Campbell v. Va. Meadows, LLC
| Decision Date | 08 March 2017 |
| Docket Number | CIVIL ACTION NO. 3:16-8696 |
| Parties | DANNY and SARAH CAMPBELL, JOSHUA and MELISSA POWELL, RICHARD and TANA TOLLEY, and all others similarly situated, Plaintiffs, v. VIRGINIA MEADOWS, LLC, CORNERSTONE CUSTOMS, INC., OLD COLONY COMPANY, d.b.a. Old Colony, Realtors, a.k.a. Old Colony, MERCYBUILT, LLC, JORDAN GARNES, a.k.a. Drew Barnes, BRAD GARNES, RICHARD GARNES, LINDA GARNES, WOODLAND DESIGNS, INC., RICHLIN INVESTMENTS, LLC, JIMMY CALHOUN, d.b.a. Calhoun Engineering and Surveying, Defendants. |
| Court | U.S. District Court — Southern District of West Virginia |
Pending before the Court is Plaintiffs' First Amended Motion to Amend Complaint. ECF No. 56. Also pending are motions to dismiss filed by each Defendant. ECF Nos. 31, 33, 43, 46, 50, 54, 59. Plaintiffs' amended motion to amend their complaint attempts to address the numerous issues raised in the motions to dismiss. For the following reasons the Court finds the amended complaint futile and therefore the motion is DENIED. Accordingly, and for the same reasons compelling a finding of futility of amendment, the Court GRANTS Defendant Virginia Meadows' motion to dismiss. ECF No. 46. Lastly, Plaintiffs Motion for Cost of Service is DENIED.1 ECF No. 24.
Plaintiffs' brought this putative limited funds class action suit against Defendants alleging that Defendants violated various state laws and the federal Racketeer Influenced Corrupt Organizations Act ("RICO") by knowingly building numerous homes in a Putnam County, West Virginia housing development that did not meet building codes and intentionally concealing the defects from Plaintiffs. Compl. ¶¶ 258-83, ECF No. 1. Defendants each filed a motion to dismiss contending that Plaintiffs did not allege facts sufficient to state a claim on which relief could be granted, did not plead facts sufficient to maintain a class action, and failed meet the heightened pleading standard required for RICO fraud claims. ECF Nos. 31, 33, 43, 46, 50, 54. Rather than responding, Plaintiffs moved the Court to amend their complaint, believing that an amendment could cure any defect raised by Defendants in their motions to dismiss. ECF No. 52. The amended complaint added Randolph and Jessica Simpson and "the Wilt family" as class representatives. First Am. Limited Funds Class Compl. ¶ 229, ECF No. 52-1. It also emphasized that Virginia Meadows was "the glue which binds all the residences and families together" and added the allegation that all the houses at issue were built by the same subcontractors. Mot. to Am. Compl., ECF No. 52.
Plaintiffs then filed an amended motion to amend, which not only amended the motion to amend but also amended the complaint for a second time. First Am. Mot. to Am. ECF No. 56. This(second) amendment attempted to address issues raised in Defendant Old Colony's motion to dismiss which was filed shortly after the Plaintiffs' original motion to amend. See First Am. Limited Funds Class Compl., ECF No. 56-1; Def's. Mot. to Dismiss, ECF No. 54. The (second) amendment also fixed a numbering issue in the complaint. First Am. Mot. to Am., ECF No. 56. Then, realizing that the first amended complaint and the amendment to that, i.e. the second amended complaint, failed to include all but one defendant in the case style, the Plaintiffs file an "Explanation of Changed Exhibit." ECF No. 61. A (third) amended complaint was attached to the "Explanation." Id. In the "Explanation," Plaintiffs' explained that they had mistakenly forgotten to add the Defendants to the style, but also that, in actuality, they intended to remove Brad Garnes as a defendant in his individual capacity. Id.
The Court in an Order dated November 23, 2016, ECF No. 58, requested that in any response to Plaintiffs' amended motion to amend, Defendants explain whether any of the amendments to the complaint moot the issues raised in their motions to dismiss. Defendants averred that none of their arguments were mooted by the amendments and each further argued that because the amended complaint was susceptible to the same arguments as the original complaint, amending it would be futile and the motion to amend should be denied. The Court agrees.
Defendants raise a surfeit of arguments in their motions to dismiss and their responses to Plaintiff's motions to amend. Nonetheless, Defendants' arguments attacking Plaintiffs RICO fraud claim, the only federal cause of action, raise a threshold issue and as such, the only issue the Court need take up at this time. Multiple Defendants have raised the same argument against Plaintiffs RICO cause of action. As it appears to the Court that the Defendants that have raised this issue coordinated their arguments, the Court will deal with the motion to dismiss and response toPlaintiffs' motions to amend of one of the Defendants, Virginia Meadows. Its resolution will resolve all similar issues in other motions and responses.
