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S.D. Benner, LLC v. Bradley Co. LLC

United States District Court, W.D. Michigan, Southern Division

March 30, 2017

S.D. Benner, LLC and S.D. Benner III, LLC, Plaintiffs,
Bradley Company, LLC, John Mundell, and Bradley Toothaker, Defendants.


          Paul L. Maloney United States District Judge.

         Pending before this Court are two motions to dismiss. The first motion was filed by Defendant John Mundell. (ECF No. 13 Motion and ECF No. 14 Brief.) The second motion was filed jointly by Defendants Bradley Toothaker and Bradley Company. (ECF No. 15 Motion and ECF No. 16 Brief.) All three defendants challenge the sufficiency of the pleadings in the amended complaint to allege a claim under Racketeer Influenced and Corrupt Organizations Act (RICO). Plaintiffs S.D. Benner and S.D. Benner III (the Benner Companies) filed responses (ECF Nos. 16 and 18) and Defendants filed replies (ECF Nos. 20 and 21). The Court agrees with Defendants that the amended complaint fails to allege facts with sufficient facts to sustain the RICO claims and will grant the motions.


         Under the notice pleading requirements, a complaint must contain a short and plain statement of the claim showing how the pleader is entitled to relief. Fed.R.Civ.P. 8(a)(2); see Thompson v. Bank of America, N.A., 773 F.3d 741, 750 (6th Cir. 2014) (holding that to survive a Rule 12(b)(6) motion, the complaint ''must comply with the pleading requirements of Rule 8(a).''). The complaint need not contain detailed factual allegations, but it must include more than labels, conclusions, and formulaic recitations of the elements of a cause of action. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A defendant bringing a motion to dismiss for failure to state a claim under Rule 12(b)(6) tests whether a cognizable claim has been pled in the complaint. Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988). Although the court considers the well-pled factual allegations in the complaint, a motion to dismiss turns exclusively on questions of law. See Thomas v. Arn, 474 U.S. 140, 150 n.8 (1985); see also Ashcroft v. Iqbal, 556 U.S. 662, 674-75 (2009) (''Evaluating the sufficiency of the complaint is not a 'fact-based' question of law, . . . .'').

         To survive a motion to dismiss, A[t]he complaint must 'contain either direct or inferential allegations respecting all material elements necessary for recovery under a viable legal theory.''' Kreipke v. Wayne State Univ., 807 F.3d 768, 774 (6th Cir. 2015) (citation omitted). The plaintiff must provide sufficient factual allegations that, if accepted as true, are sufficient to raise a right to relief above the speculative level. Bell Atl., 550 U.S. at 555. And the claim for relief must be plausible on its face. Id. at 570. AA claim is plausible on its face if the 'plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.''' Ctr. for Bio-Ethical Reform, Inc. v. Napolitano, 648 F.3d 365, 369 (6th Cir. 2011) (quoting Twombly, 550 U.S. at 556). ''The plausibility standard is not akin to a 'probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.'' Iqbal, 556 U.S. at 678 (citations omitted). When considering a motion to dismiss, a court must accept as true all factual allegations, but need not accept any legal conclusions. Ctr. for Bio-Ethical Reform, 648 F.3d at 369. Naked assertions without further factual enhancement, formulaic recitations of the elements of a cause of action, and mere labels and conclusions will be insufficient for a pleading to state a plausible claim. SFS Check, LLC v. First Bank of Delaware, 774 F.3d 351, 355 (6th Cir. 2014) (citations omitted).


         The amended complaint is the controlling pleading. (ECF No. 6 Complaint.) For these motions, the Court must accept the well-pleaded facts in the Complaint as true.

