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Milroy v. Bell Partners Inc.

United States District Court, E.D. North Carolina, Western Division

July 30, 2019

BELL PARTNERS INC., et al., Defendants.


          James C. Dever III, Judge

         On September 21, 2018, Randi Milroy ("Milroy") and Dan Williams ("Williams"; collectively "plaintiffs"), on behalf of themselves and others similarly situated, filed a complaint in Wake County Superior Court against Bell Partners Inc. ("Bell"), LSREF3 Bravo (Raleigh), LLC d/b/a The Reserve at Lake Lynn ("LSREF3" or "Reserve at Lake Lynn"), DPR Westover, LLC ("DPR"), and Hudson Capital Weston, LLC d/b/a Cary Reserve at Weston ("Reserve at Weston"; collectively, "defendants").[1] Plaintiffs failed to pay their rent on time, and defendants took remedial action under the leases. Plaintiffs allege that defendants violated the North Carolina Residential Rental Agreements Act ("RRAA"), N.C. Gen. Stat. § 42-38 et seq., the North Carolina Debt Collection Act ("NCDCA"), N.C. Gen. Stat. § 75-50 et seq., and the North Carolina Unfair and Deceptive Trade Practices Act ("UDTPA"), N.C. Gen. Stat. § 75-1 et seq., [D.E. 1-1]. On October 30, 2018, LSREF3 removed the action to this court under the Class Action Fairness Act of 2005 [D.E. 1]. On December 6, 2018, defendants moved to dismiss the complaint for failure to state a claim [D.E. 26, 28, 30] and filed memoranda in support [D.E. 27, 29, 31]. On January 28, 2019, plaintiffs responded in opposition [D.E. 35]. On February 25, 2019, defendants replied [D.E. 42, 43, 44]. As explained below, the court grants defendants' motions to dismiss and dismisses plaintiffs' complaint.


         Plaintiffs are tenants at apartment complexes leased from or managed by defendants. Bell "provides property management services" to various apartment complexes in North Carolina, including Reserve at Lake Lynn and Reserve at Weston. Compl. [D.E. 1-1] ¶¶ 3, 12-14. Milroy leased an apartment at Reserve at Lynn Lake, and Williams leased an apartment at Reserve at Weston. See Id. ¶¶ 8-9. Plaintiffs allege that defendants are "landlords" and "debt collectors" under North Carolina law and that the defendants operate as a single entity. See Id. ¶¶ 19-23, 25.

         Milroy leased an apartment at Reserve at Lake Lynn from November 22, 2016, through November2l, 2018, with monthly rent payments of $838.00. See id ¶¶ 54, 56; Pls.' Ex. 1 [D.E. 1-1] 34-39; Pls.' Ex. 2 [D.E. 1-1] 40-45. Williams leased an apartment at Reserve at Weston from September 25, 2016, to September 24, 2017, and March 1, 2018, to February 28, 2019, with monthly rentpayments of $1, 195.00. See Compl. [D.E. 1-1] ¶¶ 72, 77; Pls.' Ex.3 [D.E. 1-1] 46-51; Pls.' Ex. 4 [D.E. 1-1] 52-57. Rent payments were due on or before the first day of each month "with no grace period." Rg., Pls.' Ex. 2 [D.E. 1-1] 40 ¶ 6; Pls.' Ex. 4 [D.E. 1-1] 52 ¶ 6.

