United States District Court, D. Maryland
LATECHIA CHAMBERS, et al.
KING BUICK GMC, LLC, et al
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For Latechia Chambers, On Her Own Behalf and on Behalf of all Others Similarly Situated, Plaintiff: Richard S Gordon, LEAD ATTORNEY, Gordon, Wolf & Carney, Chtd., Towson, MD; Mark Harris Steinbach, O Toole Rothwell, Washington, DC; Stacie F Dubnow, Gordon and Wolf Chtd, Towson, MD; Thomas Macy McCray-Worrall, Office of the Attorney General, Baltimore, MD.
For King Buick GMC, LLC, King Lincoln, Inc., King Auto of Silver Spring, LLC, King Vehicles, LLC, King Hagerstown Motors LLC, King Volkswagen, LLC, Defendants: Paul J Maloney, LEAD ATTORNEY, Andrew M Williamson, Carr Maloney PC, Washington, DC; Steven M Nemeroff, Wortman and Nemeroff, Bethesda, MD.
DEBORAH K. CHASANOW, United States District Judge.
Numerous motions are pending and ready for resolution in this putative class action civil RICO case, including: (1) a motion to dismiss the federal claims or to abstain filed by Defendants King Auto of Silver Spring LLC; King Buick GMC, LLC (" King Buick GMC" ); King Hagerstown Motors LLC; King Lincoln, Inc.; King Vehicles, LLC; and King Volkswagen, LLC (ECF No. 34); (2) a separate motion filed by King Buick GMC, LLC to dismiss the claims in Counts I through VII of the amended complaint (ECF No. 36); (3) a motion to dismiss or, in the alternative, for summary judgment on Counts I through VII, filed by King Auto of Silver Spring, LLC; King Hagerstown Motors LLC; King Lincoln, Inc.; King Vehicles, LLC; and King Volkswagen, LLC (ECF No. 37); (4) a motion to consolidate cases filed by Plaintiff Latechia Chambers (ECF No. 63); (5) a motion for leave to file surreply and supplemental Rule 56(d) Declaration filed by Plaintiff (ECF No. 68); and (6) a motion to strike three notices of supplemental authority filed by Defendants (ECF No. 73). The issues have been fully briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, Defendants' motion to dismiss federal claims or to abstain will be granted in part. King Buick GMC's motion to dismiss will be granted in part, and the other Defendants' motion to dismiss or for summary judgment will be granted. Plaintiff's motion for leave to file surreply and supplemental Rule 56(d) Affidavit and motion to consolidate cases will be denied. Defendants'
motion to strike Plaintiff's notices of supplemental authority will be denied.
This case traces its origin to March 17, 2011 and February 18, 2012, when Comfort Kaakyire and Latechia Chambers purchased, respectively, a used 2008 Saturn Outlook and 2010 Dodge Caliber from King Buick GMC. (ECF No. 22 ¶ 18). Ms. Kaakyire and Ms. Chambers each executed a Buyer's Order with King Buick GMC, which did not indicate that these vehicles were prior short-term rentals. ( See ECF No. 22-2). Ms. Kaakyire instituted a putative class action lawsuit in the Circuit Court for Howard County on January 13, 2013, and later transferred the case to the Circuit Court for Montgomery County. On May 14, 2013, Ms. Kaakyire filed a first amended class action complaint in the Circuit Court for Montgomery County, on behalf of herself and a class of similarly situated consumers, alleging violations of COMAR 11.12.01.14(M)(1) due to King Buick GMC's failure to disclose the prior use of sold vehicles as short-term rental vehicles. This provision governs disclosure of former vehicle use:
(1) Vehicles formerly used for a purpose other than a consumer good shall be clearly and conspicuously identified as to their former use. This includes, but is not limited to, vehicles formerly used:
. . .
(f) As short-term rental vehicles.
