Alexander v. Se. Wholesale Corp.

• Decision Date: 17 October 2013
• Docket Number: Action No. 2:13cv213.
• Citation: 978 F.Supp.2d 615
• Parties: Andre ALEXANDER, v. SOUTHEASTERN WHOLESALE CORP., t/a Bay Auto Wholesale, and Jason D. Adams, Inc., t/a Autos by Choice, Defendants.
• Court: U.S. District Court — Eastern District of Virginia

978 F.Supp.2d 615

Andre ALEXANDER,

v. SOUTHEASTERN WHOLESALE CORP., t/a Bay Auto Wholesale, andJason D. Adams, Inc., t/a Autos by Choice, Defendants.

Action No. 2:13cv213.

United States District Court,

E.D. Virginia,

Norfolk Division.

Oct. 17, 2013.

John Cole Gayle, Jr., The Consumer Law Group, Richmond, VA, for Andre Alexander.

William Hunter Old, Kaufman & Canoles PC, Williamsburg, VA, for Defendants.

MEMORANDUM OPINION AND ORDER

REBECCA BEACH SMITH, Chief Judge.

This matter comes before the court on a Motion to Dismiss Plaintiff's Second Amended Complaint (“Motion”). For the reasons stated herein, the Motion is DENIED.

I. Factual and Procedural Background

On or about August 16, 2010, the Defendant, Jason D. Adams, Inc., trading as Autos By Choice (“Autos by Choice”), purchased a 2003 Dodge Ram pickup truck for approximately $6,000. 2d. Am. Compl. ¶ 5. At the time of this sale, the odometer incorrectly displayed 29,580 miles. 2d. Am. Compl. ¶ 8. In fact, the truck had over 100,000 miles on it. 2d. Am. Compl. ¶ 9.

On August 19, 2010, Autos by Choice sold the truck to Southeastern Wholesale Corp., trading as Bay Auto Wholesale (“Bay Auto”), for $9,100 and certified the odometer reading as correct to the best of its knowledge. 2d. Am. Compl. SI 14.

Bay Auto subsequently sold the truck to the Plaintiff, Andre Alexander (“Alexander”). On August 24, 2010, the Plaintiff made a down payment of $5,000 on the truck, and on August 27, 2010, the sale became final for a purchase price of $13,994.09. 2d. Am. Compl. ¶¶ 18, 21.

In late June or early July, 2011, the Plaintiff traded in the truck to Impex Auto Sales (“Impex”). Impex, however, discovered that the mileage displayed on the odometer was inaccurate and required the Plaintiff to take back the truck. 2d. Am. Compl. ¶ 26. The Plaintiff alleges this was the first time he discovered the odometer discrepancy. 2d. Am. Compl. ¶ 26. He attempted to rescind the transaction with Bay Auto but Bay Auto refused to cancel the sale. 2d. Am. Compl. SIS 27–28.

The Plaintiff filed his original complaint on April 22, 2013, against Bay Auto and Autos by Choice. After the court granted two successive motions to amend, the Plaintiff's Second Amended Complaint (“Complaint”) was filed on July 30, 2013, and is now the operative complaint in this case. ECF No. 44. ¹ On August 20, 2013, the Defendant, Autos by Choice,² filed the Motion to Dismiss. ECF No. 45. The Motion has been fully briefed, and is now ripe for review.

II. Standard of Review

Federal Rule of Civil Procedure 8(a) provides, in pertinent part, “[a] pleading that states a claim for relief must contain ... a short and plain statement of the claim showing that the pleader is entitled to relief.” The complaint need not have detailed factual allegations, but Rule 8 “requires more than labels and conclusions.... [A] formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). Facial plausibility means that a “plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). It is, therefore, not enough for a plaintiff to allege facts demonstrating a “sheer possibility” or “mere[ ] consist[ency]” with unlawful conduct. Id. (citing Twombly, 550 U.S. at 557, 127 S.Ct. 1955).

The Supreme Court, in Twombly and Iqbal, offered guidance to courts evaluating a motion to dismiss:

In keeping with these principles a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.

Iqbal, 556 U.S. at 679, 129 S.Ct. 1937. That is, the court accepts facts alleged in the complaint as true and views those facts in the light most favorable to the plaintiff. Venkatraman v. REI Sys., 417 F.3d 418, 420 (4th Cir.2005). Overall, “[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.” Iqbal, 556 U.S. at 679, 129 S.Ct. 1937.

