E-Alert Case Updates
Trial Court Properly Dismissed Plaintiffs’ Case Against Bank Defendant on Basis of Res Judicata, Since Plaintiff LLC Member and His LLC Were In Privity Where LLC Member Held Himself Out As LLC Representative in Prior Litigation
Price v. Independence Federal Savings Bank
In Price v. Independence Federal Savings Bank, Nos. 12-CV-1692 & 13-CV-686 (District of Columbia Court of Appeals, Feb. 19, 2015), the appellate court affirmed the trial court order dismissing four (4) counts of Plaintiffs’ Complaint on the basis of res judicata, and the remaining counts of the Complaint because Plaintiffs were not consumers within the meaning of the D.C. Consumer Protection Procedures Act, in a case advanced by Plaintiffs against Defendant Bank for wrongful foreclosure, breach of contract, breach of good faith and fair dealing, wrongful eviction, and violation of the Consumer Protection Procedures Act (“CPPA”).
In terms of the underlying facts, Plaintiff Price owned a mixed use property, and the other Plaintiff, an LLC of which Price was a member, was the commercial tenant of the property. In 2007, Price refinanced the property by way of a loan from the Defendant Bank. In 2008, Price defaulted on the loan and the Defendant Bank accelerated the entire balance. Plaintiff did not pay, so the Bank held a foreclosure sale and sold the property to itself. Thereafter, the Bank initiated a landlord-tenant action (LT1) against the LLC for nonpayment of rent and obtained a judgment of possession. The LLC redeemed the property by paying rent. After, the Bank notified the LLC that it wished to gain possession of the property since the LLC was now considered to be a tenant at will following the foreclosure. The Bank initiated a second landlord-tenant action (LT2) against the LLC, seeking possession. At a hearing, Price appeared as a member of the LLC, but was informed by the trial court that he did not have standing to represent the LLC and that an attorney must represent the LLC. The trial court then granted the Bank a non-redeemable judgment for possession. At a hearing to stay the writ of execution, Price again appeared as a member of the LLC and was again informed by the trial court that he could not appear on the LLC’s behalf because he was not an attorney.
Subsequently, Price and the LLC filed the present action against the Defendant Bank alleging wrongful foreclosure, breach of contract, breach of good faith and fair dealing, wrongful eviction, predatory lending, and deceptive trade practices. The trial court granted the Defendant’s motion to dismiss the first four (4) counts of the Complaint (wrongful foreclosure, breach of contract, breach of good faith and fair dealing, and wrongful eviction), on the basis of res judicata, reasoning that the LT2 case had resolved those issues, and that Price and the LLC were privies. The court allowed Plaintiffs to amend their predatory lending and deceptive trade practices counts to a Consumer Protection Procedures Act (“CPPA”) claim, but the court subsequently dismissed that count as well on grounds that Plaintiffs were not consumers within the meaning of the CPPA. Plaintiffs appealed.
Plaintiffs argued that the trial court erred when it dismissed the first four (4) counts of the Complaint on the basis of res judicata, since privity did not exist between Price and the LLC. Plaintiffs argued that they represented different interests and did not share the same legal right and that Price’s appearance for the LLC in the landlord-tenant proceedings did not establish privity because Price was technically prohibited from doing so under court rules. Because Price did not have the ability to control or substantially participate in the LLC’s cases, Plaintiffs argued that there can be no finding against them as to privity, and further argued they were denied due process because Price was not named as a party in LT2 and because neither he nor the LLC had an opportunity to present their interest before the Landlord Tenant Branch. The appellate court held that for purposes of res judicata, an owner or member who holds himself out as an LLC representative in connection with litigation, as Price did here, is in privity with the LLC with respect to that litigation. Therefore, the trial court properly dismissed the first four (4) counts of the Complaint on the basis of res judicata as those issues were conclusively resolved in the prior LT2 action.
The appellate court also determined that the trial court properly dismissed the CPPA claim on the basis that Plaintiffs were not consumers entitled to protection under the Act. The appellate court determined that Price fell within the definition of a merchant rather than a consumer, since there was no showing that Price owned the property for personal, family, or household purposes—instead, Price was living in Atlanta during his dealings with Defendant; he leased the property to two (2) residential tenants and the LLC to run a business; and his tax records listed the property as commercial. Accordingly, the appellate court affirmed the trial court dismissal of the CPPA claim, and Plaintiffs’ entire case was properly dismissed.
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