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Zuberi v. Hirezi

United States District Court, E.D. Virginia, Alexandria Division

January 31, 2017

JACOB ZUBERI, et al.. Plaintiffs,
DIANA HIREZI, et al., Defendants.


          Anthony J. Trenga United States district Judge

         Plaintiffs Jacob and Ashley Zuberi ("plaintiffs" or the "Zuberis") claim that they were the victims of fraudulent and other wrongful conduct when in July 2015 Jacob Zuberi purchased an Alexandria, Virginia house from Defendants Diana and Manuel Hirezi (the "Hirezis") for $465, 000. Briefly summarized, plaintiffs allege that the Hirezis concealed with cosmetic fixes serious structural defects that make the house uninhabitable and unsellable. Included as defendants in addition to the Hirezis are the Hirezis' listing agent and his real estate company and various contractors that the Hirezis hired to perform certain agreed upon repair work identified during a pre-closing inspection.

         In their 64-page, 287-paragraph, twenty-eight-count Amended Complaint, plaintiffs assert claims against the Hirezis for fraud (Count I), fraudulent inducement (Count II), constructive fraud (Count III), breach of contract (Count IV), negligence per se (Counts V-VI), and violation of the Virginia Consumer Protection Act (Count VII). It asserts similar claims against Defendants Classic Realty, Ltd. and George Greene (Counts VIII-XI), Defendant M&M Plumbing, LLC (Counts XII-XVI), Defendant S. Unlimited, LLC (Counts XVII-XXIII), and Defendant Advance Structural Concepts, LLC (Counts XXIV-XXVII). Finally, plaintiffs have alleged a civil conspiracy claim against all defendants (Count XXVIII).

         Presently pending are four motions to dismiss the Amended Complaint (collectively, the "Motions"). Defendants Classic Realty, Ltd. and George Greene [Doc. No. 51], S. Unlimited, LLC [Doc. No. 54], and M&M Plumbing, LLC [Doc. No. 58] move to dismiss the Amended Complaint in its entirety on the grounds that it fails to state a claim against them. On the same grounds, Defendants Diana and Manuel Hirezi move to dismiss all counts against them except Count IV, alleging a breach of contract [Doc. No. 61].[1]

         For the reasons stated below, (1) the motions filed by Defendants Classic Realty, Ltd. and George Greene, S. Unlimited, and M&M Plumbing, LLC are GRANTED and all claims against them will be dismissed; and

         (2) the motion filed by Defendants Diana and Manuel Hirezi will be GRANTED as to all claims filed by plaintiff Ashley Zuberi, who lacks standing to bring any claims pertaining to the purchase of the house; GRANTED as to Counts I, III, V, and VI filed by Plaintiff Jacob Zuberi alleging fraud, constructive fraud, and negligence per se; and otherwise DENIED, leaving for further proceedings Jacob Zuberi's claims for fraudulent inducement (Count II), breach of contract (Count IV), violation of the Virginia Consumer Protection Act (Count VII), and civil conspiracy (Count XXVIII).

         I. BACKGROUND

         The following alleged facts are taken as true for the purposes of the Motions:

         In November 2014, the Hirezis purchased the house located at 6024 Telegraph Road, Alexandria, Virginia for $385, 000 (the '"Property")- Am. Compl. ¶ 13. The Hirezis are in the business of "'flipping' properties." Id. ¶ 3. During their renovation of the Property, the Hirezis learned of structural and related serious issues, which they masked with cosmetic fixes in order to sell it. Id. ¶¶ 15-16. Defendant George Greene ("Greene") was the listing agent for the Property. Id. ¶ 21. Greene works for Defendant Classic Realty Ltd. ("Classic Realty"), and the Property listing included Greene's name and his association with Classic Realty. Id. ¶ 27. His listing stated that the property condition was "Renov/Remod" and described the property as, "Fully renovated & updated home...." Id. ¶ 22, Ex. C. Other than this listing, Greene and Classic Realty's only involvement in the transaction was Greene's signing the lead paint disclosure. See Id. ¶ 34, Ex. A.

         On June 27, 2015, Plaintiff Jacob Zuberi and the Hirezis entered a contract for the purchase of the Property for the price of $465, 000, which was conditioned upon a home inspection (among other contingencies) (the "Contract"). Id. The inspection revealed displacement cracks in the foundation, primarily around the garage, and other issues such as moisture in the basement wall and plumbing issues in the lower-level bathroom. Id. ¶ 35, Ex. B.

         As a result of the inspection, on July 3, 2015, the parties entered an addendum to the Contract (the "Addendum"), which provided that prior to closing the Hirezis would address certain issues identified by the inspection. Id. ¶¶ 35-38, Ex. B. To do so, the Hirezis engaged Defendants S. Unlimited, LLC ("S. Unlimited"), M&M Plumbing, LLC ("M&M Plumbing") and Advance Structural Concepts, LLC ("Advance"). Id. ¶¶ 48, 55, 62.

         S. Unlimited is a licensed contractor (but not a licensed engineer) that frequently does work for the Hirezis. Id. ¶ 55. The Hirezis hired S. Unlimited to fix doors that would not close and to fix certain cracks in the foundation around the garage area. Id. S. Unlimited also certified, presumably in its invoice to the Hirezis, that the foundation was structurally sound. See Id. ¶¶ 57-59. The Hirezis used the invoice from S. Unlimited to represent to the Zuberis that work listed in the Addendum had been adequately completed. Id. ¶ 59. Similarly, the Hirezis hired M&M Plumbing to switch the hot and cold water controls in a lower-level bathroom and to check the basement wall for moisture and leaks. Id. ¶¶ 48, 52. M&M Plumbing is not a licensed plumbing or home improvement contractor. Id. ¶ 48. The Hirezis also used M&M Plumbing's invoice to demonstrate to the Zuberis their completion of certain work set forth in the Addendum. Id. ¶ 53.

