Kiviti v. Bhatt, 2022 U.S. Dist. LEXIS 40683 (E.D. Va. Feb. 9, 2022)
On February 28, 2021, Roee Kiviti et al. (“Kiviti”) filed a two-count complaint to fix and deem non-dischargeable the obligations of Naveem Prasad Bhatt (“Bhatt”) to Kiviti pursuant to 11 U.S.C. § 523. Count I sought a judgment to disgorge a $58,770.00 deposit Kiviti paid to Bhatt’s home renovation company. Count II sought to hold such judgment non-dischargeable in bankruptcy based on fraud. On May 4, 2021, the Bankruptcy Court granted in part and denied in part Bhatt’s Motion to Dismiss, dismissing the complaint as to Count II. On June 10, 2021, Bhatt filed an answer to Count I. On August 9, 2021, the parties filed a joint stipulation of dismissal as to Count I without prejudice and the Bankruptcy Court closed the case the next day. On August 10, 2021, Kiviti filed a Notice of Appeal with respect to the Bankruptcy Court’s May 20, 2021 Order dismissing Count II of the complaint.
On appeal, the Court affirmed the Bankruptcy Court’s order dismissing Count II of the complaint. The Court found that the only alleged factual support for Kiviti’s claim in Count I was that, in reliance on Bhatt’s false representation that he was a licensed contractor, Kiviti gave Bhatt a deposit and did not receive the promised services. The Court noted that the sole legal basis for the liability and associated damages in Count I that Kiviti sought to have declared non-dischargeable in Count II was Bhatt’s violation of 16 DCMR § 800.1, a strict liability statute that requires disgorgement of all funds paid to an unlicensed contractor regardless of whether possession of a license was misrepresented and regardless of the quality of work performed. Dismissing the appeal, the Court determined that any liability and associated damages in Count I would not be proximately caused by the alleged misrepresentation that formed the sole basis for the claim of non-dischargeability in Count II. More specifically, the Court determined that Kiviti did not allege loss causation, which requires that the liability and associated damages for a violation of 16 DCMR § 800.1 be caused by the alleged misrepresentation.