DEBORAH K. CHASANOW, District Judge.
Numerous motions are pending and ready for resolution in this putative class action civil RICO case, including: (1) a motion to dismiss the federal claims or to abstain filed by Defendants King Auto of Silver Spring LLC; King Buick GMC, LLC ("King Buick GMC"); King Hagerstown Motors LLC; King Lincoln, Inc.; King Vehicles, LLC; and King Volkswagen, LLC (ECF No. 34); (2) a separate motion filed by King Buick GMC, LLC to dismiss the claims in Counts I through VII of the amended complaint (ECF No. 36); (3) a motion to dismiss or, in the alternative, for summary judgment on Counts I through VII, filed by King Auto of Silver Spring, LLC; King Hagerstown Motors LLC; King Lincoln, Inc.; King Vehicles, LLC; and King Volkswagen, LLC (ECF No. 37); (4) a motion to consolidate cases filed by Plaintiff Latechia Chambers (ECF No. 63); (5) a motion for leave to file surreply and supplemental Rule 56(d) Declaration filed by Plaintiff (ECF No. 68); and (6) a motion to strike three notices of supplemental authority filed by Defendants (ECF No. 73). The issues have been fully briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, Defendants' motion to dismiss federal claims or to abstain will be granted in part. King Buick GMC's motion to dismiss will be granted in part, and the other Defendants' motion to dismiss or for summary judgment will be granted. Plaintiff's motion for leave to file surreply and supplemental Rule 56(d) Affidavit and motion to consolidate cases will be denied. Defendants'
This case traces its origin to March 17, 2011 and February 18, 2012, when Comfort Kaakyire and Latechia Chambers purchased, respectively, a used 2008 Saturn Outlook and 2010 Dodge Caliber from King Buick GMC. (ECF No. 22 ¶ 18). Ms. Kaakyire and Ms. Chambers each executed a Buyer's Order with King Buick GMC, which did not indicate that these vehicles were prior short-term rentals. (See ECF No. 22-2). Ms. Kaakyire instituted a putative class action lawsuit in the Circuit Court for Howard County on January 13, 2013, and later transferred the case to the Circuit Court for Montgomery County. On May 14, 2013, Ms. Kaakyire filed a first amended class action complaint in the Circuit Court for Montgomery County, on behalf of herself and a class of similarly situated consumers, alleging violations of COMAR 11.12.01.14(M)(1) due to King Buick GMC's failure to disclose the prior use of sold vehicles as short-term rental vehicles. This provision governs disclosure of former vehicle use:
COMAR 11.12.01.14(M)(1)(f).
On August 2, 2013, Ms. Kaakyire's counsel filed a notice of voluntary dismissal in the state court action, and subsequently filed a class action complaint in this court on August 12, 2013 against the following Defendants: King Buick GMC; and King Lincoln, Inc., King Auto of Silver Spring, LLC, King Vehicles, LLC, King Hagerstown Motors LLC, and King Volkswagen, LLC ("the Other Dealer Defendants"). (ECF No. 1). The Defendants filed separate motions to dismiss, but before the motions were adjudicated, Plaintiff filed an amended complaint on October 17, 2013, adding Latechia Chambers as a Named Plaintiff. (ECF No. 22). On October 22, 2013, Defendants tendered a Rule 68 Offer of Judgment to Ms. Kaakyire, which she accepted. (ECF No. 24). On December 13, 2013, the undersigned entered judgment against Defendants as to Ms. Kaakyire's claims, and she was dismissed from the lawsuit. (ECF No. 45). Thus, Latechia Chambers remains the only putative Named Plaintiff here.
The amended complaint by Ms. Chambers against all of the Defendants states that Defendants misrepresented the prior short-term rental use of the vehicles sold to Plaintiff and members of the putative class in a pre-printed space on the Buyer's Order specifically designed for the disclosure of this information. Although Defendants argue that Plaintiff was provided with a CarFax Report that revealed that the vehicle was a prior short-term rental, there is a dispute about whether the CarFax Report was provided to Plaintiff before she executed the purchase documents and whether Plaintiff initialed the CarFax Report as Defendants indicate. (See ECF No. 34-5, at 2).
(ECF No. 22 ¶ 3). In Plaintiff's view, this omission was intentional and part of a fraudulent scheme by King Buick and the Other Dealer Defendants—to whom she refers collectively as the "King Auto Group"—of selling used short-term rental cars without disclosing their origins in the Buyer's Order or elsewhere clearly and conspicuously. Plaintiff asserts that Defendants consistently failed to make the requisite disclosures before consummating the sale transactions with car purchasers. COMAR 11.12.01.14(A)(2) defines "clear and conspicuous" as:
Plaintiff maintains that "Defendants deliberately designed their standard sales agreements in a manner calculated to not draw attention to any disclosure of prior rental or other commercial use." (ECF No. 22 ¶ 36).
Plaintiff asserts that the King Auto Group Defendants are all separately incorporated businesses that associate together as "King Auto Group," as an association-in-fact, although there is no formal, legal entity with that name. These dealerships jointly market and sell vehicles and develop form documents such as the Buyer's Orders used at each dealership. Plaintiff asserts:
(ECF No. 22 ¶ 49). Plaintiff believes that all of the Defendants conspired to market and sell used vehicles without disclosing to consumers that the vehicles were previously used as short-term rentals. (Id. ¶ 45). Plaintiff states that Defendants King Lincoln, Inc. and King Vehicles, Inc. did not sell prior short-term rental vehicles in their own name but routinely sold these vehicles through "their King Auto Group co-conspirators—King Buick, King Volkswagen, LLC, King Hagerstown Motors, LLC or King Auto of Silver Spring, LLC." (Id. ¶ 44). Plaintiff further contends:
(Id. ¶ 39). The amended complaint identifies fifteen additional vehicle sale transactions over a two-year period in which Defendants King Volkswagen LLC, King Hagerstown Motors, LLC, and King Auto of Silver Spring, LLC allegedly perpetrated the same fraudulent scheme to induce consumers into purchasing prior short-term rental vehicles. (Id. ¶ 43). Plaintiff alleges that she paid significantly more for her vehicle than it was worth and was overcharged as a result of the scheme.
The amended complaint asserts the following counts: implied warranty of merchantability (count I); violations of the Magnuson-Moss Warranty Act ("MMWA"), 15 U.S.C. §§ 2301 et seq. (count II) and the Maryland Consumer Protect Act ("MCPA") (count III); deceit by non-disclosure or concealment (count IV); unjust enrichment (count V); negligent misrepresentation (Count VI); breach of contract (count VII); and violations of the Federal Racketeer Influence and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962(a), (c), and (d) (counts VIII, IX, and X). Defendants filed separate motions to dismiss. All of the Defendants filed a motion to dismiss the federal claims (RICO and the MMWA) or, in the alternative, for abstention (ECF No. 34). King Buick GMC filed a separate motion to dismiss addressing the non-RICO claims. (ECF No. 36). The Other Dealer Defendants filed a separate motion to dismiss or for summary judgment on the non-RICO claims. (ECF No. 37). All the motions have been fully briefed.
All of the Defendants move to dismiss Plaintiff's RICO claims. King Buick GMC also filed a separate motion to dismiss the non-RICO claims. A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) tests the sufficiency of the complaint. Presley v. City of Charlottesville, 464 F.3d 480, 483
At this stage, the court must consider all well-pleaded allegations in a complaint as true, Albright v. Oliver, 510 U.S. 266, 268, 114 S.Ct. 807, 127 L.Ed.2d 114 (1994), and must construe all factual allegations in the light most favorable to the plaintiff, see Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir.1999) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.1993)). In evaluating the complaint, the court need not accept unsupported legal allegations. Revene v. Charles Cnty. Comm'rs, 882 F.2d 870, 873 (4th Cir.1989). Nor must it agree with legal conclusions couched as factual allegations, Iqbal, 556 U.S. at 678, 129 S.Ct. 1937, or conclusory factual allegations devoid of any reference to actual events, United Black Firefighters v. Hirst, 604 F.2d 844 (4th Cir.1979); see also Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir.2009). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged, but it has not `show[n] ... that the pleader is entitled to relief.'" Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (quoting Fed.R.Civ.P. 8(a)(2)). Thus, "[d]etermining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id.
Moreover, allegations of fraud—which Plaintiff raises in both her RICO and state law claims—are subject to a heightened pleading standard under Rule 9(b). Harrison, 176 F.3d at 783. Rule 9(b) states that "in alleging a fraud or mistake, a party must state with particularity the circumstances constituting the fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Such allegations typically "include the `time, place and contents of the false representation, as well as the identity of the person making the misrepresentation and what [was] obtained thereby.'" Superior Bank, F.S.B. v. Tandem Nat'l Mortg., Inc., 197 F.Supp.2d 298, 313-14 (D.Md.2000) (quoting Windsor Assocs., Inc. v. Greenfeld, 564 F.Supp. 273, 280 (D.Md.1983)). In cases involving concealment or omissions of material facts, however, meeting Rule 9(b)'s particularity requirement will likely take a different form. See Shaw v. Brown & Williamson Tobacco Corp., 973 F.Supp. 539, 552 (D.Md.1997) (recognizing that an omission likely "cannot be described in terms of the time, place, and contents of the misrepresentation or the identity of the person making the misrepresentation" (internal quotations omitted)). The purposes of Rule 9(b) are to provide the defendant with sufficient notice of the basis for the plaintiff's claim, to protect the defendant against frivolous suits, to eliminate fraud actions where all of the facts are learned only after discovery, and to safeguard the defendant's reputation. See Harrison, 176 F.3d at 784. In keeping with these objectives, "[a] court should hesitate to dismiss a complaint under Rule 9(b) if the court is satisfied (1) that the defendant[s were] made aware of the particular circumstances for which
The Other Dealer Defendants move to dismiss or, in the alternative, for summary judgment on the non-RICO counts. Summary judgment may be entered only if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir.2008). Summary judgment is inappropriate if any material factual issue "may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); JKC Holding Co. LLC v. Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir.2001).
"A party opposing a properly supported motion for summary judgment `may not rest upon the mere allegations or denials of [his] pleadings,' but rather must `set forth specific facts showing that there is a genuine issue for trial.'" Bouchat v. Balt. Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir.2003) (quoting former Fed. R.Civ.P. 56(e)). "A mere scintilla of proof... will not suffice to prevent summary judgment." Peters v. Jenney, 327 F.3d 307, 314 (4th Cir.2003). "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Liberty Lobby, 477 U.S. at 249-50, 106 S.Ct. 2505 (citations omitted). At the same time, the facts that are presented must be construed in the light most favorable to the party opposing the motion. Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007); Emmett, 532 F.3d at 297.
Plaintiff asserts three claims for racketeering pursuant to RICO's civil provision, 18 U.S.C. § 1964, which provides a cause of action to "[a]ny person injured in his business or property by reason of a violation of [18 U.S.C. § 1962]."