On August 2, 2013, Ms. Kaakyire's counsel filed a notice of voluntary dismissal in the state court action, and subsequently filed a class action complaint in this court on August 12, 2013 against the following Defendants: King Buick GMC; and King Lincoln, Inc., King Auto of Silver Spring, LLC, King Vehicles, LLC, King Hagerstown Motors LLC, and King Volkswagen, LLC (" the Other Dealer Defendants" ). (ECF No. 1). The Defendants filed separate motions to dismiss, but before the motions were adjudicated, Plaintiff filed an amended complaint on October 17, 2013, adding Latechia Chambers as a Named Plaintiff. (ECF No. 22). On October 22, 2013, Defendants tendered a Rule 68 Offer of Judgment to Ms. Kaakyire, which she accepted. (ECF No. 24). On December 13, 2013, the undersigned entered judgment against Defendants as to Ms. Kaakyire's claims, and she was dismissed from the lawsuit. (ECF No. 45). Thus, Latechia Chambers remains the only putative Named Plaintiff here.
The amended complaint by Ms. Chambers against all of the Defendants states that Defendants misrepresented the prior short-term rental use of the vehicles sold to Plaintiff and members of the putative class in a pre-printed space on the Buyer's Order specifically designed for the disclosure of this information. Although Defendants argue that Plaintiff was provided with a CarFax Report that revealed that the vehicle was a prior short-term rental, there is a dispute about whether the CarFax Report was provided to Plaintiff before she executed the purchase documents and whether Plaintiff initialed the CarFax Report as Defendants indicate. ( See ECF No. 34-5, at 2). Plaintiff alleges that
Defendants failed to disclose to her and members of the class " clearly and conspicuously" that the vehicles they purchased were previously used as short-term rentals in violation of Maryland law. The amended complaint states:
[a]s the Maryland Motor Vehicle Administration (" MVA" ) recognized when it enacted COMAR regulations requiring disclosure of prior short-term rental use,  buyers seek to avoid vehicles used for short-term rentals because of the perception and expectation that these vehicles are driven hard by drivers who care little about them, may not have been well or consistently maintained, and more often are involved in accidents than vehicles uses for personal, family, and household purposes.
ECF No. 22 ¶ 3). In Plaintiff's view, this omission was intentional and part of a fraudulent scheme by King Buick and the Other Dealer Defendants - to whom she refers collectively as the " King Auto Group" - of selling used short-term rental cars without disclosing their origins in the Buyer's Order or elsewhere clearly and conspicuously. Plaintiff asserts that Defendants consistently failed to make the requisite disclosures before consummating the sale transactions with car purchasers. COMAR 11.12.01.14(A)(2) defines " clear and conspicuous" as:
a statement, representation, or term different from other statements, representations or terms being made so as to be readily noticeable to the person to whom it is being disclosed either by its size, sound, length of time, color, placement in the advertisement, or the like.
Plaintiff maintains that " Defendants deliberately designed their standard sales agreements in a manner calculated to not draw attention to any disclosure of prior rental or other commercial use." (ECF No. 22 ¶ 36).
Plaintiff asserts that the King Auto Group Defendants are all separately incorporated businesses that associate together as " King Auto Group," as an association-in-fact, although there is no formal, legal entity with that name. These dealerships jointly market and sell vehicles and develop form documents such as the Buyer's Orders used at each dealership. Plaintiff asserts:
Defendants have an agreement to work together to market and sell used vehicles and actively are doing so. Defendants' cross-marketing and commingling and/or sharing of inventory and Carfax reports is evidence of their cooperation, joint agreements, and use of common procedures and documents to unlawfully sell such used vehicles without the disclosure required by Maryland law.
ECF No. 22 ¶ 49). Plaintiff believes that all of the Defendants conspired to market and sell used vehicles without disclosing to consumers that the vehicles were previously used as short-term rentals. ( Id. ¶ 45). Plaintiff states that Defendants King Lincoln, Inc. and King Vehicles, Inc. did not sell prior short-term rental vehicles in their own name but routinely sold these vehicles through " their King Auto Group co-conspirators - King Buick, King Volkswagen, LLC, King Hagerstown Motors, LLC or King Auto of Silver Spring, LLC." ( Id. ¶ 44). Plaintiff further contends:
[a]s part of its scheme to mislead customers into believing that vehicles used for prior short-term rentals were never put to such use, King Auto Group dealerships further agreed to employ, and from time to time did employ, a form entitled " Disclosure of Prior Vehicle Use for Dealership or Commercial Purposes[.]"
 This form . . . is provided to buyers only after they have signed the sales agreement and thus become legally bound to purchase a vehicle, does not provide the " clear and conspicuous" disclosure of prior non-consumer use required by law.
