Miller et al v. Laidlaw & Company (UK) LTD et al

Filing 31

ORDER granting in part 15 Defendants' Motion to Dismiss Pursuant to Rule 12(B)(2) and granting in part 16 Defendants' Motion to Dismiss Pursuant to Rules 8, 9, and 12(B)(6). Signed by District Judge Denise Page Hood. (JOwe)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
SHELDON MILLER, BRUCE SEYBURN,
ARTHUR WIRTH and JAMES RANDOLPH,
Plaintiffs,
v.

Case No. 11-12086
Honorable Denise Page Hood

LAIDLAW & COMPANY (UK) LTD., an
English corporation, HUGH REGAN, TED
FOWLER, JASON RUSSO, TODD CIRELLA,
STEPHEN GIANNANTONIO, and PETER
SILVERMAN,
Defendants.
/
ORDER GRANTING IN PART DEFENDANTS’ MOTION TO DISMISS PURSUANT
TO RULE 12(B)(2) AND DEFENDANTS’ MOTION TO DISMISS PURSUANT TO
RULES 8, 9, AND 12(B)(6)
I.

INTRODUCTION
This matter is before the Court on Defendants’ Motion to Dismiss Pursuant to Rule

12(b)(2) [Docket No. 15, filed August 15, 2011] and Defendants’ Motion to Dismiss Pursuant to
Rules 8, 9, and 12(b)(6) [Docket No. 16, filed August 16, 2011]. The Court heard oral
arguments on November 9, 2011. The matter is now fully briefed and appropriate for
determination. For the reasoned stated below, the Defendants’ Motion to Dismiss Pursuant to
Rule 12(b)(2) is GRANTED IN PART and Motion to Dismiss Pursuant to Rules 8, 9, and
12(b)(6) is GRANTED IN PART.
II.

BACKGROUND
Sheldon Miller, Bruce Seyburn, Arthur Wirth, and James Randolph (collectively the

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“Plaintiffs”) filed this present action on May 11, 2011 seeking relief under theories of fraud and
misrepresentation (Counts I, VI, XI, XVI), negligent misrepresentation (Counts II, VII, XII,
XVII), breach of fiduciary duty (Counts III, VIII, XIII, XVIII), unjust enrichment (Counts IV,
IX, XIV, XIX), and accounting (Counts V, X, XV, XX).
Defendant, Laidlaw & Company, Ltd. is an English investment banking and brokerage
firm (Compl. ¶¶ 5, 15). Plaintiffs are Laidlaw clients who invested millions of dollars in various
investment ventures (Compl. ¶ 17). Plaintiffs invested in a business venture by South Pacific
Partners, which was opening up at least 30 Hooters restaurants in Australia and New Zealand
over the span of five years (Compl. ¶¶ 19-23). South Pacific issued a private offering on May 15,
2006 for 25 percent of its partnership in order to raise $7 million to open the restaurants (Compl.
¶ 23).
A. Plaintiff Miller
Plaintiff Miller alleges that he invested $250,000 in South Pacific in 2006 based on the
private offering and Defendant Jason Russo’s, Laidlaw’s Senior Managing Member and CoHead of Product Sales, representations (Compl. ¶¶ 23, 29, 31). Defendant Russo stated that
South Pacific was a great investment that would grow by 3.7 percent (Compl. ¶ 30). In October
2007 and February 2008, Miller was contacted by Laidlaw to provide short-term bridge loans
(Compl. ¶¶ 37, 44, 50). In a February 2008 email, Russo stated that, in exchange for additional
loans, South Pacific would increase the interest rates on the promissory note and provide one unit
of South Pacific Partnership (Compl. ¶ 52). Russo indicated that the principal bridge loan would
be repaid by April 15, 2008 (Compl. ¶ 53). In October 2007 and February 2008, Miller made two
$500,000 bridge loans to South Pacific based on representations made by Defendants Russo and
Cirella (Compl. ¶¶ 23-36, 44-45, 50-54). When the principal loan was not repaid, Miller

