United States District Court, D. Maryland
ELLEN L. HOLLANDER, District Judge.
On December 31, 2013, plaintiffs Orrin Yesko; 4900 11th Street East, LLC ("4900 LLC"); C.T.O.G., Inc.; Mazel Realty Inc.; and Shivitz Properties, Inc. filed suit against six individuals and entities. See ECF 1 ("Complaint" or "Compl."). Four defendants now remain: William Fell, Jr.; Timothy Hearn; Jacqueline Hearn; and JPL Properties, L.L.C. ("JPL"). Plaintiffs' allegations center on 4900 LLC, of which Mr. Yesko, Mr. Fell, and Mr. Hearn were members. The crux of plaintiffs' allegations is that Mr. Fell and Mr. Hearn defrauded 4900 LLC by, inter alia, embezzling funds and making various unauthorized loans to themselves, their spouses, and other entities.
The Complaint contains seven causes of action under federal and Maryland law: (1) a violation of the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 et seq., Compl. ¶ 35; (2) civil conspiracy, id. ¶ 36; (3) "Breach of Fiduciary Duty, " id. ¶ 37; (4) breach of contract, id. ¶ 38; (5) fraud, id. ¶ 39; (6) "Common Law Theft/Conversion, " id. ¶ 40; and (7) "Intentional Misrepresentation, " id. ¶ 41. Plaintiffs request, inter alia, damages of $1 million, interest, and attorneys' fees. See Compl. at 9.
Defendants filed a motion to dismiss (ECF 14, "Mot."), along with a supporting memorandum (ECF 14-1, "Mem.") (collectively, the "Motion"). Plaintiffs filed an opposition (ECF 15, "Opposition" or "Opp."), with exhibits ( see ECF 15-1, 15-2), to which defendants have replied (ECF 19, "Reply").
No hearing is necessary to resolve defendants' Motion. See Local Rule 105.6. For the reasons that follow, I will grant the Motion.
As noted, plaintiffs' allegations largely pertain to 4900 LLC. That entity was incorporated in Florida on October 30, 2006, with three principals who were also 4900 LLC's members: Yesko, Timothy Hearn, and William Fell. Compl. ¶ 15. Mr. Yesko "was the sole Managing Member of the LLC, " id. ¶ 16, and "had sole authority to sign bank drafts" on behalf of 4900 LLC. Id. ¶ 20. Further, plaintiffs allege that 4900 LLC's original Operating Agreement, which is not attached to the Complaint, identified Mr. Yesko as 4900 LLC's Managing Member. Compl. ¶ 19.
Plaintiffs allege, "[o]n information and belief, " that Mr. Fell and Mr. Hearn "were or are" partners or members in several other business entities, including Blue Heron Realty and JPL, both of which were named as defendants in this suit, as well as "Bird N Hand Venture's, LLC"; "C.T.O.G."; "301 North Sunset Vista"; "302 West Sunset Vista"; "Warbucks"; "RSBB, LLC"; and "Bochtab Joint Ventures." Compl. ¶ 13.
At some point following the incorporation of 4900 LLC, Mr. Hearn and Mr. Fell allegedly "began a concerted course of conduct to defraud [4900 LLC] and Mr. Yesko, embezzling funds and making illegal loans to themselves, " as well as to their spouses and to other corporate entities. Compl. ¶ 17. Plaintiffs indicate that they attached to the Complaint "a detailed spreadsheet... showing that" Mr. Fell and Mr. Hearn "illegally signed numerous bank drafts without authorization on the account of [4900 LLC] and without Mr. Yesko's knowledge or consent." Compl. ¶ 21. However, the docket does not reflect any such spreadsheet attached to the Complaint. Regarding these bank drafts, plaintiffs assert: "There is no documentation authorizing the disbursement of those checks." Id.
According to plaintiffs, "[o]n information and belief, Mr. Hearn and Mr. Fell wrote checks for personal life insurance policies" for themselves, using 4900 LLC's assets. Compl. ¶ 22. Those checks, which Mr. Hearn and/or Mr. Fell "illegally signed and authorized, " totaled $5, 959.30. Id. However, 4900 LLC was not a listed beneficiary of the life insurance policies, and defendants did not repay those expenses to 4900 LLC. Id.
Plaintiffs also identify a number of other allegedly improper transactions. For one, "[o]n information and belief, " using 4900 LLC's assets, Mr. Hearn and Mr. Fell "illegally wrote checks that were for their personal phone bills, " which totaled at least $3, 402.54. Compl. ¶ 23. In addition, Mr. "Hearn and/or Fell illegally wrote bank drafts" from 4900 LLC's account to "Bird N Hand Ventures, LLC, " in the amount of $5, 100. Id. ¶ 24. They also "illegally wrote bank drafts" from 4900 LLC's account to "CTOG Limited Partnership, " in the amount of $17, 500, "for the repayment of loans." Id. ¶ 25. And, Mr. Hearn and/or Mr. Fell "illegally wrote bank drafts" from 4900 LLC's account to "301 North Sunset Vista, " in the amount of $2, 900. Id. ¶ 26. With respect to these expenditures, plaintiffs allege that no documentation or authorization existed, and that the loans were not repaid to 4900 LLC. See Compl. ¶¶ 23-26. More generally, plaintiffs allege that Mr. Hearn and Mr. Fell have "comingled assets" of 4900 LLC "with their personal assets, and the assets of other, unrelated companies, in violation of the law." Id. ¶ 33.
