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Greenspring Quarry Association, Inc. v. Beazer Homes Corp.

United States District Court, D. Maryland

June 26, 2017

GREENSPRING QUARRY ASSOCIATION, INC., Plaintiff
v.
BEAZER HOMES CORP., Defendant THE HIGHLANDS AT GREENSPRING, QUARRY ASSOCIATION, INC., Plaintiff
v.
BEAZER HOMES CORP., Defendant

          MEMORANDUM AND ORDER

          James K. Bredar United States District Judge

         The 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.

         I. STANDARD FOR DISMISSAL FOR FAILURE TO STATE A CLAIM

         In 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.

         II. BACKGROUND[1]

         At the 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.)

         On 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.)[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. ¶ 26.)

         III. ANALYSIS

         As with 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.

         The 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.

         Before 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).

         The 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 superior.

         A. Contractual and Non-Contractual Duties

         Defendant 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. ...


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