Defendants argue that Plaintiff has not properly alleged the existence of a RICO enterprise. Under 18 U.S.C. § 1962(c), it is unlawful:
"[T]o establish liability under § 1962(c) one must allege and prove the existence of two distinct entities: (1) a `person'; and (2) an `enterprise' that is not simply the same `person' referred to by a different name." Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161, 121 S.Ct. 2087, 150 L.Ed.2d 198 (2001). There must be a "person," alleged to have violated Section 1962(c) and to be liable to the claimant for damages, who is separate and distinct from the "enterprise," or tool, through which the RICO violation occurred. See Busby, 896 F.2d at 840-41. A "person" can be an individual or corporate entity. 18 U.S.C. § 1961(3). There may be multiple persons whose association with the same RICO enterprise gives rise to multiple violations of Section 1962(c). "Enterprise," as set forth in 18 U.S.C. § 1961(4), "includes any individual, partnership, corporation,
Plaintiff argues that the King Auto Group constitutes an association-in-fact enterprise. (ECF No. 48, at 76). An association-in-fact enterprise is not defined by a formal legal structure, but is instead characterized by the association of its members "for a common purpose of engaging in a course of conduct." United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981). Unlike Section 1962(a), Section 1962(c) "envisions the enterprise as being different from, not the same as or part of, the person" against whom recovery is sought. New Beckley Mining Corp. v. Int'l Union, United Mine Workers, 18 F.3d 1161, 1163 (4th Cir.1994) (internal citations omitted).
Defendants argue that Plaintiff's RICO allegations fail to differentiate between the "person" and the "enterprise," and thus cannot show distinctiveness under Section 1962(c). Defendants contend that Plaintiff has alleged an enterprise that is "nothing more than the Defendants by a different name (`King Auto Group')." (ECF No. 34, at 20). Defendants essentially argue that because the "King Auto Group" is comprised of the individual dealership Defendants, Plaintiff merely attempts to refer to the "persons" by a different name. As Judge Garbis recently observed, however, in Bailey v. Atl. Automotive Corp., 992 F.Supp.2d 560, 582 (D.Md.2014), "there is certainly judicial recognition that `a defendant may be both a person and a member of a collective RICO enterprise' without negating the distinctiveness requirement." (citing In re Lupron Mktg. & Sales Practices Litig., 295 F.Supp.2d 148, 173 (D.Mass.2003)); see also United States v. Urban, 404 F.3d 754, 782 (3d Cir.2005) (noting that a RICO enterprise "may be comprised only of defendants, or of defendants and non-defendants."). As explained in Lupron, "[t]he basic idea is that while one basketball player does not constitute a team, an association of five players does, without each losing his identity as a distinct
Defendants' reliance on Gondel v. PMIG 1020, LLC, Civ. Action No. CCB-08-1768, 2009 WL 248681 (D.Md. Jan. 22, 2009), and Myers v. Lee, No. 1:10cv131 (AJT/JFA), 2010 WL 3745632 (E.D.Va. Sept. 21, 2010) is misplaced. In Gondel, 2009 WL 248681, at *4, Judge Blake held that plaintiffs had not pled distinctiveness under Section 1962(c) because, unlike here, "[n]owhere in [the] complaint d[id] plaintiffs [even] mention a distinct enterprise with which the corporate defendants associated in order to carry out their alleged racketeering scheme." In Gondel, plaintiffs did not sufficiently differentiate between the individual defendants named in the complaint and the enterprise, comprised of the individual defendants and its agents. See also Riverwoods Chappaqua Corp. v. Marine Midland Bank, N.A., 30 F.3d 339, 344 (2d Cir.1994) ("by alleging a RICO enterprise that consists merely of a corporate defendant associated with its own employees or agents carrying on the regular affairs of the defendant, the distinctness requirement may not be circumvented."). Plaintiff in Myers, 2010 WL 3745632, at *3, alleged that the "enterprise" was the "Dahn Organization," an association in fact among individuals and corporations "acting in concert to target, control, and defraud its victims of their health, liberty, and property for the financial benefit of the Dahn Organization and its leader, Ilchi Lee." Importantly, in deciding that plaintiff did not adequately distinguish between the "persons" and the "enterprise," the court noted that "nowhere in the [a]mended [c]omplaint are there any allegations that the affairs of the enterprise are any different from the affairs of the defendants." Id. at *4.
Here, the amended complaint states that each Defendant is a separately incorporated entity, has its own business location and employees, and that through "contractual arrangement and joint management activity, formed an association-in-fact with each other." (ECF No. 22 ¶ 253). Plaintiff avers that "the function of the King Auto Group association-in-fact enterprise is to facilitate a fraudulent scheme of selling prior short-term rental vehicles to consumers without the disclosures required by Maryland law," whereas each dealership Defendant is also engaged in legitimate vehicle sale transactions. (ECF No. 48, at 49). Myers, 2010 WL 3745632, at *5, further noted that "[w]hile the Dahn Organization may qualify as an association-in-fact enterprise, [plaintiff] must still prove these defendants participated in the conduct of enterprise's affairs, not just their own affairs." (internal citations omitted). The amended complaint delineates, to some extent, the roles played by different dealership Defendants in the association-in-fact enterprise. For instance, Plaintiff avers that Defendant King Vehicles, Inc. and King Lincoln Inc. advertised prior rentals for the other Defendants on its website—which the other Defendants allegedly sold without the requisite prior short-term rental disclosure—but did not sell the vehicles directly. Defendant King Hagerstown allegedly furnishes CarFax Reports which contradict the representations made in the sales
Bailey, 992 F.Supp.2d 560, also addressed the question of distinctiveness of the "persons" and "enterprise" in the context of Section 1962(c). Bailey involved a putative class action lawsuit by consumers against a used car seller, its parent corporation, and the parent's other subsidiaries, alleging that the seller's failure to identify cars as having been prior short-term rentals violated, inter alia, RICO. Unlike here, however, the dealer defendants in Bailey were wholly owned subsidiaries of Atlantic Automotive Corporation ("Atlantic"), also a named defendant. Plaintiff in Bailey alleged that the dealer defendants formed the MileOne Automotive enterprise, consisting of the parent company, Atlantic, and all of its subsidiaries. Under those facts, Judge Garbis reasoned that "just as adequate distinctiveness may be missing between a parent-person and a wholly owned subsidiary-enterprise (or vice versa), it may also be lacking where the parent and its wholly owned subsidiaries are both the `alleged persons' and the sole members of the association-in-fact enterprise." 992 F.Supp.2d at 582 (emphasis added). Judge Garbis found the allegations in the second amended complaint inadequate to plead distinctiveness under Section 1964(c). He explained:
Id. at 583.
Unlike in Myers and Bailey, Plaintiff has made the requisite showing here. First, the Defendants are not subsidiaries of a single dealership; according to the amended complaint, each Defendant is an independent car dealership. Moreover, as Plaintiff explains, "[i]n contrast to the lack of distinction between the `persons' and `enterprise' in [ ] Myers, the King corporate Defendants joined together to form the King Auto Group association-in-fact not just to conduct their own separate affairs as individual car dealerships, but to facilitate a fraudulent scheme involving their co-conspirators." (ECF No. 48, at 53-54). Plaintiffs allege in the amended complaint that each Defendant owned and operated its own dealership, but also associated together under the non-incorporated "King Auto Group." (ECF No. 22 ¶ 6). The amended complaint states that "[a]ll of the Defendants share the moniker `King' in their corporate names and jointly hold themselves out to the general public under the name King Auto Group." (ECF No. 22 ¶ 6). Plaintiff further states that "Defendants conduct business using [the King Auto Group] name and have established a central website, http://www.King Auto.com." (Id. ¶ 7). Plaintiff maintains that:
Although "[a]n organization cannot join with its own members to undertake regular corporate activity and thereby become an enterprise distinct from itself," this is not the case here. Begala v. PNC Bank, Ohio, N.A., 214 F.3d 776, 781 (6th Cir. 2000). Here, Plaintiff alleges that the "King Auto Group" is comprised of six different Defendant dealerships and performs functions beyond its ordinary business of selling cars. Defendants' argument that the amended complaint fails to allege that the RICO enterprise has an existence separate and apart from the pattern of racketeering activity in which it was engaged is belied by Plaintiff's assertion that the enterprise also engages in legitimate vehicles sales transactions. (ECF No. 22 ¶ 126). Plaintiff similarly alleges that aside from engaging in a scheme to conceal prior short-term rental use of the vehicles each dealership sold, "the enterprise developed forms and marketing campaigns for legitimate vehicle sales transactions." (Id. ¶ 126 (emphasis added)); see Proctor, 645 F.Supp.2d at 480 (finding that the complaint alleged a pattern of racketeering activity separate from the enterprise where the complaint alleged that the enterprise "did not exist solely for the purpose of engaging in predicate acts violative of RICO, but the enterprises also engaged in legitimate real estate transactions over the same period of time"). In Mitchell Tracey, 935 F.Supp.2d at 844, Judge Quarles found sufficient plaintiffs' allegation that defendant and its title agents "deliberately overcharged and misappropriated amounts due for the purchase of title insurance, in violation of Maryland law.... Such unlawful acts are not conducted in the ordinary course of business." Plaintiff similarly alleges that deceiving car buyers is "not a part of any of the Defendants' normal business functions." (ECF No. 48, at 52). Thus, viewing the pleadings in the light most favorable to Plaintiff, she has alleged an enterprise separate and distinct from the "person" and from the racketeering activity.
To show a "pattern of racketeering activity," a plaintiff must "adequately plead at least two predicate acts of racketeering activity[.]" Am. Chiropractic Assoc., Inc. v. Trigon Healthcare, Inc., 367 F.3d 212, 233 (4th Cir.2004) (citing 18 U.S.C. § 1961(5)). Racketeering activity is defined under 18 U.S.C. § 1961(1), as "any act which is indictable" under a number of enumerated criminal provisions, which include violations of 18 U.S.C. §§ 1341 (mail fraud), 1343 (wire fraud), and 2314 (interstate transport of money converted or fraudulently obtained). Plaintiff cites these three sections as Defendants' predicate acts.
Defendants argue that Plaintiff fails sufficiently to plead mail and wire fraud because she cannot show that any Defendant other than King Buick GMC owed a legal duty to Plaintiff and the complaint also fails to identify any predicate acts of criminal wire and mail fraud committed by each of these Other Dealer Defendants.
Defendants further argue that Plaintiff fails to specify each Defendant's role in the mail and wire fraud. Fed. R.Civ.P 9(b) states that "[i]n alleging fraud... a party must state with particularity the circumstances constituting fraud." Thus, when mail and wire fraud are asserted as predicate acts in a civil RICO claim, each must be pled with particularity required by Rule 9(b). See WW, LLC v. Coffee Beanery, Ltd., Civ. Action No. WMN-05-3360, 2012 WL 3728184, at *10 (D.Md. Aug. 27, 2012). Defendants state that Plaintiff's "repeated reference, in bare and conclusory fashion, to the `defendants' generally refers to all of the different Defendants, without identifying which Defendant allegedly committed any act of mail or wire fraud, or made any fraudulent[ ] misrepresentation, or to whom." (ECF
935 F.Supp.2d at 845. Based on these allegations, Judge Quarles concluded that plaintiffs in Mitchell Tracey had shown a scheme to defraud.
