MEMORANDUM ORDER
JEFF KAPLAN, Magistrate Judge
Defendants Match.com, LLP ("Match") and IAC/InterActiveCorp ("IAC"), the owners and operators of various websites offering online dating services, have filed a Rule 12(b)(6) motion to dismiss this putative class action alleging RICO violations and a variety of fraud and contract claims arising under Texas law. The core allegation of plaintiffs' third amended complaint is that defendants misrepresent or conceal information regarding the number and identity of users who can be reached through their websites. More particularly, plaintiffs allege that defendants advertise that they have 15 million "members," ( see Plf. Third Am. Compl. at 11, ¶ 66), but do not disclose that members have limited access to online dating services unless they pay a fee to become "subscribers." ( See id. at 6, ¶¶ 30-31). Nor do defendants distinguish member profiles from subscriber profiles on their websites. ( See id. at 23, ¶ 165 27, ¶ 180). In addition to these material omissions of fact, plaintiffs contend that the following false and misleading statements appear on the Match.com website:
"Members" are non-paying users who may create profiles for the website, browse other user profiles, and receive notice that fee-paying "subscribers" have sent them an email. ( See Plf. Third Am. Compl. at 6-7, ¶¶ 24, 30). However, in order to view the profile of the subscriber who sent the email, read the email, or communicate with the subscriber, the member must subscribe to defendants' online dating service by paying a fee. ( See id. at 6, ¶ 24). According to plaintiffs, fewer than 1.4 million of defendants' members are paying subscribers. ( See id. at 11, ¶ 66).
• Receiving email is free; you can receive responses even if you have never subscribed to Match.com. (
Id. at 6, ¶ 27);
• When you resign your membership, we immediately hide your profile and photos from other members. (
Id. at 7, ¶ 41).
Plaintiffs allege that the first statement falsely implies that subscribers can communicate with millions of members by email, ( see id. at 7, ¶ 35), and that the second statement obfuscates the difference between "resigning a membership" and "cancelling a subscription." ( Id. at 8, ¶¶ 44, 46). In fact, profiles of subscribers who merely cancel their subscriptions are not hidden on the website which, according to plaintiffs, is done to artificially inflate the number of apparent users of defendants' online dating services. ( See id. at 8, ¶ 46). Plaintiffs also accuse defendants of fraudulently labeling the profiles of non-paying members to say "Online Now," thereby misleading subscribers "as to how many members are active subscribers." ( Id. at 7, ¶ 38). In addition to these fraud-based claims, which are pled as violations of the federal RICO statute, the Texas DTPA, and common law fraud, fraudulent inducement, and negligent misrepresentation, plaintiffs sue for breach of contract, breach of the implied duty of good faith and fair dealing, and violating their right to privacy by misappropriating their likeness to benefit another. The case is before the court on a Rule 12(b)(6) motion to dismiss. The motion has been briefed by the parties and is ripe for determination.
A district court may dismiss a complaint for failure to state a claim "only if it appears that no relief could be granted under any set of facts that could be proven consistent with the allegations." Jackson v. City of Beaumont Police Dept., 958 F.2d 616, 618 (5th Cir. 1992), quoting Barrientos v. Reliance Standard Life Ins. Co., 911 F.2d 1115, 1116 (5th Cir. 1990), cert. denied, 111 S.Ct. 795 (1991). To survive dismissal, the plaintiff must plead "enough facts to state a claim to relief that is plausible on its face[,]" Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007), and must plead those facts with enough specificity "to raise a right to relief above the speculative level[.]" Id., 127 S.Ct. at 1965. "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, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). Determining whether a complaint states a plausible claim for relief is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id., 129 S.Ct. at 1950. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged — but it has not `show[n]' — `that the pleader is entitled to relief.'" Id., quoting FED. R. Civ. P. 8(a)(2).
