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Curtis v. Propel Property Tax Funding, LLC

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

February 5, 2018

GARRY CURTIS, Plaintiff,
v.
PROPEL PROPERTY TAX FUNDING, LLC, and PROPEL FINANCIAL SERVICES, LLC, Defendants.

          OPINION

          John A. Gibney, Jr., Judge

         Garry Curtis fell behind on taxes he owed to the City of Petersburg ("Petersburg"), so he entered into an agreement with Propel Property Tax Funding, LLC ("Propel Tax"), and Propel Financial Services, LLC ("Propel Financial") (collectively, "Propel"). Through this agreement, Propel paid taxes to Petersburg on behalf of Curtis, and then Curtis repaid Propel with interest. Curtis, on behalf of himself and other similarly situated consumers, has sued Propel based on the terms of this and accompanying agreements, plus the related disclosures. Specifically, Curtis alleges that Propel violated (I) the Truth in Lending Act ("TILA"); (II) the Electronic Funds Transfer Act (the "EFTA"); and (III) the Virginia Consumer Protection Act (the "VCPA").

         Propel moved to dismiss Curtis' original complaint. The Court denied Propel's motion to dismiss Counts I and II, but certified its ruling on Count I, the 15 U.S.C. § 1693k claim in Count II, and Curtis' standing to proceed on Count II for interlocutory appeal.[1] The Court granted Propel's motion to dismiss Count III, but allowed Curtis to amend his complaint on this claim. Curtis filed an amended complaint, and Propel has again moved to dismiss. Because Curtis fails to plead the necessary elements of a VCPA claim, and does not plead with the requisite particularity, the Court will grant the motion to dismiss Count III.

         I. BACKGROUND

         The Court set forth an in-depth background of this case in its previous Opinion on Propel's motion to dismiss. Curtis v. Propel Property Tax Funding, LLC, __F.Supp.3d__, No. 3:16-cv-731, 2017 WL 3397036 (E.D. Va. Aug. 8, 2017), appeal docketed, No. 17-2114 (4th Cir. Sept. 25, 2017). Thus, the Court will only briefly summarize the pertinent facts.

         Propel offers tax payment agreements to Petersburg residents pursuant to Va. Code Ann. § 58.1-3018. This statute permits localities to authorize third parties to offer third-party tax payment agreements ("TPAs"). Id. § 58.1-3018(B). Under these TPAs, authorized third parties contract with taxpayers to pay amounts due to the locality on behalf of the taxpayers. Id. § 58.1-3018(A). The third party must pay the taxes subject to the agreement to the treasurer of the locality within ten days. Id. § 58.1-3018(B)(1). This payment tolls the enforcement period for the taxes subject to the agreement. Id. § 58.1-3018(E). If the taxes paid are for real property, this payment from the third party to the locality does not affect the tax lien created by state law.[2]The taxpayer then repays the third party in installments over a set period. Id. § 58.1-3018(B)(2).

         If the taxpayer defaults on his payments to the third party, the locality reimburses the losses the third party incurred from the default, excluding interest and fees. Id. § 58.1-3018(C)(1). Once the locality reimburses the third party, the locality reinstates the taxes owed by the taxpayer in the amount of the reimbursement. Id. § 58.1-3018(C)(2).

         In this case, Curtis applied for a TPA with Propel. Propel provided Curtis a disclosure sheet, which included the terms of the agreement, the applicable interest rate, and the costs and fees. (Am. Compl. Ex. B.) This document contained inaccurate and potentially misleading information concerning fees and Propel's rights under the agreement. At closing, Curtis signed a tax payment agreement (the "Curtis TPA") (Am. Compl. Ex. G), and received an updated payment terms disclosure sheet (Am. Compl. Ex. H.). This disclosure sheet corrected the statutory inaccuracies from the original disclosure, but listed different dollar values for some figures. Pursuant to these documents, Propel agreed to pay Petersburg $14, 547.65 on Curtis's behalf for real property taxes. The parties agreed to a $1, 454.76 origination fee (10% of the amount of taxes paid), and an interest rate of 10.95%, with no interest accruing in the first six months after payment. The Curtis TPA outlined additional possible fees, including fees for recording or insufficient funds. Under the agreement, the installment payments would go first to fees, then to interest, then to the principal. The Curtis TPA made clear that payment by Propel to the locality "is not final and will not extinguish [Curtis's] obligation" to the locality. (Am. Compl. Ex. G, at ¶ 6(A); see also Am. Compl. Ex. F.)

         II. DISCUSSION

         Curtis has sued Propel on behalf of himself and other similarly situated individuals. Curtis alleges that Propel violated: (I) TILA; (II) the EFTA; and (III) the VCPA.[3] Propel moved to dismiss Count III of the amended complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6).[4]

         The General Assembly passed the VCPA "to promote fair and ethical standards of dealings between suppliers and the consuming public." Va. Code Ann. § 59.1-197. To state a claim under the VCPA, the plaintiff must allege (1) a fraudulent act (2) by a supplier (3) in a consumer transaction.[5] Id. § 59.1-200(A); Nahigian v. Juno Loudoun, LLC, 684 F.Supp.2d 731, 741 (E.D. Va. 2010). As a claim sounding in fraud, Federal Rule of Civil Procedure 9(b) requires plaintiffs to plead VCPA claims with particularity. Wynn 's Extended Care, Inc. v. Bradley, 619 Fed.Appx. 216, 220 (4th Cir. 2015).

         The VCPA also requires proof of (1) reliance and (2) damages, with regard to the alleged misrepresentation(s) of fact. In re Lumber Liquidators Chinese-Manufactured Flooring Durability Mktg. & Sales Practice Litig., No. 1:16-md-2743, 2017 WL 2911681, at *5 (E.D. Va. July 7, 2017). A consumer may only recover under the VCPA if his loss results from a violation of the statute, and this causal connection cannot exist unless the consumer relied on the misrepresentation at issue. Cooper v. GGGR Investments, LLC, 334 B.R. 179, 188 (E.D. Va. 2005). Virginia courts have consistently required reliance to establish VCPA claims. Adardour v. American Settlements, Inc., l:08-cv-798, 2009 WL 1971458, at *3 (E.D. Va. July 2, 2009) (collecting cases).

         Curtis alleges that the credit terms on the final disclosure he received, such as the origination fee, processing fee, and third party fees, differed from those initially disclosed, but he does not allege that he relied on any misrepresentations in the initial disclosure to his detriment. He does not claim that information in the initial disclosure caused him to sign the final TPA. Moreover, even if the initial disclosure sheet contained misleading credit information, the final disclosure "plainly stated the terms of the transaction." See Johnson v. Washington, 559 F.3d 238, 245 (4th Cir. 2009) (finding that the documents the plaintiffs signed clearly stated the relevant terms, thereby correcting any prior misleading statements). Curtis also alleges that the defendants falsely represented that Propel would receive a security interest in Curtis' property, which would have authorized it to foreclose, and that the TPA was a binding contract. Again, Curtis does not allege that he relied on these misrepresentations, as required under VCPA law.

         Curtis' argument that he need not plead reliance is unavailing. Curtis cites a case in which the Virginia Supreme Court observed that VCPA claims are distinct from common law fraud. Ballagh v. Fauber Enterprises, Inc.,773 S.E.2d 366, 368 (Va. 2015). The Ballagh court noted that the elements of the two causes of action differ, with VCPA claims extending beyond common law fraud. Id. Ballagh, however, does not stand for the ...


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