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Hobbs v. Martin

United States District Court, D. Maryland

July 28, 2016

GARY HOBBS, Plaintiff
v.
SEAN ST. MARTIN, Defendant

          MEMORANDUM

          James K. Bredar United States District Judge

         Gary Hobbs ("Plaintiff), a citizen of Virginia, brought an action in diversity against Sean St. Martin ("Defendant"), a citizen of Maryland, alleging that Defendant wrongfully received and retained $500, 000 that Plaintiff loaned to one Richard Hagen, a nonparty. Plaintiff brought claims for Money Had and Received (Count I), Unjust Enrichment (Count II), and Conversion (Count III). Now pending before the Court is Defendant's Motion to Dismiss or in the Alternative for Summary Judgment. (ECF No. 8.) The issues have been briefed (see ECF Nos. 9, 13 & 14), and no hearing is required, see Local Rule 105.6 (D. Md. 2014). For the reasons explained below, Defendant's motion will be construed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and will be GRANTED.

         I. Summary of the Complaint[1]

         To read the allegations in Plaintiffs Complaint, one might be forgiven for thinking he has sued Richard Hagen. Plaintiff alleges that he knew Hagen for more than ten years and that, in or around 2003, Hagen approached him with a lucrative "business opportunity." (ECF No. 1 ¶¶ 6-7.) Evidently, Hagen held himself out as having "numerous contacts in the defense and intelligence communities"; through these contacts, he was poised to "accept private investments to invest in companies with ties to the Central Intelligence Agency." (Id.¶7.) Plaintiff seemingly took Hagen at his word, and he invested $500, 000 in the venture. (Id.) Years passed. In June 2014, Hagen again approached Plaintiff, this time seeking a $500, 000 short-term loan, ostensibly to "buy out other investors who needed to cash out prematurely." (Id.¶9.) Plaintiff agreed to withdraw the funds from his individual retirement account ("IRA") and extend the loan, provided that he would be repaid within a month. (Id. ¶¶ 10-11.) Plaintiff supplied Hagen with the name and contact information for his broker. (Id. ¶ 13.) Unbeknownst to Plaintiff, however, Hagen contacted the broker and arranged for the funds to be wired to Defendant's account at M&T Bank. (Id.) Hagen subsequently advised Plaintiff that Defendant was a "former 'black ops' operative and a high ranking official in the company who could facilitate the investment." (Id. ¶ 14.)

         Later that year, Plaintiff learned that Hagen had been sued for fraud in state and federal court. (Id. ¶ 16.)[2] Thereafter, Plaintiff repeatedly demanded that Hagen return both the $500, 000 initial investment and the $500, 000 loan, but Hagen failed to do so. (Id.¶17.) In November 2015, the Grand Jury for the District of Maryland charged Hagen with six counts of wire fraud in connection with operating a Ponzi-like investment scheme materially similar to the venture described in Plaintiffs Complaint, see Indictment, United States v. Hagen, Crim. No. RDB-15-585 (Nov. 10, 2015) (ECF No. 1). The charges were subsequently dismissed.[3]

         Plaintiff alleges that, despite his demands, Defendant refused to return the $500, 000 loan proceeds to him, instead using those proceeds "for his personal use and gain." (ECF No. 1¶¶ 18-19.) Plaintiff sued Defendant on March 14, 2016, seeking $750, 000 in compensatory damages and another $750, 000 in punitive damages. (ECF No. 1.) On May 2, 2016, Defendant moved to dismiss. (ECF No. 8.) Plaintiff filed a response in opposition (ECF No. 13), and Defendant replied (ECF No. 14). Defendant's motion is ripe for decision.

         II. Standard of Review

         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) (quoting Bell Ail. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In analyzing a Rule 12(b)(6) motion, the Court views all well-pleaded allegations in the light most favorable to the plaintiff. Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997). "[A] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable . . . ." Twombly, 550 U.S. at 556. Even so, "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id. at 555. "A pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.' Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Iqbal, 556 U.S. at 678 (alteration in original) (quoting Twombly, 550 U.S. at 555, 557).

         A motion such as Defendant's motion here, styled in the alternative as one for summary judgment, "implicates the court's discretion under Rule 12(d) of the Federal Rules of Civil Procedure, " Sager v. Hous. Comm'n of Anne Arundel Cty., 855 F.Supp.2d 524, 542 (D. Md. 2012). Rule 12(d) provides that "[i]f, on a motion under Rule 12(b)(6) . . . matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56" (emphasis added), with all parties being given a reasonable opportunity to present pertinent material. However, a "district judge has 'complete discretion to determine whether or not to accept the submission of any material beyond the pleadings ... or to reject it or simply not consider it.'" Sager, 855 F.Supp.2d at 542 (quoting 5C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1366 (3d ed. 2004)). In this case, Plaintiff has had no opportunity for discovery; what is more, he filed a declaration identifying the lines of inquiry he would pursue were discovery afforded to him (see ECF No. 13-1 at 5-6). Under these circumstances, it would be inappropriate for the Court to take notice of evidence beyond the allegations in the Complaint and information in the public record. Accordingly, the Court will disregard all extraneous submissions and related discussion in the briefs and will instead evaluate Plaintiffs Complaint pursuant to the familiar standards of Rule 12(b)(6).

