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Smith v. O'Malley

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

April 10, 2017

Malcolm Smith, Steven Graysmark, John Eccles, Camille Abdo Faraj, Paramjit Hough, Ampect Investments, LLC, Brad Lamel, Brett Specter, Andrew Sherris, Christine Sherris, Barney Edwards, Amanda Edwards, Campello, LLC, Mark Llewellyn-Jones, Kathryn Llewellyn-Jones, and Isabel Knight, Plaintiffs,
Kelly O'Malley, Escrow and Title Services Inc., and Chicago Title Insurance Company, Defendants.

          Mona K. Majzoub, Mag. Judge


          JUDITH E. LEVY United States District Judge

         On May 3, 2013, plaintiffs Mark and Kathryn Llewellyn-Jones, along with several others, sued a collection of real estate companies and their associates. See Llewellyn-Jones v. Metro Property Group, LLC, Case No. 13-cv-11977 (E.D. Mich.). That case asserted a civil claim under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), stating that the sixteen defendants in that case engaged in a mail and wire fraud scheme arising from the fraudulent sale of purported rental properties in the Detroit area. Llewellyn-Jones, Complaint, Dkt. 1.

         The Llewellyn-Joneses, along with the other plaintiffs in this case, now bring suit against defendants Escrow and Title Services Inc., Kelly O'Malley, and Chicago Title Insurance Company for their alleged roles in this scheme. Each plaintiff alleges that the defendants, as a part of the enterprise alleged in Llewellyn-Jones, also engaged in fraud related to the closings of their respective transactions. For the reasons set forth below, defendants' combined motion to dismiss (Dkt. 21) is GRANTED IN PART and this case is DISMISSED.

         I. Factual Background

         Plaintiffs allege that from “April 2011 until February 2013, ” they were the victims of “a scheme to defraud investors, primarily foreign investors.” (Dkt. 1 at 15.) The participants in that scheme are identified as Metro Property Group, LLC, Metro Property Management, LLC, Global Power Equities, LLC, Apex Equities, LLC, and Summit Acquisitions, LLC. (Id.) Each of those companies was previously named as a defendant in Llewellyn-Jones as a part of this same scheme. Llewellyn-Jones, Complaint, Dkt. 1.

         Plaintiffs further allege that Bell Title and O'Malley, acting as Bell Title's agent, were recruited by the Metro Property group to assist in the fraudulent scheme. (Dkt. 1 at 16.) The purported scheme involved the Metro Property Group buying properties in Detroit, misrepresenting the physical condition of the properties, the existence of tenants for the properties, and the profit-generating history of the properties. (Id. at 16-390.) Bell Title is generally alleged to have known about these misrepresentations and failed to disclose the true nature of the transactions to plaintiffs at or before closing, and to have misrepresented the true dates of closing on each of the properties.

         The plaintiffs filed suit on November 17, 2016. (Id.) Each plaintiff brings claims against Bell Title and O'Malley for some combination of silent fraud, civil conspiracy, breach of contract, conversion, and negligent misrepresentation, all under Michigan law. (See generally id.) Chicago Title Insurance Company is also alleged to have participated in some of the transactions as a title insurer, and is alleged to have breached a title insurance policy it issued with respect to a property purchased by Paramjit Hough. (Id. at 278.)

         All plaintiffs also bring general claims against Bell Title and O'Malley for silent fraud, civil conspiracy, negligent misrepresentation and breach of fiduciary duty, and violation of RICO, as well as an agency claim against Chicago Title and Insurance Company. (Id. at 390-400.) It is unclear how the general state law claims differ from the specific claims asserted for each plaintiff.

         On January 27, 2017, Bell Title filed a motion to dismiss plaintiffs' complaint. (Dkt. 21.) O'Malley and Chicago Insurance and Title each filed motions to join in Bell Title's motion. (Dkts. 28, 30.) The motion to dismiss is now fully briefed, and the Court determines that oral argument is not necessary to determination of this motion pursuant to E.D. Mich. Local R. 7.1(f).

         II. Legal Standard

         When deciding a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the Court must “construe the complaint in the light most favorable to the plaintiff and accept all allegations as true.” Keys v. Humana, Inc., 684 F.3d 605, 608 (6th Cir.2012). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A plausible claim need not contain “detailed factual allegations, ” but it must contain more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action[.]” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         III. Analysis

         As a threshold matter, the O'Malley and Chicago Title's motions (Dkts. 28, 30) to join in Bell ...

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