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contacted Russo and/or Cirella in April 2008 and was told that the loan would be repaid on June
1, 2008 (Compl. ¶ 59). Miller and Russo and/or Cirella engaged in subsequent conversations and
the date of payment was moved back several times (Compl. ¶¶ 59-62). In January 2009, Miller
requested information on the investments from Laidlaw but was refused (Compl. ¶ 66).
B. Plaintiff Wirth
In October 2008, Giannantonio, Russo, Fowler and Regan contacted Wirth about
providing a short-term bridge loan to South Pacific (Compl. ¶¶ 37-38). The loan would mature in
April 2008 with an interest rate of nine percent and a warrant to purchase a partnership in South
Pacific (Compl. ¶ 38). Wirth made a $500,000 bridge loan to South Pacific in October 2007
based on Defendants Giannantonio’s representations (Compl. ¶ 40). In February 2008, a South
Pacific investment broker named Robert Hersch asked for an additional bridge loan, which Wirth
provided based on representations made by Fowler, Giannantonio, Russo, and Regan (Compl. ¶¶
47-48). Fowler, Giannantonio, Russo, and Regan represented that it was a good investment and
would be repaid by April 2008 (Compl. ¶ 48). Wirth also made investments in various other
companies (Compl. ¶¶ 72-81, 87-89). In January 2009, Wirth requested information on the
investments from Laidlaw but was refused (Compl. ¶ 66).
C. Plaintiff Randolph
In July 2006, Randolph invested $100,000 in South Pacific based on Silverman’s
representations (Compl. ¶ ¶ 25-28). Silverman reported that South Pacific was a great investment
opportunity (Compl. ¶ 26). Randolph also made investments in various other companies totaling
$1.1 million based on Silverman’s representations. In January 2009, Miller requested
information on the investments from Laidlaw but was refused (Compl. ¶ 70-71).
D. Plaintiff Seyborn

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In May 2007, Seyburn invested $150,000 in South Pacific based on Cirella’s
representations (Compl.¶ 34). He also invested in several other companies based on Cirella’s
representations (Compl. ¶¶ 70-71).
Plaintiffs later learned that South Pacific never closed on the deal and lost some of its
rights to build Hooters restaurants in Australia and New Zealand (Compl. ¶ 69). Plaintiffs now
bring this instant action.
III.

ANALYSIS
A. Fed. R. Civ. P. 12(b)(2) Motion to Dismiss
1. Standard of Review
Federal Rule of Civil Procedure 12(b)(2) allows the Court to dismiss an action for lack of

personal jurisdiction. Fed. R. Civ. P. 12(b)(2). The plaintiff has the burden of establishing
whether the Court has jurisdiction over the defendants. Neogen Corp. v. Neo Gen Screening,
Inc., 282 F.3d 883, 887 (6th Cir. 2002). When presented with a motion to dismiss for lack of
personal jurisdiction, the Court may, in its discretion, pick between three options. First, it may
conduct an evidentiary hearing to resolve any factual issues. McCluskey v. Belford High Sch.,
795 F.Supp.2d 608, 615 (E.D. Mich. 2010). Second, it may proceed to discovery. Id. The Court
may conduct an evidentiary hearing or allow discovery if “the written submissions raise disputed
issues of fact or seem to require determinations of credibility.” Id. (quoting Serras v. First Tenn.
Bank Nat. Ass’n, 875 F.2d 1212, 1214 (6th Cir. 1989). Finally, it may decide the issue based on
the pleadings and affidavits alone. Id.
When the Court does not conduct an evidentiary hearing, it must consider the pleadings
and affidavits in the light most favorable to the plaintiff. Lifestyle Lift Holding Co., Inc. v.
Prendiville, 768 F.Supp.2d 929, 932 (E. D. Mich. 2011). “In this circumstance, the plaintiff must

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make a prima facie showing of jurisdiction; the court does not consider the controverting
assertions of the party moving for dismissal.” Id. In a diversity case, the plaintiff has established
a prima facie case when he or she shows that the federal court’s exercise of personal jurisdiction
over the defendants is authorized by both the law of the forum state and the Due Process Clause
of the Fourteenth Amendment. Neogen Corp., 282 F.3d at 888.
2. General Jurisdiction
Plaintiffs argue that Laidlaw is subject to general jurisdiction because it has “openly”
sought business from Michigan and has intentionally solicited investments from the two
Michigan Plaintiffs. Laidlaw’s website allows potential customers to open an account and
existing customers to review their portfolios by registering usernames. Plaintiffs cite Zippo Mfg.
Co. v. Zippo DOT Com, 952 F.Supp. 1119 (W.D. Pa. 1997), for the proposition that Laidlaw’s
website is “highly interactive” and provides sufficient contacts to support general jurisdiction.
Plaintiffs have not provided any facts that would support a finding of general jurisdiction
on the basis of Laidlaw’s website or its solicitation of investments from two Michigan residents.
Plaintiffs’ reliance on Zippo is misplaced. Zippo has been used to determine whether specific
personal jurisdiction is appropriate under the due process clause. In fact, Sixth Circuit precedent
has held that the maintenance of an accessible website alone is insufficient to confer general
personal jurisdiction. See Bird v. Parsons, 289 F.3d 865, 874 (6th Cir. 2002) (finding that the
fact that the defendant “maintain[ed] a website that [was] accessible to anyone over the Internet
[was] insufficient to justify general jurisdiction”); Brown v. Way, No. 10-13016, 2011 WL
3555618 (E.D. Mich. Aug. 5, 2011) (reasoning that the existence of a website under normal
circumstances is insufficient to form the basis for general personal jurisdiction); King v.
Ridenour, 749 F.Supp.2d 648, 653 n.3 (E.D. Mich. 2010) (“A website must specifically target a

