United States District Court for the District of Columbia
April 23, 2004.
CAROL A. ANDERSON, Plaintiff,
USAA CASUALTY INSURANCE COMPANY et al., Defendants
The opinion of the court was delivered by: RICARDO URBINA, District Judge
GRANTING DEFENDANT TEG's MOTION TO DISMISS AND
GRANTING THE PLAINTIFF LEAVE TO AMEND THE COMPLAINT
This toxic-tort case comes before the court on defendant The
Environmental Group's ("TEG") motion to dismiss the plaintiff's claim of
negligent misrepresentation pursuant to Federal Rules of Civil Procedure
9(b) and 12(b)(6). Defendant TEG believes that the plaintiffs complaint
is missing something important. The court agrees. Because the plaintiff
fails to plead her claim of negligent misrepresentation with Rule 9(b)'s
requisite particularity, the court grants defendant TEG's motion to
dismiss that claim. The court, however, will not allow the sun to set on
the plaintiff's claim without offering her a chance to cure her pleading
deficiencies. Toward that end, the court grants the plaintiff leave to
amend her complaint. II. BACKGROUND*fn1
A. Factual Background
In May 1999, the plaintiff entered into purchase agreements with the
Millennium defendants for two newly-constructed units in the Ritz-Carlton
Residences, which later were combined into one unit ("the unit"). Am.
Compl. ("Compl.") ¶¶ 17-18. The plaintiff began to occupy the unit in
January 2001, after which time she began experiencing "a variety of
flu-related symptoms, such as nasal congestion, burning eyes and
fatigue." Id. ¶¶ 24-25. The plaintiff maintains that she had
no known history of such health problems before she resided in the unit,
and that her symptoms would subside whenever she left the premises.
Id. ¶ 25.
In February 2002, black-colored mold became visible along the walls of
the unit. Id. ¶ 34. From February through May 2002,
defendant NuChemCo, Inc. ("NuChemCo") performed air-quality tests that
revealed additional mold throughout the unit. Id. ¶ 39. The
Millennium defendants contracted defendant TEG, a purveyor of
environmental investigation and remediation*fn2 services, to perform the
remediation of mold-contaminated areas throughout the building.
Id. ¶¶ 11, 76. On June 25, 2002, defendant NuChemCo issued a report to the
plaintiff stating that remediation of the unit was complete. Id.
¶ 42. In addition, a representative of defendant Millennium Partners
indicated that it was safe for the plaintiff to reinhabit the premises.
Id. Despite the green light from defendants Millennium Partners
and NuChemCo, the plaintiff allegedly continued to suffer health problems
upon her reoccupation of the unit. Id. ¶ 43. In fact, her
health apparently further deteriorated as she experienced "severe
headaches, blurred vision, difficulty breathing, coughing, congestion,
nausea, vomiting, diarrhea, swelling and cognitive deficiencies."
Id. ¶ 44. The plaintiff attributes her maladies to various
toxic molds growing within the walls of the building as a result of
"serious and reoccurring leaks and flooding" that took place during
construction. Id. ¶¶ 74-75. The plaintiff's doctor ordered
her to move out of the unit, and she has not returned since her
departure. Id. ¶ 47.
In August 2002, the plaintiff received another report from defendant
NuChemCo, this time indicating the presence of toxigenic fungi in the
unit. Id. ¶ 50. Remediation of the plaintiff's unit
continued thereafter. Id. ¶ 72.
B. Procedural History
On November 14, 2002, the plaintiff filed her original complaint,
premising the case on diversity jurisdiction. On June 6, 2003, she filed
a motion to amend her complaint. On September 29, 2003, the court granted
the plaintiff leave to file her amended complaint. Anderson v. USAA
Cas. Ins. Co., 218 F.R.D. 307 (D.D.C. 2003). While the amended
complaint alleges a host of contract, tort, and statutory claims against
the defendants, it names only two claims against defendant TEG:
negligence and negligent misrepresentation. Compl. ¶¶ 158-71. With
respect to her negligent-misrepresentation claim, the plaintiff contends
that the defendants, including defendant TEG, falsely represented to her that the
condominium building posed no health hazards. Id. ¶ 169. She
also believes that they failed to disclose the building's severe
construction defects and widespread water damage that only later became
evident upon discovery of toxic mold in several areas of the building.