         On July 23, 2015, following the work done by S. Unlimited and M&M Plumbing, the Zuberis' real estate agent observed a large crack in the foundation wall. Id. ¶ 61. The Hirezis then hired Advance, an engineering firm, to evaluate the structure of the home. Id. ¶ 62. At the Hirezis' request, Advance limited the scope of its evaluation to the garage area in order to issue a report certifying that there was no "structural problem" with the home. Id. ¶¶ 64-66. Thereafter, the Hirezis emailed the Zuberis' agent on July 26, 2015, stating there were "[n]o issues on the structure." Id. ¶ 67.

         On July 29, 2015, the transaction closed, and the Zuberis moved into the home in August. Id. ¶ 70. Subsequently, latent issues connected to the faulty foundation became apparent. Id. ¶ 71-73. By January 2016, cracks had formed in the drywall at nearly every window and doorway. Id. ¶ 73. In February 2016, the Zuberis had to hire a plumber to fix backed up sewage in the basement shower drain and discovered that the drain was misaligned and could not be repaired. Id. The Zuberis moved out in March 2016 after they hired a professional engineer who advised them that the foundation was compromised and posed a serious safety hazard. Id. ¶ 74. The Zuberis filed this action on August 22, 2016.


         A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of the complaint. See Randall v. United States, 30 F.3d 518, 522 (4th Cir. 1994); Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1994). A claim should be dismissed "if, after accepting all well-pleaded allegations in the plaintiffs complaint as true ... it appears certain that the plaintiff cannot prove any set of facts in support of his claim entitling him to relief." Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. \999);see also Trulock v. Freeh, 275 F.3d 391, 405 (4th Cir. 2001). In considering a motion to dismiss, "the material allegations of the complaint are taken as admitted, " Jenkins v. McKeithen, 395 U.S. 411, 421 (1969) (citations omitted), and the court may consider exhibits attached to the complaint, Fayetteville Investors v. Commercial Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991).

         Moreover, "the complaint is to be liberally construed in favor of plaintiff." Id.; see also Bd. of Trustees v. Sullivant Ave. Properties, LLC, 508 F.Supp.2d 473, 475 (E.D. Va. 2007). In addition, a motion to dismiss must be assessed in light of Rule 8's liberal pleading standards, which require only "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8. Nevertheless, while Rule 8 does not require "detailed factual allegations, " a plaintiff must still provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). The allegations in the complaint "must be enough to raise a right to relief above the speculative level" to one that is "plausible on its face." Id. As the Supreme Court stated in Ashcroft v. Iqbal, 556 U.S. 662, 678 (2008), "[a] claim has facial plausibility when the plaintiff pleads factual content that allows the Court to draw a reasonable inference that the defendant is liable for the conduct alleged."

         Fraud claims, however, are subject to a heightened pleading standard under Federal Rule of Civil Procedure 9(b), which requires that "[i]n alleging fraud ... a party must state with particularity the circumstances constituting fraud ...." These include "the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained" as a result. Harrison v. Westinghoi4se Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999). But "intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed.R.Civ.P. 9(b). A "lack of compliance with Rule 9(b)'s pleading requirements is treated as a failure to state a claim under Rule 12(b)(6)." Harrison, 176 F.3d at 783 n.5.

         III. ANALYSIS

          A. Claims Against Defendants Diana and Manuel Hirezi

         The Amended Complaint asserts seven counts against the Hirezis that they move to dismiss:[2] fraud (Count I); fraudulent inducement (Count II); constructive fraud (Count III); negligence per se (Count V); negligence per se against Diana Hirezi (Count VI); violation of the Virginia Consumer Protection Act (Count VII); and civil conspiracy (Count XXVIII).[3]

         1. Fraud-Based Claims

         Under Virginia law, six independent elements must be pled to state a claim for fraud: "(1) a false representation, (2) of a material fact, (3) made intentionally and knowingly, (4) with intent to mislead, (5) reliance by the party misled, and (6) resulting damage to the party misled." Evaluation Research Corp. v. Alequin, 439 S.E.2d 387, 390 (Va. 1994). Constructive fraud differs from actual fraud in that it only requires that the false representation "was made innocently or negligently, " rather than intentionally and knowingly with intent to mislead. Richmond Metro. Auth. v. McDevitt St. Bovis, Inc., 507 S.E.2d 344, 347 (Va. 1998). Concealment, "whether accomplished by word or conduct, " can constitute a false representation, but it must be based on "a knowing and a deliberate decision not to disclose a material fact." Lambert v. Downtown Garage, Inc., 553 S.E.2d 714, 717-18 (Va. 2001) (internal quotation marks omitted). A cause of action for fraud, however, cannot arise solely out of the exercise of a contractual right. Richmond Metro. Auth, 507 S.E.2d at 347.

         Plaintiffs' three fraud-based claims against the Hirezis all allege that misstatements caused Jacob Zuberi to enter into, and then close on, the Contract to purchase the Property with structural defects. In particular, the claims allege that the Hirezis made false representations by:

• "concealing major horizontal and vertical cracks with caulk, tape, drywall, and/or paint";
• "falsely represent[ing] that the Property had been properly renovated and remodeled";
• "misrepresenting] their intention to fix items listed in the Addendum as required by ...

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