MARQUETTE BANK v. BROWN et al

Filing 38

ORDER ON DEFENDANTS' MOTIONS TO DISMISS - 27 Motion to Dismiss for Failure to State a Claim with respect to Count I is GRANTED as to Defendants Debra Jo Brown, Melinda Gabbard, Brenda R. Lee and Ruthy Large, and DENIED as to Defendant John Ga y. With respect to Count II, the motion is GRANTED as to Defendants John Gay and Ruthy Large, and DENIED as to Defendants Debra Jo Brown, Melinda Gabbard and Brenda Lee. 29 Motion to Dismiss for Failure to State a Claim with respect to Court I i s GRANTED as to Meegan Collier and DENIED as to Michael Collier. With respect to Count II, the motion is GRANTED as to Michael Collier and DENIED as to Meegan Collier. Remaining before us are Count I's claim for fraud against Michael Collier and John Gay, and Count II's claim for unjust enrichment against Debra Jo Brown, Melinda Gabbard, Brenda R. Lee, and Meegan Collier. See Order for details. Signed by Judge Sarah Evans Barker on 3/31/2015. (LBT)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
NEW ALBANY DIVISION
MARQUETTE BANK,

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)
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)
)
)
)
)
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Plaintiff,
vs.
DEBRA JO BROWN,
et al.
Defendants.

4:14-cv-00034-SEB-TAB

ORDER ON DEFENDANTS’ MOTIONS TO DISMISS
This cause is before the Court on separate motions to dismiss filed on August 6, 2014 by
Defendants Debra Jo Brown, Melinda Gabbard, Brenda R. Lee, John D. Gay, and Ruthy Large 1
[Docket No. 27] and by Defendants Michael Collier and Meegan Collier2 [Docket No. 29]. For
the reasons set forth below, the motions are GRANTED in part and DENIED in part.
Factual Background
Plaintiff Marquette Bank (“Marquette”) is an Illinois bank association headquartered in
Orland Park, Illinois. Defendants are family members, employees, or agents of Lester Lee, a
citizen of Indiana who at the time controlled a number of business entities, most notably Lees
Inns of America, Inc. (“Lees Inns”), which was a regional chain of motels.3 Other related
entities—all alleged to have been controlled by Lester Lee at the time of the events described in
the Amended Complaint—were Hotel Capital Partners, LLC (“HCP”); the Lee Group Holding
Company, LLC (“the Lee Group”); Lee Holding, Inc.; Lees Inns Investment Management

1

We refer to this group of Defendants as the “Lee Defendants” throughout this order, even though Gay and Large
are not family members.
2
We refer to this group of Defendants as the “Collier Defendants.”
3
Lester Lee himself, who is party to a bankruptcy proceeding in the Southern District of Indiana, is not a Defendant
in this suit.

1

Corporation; and Kankakee Motel Associates, L.P. (“Kankakee”).4 These entities shared a
headquarters, office space, and many of the same personnel, including the Defendants named in
the complaint. Defendants Debra Brown, Melinda Gabbard, and Meegan Collier are all
daughters of Lester Lee; all three served on the board of directors of Lees Inns and as members
of the Lee Group. Defendant Brenda Lee is Lester Lee’s wife; she, too, served as a director of
Lees Inns and a member of the Lee Group. Defendant Michael Collier is Lester Lee’s son-in-law
(and Meegan Collier’s husband); he was the president of HCP and was allegedly in charge of the
day-to-day management of a number of Lester Lee’s related entities, including Kankakee.
Defendant John Gay, an attorney, served as counsel to all of the Lee entities, with his office inhouse, and was paid for his work by Lees Inns Management Corporation, a Lees Inns
subsidiary.5 Lastly, Defendant Ruthy Large was an employee of the Lee Group, and also worked
for the other related entities; according to Plaintiff, Large’s title with HCP was “loan manager,”
and “[h]er responsibilities included making sure financial reporting requirements were met for
mortgages and loan applications and to field questions loan officers might have regarding loans.”
Am. Compl. ¶ 9.
Marquette’s allegations focus primarily on two intertwined transactions undertaken by
Kankakee, a limited partnership whose sole general partner was Lees Inns—and was thus
allegedly controlled by Lester Lee, acting through the Lees Inns board composed entirely of his
wife and daughters.
The first transaction was an agreement to sell the Kankakee Motel, a property owned by
Kankakee in Bourbonnais, Illinois, to Youngevity Mineral Spa, LLC (“Youngevity”). Kankakee

4

The Amended Complaint states that some of these entities having been dissolved. We therefore refer to them in the
past tense, though we are not aware of their current status.
5
According to Plaintiff, Gay was therefore counsel to more than 30 business entities affiliated with Lester Lee,
including Lees Inns, HCP, the Lee Group, Kankakee, and Lee Holding, Inc. Am. Compl. ¶ 8.

2

and Youngevity signed a Purchase and Sale Agreement and Land Sale Contract (the “Land
Contract”) on October 31, 2007. See Pl.’s Ex. 8. The Land Contract contained the following
language regarding Youngevity’s down payment for the Kankakee Motel:
Down Payment. The Deposit to be paid by delivery of an executed Option to
Purchase a certain tract of real estate located at 66 Soto Land [sic], 6 Grand
Cayman Islands, consisting of approximately 6 acres and the improvements
thereon, with consideration of such option being valued at One Dollar U.S.
($1.00). Said Option may be executed at any time within five (5) years.
Pl.’s Ex. 8 at § 2(D)(1).7 The Land Contract called for the balance of the price, $4.2 million, to
be paid in monthly installments. Despite this contract language, however, Plaintiff alleges that
the Option never passed to Kankakee. Instead, in a separate contract signed the same day,
Youngevity’s principal, Joel Wallach, leased the same Cayman Islands property to a different
entity controlled by Lester Lee—the Lee Group. See Pl.’s Ex. 10.8 The lease contained a fiveyear option to purchase (the “Option”) that could be exercised for $1, and it was signed by
Wallach and Lester Lee. Id. at 5–6. Several months later, on March 1, 2008, the Lee Group, for
consideration of one dollar, assigned this lease and Option to Lester Lee personally; Lester Lee
signed the document memorializing the assignment in his capacity as the “manager” of the Lee
Group. Pl.’s Ex. 11. The members of the Lee Group—the same group of Lee’s wife and
daughters constituting the Lees Inns board—formally consented to the transfer. Pl.’s Ex. 12.9
Plaintiff alleges that the Option was exercised shortly thereafter; as evidence, it attaches a