Id. ¶ 39). The amended complaint identifies fifteen additional vehicle sale transactions over a two-year period in which Defendants King Volkswagen LLC, King Hagerstown Motors, LLC, and King Auto of Silver Spring, LLC allegedly perpetrated the same fraudulent scheme to induce consumers into purchasing prior short-term rental vehicles. ( Id. ¶ 43). Plaintiff alleges that she paid significantly more for her vehicle than it was worth and was overcharged as a result of the scheme.
The amended complaint asserts the following counts: implied warranty of merchantability (count I); violations of the Magnuson-Moss Warranty Act (" MMWA" ), 15 U.S.C. § § 2301, et seq. (count II) and the Maryland Consumer Protect Act (" MCPA" ) (count III); deceit by non-disclosure or concealment (count IV); unjust enrichment (count V); negligent misrepresentation (Count VI); breach of contract (count VII); and violations of the Federal Racketeer Influence and Corrupt Organizations Act (" RICO" ), 18 U.S.C. § § 1962(a), (c), and (d) (counts VIII, IX, and X). Defendants filed separate motions to dismiss. All of the Defendants filed a motion to dismiss the federal claims (RICO and the MMWA) or, in the alternative, for abstention (ECF No. 34). King Buick GMC filed a separate motion to dismiss addressing the non-RICO claims. (ECF No. 36). The Other Dealer Defendants filed a separate motion to dismiss or for summary judgment on the non-RICO claims. (ECF No. 37). All the motions have been fully briefed. On April 18, 2014, Plaintiff moved for leave to file a surreply and submit a supplemental Rule 56(d) Affidavit. (ECF No. 68). Plaintiff also moved to consolidate this matter with another putative class action against the same Defendants pending before the undersigned. ( See ECF No. 63). Plaintiff filed multiple notices of supplemental authority (ECF Nos. 50, 64, 71, 76). Defendants moved to strike these notices, deeming them as impermissible surreplies. (ECF No. 73).
II. Standards of Review
A. Motion to Dismiss
All of the Defendants move to dismiss Plaintiff's RICO claims. King Buick GMC also filed a separate motion to dismiss the non-RICO claims. A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) tests the sufficiency of the complaint. Presley v. City of Charlottesville, 464 F.3d 480, 483
(4th Cir. 2006). A plaintiff's complaint need only satisfy the standard of Rule 8(a), which requires a " short and plain statement of the claims showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). " Rule 8(a)(2) still requires a 'showing,' rather than a blanket assertion, of entitlement to relief." Bell A. Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). That showing must consist of more than " a formulaic recitation of the elements of a cause of action" or " naked assertion[s] devoid of further factual enhancement." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted).
At this stage, the court must consider all well-pleaded allegations in a complaint as true, Albright v. Oliver, 510 U.S. 266, 268, 114 S.Ct. 807, 127 L.Ed.2d 114 (1994), and must construe all factual allegations in the light most favorable to the plaintiff, see Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir. 1999) ( citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)). In evaluating the complaint, the court need not accept unsupported legal allegations. Revene v. Charles Cnty. Comm'rs, 882 F.2d 870, 873 (4th Cir. 1989). Nor must it agree with legal conclusions couched as factual allegations, Iqbal, 556 U.S. at 678, or conclusory factual allegations devoid of any reference to actual events, United Black Firefighters v. Hirst, 604 F.2d 844 (4th Cir. 1979); see also Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009). " [W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged, but it has not 'show[n] . . . that the pleader is entitled to relief.'" Iqbal, 556 U.S. at 679 (quoting Fed.R.Civ.P. 8(a)(2)). Thus, " [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." Id.
