Moss Grove II Property Owners' Association, Inc. v. Lennar Carolinas, LLC, 2:22-cv-04287

Moss Grove II Property Owners’ Association (the Association) is the HOA for Moss Grove subdivision; Lennar Carolinas, LLC (Lennar) was the Declarant responsible for development, maintenance, and a capital reserve fund.
Lennar executed the recorded Declaration and Bylaws (Aug. 19, 2014). Article 15.4 of the Declaration bars any suit with > $100,000 in controversy unless approved by 75% of the Association, but contains carve-outs (e.g., actions to enforce the Declaration; enforcement of written contracts; collection of assessments).
The Association alleges Lennar breached duties while Declarant by failing to maintain Moss Grove Plant Dam I, causing ongoing safety risks and inadequate funding for repairs.
Members transitioned control from Lennar to the elected Board on Oct. 23, 2019. The Association filed suit Oct. 24, 2022 asserting seven claims (negligence/gross negligence; negligent misrepresentation; breach of contract; breach of express warranty; breach of implied warranty of workmanlike service; breach of fiduciary duty; SCUTPA violation). Lennar removed to federal court based on diversity.
Lennar moved to dismiss for lack of standing (failure to satisfy Declaration’s 75% litigation-approval prerequisite) and to dismiss the negligent misrepresentation claim for failure to state a claim; the Court heard argument and ruled Feb. 14, 2023.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Association lacks standing for failing to obtain the Declaration’s 75% litigation approval	The Declaration’s litigation prerequisite does not apply or was satisfied/waived; some claims fall under carve-outs (enforcing Declaration or contracts)	The Association did not allege compliance with the 75% approval, so it lacks standing	Denied dismissal on standing at this stage; complaint plausibly alleges carve-outs/organizational standing so motion denied without resolving standing definitively
Whether internal noncompliance destroys organizational standing (organizational vs representational standing)	Association can have organizational standing to sue in its own right irrespective of internal voting procedures	Failure to follow internal procedures defeats standing (citing district authority)	Court found unsettled law; noted distinction between representational and organizational standing and declined to dismiss now; parties may brief later
Whether negligent misrepresentation claim is sufficiently pleaded under South Carolina law	Alleged misrepresentations about common areas and Lennar’s duties, and that Association members will bear repair costs (pecuniary loss)	Allegations are threadbare; no specific false statements, no detailed justifiable reliance, no proximate pecuniary loss pleaded	Court dismissed negligent misrepresentation claim without prejudice and granted leave to amend (claim deficient as pleaded)

Lujan v. Defs. of Wildlife, 504 U.S. 555 (1992) (defines Article III standing elements)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for complaints)
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state plausible claim)
Hunt v. Wash. State Apple Advert. Comm’n, 432 U.S. 333 (1977) (associational standing test)
White Tail Park, Inc. v. Stroube, 413 F.3d 451 (4th Cir. 2005) (organizational standing explained)
Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Found., Inc., 484 U.S. 49 (1987) (pleading of standing may rest on allegations, not proof)
McLaughlin v. Williams, 665 S.E.2d 667 (S.C. Ct. App. 2008) (elements of negligent misrepresentation under South Carolina law)
Stegelin v. Pac. Life Ins. Co., 592 F. Supp. 3d 474 (D.S.C. 2022) (justifiable reliance requirement in negligent misrepresentation)
Francis v. Giacomelli, 588 F.3d 186 (4th Cir. 2009) (Rule 12(b)(6) challenges legal sufficiency of a complaint)
Mylan Labs., Inc. v. Matkari, 7 F.3d 1130 (4th Cir. 1993) (complaint should not be dismissed unless no set of facts can support relief)