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forum in order for it to serve as a basis for general jurisdiction”); Hi-Tex, Inc. v. TSG, Inc., 87
F.Supp.2d 738, 743 (E.D. Mich. 2000) (“participation in a website, without more, is an
insufficient basis for exercising personal jurisdiction”). The fact that Laidlaw’s website allows
customers to register usernames, thereby allowing Laidlaw to conduct business with Michigan
residents, is also insufficient to confer general personal jurisdiction. See Bird, 289 F.3d at 874.
The website is available to anyone in the United States. Nor does Laidlaw’s solicitation of two
Michigan investors, alone, rise to the level of “continuous and systematic” business with
Michigan. The exercise of general jurisdiction over Laidlaw is inappropriate under these facts.
As to an individual, Michigan’s long-arm statute allows the exercise of jurisdiction when
the individual 1) is domiciled in Michigan, 2) is served in Michigan, or 3) consents to be sued in
Michigan. MICH. COMP. LAWS. § 600.701. Defendants contend that the individual Defendants
are not subject to general jurisdiction because they were not domiciled in Michigan, never
consented to jurisdiction in Michigan or were served in Michigan. None of the individual
Defendants appear to be domiciled in Michigan. In fact, Defendants Hugh Ragan, Ted Fowler,
Jason Russo, Todd Cirella, and Stephen Gianntonio are residents of New York. Defendant Peter
Silverman is a resident of Arizona.1 Plaintiffs do not allege in their Complaint that Defendants
were served while in Michigan or consented to Michigan jurisdiction. The Court does not have
general jurisdiction over the individual Defendants.
3. Specific Jurisdiction
Specific or limited jurisdiction involves the defendant’s contacts with the forum state. See
Conti v. Pneumatic Prods. Corp., 977 F.2d 978, 981 (6th Cir. 1992). The defendant’s physical

1

Defendants contend that Defendant Silverman is actually a resident of the United Kingdom, but the Court cannot
consider the Defendants’ controverting facts when determining whether a motion to dismiss for lack of personal
jurisdiction is proper. Additionally, whether Silverman is a resident of the United Kingdom or of Arizona would not
change the analysis.
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presence in the state is not essential. See McCluskey, 795 F.Supp.2d at 615. In Michigan, the
Court may exercise specific personal jurisdiction over a nonresident Defendant in an action
“arising out of an act which creates any of the following relationships:”
(1) The transaction of any business within the state.
(2) The doing or causing an act to be done, or consequences to occur, in the state
resulting in an action for tort.
(3) The ownership, use, or possession of real or tangible personal property situated within
the state.
(4) Contracting to insure a person, property, or risk located within this state at the time of
contracting.
(5) Entering into a contract for services to be rendered or for materials to be furnished in
the state by the defendant.
(6) Acting as a director, manager, trustee, or other officer of a corporation incorporated
under the laws of, or having its principal place of business within this state.
(7) Maintaining a domicile in this state while subject to a marital or family relationship
which is the basis of the claim for divorce, alimony, separate maintenance, property
settlement, child support, or child custody.
MICH. COMP. LAWS § 600.705. Similarly, the Court may exercise specific personal jurisdiction
over a corporation in connection with the following acts:
(1) The transaction of any business within the state.
(2) The doing or causing any act to be done, or consequences to occur, in the state
resulting in an action for tort.
(3) The ownership, use, or possession of any real or tangible personal property situated
within the state.
(4) Contracting to insure any person, property, or risk located within this state at the time
of contracting.
(5) Entering into a contract for services to be performed or for materials to be furnished
in the state by the defendant.
MICH. COMP. LAWS § 600.715
“When a state’s long-arm statute reaches as far as the limits of the Due Process Clause,
the two inquiries merge and the court need only determine whether the assertion of personal
jurisdiction violates constitutional due process.” Intera Corp. v. Henderson, 428 F.3d 605, 616
(6th Cir. 2005). Given that courts have held that Michigan’s long-arm statue extends to the limits
permitted by the Due Process Clause, the Court is only required to analyze whether the exercise
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of jurisdiction would be permitted under the Due Process Clause. Lifestyle, 768 F.Supp.2d at
933.
The Sixth Circuit employs a three-part test to determine whether the exercise of personal
jurisdiction would be consistent with due process: 1) the defendant has purposefully availed
itself of the privilege of acting in the forum state or causing a consequence to occur there; 2) the
cause of action arises out of the defendant’s activities in the forum state; and 3) whether the
exercise of personal jurisdiction is reasonable based on the defendant’s connection to the forum
state. S. Mach. Co. v. Mahasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968). There is an
inference that the exercise of jurisdiction is reasonable when the first two elements are satisfied.
CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1268 (6th Cir. 1996).
a. Purposeful availment
A defendant has purposefully availed himself of the forum state when “the defendant’s
contacts with the forum state ‘proximately result from the actions by the defendant himself that
create a ‘substantial connection’ with the forum State.” Neogen, 282 F.3d at 889 (quoting Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). Purposeful availment requires more than
“passive availment of Michigan opportunities.” Id. at 890 (quoting Khalaf v. Bankers & Shippers
Ins. Co., 273 N.W.2d 811, 819 (Mich. 1978)). A website is sufficient to constitute purposeful
availment when the defendant’s website is sufficiently interactive to demonstrate that the
defendant intentionally meant to interact with forum residents. Id. (citing Zippo Mfg., 952
F.Supp. at 1124.
i. Laidlaw
As previously stated, Laidlaw’s website allows customers to interact by registering a
username in order to track their portfolios. Although the maintenance of a website is insufficient