Regarding Mr. Fell, plaintiffs also allege that he wrote several bank drafts on 4900 LLC's account, including: (1) in the amount of $400, "for a loan for [Mr.] Hearn/JPL"; (2) in the amount of $5, 800, to "302 West Sunset Vistas"; (3) in the amount of $19, 080.50, to "Warbucks"; (4) in the amount of $3, 386.80, to "RSBB, LLC"; and (5) in the amount of $3, 480, to "Bochtab Joint Ventures." Compl. ¶¶ 27-31. Mr. Fell did so, plaintiffs allege, without authorization, and he has not repaid 4900 LLC for those loans. See id.
Further, plaintiffs allege that a check in the amount of $55, from the entity "Bochtab Joint Ventures" and dated August 23, 2012, was submitted to the Florida Department of State, the purpose of which "was to facilitate the removal of Mr. Yesko as Managing Partner of [4900 LLC]." Compl. ¶ 32. However, "Mr. Yesko was not notified nor did he approve this change." Id.
With respect to JPL, plaintiffs allege, "[o]n information and belief, " that this entity has been used by Mr. Hearn and Mr. Fell "in furtherance of many of the unlawful activities which are the subject of this complaint, including, but not limited to illegally transferring assets into" JPL and "laundering funds through" it. Compl. ¶ 34.
Additional facts are included in the Discussion.
II. Legal Standards
A. Fed.R.Civ.P. 12(b)(6)
Defendants' Motion invokes Fed.R.Civ.P. 12(b)(6). A motion to dismiss pursuant to Rule 12(b)(6) constitutes an assertion by a defendant that, even if the facts alleged by a plaintiff are true, the complaint fails as a matter of law "to state a claim upon which relief can be granted." Whether a complaint states a claim for relief is assessed by reference to the pleading requirements of Fed.R.Civ.P. 8(a)(2). It provides that a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." The purpose of the rule is to provide the defendant with "fair notice" of the claim and the "grounds" for entitlement to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 n.3 (2007); see Ashcroft v. Iqbal, 556 U.S. 662 (2009).
A plaintiff need not include "detailed factual allegations" in order to satisfy Rule 8(a)(2). Twombly, 550 U.S. at 555. But, the rule demands more than bald accusations or mere speculation. Id .; see Painter's Mill Grille, LLC v. Brown, 716 F.3d 342, 350 (4th Cir. 2013). To satisfy the minimal requirements of Rule 8(a)(2), the complaint must set forth "enough factual matter (taken as true) to suggest" a cognizable cause of action, "even if... [the] actual proof of those facts is improbable and... recovery is very remote and unlikely." Twombly, 550 U.S. at 556. In other words, the complaint must contain facts sufficient to "state a claim to relief that is plausible on its face." Id. at 570; see Iqbal, 556 U.S. at 684; Simmons v. United Mortg. and Loan Inv., LLC, 634 F.3d 754, 768 (4th Cir. 2011).
In reviewing such a motion, a court "must accept as true all of the factual allegations contained in the complaint, '" and must "draw all reasonable inferences [from those facts] in favor of the plaintiff.'" E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011) (citations omitted); see Kendall v. Balcerzak, 650 F.3d 515, 522 (4th Cir.), cert. denied, ___ U.S. ___ , 132 S.Ct. 402 (2011); Monroe v. City of Charlottesville, 579 F.3d 380, 385-86 (4th Cir. 2009), cert. denied, 559 U.S. 991 (2010). However, a complaint that provides no more than "labels and conclusions, " or "a formulaic recitation of the elements of a cause of action, " is insufficient. Twombly, 550 U.S. at 555. Moreover, the court is not required to accept legal conclusions drawn from the facts. See Papasan v. Allain, 478 U.S. 265, 286 (1986); Monroe, 579 F.3d at 385-86.
A Rule 12(b)(6) motion will be granted if the "well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct." Iqbal, 556 U.S. at 679 (citation omitted). "A court decides whether [the pleading] standard is met by separating the legal conclusions from the factual allegations, assuming the truth of only the factual allegations, and then determining whether those allegations allow the court to reasonably infer" that the plaintiff is entitled to the legal remedy sought. A Society Without A Name v. Virginia, 655 F.3d 342, 346 (4th Cir. 2011), cert. denied, ___ U.S. ___ , 132 S.Ct. 1960 (2012). "Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.'" Hartmann v. Calif. Dept. of Corr. & Rehab., 707 F.3d 1114, 1122 (9th Cir. 2013) (citation omitted); accord Commonwealth Prop. Advocates, LLC v. Mortg. Elec. Reg. Sys., Inc., 680 F.3d 1194, 1201-02 (10th Cir. 2011) ("When reviewing a 12(b)(6) ...