6

The actual address of the property in question is apparently 66 Soto Lane.
As part of the discovery process in the adversary action Marquette brought against him in Bankruptcy Court,
Lester Lee produced a document that he insisted was the final amended version of the Land Contract. This version
deletes mention of the Option, and calls instead for a down payment of only $1. Plaintiff vehemently disputes the
validity of this document, which it has attached “for informational purposes only” as its Exhibit 16.
8
Plaintiff alleges that Michael Collier, John Gay, and Lester Lee all wrongfully represented to Wallach that
transferring the Option to the Lee Group rather than Kankakee—as the Land Contract had stipulated—was proper.
Am. Compl ¶ 133.
9
Lester Lee signed this “Members Consent” on March 1, 2008, the same day as the Assignment. Brenda Lee,
Meegan Collier, Melinda Gabbard, and Debra Brown all signed five days later. Pl.’s Ex. 12.
7

3

Cayman Islands “transfer of land” document showing that Wallach sold the property at Soto
Lane for consideration of $1.3 million on March 6, 2008. Pl.’s Ex. 13.10
The second transaction at issue is a loan from Marquette to Kankakee intended to
facilitate the refinancing of the same Kankakee Motel property. Plaintiff asserts that Defendant
Michael Collier was Kankakee’s point person in negotiating the loan with Marquette, and that
these negotiations began in October 2007 with a meeting in which Lester Lee and Michael
Collier were present. During this meeting, Collier allegedly represented to Marquette officials
that Youngevity had agreed in principle to buy the motel property for a total price of $5.9
million, with a down payment consisting of the Cayman Islands Option—valued at $1.3
million—and the balance to be paid monthly. Kankakee followed up by emailing Marquette a
copy of the Land Contract on November 8, 2007. Pl.’s Ex. 9. On November 14, 2007,
Marquette’s Loan Committee approved the loan to Kankakee in the amount of $3.575 million.
See Pl.’s Ex. 31. The approval was subject to an independent appraisal of the value of the
Kankakee motel. In December 2007, the independent appraiser interviewed Michael Collier, who
represented to him that the total consideration paid by Youngevity for the property in the Land
Contract was “approximately $6 million,” and that this price included the value of the Option for
the Cayman Islands property which was “currently being marketed for an asking price of $1.75
million.” See Pl.’s Ex. 32 at 6.
On February 6, 2008, the Marquette Loan Committee modified the terms of its approval,
adjusting the maximum loan amount down to $3.5 million. The Committee’s continued approval
of the loan was allegedly based, at least in part, on a memorandum prepared by Marquette officer

10

The “transfer of land” contract recites that the property is being sold to “SE CAR LTD,” an entity that is not
described elsewhere in the Amended Complaint. Plaintiff asserts that this was an account held in Lester Lee’s name.
Am. Compl. ¶ 105.

4

Mikal Christopherson, in which he stated that he was “comfortable” with the amount in question
because of “[t]he conservative nature of the appraised value in relation to the contract sale price
[i.e. the $5.9 million value quoted by Michael Collier],” and “[t]he personal financial strength of
Lester Lee and his experience in the industry,” among other factors. Pl.’s Ex. 33. 11 The next day,
Marquette sent a Loan Agreement notifying Lee and his affiliated entities of the loan’s modified
approval; the Agreement stated that the deal was subject to several conditions or “covenants,”
including the following:
a. The Borrower [Kankakee] represents and warrants that all financial statements
and data submitted to the Bank [Marquette] are true and accurate and that no
litigation is currently pending against the Borrower or the Guarantors which
has not been disclosed to the Bank.
b. The Borrower agrees to immediately notify the Bank in the event of any
significant or material change in their financial structure, statements, or
undertakings.
c. Assignment of the sales contract between the owner of the borrower and Mr.
Joel Wallach.
Pl.’s Ex. 5 at 3.
The board of Lees Inns—its general partner—having given its written consent to the loan,
see Pl.’s Ex. 35, Kankakee on April 11, 2008 executed a promissory note evidencing
indebtedness of $3.5 million for the loan which was to mature on April 10, 2013.12 Pl.’s Ex. 1.
On the same day, Kankakee executed an “Assignment of Contract,” which included the
following recitals:
C. Secured Party [Marquette] requires as a condition precedent to its making the
Loan that Borrower [Kankakee] enter into this Assignment and Borrower wishes

11

Plaintiff asserts that Christopherson’s judgment as to the “financial strength” of Lester Lee was based on the 2007
Financial Statement Lee submitted to Marquette, which Plaintiff characterizes as a “complete work of fiction and a
fraud.” Am. Compl. ¶¶ 48–56. We conclude that the Defendants in this action do not bear sufficient culpability for
any misrepresentations contained in Lester Lee’s personal financial statements for them to be directly relevant here.
12
The Note itself recited that the Assignment executed on the same day (and described here below) served as
security for the Note. Pl.’s Ex. 1 at ¶ 4.

5

to grant to Secured Party a security interest, mortgage, lien, encumbrance and
charge upon the collateral more particularly hereinafter described.
D. Borrower has entered into Purchase & Sale Agreement and Land Sale Contract
dated October 31, 2007 with Youngevity Mineral Spa, LLC, an Illinois limited
liability company, as purchaser (“Land Sale Contract”).
Pl.’s Ex. 18, at ¶¶ C, D. In light of these recitals, Kankakee stated in the Assignment that:
As further security for the payment of the Loan and performance of all Borrower
obligations, Borrower hereby assigns, transfers, pledges, sets over and grants a
security interest to Secured Party, in and to all of Borrower’s right, title and
interest in the Land Sale Contract, to all funds and monies deposited with
Borrower or any of its affiliates or agents in connection with the Land Sale
Contract, all extensions, renewals, modifications and substitutions therefor or
thereof, and all proceeds thereof (all of which constitute the Pledged Collateral
hereunder).
...
This Assignment creates, and Borrower hereby grants unto Secured Party, a
security interest in the Pledged Collateral and the proceeds (cash and non-cash)
thereof and all interest thereon, if any, and constitutes a security agreement from
Borrower to Secured Party under the Uniform Commercial Code of the State of
Illinois.
Pl.’s Ex. 18, at ¶¶ 1, 4. The Assignment further stated that Kankakee had no authority to enter
into any modifications or amendments of the Land Contract, and that it would not “pledge,
assign, or transfer or attempt to pledge, assign, or transfer the Pledged Collateral.” Id. at ¶¶ 2, 7.
In connection with the promissory note and assignment agreement, Lee counsel John Gay
sent Marquette an opinion letter on April 29, 2008, stating that he had reviewed the “loan
documents”—including the April 11, 2008 assignment to Marquette and the Loan Agreement
between Kankakee and Marquette.13 Gay opined that, based on his review of the documents,

13

The promissory note defines “Loan Documents” as including, among other documents, the April 11 assignment
executed by Kankakee, the personal guaranty issued by Lester Lee, the loan agreement itself, and “any other
document now or hereafter given to evidence or secure payment of this note and delivered to induce Lender to
disburse the proceeds of the Loan, as such documents may hereafter be amended, restated, or replaced from time to
time.” Pl.’s Ex. 1 at ¶ 4.

