United States District Court, E.D. Michigan, Southern Division
REBECCA K. WILSON, et al., Plaintiffs,
5 CHOICES, LLC, et al., Defendants.
ORDER GRANTING LENDING DEFENDANTS' MOTION TO
DISMISS AND SETTING HEARING ON EDUCATION DEFENDANTS'
H. CLELAND UNITED STATES DISTRICT JUDGE.
before the court are four motions to dismiss the second
amended complaint. Three Defendants, American Cash Funding,
Income Property USA, LLC, and Insiders Cash, LLC
(collectively, “Lending Defendants”), filed a
motion to dismiss. (Dkt. #40.) Plaintiffs have filed a
response, (Dkt. #49), and Lending Defendants have filed a
reply, (Dkt. #54). Defendants Insider's Financial
Education, LLC, Yancey Events LLC, and Yancey LLC
(collectively, “Education Defendants”), also
filed a motion to dismiss (Dkt. #41) which has received a
response (Dkt. #50) and a reply (Dkt. #52). Another joint
motion was filed by Defendants 5 Choices, LLC, BuyPD, LLC,
DLS Properties, LLC, EZ Street Properties, LLC, Expansion
Properties, LLC, FrontSide Properties, LLC, Green Apple
Homes, LLC, Improvement Homes, LLC, Interactive Homes, LLC,
Malibu Breeze Properties, LLC, Max Ultra, LLC, Patriot Homes,
LLC, Property Direct, LLC, Ready Prop, Red Apple Homes, LLC,
Red List Homes, LLC, Screaming Eagle Properties, LLC, Scree
44, LLC, Silver Tie Homes, LLC (collectively, “Property
Defendants”), (Dkt. #43), followed by a response, (Dkt.
#48), and a reply, (Dkt. #53). Finally, John Graham, Inc.,
(“JGI”) has filed a motion to dismiss, (Dkt.
#45), to which Plaintiffs have responded, (Dkt. #47), and it
has filed reply, (Dkt. #51). On April 19, 2017, the court
held a hearing on the motion by Lending Defendants. For the
following reasons, the court will grant that motion and will
scheduling a new hearing for Education Defendants' Motion
on June 7, 2017.
allege that Defendants worked together in a complex scheme to
defraud naive investors. They essentially allege that
Education Defendants tricked them into paying exorbitant
tuition for an otherwise worthless class on real estate to
gain access to supposedly valuable real estate leads. They
were then allegedly handed off to Property Defendants who
would sell Plaintiffs properties, which had been purchased,
shoddily rehabilitated, and then sold to Property Defendants
by JGI. Lending Defendants would finance the transactions.
Plaintiffs would later discover that the properties, which
they had believed were sold to them at prices far below their
market value, were actually worth much less. As well as
fraud, Plaintiffs allege that Defendants breached their
fiduciary duties and their behavior constituted a
racketeering organization and are pursuing claims under RICO.
Lending Defendants respond that the court must dismiss
Plaintiffs' claims because they are all subject to either
mandatory and binding arbitration or a forum selection clause
which specifies a forum other than the Eastern District of
Michigan, pursuant to agreements signed by the parties. Since
Plaintiffs cannot show fraud in the inducement of the
arbitration or forum selection clauses as required by Supreme
Court precedent, Defendants argue, Plaintiffs cannot avoid
their enforcement. They assert that to the extent that
Plaintiffs have alleged fraudulent inducement, they have not
done so with sufficient particularity under Federal Rule of
Civil Procedure 9(b). Further, the fact that Plaintiffs were
aware of these contracts justifies an award of fees and
costs. In addition, Lending Defendants point out that any
Plaintiff who did not contract with them for financing
necessarily is unable to state a claim for relief.