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to confer general personal jurisdiction, it may be sufficient to constitute purposeful availment for
specific personal jurisdiction. See Bird, 289 F.3d at 874 (finding that the maintenance of a
website that allowed Ohio residents to register domain names and accepted business from 4,666
Ohio residents was sufficient to satisfy the purposeful availment prong); Neogen, 282 F.3d at
890-91 (finding that maintaining a website that allowed Michigan residents to access test results,
held itself out as welcoming Michigan business, and collected data from Michigan residents as
satisfying the purposeful availment requirement).
The website alone is sufficient to satisfy the purposeful availment requirement. Laidlaw’s
website allows its customers to register usernames. The Sixth Circuit precedent requires more
than a website that welcomes Michigan business. In Neogen, the defendant’s website not only
allowed Michigan residents to access test results and register domain names, but tracked
Michigan specific business statistics. 282 F.3d at 890-91. The Sixth Circuit considered the
defendant’s website coupled with the defendant’s other interactions with Michigan residents. Id.
at 891. The court found that the purposeful availment requirement was met when the defendant’s
website was considered along with its 14 yearly anticipated Michigan customers. Id. at 891-92
(“The proper test for personal jurisdiction is not based on a ‘percentage of business’
analysis…but rather on whether the absolute amount of business conducted by [the defendant] in
Michigan represents something more than ‘random, fortuitous, or attenuated contacts’ with the
state”) (quoting Burger King, 471 U.S. at 475). It appears that this plus factor is present here.
Laidlaw solicited over a million dollars in investments from the Michigan Plaintiffs. Laidlaw
reached out to the Michigan Plaintiffs to invest. Such contacts are not random, fortuitous or
attenuated. Laidlaw’s contacts satisfy the first prong of the due process analysis.
ii.

Individual Defendants

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Plaintiff, James Randolph, a resident of Arizona, alleges the following against Defendant
Silverman, a resident of New York: fraud and misrepresentation, negligent misrepresentation,
breach of fiduciary duty, unjust enrichment, and accounting. Plaintiff, Arthur Wirth, a resident of
Illinois, alleges the following against Defendants Fowler, Reagan, and Giannantonio, residents of
New York: fraud and misrepresentation, negligent misrepresentation, breach of fiduciary duty,
unjust enrichment, and accounting. The alleged actions that form the basis of these claims did
not occur in Michigan nor was there a consequence that occurred in Michigan. The Complaint is
completely devoid of any allegations connected to Michigan in any way.2 These Defendants have
not purposefully availed themselves of the privileges of doing business in Michigan in any way.
Wirth contends that he and Miller, while in Michigan, participated in conversations with the
Defendants, not including Silverman, regarding the return of their investments. Plaintiff Wirth’s
random act of calling the Defendants while in Michigan, alone, is insufficient to demonstrate that
the Defendants purposefully availed themselves of the privileges of doing business in Michigan.
The Court dismisses Defendants Silverman, Fowler, Reagan, and Giannantonio for lack of
personal jurisdiction.
As to the remaining individual Defendants, Plaintiffs allege that Defendants Russo and
Cirella purposely availed themselves of the privileges of doing business in Michigan when they
directly contacted Michigan Plaintiffs Miller and Seyburn and the Plaintiffs made investments
through Defendants Russo and Cirella. Both Plaintiffs were contacted by Defendants Russo and
Cirella on at least a few occasions by telephone or email. These phone calls were the basis of
Plaintiffs decision to make investments into the business venture.
The Defendants did purposely avail themselves of doing business in Michigan by

