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UNITED STATES DISTRICT COURT DISTRICT OF MARYLAND

JLB REALTY, LLC Plaintiff v. CAPITAL DEVELOPMENT, LLC Defendant

* * * * CIVIL NO. L-09-632 * * * ******* MEMORANDUM

This case arises from a real estate deal gone sour. In June 2008, Plaintiff JLB Realty, LLC ("JLB") contracted to purchase two parcels of land in Baltimore City from Defendant Capital Development, LLC ("Capital"). JLB planned to develop the parcels with rental apartment units and retail space. During the contract's due diligence and title review period, JLB noted an encumberance on the property. The encumberance, a Land Disposition Agreement ("LDA") between Baltimore City and a predecessor-in-interest owner of the property, was a material issue for JLB because it limited development to thirty dwelling units per acre. Accordingly, the parties negotiated and, in August 2008, executed a First Amendment to the contract. The First Amendment specified that if the City did not release the LDA within forty-five days, JLB had the right to terminate the contract and receive the return of its earnest money. Capital negotiated with the City but was unable to secure release of the LDA by October 6, 2008, the contractual deadline. Due to changing economic conditions, in December 2008, JLB advised Capital that the project could not go forward unless it was significantly restructured or reduced in scope. The parties then entered into negotiations to salvage the deal.

In January 2009, JLB tendered a second amendment to the contract, which Capital rejected. Capital then tendered a counter-offer, which JLB rejected. On February 16, 2009, JLB formally terminated the contract and requested the return of its earnest money. Capital acknowledged that the deal was dead but refused to release the earnest money JLB had deposited. Seeking return of its earnest money, JLB filed the instant suit on March 13, 2009. Now pending is JLB's motion for summary judgment. Docket No. 18. The Court held a hearing on the motion on February 18, 2010. For the reasons stated herein, the Court will, by separate Order of even date, GRANT JLB's motion. The Clerk is DIRECTED to CLOSE the case. I. Background The facts are fully set forth in the parties briefs. The undisputed material facts are as follows. A. The Parties and the Property

Capital Development, LLC is a real estate investment and development company based in Baltimore, Maryland. The principals of Capital, David Holmes and Cristina King, are experienced real estate investors who have been involved in many projects in Baltimore City. P.'s Ex. 6, 16-18, 17-24, 39. Among Capital's holdings are three contiguous parcels of land in the Washington Hill area of East Baltimore. This property, which is bounded by Orleans, Baltimore, Washington, and Wolfe streets, is located just south of Johns Hopkins Hospital and just north of the Fells Point neighborhood. P.'s Ex. 3. Development of this property is crucial to the revitalization of the corridor between Johns Hopkins and Fells Point.

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In 2007, Capital sought to sell the Washington Hill property. Capital hired a commercial brokerage, CB Richard Ellis, to entertain proposals from national and local developers. Ultimately, Capital accepted a proposal from JLB, a sophisticated real estate development company headquartered in Dallas, Texas.1 Gary Plichta, an Executive Vice President, managed JLB's Mid-Atlantic regional office and submitted the proposal, which called for JLB to purchase two parcels of the Washington Hill property. Capital planned to retain and develop the third parcel. B. The Contract

On June 13, 2008, JLB and Capital authorized and executed a sales contract for the Washington Hill property. P.'s Ex. 1. Both parties were represented by experienced counsel throughout the negotiation and drafting of the contract.2 The contract established a base purchase price of $20,400,000. Id.

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Maryland Law