Much like in Mitchell Tracey, at this juncture, Plaintiff's allegations are sufficient to survive a motion to dismiss. Plaintiff alleges that "Defendants failed to disclose and intentionally concealed from Named Plaintiffs and the Class the material fact that vehicles sold to them previously were used as short-term rentals." (ECF No. 22 ¶ 4). Plaintiff asserts that "Defendants all used the identical form vehicle sales agreements[, which] included a space specifically designated for the disclosure of the prior non-consumer use of the vehicles being sold." (Id. ¶ 54). Plaintiff asserts that despite this disclosure built into the form, "each Defendant routinely failed to use this space to identify the prior short-term rental use of the vehicles it sold to retail buyers and knew the other King Auto Group Defendants failed to do so as well." (Id. ¶ 55). In addition to the sale transaction on February 18, 2012, when King Buick GMC allegedly failed to disclose to Ms. Chambers that the vehicle she purchased was a prior short-term rental, the amended complaint identifies fifteen (15) additional transactions
Defendants also argue that the amended complaint "fails to identify any fraudulent mail or wire sent allegedly by the Unrelated Defendants to Plaintiffs or anyone else in connection with the purchase of their vehicles." (ECF No. 34-1, at 28). Defendants argue that "the Complaint fails to identify how the Unrelated Defendants allegedly used generic mail or wire to further the alleged fraudulent scheme against the Plaintiff[] (who they did not know and had no involvement) so as to constitute criminal mail and wire fraud under RICO." (ECF No. 34-1, at 28). They argue that "[e]very commercial transaction will inevitably require using the mail or wire system as part of its ordinary business, but this does not establish criminal mail fraud or the requisite pattern of racketeering activity." (Id.). As explained above, however, "[t]o be part of the execution of the fraud ... the use of the mails need not be an essential element of the scheme." Schmuck v. United States, 489 U.S. 705, 710, 109 S.Ct. 1443, 103 L.Ed.2d 734 (1989). Instead, they need only be "incident to an essential part of the scheme." Pereira v. United States, 347 U.S. 1, 8, 74 S.Ct. 358, 98 L.Ed. 435 (1954); see also In re Am. Honda Motor Co. Dealerships Litig., 941 F.Supp. 528, 546 n. 19 (D.Md.1996) (stating that "a mailing need only be a necessary step in furtherance of a scheme, and need not be fraudulent in and of itself."). Moreover, despite the high standard demanded by the Rule 9(b) particularity requirement, in the context of RICO mail fraud, the court may also consider the interplay of the more liberal notice pleading standard of Rule 8, which simply requires "a short and plain statement." Kerby v. Mortg. Funding Corp., 992 F.Supp. 787, 799 (D.Md. 1998); Coffee Beanery, 2012 WL 3728184, at *10. Courts have acknowledged the difficulty that arises in pleading a RICO suit against multiple defendants—such as the case here—and have determined that it is "not necessary that a plaintiff elucidate
Kerby, 992 F.Supp. at 800.
Plaintiff has alleged the predicate acts of mail and wire fraud with sufficient particularity at this juncture. Plaintiff asserts that the mailings in furtherance of the fraudulent scheme included: the mailing and distribution among Defendants of contracts, form sale and credit agreements, and other documents used in the transactions of Plaintiff and members of the putative class. (ECF No. 22 T 102). Plaintiff further contends that:
(Id. ¶ 103).
In Coffee Beanery, 2012 WL 3728184, at *11, Judge Nickerson found persuasive that "[p]laintiffs have outlined the alleged scheme to defraud, a time frame for the scheme, who was targeted by the scheme, the contents of the allegedly fraudulent communications that were sent using the mails and wires, and what [d]efendants hoped to obtain through the scheme." Judge Nickerson held that "[c]oupling these specific allegations with the broader allegations that the [d]efendants used the mails as part of the scheme to defraud other unnamed potential franchisees is sufficient to meet the requirements of Rule 9(b)." Here too, Plaintiff has outlined the alleged scheme to defraud consumers by failing to disclose the prior short-term rental use of vehicles sold by the Defendants, a time frame for the alleged scheme, and the role of mail and wires in the scheme. See, e.g., Mitchell Tracey, 935 F.Supp.2d at 845 (finding sufficient allegations of mail and wire fraud where the complaint alleged "specific dates when [defendant] used the mail and electronic communication to further its scheme" and stated that distributions of the profits were sent interstate).
Plaintiff further asserts that "on or before February 18, 2012, Defendants used the wires to advertise the vehicle sold to Ms. Chambers on the Internet, "without the required clear and conspicuous disclosure of this vehicle's prior use as a shortterm rental required by Maryland law." (Id. ¶ 106). Plaintiff avers that in February 2012, "Defendants used the wires and/or U.S. mail to submit a loan application, contract of sale, and other documents related to the sale to a potential assignee for the financing of Ms. [Chambers's] prior but undisclosed short term rental vehicle—namely
Plaintiff contends that Defendants used the wires to "register and title Ms. Chamber[s's] vehicle through an electronic registration and titling system." (Id. ¶ 113). Specifically, Defendants allegedly used the wires electronically to transfer $587.95 of funds to the MVA in connection with Ms. Chambers's transaction on February 18, 2012, for payment of sales tax, titling and registration fees. Defendants also allegedly used mails and wires to advertise and sell to putative class members the vehicles previously used as short-term rentals without the requisite disclosure in the fifteen additional transactions Plaintiff has identified in the complaint, including the date of the transaction. (Id. ¶¶ 108, 114; see also ¶ 104 ("Defendants used the Internet and the wires in connection with the sale of hundreds if not thousands, of vehicles sold to members of the class by providing a forum in which customers could search for and receive information regarding vehicles offered for sale by Defendants, including the prior rental vehicles sold by Defendants.")). Plaintiff also avers that:
(Id. ¶ 109). Finally, according to Plaintiff, "Defendants further used the wires to facilitate the operation of and to operate the fraudulent scheme described herein, and to communicate with each [other] during the course of the scheme through telephone calls, facsimiles, e-mail transmissions, and wire transfers of money resulting from and in furtherance of the fraudulent scheme." (Id. ¶ 116); see, e.g., Proctor, 645 F.Supp.2d at 474 ("[p]laintiffs have pleaded the predicate acts of mail and wire fraud with particularity against the background of a grand mortgage foreclosure rescue scam that involved the sale and leaseback of [p]laintiffs' properties from which [two settlement agents] among others would siphon off and transfer the equity illegally.").
In Coffee Beanery, 2012 WL 3728184, Judge Nickerson found sufficient the allegations supporting mail and wire fraud because plaintiffs specifically alleged the circumstances surrounding the use of the mails with regard to fraudulent statements and listed the material facts they believed were fraudulently omitted. Coffee Beanery, 2012 WL 3728184, at *11. Judge Nickerson observed: [look to see if repetitive with prior]
Id. Although the facts are less compelling here, Plaintiff identifies fifteen additional transactions between 2010 and 2011, in which consumers entered into sales agreements for vehicles as a result of Defendants' fraudulent scheme to sell prior short-term rental vehicles without the requisite disclosures. For these fifteen transactions, Plaintiff identifies the approximate vehicle sale date, the vehicle description, VIN, and the Defendant dealership that consummated the transaction. (See ECF No. 48, at 41). Plaintiff asserts that mail and wire were used to send the loan documents and financing contracts in connection with the fraudulent transactions, to register and title the sold vehicles, and to wire funds to the MVA in connection with the vehicle sale transactions. (ECF No. 22 ¶¶ 111-114). These acts involving mail and wire use were allegedly made in connection with consummating the fraudulent sale of the vehicles to induce unaware consumers into purchasing prior short-term rentals. See VNA Plus, Inc. v. Apria Healthcare Grp., Inc., 29 F.Supp.2d 1253, 1263 (D.Kan.1998) (noting that the requirements to plead specific instances of mail or wire fraud is "relaxed where there are `numerous mailings of standardized documents containing identical false representations.'"). Plaintiff points out that "[a]bsent their use of the mails and/or wires in connection with the financing, registration and titling of the prior short-term rentals they sold pursuant [to] their fraudulent scheme, Defendants would not have been able to consummate this scheme." (ECF No. 48, at 62 n. 46).
Defendants also challenge Plaintiff's RICO allegations insofar as they fail to demonstrate that the conduct of the enterprise affected interstate commerce. Defendants assert that "the gravamen of Plaintiffs' claim is that the `enterprise' consists of Maryland-automobile dealers, licensed by the Maryland MVA to sell cars in Maryland to two Maryland residents in a manner that does not comply with the Maryland law applicable to automobiles sales occurring solely in Maryland." (ECF No. 34-1, at 44). Defendants are correct that Plaintiff must plead the existence of a RICO enterprise whose activities affected interstate commerce. See DB Capital Group, 2011 WL 887554, at *13. The allegations in the amended complaint concerning interstate commerce are sufficient at this stage of the proceedings. As Plaintiff summarizes in the opposition, she "alleges the King Auto Group purchased previously used rental vehicles out-of-state for sale in Maryland, wired and mailed monies from Maryland to lenders outside of Maryland in connection with financing of such vehicles, and uses the wires and mails to forward loan applications, contracts and other documents from Maryland to persons outside of Maryland in connection with the sales of such vehicles." (ECF No. 48, at 78 n. 67) (emphasis in original). Specifically, Plaintiff alleges that "Defendants and King Auto Group were engaged in, and affected interstate commerce in that, inter alia, the vehicle sales that are the subject of the scheme to defraud were consummated in Maryland using vehicles that in many circumstances were purchased out-of-state for sale in Maryland." (ECF No. 22 ¶ 101). Plaintiff asserts that "Defendants wired funds or mailed checks from Maryland to persons outside of Maryland to pay for prior short-term rentals later sold within Maryland." (Id.). Plaintiff further avers that in February 2012, King Buick GMC used mails and/or wires to submit a loan application, contract of sale, and other documents related "to the sale to a potential assignee for the financing of Ms. Chamber[s's] prior but undisclosed prior
To state a plausible claim of a pattern of racketeering activity, the plaintiff must allege facts establishing "that the racketeering predicates are related and that they amount to or pose a threat of continued criminal activity." Cf. H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989) (reversing a 12(b)(6) dismissal of a RICO complaint and discussing what a plaintiff in a RICO case must show to prove a pattern of racketeering activity). With respect to the requirement that the predicate acts be "related," the Fourth Circuit has explained that "[t]he relationship criterion may be satisfied by showing that the criminal acts `have the same or similar purposes, victims, or methods of commission, or are otherwise interrelated by distinguishing characteristics and are not isolated events.'" Anderson v. Found. for Advancement, Educ. & Emp't of Am. Indians, 155 F.3d 500, 505-06 (4th Cir.1998) (quoting H.J. Inc., 492 U.S. at 240, 109 S.Ct. 2893). Plaintiff alleges that Defendants' acts were "related, as they had the similar purpose of concealing and affirmatively misrepresenting the prior rental history of vehicles sold to Defendants' customers, and they used the same methods of commission by concealment and affirmative misrepresentation." (ECF No. 22 ¶ 124). Plaintiff identifies fifteen other vehicle sale transactions. In Coffee Beanery, 2012 WL 3728184, at *12, Judge Nickerson found sufficient to satisfy the relationship requirement the following allegations:
Plaintiff here also alleges that the predicate acts of mail and wire fraud were perpetrated on at least fifteen other occasions with separate consumers in an effort to induce them to purchase vehicles that dealership Defendants did not disclose were previously used as prior short-term rentals. Accordingly, the relatedness element is satisfied.
Defendants also argue that Plaintiff's allegations are insufficient to meet the continuity-of-activity requirement. A plaintiff can fulfill the continuity-of-activity requirement by establishing either a closed or open-ended pattern. H.J. Inc., 492 U.S. at 241, 109 S.Ct. 2893. A "closed-ended" pattern of racketeering activity involves a
Plaintiff's amended complaint suggests that she attempts to establish an open-ended pattern. Specifically, Plaintiff asserts that King Auto Group is an association-in-fact that "has continued as a unit, with a core membership, over a substantial period of time, exceeding five years, and is an ongoing organization established for an economic motive." (ECF No. 22 ¶ 231). Defendants assert that the amended complaint fails to plead facts demonstrating a threat of continuing future criminal conduct for essentially two reasons. First, Defendants argue that there is no criminal activity at all because the prior short-term rental disclosure was made in the CarFax Report, which Defendants maintain Plaintiff received along with the Buyer's Order and which indicated that the vehicle she bought was previously used as a short-term rental. (ECF No. 34-1, at 38). This argument is unpersuasive at this point because whether Plaintiff received the CarFax Report before she consummated the transaction is a disputed fact, and inappropriate to resolve on a motion to dismiss. (See ECF No. 48-2, at 33, Declaration of Latechia Chambers ("I do not recall anyone at the dealership showing me a Carfax report or asking me to sign or initial it, though I do recall signing quite a few documents wherever the King rep put an "x" mark next to a line for my signature, but the Carfax report was NOT one of those documents" (emphasis in original))).
