Moss Grove II Prop. Owners' Ass'n v. Lennar Carolinas, LLC

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MOSS GROVE II PROPERTY OWNERS' ASSOCIATION, INC., Plaintiff, v. LENNAR CAROLINAS, LLC, Defendant.

No. 2:22-cv-04287-DCN

United States District Court, D. South Carolina, Charleston Division

February 14, 2023

ORDER

DAVID C. NORTON UNITED STATES DISTRICT JUDGE

The following matter is before the court on defendant Lennar Carolinas, LLC's (“Lennar”) motion to dismiss, ECF No. 4. For the reasons set forth below, the court grants in part and denies in part the motion.

I. BACKGROUND

Plaintiff Moss Grove II Property Owners' Association, Inc. (the “Association”) is a nonprofit corporation consisting of the property owners of the Moss Grove II subdivision (hereinafter, “Moss Grove”) in Moncks Corner, South Carolina. Lennar participated in the development, construction, marketing, and sales of the homes in Moss Grove.

On August 19, 2014, Lennar executed two documents related to the governance of Moss Grove: (1) the “Declaration of Covenants, Restrictions and Easements for Moss Grove II” (the “Declaration”) and (2) the “Bylaws of Moss Grove II Property Owners' Association.” The documents were recorded in the Berkeley County Register of Deeds on September 18, 2014. The Declaration created the Association and specified that the “Declarant” and every owner of a unit would serve as members. ECF No. 4-2 at 18. The Declaration named Lennar as the “Declarant,” id. at 10, and Lennar executed the document as the Declarant, id. at 62.

As relevant to the instant motion, Article 15.4 of the Declaration, titled “Litigation,” states in part:

No judicial or administrative proceeding with an amount in controversy exceeding $100,000.00 . . . will be commenced or prosecuted by the Association unless approved by 75% or more of the votes of the entire Association, by Referendum or at a duly held meeting of Members called for the purpose of approving the proceeding, which percentage will also constitute the quorum required for any such meeting. This Section will not apply, however, to (a) actions brought by the Association to enforce the provisions of this Declaration (including, without limitations, the foreclosure of liens) (b) the imposition and collection of Assessments; (c) proceedings involving challenges to ad valorem taxation; (d) counterclaims brought by the Association in proceedings instituted against it; or (e) actions brought by the Association to enforce written contracts with its suppliers and service providers.

Id. at 55.

As generally relevant to the suit, Lennar, as the Declarant, created and maintained a capital reserve fund for the Association to use on maintenance and repairs within the subdivision, and it had full decision-making authority over the Association and how it spent the funds. ECF No. 1-1, Compl. ¶¶ 8-9. The Association alleges that during the time that Lennar served as the Declarant, Lennar was obligated to ensure that common areas and structures were properly maintained. Lennar allegedly breached its duty by failing to properly care for, maintain, and repair the Moss Grove Plant Dam I, D3467 (the “Dam”). Lennar also allegedly refused to provide the Association with sufficient funds to make the repairs.

Lennar remained the Declarant until October 23, 2019, when the members of the Association held a transition meeting and formally elected a Board of Directors. At that point, Lennar relinquished its rights as the Declarant and turned over authority to the members, who now have full control over the Association. Nevertheless, the Association claims that the Dam's poor conditions dating back to Lennar's time as the Declarant have caused ongoing health and safety risks to members of the Association, necessitating the instant action.

On October 24, 2022, the Association filed a complaint against Lennar in the Berkeley County Court of Common Pleas, alleging seven causes of action: (1) negligence/gross negligence, (2) negligent misrepresentation, (3) breach of contract, (4) breach of express warranty, (5) breach of implied warranty of workmanlike service, (6) breach of fiduciary duty, and (7) violation of the South Carolina Unfair Trade Practices Act (“SCUTPA”), SC Code Ann. § 39-5-10 et seq. ECF No. 1-1, Compl. On November 28, 2022, Lennar removed the action to this court pursuant to 28 U.S.C. § 1332. ECF No. 1 ¶ 8.

