West v. Christopher Consultants, 2020 Va. Cir. LEXIS 82 (Loudoun Cnty. Cir. Ct. Jun. 10, 2020)
After moving in, new-home purchasers discovered that their home was subject to flooding. Evidence indicated that both the homeowners association (“HOA”) and the engineering firm that designed the community’s stormwater flows knew about the flooding beforehand.
Over the next several years, the engineering firm and the HOA modified the site in an effort to address the flooding. Rather than solving the problem, however, the changes exacerbated the flood risk while concealing its true severity. In 2015, despite the modifications, the home suffered a catastrophic flood causing thousands of dollars in damages. The home flooded again in 2018. The second flood prompted the homeowners to file suit against both the HOA and the engineering firm. The complaint alleged, among other things, fraud and violations of Virginia’s Consumer Protection Act (“VCPA”).
The Defendants demurred to the fraud claim by arguing that the homeowners had not pleaded it with requisite specificity. In their complaint, the homeowners alleged that prior to the flooding, an unnamed representative of the engineering firm conveyed assurances that the home was safe. The homeowners did not specify when the call occurred, nor when the firm made alleged “repeated assurances” to the homeowners regarding the safety of the remediations.
The Court found that the missing information undermined a claim for fraud, which demands a heightened standard for pleading. The reason for the heightened standard is, in part, that fraud must be proven by clear and convincing evidence (rather than the normal preponderance). Moreover, a fraud claim, like any civil claim, must contain sufficient detail to allow the defendant to shape a defense. The homeowners’ complaint did not even indicate which employee allegedly made misrepresentations to them, or when, and was thus inadequate for shaping a defense. Therefore, the Plaintiffs’ fraud claim could not survive demurrer as pleaded.
Defendants demurred to the VCPA claim by arguing that (1) it also was not pleaded with the requisite specificity for fraud claims, and further, that (2) the homeowners were not a party to any transaction with the engineering firm. As to the first argument, the Court held that VCPA claims do not call for heightened specificity when pleaded, because, unlike fraud claims, they need only be proven by a preponderance of the evidence. Moreover, the General Assembly enacted the VCPA to supplement the common law on a variety of consumer claims, not just fraud. It follows that VCPA claims do not require a heightened pleading standard, and the homeowner’s VCPA claim did not fail for lack of specificity.
It is the case, however, that the VCPA only covers parties to a consumer transaction. In this instance, the engineering firm was in privity with the HOA, not the homeowners. Indeed, the homeowners pleaded no facts indicating they had ever transacted with the engineering firm or any downstream affiliate. Accordingly, the homeowners could not state a claim for relief under the VCPA, because they were not consumers with respect to the firm’s alleged wrongful acts.