United States District Court, W.D. Michigan, Southern Division
S.D. Benner, LLC and S.D. Benner III, LLC, Plaintiffs,
Bradley Company, LLC, John Mundell, and Bradley Toothaker, Defendants.
OPINION AND ORDER GRANTING DEFENDANTS' MOTIONS TO
L. Maloney United States District Judge.
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.
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, . .
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).
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.
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.)
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. ¶
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.)
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.)
December 20, 2014, Grand River Retail, LLC was
organized. (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.)
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 ...