         If plaintiffs did not pay rent on time, then under their leases they were delinquent, and the leases authorized various remedies. Kg,, Pls.' Ex. 2 [D.E. 1-1] 40 ¶ 6; Pls.' Ex. 4 [D.E. 1-1] 52 ¶ 6. Those remedies included terminating the tenant's lease, instituting proceedings for summary ejectment, or pursuing any remedy permitted by law. See, e.g.. Pls.' Ex. 2 [D.E. 1-1] 41 ¶ 12, 43 ¶ 31; Pls.' Ex. 4 [D.E. 1-1] 53 ¶ 12, 55 ¶ 31. Additionally, the leases provided that "[defendants] may recover from [a defaulting tenant] attorney's fees and all litigation costs to the extent permitted by law." Kg. Pls.' Ex. 2 [D.E. 1-1] 43 ¶ 31; Pls.' Ex. 4 [D.E. 1-1] 55 ¶ 31. If defendants pursued summary ejectment, plaintiffs' leases authorized defendants to "recover from [a defaulting tenant] the highest one of the following fees (which shall be in addition to late fees, attorney's fees, and any applicable court costs):" a complaint filing fee, court appearance fee, or second trial fee. Compl. [D.E. 1-1] ¶¶ 27-28; e.g. Pls.' Ex.2[D.E. 1-1] 43 ¶ 31; Pls.' Ex. 4 [D.E. 1-1] 55 ¶ 31; see N.C. Gen. Stat.§ 42-46 (e)-(g).

         Plaintiffs allege that defendants follow a regular procedure if a tenant fails to timely pay rent. First, on approximately the sixth day of the month, defendants "cause written letters or emails to be delivered to the tenant stating that the tenant 'will also be charged for court costs' if he or she fails to make a complete rental payment." Compl. [D.E. 1-1] ¶ 34; see Pls.' Ex. 5 [D.E. 1-1] 58. Next, on approximately the eleventh day of the month, defendants charge the tenant "eviction fees," sometimes without a court order and before filing a complaint against the tenant, and file a legal action to evict the tenant. Compl. [D.E. 1-1] ¶¶ 41-42, 44-46. The eviction fees include the filing fees ($96.00), sheriff service fees ($30.00), and attorneys' fees (a flat fee). See id ¶¶ 29-33. These fees are allegedly "in addition to, and separate from, the late fees and the fees specifically authorized by [ N.C. Gen. Stat.] § 42-46." Id. ¶ 43. Finally, after defendants enter the eviction fees "onto a tenant's account ledger," defendants cause "additional written letters or emails to be delivered to the tenant stating that [e]viction [f]ees are currently due and owing." Id. ¶ 48; see Pls.' Ex. 8 [D.E. 1-1] 61. Once defendants enter the eviction fees onto a tenant's account ledger, defendants will not review or remove the fees, even if defendants improperly assessed the fees or a summary ejectment action is dismissed. See Compl. [D.E. 1-1] ¶¶ 51-53.

         Both Milroy and Williams were, at some point, late in paying rent. See Compl. [D.E. 1-1] ¶¶ 57, 78; Pls.' Ex. 5 [D.E. 1-1] 58; Pls.' Ex. 6 [D.E. 1-1] 59; Pls.' Ex. 7 [D.E. 1-1] 60; Pls.' Ex. 9 [D.E. 1-1] 62; Pls.' Ex. 10 [D.E. 1-1] 63-67. In September 2017, Milroy did not pay rent on time. See Id. ¶ 57. Defendants charged Milroy a late fee under N.C. Gen. Stat. § 42-46(a) and eviction fees. See Id. ¶¶ 57-60; Pls.' Ex. 10 [D.E. 1-1] 64. Williams did not pay rent on time on several occasions. See Compl. [D.E. 1-1] ¶¶ 78-79. Each time that Williams failed to timely pay his rent, defendants added eviction fees to Williams's account. See Id. ¶¶ 82-84. In total, Milroy paid $201.00 in "eviction fees" and Williams paid approximately $583.00 in "eviction fees." See Id. ¶¶ 58, 82; Pls.'Ex. 11 [D.E. 1-1].

         Plaintiffs allege that, when defendants added eviction fees to plaintiffs' accounts, no hearing had been held, no attorney had appeared in court to evict plaintiffs, defendants had not hired an attorney to collect any debt, and defendants had not served plaintiffs with a complaint. See Compl. [D.E. 1-1] ¶¶ 61-63, 66, 84-88. For each instance of default, plaintiffs cured their defaults and defendants voluntarily dismissed their summary ejectment complaints without prejudice. See Id. ¶¶ 68-69, 96-99. Plaintiff's allege that no court awarded fees to defendants and that plaintiffs did not settle with defendants. See id ¶¶ 70-71, 100-05.


