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Hardy v. Flood

United States District Court, D. Colorado

February 23, 2018

MERVIN J. FLOOD, and SUSAN S. FLOOD, Defendants.


          CHRISTINE M. ARGUELLO, United States District Judge.

         This matter is before the Court upon the February 2, 2018, Recommendation by Magistrate Judge Michael J. Watanabe that the Court deny Defendants Mervin Flood and Susan Flood's Motion to Dismiss. (Doc. # 62.) Defendants timely objected to the Recommendation. (Doc. # 63.) For the reasons described herein, the Court rejects the Recommendation and grants Defendants' Motion to Dismiss (Doc. # 35.)

         I. BACKGROUND

         Plaintiffs Steven Hardy and Jody Whitson-Hardy purchased certain residential property in Franktown, Colorado (the “Property”), from Defendants pursuant to a written Contract to Buy and Sell Real Estate (the “Contract”). (Doc. # 32 at 2.) The parties executed the Contract on April 27, 2013. (Doc. # 62 at 6); see (Doc. # 35-1.)

         Approximately three and a half years later, on December 28, 2016, Plaintiffs instituted this action in Douglas County District Court. See (Doc. # 3.) Defendants subsequently removed the action to this Court pursuant to 28 U.S.C. § 1332 on March 16, 2017. (Doc. # 1.) Plaintiffs allege that “[p]rior to closing on the Property, Defendants made written and oral representations to [Plaintiffs] concerning the condition of the Property, including, but not limited to, whether the Property had moisture or water problems and whether improvements to the Property had been in compliance with governmental building code requirements.” (Doc. # 3 at 5.) Plaintiffs assert three claims: (1) breach of contract; (2) fraud; and (3) negligent misrepresentation. (Id. at 5-7.)

         Shortly after removing the action to this Court, Defendants filed a Motion for More Definite Statement under Federal Rule of Civil Procedure 12(e), asserting that Plaintiffs' Complaint was neither definite nor particular enough to satisfy Rules 9(b) and 9(f). (Doc. # 7.) Magistrate Judge Watanabe denied Defendants' Motion for More Definite Statement on May 5, 2017. (Doc. # 23.) In his view, “Plaintiffs' Complaint gives Defendants adequate information to frame a responsive pleading.” (Id. at 2.) Plaintiffs filed an Amended Complaint (Doc. # 32) on June 9, 2017 “only to confirm that they are seeking an award of punitive/exemplary damages.” (Doc. # 37 at 1 n.1.) The Amended Complaint maintains Plaintiffs' theory of the case and claims for breach of contract, fraud, and negligent misrepresentation, and does not include additional factual allegations. (Doc. # 32.)

         Defendants filed the instant Motion to Dismiss pursuant to Rule 12(b)(6) on June 12, 2017. (Doc. # 35.) Defendants argue Plaintiffs' Amended Complaint should be dismissed for five reasons: (1) Plaintiffs' action is barred by statutes of limitations; (2) Plaintiffs cannot show justifiable reliance; (3) Plaintiffs lack a factual basis to assert that Defendants knew of alleged water damage prior to sale; (4) whether Defendants obtained a permit for improving the Property's basement is not a material fact; and (5) Plaintiffs assert conclusions of law and therefore do not establish a breach of contract claim. (Id. at 2-3.) Plaintiffs responded in opposition on June 13, 2017 (Doc. # 37, ) and Defendants replied in support of dismissal on June 27, 2017 (Doc. # 42.)

         On February 2, 2018, Magistrate Judge Watanabe issued his Recommendation in favor of Plaintiffs. (Doc. # 62.) As the Court details below, Magistrate Judge Watanabe rejected each of Defendants' five arguments and recommended that this Court deny Defendants' Motion to Dismiss. (Id.) Defendants timely objected to the Recommendation on February 15, 2018. (Doc. # 63.) Defendants object to Magistrate Judge Watanabe's analysis of their third argument for dismissal-that “Plaintiffs' Amended Complaint is whole conclusory in nature and failures to meet” pleading standards.” (Id. at 1.)



         When a magistrate judge issues a recommendation on a dispositive matter, Rule 72(b)(3) requires that the district judge “determine de novo any part of the magistrate judge's [recommended] disposition that has been properly objected to.” An objection is properly made if it is both timely and specific. United States v. One Parcel of Real Property Known As 2121 East 30th Street, 73 F.3d 1057, 1059 (10th Cir.1996). In conducting its review, “[t]he district judge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions.” Fed.R.Civ.P. 72(b)(3); see also 28 U.S.C. § 636(b)(1).


         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). The scope of the allegations may not be “so general that they encompass a wide swath of conduct, much of it innocent” or else the plaintiff has ‘not nudged [his] claims across the line from conceivable to plausible.'” Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (quoting Twombly, 550 U.S. at 570). A plaintiff may not rely on mere labels or conclusions, “and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. The ultimate duty of the court is to “determine whether the complaint sufficiently alleges facts supporting all the elements necessary to establish an entitlement to relief under the legal theory proposed.” Forest Guardians v. Forsgren, 478 F.3d 1149, 1160 (10th Cir. 2007).

         III. ...

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