III. Analysis

The Plaintiff has alleged four grounds for relief. Count I is a claim based on the federal Motor Vehicle Information and Cost Savings Act (“Odometer Act”). Count II is asserted only against Bay Auto, which is in default, ³ not against Autos by Choice. Count III is a claim based on the Virginia Consumer Protection Act (“VCPA”). Count IV is a Virginia common law fraud claim. The Defendant asserts that the pleadings for Counts I, III, and IV fail to state a claim. The court considers each argument in turn.

A. Statute of Limitations

The Defendant first argues that the Plaintiff has not filed his claims under Counts I, III, and IV within the applicable limitations periods for claims based on the Odometer Act, the Virginia Consumer Protection Act, and common law fraud, respectively. Def.'s Mem. Supp. at 4, 10, 13.

1. Motor Vehicle Information and Cost Savings Act

The Odometer Act specifies that an “action must be brought not later than 2 years after the claim accrues.” 49 U.S.C. § 32710(b). Both parties agree that because the cause of action is based on the fraudulent intent of the seller, the federal “discovery rule” applies.

[W]here a plaintiff has been injured by fraud and “remains in ignorance of it without any fault or want of diligence or care on his part, the bar of the statute does not begin to run until the fraud is discovered, though there be no special circumstances or efforts on the part of the party committing the fraud to conceal it from the knowledge of the other party.”

Holmberg v. Armbrecht, 327 U.S. 392, 397, 66 S.Ct. 582, 90 L.Ed. 743 (1946) (quoting Bailey v. Glover, 88 U.S. 342, 21 Wall. 342, 22 L.Ed. 636 (1875)). The cause of action does not accrue until the time that the Plaintiff “discovered, or had failed in reasonable diligence to discover, the alleged deception.” Id.

In this case, the Defendant first argues that the Plaintiff should have known of the inaccuracy when he purchased the truck from Bay Auto, the same as the Plaintiff alleges in the Complaint that the Defendant should have known of the inaccuracy when it purchased the truck. Def's Mem. Supp. at 5. By this reasoning, the Defendant's constructive knowledge, as alleged in the Complaint, would necessarily imply that the Plaintiff also had constructive knowledge, causing the statute of limitations to run on August 27, 2012, two years from the date he purchased the truck from Bay Auto.

This equivalency is incorrect. A determination of what constitutes “reasonable diligence” would necessarily take into account the situation of the party in question. The Defendant is a commercial seller of vehicles. 2d. Am. Compl. ¶¶ 3, 14. The Plaintiff is not. 2d. Am. Compl. ¶ 1. This difference between the Plaintiff and the Defendant means that what is reasonable to expect the Defendant to have known is not necessarily reasonable to expect the Plaintiff to have known. Viewing all facts in a light most favorable to the Plaintiff does not lead the court to conclude, at this juncture, that it was reasonable for the Plaintiff, as an individual consumer, to have known of the odometer inaccuracy.⁴

The Defendant argues in the alternative that the statute of limitations period should start against all future plaintiffs in the chain of title when Bay Auto, the direct seller of the truck to the Plaintiff, first had “knowledge of, or duty to discover, the inaccuracy of the odometer....” Def's Mem. Supp. at 5. The issue is whether the statute of limitations begins to run against a particular plaintiff when that plaintiff has knowledge of the inaccuracy, or whether it begins to run against all potential plaintiffs whenever any plaintiff has knowledge of a violation. This issue is a matter of first impression in this court.

The Defendant relies primarily on Byrne v. Autohaus on Edens, Inc., 488 F.Supp. 276, 281 (N.D.Ill.1980). In Byrne, the court held that “the Act's statute of limitation begins to run as to a violation of the Act as against all potential plaintiffs at the time any person having standing to sue discovers or constructively discovers the violation, absent some act of fraudulent concealment.” Id. To do otherwise, the court held, would “subject a violation of the Act to potential liability throughout the life of a vehicle.” Id.

The court in Byrne based its reasoning on two legal theories. First, the court held that “a violation of the Act creates a single cause of action, not as many causes of action as there might be subsequent owners.” Id. at 280. Second, the court held that “knowledge possessed by an owner of a motor vehicle as to a previous owner's possible violation of the Act should be imputed to all subsequent owners....” Id. at 281. Under this theory, the statute of limitations begins to run when Bay Auto knew or should have known about the inaccuracy, which would preclude the Plaintiff from pursuing this cause of action.

The Plaintiff points to other courts that have declined to follow Byrne. Pl.'s Mem. Opp'n at 8–10. In John Watson Chevrolet, Inc. v. Willis, 890 F.Supp. 1004, 1010 (D.Utah 1995), the court examined Byrne and determined that it had “wrongly assumed that a statute of limitations is the...