Nick Hurston//October 2, 2023
Nick Hurston//October 2, 2023//
Allegations of poor housing conditions made by military families against businesses responsible for privatized housing at the Fort Belvoir Army base in Fairfax were sufficient under the Virginia Consumer Protection Act, or VCPA, the Eastern District of Virginia has held.
The defendants, the landlord and the former and current property managers, argued that the plaintiffs’ claims weren’t sufficiently particular to pass muster.
U.S. District Judge Rossie D. Alston Jr. disagreed, saying that Rule 9(b)’s particularity requirement was satisfied here.
“Plaintiffs’ lack of allegations indicating scienter is not fatal to their VCPA claim,” Alston wrote. “Any other determination would render the VCPA, which was intended ‘to relax the restrictions imposed upon [consumers] by the common law[,]’ merely redundant of actual fraud under Virginia law.”
A complaint was filed on behalf of servicemembers and their spouses against Fort Belvoir Residential Communities, or FBRC, the landlord for privatized military housing at Fort Belvoir, as well as FBRC’s current and former property manager.
Requesting putative class status, the plaintiffs asserted six causes of action for having endured reprehensibly poor housing conditions while serving their country.
Per the complaint, FBRC placed the plaintiffs in homes with conditions that rendered them unlivable, including water intrusion, mold growth and pest infestations. As a result, the plaintiffs were relocated to temporary housing while the defendants purportedly addressed the issues.
But a pattern emerged in which the defendants’ maintenance workers used the cheapest and quickest fixes without performing any root cause assessments. Having been told their homes were safe, the plaintiffs would return to find otherwise.
The complaint referenced Congress’ privatization of military housing with the 1996 enactment of the Military Housing Privatization Initiative, or MHPI. In 2020, government investigators found problems with every privatized housing location they visited.
In 2021, Clark Realty Capital — FBRC’s property manager at the time — declined to participate in a hearing of the House Armed Services Committee. The committee’s chairwoman, Rep. Jackie Speier, noted “firsthand horror stories” about the homes ranging from mold to incorrect lead abatement, and called out the “irresponsible conduct” of Clark Realty.
“I want to convey to them that you can run, but you can’t hide,” she asserted.
The defendants moved to dismiss the plaintiffs’ VCPA claim. The pleadings neither allege misrepresentations with requisite particularity under Rule 9(b) nor that the alleged misrepresentations were knowingly made, they argued.
Where some plaintiffs may be time-barred, the defendants also moved dismiss the class action suit for lack of commonality. Finally, the defendants asserted that the “immaterial, impertinent, and scandalous allegations” involving Clark Realty should be stricken as prejudicial.
A plausible claim under the VCPA requires allegations of fraud by a supplier in a consumer transaction, Alston explained.
Because the defendants admitted they were suppliers and that the purported misrepresentations occurred in the course of consumer transactions, the judge focused on whether the pleadings satisfied Rule 9(b)’s particularity requirement regarding the VCPA’s fraud element.
“‘[A] court 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,’” Alston said, citing 1999’s Harrison v. Westinghouse Savannah River Co.
Here, the defendants argued that the allegations didn’t pass Rule 9(b) muster because the plaintiffs didn’t specifically identify anyone who allegedly made the misrepresentations. The plaintiffs, however, countered that their allegations in their third amended complaint, or TAC, were sufficient even without specific names.
Alston agreed with the plaintiffs.
“Importantly, the alleged misrepresentations relate to facts (rather than opinions), such as the extent of moisture, mold or pest infestation problems, and whether those problems had been properly remediated,” he wrote. “Furthermore, throughout the TAC, Plaintiffs allege specific timeframes during which Defendants’ maintenance workers made misrepresentations to them.”
Thus, Alston concluded that the alleged misrepresentations were adequately detailed.
“And in any event, there is substantial pre-discovery evidence (in the form of photos of the poor housing conditions included in the TAC) that the incidents alleged did in fact occur,” the judge wrote. “Accordingly, dismissal of plaintiffs’ VCPA claim would not serve the purposes of Rule 9(b).”
And while the plaintiffs didn’t name specific maintenance workers who made the misrepresentations to them, Alston said this doesn’t undermine such a finding.
“After all, ‘it is [the defendant entities] and not Plaintiffs who are in the best — indeed, the only — position to identify the maintenance workers who made the statements,” he noted.
Alston pointed out that the defendants misconstrued the relevant law by arguing that the VCPA claim failed because the plaintiffs didn’t allege facts indicating that the maintenance workers knew the statements they made were false.
“While a claim for actual fraud in Virginia requires a showing of a false representation made knowingly …, a VCPA claim contains no such requirement,” he explained.
Alston said 1994’s Finney v. Clark Realty Cap. decision, an analogous case from the Supreme Court of Virginia, was “illustrative of the differing standards.” Lacking allegations that the defendants knew their misrepresentations were false, Finney’s actual fraud claims failed.
“Yet, the Finney Court concluded that the plaintiffs’ VCPA claim could proceed beyond the motion to dismiss stage based on the alleged negligent misrepresentation of facts,” Alston wrote. “Here too, Plaintiffs’ lack of allegations indicating scienter is not fatal to their VCPA claim.”
Thus, the judge found that the plaintiffs sufficiently pleaded a VCPA claim.
Because 15 of the 32 plaintiffs may be time-barred from bringing a VCPA claim, the defendants argued that their claim lacked the requisite common question of law and claims and defenses typical to the class and should be dismissed.
Alston wasn’t convinced.
“While the issue defendants raise is well-taken, case law from within the Fourth Circuit makes clear that ‘analysis of a prospective class’s compliance with Rule 23 is not appropriately considered on a motion to dismiss, but should instead be addressed [o]n a motion brought pursuant to Rule 23(c)(1)(A),’” he wrote.
The judge declined to dismiss the VCPA claim, but allowed the defendants to renew their statute of limitations argument in opposition to the plaintiffs’ pending motion to certify class.
Finally, Alston was unpersuaded by the plaintiffs’ argument that allegations about Clark Realty were relevant to FBRC’s knowledge of the fraud being perpetrated at Fort Belvoir.
“Plaintiffs essentially conflate the conduct of Clark Realty, a non-party, with that of its successor property managers, MMS and MMS Army,” the judge said. “That is precisely the type of prejudicial and immaterial allegation that Rule 12(f) is intended to strike.”