Second, Defendants argue that there is no threat of continuing future criminal conduct or that the pattern of racketeering activity is open and ongoing because on May 14, 2013, the State of Maryland promulgated its own disclosure form to be used by motor vehicle dealers-Disclosure of Former Vehicle Use Form, VR-460. (See ECF No. 34-7). Defendants argue that:
(ECF No. 34-1, at 40). As Plaintiff points out, though, her RICO claims are based on Defendants' alleged scheme to defraud, not just an alleged violation of COMAR or an MVA bulletin. Furthermore, Defendants' argument assumes that the dealership Defendants accused of fraudulent misrepresentations and concealment will cease this alleged conduct and use this new form. Defendants further argue that the conduct attributed to the RICO enterprise lasted less than eighteen months, which is insufficient to establish continuity for RICO pattern purposes. Although Defendants are correct to note that the Fourth Circuit has expressed reservations about RICO claims where the predicate acts are mail and wire fraud, see GE Inv. Private Placement Partners II v. Parker, 247 F.3d 543, 549 (4th Cir.2001), as Judge Blake explained in Friedler, M.D., et al. v. Cole, Jr., et al., No. Civ.A. CCB-04-1983, 2005 WL 465089, at *9 (D.Md. Feb. 28, 2005), "determining whether a pattern exists is a commonsensical, fact-specific inquiry, not a mechanical one determined solely by the number of predicate acts over a given time period." (internal citations omitted). Rather, the critical inquiry is whether the predicate
The Fourth Circuit has identified several factors to consider when determining whether a RICO pattern exists. These factors, including, "the number and variety of predicate acts and the length of time over which they were committed, the number of putative victims, the presence of separate schemes, and the potential for multiple distinct injuries," should be considered along with "all the facts and circumstances of the particular case—with special attention to the context in which the predicate acts occurred." Brandenburg v. Seidel, 859 F.2d 1179, 1185 (4th Cir.1988), overruled on other grounds by Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996). The facts as pled in the amended complaint are readily distinguishable from cases where courts have found the alleged pattern of racketeering activity-consisting only of acts of mail and wire fraud—insufficient to present the sort of "ongoing unlawful activities whose scope and persistence pose a special threat to social well-being." For instance, in Menasco, Inc. v. Wasserman, 886 F.2d 681, 684 (4th Cir. 1989), the court found that plaintiffs' allegations failed to satisfy the continuity prong of RICO's pattern requirement. The court noted:
(emphasis added). Here, unlike in Menasco, Plaintiff does not allege that the fraudulent scheme was only directed at her. Instead, Plaintiff alleges that King Auto Group enterprise undertook a scheme to defraud consumers into purchasing vehicles that were previously used as short-term rentals, but which disclosure was not made clearly and conspicuously as required under Maryland law.
In Bailey, 992 F.Supp.2d at 584, Judge Garbis held that there was no viable claim of a pattern of racketeering activity because Plaintiff "alleged only one instance of specific fraudulent conduct directed at her."
In Friedler, 2005 WL 465089, at *12, Judge Blake determined that the predicate acts, consisting mainly of mail and wire fraud, failed to establish a RICO pattern. Unlike here, the complaint in Friedler described a fraudulent scheme spearheaded by a single defendant and "narrowly targeted to misappropriate the plaintiffs' investments." Judge Blake noted that "[i]f plaintiffs had alleged a more widespread scheme, involving various predicate acts and other offenders and victims, then the fraud they suffered would more closely resemble the kind that "rises above the routine" and "poses a threat to social wellbeing." Id. Here, Plaintiff has alleged a widespread fraud scheme involving various victims, which—at this stage—suggests a continuing pattern of racketeering activity. See, e.g., Superior Bank, 197 F.Supp.2d at 324 (finding the RICO pattern requirement satisfied where over thirty defendants coordinated a mortgage flipping scheme involving twenty-three transactions); Thomas v. Ross & Hardies, 9 F.Supp.2d 547, 555 (D.Md.1998) (finding a RICO pattern existed where defendants directed a broad, open-ended scheme to recruit and defraud homeowners through a mortgage scheme). Ultimately, Plaintiff will need significantly more proof to establish RICO violations, but viewing the pleadings in the light most favorable to her, she has pled adequate facts for the Section 1962(c) claims to proceed based on a pattern of racketeering activity.
The parties also disagree over the means by which Plaintiff may satisfy RICO's proximate cause requirement in a class action. To state a claim under civil RICO, a plaintiff is required to show that a RICO predicate offense "not only was a
The fraudulent conduct alleged here is the misrepresentation and concealment of the rental history of the vehicles sold to Plaintiff and other consumers in violation of Maryland law. Plaintiff's alleged injury was that she was overcharged for the vehicle because the vehicle was sold falsely as a former consumer car. (ECF No. 22 ¶ 249); Bailey, 992 F.Supp.2d at 581 (holding that plaintiff has alleged a cognizable RICO injury where plaintiff alleged that "she suffered the claimed loss at the moment of purchase in reliance upon the false representation that she was not buying a former short-term rental vehicle."). Plaintiff asserts that:
(ECF No. 22 ¶ 209). Unlike in Hemi, where the Supreme Court found that "[m]ultiple steps [ ] separate the alleged fraud from the asserted injury," there is a sufficiently direct relationship between the wrongful conduct here and the alleged injury. Hemi, 559 U.S. 1, 130 S.Ct. 983, involved a lawsuit by the City of New York against out-of-state cigarette retailers and affiliated individuals. The United States Supreme Court held—on readily distinguishable facts—that the city failed to establish the proximate cause element of a civil RICO claim. According to the City, Hemi committed fraud by selling cigarettes to city residents and failing to submit the required customer information to the State. Without the reports from Hemi, the State could not pass on the information to the City. Some of the customers legally obligated to pay the cigarette tax to the City failed to do so. Because the City did not receive the customer information, the City could not determine which customers had failed to pay the tax. Thus, plaintiff argued that the City was injured in the amount of the portion of back taxes that were never collected. On these facts, the Supreme Court concluded that the City's theory of causation was far too indirect. The Court noted that:
559 U.S. at 11, 130 S.Ct. 983 (emphasis added). Unlike in Hemi, the conduct giving rise to the harm here (failure to disclose
Defendants assert that Plaintiff fails to allege that she detrimentally relied on any fraudulent mail or wire sent by the Unrelated Defendants, "or the specific harm directly caused to them as a result of the predicate acts allegedly committed by each Unrelated Defendant." (Id. at 32). Defendants essentially argue that because Plaintiff only dealt with King Buick GMC, she cannot show reliance in connection with the Other Dealer Defendants with which she did not transact business. As Judge Nickerson stated in Robinson v. Fountainhead Title Grp. Corp., Civ. No. WMN-03-3106, 2009 WL 539882, at *2 (D.Md. Mar. 3, 2009), "a RICO claim predicated on mail fraud is based on the fraudulent scheme rather than on a particular fraudulent mailing." See also Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639, 648, 128 S.Ct. 2131, 170 L.Ed.2d 1012 (2008) ("[u]sing the mail to execute or attempt to execute a scheme to defraud is indictable as mail fraud, and hence a predicate act of racketeering under RICO, even if no one relied on any misrepresentation."). Plaintiff alleges that the Other Dealer Defendants are participants in the fraudulent scheme to defraud her and other consumers. Thus, Plaintiff need not have relied on any specific fraudulent mailing or wire by the Other Dealer Defendants in order to assert a civil RICO claim in a putative class action predicated on mail and wire fraud. Defendants maintain that "[t]here is no direct relationship between the Plaintiff['s] alleged injury and any alleged fraudulent mail or wire sent by the Unrelated Defendants," thus Plaintiff cannot show reliance. (Id.) (emphasis added). But "[p]laintiff need only show reliance on the scheme, not necessarily on any particular fraudulent mailing or misrepresentation." Robinson v. Fountainhead Title Grp. Corp., 257 F.R.D. 92, 95 (D.Md. 2009). Here, the injury as alleged by Plaintiff, was caused by the fraudulent scheme—that all of the Defendants allegedly facilitated—of concealing prior short-term rental use of the vehicles they were selling.
Judge Messitte's reasoning in Biggs v. Eaglewood Mortg. LLC, 636 F.Supp.2d 477, 479 (D.Md.2009), applies here:
(emphasis added). Here, Plaintiff has alleged that she justifiably relied on the misrepresentation made in the Buyer's Order, which encompassed the alleged scheme involving "Defendants' concealments, failures to disclose and affirmative misrepresentations concerning the prior rental use of the used vehicles they purchased when they consummated their transactions." (ECF No. 22 ¶ 176); Busby v. Crown Supply, Inc., 896 F.2d 833, 840 (4th Cir.1990) ("We think the plaintiff has alleged causation. Whether he will be able to prove it at trial is not a question on
Defendants' argument that Plaintiff's alleged injuries were caused by her own conduct is also unpersuasive. Defendants argue that "Plaintiff['s] alleged injury occurred either because [she] ignored or failed to read the CarFax Report [she] signed which clearly discloses five times that it was a prior rental vehicle." (ECF No. 34-1, at 34). Thus, the argument goes:
(Id. at 35). As explained supra, the Carfax Report was not attached to the complaint, but to Defendants' motion to dismiss the federal claims. Although as a general rule extrinsic evidence should not be considered at the 12(b)(6) stage, the Fourth Circuit has held that when a defendant attaches a document to its motion to dismiss, "a court may consider it in determining whether to dismiss the complaint [if] it was integral to and explicitly relied on in the complaint and [if] the plaintiffs do not challenge its authenticity." Phillips v. LCI Int'l Inc., 190 F.3d 609, 618 (4th Cir.1999) (emphasis added). Here, Plaintiff challenges the authenticity of the CarFax Report and disputes ever having received or signed the version Defendants provide. She states in an affidavit that she "do[es] not recall anyone at the dealership showing [her] a Carfax report or asking [her] to sign or initial it." (ECF No. 48-2, at 33). She further avers that she does not recall seeing the word "rental" circled "or any blue highlighting on any document received at the King dealership." (Id.). Defendants cite American Chiropractic Ass'n, 367 F.3d at 234, as holding that "plaintiff's allegations of mail and wire fraud were insufficient as a matter of law because he could not have justifiably relied on an isolated omission in the agreement where he received another document attached to the agreement that disclosed the very fact he claims was misrepresented." (ECF No. 34-1, at 35). In that case, however, plaintiff did not contest the authenticity of the additional documents that defendant included with the motion. Such is not the case here.
Accordingly, drawing all inferences in favor of Plaintiff, the proximate cause element is met at this stage.
Defendants argue that Plaintiff has not pled a violation of Section 1962(a). To allege a violation of Section 1962(a), a plaintiff must show: (a) receipt of income from a pattern of racketeering activity, and (b) the use or investment of this income in an enterprise. See Busby, 896 F.2d at 837.