Cases involving fraud are subject to more stringent pleading requirements. In such cases, "a party must state with particularity the circumstances constituting fraud[.]" FED. R. Civ. P. 9(b). At a minimum, this requires the plaintiff to identify the "who, what, when, where, and how" of the alleged fraud. See Williams v. WMX Technologies, Inc., 112 F.3d 175, 177 (5th Cir.), cert. denied, 118 S.Ct. 412 (1997), quoting Tuchman v. DSC Communications, Corp., 14 F.3d 1061, 1068 (5th Cir. 1994), reh'g denied, 20 F.3d 1172 (5th Cir. 1994). Although fraud pleadings may be based on information and belief if certain facts are peculiarly within the knowledge of the opposing party, "this luxury must not be mistaken for license to base claims of fraud on speculation and conclusory allegations." Tuchman, 14 F.3d at 1068, quoting Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2d Cir. 1990) (internal quotations omitted).
One of the grounds for dismissal urged by defendants is that plaintiffs have not pled reliance — an essential element of their fraud, fraudulent inducement, negligent misrepresentation, and DTPA claims. Plaintiffs tacitly concede that their most recent complaint alleges no facts to support the conclusory assertion that they "relied on defendants' false representations in making their decision to subscribe and to write e-mails to members who could not read them." ( See Plf. Third Am. Compl. at 33, ¶ 226). Rather, plaintiffs argue that there is a "presumption of reliance" in fraud cases involving both affirmative misrepresentations and a failure to disclose. ( See Plf. Resp. Br. at 5-7, 13-14, 17).
It is well-settled that actual reliance is a necessary element of common law fraud under Texas law. See Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 341 (5th Cir. 2008), citing Johnson Johnson Medical, Inc. v. Sanchez, 924 S.W.2d 925, 929-30 (Tex. 1996) (to state a claim for common law fraud under Texas law, plaintiff must allege that a material misrepresentation was made, was either known to be false or asserted without knowledge of the truth when made, was intended to be acted upon, was relied upon, and caused injury). This is true regardless of whether the fraud is by affirmative misrepresentation or by nondisclosure. See Celanese Corp. v. Coastal Water Authority, 475 F.Supp.2d 623, 637-38 (S.D. Tex. 2007), citing Schlumberger Technology Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997). Reliance is also an essential element of fraudulent inducement, negligent misrepresentation, and violations of the DTPA. See, e.g. Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 56 (Tex. 2008) (fraudulent inducement); Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 686 (Tex. 2002) (negligent misrepresentation and DTPA). Other than their conclusory allegations of reliance, plaintiffs allege nothing to suggest that they actually relied on any false representation in deciding to become fee-paying subscribers of defendants' online dating services.
Recognizing this pleading deficiency, plaintiffs argue that proof of reliance is not required in fraud cases involving primarily a failure to disclose. ( See Plf. Resp. Br. at 5). In Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972), the Supreme Court held that reliance in a federal securities fraud action may be established by showing that the facts withheld are material "in the sense that a reasonable investor might have considered them important in the making of [a] decision." Id., 92 S.Ct. at 1472. However, subsequent cases make clear that this presumption of reliance does not apply to "mixed claims" alleging both affirmative misrepresentations and material omissions. See Akin v. Q-L Investments, Inc., 959 F.2d 521, 529 (5th Cir. 1992); Krogman v. Sterritt, 202 F.R.D. 467, 478-79 (N.D. Tex. 2001). Nor is the presumption widely applied outside the context of federal securities fraud litigation. See Gyarmathy Assoc., Inc. v. TIG Ins. Co., No. 3-02-CV-1245-N, 2003 WL 21339279 at *3, n. 6 (N.D. Tex. Jun. 3, 2003) (rejecting application of Affiliated Ute in case involving claims of civil RICO, violations of the Texas DTPA, fraud, negligent misrepresentation, breach of contract, and breach of duty of good faith and fair dealing). Because the Affiliated Ute presumption is inapplicable here, the failure to plead facts that establish reliance is fatal to plaintiffs' claims for fraud, fraudulent inducement, negligent misrepresentation, and violations of the DTPA. These claims are dismissed with prejudice.
Ordinarily, the court would allow plaintiffs to amend their complaint in an attempt to cure the pleading defects identified by defendants. See Great Plains Trust Co. v. Morgan Stanley Dean Witter Co., 313 F.3d 305, 329 (5th Cir. 2002) (court should allow plaintiffs at least one opportunity to cure pleading deficiencies before dismissing a case, "unless it is clear that the defects are incurable or the plaintiffs advise the court that they are unwilling or unable to amend in a manner that will avoid dismissal"). However, plaintiffs have already amended their complaint three times. Because plaintiffs have presumably stated their best case after "three bites at the apple," any further attempts to cure these pleading deficiencies would be futile and cause unnecessary delay. See Jacquez v. Procunier, 801 F.2d 789, 792 (5th Cir. 1986) ("At some point a court must decide that a plaintiff has had fair opportunity to make his case; if, after that time, a cause of action has not been established, the court should finally dismiss the suit.").
