United States District Court, D. Maryland
MEMORANDUM AND ORDER
K. Bredar United States District Judge
plaintiffs in these related cases filed separate complaints
against Defendant Beazer Homes Corporation in the Circuit
Court for Baltimore County, Maryland. (Compls., 17-645 ECF
No. 2; 17-646 ECF No. 2.) Plaintiff Greenspring Quarry
Association, Inc. (''GSQA'') is a master
property owner‘s association of a mixed residential and
commercial development, and Plaintiff The Highlands at
Greenspring Quarry Association, Inc.
(''Highlands'') is a subordinate
''village association'' of condominium
owners. (Id.) Plaintiffs brought their respective
actions against Defendant, the developer of the relevant
properties, each alleging breach of contract (Count I),
negligent misrepresentation (Count II), and fraudulent
misrepresentation (Count III). (Id.) Defendant, in
turn, removed both actions under federal diversity
jurisdiction (Notices of Removal, 17-645 ECF No. 1; 17-646
ECF No. 1), and now moves to dismiss both cases pursuant to
Federal Rule of Civil Procedure 12(b)(6) (17-645 ECF No. 16;
17-646 ECF No. 16). Both motions are fully briefed (17-645
ECF Nos. 18, 19; 17-646 ECF Nos. 17, 18), and no hearing is
necessary, see Local Rule 105.6 (D. Md. 2016). For
the following reasons, both of Defendant‘s motions
shall be denied.
STANDARD FOR DISMISSAL FOR FAILURE TO STATE A
order to survive a Rule 12(b)(6) motion to dismiss for
failure to state a claim on which relief may be granted, a
complaint must contain ''sufficient factual matter,
accepted as true, to ‗state a claim to relief that is
plausible on its face.‘'' Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Facial plausibility exists ''when the plaintiff
pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.'' Iqbal, 556 U.S. at
678. An inference of a mere possibility of misconduct is not
sufficient to support a plausible claim. Id. at 679.
As the Twombly opinion stated, ''Factual
allegations must be enough to raise a right to relief above
the speculative level.'' 550 U.S. at 555. ''A
pleading that offers ‗labels and conclusions‘ or
‗a formulaic recitation of the elements of a cause of
action will not do.‘ . . . Nor does a complaint suffice
if it tenders ‗naked assertion[s]‘ devoid of
‗further factual enhancement.‘''
Iqbal, 556 U.S. at 678 (quoting Twombly,
550 U.S. at 555, 557). Although when considering a motion to
dismiss a court must accept as true all factual allegations
in the complaint, this principle does not apply to legal
conclusions couched as factual allegations. Twombly,
550 U.S. at 555.
outset, the Court notes that the Complaints and attached
documents in the above-captioned cases are virtually
identical to one another (including the paragraph
enumeration). For convenience and efficiency, where the
pertinent information may be found at the equivalently
numbered location in either document, the Court will refer
cumulatively to ''the Complaints.'' Defendant
acquired certain lands in Baltimore County, Maryland, in 2005
and thereafter began development of Quarry Lake at
Greenspring (the ''Development''). (Compls.
¶¶ 2, 8.) Defendant filed articles of incorporation
for GSQA and for Highlands (collectively, ''the
Associations'') on July 21, 2006, and September 13,
2006, respectively. (Id. ¶ 2.) Defendant then
allegedly caused its employees to occupy the initial
positions on both Associations‘ boards of directors.
(Id. ¶ 18.)
August 1, 2006, Defendant filed a Declaration of Covenants,
Conditions, and Restrictions (''Covenant'')
governing common property to be associated with GSQA; on May
11, 2007, it filed a similar document with respect to
property associated with Highlands. (Covenants, 17-645 ECF
No. 2; 17-646 ECF No. 2.) Both Covenants had the stated purpose
of ''protecting the value and desirability''
of the Development‘s common areas. (Id.
preamble.) Under the Covenants, GSQA and Highlands would
retain a management company to arrange for the maintenance of
certain common areas within the Development. (Id.
§ 10.) Defendant agreed that it would pay the costs
associated with such maintenance until it transferred title
to the property over to the relevant Association, at which
point the Association would assume responsibility for
maintenance costs. (Id. § 13.) According to the
Complaints, GSQA‘s and Highlands‘ respective
boards of directors, while still under the control of
Defendant‘s agents, instructed their management
companies to begin billing the Associations (and their
constituents) in 2008. (Compls. ¶ 24.) However,
Defendant did not actually transfer title to the respective
common areas until December 15, 2015. (Id. ¶
the parallelism in the Complaints, the Court notes that the
motions and briefing in the above-captioned cases mirror each
other almost perfectly, employing identical arguments. Thus,
the Court will refer to the Parties‘ arguments
simultaneously across the two cases.
Associations bring actions under the theories of breach of
contract (Count I), negligent misrepresentation (Count II),
and fraudulent misrepresentation (Count III). (Compls.
¶¶ 28-44.) Defendant moves to dismiss
Plaintiffs‘ tort claims only, that is, Counts II and
III of the Complaints. (Def.‘s Mots. to Dismiss, 17-645
ECF No. 16; 17-646 ECF No. 16.) Defendant argues alternately
that (A) Plaintiffs‘ allegations sound only in contract
and not in tort, (B) the economic loss doctrine bars
Plaintiffs‘ tort claims, (C) Plaintiffs‘ alleged
reliance on Defendants‘ statements was unreasonable,
and (D) the Complaints fail to meet the particularity
requirement for allegations of fraud as imposed by Rule 9(b)
of the Federal Rules of Civil Procedure. (Id. at
3-4.) As discussed below, each of Defendant‘s arguments
fails to persuade.
considering Defendant‘s arguments in favor of
dismissal, it will be helpful to review a basic concept of
Maryland law with respect to principals and their agents.
According to the doctrine of respondeat superior, a party may
be held liable for the tortious acts committed by its
employees within the scope of their employment. Rusnack
v. Giant Food, Inc., 337 A.2d 445, 451 (Md. Ct. Spec.
App. 1975). For an act to be considered within the scope of
employment, it ''must have been in furtherance of the
employer‘s business and authorized by the
employer.'' S. Mgmt. Corp. v. Taha, 836 A.2d
627, 638 (Md. 2003).
Complaints allege that Defendant instructed certain of its
employees to join the Associations‘ boards of
directors. (Compls. ¶ 18.) Because those employees
allegedly joined the boards with Defendant‘s express
authorization and in furtherance of Defendant‘s goal of
establishing and promoting the Development, actions those
employees subsequently took as members of said boards were
within the scope of their employment. To the extent that any
such acts were tortious, the facts as alleged in the
Complaint support the conclusion that Defendant has vicarious
liability for those acts through the doctrine of respondeat
Contractual and Non-Contractual Duties
argues that the only duties the Complaints allege to flow
from Defendant to the Associations are grounded in the
contracts between them (i.e., the Covenants) and are
therefore insufficient to constitute the required duties for
tort actions. (Def.‘s Mots. to Dismiss 6-8.) Indeed,
the negligent breach of one‘s contractual duty does
not, without more, expose one to liability in tort.
Jacques v. First Nat'l Bank of Md., 515 A.2d
756, 757 (Md. 1986). However, when an independent duty
accompanies a contractual obligation, that independent duty
may support a tort claim. Lawyers Title Ins. Corp. v. Rex
Title Corp., 282 F.3d 292, 294 (4th Cir. 2002). Board
members of a Maryland nonstock corporation owe that
corporation the same fiduciary obligations as would board
members in any other Maryland corporation. Shah v.
HealthPlus, Inc., 696 A.2d 473, 480 (Md. Ct. ...