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Home>Duane Morris LLP Announces: Consumers File Class Action Against Baltimore Nonprofit Second Chance, Inc. and Virginia-Based Appraisal Company NoVaStar Appraisals, Inc.

Duane Morris LLP Announces: Consumers File Class Action Against Baltimore Nonprofit Second Chance, Inc. and Virginia-Based Appraisal Company NoVaStar Appraisals, Inc.

Duane Morris LLP Announces: Consumers File Class Action Against Baltimore Nonprofit Second Chance, Inc. and Virginia-Based Appraisal Company NoVaStar Appraisals, Inc.

10/05/2017

Duane Morris LLP Announces: Consumers File Class Action Against Baltimore Nonprofit Second Chance, Inc. and Virginia-Based Appraisal Company NoVaStar Appraisals, Inc.

A Bethesda, Maryland married couple is leading a class action lawsuit against a charity and an appraisal company for allegedly misleading them and hundreds of other Maryland consumers. The lawsuit, filed in the Circuit Court for Montgomery County, Maryland, details how Baltimore-based Second Chance, Inc. deceived consumers into donating to the charity and how Virginia-based NoVaStar Appraisals, Inc. deceived consumers into purchasing its high-priced appraisals.

The couple, Nitin Gogtay and Kiran Dixit, and their lawyers at Duane Morris LLP and at New Jersey-based Buttaci Leardi & Werner LLC, say that Second Chance, through misleading promises of significant financial benefits in the form of tax refunds and deductions, persuaded hundreds of consumers to donate their homes to the charity through what is called “deconstruction”—a process that involves dismantling a house and preserving finished and reusable materials from that house for other uses or purposes. NoVaStar independently made misleading guarantees of delivering appraisals of deconstructed homes that would be “IRS compliant” and that provided consumers “peace of mind” because there would be “no IRS audits.”

The problem, the lawsuit contends, is that Second Chance and NoVaStar have known for many years that (1) the IRS audited consumers and did not allow tax refunds or deductions for house donations made to Second Chance, and (2) that NoVaStar’s appraisals were IRS non-compliant. According to the complaint, despite this knowledge, Second Chance and NoVaStar concealed that information from Maryland consumers, including Gogtay and Dixit.

In 2013, Gogtay and Dixit used Second Chance to deconstruct their home in Bethesda, Maryland. They were told by the charity—through tax planning worksheets, emails, and telephone conversations—that donating their house after paying for or using Second Chance’s deconstruction services would produce a net benefit of $76,000. That supposed benefit was primarily based on an expensive and supposed IRS-compliant appraisal from NoVaStar. Second Chance also persuaded the couple to commit to an additional cash contribution of $35,000 that would be paid over a three-year period.

In March 2014, the couple filed their federal and Maryland state tax returns, claiming a $250,000 non-cash charitable contribution to Second Chance, as the charity had indicated was allowed and that NoVaStar declared was valid through its “IRS compliant” appraisal. In the fall of 2015, however, the IRS audited the couple’s 2013 federal tax returns and disallowed the deduction in its entirety, concluding that the appraisal was non-compliant (among other things).

The class action complaint alleges that such disallowances happened many other times in the past to other Maryland consumers. Yet, Second Chance and NoVaStar aggressively marketed its services, benefits, and appraisals knowing that the IRS disallowed those benefits and rejected those appraisals. The class action complaint further claims that none of this information was public or otherwise disclosed to Maryland consumers (including Gogtay and Dixit). Yet, Second Chance and NoVaStar continued marketing their services and supposed benefits anyway.

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