Asian American Organization Sues Newmark For $5.3M Over D.C. Property Sale
Newmark and a pair of its D.C.-area brokers have been sued for their handling of the sale of a 150-year-old office property near Dupont Circle.
Nonprofit group OCA-Asian Pacific American Advocates filed a lawsuit Dec. 28 in D.C. Superior Court against brokerage firm Newmark, law firm Offit Kurman and individual employees at each firm.
The lawsuit alleges several counts including breach of contract, breach of fiduciary duty and negligence, and it seeks damages totaling $5.32M. Newmark and Offit Kurman didn't respond to requests for comment.
Founded in 1973 as the Organization for Chinese Americans to create a unified voice for that community, the D.C.-based nonprofit has since expanded its mission to advance the social, political and economic well-being of Asian Americans and Pacific Islanders, according to its website.
The organization says it retained Newmark in July 2016 to advise it in the sale of the three connected properties at 1322, 1324 and 1326 18th St. NW. The four-story buildings were constructed in 1870, according to LoopNet, and OCA had owned them since 2006, but it wanted to sell them and move to a new building.
The brokers the group retained, whom it names as defendants in the suit, were Newmark's Michael Douglas Damron and Christopher Lucey.
Damron and Lucey, who are senior managing director and managing director, respectively, still work in the firm's D.C. office, according to its website. Newmark, one of the most active firms in selling and leasing office buildings in the area, has more than 40 brokers and other employees in its D.C. office at 1899 Pennsylvania Ave. NW, according to its website.
OCA's sale process lasted more than five years, according to the suit, with the first potential deal falling through and the second becoming embroiled in a separate lawsuit before the sale ultimately closed Sept. 30 for $4.4M, property records show.
OCA sold the property to PG18TH LLC, an entity managed by Richard Gerstein. Gerstein then sold the property for $5.75M in January to Inmobiliara LLC, a subsidiary of D.C.-based real estate firm Murillo/Malnati group, property records show.
That sale represented a 31% increase from the price OCA received for the property four months earlier.
OCA's lawsuit was filed prior to the January sale, and the plaintiff doesn't appear to have mentioned that sale in subsequent filings. The claims in its suit centered largely around the property not receiving its full market value in September because of errors made by the brokers.
The suit claims that the brokers failed to obtain an accurate measurement of the property, instead having an architect, working pro bono, estimate its square footage by looking at PDF files. That estimate of 18,796 SF was used in marketing flyers and in an initial sale agreement, but it ultimately turned out to be inaccurate, the suit claims.
Gerstein had initially agreed to pay $6.5M for the property, according to the suit. But he then retained an architect who measured the property and found it totaled 12,855 SF of rentable space, and he demanded a reduction in the price of more than $2M, the suit claimed. It said his demand cited a clause in the agreement that would lower the price by a certain per-square-foot amount if it found the advertised size had been inaccurate.
OCA's attorney in the sale, Offit Kurman's Mark Moorstein, then advised the organization to not proceed to closing, and he told OCA it would prevail if Gerstein sued it for pulling out of the deal, according to the latest suit.
Gerstein did sue in November 2017, and that case lasted two and a half years before a judge ruled in favor of Gerstein in April 2020, court records show. OCA appealed the verdict, pushing the case back another year until its appeal was ultimately dismissed in November, one month before it filed this latest suit against its brokers and attorney in the deal.
The judge's 2020 ruling ordered OCA to sell the property for $4.4M, according to the latest suit.
In requesting $5.3M in damages, the suit argues that the actions of Newmark and Offit Kurman led to the reduction in sale price, and it is seeking reimbursement for the costs of the prior lawsuit and for property taxes it paid while the sale was delayed by the lawsuit.
"In fulfilling its contractual duties, Newmark was required to exercise a standard of care ordinary to other brokers in the industry," the lawsuit said. "Newmark was required to ensure that any information provided to OCA and to potential purchasers pursuant to its obligations under the brokerage agreements was accurate ... Newmark breached its duties under the brokerage agreements."
The lawsuit was moved in January from the D.C. Superior Court to the U.S. District Court for the District of Columbia, where it is still an active case. The most recent filing last week was a joint agreement by all parties to have the case decided by a U.S. District Court judge, rather than having it tried by a jury.