The court denies without prejudice the remainder of defendants' Rule 12(b)(6) motion. Without suggesting a view of whether dismissal may be proper in another procedural context, such as a motion for summary judgment, the parties have not adequately briefed the legal issues surrounding plaintiffs' RICO claim. Nor is the court comfortable dismissing plaintiffs' contract-based claims at the pleading stage. Defendants may reurge their arguments for dismissal of these claims in a motion for summary judgment.
Defendants rely on the contents of their website, including the "Terms of Use Agreement," to support the dismissal of plaintiffs' contract-based claims. However, it is unclear whether such materials constitute "matters outside the pleadings" that may not be considered by the court in ruling on a Rule 12(b)(6) motion. See General Retail Services, Inc. v. Wireless Toyz Franchise, LLC, 255 Fed.Appx. 775, 785, 2007 WL 2909565 at *8 (5th Cir. Oct. 5, 2007), quoting 5C C. Wright A. Miller, FEDERAL PRACTICE AND PROCEDURE § 1366 (3d ed. 2004) (describing "matters outside the pleadings" to include "written or oral evidence introduced in support of or in opposition to the motion challenging the pleading that provides some substantiation for and does not merely reiterate what is said in the pleadings," but not "exhibits that are attached to the pleadings, matters of which the district court can take judicial notice, and items of unquestioned authenticity that are referred to in the challenged pleading and are `central' or `integral' to the pleader's claim for relief'); Corbis Corp. v. Integrity Wealth Management, Inc., No. C-09-708-MJP, 2009 WL 3835976 at *2 n. 1 (W.D. Wash. Nov. 16, 2009) (terms of license agreement for use of images appearing on website were "factual matters outside the pleadings which are inappropriate to determination of Rule 12(b)(6) motion"). In an abundance of caution, the court determines that defendants should reurge their arguments for dismissal of these claims in the context of a Rule 56 motion for summary judgment.
CONCLUSION
Defendants' Rule 12(b)(6) motion to dismiss [Doc. #48] is granted in part and denied in part. The motion is granted with respect to plaintiffs' claims for fraud, fraudulent inducement, negligent misrepresentation, and violations of the DTPA. Those claims are dismissed with prejudice. In all other respects, the motion is denied.
Defendants may file a motion for summary judgment with respect to plaintiffs' RICO claim and contract-based claims within 60 days from the date of this order. The court will enter a summary judgment briefing schedule after defendants file their motion. Upon request, the court may authorize plaintiffs to conduct limited discovery in order to respond to the grounds raised by defendants in their motion for summary judgment. An opposed motion for leave to conduct discovery must comply with the requirements of the Standing Order on Non-Dispositive Motions filed on November 23, 2009.
SO ORDERED.
DATED: September 30, 2010
ty of citizenship exists between them.
Indeed, the Court is not even certain, based on the allegations in the complaint and the representations of CAIR, that CAIR-VA is an entity legally distinct from CAIR itself. The complaint alleges that CAIR-VA is either (1) a branch office of CAIR, see Compl. ¶¶ 15-16, or (2) a subsidiary of CAIR that operates as its alter ego. See id. ¶ 16. If the former is the case, then CAIR-VA has no legal identity independent of CAIR and functionally is a party in this case.
C. Amount in Controversy
The diversity statute, 28 U.S.C. § 1332(a), provides for federal jurisdiction over civil actions between citizens of different states, but only where the amount in controversy, exclusive of interest and costs, exceeds $75,000.See 28 U.S.C. § 1332(a). When the court considers whether a claim meets the amount-in-controversy requirement, "the sum claimed by the plaintiff controls if the claim is apparently made in good faith." St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938) (footnotes omitted). Dismissal is justified only if it "appear[s] to a legal certainty that the claim is really for less than the jurisdictional amount," Id. In short, "the Supreme Court's yardstick demands that courts be very confident that a party
cannot recover the jurisdictional amount before dismissing the case for want of jurisdiction." Rosenboro v. Kim, 994 F.2d 13, 17 (D.C. Cir. 1993).