Plaintiff asserts that "[t]hrough the use of this illegal and fraudulent scheme, and through their efforts to operate and maintain the enterprise . . . and to facilitate the sale of prior short-term rental vehicles without the disclosures required by Maryland law, Defendants have been able to retain money that is rightfully payable to [] Plaintiff[ ] and Class members." (ECF No. 22 ¶ 245). Plaintiff further alleges that Defendants have retained these illegally gained funds and reinvested and used those funds in their operations in violation of 18 U.S.C. § 1962(a). (Id. ¶ 246). Plaintiff
These conclusory allegations are insufficient to assert a RICO violation under Section 1962(a). Section 1962(a) prohibits a person from receiving income from a pattern of racketeering activity and then using that income in the operation of an enterprise engaged in commerce. See New Beckley Mining Corp., 18 F.3d at 1165. Plaintiff asserts that the King Auto Group is an association-in-fact. Defendants argue that "Plaintiff[ ] make[s] no allegation about the manner in which the alleged enterprise received money or how they used it . . . [t]he Complaint is devoid of any factual allegations showing the manner in which profits allegedly received by the Defendants were then used to acquire any interest or invest in the [King Auto Group]." (ECF No. 34-1, at 42). Plaintiff alleges that she and other consumers were significantly overcharged for the vehicles sold to them, and that the money from the alleged fraudulent scheme to sell the vehicles without proper disclosure was invested in the enterprise. She also states that "[e]ach of the Defendants used proceeds derived from a pattern of racketeering activity under 18 U.S.C. §§ 1961(1) and (5) to acquire an interest in, establish, and operate the enterprise." (ECF No. 22 ¶ 226).
Without any factual support to buttress these legal conclusions, the allegations are insufficient to survive a motion to dismiss. Plaintiff does not allege how much was invested or the contours of the reinvestment of the funds into the King Auto Group operation. Section 1962(a) applies only in situations where an enterprise is an object or goal of the racketeering activity, not a tool to carry out the racketeering activity. See Eason, 2004 WL 903756, at *1. In In re Am. Honda Motor Co., Inc. Dealerships Relations Litig., 941 F.Supp. 528, 548-49 (D.Md.1996), plaintiff offered two allegations of "use or investment" of racketeering proceeds, including: "(1) that corrupt Honda executives used the bribes and kickbacks they received to obtain ownership interests in existing or new dealerships, and (2) that Honda received income in that it was able to pay its executives substantially less than other manufacturers, and that Honda used this income, directly or indirectly to finance its sales and allocation network." Id. at 548-49. Judge Motz found the allegations sufficient to sustain a claim under Section 1962(a). He reasoned that the "investment use" injury pleading requirement
Plaintiff also alleges a violation of Section 1962(d), which states, in relevant part, that "[i]t shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section." Defendants argue that "[s]ince the Complaint fails to allege any substantive RICO claim under 1962(c), Plaintiffs' conspiracy claim under 18 U.S.C. § 1962(d) alleged in Count X fails as a matter of law." (ECF No. 34-1, at 43). See also Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012). As discussed supra, Plaintiff's claims for substantive RICO violations under Section 1962(c) can proceed at this stage, thus this argument is without foundation.
Plaintiff's Section 1962(d) claim fails for a different reason, however. A RICO conspiracy claim "requires that the plaintiff allege and later prove that the defendants knew of the RICO violations of the enterprise and agreed to facilitate those activities." Proctor, 645 F.Supp.2d at 483. Judge Titus reasoned in Proctor, 645 F.Supp.2d at 483, also a class action alleging civil RICO violations: "[l]ike other conspiracies, a defendant who agrees to do something illegal and opts into or participates in a conspiracy is liable for the acts of his coconspirators even if the defendant did not agree to do or conspire with respect to a particular act." However, "[b]ecause the core of a RICO civil conspiracy is an agreement to commit predicate acts, a RICO civil conspiracy complaint, at the very least, must allege specifically such an agreement." Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 25 (2d Cir.1990).
The amended complaint contains the following allegations:
(ECF No. 22 ¶ 160). Plaintiff further asserts that "Defendants reached an agreement or understanding to conceal from, and fail to disclose to, [ ] Plaintiff[ ] and the Class material facts concerning the prior short-term rental use of the vehicles sold." (Id. ¶ 177). Plaintiff avers that "Defendants participated in this fraudulent scheme and worked in combination with each other . . . to facilitate and engage in a conspiracy to deceive and defraud" Plaintiff and members of the class. (Id.). Plaintiff also alleges that "Defendants conspired with each other to engage in the various activities set forth herein, agreed to participate in the operation of the conspiracy and scheme to defraud Named Plaintiff[ ] and Class members, and aided and abetted one another in these activities, all as proscribed by Maryland law." (Id. ¶ 79).
These allegations are insufficient to show a violation of Section 1962(d). "As compared with an allegation under general conspiracy law, the objective of a RICO conspiracy is the violation of a substantive
Defendants argue, in the alternative, that the court should abstain from exercising jurisdiction pursuant to the doctrine set forth in Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943). As the Fourth Circuit explained in Martin v. Stewart, 499 F.3d 360, 364 (4th Cir.2007):
(internal marks omitted). Defendants argue that the State of Maryland has a strong interest in having the issues decided in state court. Defendants explain that "[f]or more than 50 years, the Maryland legislature has set forth a comprehensive scheme with detailed provisions regulating the sale of automobiles, which requires restrictive licensing from the state in order to do business." (ECF No. 34-1, at 45-46). Defendants contend that Maryland's legislature has developed a comprehensive legislative and regulatory scheme involving the disclosure requirements for automobile dealers selling cars in the State of Maryland. Thus, Defendants believe that "the Maryland legislature and the MVA have a strong interest in retaining the power to govern the types of disclosure required to comply with COMAR to ensure dealer accountability in the context of consumer transactions." (Id. at 46-47) (internal citations omitted).
Defendants do not offer compelling reasons to support abstention. Plaintiff alleges that Defendants engaged in a fraudulent scheme by failing to disclose to consumers the prior short-term rental history of the vehicles that they were systematically selling, in violation of Maryland law. Although Plaintiff disputes this point, Defendants maintain that the prior short-term rental history of the vehicle was disclosed to Plaintiff in a separate
The Other Dealer Defendants argue that Plaintiff lacks standing to sue them. (ECF No. 37-1, at 32).
Standing is a threshold jurisdictional requirement. See Central Wesleyan College v. W.R. Grace & Co., 6 F.3d 177, 188 (4th Cir.1993) ("standing is a jurisdictional issue, and courts should attempt to resolve such issues as soon as possible."). The Supreme Court has consistently required that a litigant have "standing" to challenge the action sought to be adjudicated in federal court. Valley Forge Christian Coll. v. Americans United for Separation of Church and State, Inc.,
Lewis v. Casey, 518 U.S. 343, 357, 116 S.Ct. 2174, 135 L.Ed.2d 606 (1996) (alteration in original) (quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 40 n. 20, 96 S.Ct. 1917, 48 L.Ed.2d 450 (1976)). Judge Garbis reasoned in Bailey, 992 F.Supp.2d at 566, that "[t]he United States Court of Appeals for the Fourth Circuit has echoed this outlook, stating that in the class action context, it `is essential that named class representatives demonstrate standing through a requisite case or controversy between themselves personally and' each defendant." (emphasis added) (quoting Cent. Wesleyan Coll. v. W.R. Grace & Co., 6 F.3d 177, 188 (4th Cir. 1993)); Lieberson v. Johnson & Johnson Consumer Co., Inc., 865 F.Supp.2d 529, 537 (D.N.J.2011) (holding that the plaintiff lacked standing to pursue putative class action claims of consumer fraud against a baby bath product manufacturer as to any products the named plaintiff did not allege she used or purchased). The fact that members of the putative class may assert claims against the Other Dealer Defendants does not confer standing on Plaintiff to sue the Other Dealer Defendants. As noted in Miller v. Pacific Shore Funding, 224 F.Supp.2d 977, 995-96 (D.Md.2002), "[a]bsent a contractual relationship with any of these defendants, the plaintiffs cannot possibly show that their injuries, such as they have suffered, are traceable to the conduct of any of these defendants . . . . Their categorization of their suit as a putative class action in no way cures this defect."
Plaintiff argues that "a conspiracy [among all of the Defendants] confers standing with respect to each Defendant." (ECF No. 48, at 107). Her theory is that the Other Dealer Defendants are liable as co-conspirators with King Buick GMC because all of the Defendants reached an agreement and/or understanding concerning the written disclosures to be made to Named Plaintiff and members of the putative class and regularly concealed the fact that the vehicles they sold were prior short-term rentals, in violation of Maryland law. In a situation where a named plaintiff did not deal directly with the named defendants, "a plaintiff may be able to satisfy the injury aspect of standing through sufficient allegations of conspiracy." See Cent. Wesleyan Coll., 6 F.3d at 188 ("[w]hile allegations of conspiracy among parties with whom a plaintiff did not directly deal may confer standing upon the plaintiff to sue the non-dealing parties,[ ], the Supreme Court has emphasized that indirectness of injury, though not fatal to standing, `may make it substantially
Plaintiff has not adequately pled the existence of a conspiracy. A civil conspiracy is "`a combination of two or more persons by an agreement or understanding to accomplish an unlawful act or to use unlawful means to accomplish an act not in itself illegal, with the further requirement that the act or the means employed must result in damages to the plaintiff.'" Hoffman v. Stamper, 385 Md. 1, 24, 867 A.2d 276 (2005) (citation omitted) (emphasis added). The key question in assessing whether a conspiracy theory has been adequately pled is whether there is adequate factual support for the existence of an agreement to conspire. DB Capital Grp., 2011 WL 887554, at *6; Brady v. Livingood, 360 F.Supp.2d 94, 104 (D.D.C. 2004). A clear agreement to conspire is necessary because the "[i]ndependent acts of two wrongdoers do not make a conspiracy." Murdaugh Volkswagen, Inc. v. First Nat. Bank of South Carolina, 639 F.2d 1073, 1076 (4th Cir.1981). Detrimental to Plaintiff's conspiracy claim here is the requirement that "plaintiff must set forth more than just conclusory allegations of [the] agreement." Brady, 360 F.Supp.2d at 104. The complaint should include factual allegations that provide an indication of when and how the agreement was brokered and how each of the defendants specifically were parties to the agreement. DB Capital Group, 2011 WL 887554, at *6; Acosta Orellana v. CropLife Int'l, 711 F.Supp.2d 81, 113-14 (D.D.C.2010).
