E-Alert Case Updates

In Bed Bug Case, Court Denied Defendants’ Motion to Dismiss Plaintiffs’ Fraud, Consumer Protection, and Punitive Damages Claims for Failure to State a Claim

Myles v. Rent-A-Center, Inc.
Civ. No. JKB-15-300 (July 7, 2015) U.S. District Court for the District of Maryland
by Colleen K. O’Brien, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.mdd.uscourts.gov/Opinions/Opinions/15-300%20Memo%20and%20Order%20for%20Website.pdf

Myles v. Rent-A-Center, Inc., U.S.D.C. D. Md. Civ. No. JKB-15-300 (July 7, 2015), involved the sufficiency of Plaintiffs’ consumer protection, fraud, and punitive damage claims against the Defendants in a bed bug case on Defendants’ Motion to Dismiss for failure to state a claim pursuant to FED. R. CIV. P. 12(b)(6). The Court concluded that Plaintiffs’ claims were sufficient and denied the Defendants’ Motion to Dismiss.

Plaintiffs’ Complaint alleged that Plaintiffs entered into a rental-purchase agreement with Defendants for a used couch. Within hours of the couch being delivered to Plaintiffs, Plaintiffs observed live bugs crawling on it. Two (2) different exterminators inspected Plaintiffs’ home and discovered evidence of bed bugs inside the couch. One (1) of the exterminators concluded that the bed bugs came in the apartment from the couch. Defendants would not cover the cost of exterminators unless Plaintiffs would first agree to release Defendants from liability. Defendants also refused to retrieve the infested couch. Plaintiffs filed a Complaint against Defendants in the Circuit Court for Baltimore County, and Defendants removed the case to federal court. After removal, Defendants filed a Motion to Dismiss Plaintiffs’ claims alleging violation of the Maryland Consumer Protection Act (“MCPA”) and fraud, as well as Plaintiffs’ claims for punitive damages, for failure to state a claim upon which relief could be granted.

The Court determined that the resolution of the Motion to Dismiss hinged on whether Plaintiffs sufficiently pleaded fraud and with the requisite particularity required by FED. R. CIV. P. 9(b). First, Plaintiffs alleged that Defendants made false representations (Fraud Element #1) about the quality of the couch, and did so with sufficient particularity to satisfy Rule 9(b). Defendants allegedly “represented that the Couch was of good quality, merchantable and fit for its ordinary and intended use,” when in fact the couch was infested with bed bugs. Plaintiffs alleged a date certain that Defendants made these false representations at its retail store and provided the address of same. The Complaint identified the time, place, and contents of the alleged false representations; and thus, satisfied Rule 9(b). Defendants were on notice about the particular incident giving rise to Plaintiffs’ fraud claim; the Court was satisfied that Plaintiffs’ claims were not frivolous; and Plaintiffs demonstrated that they were in possession of substantial pre-discovery evidence. While Plaintiffs do not name the specific store representative who stated that the couch was of good quality, the Court has previously held and reaffirmed that “where a misrepresentation is attributed to a corporate defendant, the Plaintiff does not necessarily have to identify the individual agent who made the alleged false statement.”

Second, Plaintiffs plausibly alleged Defendants’ knowledge of falsity (Fraud Element #2). Plaintiffs claim that Defendants knew or willfully refused to know that the couch was infested at the time they represented that the couch was of good quality. The Court reasonably inferred that Defendants possessed the requisite knowledge of falsity on the date of the alleged false representation, because the couch was found to be infested only four (4) days later when it was delivered.

Third, Plaintiffs alleged that Defendants falsely represented the quality of the couch with an intent to defraud (Fraud Element #3), “[i]n order to induce [Plaintiffs] to apply for and accept a Rental-Purchase Agreement for the Couch . . . .” These allegations passed muster, and Plaintiffs’ claim for fraud survived Defendants’ Motion to Dismiss.

Plaintiffs’ claim alleging a violation of the MCPA survived for the same reasons. To survive a motion to dismiss, “a consumer . . . must allege (1) an unfair or deceptive practice or misrepresentation that is (2) relied upon, and (3) causes them actual injury.” Defendants challenged only the first element; they contended that Plaintiffs’ MCPA claim should be dismissed because Plaintiffs failed to allege an unfair or deceptive practice or misrepresentation. Section 13-301 of the MCPA lists qualifying unlawful activities, including any “[d]eception, fraud, false pretense, false premise, misrepresentation, or knowing concealment, suppression, or omission of any material fact with the intent that a consumer rely on the same . . . .” MD. CODE ANN., COM. LAW § 13-301(9). This specific subsection of the MCPA “replicates common-law fraud.” See McCormick v. Medtronic, Inc., 101 A. 3d 467, 493 (Md. Ct. Spec. App. 2014). Therefore, Plaintiffs adequately alleged a violation of the MCPA for the same reasons that Plaintiffs alleged an adequate claim for fraud.

Finally, Plaintiffs’ request for punitive damages also survived Defendants’ Motion to Dismiss. In Maryland, punitive damages may only be awarded where “the plaintiff has established the defendant’s conduct was characterized by evil motive, intent to injure, ill will, or fraud, i.e., ‘actual malice’.” Ellerin v. Fairfax Sav., F.S.B., 652 A.2d 1117, 1125 (Md. 1995). Here, having already found that Plaintiffs plausibly alleged the elements of fraud, Defendants’ alleged “actual knowledge of falsity, coupled with [its alleged] intent to deceive [Plaintiffs] by means of the false statement, constitute[d] the actual malice required to support an award of punitive damages.” Thus, Defendants’ Motion to Dismiss Plaintiffs’ request for punitive damages was also denied.

Overall, the Court denied Defendants’ Motion to Dismiss, and allowed Plaintiffs’ fraud, consumer protection, and punitive damages claims to survive.