Cordoba Initiative Corp. v. Deak

900 F.Supp.2d 42

CORDOBA INITIATIVE CORPORATION, Plaintiff,

v.Robert Leslie DEAK, et al., Defendants.

Civil Action No. 11–1541 (RWR).

United States District Court, District of Columbia.

Oct. 26, 2012.

Paul L. Knight, Tamir Damari, Nossaman LLP, Washington, DC, for Plaintiff.

Hal J. Perloff, Husch Blackwell, LLP, Washington, DC, Jonathan B. Nelson, Dorf Law Firm LLP, Mamaroneck, MD, for Defendants.

MEMORANDUM OPINION AND ORDER

RICHARD W. ROBERTS, District Judge.

Plaintiff Cordoba Initiative Corporation (“Cordoba”) filed this lawsuit against Robert Leslie Deak and his wife, Moshira Soliman, alleging that Cordoba was the victim of fraud when Deak misrepresented the value of a condominium unit in the District of Columbia, sold it to Cordoba, and did not transfer the title. Deak and Soliman have moved to dismiss the complaint for failure to state a claim, or in the alternative for summary judgment. Because Cordoba pled with sufficient particularity its claims of fraud, breach of fiduciary duty, negligent misrepresentation and constructive fraud, and unjust enrichment, but failed to allege a cognizable claim in the count alleging “misrepresentation,” Cordoba's motion to dismiss will be granted in part and denied in part.

BACKGROUND

Cordoba is a non-profit organization based in Malaysia and dedicated to improving relations among people of all cultures and faiths. Compl. ¶¶ 1, 5. Over the course of five years, Cordoba's principal and president Imam Feisal Abdul Rauf developed a close friendship with Deak and Soliman, who are residents of the District of Columbia. Id. ¶¶ 2, 6. Deak and Soliman attempted to raise funds for Cordoba, acted as advisors to Cordoba and Rauf, and hosted Rauf in their home for over three months in 2010. Id. ¶¶ 7–10. The complaint avers that based on the friendship and support Deak showed Rauf and Cordoba, Deak earned their trust and confidence. Id. ¶ 12.

In 2010, Deak suggested to Rauf that Cordoba purchase a condominium unit located on K Street in Washington, D.C. Compl. ¶ 14–15. During Deak's discussions with Rauf, Deak represented that he had specialized knowledge of the real estate market for the unit, and that Deak's real estate broker had advised him that the unit was worth $1,350,000 and would sell for that price. However, according to the complaint, Deak knew at the time that his representations about the unit's value were false. Id. ¶¶ 16–18. Deak did not disclose to Rauf that Deak and Soliman had purchased that unit less than five months earlier for $567,500. Id. ¶ 15.

In October 2010, Deak e-mailed Rauf asking for a total payment of $1,500,000, with $1,350,000 attributed to the “property” and $150,000 for anything Cordoba wanted done to the apartment (“furnishings, special equipment ..., extra appliances, etc.”) and for Cordoba's general use. Deak stated that the sale of the condominium unit was not a transaction “that we can, nor would we want to, run through attorneys.” Compl. ¶ 20. Five days later, Cordoba transferred $1,500,000 ¹ by wire to Deak's bank account. According to the complaint, Deak and Soliman failed to prepare a sales contract, failed to give Cordoba a Property Disclosure Statement, and never delivered to Cordoba or Rauf the title to the unit. Id. ¶¶ 21–25.

In February 2011, Cordoba learned that Deak and Soliman had purchased the condominium unit for $567,500 in May 2010. Compl. ¶ 27. Cordoba then asked an independent real estate broker what the asking price of the unit would be. The broker advised that, based on the condominium market in the Georgetown neighborhood of Washington, D.C., the initial asking price for the unit would be $799,000. Id. ¶ 28. In March 2011, Cordoba demanded that Deak return to Cordoba the $1,500,000. Deak refused to return any of the money. Id. ¶¶ 29–30.

In August 2011, Cordoba filed this complaint against Deak and Soliman. The complaint alleges five counts against Deak and one against Soliman. The allegations against Deak are common law fraud (Count I), breach of fiduciary duty (Count II), misrepresentation (Count III) ², constructive fraud and negligent misrepresentation (Count IV), and unjust enrichment (Count V). The sole allegation against Soliman is for unjust enrichment (Count V). ³

Deak and Soliman have moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss Cordoba's complaint for failure to state a claim upon which relief can be granted,⁴ and in the alternative to enter summary judgment against Cordoba. They argue that the complaint's allegations are based on a contract between Cordoba and an entity not named in the complaint—Deak's company Cause Management, LLC—that the defendants were not parties to and therefore are not responsible for, and that all of the obligations flowing from that contract were extinguished by a valid accord and satisfaction that was signed on December 31, 2010. Defs.' Mem. in Supp. of. Mot. to Dismiss or in the Alternative for Summ. J. (“Defs.' Mem.”) at 2–3. ⁵ The defendants also arguethat Cordoba fails to allege facts that would pierce Cause Management's corporate veil, and that, in general, the complaint fails to allege plausibly that Deak owed Cordoba a duty. Cordoba opposes.