Id. Consequently, the plaintiffs alleged reliance on such
misrepresentations and omissions exposed her to mold contamination, which
in turn caused her to suffer "serious and ongoing personal injury and
property damage." Id. ¶ 171.
On October 9, 2003, defendant TEG filed a motion to dismiss the
plaintiff's claim of negligent misrepresentation pursuant to Rules 9(b)
and 12(b)(6). The court now addresses that motion.
As a preliminary matter, the court must determine whether it will
proceed to resolve the instant motion under Rule 9(b) or Rule 12(b)(6).
Although the D.C. Circuit has recognized that a court may base dismissal
on either rule, Kowal v. MCI Communications Corp., 16 F.3d 1271,
1279 (D.C. Cir. 1994), defendant TEG offers no argument in support of
dismissal under Rule 12(b)(6). Indeed, defendant TEG simply refers to the
rule in passing while pinning the crux of its challenge on Rule 9(b)'s
heightened-pleading standard. See generally Def. TEG's Mot. to
Dismiss ("Bef.'s Mot."). In addition, the plaintiff's responsive brief
similarly focuses on Rule 9(b). See generally Pl.'s Opp'n.
Accordingly, the court gives effect to the substance of the parties'
arguments by analyzing the complaint through a Rule 9(b) lens.*fn3 A. Legal Standard for a Rule 9(b) Motion to
Rule 9(b) requires that a pleader state with particularity the
circumstances constituting fraud or mistake. FED. R. CIV. P. 9(b).
Rule 9(b)'s particularity requirement ensures that the opponent has notice of
the claim, prevents attacks on his reputation where the claim for fraud
is unsubstantiated, and protects him against a strike suit brought solely
for its settlement value. Shields v. Wash. Bancorp., 1992 WL
88004, at *4 (D.D.C. Apr. 7, 1992) (Lamberth, J.); see also
Kowal, 16 F.3d at 1279 n.3 (observing that Rule 9(b) aims to prevent
a claim filed as a "pretext for the discovery of unknown wrongs"
(citation omitted)); Vicom, Inc. v. Harbridge Merch. Servs.,
20 F.3d 771, 777-78 (7th Cir. 1994) (recognizing that Rule 9(b) is largely
designed to give each opponent notice of his purported role in the
alleged fraud); DiVittorio v. Equidyne Extractive Indus., Inc.,
822 F.2d 1242, 1247 (2d Cir. 1987) (same).
Because the rule is chiefly concerned with the elements of fraud, the
circumstances that the claimant must plead with particularity include
matters such as the time, place, and content of the false
misrepresentations, the misrepresented fact, and what the opponent
retained or the claimant lost as a consequence of the alleged fraud.
United States ex rel. Totten v. Bombardier Corp., 286 F.3d 542,
551-52 (D.C. Cir. 2002); United States ex rel. Joseph v. Cannon,
642 F.2d 1373, 1385 (D.C. Cir. 1981). In other words, Rule 9(b) requires
that the pleader provide the "who, what, when, where, and how" with
respect to the circumstances of the fraud. DiLeo v. Ernst &
Young, 901 F.2d 624, 627 (7th Cir. 1990), cert. den `d,
498 U.S. 941 (1990) (requiring the pleader to provide the equivalent of a
"first paragraph of any newspaper story"). Following the same line of
reasoning, a pleading subject to Rule 9(b) scrutiny may not rest on
information and belief, but must include an allegation that the necessary
information lies within the opponent's control, accompanied by a statement of the facts on
which the pleader bases his claim. Kowal, 16 F.3d at 1279 n.3.
That said, Rule 9(b)'s particularity requirement does not abrogate
Rule 8's general requirements that a pleading contain a short and plain
statement of the claim, and that each averment be simple, concise, and
direct. Id. at 1278 (citing Cannon, 642 F.2d at 1385);
FED. R. CIV. P. 8. Rule 9(b) simply requires the pleader to provide a
higher degree of notice by adequately alleging all of the requisite
elements for the cause of action invoked. Alicke v. MCI
Communications Corp., 111 F.3d 909, 912 (D.C. Cir. 1997);
Schaller Tel. Co. v. Golden Sky Sys., Inc., 298 F.3d 736, 746
(8th Cir. 2002). Additionally, while the court must take as true all
allegations of material fact and construe them in the light most
favorable to the pleader in resolving a Rule 9(b) challenge, the pleader
nevertheless must satisfy his burden by stating with particularity the
supporting factual allegations for his claim. Kowal, 16 F.3d at
1278 (citing Wool v. Tandem, 818 F.2d 1433, 1439 (9th Cir.