         A motion to dismiss under Rule 12(b)(6) tests the complaint's legal and factual sufficiency. See Ashcroft v. Iqbal, 556 U.S. 662, 677-80 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554-63 (2007); Coleman v. Md. Court of Appeals, 626 F.3d 187, 190 (4th Cir. 2010), affd. 566 U.S. 30 (2012); Nemet Chevrolet Ltd. v. Inc., 591 F.3d 250, 255 (4th Cir. 2009); Giairatano v. Tnnnsnn, 521 F.3d 298, 302 (4th Cir. 2008). To withstand a Rule 12(b)(6) motion, a pleading "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Iqbal. 556 U.S. at 678 (quotation omitted); see Twombly, 550 U.S. at 570; Giarratano, 521 F.3d at 302. In considering the motion, the court must construe the facts and reasonable inferences "in the light most favorable to the [nonmoving party]." Massey v. Ojaniit, 759 F.3d 343, 352 (4th Cir. 2014) (quotation omitted); see Clatterbuck v. City of Charlottesville, 708 F.3d 549, 557 (4th Cir. 2013), abrogated on other grounds by Reed v. Town of Gilbert, 135 S.Ct. 2218 (2015). A court need not accept as true a complaint's legal conclusions, "unwarranted inferences, unreasonable conclusions, or arguments." Giarratano. 521 F.3d at 302 (quotation omitted); see Iqbal, 556 U.S. at 678-79. Rather, plaintiffs' allegations must "nudge[] their claims," Twombly, 550 U.S. at 570, beyond the realm of "mere possibility" into "plausibility." Iqbal, 556 U.S. at 678-79.

         When evaluating a motion to dismiss, a court considers the pleadings and any materials "attached or incorporated into the complaint." E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 448 (4th Cir. 2011); see Fed.R.Civ.P. 10(c); Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159, 165-66 (4th Cir. 2016); Thompson v. Greene. 427 F.3d 263, 268 (4th Cir. 2005). A court also may consider a document submitted by a moving party if it is "integral to the complaint and there is no dispute about the document's authenticity" without converting the motion into one for summary judgment. Goines. 822 F.3d at 166. Additionally, a court may take judicial notice of public records when evaluating a motion to dismiss for failure to state a claim. See, e.g., Fed.R.Evid. 201; Tellabs, Inc. v. Makor Issues & Rights. Ltd., 551 U.S. 308, 322 (2007); Philips v. Pitt Cty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009).

         The motions to dismiss require the court to consider the plaintiffs' state law claims, and the parties agree that North Carolina law applies to this action. Accordingly, this court must predict how the Supreme Court of North Carolina would rule on any disputed state-law issue. See Twin City Fire Ins. Co. v. Ben Arnold-Sunbelt Beverage Co. of S.C.,433 F.3d 365, 369 (4th Cir. 2005). In doing so, the court must look first to opinions of the Supreme Court of North Carolina. See Id.; Stanley, CTS Corp.,817 F.3d 96, 100 (4th Cir. 2016). If there are no governing opinions from that court, this court may consider the opinions of the North Carolina Court of Appeals, treatises, and "the practices of other states." Twin City Fire Ins. Co.. 433 F.3d at 369 (quotation omitted).[2] In predicting how the highest court of a state would address an issue, this court must "follow the decision of an intermediate state appellate court unless there [are] persuasive data that the highest court would decide differently." Toloczko, 728 F.3d at 398 (quotation omitted); Hicks v. Feiock,485 U.S. 624, 630 & n.3 (1988). Moreover, in predicting how the highest court of a state would address an issue, this court "should not create or expand a [s]tate's public policy." Time ...

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