6

Marquette had “all necessary legal right, power and authority to conduct its business and to enter
into and perform its obligation under this Agreement and the Loan Documents.” Pl.’s Ex. 6 at ¶
ii. He further represented that “the Loan Documents and this Agreement have been duly and
validly executed and delivered, are enforceable in accordance with their respective terms (subject
to bankruptcy laws and pertaining to the exercise of creditors’ rights generally) and are subject to
no defenses of any kind.” Id. at ¶ v. Plaintiff alleges that these representations were intentionally
false, because Gay knew as of April 2008 that the Cayman Islands property Option had been
transferred to Lester Lee’s personal possession, and thus could not be pledged by Kankakee as
collateral as expressly contemplated in the Loan Agreement and the April 11, 2008
Assignment.14
Plaintiff alleges that neither Marquette’s principal representative Christopherson nor any
other Marquette official was aware at the time that the Cayman Islands property Option had been
assigned to the Lee Group—and then to Lee himself—rather than to Marquette.15 Lester Lee
allegedly sold the Cayman Islands property in May 2008, reaping a profit of $1.2 million from
the sale. Defendants assert that, later in May 2008, Kankakee and Youngevity cancelled the Land
Contract and executed a mutual release.16 Plaintiff disputes the authenticity of this release and
insists that it could not have been effective, since Kankakee had never owned the Option—which
had allegedly since been exercised by Lester Lee—and had no authority to cede it back to
Youngevity.

14

Lester Lee also made a personal guaranty of the promissory note. Am. Compl. ¶ 69.
Plaintiff recounts that Ruthy Large inadvertently sent Christopherson an email containing information relevant to
Lester Lee’s interests in the Cayman Islands property, and then told him to “please disregard, I’m not sure how it
happened or what it was, but by the subject it is not pertaining to this deal [i.e. the loan].” Am. Compl. ¶ 116.
16
Plaintiff has attached this document to its Amended Complaint as Exhibit 17, though it disputes its authenticity
and validity.
15

7

Pursuant to a court judgment in what Plaintiff alleges was a collusive suit, Lees Inns
dissolved in August 2008 and transferred all of its assets to the Lee Group. Another judgment for
approximately $7.5 million was entered against the Lee entities in resolution of a long-running
dispute with extended-family shareholders under the Indiana dissenters’ rights statute. See Pl.’s
Ex. 25. Plaintiff alleges that in January 2009, Lester Lee “transferred all of his assets to his wife
and children or to entities owned by them.” Am. Compl. ¶ 214. Despite these developments,
Plaintiff asserts that Lester Lee continued to provide financial statements to Marquette, pursuant
to his obligations as loan guarantor, that significantly overstated his financial solvency.
According to Plaintiff, these misrepresentations, which were knowingly aided by his attorney
Gay, occurred through October 2009.
In July 2009, Kankakee became delinquent on its loan payments to Marquette, and it
went into default in September 2009. Lester Lee, through Ruthy Large, told Marquette that the
decrease in his personal net worth had been caused by recent “estate planning” activities, but
neither Lee himself nor any of his agents disclosed the fate of the Cayman Islands Option or the
money derived from its exercise and the subsequent sale of the property. Kankakee closed the
Kankakee motel in January 2010, and, shortly thereafter, Marquette filed a foreclosure suit in
Illinois state court. Judgment in that suit was entered in favor of Marquette for approximately $4
million. Plaintiff asserts that, as of March 28, 2013, Lester Lee still owes Marquette $2.597
million by virtue of his personal guaranty of the loan to Kankakee.
Legal Analysis
Standard of Review
Under Rule 12(b)(6)

8

The Federal Rules of Civil Procedure authorize dismissal of claims for “failure to state a
claim upon which relief may be granted.” Fed. R. Civ. P. 12(b)(6). In determining the
sufficiency of a claim, the court considers all allegations in the complaint to be true and draws
such reasonable inferences as required in the plaintiff's favor. Jacobs v. City of Chi., 215 F.3d
758, 765 (7th Cir. 2000). Federal Rules of Civil Procedure 8(a) applies, with several enumerated
exceptions, to all civil claims, and it establishes a liberal pleading regime in which a plaintiff
must provide only a “short and plain statement of the claim showing that [he] is entitled to
relief,” Fed. R. Civ. Pro. 8(a)(2); this reflects the modern policy judgment that claims should be
“determined on their merits rather than through missteps in pleading.” E.E.O.C. v. Concentra
Health Servs., Inc., 496 F.3d 773, 779 (7th Cir. 2007) (citing 2 James W. Moore, et al., Moore’s
Federal Practice § 8.04 (3d ed. 2006)). A pleading satisfies the core requirement of fairness to
the defendant so long as it provides “enough detail to give the defendant fair notice of what the
claim is and the grounds upon which it rests.” Tamayo v. Blagojevich, 526 F.3d 1074, 1083 (7th
Cir. 2008).
In its decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v.
Iqbal, 556 U.S. 662 (2009), the United States Supreme Court introduced a more stringent
formulation of the pleading requirements under Rule 8. In addition to providing fair notice to a
defendant, the Court clarified that a complaint must “contain sufficient factual matter, accepted
as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting
Twombly, 550 U.S. at 570). Plausibility requires more than labels and conclusions, and a
“formulaic recitation of the elements of a cause of action will not do.” Killingsworth v. HSBC
Bank Nevada, N.A., 507 F.3d 614, 618 (7th Cir. 2007) (quoting Twombly, 550 U.S. at
555). Instead, the factual allegations in the complaint “must be enough to raise a right to relief

9

above the speculative level.” Id. The plausibility of a complaint depends upon the context in
which the allegations are situated, and turns on more than the pleadings’ level of factual
specificity; the same factually sparse pleading could be fantastic and unrealistic in one setting
and entirely plausible in another. See In re Pressure Sensitive Labelstock Antitrust Litig., 566 F.
Supp. 2d 363, 370 (M.D. Pa. 2008).
Although Twombly and Iqbal represent a new gloss on the standards governing the
sufficiency of pleadings, they do not overturn the fundamental principle of liberality embodied in
Rule 8. As this Court has noted, “notice pleading is still all that is required, and ‘a plaintiff still
must provide only enough detail to give the defendant fair notice of what the claim is and the
grounds upon which it rests, and, through his allegations, show that it is plausible, rather than
merely speculative, that he is entitled to relief.’” United States v. City of Evansville, 2011 WL
52467, at *1 (S.D. Ind. Jan. 8, 2011) (quoting Tamayo, 526 F.3d at 1083). On a motion to
dismiss, “the plaintiff receives the benefit of imagination, so long as the hypotheses are
consistent with the complaint.” Sanjuan v. Am. Bd. of Psychiatry & Neurology, Inc., 40 F.3d
247, 251 (7th Cir. 1994).
Under Rule 9(b)
Count I of the Amended Complaint sounds in fraud. To plead fraud or mistake under
Rule 9(b), a plaintiff must state “the identity of the person making the misrepresentation, the
time, place, and content of the misrepresentation, and the method by which the misrepresentation
was communicated to plaintiff.” See Fed. R. Civ. Pro. 9(b); Bankers Trust Co. v. Old Republic
Ins. Co., 959 F.2d 677, 683 (7th Cir.1992). The Seventh Circuit has summarized the particularity
requirement as “calling for the first paragraph of any newspaper story: the who, what, when,
where, and how.” Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 569 (7th Cir. 2012) (citations