1987)); Shields, 1992 WL 88004, at *7; see also One-O-One
Enters., Inc. v. Caruso, 668 F. Supp. 693, 697-99 (D.D.C. 1987)
(Richey, J.), aff'd, 848 F.2d 1283 (D.C. Cir. 1988) (explaining
that the pleader must allege with particularity the alleged fraud to
survive a Rule 9(b) motion).
Where a pleading does not satisfy the heightened requirements of
Rule 9(b), the court should freely grant leave to amend. See Firestone v.
Firestone, 76 F.3d 1205, 1209 (D.C. Cir. 1996) (recognizing that
courts almost always grant leave to amend to cure deficiencies in
pleading fraud). Accordingly, the court should reserve dismissal with
prejudice for "extreme situations where the pleader has had the
opportunity to cure any deficiencies but either has not or cannot do so."
Shields, 1992 WL 88004, at *5. B. The Court Grants Defendant TEG's Rule 9(b) Motion
The claim at issue appears in Count XII of the plaintiff's amended
complaint (hereinafter, "complaint"), which alleges that the defendants,
as a whole, negligently misrepresented or withheld material facts
regarding the condition of the plaintiff's unit. Compl. ¶¶ 168-71. In
this diversity action, the court applies the law of the District of
Columbia in defining the elements of a negligent-misrepresentation claim.
See Rogers v. Ingersoll-Rand Co., 144 F.3d 841, 843 (D.C. Cir.
1998) (noting that the Erie doctrine requires federal courts for
the District of Columbia to follow the decisions of the District of
Columbia Court of Appeals, the highest court of the District of Columbia,
when addressing non-procedural issues in diversity-jurisdiction cases).
Although this court has previously identified case law that suggests
additional elements comprising negligent misrepresentation, e.g., In
re U.S. Office Prods. Co. Secs. Litig., 251 F. Supp.2d 58 (D.D.C.
2003), current precedent lists only three elements.*fn4 To wit, under
District of Columbia law, the plaintiff must prove: (1) a false statement
or omission of fact which the defendant had a duty to disclose, (2)
involving a material issue, (3) on which the plaintiff reasonably relied to her detriment.*fn5 Appleton v. United
States, 2001 WL 45473, at *3 (D.D.C. June 5, 2001) (Kay, M.J.)
(citing Redmond v. State Farm Ins. Co., 728 A.2d 1202, 1207
(D.C. 1999)); Hall v. Ford Enters. Ltd., 445 A.2d 610, 612 (D.C.
Because a failure to satisfy the pleading requirements of Rule 9(b)
would be fatal to the plaintiff's claim of negligent misrepresentation,
the court first turns its attention to the complaint's supporting
allegations and their level of particularity, drawing all reasonable
inference in favor of the plaintiff. Alicke, 111 F.3d at 910-12;
Kowal, 16 F.3d at 1278; Cannon, 642 F.2d at 1385;
Shields, 1992 WL 88004, at *7, 9; One-O-One Enters.,
Inc., 668 F. Supp. at 697-99; Nelson v. Nationwide Mortgage
Corp., 659 F. Supp. 611, 618 (D.D.C. 1987) (Harris, J.). In pressing
her claim, the plaintiff alleges that the defendants
have repeatedly failed to properly warn plaintiff
of the severe health risks associated with mold
contamination in plaintiff's condominium and in
the surrounding condominiums, despite having
superior knowledge of numerous water intrusion
problems and mold contamination, and despite
having knowledge that several occupants were
experiencing serious health problems in the
condominium. [Additionally, the defendants] have misrepresented
or withheld material and significant facts from
the plaintiff . . . by withholding facts that the
building had severe construction defects and
failures, that there was much more severe water
damage and contamination than was evident to the
untrained eye and that toxic mold had been
uncovered in many parts of the condominium
Compl. ¶¶ 82, 169. The plaintiff refers to defendant TEG only a
handful of times, stating that the Millennium defendants hired defendant
TEG to perform remediation services on mold-contaminated areas in the
building, including the plaintiff's unit. Id. ¶ 76. The
plaintiff also claims that defendant TEG opened the walls, floors, and
ceilings of surrounding units during the course of the remediation work.