         III. Analysis

         A. Counts I (Money Had and Received) and II (Unjust Enrichment)

         In Count I, Plaintiff alleges that "Defendant obtained $500, 000 from Plaintiff to which he is not entitled and which he has no right to retain." (ECF No. 1 ¶ 23.) In Count II, Plaintiff similarly alleges that Defendant's continued retention of the $500, 000 would "violate[] fundamental principles of justice, equity, and good conscience and would unjustly enrich Defendant at Plaintiffs expense." (Id.¶32.) As both parties have acknowledged in their briefs, actions sounding in unjust enrichment and for money had and received are materially similar and analyzed pursuant to the same basic framework. See Jennings v. Rapid Response Delivery, Inc., Civ. No. WDQ-11-0092, 2011 WL 2470483, at *6 (D. Md. June 16, 2011) ("Money had and received is analogous to an unjust enrichment or restitution claim." (citing Benson v. State, 887 A.2d 525, 547 (Md. 2005))). To recover under either theory, the plaintiff must demonstrate that the defendant received a benefit which equity requires the defendant to relinquish. A claim for unjust enrichment, in particular, comprises three elements: (1) a "benefit conferred upon the defendant by the plaintiff; (2) an "appreciation or knowledge by the defendant of the benefit"; and (3) the "acceptance or retention by the defendant of the benefit under such circumstances as to make it inequitable for the defendant to retain the benefit without the payment of its value." Hill v. Cross Country Settlements, LLC, 936 A.2d 343, 351 (Md. 2007); cf. Benson, 887 A.2d at 547 ("The action for money had and received is a common count used to bring a restitution claim under the common law writ of assumpsit. . . . [T]his count 'lies whenever the defendant has obtained possession of money which, in equity and good conscience, he ought not to be allowed to retain.'" (citations omitted)).

         Significantly, the measure of recovery for these (and other) restitutionary actions is "the gain to the defendant, not the loss by the plaintiff." Mass Transit Admin, v. Granite Constr. Co., 471 A.2d 1121, 1126 (Md. Ct. Spec. App. 1984); see also Restatement (First) of Restitution § 150 (Am. Law Inst. 1937) ("In an action of restitution in which the benefit received was money, the measure of recovery for this benefit is the amount of money received."). Moreover, while scienter is not an element of these restitutionary actions, and while an innocent recipient enriched by third-party wrongdoing might nevertheless be held to account under certain circumstances, "the primary rule is that if repayment will cause the recipient loss, restitution is barred to the extent that such loss would occur." Bank of Am. Corp. v. Gibbons, 918 A.2d 565, 577 (Md. Ct. Spec. App. 2007) (citation omitted); see also Plitt v. Greenberg, 219 A.2d 237, 364 (Md. 1966) ("It has been held that a plaintiff could recover money from even an innocent transferee who was without knowledge that he possessed the plaintiffs money. However, if a transferee came into possession of a plaintiffs money in good faith after paying a good and valuable consideration for it, then the plaintiff could not prevail and recover . . . the funds in that transferee's possession." (emphasis added) (citations omitted)).

         In his memorandum accompanying his Motion to Dismiss, Defendant observes that it is "not alleged that [he] had anything to do with [the $500, 000 loan] transaction or had knowledge of any of the fraudulent misrepresentations made by Hagen to Hobbs, " nor is he alleged to have "failed to have paid consideration for the funds received from Hobbs on account of the loan to Hagen." (ECF No. 9 at 12.) The Court agrees: Plaintiff devotes most of the factual allegations in his Complaint to Hagen, barely mentioning Defendant at all. After paring back Plaintiffs legal labels and conclusions, which are entitled to no deference even at the Rule 12(b)(6) stage, see Monroe v. City of Charlottesville,579 F.3d 380, 385-86 (4th Cir. 2009), the most the Court can gather is that (1) the $500, 000 loan proceeds were wired into Defendant's M&T Bank account; (2) Hagen held Defendant out as a former "black ops" operative and a high-ranking company official; and (3) upon demand, Defendant refused to return the proceeds to Plaintiff but instead used them for his "personal use and gain." (ECF No. 1 at 4.) Absent are any allegations concerning the circumstances under which Defendant received the wire transmission: the Court can only speculate as to whether Defendant gave good and valuable consideration for the funds; whether Defendant was Hagen's creditor or donee; and whether Defendant was involved with Hagen's apparent Ponzi scheme, ignorant of the scheme, or perhaps himself a victim of the scheme. Yet such information is essential to the Court's determination as to the legal viability of Plaintiffs restitutionary theories. This is so because the "mere fact that a person benefits another is not of itself sufficient to require the other to make restitution, " and while '"a person is enriched if he has received a benefit, ' the law does not consider him unjustly enriched unless 'the circumstances of the ...


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