As the Supreme Court has held:
where the other elements of jurisdiction are present and at least one named plaintiff in [an] action satisfies the amount-in-controversy requirement, [28 U.S.C.] § 1367 . . . authorize[s] supplemental jurisdiction over the claims of other plaintiffs in the same Article III case or controversy, even if those claims are for less than the jurisdictional amount specified in the statute setting forth the requirements for diversity jurisdiction.
Exxon Mobil Corp. v. Allapattah Servs.,
545 U.S. 546, 549 (2005);
see id. at 558-60. The claims of all plaintiffs in this case form part of a single case or controversy because they arise from "a common nucleus of operative fact,"
United Mine Workers v. Gibbs,
383 U.S. 715, 725 (1966); each plaintiff claims injuries resulting from CAIR/CAIR-VA's employment of Mr. Morris and his false representation that he was a licensed attorney. Consequently, under
Allapattah, this Court may exercise supplemental jurisdiction over the claims of the remaining plaintiffs so long as at least one plaintiff makes satisfactory allegations of a right to damages equal to or exceeding $75,000.
CAIR argues that the Court should disregard the plaintiffs' claims for damages related to emotional distress as having been made in bad faith. See MTD at 17-19. The Court will not assume, and defendant has not demonstrated, that this claim is made in bad faith. But even if the Court does disregard those claims for the purpose of this analysis, plaintiff Bayenah Nur has stated a claim for damages in excess of $75,000. Ms. Nur alleges that, after taking action in reliance on Mr. Days' legal advice, she was placed on unpaid leave from her place of employment and was forced to relocate to North Carolina in order to find paying work. See Compl. ¶¶ 107-08, 116. She seeks compensatory damages (lost wages and moving expenses) in the amount of $8,925. See id. ¶ 122. She also seeks punitive damages. See id. ¶ 176. It is established that punitive damages count toward the amount in controversy so long as "the punitive damage claim . . . has at least a colorable basis in law and fact." Thomas v. Nat'l Legal Prof'l Assocs., 594 F. Supp. 2d 31, 33 (D.D.C. 2009) (quotingKahal v. J.W. Wilson Assocs., Inc., 673 F.2d 547, 549 (D.C. Cir. 1982)) (internal quotation marks omitted); see also G. Keys PC/Logis NP v. Pope, 630 F. Supp. 2d 13, 17 (D.D.C. 2009). Under Virginia law, a complaint states a valid claim for punitive damages if it alleges that a defendant committed a tortious act with "actual malice, or such recklessness or negligence as to evince a conscious disregard of the rights of another." Simbeck, Inc. v. Dodd Sisk Whitlock Corp., 508 S.E.2d 601, 604 (Va. 1999). This cases involves such claims.
CAIR contends that Ms. Nur's claims fail to meet the amount-in-controversy requirement because to obtain damages of $75,000, she would have to receive punitive damages of at least $66,075, which creates a ratio of punitive to compensatory damages of approximately 7.4. See MTD at 20. Upholding a damage award that creates such a ratio, argues CAIR, would violate the limits placed on punitive damage awards by the Due Process Clause, as explained by the Supreme Court in State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003). MTD at 20. The Court disagrees. "The closest the Supreme Court has come to establishing a hard ratio cap on punitive damages is to admonish that `few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.'" Thomas v. Nat'l Legal Prof'l Assocs., 594 F. Supp. 2d at 34 (quoting State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. at 425). A 7 to 1 ratio is well within that presumptive outer boundary. At
this stage in this litigation, the Court cannot conclude to "a legal certainty," Rosenboro v. Kim, 994 F.2d at 17, that an award against the defendant having such a ratio of punitive to compensatory damages would violate the Due Process Clause. See Thomas v. Nat'l Legal Prof'l Assocs., 594 F. Supp. 2d at 34 (refusing, on a motion to dismiss for failure to meet the amount-in-controversy requirement, to find that an award creating a 6.5 to 1 ratio would be unconstitutional and so unobtainable by the plaintiff). Ms. Nur thus has made a colorable claim that the amount in controversy in this case exceeds $75,000. The plaintiffs' claims therefore will not be dismissed for failure to meet the requirements of 28 U.S.C. § 1332(a).