2

As to Defendants Fowler, Reagan, and Giannantonio, Plaintiffs attempt to assert a conspiracy theory in its
Response. However, the Complaint itself does not make any claims based on a conspiratorial relationship.
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soliciting these investments from Michigan residents. Defendants initiated the conversations with
the Michigan Plaintiffs in order to convince them to invest. Through the acts of calling and
emailing the Michigan Plaintiffs in order to create a continuous relationship, Defendants acts
were more than “random, fortuitous, and attenuated.” See King, 749 F.Supp.2d at 656 (“simple
correspondence and telephone calls to the forum that facilitate formation and performance of the
contract are not enough”); see also In re Trade Partners, Inc., MDL No. 1846, 2008 WL
3979238, *5 (W.D. Mich. Aug. 22, 2008) (finding that an investor had purposely availed himself
of California when he solicited California investments). Here, the Defendants actively reached
out to Michigan in order to secure investments. Such contact was more than simple
correspondence to facilitate formation or performance of a contract. The first prong of the due
process analysis is satisfied as to Defendants Russo and Cirella.
b. Cause of arising from activities in the forum
The second prong of the due process analysis is also met. The cause of action arises out
of Laidlaw and Defendants Russo and Cirella’s connection with Michigan. Specifically, they
reached out to the Michigan Plaintiffs through telephone and email to solicit investments.
Defendants contend that the website is insufficient to satisfy this prong of the due process
analysis because the Michigan Plaintiffs are not alleging that their decision to invest arose from
their use of the website. However, Plaintiffs do allege that Laidlaw and its employees Russo and
Cirella reached out to Plaintiffs to obtain investments and base their claims on these actions. This
is sufficient to satisfy t prong of the due process analysis.
c. Reasonableness
There is an inference that the exercise of jurisdiction is reasonable when the first two
elements are satisfied. CompuServe, 89 F.3d at 1268. “Generally, when considering whether it is

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reasonable to exercise personal jurisdiction over a non-resident defendant, a court must consider
several factors including the following: (1) the burden on the defendant; (2) the interest of the
forum state; (3) the plaintiff's interest in obtaining relief; and (4) other states' interest in securing
the most efficient resolution of the controversy.” Intera Corp., 428 F.3d at 618.
Laidlaw and Defendants Cirella and Russo appear to have satisfied the first two prongs of
the due process analysis. All three Defendants are residents of New York, with Laidlaw being a
United Kingdom corporation. It would be a burden on the Defendants to resolve their dispute in
Michigan. However, Michigan has an interest in ensuring that the investments that its residents
engage in are free of fraud and misrepresentation by non-residents. Additionally, Defendants
have not indicated any unique burden that would defeat an inference of reasonableness. The
exercise of personal jurisdiction is reasonable.
The Court finds that it has personal jurisdiction over Laidlaw and Defendants Cirella and
Russo. Defendants Peter Silverman, Ted Fowler, Hugh Reagan, and Stephan Giannantonio are
dismissed for lack of personal jurisdiction. The Court will now turn to the Defendants’ motion to
dismiss as to Laidlaw, Cirella, and Russo.
B. Fed. R. Civ. P. 8, 9 & 12(b)(6) Motion to Dismiss
1. Standard of Review
Federal Rules of Civil Procedure 12(b)(6) governs a motion to dismiss for failure to state
a claim upon which relief can be granted. A motion to dismiss tests the legal sufficiency of the
plaintiff's Complaint. Davey v. Tomlinson, 627 F. Supp. 1458, 1463 (E.D. Mich. 1986). The
court must accept all factual allegations as true and construe the complaint in the light most
favorable to the plaintiff. Varljen v. Cleveland Gear Co., Inc., 250 F.3d 426, 429 (6th Cir. 2001).
The Court must determine whether it is beyond a doubt that the plaintiff can prove no set of facts

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in support of his claims that would entitle him to relief. Id. A complaint that only offers “labels
and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.”
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950-1951 (2009). Nor does a complaint suffice if it tenders
‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal, 129 S. Ct. at 1949 (quoting
Bell Atlantic Corp. v. Twombly, 550 U.S. 554,557 (2007)). Rather, a complaint must contain
sufficient factual matter to “state a claim to relief that is plausible on its face.” Bell Atlantic, 550
U.S. at 570. A claim has facial plausibility when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.
Id. at 556.
2. Fraud
Defendants allege that Plaintiffs have not pled their fraud claims with the requisite
particularity. Federal Rule of Civil Procedure 9(b) requires “a party [to] state with particularity
the circumstances constituting fraud.” To satisfy Rule 9(b), the complaint must identify the
allegedly fraudulent statements, the speaker, when and where the statements were made, and
why the statements were fraudulent. Frank v. Dana Corp., 547 F.3d 564, 570 (6th Cir. 2008)
(quoting Gupta v. Terra Nitrogen Corp., 10 F.Supp.2d 879, 883 (N.D.Ohio 1998)). “At a
minimum, [a plaintiff] must allege the time, place and contents of the misrepresentations upon
which [he or she] relied.” Id. Michigan fraud requires proof that (1) the defendant made a
material representation; (2) the representation was false; (3) the defendant knew the
representation was false or made the representation recklessly as a positive assertion; (4) the
defendant made the statement intending that the plaintiff would rely on it; (5) the plaintiff
reasonably relied on it; and (6) the plaintiff was injured as a result. Bennett v. MIS Corp., 607
F.3d 1076, 1100-1101 (6th Cir. 2010) (citing Cummins v. Robinson Twp., 770 N.W.2d 421, 435