respond that Lending Defendants are indistinct from other
Defendants, and that they are all members of a coordinated
scheme to trick the unwary. They contend that the court
should not enforce arbitration or forum selection clauses
which, across these agreements and Defendants, would require
litigation in multiple fora. They further argue that the RICO
claims can be brought by Plaintiffs who are not in privity of
contract with Lending Defendants, and that these would not be
subject to any of the provisions Lending Defendants seek to
enforce. Plaintiffs insist that their agreements are
controlled by a “settlement statement” which do
not contain forum selection or mandatory arbitration
provisions. They contend that Defendants were actually acting
in a fiduciary capacity rather than as arms-length
contracting parties, because part of the “pitch”
delivered to Plaintiffs prior to or during the Buying Summit
induced them to feel they had entered into a
“relationship of trust” with Defendants,
precluding strict enforcement of the agreements. Plaintiffs
further allege that attorneys for Defendants indicated that
they were working on Plaintiffs' behalf. Finally, they
argue that some versions of the provisions at issue permit
litigation within the state where the properties are
located-in some cases Michigan-at the Lender's option.
reply Lending Defendants argue that Plaintiffs have
established no law for the proposition that conflicting forum
selection clauses in different agreements somehow nullify one
another. They claim that the court should not allow
Plaintiffs to proceed under RICO claims with “shotgun
pleading” amounting to little more than vague
allegations lacking specificity against numerous Defendants.
Finally, Lending Defendants insist that Plaintiffs have not
properly alleged that they were in a fiduciary relationship
with Lending Defendants, and allegations regarding the
contents of the “pitch” or innuendo regarding a
non-party law firm is irrelevant to this point.
Rule of Civil Procedure 12(b)(6) provides for dismissal for
failure to state a claim upon which relief may be granted.
Under the Rule, the court construes the complaint in the
light most favorable to the plaintiff and accepts all
well-pleaded factual allegations as true. League of
United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527
(6th Cir. 2007). This standard requires more than bare
assertions of legal conclusions. Bovee v. Coopers &
Lybrand C.P.A., 272 F.3d 356, 361 (6th Cir. 2001).
“[A] formulaic recitation of the elements of a cause of
action will not do.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007). Any claim for relief
must contain “a short and plain statement of the claim
showing that the pleader is entitled to relief.”
Erickson v. Pardus, 551 U.S. 89, 93 (2007).
“Specific facts are not necessary; the statement need
only ‘give the defendant fair notice of what the . . .
claim is and the grounds upon which it rests'”
Id. (quoting Twombly, 550 U.S. at 555).
to survive a motion to dismiss, a complaint must provide
sufficient facts to “state a claim to relief that is
plausible on its face.” Twombly, 550 U.S. at
570. “The plausibility standard is not akin to a
“probability requirement, ' but it asks for more
than a sheer possibility that defendant has acted
unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citing Twombly, 550 U.S. at 556).
“Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
suffice.” Id. (citing Twombly, 550
U.S. at 555.) Additionally, on a motion to dismiss, a court
is usually limited to the complaint and attached exhibits,
but it may also consider “public records, items
appearing in the record of the case, and exhibits attached to
the defendant's motion to dismiss so long as they are
referred to in the complaint and are central to the claims
contained therein.” Erie County v. Morton
Salt, Inc., 702 F.3d 860, 863 (6th Cir. 2012)
(quoting Bassett v. Nat'l Coll. Athletic
Ass'n., 528 F.3d 426, 430 (6th Cir. 2008)).
evaluating the enforceability of the arbitration and forum
selection clauses, this court is bound by Sixth Circuit
precedent. On the question of arbitration, the Sixth Circuit
The Federal Arbitration Act codifies a national policy in
favor of arbitrating claims when parties contract to settle
disputes by arbitration. A district court should dismiss or
stay a suit involving an arbitration clause as follows:
If any suit or proceeding be brought in any of the courts of
the United States upon any issue referable to arbitration
under an agreement in writing for such arbitration, the court
in which such suit is pending, upon being satisfied that the
issue involved in such suit or proceeding is referable to
arbitration under such an agreement, shall on application of
one of the parties stay the trial of the action until such
arbitration has been had in accordance with the ...