Here, the dealerships Defendants are separate businesses. Plaintiff asserts that:
(ECF No. 22 ¶ 208). She further asserts that "Defendants conspired among themselves, by agreement and understanding, to engage in the unlawful acts and omissions described herein." (Id. ¶ 5). Plaintiff provides no details as to when such an agreement was reached or the contours of the agreement. Furthermore, Plaintiff does not reference when King Buick GMC met or communicated with other members of the alleged conspiracy. Cf. DB Capital Grp., 2011 WL 887554, at *7 (finding conspiracy allegations sufficient where plaintiff's complaint referenced specific instances when alleged co-conspirators met and engaged in acts to defraud plaintiff). Plaintiff attempts to show standing over the Other Dealer Defendants on the premise that the Other Dealer Defendants similarly defrauded other consumers who are members of the putative class. This is not a true conspiracy. Plaintiff's allegations supporting a conspiracy among the Defendants include: (1) the dealerships jointly marketing and selling vehicles and developing form documents such as the Buyer's Order used at each dealership; (2) using the same forms and same allegedly deceptive practices to misrepresent the prior rental use of the vehicles sold to consumers;
The analysis in Herlihy, 752 F.Supp. at 1290, is instructive. That case involved a putative class action by a group of homeowners against manufacturers of fire retardant plywood products, alleging that the products were defective. The court reasoned:
Id. The court rejected this argument, noting that Maryland law does not recognize a cause of action based upon an alleged concert of action. Here, although Plaintiff uses the word "conspiracy" in the amended complaint, the factual allegations support the inference of concerted action among the Defendants, which does not confer standing. Indeed, the amended complaint alleges that "when King Buick failed to disclose and concealed from [ ] Ms. Chambers the prior rental use of the vehicle[ ] [she was] purchasing, it did so as part of a conspiracy, scheme and concerted action in which all of the Defendants participated with their knowledge and consent, as well as with the aid and encouragement of one another." (ECF No. 22 ¶ 60; see also ¶ 16 ("The King Auto Group entities named as Defendants acted in concert to accomplish, and jointly benefitted from, the scheme described herein.")); Sprint Nextel Corp. v. Simple Cell, Inc., Civil No. CCB-13-617, 2013 WL 3776933, at *5 (D.Md. July 17, 2013) ("[t]he mere involvement or encouragement of lies made by others is neither sufficient to maintain a fraud action under Maryland law, . . . nor specific enough to maintain a claim under Rule 9(b).").
The allegations are insufficient to show a conspiracy among all of the Defendants. In Acosta, 711 F.Supp.2d at 114, the court dismissed a civil conspiracy claim because the plaintiff failed to provide any factual support that the defendant CropLife had an agreement with the other defendants and found that it was just as likely that they were acting independently with a common motivation or goal. This is the case here. Moreover, the Other Dealer Defendants submit an affidavit from Gerard Ceresini, the Controller of King Buick
Defendants assert that this court lacks subject matter jurisdiction over the MMWA claim because the amended complaint fails to allege any amount of damages and, even if it did, Plaintiff and members of the class still could not plausibly allege $50,000 in damages under their separate MMWA claims. (ECF No. 34-1, at 16-17). Defendants further argue that Plaintiff cannot meet the jurisdictional "100-named plaintiff" requirement under 15 U.S.C. § 2301(d)(3)(C).
A plaintiff may file a MMWA suit for damages for certain breach of warranty obligations in either state or federal court. 15 U.S.C. § 2301(d)(1). Such a suit, however, is not appropriately brought in a United States district court:
15 U.S.C. § 2310(d)(3); Misel v. Mazda Motor of Am., Inc., 420 Fed.Appx. 272, 273-73 (4th Cir.2011). Here, Latechia Chambers is the only putative Named Plaintiff and it does not appear that the jurisdictional requirement is met. Plaintiff maintains that "where an alternate basis for federal jurisdiction exists—as where violations of a federal statute such as RICO have been alleged—federal jurisdiction may be maintained over a Magnuson-Moss claim, irrespective of the number of named plaintiffs and the jurisdictional amount at issue in the Magnuson-Moss claims." (ECF No. 48, at 82).
The court has subject matter jurisdiction over the MMWA claim because one of the RICO counts will not be dismissed at this time. As Judge Ellis reasoned in Barnes v. West, Inc., 249 F.Supp.2d 737, 739 (E.D.Va.2003), "MMWA claims that cannot independently be heard in federal court owing to the absence of the requisite amount in controversy, can still be heard in federal court in circumstances where supplemental jurisdiction is properly exercised under 28 U.S.C. § 1367." In such circumstances—as here—the amount in controversy and "100 named plaintiff" requirements are no obstacles to the claim being heard in federal court because the court can exercise supplemental jurisdiction over the MMWA claim provided another jurisdictional basis exists. See Chavis v. Fidelity Warranty Servs., Inc., 415 F.supp.2d 620, 623 (D.S.C. 2006) ("many courts have allowed federal jurisdiction to be maintained over Magnuson-Moss claims that fail to conform to the strict limitations of § 2301(d)(3) when an alternate basis for federal jurisdiction exists."). Defendants' argument assumes
Plaintiff asserts a claim for breach of implied warranty of merchantability and seeks relief under both federal law, the MMWA, and state law: Section 2-314 of the Uniform Commercial Code, as codified at Md.Code Ann. § 2-314. Resolution of Plaintiff's claims for breach of implied warranty of merchantability and violation of the MMWA turns largely on principles of state law. Carlson v. Gen. Motors Corp., 883 F.2d 287, 291 (4th Cir.1989); Laing v. Volkswagen of Am., Inc., 180 Md.App. 136, 949 A.2d 26 (2008); Ingram v. Auto Palace, Inc., No. BPG-09-2660, 2012 WL 5077633, at *4 (D.Md. Oct. 17, 2012) ("[t]he Fourth Circuit has recognized that the Magnuson-Moss Warranty Act operates in conjunction with state law to regulate the warranting of consumer products."). In a Maryland warranty action, the plaintiff must show that a warranty existed, that the product did not conform to the warranty, and that the breach proximately caused the injury or damage. Lloyd v. Gen. Motors Corp., 397 Md. 108, 916 A.2d 257 (2007). The Maryland Uniform Commercial Code governs actions asserting breaches of express or implied warranties for transactions in goods. See Md.Code Ann., Com. Law § 2-102. Section 2-314(1) states that "a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind." The code further explains that "goods to be merchantable must be at least such as (a) pass without objection in the trade under the contract description;. . . and (c) are fit for the ordinary purposes for which such goods are used." § 2-314(2).
Here, Plaintiff invokes Section 2-314(2)(a), alleging that:
(ECF No. 22 ¶ 134). Defendants argue that absent allegations of any physical defect in the vehicle sold to Plaintiff, there can be no cause of action for breach of implied warranty of merchantability or violation of the MMWA. (ECF No. 36, at 15).
There is a long history of applying the implied warranty of merchantability in the used car context. Jones v. Koons Automotive, Inc., 752 F.Supp.2d 670, 685 (D.Md.2010). Even so, most—if not all—of these cases contemplate physical defects in automobiles that offend the expectations of reasonable consumers. Indeed, the Fourth Circuit has construed the implied warranty to reach only those defects:
Carlson v. Gen. Motors Corp., 883 F.2d 287, 297 (4th Cir.1989). Carlson rejects the argument that the implied warranty of merchantability is meant to protect mere consumer expectations that a product holds its value, absent some tangible defect so substantial as to render the automobile virtually useless. Carlson, 883 F.2d at 298; Ingram, 2012 WL 5077633, at *9 ("[t]he implied warranty of merchantability warrants both that the vehicle will operate effectively and will provide reasonably safe transportation . . . . There is no evidence, however, establishing that a vehicle's inability to pass state inspection is equivalent to a finding of a vehicle's inoperability.").
In Koons, 752 F.Supp.2d at 685, plaintiff's claim for breach of the implied warranty of merchantability was dismissed on nearly identical facts as here. Plaintiff argues that "[i]n Koons, this Court concluded a buyer did not state a claim for breach of the Implied Warranty of Merchantability where the buyer alleged the dealer failed to disclose the vehicle's rental history because the vehicle was not `unfit for use.'" (ECF No. 48, at 89). Plaintiff mischaracterizes the holding in Koons. To the contrary, the plaintiff in Koons, 752 F.Supp.2d at 685, alleged a breach of the implied warranty of merchantability, "as the 2007 Pontiac G6 would not pass without objection in the trade because the contract description [did not] include a clear and conspicuous disclosure that [the Pontiac G6] had previously been used as a short-term rental." (internal citations omitted). This argument was rejected, however, because there was no suggestion that the car had any physical defect or was otherwise functionally useless. Plaintiff argues that the fact that "a dealer will not accept a trade-in vehicle from a buyer without first obtaining a signed statement from the buyer certifying, among other things, the existence of any former rental use of a trade-in establishes that accurate disclosure of prior use is needed for a vehicle to `pass without objection in the trade.'" (ECF No. 48, at 88). Plaintiff asserts that "[ ]otherwise, it would not be common practice in the automobile industry for car dealers to require buyers trading in their used vehicles to provide such information." (Id. at 89). Plaintiff cites no case law from this district to support this contention. In Bailey, 992 F.Supp.2d at 575, Judge Garbis noted that:
Judge Garbis stated that "[t]he Court doubts—in the absence of Maryland precedent supporting [plaintiff's] position—that there would be a valid claim based upon a violation of an implied warranty of merchantability." Although Judge Garbis ultimately decided not to dismiss this claim because he found viable the other claims premised on the same facts, the undersigned declines to keep the implied warranty of merchantability and MMWA claims on this basis.
Plaintiff has submitted a notice of supplemental authority, including a transcript from a proceeding before the Circuit Court for Baltimore City (Case No. 03-C-13-008147), another putative class action against dealerships. (See ECF No. 64-1). In ruling on a motion to dismiss the implied warranty of merchantability claim in that case, Judge Stringer Jr. decided to
Plaintiff asserts a negligent misrepresentation claim. She alleges that:
(ECF No. 22 ¶ 200). To state a claim for negligent misrepresentation under Maryland law, Plaintiff must show:
Lloyd v. Gen. Motors Corp., 397 Md. 108, 136, 916 A.2d 257 (2007).
King Buick GMC argues that Plaintiff fails to state a negligent misrepresentation claim because King Buick GMC did not make any misrepresentations or omissions. King Buick maintains that it disclosed to Plaintiff in a CarFax Report in multiple places that the vehicle she was purchasing was a prior short-term rental. King Buick GMC further asserts that because Plaintiff received the CarFax Report which disclosed that the vehicle was previously used as a short-term rental, she could not have justifiably relied on any alleged misrepresentations in the Buyer's Order. It includes as an exhibit to its motion to dismiss a copy of a CarFax Report allegedly furnished to Ms. Chambers, showing that the word "rental" is highlighted in blue and Ms. Chambers's initials are contained next to this purported disclosure. (See ECF No. 36-5).
There are several problems with King Buick GMC's arguments. First, King Buick GMC has moved to dismiss. As indicated above, as a general rule, extrinsic evidence should not be considered at the 12(b)(6) stage. The Fourth Circuit has held that "when a defendant attaches a document to its motion to dismiss, "a court may consider it in determining whether to dismiss the complaint [if] it was integral to and explicitly relied on in the complaint and [if] the plaintiffs do not challenge its authenticity."" Phillips v. LCI Int'l Inc., 190 F.3d 609, 618 (4th Cir.1999). Here, Plaintiff challenges the authenticity of the
(ECF No. 48-2, at 33) (emphasis added). Plaintiff avers that she "further understand[s] that King has told the Court that the word `rental' was circled and highlighted in blue when the Carfax report was presented to [her]. This cannot be true." (Id.). Accordingly, to the extent King Buick GMC maintains that Plaintiff could not have justifiably relied on any representations in the Buyer's Order given the conflicting information in the CarFax Report, this argument is unavailing at this stage of the proceedings because Plaintiff disputes the authenticity of the CarFax Report that King Buick GMC proffers.
King Buick relies on American Chiropractic, 367 F.3d at 235, for the proposition that where plaintiff receives another document attached to the agreement that discloses the very terms she claims were misrepresented or omitted, she cannot claim negligent misrepresentation or fraud. The facts of American Chiropractic are readily distinguishable. In that case, the Fourth Circuit held that plaintiff could not have relied on a misrepresentation by defendant because, unlike here, there was no dispute that plaintiff received the second document with the pertinent disclosure. Here, Plaintiff alleges that she did not receive a document before she purchased the vehicle from King Buick GMC that disclosed that the car was a prior short-term rental. In Jones, 752 F.Supp.2d at 686, the undersigned denied defendant's motion to dismiss the negligent misrepresentation claim where plaintiff alleged that defendant failed to disclose the prior use of a purchased vehicle as a daily rental. Accordingly, the negligent misrepresentation claim against King Buick GMC will not be dismissed at this time.