10

omitted). The rules require that fraud allegations be stated with greater particularity in order to
combat “the great harm to the reputation of a business firm or other enterprise” that can be
inflicted by a baseless claim. See Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 507
(7th Cir. 2007). It is important to keep in mind that these heightened particularity requirements
apply only to the circumstances of the alleged fraudulent representation; they do not impose a
higher pleading standard as to the other elements of the plaintiff’s claim. “Rule 9(b) applies to
the specifics of alleged misrepresentations, but the notice pleading requirements of Rule 8 apply
to other aspects of the plaintiff's complaint, such as damages, reliance, or a defendant's state of
mind.” Ind. Bell Tel. Co. v. Ward, 2002 WL 32067296, at *3 (S.D. Ind. Dec. 6, 2002). See also
Lachmund v. ADM Inv. Servs., Inc., 191 F.3d 777, 782–783 (7th Cir. 1999).
Discussion
Plaintiff alleges that Defendants, in their capacities as Lee employees or directors of the
Lee Group and Lees Inns, assisted Lester Lee in securing for Kankakee a loan under false
premises—and then converting the value of the $1.3 Cayman Islands property Option that
Marquette had been led to believe was secured by the loan. The Amended Complaint contains
two counts: Count I alleges conspiracy to commit fraud and to fraudulently transfer assets, and
Count II seeks recovery under the equitable theory of unjust enrichment. We address these
common-law claims in turn, applying Indiana law.17
I.

Count I

A. Conspiracy liability
17

Plaintiff and Defendants agree that Indiana law applies. Though many of the contracts at issue here state that they
are to be governed according to Illinois law, this suit sounds in fraud rather than contract. In this diversity action, we
apply Indiana choice of law principles. Indiana, in turn, states that tort suits are generally governed by the law of the
state in which the alleged tortious actions occurred. See Hubbard Mfg. Co., Inv. v. Greeson, 515 N.E.2d 1071, 1073–
1074 (Ind. 1987). The alleged tortious misrepresentations here occurred almost entirely in Indiana, where the
various Lee entities were headquartered and all Defendants resided and worked. Under these circumstances, we
agree with the parties that Indiana law governs.

11

On its face, Count I alleges that all the named Defendants engaged in a civil conspiracy
to commit two underlying torts. Indiana law defines a civil conspiracy as “a combination of two
or more persons who engage in a concerted action to accomplish an unlawful purpose or to
accomplish some lawful purpose by unlawful means.” K.M.K. v. A.K., 908 N.E.2d 658, 663 (Ind.
Ct. App. 2009); Boyle v. Anderson Fire Fighters Ass’n Local 1262, AFL-CIO, 497 N.E.2d 1073,
1079 (Ind. Ct. App. 1986). In order to state a claim for a civil conspiracy, a plaintiff must
therefore allege not only concerted action among defendants, but the commission of an
underlying tort that resulted in damages. Allen v. Great Am. Reserve Ins. Co., 766 N.E.2d 1157,
1168 (Ind. 2002).
We conclude that Plaintiff’s conspiracy theory of liability is not viable here, for two
reasons. First, the allegations against the Lee family Defendants—Debra Jo Brown, Melinda
Gabbard, Brenda R. Lee, and Meegan Collier—do not plausibly describe concerted tortious
action with the other Defendants. Second, the remaining Defendants were all agents of Lester
Lee or the entities controlled by him—and thus cannot have “conspired” with him or each other
as a matter of law.
Plaintiff’s allegations against Lester Lee’s wife and daughters, who constituted the Lees
Inns board of directors and four of the five members of the Lee Group (along with Lester Lee
himself), exclusively involve their votes to approve transactions engaged in by Kankakee or the
Lee Group. The Lees Inns board, in its capacity as the sole general partner of Kankakee,
approved the loan between Kankakee and Marquette. See Am. Compl. ¶ 64; Pl.’s Ex. 35. The
same four Defendants, in their capacity as members of the Lee Group, also unanimously
consented to the Lee Group’s assignment of the Cayman Islands property Option from the Lee
Group to Lester Lee. Am. Compl. ¶¶ 85–87. Plaintiff alleges that the four Lee family

12

Defendants had full knowledge of the terms of the loan when they approved it, and were
therefore aware that the assignment of the Option contravened the representations made by
Kankakee in connection with the loan. Id. at ¶ 63. But after-the-fact ratification of two business
transactions that are inconsistent with each other, by itself, does not plausibly support an
inference that the board members had the requisite intent to engage in fraudulent concerted
action with the other Defendants. Cf. Rosenbaum v. White, 692 F.3d 593, 606 (7th Cir. 2012)
(rejecting a conspiracy claim where “the plaintiffs have failed to demonstrate that the defendants
acted in concert with [the principal co-defendant] to commit any unlawful act”). These board
votes might give rise to a claim that the directors and members violated their fiduciary duty of
care to Kankakee or the Lee Group, but we do not find that they are sufficient to implicate them
in a conspiracy.
The remaining Defendants—Michael Collier, John Gay, and Ruthy Large—were all
agents of Lester Lee.18 Collier was the president of HCP and ran Lees Inns “on a day-to-day
basis”; Plaintiff alleges that he “reported to, and worked with, Lester Lee.” Am. Compl. ¶ 7. Gay
“served as counsel to all companies and business entities operated, owned and/or controlled by
Lester Lee.” Id. at ¶ 8. Large “worked for HCP, State Mortgage Corp., and other entities
operated, owned, and/or controlled by Lester Lee.” Id. at ¶ 9. These individuals cannot have
conspired with Lester Lee to effect Lee’s fraudulent scheme because, as a matter of law, a
principal cannot conspire with his own agents. See Soft Water Utilities, Inc. v. LeFevre, 308
N.E.2d 395, 399–400 (Ind. Ct. App. 1974) (“It is basic to the law of conspiracy that there must
be at least two persons or entities to constitute a conspiracy. A corporation cannot conspire with
an agent when that agent is acting within the scope of his authority.”); Jamerson v. Anderson

18

Plaintiff has alleged that all of the various “Lee entities” involved in this litigation were subject to the control of
Lester Lee. See generally Am. Compl. ¶¶ 11–18.