D. Standing
CAIR's contention that the plaintiffs lack Article III standing to bring their claims, see MTD at 21, merits little discussion. The plaintiffs allege that they paid wrongful legal fees or were deprived of wages as a result of the tortious actions of Mr. Days and that CAIR bears legal responsibility for Mr. Days' conduct under the doctrine of respondeat superior. That allegation alone is sufficient to demonstrate standing. CAIR is simply wrong in suggesting that "[p]laintiffs are bound by this Court's previous determination in Lopez I that they do not have standing to bring their claims because they failed to demonstrate that their injuries were caused by CAIR." MTD at 21. Judge Urbina held inLopez I that the plaintiffs lacked standing to bring a RICO claim because the injuries they alleged did not result from any actions taken by CAIR in furtherance of a racketeering conspiracy. See Lopez I, 657 F. Supp. 2d at 111-12. He did not purport to decide whether the plaintiffs would have standing to bring tort claims predicated on the theory that CAIR is vicariously liable for the actions of Mr. Days. Since Lopez I did not decide the relevant issue, it does not control the outcome of the question of standing in this case.
III. SUFFICIENCY OF CLAIMS
Having determined that it may exercise jurisdiction over the subject matter of this litigation, the Court now turns to the defendant's claims that the plaintiffs' complaint should be dismissed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim. In order to assess the legal sufficiency of the plaintiffs' claims, the Court must first determine which law applies.
A. Choice of Law
In a diversity action, a federal district court applies the choice of law principles of the state or jurisdiction in which it sits. See Rafferty v. NYNEX Corp., 60 F.3d 844, 849-50 (D.C. Cir. 1995) (citing Bledsoe v. Crowley, 849 F.2d 639, 641 (D.C. Cir. 1988)); Long v. Sears Roebuck Co., 877 F. Supp. 8, 10-13 (D.D.C. 1995). The District of Columbia employs a "modified `governmental interest analysis,'" under which the court evaluates the governmental policies underlying the applicable laws and determines which jurisdiction's policy would be most advanced by having its laws applied to the facts in the case.Thompson v. Islam, Civil Action No. 01-585, 2005 WL 3262926, at *4 (D.D.C. July 29, 2005). Under District of Columbia conflict of laws principles, the Court must conduct the choice of law analysis for each claim being adjudicated. See Long v. Sears Roebuck Co., 877 F. Supp. at 11; In re Air Crash Disaster at Washington, D.C., 559 F. Supp. 333, 341 (D.D.C. 1983). Plaintiffs contend that either District of Columbia law or Virginia law governs this action, while defendant maintains that Virginia law controls. See Compl. ¶¶ 154, 160, 168; see also Opp. at 43, n. 37; see also MTD at 27 n. 17.
For a tort claim, the state whose policy would be advanced the most is the state with the most significant relationship to the case. District of Columbia v. Coleman, 667 A.2d 811 (D.C. 1995). The Court considers the place where the injury occurred, the place where the conduct causing the injury occurred, the residence, domicile, place of incorporation or place of business of the parties, and the place where the parties' relationship, if any, is centered. See Restatement (Second) of Conflict of Laws § 145 (1971); Long v. Sears Roebuck Co., 877 F.Supp. at 11. In light of the allegations contained in the plaintiffs' complaint, the Court concludes that Virginia has the most significant relationship with this case and that its policies "would be more advanced by the application of its law to the facts of th[is] case."
Although CAIR is incorporated in the District of Columbia and, according to the complaint, a few of the phone calls between CAIR employees and the plaintiffs originated in the District of Columbia, most of the relevant contacts occurred in Virginia. See Compl. ¶¶ 11-12, 55-110. Plaintiffs Lopez, Abdussalaam, and Turner are citizens of Virginia. Days worked out of the CAIR branch in Herndon, Virginia, and all of the alleged misrepresentations made by Days occurred in Virginia. Id. ¶¶ 19, 55-63, 83-87, 100-110. All of the phone calls, email correspondence and face-to-face meetings between Mr. Days and the plaintiffs occurred in Virginia. Id. ¶¶ 55-110. It appears that the few documents that Mr. Days actually filed were mailed from Virginia. Id. ¶ 88. Thus, nearly all of the events at issue in this case occurred in Virginia, and the injuries alleged were inflicted primarily on individuals living in Virginia. Virginia law therefore applies to the plaintiffs' tort claims.
