United States District Court, W.D. Michigan, Southern Division
DAWN M. BACHI-REFFITT, Plaintiff,
KEVIN REFFITT, RONALD REFFITT, SR., KAREN WIERENGA, and PENCON, INC., Defendants.
OPINION REGARDING DEFENDANTS' MOTION TO DISMISS
AND MOTION FOR RULE 11 SANCTIONS
J. QUIST, UNITED STATES DISTRICT JUDGE.
Dawn Bachi-Reffitt, and Defendant Kevin Reffitt were married
for approximately eighteen years when Kevin filed a complaint
for divorce. The divorce became final on April 19, 2013,
following the entry of a Consent Judgment of Divorce.
Thereafter, Dawn concluded that, during the divorce
proceeding, Kevin had committed fraud in connection with the
sale of his stock in his family construction business to his
father for “in excess of $1 million” (ECF No.
13-7 at PageID.298), and filed a motion for relief from
judgment in the family court. The family court judge denied
relief, as did a circuit judge in a subsequent, separate
lawsuit that Dawn filed alleging that Kevin defrauded her in
the divorce proceeding.
Dawn has come to federal court, recasting her fraud claims as
violations of the Racketeer Influenced and Corrupt
Organizations Act (RICO), 18 U.S.C. §§ 1961et
seq. Dawn also asserts fraud and other state-law claims.
Defendants have filed a motion to dismiss pursuant to Federal
Rules of Civil Procedure 12(b)(1) and 12(b)(6) and a separate
motion for Rule 11 sanctions, which are fully briefed.
Because Dawn's claims (including her RICO claim) allege
intrinsic fraud-that is, fraud committed in the course of the
divorce proceeding- and her RICO claims are barred by the
doctrine of res judicata and the broad release set forth in
the Consent Judgment, Dawn must seek relief (assuming it is
available) in the family court that entered the Consent
Judgment. In addition, even assuming that Dawn's RICO
claims are not otherwise barred, they are nonetheless subject
to dismissal because Dawn lacks statutory standing to
maintain her RICO claims. Therefore, the Court will grant
Defendants' motion to dismiss. In addition, the Court
will grant Defendants' motion for Rule 11 sanctions.
and Kevin were married in 1993 and had three children
together. (ECF No. 1 at PageID.4; ECF No. 1-2 at PageID.41.)
During the marriage, Kevin worked in his family's
construction business, Peninsula Construction. In 2006, Kevin
and his brother, Ronald Reffitt, Jr. (Reffitt, Jr.),
purchased all the outstanding stock of Peninsula from their
father, Ronald Reffitt, Sr. (Reffitt, Sr.), when he retired
from the business. (ECF No. 1 at PageID.6.) Kevin and
Reffitt, Jr. each received a 50% interest in Peninsula.
(Id.) Sometime after the stock purchase, Kevin and
Reffitt, Jr. purchased life insurance policies on each other
in the amount of $1.5 million, for the apparent purpose of
funding the purchase of each other's interest in
Peninsula in the event of death. Kevin was the owner and
beneficiary of the policy insuring Reffitt, Jr.'s life,
and Reffitt, Jr. was the owner and beneficiary of the policy
insuring Kevin's life. (Id. at PageID.2, 6.) On
or about November 15, 2011, Reffitt, Sr., Reffitt Jr., and
Kevin entered into an Option Agreement granting Reffitt, Sr.
the right to purchase Kevin's interest in Peninsula.
(Id. at PageID.20; ECF No. 1-18.)
The Divorce Proceeding
February 9, 2012, Kevin filed for divorce from Dawn in the
Grand Traverse County Circuit Court, Family Division. Reffitt
Sr. purportedly exercised his option to purchase Kevin's
shares on February 7, 2012, two days before Kevin filed for
divorce. According to Dawn, however, the transfer documents
were executed after the divorce proceeding was initiated,
sometime after February 17, 2012, and backdated prior to the
date Kevin filed for divorce. (Id. at PageID.6-7.)
the divorce proceeding, Dawn served discovery requests on
Kevin, which sought, among other things, information
regarding Kevin's ownership interest in Peninsula. In his
answers to Dawn's interrogatories and request for
production of documents, Kevin disclosed that he had
transferred his ownership interest in Peninsula to Reffitt,
Sr. on February 7, 2012, and he stated the amount he received
for his stock. (ECF No. 13-3 at PageID.245-47; ECF No. 13-4
at PageID.252-53.) In addition, Kevin gave Dawn's counsel
copies of the option agreement, corporate consents, stock
certificates, and other documents pertaining to the transfer.
(Id. at PageId.269-80.)
value of Kevin's Peninsula ownership interest was one of
the main issues in contention during the divorce case and was
to be tried in April 2013. In preparation for trial, Kevin
filed a trial brief on March 8, 2013, which disclosed that
Reffitt Sr. had purchased Kevin's stock based on an
appraised value set in July 2011, and that Kevin received
$150, 000 from the sale of his stock, which was placed in a
CD at Huntington Bank. (ECF No. 13-5 at PageID. 283-84.)
Kevin also noted that Peninsula's corporate accountant,
Brad Niergarth, had been available to Dawn's attorney to
answer “any and all questions relative to the financial
status of the company.” (Id. at PageID.287.)
Kevin proposed dividing the proceeds of the stock sale
equally with Dawn. (Id. at PageID.289.)
than incur the expense of a trial and risk an adverse
judgment, the parties decided to settle the division of the
marital estate, and all other issues, and entered into the
Consent Judgment to memorialize the settlement. The Consent
Judgment, entered on April 18, 2013, divided the proceeds of
the stock sale equally between Dawn and Kevin. (ECF No. 1-2
at PageID.37.) It also contained the following provisions:
20. Release of Claims:
It is Further Ordered and Adjudged, that except as otherwise
herein expressly provided, the parties shall and do hereby
mutually release and forever discharge each other from any
and all actions, suits, debts, claims, demands and
obligations whatsoever both in law and in equity which either
of them ever had, now has or may hereafter have against the
other, upon or by reason of any matter, cause or thing, up to
the date of the entry of this Judgment of Divorce.
21. Settlement of All Claims Arising Out of Marital
It is Further Ordered and Adjudged, that the terms of this
Judgment of Divorce forever settle any and all claims or
rights between them arising out of their marriage and
subsequent divorce, excepting the executory rights and
obligations specifically set forth herein.
. . . .
25. Disclosure by Parties:
That each of the parties hereto represents that he or she has
made a full and complete disclosure to the other party of all
assets and liabilities acquired during the course of the
marriage and that this Judgment contains a complete
itemization of the aforesaid assets and liabilities and the
distribution thereof. Subsequent to the entry of this
Judgment of Divorce, if it is determined by the Court that a
party to this divorce action has concealed assets acquired or
appreciated during the marriage, failed to disclose assets
acquired or appreciated during the marriage or otherwise
attempted to secret or conceal assets from the other party;
the Court shall award to the non-offending party the entire
value of the asset(s) identified as concealed.
. . . .
It Is Further Ordered and Adjudged, that this Court
specifically reserves and retains jurisdiction over this
cause and the parties for the purpose of assuring compliance
with the executory provisions of this Judgment of Divorce and
it reserves the right to make such other and further orders
as shall be necessary to implement this Judgment including
the use of the contempt powers of the Court.
(Id. at 44-46.)