13

Newspapers, Inc., 469 N.E.2d 1243, 1252 (Ind. Ct. App. 1984), overruled on other grounds by
Milkovich v. Lorain Journal Co., 497 U.S. 1 (1990). See also In re Settlers’ Hous. Serv., Inc.,
514 B.R. 258, 280 (Bankr. N.D. Ill. 2014) (affirming the general rule that “a principal cannot
conspire with its own agents”).
The conclusion that Count I does not state a claim for conspiracy does not necessarily
mandate its wholesale dismissal, however. In Indiana, as Defendants have pointed out, “there is
no separate civil cause of action for conspiracy.” Sims v. Beamer, 757 N.E.2d 1021, 1026 (Ind.
Ct. App. 2001). “Unlike criminal conspiracy, the gist of a civil conspiracy is not the unlawful
agreement, but the damage resulting from that agreement. In other words, allegations of a civil
conspiracy are just another way of asserting a concerted action in the commission of a tort.”
K.M.K., 908 N.E.2d at 663 (citations omitted). In its essence, Count I asserts a theory of joint
liability for fraudulent acts committed by certain Defendants; Plaintiff argues that it has “stated
allegations to sufficiently support viable claims for fraud against Michael Collier, John Gay, and
Ruthy Large, [and] conspiracy to commit fraud against all Defendants.” Pl.’s Resp. 3.
The Federal Rules of Civil Procedure “reflect[] a liberal notice pleading regime, which is
intended to ‘focus litigation on the merits of a claim’ rather than on technicalities.” Brooks v.
Ross, 578 F.3d 574, 580 (7th Cir. 2009) (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506,
514 (2002)). We use “common sense to determine what relief the party desires,” and we will not
dismiss a count that sets forth a viable claim for relief simply because it has been mislabeled.19
See S.E.C. v. Elliott, 953 F.2d 1560, 1582 (11th Cir. 1992); Misco Leasing, Inc. v. Keller, 490

19

We are not concerned here that Defendants were not fairly put on notice of the nature of the claim. Both sets of
Defendants devoted almost the entirety of their briefs to arguing the question of whether any of the individual
Defendants engaged in fraud.

14

F.2d 545, 548 (10th Cir. 1974). We will therefore allow Count I to survive to the extent that
Plaintiff has adequately pled a claim for fraud against any individual Defendant.20
B. Fraud liability of individual Defendants
Count I incorporates specific fraud allegations against three Defendants: Michael Collier,
John Gay, and Ruthy Large.21 Fraud in Indiana is defined as “(1) a material representation of a
past or existing fact by the party to be charged that; (2) was false; (3) was made with knowledge
or reckless ignorance of its falsity; (4) was relied upon by the complaining party; and (5)
proximately caused the complaining party's injury.” Ruse v. Bleeke, 914 N.E.2d 1, 10 (Ind. Ct.
App. 2009); Youngblood v. Jefferson Cnty. Div. of Family & Children, 838 N.E.2d 1164, 1169–
1170 (Ind. Ct. App. 2005).
Although most formulations of the standard do not explicitly include such a requirement,
“[a]n intent to deceive, or ‘scienter,’ is an element of actual fraud, whether classified as a
knowing or reckless misrepresentation or as an additional element to a knowing or reckless
misrepresentation.” Wright v. Pennamped, 657 N.E.2d 1223, 1230 (Ind. Ct. App. 1995). See also
Francis v. AIT Labs., 2008 WL 4585423, at *5 (S.D. Ind. Oct. 14, 2008). A tortfeasor’s state of
mind, of course, can seldom be proven directly; evidence that a defendant knew, or should have
known, that a representation would induce reliance is one of several factors that may be

20

Count I also asserts that Defendants are liable for civil conspiracy to commit a fraudulent conveyance. Both sets
of Defendants argue in their briefs that any claim for fraudulent conveyance fails because it is (1) barred by
Indiana’s applicable statute of limitations and (2) not properly before the Court as it is within the exclusive
jurisdiction of the Bankruptcy Court before which actions involving Lester Lee are currently pending. Lee
Defendants’ Br. 19–22; Collier Defendants’ Br. 26–30. Plaintiff has not responded to these arguments, and does not
address the fraudulent conveyance claim in its Response brief. Plaintiff has therefore waived any such arguments
and abandoned the fraudulent conveyance claim. See Central States, Se. & Sw. Areas Pension Fund v. Midwest
Motor Express, Inc., 181 F.3d 799, 808 (7th Cir. 1999); Perry v. City of Indianapolis, 2013 WL 1750747, at *7
(S.D. Ind. Apr. 23, 2013).
21
Although Plaintiff asserts generally that the Lee family Defendants bear responsibility for the other Defendants’
(and Lester Lee’s) fraud pursuant to its conspiracy theory of liability, the Amended Complaint contains no
allegations that any of the four made any representations themselves that could give rise to fraud liability.

15

probative of scienter. “Proof of intent to deceive is determined by a review of all of the relevant
factors of the particular case . . . . Where a person knowingly or recklessly makes false
representations which the person knows or should know will induce another to act, the finder of
fact may logically infer an intent to deceive.” In Re McGinnis, 2010 WL 4956376, at *3 (Bankr.
S.D. Ind. Nov. 30, 2010) (citing Mayer v. Spanel Int’l, Ltd., 51 F.3d 670, 673 (7th Cir. 1995)).22
We address the allegations pertaining to each of these three Defendants in turn, and we
conclude that Plaintiff has adequately stated a claim with respect to Michael Collier and John
Gay.
1. Allegations against Michael Collier
Plaintiff’s two most specific allegations against Collier concern his representations as to
the value received by Kankakee in the Land Contract with Youngevity—particularly whether
Kankakee actually received the Option as recited by that contract.
First, Plaintiff asserts that, at a meeting with Marquette on October 24, 2007 as part of the
negotiation of the loan to Kankakee, Collier—alongside Lester Lee—represented to Marquette
officer Christopherson that Youngevity had agreed to pay $5.9 million for the Kankakee motel.
The way Collier allegedly described the deal, Youngevity’s down payment would be the Option
(represented as worth $1.3 million); the rest of the amount would consist of a $400,000 payment
towards the motel’s mortgage and $4.2 million in monthly payments over five years. Am.
Compl. ¶¶ 30, 32. Regardless of the effect this statement may have had on Marquette, it cannot
constitute fraud because it was made before the Land Contract and assignment of the Option to

22

These cases involve the construction of a federal bankruptcy statute rather than Indiana law, but they derive the
“intent to deceive” element of fraud from the common law. “The word ‘fraud’ implies a requirement of intent to
deceive.” Mayer, 51 F.3d at 674 (citing Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976); Neal v. Clark, 95 U.S.
704, 709 (1877)).