Count IV of the complaint alleges deceit by non-disclosure or concealment.
Blondell v. Littlepage, 413 Md. 96, 119, 991 A.2d 80 (2010). "`To create a cause of action, concealment must have been intentional and effective—the hiding of a material fact with the attained object of creating or continuing a false impression as to that fact. The affirmative suppression of the truth must have been with intent to deceive.'" Fegeas, 218 Md. at 476-77, 147 A.2d 223 (citation omitted). With respect to active suppression or concealment of facts, fraudulent concealment "is any statement or other conduct which prevents another from acquiring knowledge of a fact, such as diverting the attention of a prospective buyer from a defect which otherwise, he would have observed." Lloyd, 397 Md. at 138, 916 A.2d 257. A claim for deceit by nondisclosure "requires only that the defendant remain silent about, or omit, facts." Lloyd, 397 Md. at 138 n. 11, 916 A.2d 257. The non-disclosed fact must be material, which means it must be one on which a reasonable person would rely in making a decision. Sass v. Andrew, 152 Md.App. 406, 430, 832 A.2d 247 (2003). Like a claim for fraudulent concealment, a claim for deceit by nondisclosure will only lie if "the defendant had a duty to disclose." Id.; Bourgeois, 3 F.Supp.3d at 459-60. Maryland ordinarily does not impose a general duty on every party to a transaction to disclose facts to the other party. Sass, 152 Md.App. at 430, 832 A.2d 247. Maryland law also recognizes that, though, even where there is no duty to disclose, a person who suppresses or conceals facts that materially qualify other representations that person has made may be found liable for fraud. Hogan v. Maryland State Dental Ass'n, 155 Md.App. 556, 567, 843 A.2d 902 (2004). Claims of fraud must be pled with particularity, as noted above.
Unlike the negligent misrepresentation claim, this claim requires Plaintiff to plead scienter. King Buick GMC argues that it did not make any intentionally false statement or conceal anything from Plaintiff because it clearly disclosed in the CarFax Report the prior short-term rental use of the vehicle it sold to Ms. Chambers. (See ECF No. 36-1, at 23-24). King Buick GMC avers that "[b]y providing Plaintiff[ ] with the CarFax Report, with the `Title History' and `Ownership History' disclosing that [her] vehicle was a prior rental in five different places, King Buick GMC intended to and did in fact accurately disclose the true title history of the vehicle before it was sold." (ECF No. 36-1, at 23-24). King Buick GMC points to guidance from the Maryland MVA stating that disclosures regarding a vehicle's prior use do not need to be made on the Buyer's Order and the disclosure can be made on a separate document. (See ECF No. 36-6, at 2 (MVA Bulletin, Aug. 25, 2011)); Philips v. Pitt Cnty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir.2009) (in reviewing motions to dismiss, the court may consider matters of public record). The guidance from the Maryland MVA states that "[t]he MVA does not limit which document must contain the required disclosures. Best
This claim will not be dismissed at this time. The parties dispute whether Ms. Chambers received a CarFax Report in connection with her transaction and, if she did, at what point (before or after the purchase transaction was consummated) it was provided and whether Ms. Chambers signed it. On a motion to dismiss, Plaintiff's allegations in the amended complaint must be credited given that she disputes the authenticity of the CarFax Report that King Buick GMC submits. According to the amended complaint, when King Buick GMC sold to Plaintiff the used 2010 Dodge Caliber on February 18, 2012, it failed to disclose to her that this vehicle had been used as a short-term rental. She asserts that by concealing the prior short-term rental use of the vehicle, King Buick GMC intended to induce her to purchase a less desirable and less valuable vehicle and to pay more for the vehicle than it was worth. (ECF No. 22 ¶¶ 175, 182). Defendant argues that Plaintiff cannot show that King Buick GMC intended to conceal the prior short-term rental use of the vehicle as part of a scheme to defraud her. Although Plaintiff certainly has to make this showing to ultimately prevail on this claim, at this stage, "intent, knowledge, and other conditions of a person's mind may be alleged generally." United States ex rel. Palmieri v. Alpharma, Inc., Civ. Action No. ELH-10-1601, 2014 WL 1168953, at *7 (D.Md. Mar. 21, 2014).
King Buick GMC relies on McGraw v. Loyola Ford, Inc., 124 Md.App. 560, 579, 723 A.2d 502 (1999), to support the argument that the omission in the Buyer's Order does not "vitiate the dealer's affirmative act of timely disclosing that the vehicle was a prior rental in the CarFax Report." (ECF No. 56, at 8 (internal citation omitted)). Unlike here, in McGraw, 124 Md. App. at 580, 723 A.2d 502, it was "uncon-troverted that, at the time of the transaction, [plaintiff] was expressly informed that the vehicle had been used as a `demo.'" The court in McGraw, id., reasoned:
(emphasis added). Thus, the facts of McGraw are readily distinguishable, as Plaintiff alleges that King Buick GMC did not make the requisite disclosure regarding the vehicle's prior rental use before she consummated the transaction—and Plaintiff's allegations must be accepted as true at this juncture. Plaintiff has identified the time, place, and content of the false representation, which is sufficient under Rule 9(b). Accordingly, Count IV against King Buick GMC will not be dismissed at this time.
Count III of the amended complaint alleges violations of the MCPA. The MCPA prohibits "unfair or deceptive trade practices." Md.Code Ann., Com. Law, § 13-301. The MCPA proscribes fourteen categories of unfair or deceptive practices, including "any . . . [f]alse . . . or misleading oral or written statement, visual description, or other representation of any kind which has the capacity, tendency, or effect of deceiving or misleading consumers" and "any . . . [f]ailure to state a material fact if the failure deceives or tends to deceive." Private parties who bring a suit must establish that they "suffered an identifiable loss, measured by the amount the consumer spent or lost as a result of his or her reliance on the sellers' misrepresentation." Green v. Wells Fargo Bank, N.A., Civ. Action No. DKC 12-1040, 2014 WL 360087, at *3 n. 3 (D.Md. Jan. 31, 2014). Plaintiff's claim alleging violations of the MCPA is also subject to the heightened pleading standard of Rule 9(b). See Green, 2014 WL 360087, at *2; Dwoskin v. Bank of Am., N.A., 850 F.Supp.2d 557, 569 (D.Md.2012).
King Buick GMC makes three arguments to contest Plaintiff's ability to plead an MCPA claim: (1) King Buick GMC did not make any false statement; (2) there was no justifiable reliance; and (3) Plaintiff fails to meet MCPA's "actual injury" requirement. The first two arguments have already been addressed and rejected in the context of the negligent misrepresentation and fraud claims, and the same logic applies here. As for the third argument, King Buick GMC argues that Plaintiff has not alleged that she sold her vehicle and suffered any actual injury or loss. King Buick GMC further avers that Plaintiff has not alleged that she has "spent a dime on any repair or has been unable to use [her] vehicle at any time over the past 21/2-3 years." (ECF No. 36-1, at 35). Plaintiff asserts that as a result of the misrepresentations regarding the vehicle's prior short-term rental use, she suffered injury because she was overcharged and paid significantly more for the vehicle than it was worth. (ECF No. 22 ¶ 180). The amended complaint further states that Plaintiff was denied the opportunity to decline to purchase vehicles known to have been used previously for short-term rentals. (Id. ¶ 129). In the opposition, Plaintiff asserts that "Ms. Chambers [] suffered an actual economic loss at the time [she] paid for [her] vehicle[]," because she paid more for the vehicle than it was worth (i.e., she was overcharged). (ECF No. 48, at 103).
Plaintiff has not adequately pled injury with respect to the MCPA violation. "[I]n order to articulate a cognizable injury under the [MCPA], the injury must be objectively identifiable." Lloyd, 397 Md. at 143, 916 A.2d 257. A complaint adequately pleads loss, for instance, when it points to some amount that it would "take to remedy the loss [the plaintiff] incurred as a result of the respondents' alleged deceptive trade practices." Id. at 150, 916 A.2d 257. Jones, 752 F.Supp.2d at 684, is
Plaintiff argues in the opposition that she suffered an actual economic loss on the date of the transaction because she was overcharged for the vehicle and paid significantly more for her vehicle. Plaintiff specifies in the opposition that she does not assert that she suffered damages on the basis of "a diminished post-sale value of the vehicles, lost profits, or any other speculative future loss." (Id.); Jones, 752 F.Supp.2d at 684 ("[n]or does [plaintiff] allege that the concealed fact caused any diminution in the value of the car."). The allegations here mirror those in Jones with respect to the MCPA claim, warranting dismissal. Accordingly, the MCPA claim against King Buick GMC will be dismissed.
Plaintiff asserts that King Buick GMC's failure to disclose the prior short-term rental use of the 2010 Dodge Caliber in the Buyer's Order constituted a breach of contract. "To prevail in an action for breach of contract, a plaintiff must prove that the defendant owed the plaintiff a contractual obligation and that the defendant breached that obligation." Carroll Co. v. Sherwin-Williams Co., 848 F.Supp.2d 557, 563 (D.Md.2012). King Buick GMC argues that the breach of contract claim should be dismissed. It contends that Plaintiff fails to identify any term in the sales contract which King Buick GMC failed to perform and how it breached any contractual term.
The breach of contract claim will be dismissed. As noted in RRC Northeast, LLC v. BAA Maryland, Inc., 413 Md. 638, 655, 994 A.2d 430 (2010), "[i]t is well-established in Maryland that a complaint alleging a breach of contract `must of necessity allege with certainty and definiteness facts showing a contractual obligation owed by the defendant to the plaintiff and a breach of that obligation by defendant.'" (quoting Continental Masonry Co., Inc. v. Verdel Constr. Co., Inc., 279 Md. 476, 480, 369 A.2d 566 (1977)) (emphasis in original). Moreover, in considering the sufficiency of a complaint alleging breach of contract, "any ambiguity or uncertainty in the allegations is to be construed against the pleader." RRC Northeast, 413 Md. at 655, 994 A.2d 430. Here, Plaintiff does not identify which contract provision Defendant purportedly breached. Instead, Plaintiff posits that the failure to identify the vehicle as a short-term rental constituted a material breach of the contract. In the opposition, Plaintiff cites no case-law to support this claim against King Buick GMC, namely that an omission on this sort in a contract can constitute a breach. The amended complaint states that King Buick GMC materially breached the contract by failing to sell the vehicle promised and selling a used vehicle that failed to comport with the description of the vehicle. The vehicle promised was a 2010 Dodge Caliber, which is what Plaintiff received. Moreover, as King Buick GMC points out, "[t]he sales contract[] expressly state[d] the material terms agreed to by the parties including the make, model and year of the vehicles purchased, the sales price and the amount of all of the taxes, charges, etc. to be paid." (ECF No. 36-1, at 36). Plaintiff has not explained how failure to identify in the Buyer's Order that the 2010 Dodge Caliber was a prior short-term rental constituted a material breach of King Buick GMC's obligation. King Buick GMC avers that Plaintiff has not alleged that the vehicle failed to operate properly or as indicated in the Buyer's Order. The fact that the Buyer's Order contained a space for the rental use disclosure does not necessarily make prior rental use a material term, and Plaintiff has pointed to no authority to suggest otherwise. Plaintiff's claim sounds in tort, not in contract. Moreover, the single assertion in the amended complaint that King Buick GMC did not exercise good faith in performing its contractual obligation is conclusory and insufficient for Plaintiff to satisfy its pleading burden on the breach of contract claim. See, e.g., Barry v. EMC Mortg., 2011 WL 2669436, at *7 (D.Md. July 6, 2011) ("Count III does not identify EMC's obligations under the Deed of Trust or state when or how these obligations were breached. The vague assertion that EMC's conduct `was in bad faith' is not sufficient."). Accordingly, the breach of contract claim will be dismissed.
