Plant v. Merrifield Town Ctr. Ltd. P'ship

• Decision Date: 09 November 2010
• Docket Number: Case No. 1:08cv374.
• Citation: 751 F.Supp.2d 857
• Parties: ZHOU JIE PLANT, et al., Plaintiffs,v.MERRIFIELD TOWN CENTER LIMITED PARTNERSHIP, et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

751 F.Supp.2d 857

ZHOU JIE PLANT, et al., Plaintiffs,

v.MERRIFIELD TOWN CENTER LIMITED PARTNERSHIP, et al., Defendants.

Case No. 1:08cv374.

United States District Court, E.D. Virginia,Alexandria Division.

Nov. 9, 2010.

Henry St. John Fitzgerald, Law Offices of Henry St. J. Fitzgerald, Arlington, VA, for Plaintiffs.Edward W. Cameron, Sean Patrick Roche, Cameron McEvoy PLLC, Fairfax, VA, John Laughlin Carter, Carter Fullerton & Hayes LLC, Alexandria, VA, for Defendants.

MEMORANDUM OPINION

T.S. ELLIS, III, District Judge.

In this consolidated federal question case, more than one hundred purchasers of condominiums in the heart of Fairfax County sued the developer of those condominiums alleging that violations of the Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1701 et seq. (“ILSFDA”) entitle them to rescission of their condominium sales contracts and the return of their deposits. At issue on the basis of a Report and Recommendation of the Magistrate Judge pursuant to 28 U.S.C. § 636(b)(1) is whether plaintiffs, who did not timely seek automatic rescission under 15 U.S.C. §§ 1703(b), (c), or (d), are nonetheless entitled to an equitable remedy pursuant to 15 U.S.C. § 1709 given defendants' failure to comply with certain ILSFDA disclosure requirements.

I.

A. Procedural History

Plaintiffs are approximately one hundred fifteen individuals who contracted to purchase condominium units from defendant Merrifield Town Center Limited Partnership (“Merrifield”), a Virginia limited partnership. The units were to be built as part of the Vantage Condominiums at Merrifield Town Center (“Vantage Condominiums”) in Falls Church, Virginia. Buyers of the units signed one of two Unit Purchase Agreements (“UPAs”): (i) one UPA form required Merrifield to complete construction within 36 months of the date on which Merrifield signed the UPA; and (ii) a second UPA form required Merrifield to complete construction within 24 months of Merrifield's signing. In addition to Merrifield, this consolidated action includes four other defendants: (i) Uniwest Group, LLC, a Virginia limited liability company and Merrifield's sole general partner; (ii) Michael D. Collier, Uniwest Group's President and the registered agent for both Merrifield and Uniwest Group; (iii) Uniwest Development, LLC, a Virginia limited liability company; and (iv) defendant Walker Title & Escrow Company, Inc., a Virginia corporation that plaintiffs allege to have custody of plaintiffs' condominium deposits. Plaintiffs allege that Collier, Uniwest Group, and Uniwest Development acted as Merrifield's agents for the purposes of the Vantage Condominiums development.

On November 6, 2008, plaintiffs' motion to consolidate this case with Kim v. Merrifield Town Ctr. Ltd. P'ship, No. 1:08cv566, was granted. See Plant v. Merrifield Town Ctr. Ltd. P'ship, No. 1:08cv374 (E.D.Va. Nov. 6, 2008) (Consolidation Order). The original complaint in Kim identified more than one hundred plaintiffs, nine of whom were also plaintiffs in the Plant action. The Kim complaint also named two defendants in addition to those names in the Plant complaint: McWilliams–Ballard, LLC and Jonnie Jameson. Following consolidation, plaintiffs' motion for class certification was denied on November 12, 2008 for failure to meet any of the four class certification requirements, namely numerosity, commonality, typicality, and adequacy of representation. Plant v. Merrifield Town Ctr. Ltd. P'ship, No. 1:08cv374, 2008 WL 4951352 (E.D.Va. Nov. 12, 2008) (Order) (citing Rule 23, Fed.R.Civ.P.).

On December 16, 2008, the claims against defendants McWilliams–Ballard, LLC and Jonnie Jameson were dismissed with prejudice. Plant v. Merrifield Town Ctr. Ltd. P'ship, No. 1:08cv374 (E.D.Va. Dec. 16, 2008) (Order). On December 19, 2008, plaintiffs were granted leave to file a second amended complaint adding additional plaintiffs. The second amended complaint, filed January 12, 2009, named 126 plaintiffs who, individually or jointly, purchased 93 units in the Vantage Condominiums.

Both the Kim complaint and the Plant amended complaint alleged claims for (i) violation of ILSFDA; (ii) statutory business conspiracy to injure plaintiffs' reputation, trade, business or profession pursuant to Va.Code § 18.2–499 et seq.; and (iii) breach of contract. The claims in both cases for statutory business conspiracy were withdrawn on September 19, 2008, and the breach of contract claims in both cases were withdrawn on December 16, 2008. ¹ Accordingly, the alleged ILSFDA violations are the only remaining claims in the consolidated cases.

