The United States District Court for the District of Columbia (Chief Judge Boasberg) denied a motion to dismiss a claim brought against a title company by an attorney whose sale proceeds were diverted and stolen

Hannon is a Florida resident who operates a law firm in the nation’s capital. See ECF No. 12 (Am. Compl.), ¶¶ 7, 11. On July 17, 2015, he purchased a property in a residential neighborhood on Capitol Hill — 333 8th Street, Northeast — but titled it in a wholly owned shell company called “333 8th Street, NE, LLC,” the second Plaintiff in this matter. Id., ¶ 9. He used the property not only as an office for his firm, but also as a part-time abode and an investment asset. Id., ¶ 11. Over the years, he expended a quarter-million dollars of his personal funds in maintenance and improvements, hoping to eventually sell it at a higher price and put the proceeds toward his retirement. Id., ¶¶ 13–14.

In 2022, Hannon decided to sell the property to one John King for $1.15 million. Id., ¶¶ 15–16. Plaintiff hired a title company, Legacy Settlement Services, and a real estate agent, Catherine Arnaud-Charbonneau. Id., ¶¶ 18–19. King hired Defendant Turnkey Title, LLC — another title company — to assist in wiring proceeds from the transaction to 8th Street’s bank. Id., ¶ 8. Hannon “executed all documents necessary for the listing, sale and settlement of the sale of the property,” and closing took place on October 27, 2022. Id., ¶¶ 15–16. But just before the deal crossed the finish line, an unknown fraudster inserted himself into the transaction and deceived Turnkey into wiring an amount of roughly half the property’s purchase price to the wrong bank account. Id., ¶¶ 20, 26–27. (There is no allegation that King bears any blame.)

Plaintiffs sued Turnkey after the fraud was discovered; the funds were never recovered.

Standing

The Court finds that 8th Street has sufficiently alleged that its primary purpose was to personally benefit Hannon. Although he operated his law firm from that address, he also “resided in the apartment on the first floor” whenever he was in the District of Columbia, unlike the plaintiff in Price, and “allowed members of his family” to use it. See Am. Compl., ¶ 11. In addition, because 8th Street is a mere shell owned exclusively by Hannon that does not operate a business or own any assets beyond the property at issue, it has no apparent commercial purpose of its own apart from the purposes for which Hannon uses it.

The court denied the motion to dismiss but struck the claim for punitive damages. (Mike Frisch)

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