Plaintiff Nur was a citizen of Virginia at the time of all of the relevant incidents in the case. She has since relocated to North Carolina.
The same analysis applies to plaintiffs' statutory claims, pled under both the Virginia Consumer Protection Act and the District of Columbia Consumer Protection Act. See Compl. ¶¶ 127-152;Washkoviak v. Student Loan Marketing Ass'n, 900 A.2d 168, 180 (D.C. 2006) (applying the "significant relationship" test to determine which state's consumer protection statute was applicable in a case where the victims of the alleged conduct lived in one state, while the defendant was located in another). Virginia's consumer protection law, not the District of Columbia's, therefore controls the plaintiffs' claims. The plaintiffs' claims under the District's statute will be dismissed, and the Court will apply Virginia's statutory and common law to determine whether the plaintiffs' remaining claims survive under Rule 12(b)(6) of the Federal Rules of Civil Procedure.
B. Standard of Review
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows dismissal of a complaint if a plaintiff fails "to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6). In Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Supreme Court noted that "Federal Rule of Civil Procedure 8(a)(2) requires only `a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to `give the defendant fair notice of what the . . . claim is and the grounds upon which it rests[.]'"Id. at 544 (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); see also Erickson v. Pardus, 551 U.S. 89 (2007); Aktieselskabet AF 21 v. Fame Jeans Inc., 525 F.3d 8, 15 (D.C. Cir. 2008). Although "detailed factual allegations" are not necessary to withstand a Rule 12(b)(6) motion to dismiss, to provide the "grounds" of "entitle[ment] to relief," a plaintiff must furnish "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action."Bell Atlantic Corp. v. Twombly, 550 U.S. at 555; see also Papasan v. Allain, 478 U.S. 265, 286 (1986). The Court stated that there was no "probability requirement at the pleading stage," Bell Atlantic Corp. v. Twombly, 550 U.S. at 556, but "something beyond . . . mere possibility . . . must be alleged[.]" Id. at 557 The facts alleged in the complaint "must be enough to raise a right to relief above the speculative level," id. at 555, because Rule 8(a)(2) requires a "showing," rather than a "blanket assertion," of entitlement to relief, id. at 555 n. 3. The complaint must be sufficient "to state a claim for relief that is plausible on its face." Id. at 570. The Court referred to this newly clarified standard as "the plausibility standard." Id. at 560 (abandoning the "no set of facts" language from Conley v. Gibson).
On a motion to dismiss under Rule 12(b)(6), the Court "must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 551 U.S. at 94; see also Bell Atlantic Corp. v. Twombly, 550 U.S. at 555. The complaint "is construed liberally in the [plaintiff's] favor, and [the Court should] grant [the plaintiff] the benefit of all inferences that can be derived from the facts alleged." Kowal v. MCI Commc'ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). Nevertheless, the Court need not accept inferences drawn by the plaintiff if those inferences are unsupported by facts alleged in the complaint, nor must the Court accept plaintiff's legal conclusions. See Kowal v. MCI Communications Corp., 16 F.3d at 1276; Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002).
C. Virginia Consumer Protection Act
CAIR argues that the allegations pled by the plaintiffs do not state a claim under Virginia's Consumer Protection Act, Va. Code §§ 59.1-196 et seq., because "the `majority of jurisdictions that have addressed this issue have held that the regulation of attorneys does not fall within the ambit of consumer protection laws." MTD at 26 (quoting Beyers v. Richmond, 594 Pa. 654, 660 n. 7 (2007)). The plaintiffs, however, do not challenge the conduct of attorneys; they complain that CAIR knowingly employed and held out a non-attorney as a provider of legal services. As a result, CAIR's argument is inapposite.
D. Fraud
Under Virginia law, the elements necessary to state a claim of actual fraud are: (1) a false representation (2) of a material fact (3) made intentionally or knowingly (4) with the intent to mislead; (5) reliance by the misled party; and (6) injury.Winn v. Aleda Constr. Co., 315 S.E.2d 193 (Va. 1984). Each element of the claim must be pled with particularity — including identification of the agents, officers, and employees of the entities who are alleged to have perpetrated the fraud and the details of the time and place of the fraudulent acts. Weiss v. Cassidy Devel. Corp., 61 Va. Cir. 237 (Cir. Ct. 2003); accord FED. R. CIV. P. 9(b).