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(2009)).
Defendants contend that Plaintiffs have failed to identify the time, place, or content of the
misrepresentation. Defendants further argue that the representations by Defendants as to the
quality and growth of the investment were only puffery or a future promise of performance.
An action for fraud must be based on a statement relating to a past or existing fact. HiWay Motor Co. v. International Harvester Co., 247 N.W.2d 813, 816 (Mich. 1976). “Future
promises are contractual and do not constitute fraud.” Id. In addition, a claim for fraud cannot be
based on an opinion or “puffery.” Van Tassel v. McDonald Corp., 407 N.W.2d 6, 8 (Mich. Ct.
App. 1987). “[A] mere honest expression of opinion will not, although proved erroneous, be
regarded as fraud.” Id. (quoting Graham v. Meyers, 115 N.W.2d 621, 623 (Mich. 1952).
However, a statement is not an opinion and is actionable if the defendant has personal knowledge
of the property. Foreman v. Foreman, 701 N.W.2d 167, 175 (Mich. Ct. App. 2005). When the
means of determining the truthfulness of the representation is available to the plaintiff and the
defendant has not prohibited the degree of the means of learning the truthfulness, a plaintiff
cannot sustain an action for fraud. Webb v. First of Michigan Corp., 491 N.W.2d 851,
854 (Mich.App. 1992).
Russo and Cirella’s statements that Plaintiffs were making a “great investment,” a “huge
investment and business opportunity,” and the like appear to be nothing more than a professional
opinion or puffery. See Van Tassel, 407 N.W.2d at 8 (noting that “it is within normal
expectations of commercial dealing for salesmen to ‘hype’ their products beyond objective
proof”); Crofton v. Bank of America Home Loan, No. 11-10124, 2011 WL 1298747, *8 (E.D.
Mich. Mar. 31, 2011) (finding that defendant’s statement that plaintiff was getting the “best
interest rate” is mere opinion and not actionable as fraud). Cirella and Russo also made

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statements regarding the growth or return of the investments and when the investments would be
repaid. Such language constitutes a future promise, which is not actionable for fraud.3 See Webb
v. First of Michigan Corp., 491 N.W.2d 851, 853 (Mich. Ct. App. 1992) (“we have little
difficulty concluding that the statement regarding the eighteen percent interest return rate was
nothing more than a promise of future benefit that cannot, by law, constitute fraud”); Van Tassel,
407 N.W.2d at 9 (Mich. Ct. App. 1987) (finding that the defendant’s statements regarding the
plaintiff’s “bright future” were “purely speculation as to future events”). The statement regarding
when the loan would be repaid is only a future promise of performance, which is contractual in
nature. See Gorman v. Soble, 328 N.W.2d 119, 124 (Mich. Ct. App. 1982); Hi-Way Motor, 247
N.W.2d at 816. These statements are insufficient to maintain an action for fraud under Michigan
law.
Defendants also allege that Plaintiffs have failed to state with particularity which
statements are attributed to which Defendants, that those statements were false, that the
Defendants made those statements knowing that they were false, or that the statements were
made knowing that Plaintiffs would rely on them. The Complaint does attribute certain
statements to Russo or Cirella. However, the Complaint does not indicate what representations
caused Miller to make the October 2007 bridge loan or what Defendant made a representation to
Seyburn. Nor does the Complaint allege any facts showing that the Defendants knew that their
statements were false. Instead there is a formulaic recitation of the elements of fraud, including
that the statements were made with the intention that Plaintiffs would rely on them. As to
3