16

the Lee Group were consummated on October 31, 2007—in other words, it was not yet
necessarily untrue. “Indiana law is well-settled that actual fraud ‘may not be based on
representations regarding future conduct, or on broken promises, unfulfilled predictions or
statements of existing intent which are not executed.’” Dunlap v. Switchboard Apparatus, Inc.,
2012 WL 1712554, at *9 (S.D. Ind. May 15, 2012) (quoting Biberstine v. N.Y. Blower Co., 625
N.E.2d 1308, 1315 (Ind. Ct. App. 1993)).
Plaintiff also alleges, however, that Collier made similar misrepresentations in December
2007 in an interview with the independent appraiser who was assessing the value of the
Kankakee motel property pursuant to the loan agreement. Am. Compl. ¶ 41. The appraiser’s
subsequent memorandum to Marquette specifically noted the interview with Collier, and
reflected Collier’s statement that the total consideration paid by Youngevity for the property in
the Land Contract was “approximately $6 million,” and that this price included the value of the
Option for the Cayman Islands property which was “currently being marketed for an asking price
of $1.75 million.” See Pl.’s Ex. 32 at 6. Plaintiff asserts that the Marquette Loan Committee
relied upon Collier’s statements in approving the modified loan in February 2008. Am. Compl. ¶
45.
We conclude that the allegations regarding the December 2007 representation to the
appraiser satisfy the Rule 9(b) fraud pleading requirements. Plaintiff has stated—within
reasonably narrow bounds—when the misrepresentation occurred, who made it, and what its
subject matter was. See UniQuality, Inc. v. Infotronx, Inc., 974 F.2d 918, 923 (7th Cir. 1992).
This allegation is rendered plausible by the existence of a memorandum from the independent
appraiser, attached to the Amended Complaint, reflecting that the interview with Collins did, in

17

fact, take place.23 See Pl.’s Ex. 32 at 6. Moreover, Plaintiff has satisfactorily pled the elements of
a claim for actual fraud. By December 2007, the transactions described by Collier had already
occurred: Youngevity had executed the lease and Option to the Lee Group on October 31, 2007,
even though the Land Contract signed the same day recited that the Option would be provided to
Kankakee as a down payment for the motel property. The value of the collateral Kankakee would
be able to provide for the loan was plainly a material question to Marquette, and, unlike Collier’s
October 24 statement, this later colloquy represented a “misrepresentation of past or existing
fact.” See Baehl v. Bank of America, N.A., 2013 WL 1319635, at *8 (S.D. Ind. Mar. 29, 2013)
(emphasis added).24 Plaintiff plausibly alleges that Collier, as an executive officer of Lees Inns
and other Lee entities, was aware that his representations to the appraiser were false; Defendants
do not meaningfully dispute this imputation of knowledge.25 See Am. Compl. ¶¶ 79, 81.
With respect to reliance, the Collier Defendants argue that Marquette cannot have relied
on Michael Collier’s statements, because the appraiser ultimately set the Kankakee motel’s value
at $5 million—less than Collier’s $6 million incorporating the ostensible $1.3 million down
payment represented by the Option. In the hyperbolic style that unfortunately pervades the
Collier Defendants’ brief, they state as follows: “Astoundingly, a close review of the Amended
Complaint discloses that the independent appraiser did not even rely on Michael Collier’s
statements of value . . . . The contradictory nature of these allegations is puzzling and their

23

To the extent that memorandum is offered for the truth of its contents at trial, it would likely be hearsay. Fed. R.
Evid. 801(c). We do not concern ourselves with that question at this stage; the existence of the memorandum, not its
veracity, lends plausibility to Plaintiff’s allegation that an interview took place.
24
The Collier Defendants insist that Collier’s statements must be regarded as expressions of “opinion” or “the
‘puffing’ of a sales agent or broker.” Collier Defs.’ Br. 21, ¶ 31. We do not see how the December 2007 statement
can be classified as opinion or puffery, given that he was purportedly describing a transaction that had already taken
place rather than merely extolling the virtues of a property for sale.
25
The Collier Defendants argue only that the allegations with regard to the first, second, and third elements of a
fraud claim (material representation, falsity, and knowledge) are “vague, at best.” Collier Defs.’ Br. 9, ¶ 15. They
primarily dispute the sufficiency of the allegations regarding intent to deceive and reliance. Id.

18

purpose is baffling, save perhaps to defame and cast obloquy and ridicule upon Michael Collier.”
Collier Defs.’ Br. 20, at ¶ 30. Defendants’ protestations notwithstanding, Plaintiff’s allegation of
reliance is sufficient at the motion to dismiss stage. The Amended Complaint states that the
appraiser relied upon Collier’s statements, which were in turn relied upon by the Marquette Loan
Committee, whose approval of the loan in February 2008 noted that the $5 million value set by
the appraiser was “conservative” in light of the nearly $6 million ostensibly paid under the Land
Contract. See Am. Compl. ¶ 45; Pl.’s Ex. 33. Count I asserts that Marquette’s grant of the loan in
reliance on these and other misrepresentations damaged it in the amount of more than $2.5
million. Am. Compl. ¶¶ 240, 247–248.
In urging dismissal, the Collier Defendants contend that Plaintiff has not adequately pled
that Collier acted with fraudulent intent, correctly noting that “there can be no fraud without a
representation made with intent to deceive.” Collier Defs.’ Br. 12, ¶ 22 (citing B.E.L.T., Inc. v.
Wachovia Corp., 403 F.3d 474, 477 (7th Cir. 2004)). Intent, however, is a factual question, and it
may inferred from a defendant’s knowledge and other circumstances. See Wright v. Pennamped,
657 N.E.2d 1223, 1230 (Ind. Ct. App. 1995). As we have already observed, scienter, while
indispensable to proving fraud, is not necessarily a formal pleading requirement under Indiana
law. See Ruse v. Bleeke, 914 N.E.2d 1, 10 (Ind. Ct. App. 2009) (enumerating elements of a
claim, excluding intent element); Youngblood v. Jefferson County Div. of Family & Children,
838 N.E.2d 1164, 1169–1170 (Ind. Ct. App. 2005); Wells v. Stone City Bank, 691 N.E.2d 1246,
1250 (Ind. Ct. App. 1998) (likewise).