Id. ¶ 81.
Defendant TEG argues that these allegations fail to provide the level
of particularity that is sufficient to support a claim that defendant TEG
either made misrepresentations or failed in its duty to make
representations to the plaintiff. Def.'s Mot. at 6. Put another way,
defendant TEG submits that the complaint does not specify the alleged
material misrepresentations or omissions. Id. In response, the
plaintiff concedes that her complaint fails to aver the circumstances and
precise date or time of the alleged false statements or omissions, but
nevertheless asserts that she has "put the defendant on notice of the
claim." PL's Opp'n at 7.
In applying Rule 9(b)'s heightened-pleading requirements, the court has
little trouble concluding that defendant TEG presents the more convincing
argument. Indeed, the plaintiff's negligent-misrepresentation claim, as
presented, suffers from several flaws. Although the plaintiff has
notified defendant TEG of her allegation that it made a material
misrepresentation or omission on which the plaintiff detrimentally
relied, this general accusation does not salvage her claim because it leaves defendant TEG clueless as to the time,
place, and content of its alleged misrepresentations or omissions.
Totten, 286 F.3d at 551-52. Indeed, the plaintiff falls short of
pleading any specific allegations as to defendant TEG's conduct that
would support the gravamen of her claim, advancing nothing more than what
appears to be a blanket belief that the defendants as a group
"misrepresented or withheld material and significant facts." Compl. ¶
169. As noted, the complaint's sole references to defendant TEG are that
it performed remediation services in the mold-contaminated areas of the
building and opened the walls, floors, and ceilings of the unit and
surrounding areas in the building. Id. ¶¶ 76, 81. Moreover,
nowhere does the plaintiff put defendant TEG on notice as to any duty
owed to the plaintiff, a required element for a
negligent-misrepresentation claim. See Alicke, 111 F.3d at 912
(affirming dismissal of a complaint for failure to adequately allege all
of the necessary elements for a negligent-misrepresentation claim).
Accordingly, the court grants defendant TEG's motion to dismiss because
the brush strokes with which the plaintiff paints her claim fail to
illustrate for defendant TEG the precise misconduct with which it is
charged. FED. R. CIV. P. 9(b); Totten, 286 F.3d at 552;
Alicke, 111 F.3d at 910-12; Cannon, 642 F.2d at 1385.
C. The Court Grants the Plaintiff Leave to Amend
The court's task is not at an end. Having concluded that the plaintiff
has failed to allege negligent misrepresentation with sufficient
particularity, the court must now consider whether it should give the
plaintiff an opportunity to cure her pleading deficiencies.
Firestone, 76 F.3d at 1209. Ordinarily, when a court grants
dismissal under Rule 9(b), it provides the claimant leave to amend the
pleading to achieve the particularity required by Rule 9(b) and in
accordance with Rule 15(a). Id.; Shields, 1992 WL 88004, at *5;
Shekoyan v. Sibley Int'l Corp., 217 F. Supp.2d 59, 74 (D.D.C. 2002) (Walton, J.); cf. In re Burlington Coat
Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997) (honoring
the general principle that courts ordinarily deny leave to amend when
amendment is futile and the pleader could never plead his claim with
Rule 9(b)'s requisite particularity). Because defendant TEG is silent on this
question, the court sees no reason why it should prevent the plaintiff
from amending her negligent-misrepresentation claim to bring it within
compliance of Rule 9(b)'s strictures. Id.
For the foregoing reasons, the court grants the defendant's motion to
dismiss and grants the plaintiff leave to amend her
negligent-misrepresentation claim within 30 days of today's ruling. An
order directing the parties in a manner consistent with this Memorandum
Opinion is separately and contemporaneously issued this 23rd
day of April 2004.