The complaint states that between February of 2007 and September of 2008, Days knowingly and with the specific intent to defraud made representations to the plaintiffs regarding his competency as an attorney. See Compl. ¶ 23. Defendant argues that this is a conclusory statement and does not meet the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure. See Mot. at 27-29. The Court disagrees. The statements made in support of the plaintiffs' fraud claim do not appear solely in Paragraph 23 of the complaint. On the contrary, the complaint outlines specific instances in which Mr. Days told the plaintiffs that he was an attorney and took money for his services. See Compl. ¶¶ 55, 60, 83, 85, 101. It also recounts face-to-face meetings and telephone calls between Days and the plaintiffs and alleges dates on which the meetings occurred. See Compl. ¶¶ 55-126, 153-157. The statements in the complaint are specific enough to meet the first four elements of fraud even when applying the heightened requirements of Rule 9(b) of the Federal Rules of Civil Procedure.
The complaint also meets that heightened standard for elements five and six of the definition of fraud under Virginia law. Mr. Lopez, Ms. Turner, and Mr. Abdussalam claim that, in reliance on the representations of Mr. Days and/or CAIR that Mr. Days was a qualified attorney, they paid Mr. Days legal fees for services that he was not licensed to perform and that he never did perform. See Compl. ¶¶ 60, 85. Ms. Nur alleges that, in reliance on Mr. Days' legal advice, which he was not, in fact, qualified to give, she declined a settlement offer from her employer and was placed on unpaid leave as a result. See id. ¶¶ 107-08. These are sufficiently specific allegations to state a claim for fraud.
E. Breach of Fiduciary Duty
To prevail on a claim for breach of fiduciary duty in Virginia, plaintiffs must prove facts sufficient to establish the following: (1) the defendant owed plaintiff a fiduciary duty; (2) defendant breached that duty; and (3) the breach proximately caused an injury. Carstensen v. Chrisland Corp., 442 S.E.2d 660 (Va. 1994). In Virginia, "[e]vidence of advice and counsel in business matters involving a degree of trust is necessary to show a fiduciary relationship." Oden v. Salch, 379 S.E.2d 346, 351 (Va. 1989). An attorney has a fiduciary duty to his or her client. Martin v. Phillips, 235 Va. 523, 527 (1988).
The defendant does not deny that the plaintiffs put their trust and confidence in Mr. Days or that there was a fiduciary relationship between Mr. Days and the plaintiffs. Instead, CAIR argues that it cannot be liable for breach of fiduciary duty because the plaintiffs put their trust in Mr. Days, not in CAIR.See Mot at 29-30. Regardless of whether CAIR itself had a fiduciary duty to the plaintiffs, the complaint alleges sufficient facts to suggest that Mr. Days had such a duty, that he breached it, and that CAIR is vicariously liable for his conduct. Plaintiffs therefore state a claim for breach of fiduciary duty against CAIR.
F. Intentional Infliction of Emotional Distress
To establish a prima facie case for the tort of intentional infliction of emotional distress ("IIED") under Virginia law, plaintiffs must allege: "(1) the wrongdoer's conduct was intentional or reckless; (2) the conduct was outrageous and intolerable; (3) there was a causal connection between the wrongdoer's conduct and the emotional distress; and (4) the emotional distress was severe." Hatfill v. The New York Times Co., 532 F.3d 312 (4th Cir. 2008); Womack v. Eldridge, 210 S.E.2d 145 (Va. 1974).
CAIR argues that the conduct of Mr. Days and of CAIR itself described in the complaint does not "rise to the level of `outrageous' or `intolerable.'" MTD at 32. The Court is not so certain. The plaintiffs allege that Mr. Days held himself out as an attorney; that they entrusted their legal problems, including a divorce petition and a personal immigration matter, to him; and that Mr. Days mishandled those problems while, in some cases, demanding fees for services he knew he would not provide. He did all of this when, it is alleged, he was not licensed to practice law. While reasonable minds could differ as to whether Mr. Days' conduct, for which CAIR may be vicariously liable, was extreme and outrageous, "it is for the jury . . . to determine whether, in the particular case, the conduct has been sufficiently extreme and outrageous to result in liability." Womack v. Eldridge, 210 S.E.2d at 148 (citation and internal quotation marks omitted);see also Perk v. Worden, 475 F. Supp. 2d 565, 570 (E.D. Va. 2007).