19

We therefore DENY the Collier Defendants’ motion to dismiss with respect to Count I’s
allegation of fraud against Michael Collier based on his December 2007 representations to the
appraiser.26
2. Allegations against John Gay
Plaintiff’s allegations against John Gay primarily concern the Opinion Letter he sent to
Marquette on April 29, 2008. In that letter, Gay represented that he had reviewed the loan
documents, including the “Assignment of Contract” between Kankakee and Marquette, and that
he had “examined such other documents, made such investigations of fact, and . . . considered
such questions of law, as, in my judgment, have been necessary to render this opinion.” Pl.’s Ex.
6. He assured Marquette that Kankakee had all necessary authority to enter into the loan
documents, that the loan documents were enforceable according to their terms, and that they
were subject to “no defenses of any kind.” Id.
The allegations pertaining to the Opinion Letter plainly satisfy Rule 9(b)’s pleading
particularity requirements: Plaintiff has attached the letter containing Gay’s precise words to its
Amended Complaint, see Pl.’s Ex. 6, and Defendants do not dispute the letter’s authenticity. In
urging that the letter does not give rise to a fraud claim, the Lee Defendants argue that, read
strictly, the letter contains “no misrepresentations whatsoever concerning the Cayman Property
or the Option.” Lee Defendants’ Br. 15–16. While it is true that the letter does not mention either

26

The Amended Complaint contains several other, less specific allegations that Collier engaged in actionable
misrepresentations. These include that he repeatedly told Christopherson that the Option had not yet be exercised,
and that he forwarded the Land Contract to Ruthy Large knowing that it contained material misrepresentations and
omissions. Am. Compl. ¶¶ 47, 75, 81. Plaintiff also alleges that Collier made misrepresentations to Youngevity, the
contract buyer of the Kankakee property. Id. at ¶ 133. The allegations relating to Collier’s further statements to
Christopherson fail to satisfy the particularity requirements of Rule 9(b), in that they do not specify the time or
manner of the alleged misrepresentations. Cf. Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 569 (7th Cir. 2012).
The allegations that he forwarded a document to Large or lied to Youngevity fail to state a claim for fraud, in that
they fail to allege an actual material misrepresentation or detrimental reliance by Marquette, respectively.

20

by name, it testifies to the validity and enforceability of the “loan documents”—a term defined
by the loan agreement itself to include Kankakee’s assignment of the Land Contract to
Marquette. See Pl.’s Ex. 1 at ¶ 4. The assignment document, in turn, specifically refers to the
Land Contract and its purported Cayman Islands Option down payment. Pl.’s Ex. 18, at ¶¶ C, D,
1, 4. In the assignment, Kankakee stated that it “hereby assigns, transfers, pledges, sets over and
grants a security interest to Secured Party, in and to all of Borrower’s [Kankakee’s] right, title
and interest in the Land Sale Contract.” Id. at ¶ 1. In representing to Marquette that this
assignment was valid, and that Kankakee had the necessary authority to enter into it, Plaintiff has
plausibly alleged that Gay made a misrepresentation of fact.
Plaintiff has adequately pled the remaining elements of a fraud claim as well. As counsel
for the Lee Group as well as Kankakee, Plaintiff alleges that Gay was fully aware of the true
disposition of the Option—and thus of the material falsity of his opinion letter in that respect.
Am. Compl. ¶ 67. Although the loan had already been preliminarily approved by April 2008,
Plaintiff alleges that Marquette relied upon the opinion letter—the receipt of which was a
condition of the loan’s approval—in continuing to perform under the agreement. Id. at ¶ 68. And
as before, Plaintiff asserts that its funding of the loan caused it dire financial consequences
resulting from Kankakee’s default and Lee’s alleged conversion of the Option which was
supposed to have been loan collateral. ¶¶ 240, 247–248.27
Gay’s status as Lester Lee’s lawyer places him in a unique position relative to the other
Defendants in this action—in that his fiduciary duties did not necessarily begin and end with his
responsibilities to his employer. Regardless of whether he owed Marquette any affirmative duty
of disclosure, however, his attorney-client relationship does not shield him from liability for any

27

Although the Amended Complaints contains other, less specific allegations of misrepresentations made by Gay,
Plaintiff prudently argues only that the April 29, 2008 opinion letter satisfies the requirements of actual fraud.

21

actual fraud he may have committed while acting in service of his client. See generally Wright v.
Pennamped, 657 N.E.2d 1223 (Ind. Ct. App. 1995). We therefore DENY the Lee Defendants’
motion to dismiss with respect to Count I’s allegation of fraud against John Gay based on his
April 2008 opinion letter to Marquette.
3. Allegations against Ruthy Large
Most of Plaintiff’s allegations against Ruthy Large do not actually describe
“representations” made to Marquette. Plaintiff alleges that, in carrying out her job, she played a
role in delivering the land contract assignment and other documents to Marquette, knowing that
the Option had not in fact been delivered to Kankakee as a down payment as the land contract
stated. But unlike Collier and Gay, Large is not alleged to have made any statements of past or
existing fact herself. Am. Compl. ¶¶ 39, 57, 164–165, 189–190, 220–221. Similarly, the
allegation that she “was working with Lester Lee to convert to his personal benefit the funds
from the sale of the Cayman Islands Property,” id. at ¶ 110, in addition to being conclusory, says
nothing about a statement to Marquette.
The only communication between Large and Marquette that Plaintiff alleges with any
specificity was an email exchange between her and Marquette officer Christopherson. In April
2008, Large inadvertently forwarded Christopherson an email from an account officer at the
Cayman National Bank—Plaintiff apparently means to assert that this email concerned the
Caymans property described in the Option, though the Amended Complaint does not explicitly
say so. Am. Compl. ¶ 114. Christopherson replied, “Did you mean to send this to me?” Id. at ¶
115. Minutes later, Large responded: “Ooopppps [sic] no please disregard, I’m not sure how it
happened or what it was, but by the subject it is not pertaining to this deal.” Id. at ¶ 116. It is not
clear what importance Plaintiff attaches to this email exchange—or what importance it thinks
22

Christopherson attached to it. Regardless, Plaintiff never alleges that Marquette relied to its
detriment on these enigmatic few sentences, and Plaintiff has therefore failed to plead a fraud
claim arising from the emails.28
The Lee Defendants’ motion to dismiss Count I with respect to Ruthy Large is therefore
GRANTED.
II.

Count II
Count II seeks equitable recovery for the unjust enrichment Plaintiff has allegedly

conferred upon all Defendants. Also referred to as quantum meruit or quasi-contract, unjust
enrichment requires a party who has been unjustly enriched at another's expense to make
restitution to the aggrieved party. Reed v. Reid, 980 N.E.2d 277, 296 (Ind. 2012) (citing Bayh v.
Sonnenburg, 573 N.E.2d 398, 408 (Ind. 1991)). “To recover under an unjust enrichment claim, a
plaintiff must generally show that he rendered a benefit to the defendant at the defendant's
express or implied request, that the plaintiff expected payment from the defendant, and that
allowing the defendant to retain the benefit without restitution would be unjust.” Id. See also
Woodruff v. Ind. Family & Soc. Servs. Admin., 964 N.E.2d 784, 791 (Ind. 2012).29

28

The Amended Complaint states only that “Mikal Christopherson had no other information that suggested Ruthy
Large was lying, and he had no reason not to trust her.” Am. Compl. ¶ 116.
29
The Lee Defendants argue in a footnote that the unjust enrichment claims are barred by Indiana’s applicable sixyear statute of limitations, Ind. Code § 34-11-2-7, since “[a]ny transfers regarding the Option or the Cayman
Property occurred no later than March 6, 2008—more than six years before Marquette filed this action in April
2014.” Lee Defs.’ Br. 28 n.15. But this statute of limitations is subject to the “discovery rule,” under which “a cause
of action accrues and the statute of limitations begins to run when the plaintiff knew or could have discovered an
injury.” King v. Terry, 805 N.E.2d 397, 400 (Ind. Ct. App. 2004) (citing Del Vecchio v. Conseco, Inc., 788 N.E.2d
446, 449 (Ind. Ct. App. 2003)). Here, Marquette alleges that it was unaware that the Option had been transferred to
the Lee Group rather than Kankakee—or subsequently re-transferred to Lee and his family members—until after it
had sued Lester Lee in Illinois state court in January 2010. Am. Compl. ¶¶ 133, 236. At least for purposes of this
motion to dismiss, we therefore cannot say that the statute of limitations bars the claim.

