United States District Court, E.D. Michigan, Southern Division
REBECCA K. WILSON, et al., Plaintiffs,
5 CHOICES, LLC, et al., Defendants.
ORDER GRANTING EDUCATION DEFENDANTS' MOTION TO
DISMISS AND TO COMPEL ARBITRATION, DISMISSING WITHOUT
PREJUDICE PLAINTIFFS' CLAIMS AGAINST EDUCATION DEFENDANTS
AND SETTING HEARING
H. CLELAND UNITED STATES DISTRICT JUDGE
court had scheduled a hearing on a Motion to Dismiss for June
7, 2017, which it now cancels having deemed it unnecessary in
light of the briefings and a hearing on a previous motion in
the same case presenting substantially similar
issues. Pending before the court are three motions
to dismiss the second amended complaint or transfer venue,
and this court previously granted a similar motion. Three
Defendants, American Cash Funding, Income Property USA, LLC,
and Insiders Cash, LLC (“Lending Defendants”),
filed a motion to dismiss (Dkt. #40), which the court granted
(Dkt. #55). Defendants Insider's Financial
Education, LLC, Yancey Events LLC, and Yancey LLC
(“Education Defendants”), also filed a motion to
dismiss (Dkt. #41.) 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, (“Property Defendants”).
(Dkt. #43.) Finally, John Graham, Inc., (“JGI”)
has filed a motion to dismiss, (Dkt. #45), to which
Plaintiffs have responded, (Dkt. #47), and he has filed
reply, (Dkt. #51). For the following reasons, the court will
grant Education Defendant's motion and will scheduling a
new hearing for Property Defendants' motion on
June 28, 2017 at 2:00 P.M.
court's earlier order, familiarity with which is
presumed, summarized the alleged facts of this case. (Dkt.
#55.) In the interest of judicial economy, the court will not
restate them here but will instead move directly to its
summary of the pertinent arguments.
Education Defendants contend that the court must dismiss
Plaintiffs' claims because they are all subject to
mandatory and binding arbitration pursuant to agreements
signed by the parties. Since Plaintiffs cannot show fraud in
the inducement of the arbitration clause as required by
Supreme Court precedent, Defendants argue, Plaintiffs cannot
avoid enforcement of the arbitration clause. 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.
respond that Education Defendants are not really distinct
entities from the other members of what they view to be a
coordinated scheme to trick the unwary. Far from supplying
training services, Plaintiffs argue that attendance at the
nearly $40, 000 “Buying Summit” was a
prerequisite to participation in the ill-fated real estate
transactions, and that the terms of the agreements between
Plaintiffs and Education Defendants are really the oral
promises made to induce them to participate. They go on to
state that they would be unable to arbitrate their claims
against two of the entities with which they contracted,
Yancey Events, LLC, and Insider's Financial Education,
LLC, in any case, because they technically do not exist. In
support of their allegation that a RICO organization exists,
Plaintiffs point to a flier by Yancey Events indicating that
one of the Property Defendants is an affiliate. They also
argue that they are not required to submit their RICO claims
to arbitration, even assuming the arbitration clause is valid
and enforceable, because they will not be able to vindicate
the statutory cause of action in that forum as each group of
Defendants has separate agreements requiring a different
also argue that Supreme Court precedent holds that the proper
vehicle for enforcement of a forum selection clause is a
motion to transfer, under which the court should consider
public interest factors that would favor the current forum as
many of the subject properties, sitting abandoned or without
maintenance as a result of the alleged scheme, are located
within Michigan. Plaintiffs further contend that Defendants
continue with their operations affecting Michigan properties
reply Defendants assert that the purpose of the contracts was
clearly education on real estate transactions, and the Buying
Summit was only one component of that training. They insist
that to the extent that Plaintiffs rely on a theory that
Yancey Events, LLC, and Insider's Financial Education,
LLC, lack a formal existence, they should be dismissed as
Defendants. Instead, Defendants claim, Plaintiffs'
confusion stems from a typographical omission of
“LLC” at the end of “Yancey Events”
from the text of a purchase agreement and Plaintiffs'
misreading of Insider Financial, LLC's corporate history.
Finally, Education Defendants contend that the court should
not excuse Plaintiffs from the enforcement of the mandatory
arbitration provisions of the agreements signed with
Education Defendants merely because Plaintiffs entered into
other agreements with other entities performing other
transactions which specified a different forum. Defendants
also attack Plaintiffs' assertions about the level of
local interest in the adjudication of the claims here.
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)).
with its previous order, the court views a motion for
dismissal as an appropriate procedural vehicle. See
Andrews v. TD Ameritrade, Inc., 596 F. App'x 366,
370 (6th Cir. 2014) (“A district court should dismiss
or stay a suit involving an arbitration clause as follows[. .
.]”). “Before compelling an unwilling party to
arbitrate, the court must engage in a limited review to
determine whether the dispute is arbitrable, including,
first, whether the parties agreed to arbitrate; and, second,
whether the specific dispute falls within the substantive
scope of that agreement.” Moran v. Svete, 366
F. App'x 624, 629 (6th Cir. 2010) (citing Fazio v.
Lehman Bros., Inc., 340 F.3d 386, 392 (6th Cir. 2003)).
with the Lending Defendants, Plaintiffs do not dispute that
they transacted with Education Defendants pursuant to the
written agreements containing arbitration provisions.
(See Dkts. ##41-3 - 41-24.) However, they allege
that the contracts containing the provisions were
fraudulently acquired and do not reflect the meeting of the
minds better evidenced in oral promises. It remains true that
“unless the challenge is to the arbitration clause
itself, the issue of the contract's validity is
considered by the arbitrator in the first instance.”
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S.
440, 445-46, (2006). Further, the Sixth Circuit “has
specifically rejected as insufficient allegations that the
arbitration agreement was used to further a fraudulent
scheme, where the plaintiff failed to identify any
misrepresentations particular to the arbitration agreement
separate from the contract as a whole.” Moran,