DISCUSSION

“ ‘A complaint can be dismissed under Federal Rule of Civil Procedure 12(b)(6) when a plaintiff fails to state a claim upon which relief can be granted.’ ” Maib v. FDIC, 771 F.Supp.2d 14, 17 (D.D.C.2011) (quoting Peavey v. Holder, 657 F.Supp.2d 180, 185 (D.D.C.2009) (citing Fed.R.Civ.P. 12(b)(6))). “A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of a complaint.” Smith–Thompson v. Dist. of Columbia, 657 F.Supp.2d 123, 129 (D.D.C.2009).

To survive a motion to dismiss, a complaint must contain sufficient factual matter, acceptable as true, to “state a claim to relief that is plausible on its face.” ... A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.

Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). The court must construe the complaint in the light most favorable to the plaintiff and “must assume the truth of all well-pleaded allegations.” Warren v. Dist. of Columbia, 353 F.3d 36, 39 (D.C.Cir.2004). “[A] complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations[.]” Twombly, 550 U.S. at 555, 127 S.Ct. 1955.

I. FRAUD

The defendants argue that Count I's claim of fraud against Deak should be dismissed because the complaint failed to allege that Deak owed Cordoba a duty to accurately disclose the value of the condominium unit. Defs.' Mem. at 4–5. But under District of Columbia law, a plaintiff claiming fraud must prove “(1) the defendant made a false representation; (2) in reference to material fact; (3) with knowledge of its falsity; (4) with the intent to deceive the plaintiff; (5) the plaintiff acted in reasonable reliance on that representation; (6) which consequently resulted in provable damages.” Essroc Cement Corp. v. CTI/D.C., Inc., 740 F.Supp.2d 131, 145 (D.D.C.2010) (citing C & E Servs., Inc. v. Ashland, 498 F.Supp.2d 242, 255 (D.D.C.2007) (internal citation omitted)). “A claim for fraud may be founded on a false representation or a willful omission.” McWilliams Ballard, Inc. v. Broadway Mgmt. Co., 636 F.Supp.2d 1, 5 (D.D.C.2009) (citing Bell v. Rotwein, 535 F.Supp.2d 137, 144 (D.D.C.2008) (citing Schiff v. AARP, 697 A.2d 1193, 1198 (D.C.1997))).

The Federal Rules of Civil Procedure include special pleading standards for fraud. SeeFed.R.Civ.P. 9(b). However, when alleging fraud, Rule 9 “permits a plaintiff to plead generally ‘malice, intent, knowledge, and other conditions of a person's mind.’ ” McWilliams Ballard, 636 F.Supp.2d at 6 n. 6 (quoting Fed.R.Civ.P. 9(b)). One who pleads fraud must “ ‘state the time, place and content of the false [representations], the fact misrepresented and what was retained or given up as a consequence of the fraud.’ ” United States ex rel. Williams v. Martin–Baker Aircraft Co., 389 F.3d 1251, 1256 (D.C.Cir.2004) (quoting Kowal v. MCI Communications Corp., 16 F.3d 1271, 1278 (D.C.Cir.1994)). Complaints alleging fraud must also identify the individuals involved in the fraud. Martin–Baker Aircraft Co., 389 F.3d at 1256.

Here, the complaint plausibly alleges all of the elements of a claim for common law fraud with the particularity required by Rule 9. The complaint recites the false representation, who made it, and when it was made, namely, that Deak falsely represented the value of the condominium unit as $1,350,000 just before October 13, 2010. Compl. ¶¶ 13–17. The complaint alleges facts reflecting Deak's intent to deceive when he did not reveal that he had purchased the unit five months earlier for $567,500. Id. ¶ 15. The complaint pleads generally that Deak knew his representation to be false and material “under conditions which demonstrate that he intended that these misrepresentations be treated as an immediate factor inducing action by Cordoba.” Id. ¶¶ 16–17, 32, 35. Rauf alleges that based on the special relationship that he had developed with Deak over the course of several years, Rauf reasonably relied upon Deak's claim to have specialized knowledge of the real estate market in the area and the value of the unit. Compl. ¶¶ 18, 33. The complaint also pleads that Cordoba justifiably relied on Deak's misrepresentations and material omissions to its detriment, suffering proximate damages for having purchased an over-priced condominium unit and never receiving title. Id. ¶ 37.⁶ Since fraud is sufficiently pled, the defendants' motion to dismiss Count I will be denied.

II. BREACH OF FIDUCIARY DUTY

To make a legally cognizable claim of breach of fiduciary duty under District of Columbia law, a plaintiff “must allege facts sufficient to...