Plaintiff relies on a string of Sixth Circuit cases for the proposition that opinions and forward-looking statements
are “not subject to safe harbor provisions or defenses of puffery where such statements constitute misrepresentations
of fact or lack any meaningful cautionary language.” See Helwig v. Vencor, Inc., 251 F.3d 540, 554-44 (6th Cir.
2011); In re Federal-Mogul Corp., Sec. Litig., 166 F.Supp.2d 559, 565 (E.D. Mich. 2011); In re Lason, Sec. Litig.,
143 F.Supp.2d 855, 861 (E.D. Mich. 2001); Mayer v. Mold, 988 F.2d 635, 639 (6th Cir. 1993). These cases,
however, deal with a claim of securities fraud under the Securities Exchange Act. Plaintiffs have pled common law
fraud.
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Randolph, the Complaint is void of any statement made that induced his investments or the
identity of that speaker.
Plaintiffs argue that Defendants made forward-looking statements to induce Plaintiffs to
invest in businesses that were not viable. Plaintiffs also imply that Defendants suppressed the
truth of their statements. A claim of fraud may be actionable when the defendant makes a
representation knowing that it he has no intention of carrying it out. See Gorman, 328 N.W.2d at
124. Nevertheless, Plaintiffs have not pled that Defendants made forward-looking statements
regarding the return on the investment or when it would be repaid knowing that they had no
intention to perform nor that they suppressed the truth regarding the investments. Plaintiffs
merely state that the statements were false or made with reckless disregard of their truth.
Although it appears that Defendants statements were mere expressions of opinion, Plaintiffs are
entitled to amend their Complaint to allege any facts to support their claim that Defendants
knowingly suppressed the truth of their statements or intended to induce Plaintiffs to invest
knowing that South Pacific was not viable. Nothing in the Complaint suggests that Cirella,
Russo, or Laidlaw made these statements knowing that the investments were not viable or would
not produce the return indicated. Further, Plaintiffs have failed to indicate what statement
induced Randolph to invest, when those statements were made, and who made them. However,
Randolph makes his claim against Silverman, over whom the Court has no jurisdiction. The
Court will allow Plaintiffs an opportunity to amend their Complaint to address any deficiencies
in their fraud allegations. The Court, however, will not allow Randolph leave to amend his fraud
claim.
3. Negligent Misrepresentation
Defendants contend that Plaintiffs fail to sufficiently plead a claim for negligent

16

misrepresentation under Michigan law or the Federal Rule of Civil Procedure 8. Negligent
misrepresentation requires that a party justifiably relies to his detriment on information provided
without reasonable care by one that owed the plaintiff a duty of care. Law Offices of Lawrence J.
Stockler, P.C. v. Rose, 436 N.W.2d 70, 81 (Mich. Ct. App. 1989). The plaintiff must prove that
1) the defendant made a material misrepresentation; 2) the representation was unintentionally
false; 3) the representation was made in connection with the contract’s formation; 4) the parties
were in privity of contract; 5) the plaintiff relied on the defendant’s representation; 6) plaintiff
suffered damages; and 7) plaintiff’s damages inured to the benefit of the defendant. Yaldu v.
Bank of America Corp., 700 F.Supp.2d 832, 845 (E.D. Mich. 2010). Recovery cannot be based
on a remote, contingent or speculative injury. Law Offices, 436 N.W.2d at 81. The plaintiff is not
required to prove that the defendant knew or should have known that the representation was false
or that defendant intended the plaintiff to rely on it. Roberts v. Saffell, 760 N.W.2d 715,
720 (Mich. Ct. App. 2008).
The Federal Rules do not require Plaintiffs to plead this claim with a heightened level of
particularity. See Fed. R. Civ. P. 8(a). However, Federal Rule of Civil Procedure 8(a) “demands
more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal,
556 U.S. 662 (2009). Plaintiffs have alleged that Defendants statements were false, that Plaintiffs
justifiably relied on those statements, that those statements harmed Plaintiffs, and that
Defendants benefited from those investments. The Court finds that Plaintiffs have sufficiently
pled negligent misrepresentation. However, as to Randolph, the Court dismisses his claim for
negligent misrepresentation as Silverman is no longer a party.
4. Unjust Enrichment
Defendants contend that Plaintiffs’ claims for unjust enrichment are timed barred,

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precluded based on the existence of a valid contract, and insufficiently pled. To maintain an
action for unjust enrichment, a plaintiff must prove 1) the receipt of a benefit by the defendant
from the plaintiff and that 2) an inequity resulted to the plaintiff when the defendant retained the
benefit. Belle Isle Grill Corp. v. Detroit, 666 N.W.2d 271 (Mich. Ct. App. 2003). The law will
imply a contract to prevent unjust enrichment only if there is no express contract covering the
subject matter. Bye v. Nationwide Mut. Ins. Co., 733 F.Supp.2d 805, 830 (E.D. Mich. 2010).
Claims for unjust enrichment are the equitable counterpart to a claim for breach of
contract and Michigan courts have held that statute of limitations apply to equitable claims by
analogy. Romeo Inv. Ltd. v. Michigan Consol. Gas Co., No. 260320, 2007 WL 1264008, *8
(Mich. Ct. App. May 1, 2007); Underwood v. Albery, No. 292151, 2010 WL 4977977, *2 (Mich.
Ct. App. Dec. 7, 2010). “Thus, when an equitable claim would provide relief that is analogous to
the relief available under a similar legal claim, courts typically apply the legal claim's statute of
limitations to the equitable claim as well.” Id. Applying these principles, Michigan courts have
held that the applicable statute of limitations for a claim of unjust enrichment is six years. Id.
First, Defendants rely on Corner Holdings v. Rich Coast, Inc., No. 97–60388, 1999 WL
33617501 (E.D. Mich. Jan. 22, 1999) to assert that the statutes of limitations for a claim of unjust
enrichment is three years. However, that action was based on an injury to person or property
under M.C.L. § 600.5805(8), which does not depend on the existence of a contract. Id. at *3. The
applicable statute of limitations here is six years. See MICH. COMP. LAWS § 600.5807. Plaintiffs’
claims are timely.
Second, Defendants argue that Plaintiffs’ claim for unjust enrichment is precluded
because a valid contract exists between the parties.4 Plaintiffs contend that their Complaint does

