Boomer Dev., LLC v. Nat'l Ass'n of Home Builders of the United States
Decision Date | 16 June 2017 |
Docket Number | Civil Action No. 16-2225 (RC). |
Citation | 258 F.Supp.3d 1 |
Parties | BOOMER DEVELOPMENT, LLC, et al., Plaintiffs, v. NATIONAL ASSOCIATION OF HOME BUILDERS OF the UNITED STATES, Defendant. |
Court | U.S. District Court — District of Columbia |
Larry B. Selkowitz, The Law Offices of Alan M. Gnessin, Steven J. Schiffman, Schiffman, Sheridan & Brown, P.C., Harrisburg, PA, Thomas J. Vande Sande, Hall & Vande Sande, LLC, Potomac, MD, for Plaintiff.
Elizabeth Anne Scully, Baker & Hostetler LLP, Washington, DC, for Defendant.
GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS
Beginning in 2014, the National Association of Home Builders of the United States ("NAHB"), a Nevada nonprofit trade association, allegedly began promoting a loan program offered by North Star Finance LLC ("North Star") to NAHB members and prospective members. Compl. ¶¶ 9, 13–14, ECF No. 1–13. Under the program, members were allegedly offered non-recourse debt financing for building projects up to $10 million at attractive interest rates and with other favorable terms. Compl. ¶ 13. Plaintiffs, who were members or prospective members of NAHB, allege that they applied to the loan program and paid application fees ranging from $30,000 to $190,000 in reliance on representations made by NAHB, which they claim suggested NAHB had reviewed and approved of North Star.1 See Compl. ¶¶ 83, 102, 125–28. Ultimately, however, North Star's financing never materialized because that program was, in reality, a fraudulent investment scheme carried out by North Star. See Compl. ¶¶ 28–29. In addition to losing monies paid for application fees, Plaintiffs also claim they lost expected profits and incurred development costs in connection with construction projects that they were unable to complete in the absence of the promised financing. Compl. ¶ 128. In June 2016, Plaintiffs filed this lawsuit, not against North Star, but directly against the NAHB for fraudulent misrepresentation (Count I), negligent misrepresentation (Count II), breach of fiduciary duty (Count III), and fraudulent inducement (Count IV), Compl. at 20–24, though Plaintiffs later conceded their fraudulent inducement claims,2 Pls.' Opp'n at 22, ECF No. 20.
This matter now comes before the Court on Defendant's motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. See generally Def.'s Mot. to Dismiss, ECF No. 10. For the reasons below, the Court grants the motion in part and denies the motion in part; dismissing without prejudice the fraudulent and negligent misrepresentation claims (Counts I and II) as to Plaintiffs Boomer, Davis, Biltmore, Bloomfield, and Dostal and dismissing the breach of fiduciary duty claims (Count III) in their entirety without prejudice.
In late 2013 and early 2014, the NAHB, a Nevada nonprofit trade association with its principal place of business in Washington, D.C., entered into an agreement with North Star to offer a financing program for current and prospective members of the NAHB. Compl. ¶¶ 9, 13. Under the program, members could obtain non-recourse debt financing for projects up to $10 million at interests rates that were at or below available market rates and included other favorable terms. Compl. ¶ 13.
NAHB first announced the North Star program in February 2014 at the NAHB's annual Home Builders Show in Las Vegas, Nevada. See Compl. ¶¶ 14–15. The program was introduced at various points throughout the Show by prominent NAHB representatives. Compl. ¶¶ 15–16. Indeed, among others, the program was touted by Rick Judson, the Chairman of NAHB's Board of Directors and the supposed first loan applicant of the North Star program, and by Thomas Vetter, an NAHB Executive Board Member who the NAHB awarded a Lifetime Achievement Award in the area of building finance at the conference. Compl. ¶ 16. During the presentations, attendees were told that the program was an NAHB program available only to NAHB members and that, if they were interested in applying, they should provide their contact information to NAHB personnel. Compl. ¶ 17–18. Attendees were also advised that NAHB and North Star intended to enter into an "affinity" program whereby the NAHB would receive a share of the application fees that loan applicants paid to North Star. Compl. at ¶ 19. Plaintiffs allege their belief that NAHB and North Star ultimately entered into such an arrangement. See Compl. ¶ 19. The NAHB also permitted North Star to indicate on its website that the North Star program was being "conducted in conjunction with and under the auspices of the NAHB." Compl. ¶ 20.
Following the conference, the NAHB continued to promote and disseminate information about the North Star program to its members and others. The NAHB provided information about the program to its state and local affiliates and recommended that they refer any interested persons to NAHB for additional details. Compl. ¶ 21. When contacted, the NAHB provided information about the program, instructed interested persons on how to contact North Star to apply, and also provided certain assurances. Compl. ¶ 23. According to the Complaint, the NAHB assured many of the Plaintiffs, either before or after they applied for loans, of the "soundness," "integrity[,] and safety of the North Star program." Compl. ¶¶ 22, 50, 51, 60, 85, 106, 116. Furthermore, some Plaintiffs allege that the NAHB claimed that it was "well informed about the North Star program," Compl. ¶¶ 22, 103, or that "the North Star program had been vetted by the NAHB," Compl ¶ 111. These alleged representations were made by senior NAHB officers and directors, including Mr. Judson, Mr. Vetter, Rebecca Froass, a Director for NAHB's Financial Institutions and Capital Markets, and Richard Krump, legal counsel to NAHB, via telephone conversations and email correspondence. See Compl. ¶¶ 22, 50, 51, 60, 85, 103, 106, 111, 116. According to Plaintiffs, the NAHB both intended and expected that its various actions endorsing the North Star program would result in NAHB members and prospective members applying to the program because it was being offered at a time when "conventional financing at reasonable rates was generally not available for home building projects costing up to $10 million." Compl. ¶¶ 26 121–123. Despite the NAHB's general promotion of the North Star program or its assurances concerning its soundness, the NAHB had never undertaken any reasonable steps to confirm independently the qualifications of North Star's operators, the accuracy of North Star's representations about the program, or the merits of the program generally. Compl. ¶ 25.