On December 12, 2022, Lennar filed its motion to dismiss for failure to state a claim. ECF No. 4. The Association responded on December 22, 2022. ECF No. 5. Lennar did not file a reply, and the time to do so has now elapsed. The court held a hearing on the motion on February 9, 2023. ECF No. 8. As such, the motion has been fully briefed and is now ripe for review.

II. STANDARD

A. Motion to Dismiss

A Rule 12(b)(6) motion for failure to state a claim upon which relief can be granted “challenges the legal sufficiency of a complaint.” Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009) (citations omitted); see also Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (“A motion to dismiss under Rule 12(b)(6) . . . does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”). To be legally sufficient, a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A Rule 12(b)(6) motion should not be granted unless it appears certain that the plaintiff can prove no set of facts that would support his claim and would entitle him to relief. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). When considering a Rule 12(b)(6) motion, the court should accept all well-pleaded allegations as true and should view the complaint in a light most favorable to the plaintiff. Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir. 1999); Mylan Labs., Inc., 7 F.3d at 1134. “To survive a motion to dismiss, 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)). “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.” Id.

B. Standing

If a plaintiff does not have standing or the controversy is not sufficiently ripe, the court must dismiss the action for lack of subject matter jurisdiction. See Middleton v. Andino, 488 F.Supp.3d 261, 278 (D.S.C. 2020), appeal dismissed as moot, 2020 WL 8922913 (4th Cir. Dec. 17, 2020) (“Standing implicates the court's subject matter jurisdiction and is governed by Federal Rule of Civil Procedure 12(b)(1).”). “[T]he irreducible constitutional minimum of standing contains three elements.” Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). First, a plaintiff must demonstrate an “injury-in- fact,” which is a “concrete and particularized . . . invasion of a legally protected interest.” Id. Second, “there must be a causal connection between the injury and the conduct complained of, meaning that the injury must be “fairly . . . trace[able] to the challenged action of the defendant.” Id. Third, “it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.” Id.

The plaintiff bears the burden of proving that standing exists. Piney Run Pres. Ass'n v. Cnty. Comm'rs of Carroll Cnty., 523 F.3d 453, 459 (4th Cir. 2008). Importantly, the overriding motion-to-dismiss standard applies to the inquiry of standing, meaning that “a suit will not be dismissed for lack of standing if there are sufficient ‘allegations of fact'-not proof-in the complaint or supporting affidavits.” Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Found., Inc., 484 U.S. 49, 65 (1987). Plausible, good-faith allegations that, if true, would satisfy the standing requirements will sufficiently preclude dismissal. See id.; see also Iqbal, 556 U.S. at 678. Nevertheless, the court may “regard the pleadings as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment.” Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999).

III. DISCUSSION

Lennar moves for dismissal on two grounds. First, Lennar argues that the entire complaint should be dismissed based on the Association's lack of standing. Second, Lennar argues that the Association's second cause of action for negligent misrepresentation should be dismissed for failure to state a claim. The court addresses each argument in turn.

A. Standing

First, Lennar moves to dismiss the complaint for lack of standing, arguing that the Association failed to satisfy the conditions precedent for commencing a lawsuit as set forth in the Declaration. The Declaration specifies that any judicial proceeding with an amount in controversy exceeding $100,000 may not be brought by the Association unless approved by at least seventy-five percent of the votes by its members. Lennar contends that there are no allegations in the complaint about whether this condition was satisfied or waived, and as such, the Association has failed to meet its burden to prove that standing exists. The court determines below that the most judicially-efficient result is to find that the Association has plausibly alleged that the conditions for litigation as specified in the Declaration do not apply in this case-meaning a vote or other specified procedure was not a condition precedent for bringing this action. Because this issue is likely to resurface, the court further surveys the legal landscape of homeowner association standing (as the court views it) and denies the motion on those grounds as well.

1. Applicability of...