Rule 15(a)(2) of the Federal Rules of Civil Procedure permits amendment of a complaint after a responsive pleading has been filed "with the opposing party's written consent or the court's leave" and leave should be freely given "when justice so requires." "[A] district court has discretion to deny a motion to amend a complaint, so long as it does not outright refuse to grant the leave without any justifying reason." Equal Rights Ctr. v. Niles Bolton Assocs. 602 F.3d 597, 603 (4th Cir. 2010) (quoting Forman v. Davis, 371 U.S. 178, 182 (1962)). A court may deny a motion to amend a complaint if the amendment would be futile. Id. (citing Laber v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006) (en banc)). An amendment is futile where even if it is permitted the amendment would not save the complaint from a motion to dismiss. Perkins v. United States, 55 F.3d 910, 917 (4th Cir. 1995) (citing Glick v. Koenig, 766 F.2d 265, 268-69 (7th Cir. 1985)).
A claim for fraud will not survive a motion to dismiss unless it complies with Rule 9(b) of the Federal Rules of Civil Procedure. "In alleging fraud or mistake a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). The Fourth Circuit has explained that "the circumstances required to be pled with particularity under Rule 9(b) are the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby." McCauley v. Home Loan Inv. Bank, F.S.B., 710 F.3d 551, 559 (4th Cir. 2013) (quoting Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999)). "The standard set forth by Rule 9(b) aims to provide defendants with fair notice of claims against them and the factual ground upon which they are based, forestall frivolous suits, prevent fraud actions in which all facts are learned only following discovery, andprotect defendants' goodwill and reputation." Id. Where a plaintiff asserts merely conclusory allegations of fraud against multiple defendants "without identifying each individual defendant's participation in the alleged fraud," the complaint fails to meet the particularity requirements of 9(b). Adams v. NVR Homes, Inc., 193 F.R.D. 243, 250 (D. Md. 2000).
This heightened standard applies to allegations of RICO predicate acts of fraud. See Heinrich v. Waiting Angels Adoption Servs., Inc., 668 F.3d 393, 404-05 (6th Cir. 2012); Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1291 (11th Cir. 2010); Doyle v. Hasbro, Inc., 103 F.3d 186, 194 (1st Cir. 1996); Murr Plumbing v. Scherer Bros. Fin. Servs. Co., 48 F.3d 1066, 1069 (8th Cir. 1995); Schreiber Distrib. Co. v. Serv-Well Furniture Co., Inc., 806 F.2d 1393, 1400-01 (9th Cir. 1986); Moss v. Morgan Stanley Inc., 719 F.2d 5, 19 (2d Cir. 1983). Courts, however, "should hesitate to dismiss a complaint under Rule 9(b) if the court is satisfied (1) that the defendant has been made aware of the particular circumstances for which she will have to prepare a defense at trial, and (2) that plaintiff has substantial prediscovery evidence of those facts." Harrison, 176 F.3d at 784.
Plaintiffs' ninth or tenth cause of action, depending on which version of the complaint is used, alleges that all of the Defendants engaged in a fraudulent scheme to sell defective houses to Plaintiffs in violation of RICO. Plaintiffs claim that all Defendants since approximately 2009 have committed two or more acts constituting either wire fraud, mail fraud, or bank fraud as codified by 18 U.S.C. §§ 1341, 1343, and 1344, respectively. Compl. ¶¶ 271, 273. It is these violations, Plaintiffs allege, which constitute the predicate racketeering acts required by RICO to incur civil liability. Id. ¶ 273. While Plaintiffs amended their complaint numerous times, Plaintiffs have notamended their RICO allegations save the cause of action numbers to fix a missing number—thus the change from Count Ten in the original complaint to Count Nine in later iterations.
To properly plead a RICO cause of action a plaintiff must plead facts consistent with seven elements. They are: (1) that the defendant, a "person" under RICO; (2) through the commission of two or more acts; (3) constituting a "pattern" (4) of "racketeering activity;" (5) directly or indirectly invests in, or maintains an interest in, or participates in; (6) an "enterprise;" (7) the activities of which affect interstate or foreign commerce. Moss, 719 F.2d at 17 (quoting 18 U.S.C. § 1962 (c)).
Acts constituting racketeering activity consist of indictable offenses under a number of federal statutes listed in the RICO statute. See 18 U.S.C. 1961(1)(B). In this case, Plaintiffs have alleged predicate acts of mail fraud, wire fraud, and bank fraud. 18 U.S.C. §§ 1341, 1343, 1344. The elements of mail fraud and wire fraud are: "(1) the existence of a scheme to defraud and (2) the use of the mails or wire communication in furtherance of the...
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