CAIR also contends that the plaintiffs have failed to allege that they have suffered sufficiently severe emotional distress. This is a close question. Because the tort of intentional infliction of emotional distress is disfavored under Virginia law, Virginia courts have defined the tort narrowly. See, e.g.,Ruth v. Fletcher, 377 S.E.2d 412, 415 (Va. 1989). In particular, to state a claim for IIED, a plaintiff must allege that she has experienced emotional injury so severe that "no reasonable person could be expected to endure it." Russo v. White, 400 S.E.2d 160, 163 (Va. 1991).
The complaint contains the same rote allegations of emotional distress with regard to each plaintiff in this action: the plaintiff is said to have "suffered severe emotional, mental, and physical distress . . ., including anxiety, lack of appetite, inability to sleep, relationship problems with . . . friends and family, inability to sustain employment resulting from . . . anxiety, and other manifestations." Compl. ¶¶ 79 (Mr. Abdussalaam); 96 (Ms. Turner and Mr. Lopez); 123 (Ms. Nur). Most of those alleged symptoms of distress fall into the category of injuries judged insufficient by the Virginia courts to rise to the level of severe distress required to state a claim for IIED.See Russo v. White, 400 S.E.2d at 163 (a plaintiff fails to allege sufficiently severe distress where she merely claims that "she was nervous, could not sleep, experienced stress and `its physical symptoms,' withdrew from activities, and was unable to concentrate at work").
On the other hand, allegations of emotional distress have been upheld as sufficient under Virginia law where they stated that the defendant's conduct "rendered [the plaintiff] functionally incapable of carrying out any of her work or family responsibilities." Almy v. Grisham, 639 S.E.2d 182, 188 (Va. 2007). Here, the plaintiffs claim that Mr. Days' actions resulted in their "inability to sustain employment."See Compl. ¶¶ 79, 96, 123. At this stage of the litigation, such a statement alleges sufficient distress to satisfy the liberal pleading requirements of Rule 8 of the Federal Rules of Civil Procedure.Cf. Hatfill v. New York Times Co., 416 F.3d 320, 337 (4th Cir. 2005) (under liberal pleading requirements of the federal courts, plaintiff alleged sufficient emotional distress under Virginia law where he merely claimed that he suffered "severe emotional distress"). Whether this claim can withstand a motion for summary judgment after discovery is a question for another day.
IV. DEFENDANT'S MOTION TO CONSOLIDATE AND REASSIGN THIS CASE
CAIR has requested that this case be consolidated with Saiyed v. Council on American-Islamic Relations Action Network, Inc., Civil Action No. 10-0022, pending before the undersigned, and that both cases be reassigned to Judge Urbina. See Trans. Mot. at 1. Because the Court finds that both cases share "common question[s] of law or fact," they will be consolidated. FED. R. CIV. P. 42(a). Reassignment of this case to Judge Urbina, however, is neither necessary nor desirable under this Court's Local Civil Rules.
The defendant correctly points out that, under Local Civil Rule 40.5(a)(4), this case is related to Lopez I. But where, as here, "the existence of related cases . . . is revealed after the cases are assigned, the judge having the later-numbered case may transfer" it to "the judge having the earlier case" if "good cause exists for the transfer." LOC. CIV. R. 40.5(c)(2). No such good cause exists in this case. Having considered and resolved the matters discussed in this Opinion, this Court is more familiar with this case than Judge Urbina, having written the opinion in Lopez I, would be. Reassignment of this case therefore would save neither time nor effort. CAIR's motion thus will be denied.
V. CONCLUSION
For the foregoing reasons, the Court will grant in part and deny in part CAIR's motion to dismiss this case, grant the motion to consolidate this case with Saiyed, and deny the motion to reassign this matter to Judge Urbina. An Order consistent with this Opinion shall be issued this same day.
SO ORDERED.
DATE: September 30, 2010