Wednesday, September 12, 2007

E.D. Pennsylvania Grants Defendant's Motion to Dismiss for Failure to Plead Fraud with Particularity

Per Rosenberg v. Avis Rent A Car System, Inc., Slip Copy, 2007 WL 2213642 (E.D.Pa. Jul 31, 2007) (NO. CIV.A 07-1110):

Defendant next argues that Rosenberg fails to plead the alleged violation of the UTPCPL with sufficient particularity, as required by Rule 9(b). Rosenberg responds that he has fully complied with Rule 9(b), but he requests leave to amend the complaint if this Court disagrees.

Both parties agree that Rule 9(b) requires a heightened level of specificity when pleading fraud. It states, in part, that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Fed.R.Civ.P. 9(b) . Federal courts have analogized fraud pleading to "the first paragraph of any newspaper story," requiring "the who, what, when, where, and how" of the circumstances. DiLeo v. Ernst & Young, 901 F.2d 624, 627 (11th Cir.1990); see In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1422 (3d Cir.1997); Kanter v. Barella, 2007 U.S. Dist. WL 1519894, at *2 (3d Cir. May 25, 2007). However, "focusing exclusively on [the Rule's] 'particularity' language is too narrow an approach and fails to take account of the general simplicity and flexibility contemplated by the rules." Id. at 100 (quotations omitted), quoting 5 Wright & Miller, supra, § 1298, at 407 (1969).

Rule 9(b) "applies not only to fraud actions under federal statutes, but to fraud claims based on state law." Christidis v. First Pa. Mortg. Trust, 717 F.2d 96, 99 (3d Cir.1983). In order to properly state a UTPCPL claim in Pennsylvania courts-and consequently in federal courts applying the state law via diversity jurisdiction-"a plaintiff must plead the following elements with particularity: (1) a specific false representation of material fact; (2) knowledge by the person who made it of its falsity; (3) ignorance of its falsity by the person to whom it was made; (4) the intention that it should be acted upon; and (5) that the plaintiff acted upon it to his damage." Fass v. State Farm Fire & Cas. Co., 2006 U.S. Dist. WL 2129098, at *2 (E.D.Pa. July 26, 2006), quoting U.S. ex. rel. Atkinson v. Pa. Shipbuilding Co., 255 F.Supp.2d. 351, 407 (E.D.Pa.2002); see Lutzky v. Petcove, 2006 U.S. Dist. WL 2456466, at *2 (E.D.Pa. Aug. 21, 2006). However, the application of Rule 9(b) is relaxed "when the factual information regarding the alleged fraud is within the defendant's control." Christidis, 717 F.2d at 99-100.

Upon reviewing the complaint and all subsequent documents submitted in this matter, I find that Rosenberg has failed to plead a violation of the UTPCPL with the particularity required by Rule 9(b) and Third Circuit precedent. The fraud allegations are vague, include internal contradictions, and failure to address specific elements of common law fraud. For example, Rosenberg fails to allege with particularity that defendant Avis or its representative had knowledge of the falsity of the alleged representation. The complaint does not provide the exact or even the approximate date of the alleged fraudulent transaction between Avis and Rosenberg. In addition, while one section of the complaint alleges fraudulent behavior for a period of four years, Doc. 1 at 2, another section alleges fraudulent behavior "[t]hroughout the relevant period, since at least 2006, but possibly before (which will be confirmed through discovery) ...." Doc. 1 at 3. Plaintiff's reply brief alleges fraudulent practices for "nearly six (6) years." Doc. 17 at 6.

Count I of Rosenberg's complaint does provide a litany of legal terms, assailing Avis's "unconscionable commercial practices, deceptions, frauds, false pretenses, false promises, misrepresentations or concealment, suppression, or omission of material facts with the intent that Plaintiff Larry Rosenberg and members of the class rely upon such concealment, suppression or omission in connection with the rental of a vehicle and are unlawful under the Act." Doc. 1 at 7. This list of accusations, unaccompanied by the substance of specific factual allegations that fit the elements of common law fraud, does not meet the Rule 9(b) requirement of specificity in fraud pleading.

In so deciding, I plainly disagree with Rosenberg's contention that he has "fully complied with Rule 9(b)" by stating in his complaint that "he was told a rental car would be a certain price, and upon receiving his bank statement he realized that Defendant Avis had deceptively added charges to his bill." Doc. 17 at 14. I also disagree with plaintiff that his vague UTPCPL allegations should be allowed to proceed because "much of the information is contained within [defendant Avis's] internal business operations" which could only be revealed upon discovery, Doc. 17 at 15, nor do I find that the "factual information is peculiarly within the defendant's knowledge or control." Id., citing Craftmatic Sec. Litig. v. Kraftsow, 890 F.2d 628, 645 (3d Cir.1989). While "[i]t is the function of discovery to fill in the details," Seville Indus. Machinery Corp. v. Southmost Machinery Corp., 742 F.2d 786, 790 (3d Cir.1984), citing Wright & Miller, supra, § 1215, plaintiff nevertheless has an obligation at the outset of his claim to plead the factual circumstances of the transaction that precipitated Rosenberg filing the class action complaint. Such a pleading would undoubtedly describe the outward conduct of both parties during the transaction-information that is surely within Rosenberg's knowledge.

. . .

Defendant's motion to dismiss for failure to plead fraud with particularity is granted, and Rosenberg is hereby provided 30 days from the date of this order to amend and resubmit his complaint in compliance with this order. See Grayson v. Mayview State Hospital, 293 F.3d 103, 108 (3d Cir.2002); Novinger Group Inc. v. Hartford Ins., 2007 U.S. Dist. WL 1450396, at *4 (M.D.Pa. May 16, 2007).


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