         The Benner Companies filed for Chapter 11 bankruptcy in 2011. (Compl. ¶ 9.) At the time, the Benner Companies owned twenty-two properties in this judicial district. (Id. ¶ 8.) Comerica Bank was the Benner Companies' largest creditor. (Id. ¶ 10.) At Comerica's request, the Benner Companies used the services of Defendant John Mundell, then a real estate broker with Signature Associates. (Id. ¶ 10.) In March 2012, Mundell completed an Opinion of Values for the properties. (Id. ¶ 11.) A reorganization plan was approved in January 2013. (Id. ¶ 13.) In April 2013, following Comerica's suggestion, the Benner Companies concluded one-year listing agreements with Signature Associates, naming Mundell as the broker. (Id. ¶ 15.)

         On April 1 and June 1, 2014, the Benner Companies entered into twenty-two broker agreements with Defendant Bradley Company. (Compl. ¶18.) Mundell had joined Bradley Company in March 2014 (id. ¶ 16), and each agreement provided that Mundell would act as the broker for the property for any sale or lease (Id. ¶ 18.) The agreements expired on December 31, 2014. (Id. ¶ 21.)

         On April 27, 2014, the Benner Companies completed a settlement agreement with Comerica, which required the Benner Companies to execute quitclaim deeds for the properties. (Compl. ¶ 22.) The quitclaim deeds were signed, but the name of the grantee was left blank. (Id. ¶ 25.) Under the settlement agreement, Comerica would return the properties to the Benner Companies on the condition that the Benner Companies paid Comerica $18.75 million by August 8, 2014. (Id. ¶ 23.) If the payment was not made by August 8, Comerica would own the properties and the amount owed by the Benner Companies to Comerica would be reduced by the same amount. (Id. ¶ 24.) Comerica later extended the deadline for the payment to September 8, 2014. (Id. ¶ 32.) The Benner Companies did not make the required payment by the extended deadline date. (Id. ¶ 35.)

         After the settlement agreement was executed, Mundell introduced the Benner Companies to Great Lakes Capital and to Bradley Capital Markets, purportedly to assist the Benner Companies secure financing in order make the payment to Comerica. (Compl. ¶ 26.) Defendant Bradley Toothaker is a principal with both Great Lakes Capital and Bradley Capital Markets. (Id. ¶ 27.) On July 16, 2014, Defendant Bradley Company executed a confidentiality agreement with Great Lakes Capital, which identified Bradley Company as the broker and identified Great Lakes Capital as the potential purchaser of the properties that were the subject of the settlement agreement between Comerica and the Benner Companies. (Id. ¶ 28.) On July 24, 2014, Mundell requested and obtained confidential information about the properties from the Benner Companies. (Id. ¶ 30.) The same day, Mundell asked the Benner Companies to sign off on the confidentiality agreement that had been executed by Great Lakes Capital and Bradley Capital Markets. (Id. ¶ 31.) The Benner Companies did not agree because of the apparent conflict of interest. (Id.)

         On December 20, 2014, Grand River Retail, LLC was organized.[1] (Compl. ¶ 36.) And three days later, on December 23, GRR Capital Funding was formed. (Id. ¶ 38.) Toothaker is a principal of Grand River Retail and GRR Capital Funding. (Id. ¶¶ 37 and 39.) On December 26, 2014, GRR Capital Funding purchased the note for the Benner Properties from Comerica. (Id. ¶ 40.) On January 8, 2015, the quitclaim deeds to the Benner Properties were recorded with the Register of Deeds of Kent County, with the grantee identified as Grand River Retail. (Id. ¶ 41.)

         At this point, the Court must note that Plaintiffs have not explained with sufficient detail how the scheme to defraud occurred. Plaintiffs have alleged a number of facts which are consistent with a scheme to defraud. But, in neither the complaint nor in their responses, have Plaintiffs summarized how the scheme was to be accomplished. Based on the pleading, the Court infers the following scheme. Defendants conspired to acquire the Benner Properties at an amount less than the fair market price. Defendants accomplished this by acting as the broker for the properties and intentionally failing to find buyers or lessees for the properties. Because there were no offers, under the settlement agreement Plaintiffs were forced to accept $18.75 million from Comerica for ...

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