23

Here, Plaintiff has alleged that the Cayman Islands property Option, which Marquette
reasonably believed belonged to Kankakee as the down payment for Youngevity’s purchase of
the Kankakee motel property, was wrongfully usurped by Lester Lee personally. See Pl.’s Exs.
10, 11; Am. Compl. ¶ 119. In January 2009, Plaintiff alleges that Lester Lee then “transferred all
of his assets to his wife and children or to entities owned by them.” Am. Compl. ¶ 214. Plaintiff
has not shown that Michael Collier, John Gay, or Ruthy Large realized any personal financial
benefit from this alleged misappropriation; the unjust enrichment claim against them therefore
fails. See Lee Defs.’ Br. 28–29. If Plaintiff’s assertions are true, however, then his wife and three
daughters—Brenda Lee, Melinda Gabbard, Debra Brown, and Meegan Collier—ultimately
received the unjust proceeds derived from the sale of the converted Option. See Bayh, 573
N.E.2d at 408.
Defendants protest that Marquette did not grant “any benefit to the Lee Family
Defendants with their express or implied request,” and they argue that “[t]he absence of any such
allegation is fatal to Marquette’s unjust enrichment claim.” Lee Defs.’ Br. 29 (citing Reed, 980
N.E.2d at 296). However, as Plaintiff has pointed out in response, recovery is possible against a
defendant who was unjustly enriched by a misappropriation, even if the plaintiff did not intend to
confer a benefit upon that defendant and that defendant was not personally responsible for the
misappropriation.30 In Paul v. I.S.I. Services, Inc., 726 N.E.2d 318 (Ind. Ct. App. 2000), for
instance, the court held that where a husband had embezzled funds from his company and his
wife—though innocent of the initial wrongdoing—had benefitted from the proceeds, recovery

30

We recognize that the decisions in Paul and Dominiack seem to exist in tension with Indiana courts’ statements of
the general rule that the benefit conferred must be “one that the defendant impliedly or expressly requested.” See
Morris v. Crain, 969 N.E.2d 119, 124 (Ind. Ct. App. 2012); Coleman v. Coleman, 949 N.E.2d 860, 867 (Ind. Ct.
App. 2011). In light of the fact that valid Indiana case law has allowed recovery against “innocent” parties—without
discussing whether they could be said to have “impliedly” requested the benefits in question—we resolve any
ambiguity in the precedent in favor of Plaintiff at this stage.

24

for unjust enrichment was appropriate against her. 726 N.E.2d at 320, 322 (“[T]he trial court
heard that embezzled funds were used to make house and car payments, and to pay for vacations
by Donald and Judith, their theater tickets, and various household repairs. Such evidence
supports the inference that Judith was unjustly enriched by Donald's embezzlement.”). See also
Dominiack Mech., Inc. v. Dunbar, 757 N.E.2d 186, 191 (Ind. Ct. App. 2001).31
We therefore GRANT the Lee Defendants’ motion to dismiss Count II as to John Gay
and Ruthy Large, and DENY the motion as to Debra Brown, Melinda Gabbard, and Brenda Lee.
On the same grounds, we GRANT the Collier Defendants’ motion to dismiss Count II as to
Michael Collier, and DENY the motion as to Meegan Collier.
Conclusion
We resolve the Defendants’ motions to dismiss as follows:
(1) The Lee Defendants’ motion to dismiss [Docket No. 27] with respect to Count I is
GRANTED as to Defendants Debra Jo Brown, Melinda Gabbard, Brenda R. Lee, and
Ruthy Large, and DENIED as to Defendant John Gay. With respect to Count II, the

31

The Collier Defendants also argue that recovery under this theory is precluded because a contract between the
parties exists here, and “[w]hen the rights of the parties are controlled by an express contract, recovery cannot be
based on a theory implied in law.” Collier Defs.’ Br. 31, ¶ 49 (citing Zoeller v. E. Chi. Second Century, Inc., 904
N.E.2d 213, 221 (Ind. Ct. App. 2009)). However, as the case law cited by Defendants recognizes, there are
significant exceptions to this general principle. Where a contract exists but the defendants in question are not parties
to it, as here, unjust enrichment recovery may still be appropriate. See Zoeller, 904 N.E.2d at 221 (“There was an
express contract in this transaction, but it was not one to which the Attorney General or the State were parties. . . .
That transaction is thus not a bar to the Attorney General's claim for unjust enrichment, an equitable remedy.”).
Moreover, “when an express contract does not fully address a subject, a court of equity may impose a remedy to
further the ends of justice.” Copolillo v. Cort, 947 N.E.2d 994, 998 (Ind. Ct. App. 2011) (citations omitted). The
Defendants alleged to have been unjustly enriched here were not parties to the loan agreement, and the wrong
alleged was in fraudulent inducement of the contract rather than its breach. Under these circumstances, we do not
find that the existence of the loan precludes recovery on an unjust enrichment theory as a matter of law.

25

motion is GRANTED as to Defendants John Gay and Ruthy Large, and DENIED as to
Defendants Debra Jo Brown, Melinda Gabbard, and Brenda Lee.
(2) The Collier Defendants’ motion to dismiss [Docket No. 29] with respect to Count I is
GRANTED as to Meegan Collier and DENIED as to Michael Collier. With respect to
Count II, the motion is GRANTED as to Michael Collier, and DENIED as to Meegan
Collier.
Remaining before us are Count I’s claim for fraud against Michael Collier and John Gay, and
Count II’s claim for unjust enrichment against Debra Jo Brown, Melinda Gabbard, Brenda R.
Lee, and Meegan Collier.
IT IS SO ORDERED.
Date: ______________________
03/31/2015

26

Distribution:

W. Bruce DelValle
DELVALLE LAW GROUP, PA
[e-mail]
Emily C. Lamb
WYATT TARRANT & COMBS -- Lousiville
[e-mail]
Jason Andrew Lopp
WYATT TARRANT COMBS LLP
[e-mail]
Jean Marie Blanton
ZIEMER STAYMAN WEITZEL & SHOULDERS LLP
[e-mail]
Nick J. Cirignano
ZIEMER STAYMAN WEITZEL & SHOULDERS, LLP
[e-mail]

27