The ten Plaintiffs in this case allege that they applied for the North Star program and paid substantial fees to North Star and an associated firm, called Capital Source Funding ("Capital Source"), in reliance on various representations made by the NAHB. See Compl. ¶¶ 39, 53, 58, 63–64, 74, 83, 92–93, 101–102, 115, 125–127. According to Plaintiffs, these representations suggested that "the NAHB had reviewed and approved of the North Star program." Compl. ¶ 125. The Plaintiffs then spent months attempting to obtain the loan proceeds, but the North Star financing never materialized. See Compl. ¶¶ 40, 55, 66, 77, 87, 96, 108, 118. Although Capital Source agreed to refund portions of the Plaintiffs' application fees, North Star refused to provide Plaintiffs with any refunds whatsoever. See Compl. ¶¶ 40, 55, 66, 77, 87, 96, 108, 118. In May 2015, it was revealed that the North Star program was, in reality, a fraudulent investment scheme when the Securities and Exchange Commission filed a federal lawsuit against North Star and others. Compl. ¶ 28.
On June 21, 2016, Plaintiffs commenced this suit against the NAHB in the Pennsylvania Court of Common Pleas alleging intentional misrepresentation, negligent misrepresentation, breach of fiduciary duties, and fraudulent inducement. See Compl. at 20–24. The NAHB subsequently removed the action to the United States District Court for the Middle District of Pennsylvania on July 11, 2016, invoking diversity jurisdiction under 28 U.S.C. § 1332. See Notice of Removal at 2, ECF No. 1. Thereafter, on August 1, 2016, NAHB filed a motion to dismiss the action for improper venue, lack of jurisdiction, and for failure to state a claim under Rules 12(b)(2), 12(b)(3), and 12(b)(6) of the Federal Rules of Civil Procedure. See Def.'s Mot. to Dismiss, ECF No. 10. In the course of briefing that motion, Plaintiffs conceded their fraudulent inducement claims. See Pls.' Opp'n at 22. Once the motion was fully briefed, the district court concluded that it did not have personal jurisdiction over the NAHB, but declined to dismiss the case, finding that such dismissal would not be in the interests of justice. See Mem. at 11–12, ECF No. 24. Instead, it transferred the matter to this Court pursuant to 28 U.S.C. § 1631 after it determined that jurisdiction existed and that venue was proper. See Mem. at 11–12. Because the district court did not have jurisdiction over the matter, it did not reach the merits of Defendant's motion under Rule 12(b)(6) and deferred the resolution of that part of the motion to this Court. See Order at 1, ECF No. 25.
NAHB has moved to dismiss the three remaining counts of Plaintiffs' Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). As described below, the Court grants the motion in part and denies the motion in part, dismissing Counts I and II with respect to Plaintiffs Boomer, Davis, Bloomfield, Biltmore, and Dostal and dismissing Count III in its entirety.
Before reaching the merits of the NAHB's motion, the Court must first determine which state's laws should govern Plaintiffs' claims. In cases transferred pursuant 28 U.S.C. § 1631, "the action or appeal shall proceed as if it had been filed or noticed for the court to which it is...
To continue reading
Request your trial-
Alemu v. Dep't of For-Hire Vehicles
...with intent to deceive, and (5) action taken in detrimental reliance upon the representation.’ " Boomer Dev., LLC v. Nat'l Ass'n of Home Builders of U.S. , 258 F.Supp.3d 1, 13 (D.D.C. 2017) (quoting Sibley v. St. Albans Sch. , 134 A.3d 789, 808–09 (D.C. 2016) ). Federal Rule of Civil Proced......
-
Hawthorne v. Rushmore Loan Mgmt. Servs.
... ... Civil Action No. 20-393 (RDM) United States District Court, District of Columbia ... Fed.R.Civ.P ... 9(b); see Boomer Dev., LLC v. Nat'l Ass'n of Home ... ...
-
Roque "Rocky" De La Fuente & Rocky 2016 LLC v. DNC Servs. Corp.
...be given access. The complaint's conclusory allegations are simply not adequate under Rule 9(b). See Boomer Dev., LLC v. Nat'l Ass'n Home Builders U.S., 258 F. Supp. 3d 1, 17 (D.D.C. 2017) (holding that allegations that the defendant promised "assurances," "assistance," and "support," could......
-
Targetsmart Holdings, LLC v. GHP Advisors, LLC
...have looked to the place where the statements at issue 'were formulated and transmitted.'" Boomer Dev., LLC v. Nat'l Ass'n of Home Builders of the U.S., 258 F. Supp. 3d 1, 10 (D.D.C. 2017) (citing In re APA Assessment Fee Litig., 766 F.3d 39, 54 (D.C. Cir. 2014); Washkoviak v. Student Loan ......