Moreover, allegations of fraud - which Plaintiff raises in both her RICO and state law claims - are subject to a heightened pleading standard under Rule 9(b). Harrison, 176 F.3d at 783. Rule 9(b) states that " in alleging a fraud or mistake, a party must state with particularity the circumstances constituting the fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Such allegations typically " include the 'time, place and contents of the false representation, as well as the identity of the person making the misrepresentation and what [was] obtained thereby.'" Superior Bank, F.S.B. v. Tandem Nat'l Mortg., Inc.., 197 F.Supp.2d 298, 313-14 (D.Md. 2000) ( quoting Windsor Assocs., Inc. v. Greenfeld, 564 F.Supp. 273, 280 (D.Md. 1983)). In cases involving concealment or omissions of material facts, however, meeting Rule 9(b)'s particularity requirement will likely take a different form. See Shaw v. Brown & Williamson Tobacco Corp., 973 F.Supp. 539, 552 (D.Md. 1997) (recognizing that an omission likely " cannot be described in terms of the time, place, and contents of the misrepresentation or the identity of the person making the misrepresentation" (internal quotations omitted)). The purposes of Rule 9(b) are to provide the defendant with sufficient notice of the basis for the plaintiff's claim, to protect the defendant against frivolous suits, to eliminate fraud actions where all of the facts are learned only after discovery, and to safeguard the defendant's reputation. See Harrison, 176 F.3d at 784. In keeping with these objectives, " [a] court should hesitate to dismiss a complaint under Rule 9(b) if the court is satisfied (1) that the defendant[s were] made aware of the particular circumstances for which
[they] will have to prepare a defense at trial and (2) that [the] plaintiff has substantial prediscovery evidence of those facts." Id.
B. Summary Judgment Standard
The Other Dealer Defendants move to dismiss or, in the alternative, for summary judgment on the non-RICO counts. Summary judgment may be entered only if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008). Summary judgment is inappropriate if any material factual issue " may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); JKC Holding Co. LLC v. Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001).
" A party opposing a properly supported motion for summary judgment 'may not rest upon the mere allegations or denials of [his] pleadings,' but rather must 'set forth specific facts showing that there is a genuine issue for trial.'" Bouchat v. Balt. Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003) ( quoting former Fed.R.Civ.P. 56(e)). " A mere scintilla of proof . . . will not suffice to prevent summary judgment." Peters v. Jenney, 327 F.3d 307, 314 (4th Cir. 2003). " If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Liberty Lobby, 477 U.S. at 249-50 (citations omitted). At the same time, the facts that are presented must be construed in the light most favorable to the party opposing the motion. Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007); Emmett, 532 F.3d at 297.
A. RICO Claims
Plaintiff asserts three claims for racketeering pursuant to RICO's civil provision, 18 U.S.C. § 1964, which provides a cause of action to " [a]ny person injured in his business or property by reason of a violation of [18 U.S.C. § 1962]."  Plaintiff alleges that all Defendants violated Section 1962(a), (c), and (d).
In order for a civil RICO claim to survive a Rule 12(b)(6) motion to dismiss, plaintiff must allege " (1) conduct; (2) of an enterprise; (3) through a pattern; (4) of racketeering." Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985). Plaintiff must additionally plead proximate cause, that is she was injured in her business or property " by reason of" the RICO violation. Hemi Group, LLC v. City of New York, N.Y., 559 U.S. 1, 6, 130 S.Ct. 983, 175 L.Ed.2d 943 (2010). Defendants argue that Plaintiff has failed to allege: (1) a RICO enterprise separate and distinct from the persons as required by Section 1962(c); (2) a RICO enterprise separate and apart from the pattern of racketeering activity; (3) predicate acts of racketeering; (4) a pattern of racketeering activity; (5) effect on interstate commerce; (6) as to the Section 1962(a) claim, investment of proceeds from racketeering activity; and (7) as to the Section 1962(d) claim, lack of a conspiracy because there was no underlying RICO violation.
1. RICO Enterprise
Defendants argue that Plaintiff has not properly alleged the existence of a RICO enterprise. Under 18 U.S.C. § 1962(c), it is unlawful:
for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.
" [T]o establish liability under § 1962(c) one must allege and prove the existence of two distinct entities: (1) a 'person'; and (2) an 'enterprise' that is not simply the same 'person' referred to by a different name." Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161, 121 S.Ct. 2087, 150 L.Ed.2d 198 (2001). There must be a " person," alleged to have violated Section 1962(c) and to be liable to the claimant for damages, who is separate and distinct from the " enterprise," or tool, through which the RICO violation occurred. See Busby, 896 F.2d at 840-41. A " person" can be an individual or corporate entity. 18 U.S.C. § 1961(3). There may be multiple persons whose association with the same RICO enterprise gives rise to multiple ...