated only that the AGM& M Boa rd of Tr ustees had the rig ht to appoint the Boa rd of Gove rnors of A

NI

. 56indemnification. The Court sha ll also deny -in-par t Defe ndants’ [221] Motion Requesting Attorney s’ Fe es for

Vexatious L itigation bec ause D efe ndants have mostly failed to de monstrate that Plaintiffs or their counse l acted r eckle ssly or in bad fa ith. However , the Court shall hold in abeyance Def

endants’ motion with respe ct to Plaintiffs’ untimely production of doc uments on the eve of trial and re quire Plaintiffs to more c lear ly explain why

they did not produce the se documents duringdiscovery

. The Court shall dec line to exercise supplementa l jurisdiction over Def endants’ [198] Petition for I nvoluntary

Dissolution of AGM&M, a s this is a new claim asser

ted af ter trial that is best left to be a djudicated by the Superior Court of the District of Columbia. Finally , the Court shall deny Def endants’ [214] R equest for Orde r to Show Cause as to Why Plaintiffs Shoul d Not Be Held I n Contempt because Def

endants have not shown that Plaintiffs violated one of this Court’s order s. Be cause the Court has now fina lly disposed of all the pa

rties’ c laims ex cept f

or deter mining the a

mount of indemnification, the Court shall direc t entry of final judgment pursuant to Rule 54(b) a s to all claims except for De fenda nts’ claim for le g al fe es and e x penses under the indemnification provision of the AG M&M B y -L aws (Count VI I of their Strea

mlined Counterclaims). An a

ppropriate Orde r ac companies this Memora ndum Opinion.

Date: Ma y 9, 2011 /s/ COLLE EN KOLLAR-K OTEL LY United States District J udg e

57