Defendants initially claimed they were exempt from the disclosure requirements of ILSFDA. On March 16, 2009, an Order issued rejecting this argument and granting plaintiffs partial summary judgment with respect to the ILSFDA claims

insofar as (i) the 24–month UPA sales contracts are not exempt, pursuant to 15 U.S.C. § 1702(a)(2), from ILSFDA's reporting and disclosure requirements; (ii) the 36–month UPA sales contracts are not exempt, pursuant to 15 U.S.C. § 1702(b)(1), from ILSFDA's reporting and disclosure requirements; and (iii) that it is undisputed that defendants failed to comply with ILSFDA's reporting and disclosure requirements with respect to all sales contracts at issue.

See

Plant v. Merrifield Town Ctr. Ltd. P'ship, No. 1:08cv374, 749 F.Supp.2d 404, 410, 2009 WL 7076183, at *5, 2009 U.S. Dist. LEXIS 68113, at *20 (E.D.Va. Mar. 16, 2009) (Order) (“ Merrifield II ”). As to exemption, the defendants had argued that the 24–month UPA contracts were exempt from ILSFDA under § 1702(a)(2), which exempts land sales “obligating the seller or lessor to erect [the building at issue] within a period of two years.” The 24–month UPAs were subject to “ratification” from the sellers, and the contract obligated sellers to build the condominiums within two years of the ratification date. Thus, defendants argued that the exemption applied because the sellers were obligated to build the condominiums within two years of the sellers' ratification date. Defendants raised this same argument in a related case, Ahn v. Merrifield Town Ctr. Ltd. P'ship, 584 F.Supp.2d 848 (E.D.Va.2008) (“ Merrifield I ”).² For the same reasons elucidated in Merrifield I, defendants' § 1702(a)(2) argument was rejected because the two-year building exemption requires the two-year period to commence when a purchaser signs the sales contract and incurs obligations, not the later date of the sellers' “ratification.” Merrifield II, 749 F.Supp.2d at 409–10, 2009 WL 7076183, at *5, 2009 U.S. Dist. LEXIS 68113, at *20 (citing Merrifield I, 584 F.Supp.2d 848, 849 (E.D.Va.2008)). Defendants also argued that the 36–month UPAs were exempt under the “One Hundred Lot Exemption” of § 1702(b)(1), which exempts from ILSFDA “the sale or lease of lots in a subdivision containing fewer than one hundred lots which are not exempt under” § 1702(a). Had the § 1702(a) exemption covered the 24–month UPAs, then only the 36–month UPAs would have been counted for the purposes of the “One Hundred Lots Exemption,” and the exemption might then have applied. Yet, because the § 1702(a) exemption did not apply to the 24–month UPAs, more than one hundred lots remained, and the “One Hundred Lots Exemption” was inapplicable. Accordingly, none of the Vantage Condominium lots are exempt from ILSFDA. Id.

On March 24, 2009, the matter was referred to the Magistrate Judge to determine what remedies, if any, were appropriate for the plaintiffs to seek under ILSFDA. See Plant v. Merrifield Town Ctr. Ltd. P'ship, No. 1:08cv374, 2009 U.S. Dist. LEXIS 67687, at *6 (E.D.Va. Mar. 24, 2009) (Order). The subsequent Report and Recommendation from the Magistrate Judge (“First R & R”) was adopted in part and modified in part by Order dated July 21, 2009, which permitted plaintiffs to seek rescission of the contracts and return of their deposits “ provided that each plaintiff can establish a basis for such equitable relief with respect to the specific violation at issue.” See Plant v. Merrifield Town Ctr. Ltd. P'ship, No. 1:08cv374, 2009 WL 2225415 at *3, 2009 U.S. Dist. LEXIS 65831 at *12 (E.D.Va. July 21, 2009) (Order) (emphasis in original). Plaintiffs were specifically denied relief under the automatic rescission provisions of §§ 1703(b), (c), or (d), because plaintiffs failed to submit notice of intent to revoke the UPAs within two years of their signing, as required by those subsections. Id.

Discovery was then allowed to proceed but was interrupted briefly when on October 7, 2009, the matter was stayed with respect to defendant Merrifield because plaintiffs filed an involuntary bankruptcy petition against Merrifield. See Plant v. Merrifield Town Ctr. Ltd. P'ship, No. 1:08cv374 (E.D.Va. Oct. 7, 2009) (Order) (citing 11 U.S.C. § 362(a)). The same order stayed the case with respect to all other defendants pursuant to Rule 19(b), Fed.R.Civ.P. On December 2, 2009, the bankruptcy judge found that plaintiffs had only filed the petition “to secure ... a tactical advantage ... because a trial date was looming,” and dismissed the petition as frivolous. In re Merrifield Town Ctr. Ltd. P'ship, No. 09–18119, tr. at 8 (Bankr.E.D.Va. Dec. 1, 2009) (transcript of bench ruling). Accordingly, on December 7, the stay in this case was lifted and discovery proceeded. See Plant v. Merrifield Town Ctr. Ltd. P'ship, No. 1:08cv374 (E.D.Va. Dec. 7, 2009) (Order).

The question of the appropriate remedy for the ILSFDA violations was referred to the Magistrate Judge prior to the stay. The Magistrate Judge addressed this question in a September 29, 2009, 2009 WL 6059552, Report and Recommendation (“Second R & R”). Additionally, when the stay was lifted, defendants moved for sanctions against plaintiffs, which question was also referred to the Magistrate Judge and resulted in a third Report and Recommendation dated December 23, 2009, 2009 WL 6082878 (“Third R & R”). Objections to both the Second R &...