Plaintiff alleges an unjust enrichment claim, stemming from King Buick GMC's
In its motion to dismiss, King Buick includes a paragraph arguing that the unjust enrichment claim should be dismissed because there is an express contract governing this action. (ECF No. 36-1, at 37). "In Maryland, a claim of unjust enrichment, which is a quasi-contract claim, may not be brought where the subject matter of the claim is covered by an express contract between the parties." Janusz v. Gilliam, 404 Md. 524, 537, 947 A.2d 560 (2008) (quotation marks omitted); see also FLF, Inc. v. World Publ'ns, Inc., 999 F.Supp. 640, 642 (1998) ("It is settled law in Maryland, and elsewhere, that a claim for unjust enrichment may not be brought where the subject matter of the claim is covered by an express contract between the parties."). "Generally, courts are hesitant to deviate from the principle of the rule and allow unjust enrichment claims only when there is evidence of fraud or bad faith, there has been a breach of contract or a mutual rescission of the contract, when rescission is warranted, or when the express contract does not fully address a subject matter." Cnty. Com'rs of Caroline Cnty. v. J. Roland Dashiell & Sons, Inc., 358 Md. 83, 101, 747 A.2d 600 (2000).
Here, the amended complaint alleges fraud. Moreover, the Federal Rules of Civil Procedure allow parties to plead claims in the alternative. See Fed. R.Civ.P. 8(e)(2) ("A party may also state as many separate claims or defenses as the party has regardless of consistency and whether based on legal [or] equitable grounds."). King Buick GMC has not argued that Plaintiff failed to state a claim for unjust enrichment. Thus, dismissing the unjust enrichment claims now would be premature. See, e.g., RaceRedi Motorsports, LLC v. Dart Mach., Ltd., 640 F.Supp.2d 660, 666 (D.Md.2009) (declining to dismiss unjust enrichment claim pled in the alternative where contract terms remained in dispute).
Plaintiff moved for leave to file a surreply and to file a supplemental Rule 56(d) Declaration. (ECF No. 68). "Unless otherwise ordered by the Court, surreply memoranda are not permitted to be filed." Local Rule 105.2(a). Although a district court has discretion to allow a surreply, surreplies are generally disfavored. Chubb & Son v. C.C. Complete Servs., LLC, 919 F.Supp.2d 666, 679 (D.Md.2013). A surreply may be permitted "when the moving party would be unable to contest matters presented to the court for the first time in the opposing party's reply." Khoury v. Meserve, 268 F.Supp.2d 600, 605 (D.Md.2003) (citation omitted). By contrast, "[a] motion for leave to file a surreply may be denied when the matter addressed in the reply is not new." Marshall v. Capital View Mut. Homes, No. RWT-12-3109, 2013 WL 3353752, at *3 (D.Md. July 2, 2013).
Here, to support her request, Plaintiff objects to the arguments made in the Other Dealer Defendants' motion to dismiss or for summary judgment regarding King Buick GMC's inspection of its sales files and arguments made regarding the percentage of rental vehicles sold in the last three years and the disclosures made. (See ECF No. 55-6). The Other Dealer Defendants also submitted as exhibits to their motion to dismiss or for summary judgment, redacted versions of customer
There are several problems with Plaintiff's arguments. As an initial matter, the Other Dealer Defendants' motion for summary judgment only addressed the non-RICO claims, and as discussed supra, Plaintiff lacks standing to assert these claims against the Other Dealer Defendants.
Plaintiff's request to file a supplemental Rule 56(d) affidavit from Richard Gordon, counsel for Plaintiff in this matter, will also be denied. First, the Other Dealer Defendants' motion to dismiss or for summary judgment was granted on standing grounds, not on the merits of the claims against them. Thus, Plaintiff's initial Rule 56(d) request is moot. In any event, the information contained in this supplemental affidavit largely attempts to refute the statistics provided by the Other Dealer Defendants regarding the number of short-term rental vehicles sold and disclosures made to purchasers. For instance, Mr. Gordon states in the supplemental affidavit that:
(ECF No. 68-4 ¶ 18). Plaintiff also seeks to submit declarations from three purchasers alleging that they were unaware at the time of purchase that the vehicles they were buying were prior short-term rentals. These arguments fail for the same reason that a surreply is unnecessary. The claims addressed in the motion to dismiss or for summary judgment will be dismissed against the Other Dealer Defendants
Fed.R.Civ.P. 42 gives the court broad discretion to make decisions about how to most efficiently and economically try cases on its docket while providing justice to the parties. The rule states that the court may consolidate actions that involve a common question of law or fact. Fed.R.Civ.P. 42(a).
Plaintiff urges the undersigned to consolidate the instant lawsuit with another putative class action, Michelle Clay et al. v. King Buick GMC LLC, et al., Case No. 1:14-cv-00811-DKC ("the Clay Lawsuit"), also pending before the undersigned. (See ECF No. 63-1). The Clay Lawsuit is a putative class action against the same dealership Defendants, alleging a fraudulent scheme among these Defendants based on their failure to disclose the prior short-term rental use of vehicles to consumers. Plaintiff asserts that the two lawsuits involve identical defendants, rely on virtually the same facts, and assert the same counts, with the exception of an additional count for express breach of warranty asserted in the Clay Lawsuit. Plaintiff further argues that the Clay Lawsuit is based on seemingly-overlapping factual and legal issues and the required document discovery from the Defendants will be virtually identical in both lawsuits. (Id. at 6). Plaintiff believes that consolidating both lawsuits will generate substantial economies for the court and the parties and prevent inconsistent factual and legal determinations in the event the two actions are separately adjudicated.
All of the Defendants filed a motion opposing the request to consolidate the two actions. Although Plaintiff cited Fed.R.Civ.P. 42 as the basis for her motion to consolidate, Defendants rely on Fed. R.Civ.P. 20—governing joinder of parties—in framing their arguments against consolidation. In any event, Defendants offer compelling arguments against consolidation.
Defendants argue that:
(ECF No. 65, at 4). Specifically, in the Clay Lawsuit, there are three putative Named Plaintiffs. Michelle Clay alleges that in 2010, she purchased her vehicle from Hagerstown Ford for $8,000; Veronica Blake Weinberger alleges that in 2011, she purchased her vehicle from Kia of Silver Spring for $15,034.66; and Agnita Kote alleges that in 2012, she purchased her vehicle from King Volkswagen for $10,841. Defendants point out that Ms. Chambers and the three Plaintiffs in the Clay Lawsuit received different disclosures regarding the prior short-term rental use in each transaction with a different dealership Defendant. For instance, Defendants include as an exhibit to their opposition a copy of a Disclosure of Former Vehicle Use Form from King Hagerstown Motors to Michelle Clay, showing that the "short term rental vehicle" box is checked, highlighted, and the form is
Also compelling is Defendants' argument that the terms of the sales agreements with each Plaintiff differ in important respects. For instance, Agnita Kote—a Plaintiff in the Clay Lawsuit—executed a sales contract with King Volkswagen. Her contract contains a binding arbitration clause. (See ECF No. 65-2, at 2). Moreover, the integration clause in Ms. Kote's Buyer's Order is different from the Buyer's Order Ms. Chambers executed with King Buick GMC. Specifically, the integration clause in Ms. Kote's contract states that "any other documents signed by Purchaser in connection with the transaction comprise the entire and complete agreement." (Id.). Furthermore, Ms. Kote's contract contains a "waiver of jury trial" provision, not included in other agreements. The undersigned finds persuasive Defendants' argument that consolidation would "create a logistical nightmare with different plaintiffs each raising unique factual and legal issues that will have to be analyzed one at a time." (ECF No. 65, at 31). The two lawsuits are quite obviously similar on their face, but there are important factual differences that counsel against consolidation.
Although analyzed in the context of joinder, the reasoning in Saval v. BL Ltd., 710 F.2d 1027, 1031 (4th Cir.1983), applies here. The court noted:
Moreover, Plaintiff is operating under the premise that all of the claims in the instant lawsuit will survive dismissal; but for the reasons explained supra, this is not the case. Accordingly, to consolidate the two cases where some of the claims against the Other Dealers Defendants and King Buick GMC will be dismissed here would only complicate the already involved proceedings in this action. To the extent Plaintiff is worried that maintaining two separate actions would result in inconsistent adjudication, the fact that the two cases are both before the undersigned reduces the risk that the undersigned would decide differently identical issues in the two cases. Of course, nuances in the law and facts in each proceeding may require different results.
Accordingly, the motion to consolidate the two actions will be denied at this time.
For the foregoing reasons, the motion to dismiss the RICO claims filed by all of Defendants will be granted in part. Claims under Section 1962(a) and (d) will be dismissed. King Buick GMC's motion to dismiss the non-RICO claims will be granted in part. The MMWA, breach of the implied warranty of merchantability, MCPA, and breach of contract claims will be dismissed. The Other Dealer Defendants' motion to dismiss or for summary judgment on the non-RICO claims will be
Walsey, 828 F.2d at 1075. Thus, the fact that the instant dispute arises in a commercial context does not, in and of itself, take this case outside of the purview of RICO.
(ECF No. 22 ¶ 117). This conclusory allegation is insufficient to plead a predicate act. See, e.g., Robinson v. Fountainhead Title Grp. Corp., 252 F.R.D. 275, 279 n. 4 (D.Md.2008) (declining to consider predicate act premised on 18 U.S.C. § 2314 where plaintiff merely included a bare assertion that defendants engaged in multiple instances of interstate transports of money converted or fraudulently obtained in violation of 18 U.S.C. § 2314, but did not explain how or when these interstate transports occurred). Accordingly, Plaintiff fails to plead a predicate act pursuant to Section 2314.
Plaintiff submitted a Notice of Supplemental Authority on April 30, 2014, alerting the undersigned to an order issued in the Circuit Court for Baltimore County related to another class action, Buie v. Antwerpen Motorcars, Ltd., Case No. C-13-12341, that alleges that a group of automobile dealerships failed to disclose the prior short-term rental use of vehicles offered for sale. (See ECF No. 71). Plaintiff asserts that the Antwerpen Auto Group Defendants included all nine of the Antwerpen dealers as defendants, but named plaintiffs' transactions were with only three of those entities. (ECF No. 71, at 2). Plaintiff submits a two-page order from the Circuit Court for Baltimore County. The order states that "[t]he facts alleged here, in Plaintiffs' Amended Complaint, are sufficient to establish the existence of a civil conspiracy, and thus sufficient to establish the standing of these [p]laintiffs to sue these [d]efendants." (ECF No. 71-1, at 1). This order, of course, is not binding precedent on this court. Moreover, the court did not explain its reasoning.
Accordingly, the undersigned does not find these decisions controlling on the issue of standing against the Other Dealer Defendants in this matter.
(ECF No. 48-2, at 33). Plaintiff submits the CarFax Report that she allegedly received in the envelope from King Buick GMC, which is not initialed and the disclosure regarding the vehicle's prior use as a short-term rental is not highlighted (unlike the CarFax Report that Defendant proffers). (Id. at 36-38). Thus, the authenticity of the CarFax Report that King Buick GMC provides is disputed.