4

Defendants provide poor copies of customer agreements allegedly signed by Plaintiffs, governing the relationship
and duties of the respective parties. Plaintiffs object to Defendants’ attachment of the contracts to their motion to
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not include a breach of contract claim. There is a question of fact as to whether a contract existed
between the parties and the terms and duties implied under the contract. Plaintiffs have not
alleged that a contract existed between the parties.
Finally, Defendants argue that Plaintiffs’ unjust enrichment claims are improperly pled
by including conclusory statements that Defendants benefited from a windfall of commissions
and compensations from the investments. Plaintiffs have pled that Defendants were unjustly
enriched by the investments and that Plaintiffs are entitled to recover the value of the benefit
provided to Defendants. These allegations are formulaic and do not show why Plaintiffs are
entitled to relief. See Twombly, 550 U.S. at 555. The Court will allow Plaintiffs leave to amend
their Complaint to indicate whether a contract existed between the parties and the terms of that
contract and the specific facts that support a claim for unjust enrichment.
5. Breach of Fiduciary Duty
Defendants argue that Plaintiffs’ breach of fiduciary duty claims should be dismissed
because they are time barred and insufficiently pled. “[A] fiduciary relationship arises from the
reposing of faith, confidence, and trust and the reliance of one upon the judgment and advice of
another” and “[r]elief is granted when such position of influence has been acquired and abused,
or when confidence has been reposed and betrayed.” Vicencio v. Ramirez, 536 N.W.2d 280,
284 (Mich. Ct. App. 1995). 5 This placement of trust must be reasonable and is deemed
dismiss. When presented with a motion to dismiss, the Court may consider the Complaint and exhibits attached to
the Complaint, public records, items in the record of the case, and exhibits attached to the defendant’s motion to
dismiss as long as they are referenced in the Complaint and central to the plaintiff’s claims. Bassett v. Nat’l
Collegiate Ass’n, 528 F.3d 426, 430 (6th Cir. 2006). The Court may consider items that “verify the complaint” and
do “not rebut, challenge, or contradict anything in the plaintiffs' complaint.” Song v. City of Elyria, 985 F.2d 840,
842 (6th Cir. 1993); see also Armengau v. Cline, 7 Fed.Appx. 336, *5 (6th Cir. 2001) (“extrinsic materials [that]
merely ‘fill in the contours and details’ of a complaint, …add nothing new and may be considered without
converting the motion to one for summary judgment”) (quoting Yeary v. Goodwill Indus.-Knoxville, Inc., 107 F.3d
443, 445 (6th Cir. 1997)). Here, Plaintiffs have not alleged that a contract existed and do not appear to base their
claims on a breach of contract theory. Defendants’ attachment of a contract directly contradicts Plaintiffs’
Complaint. The Court will not consider it.
5
In the federal securities context, a fiduciary duty rises between a broker and client when there is a discretionary
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unreasonable if the client and nonclient’s interest are adverse or potentially adverse. Prentis
Family Found. v. Barbara Ann Karmanos Cancer Institute, 698 N.W.2d 900, 906 (Mich. Ct.
App. 2005). A breach of fiduciary duty is a tort claim subject to M.C.L. § 600.5805 and is
governed by a statute of limitations of three years. See Miller v. Magline, 256 N.W.2d 761
(Mich. 1977). A claim for breach of fiduciary duty accrues when the wrong was done “regardless
of the time when damage results.” Id. at M.C.L. § 600.5827. The Michigan Supreme Court has
interpreted this to mean that the claim accrues when all the elements of the cause of action have
occurred and can be alleged in a complaint, when there is an actionable wrong. Connelly v. Paul
Ruddy’s Equipment Repair & Service Co., 200 N.W.2d 70, 72 (Mich. 1972). “Damages may be
obtained for a breach of fiduciary duty when a ‘position of influence has been acquired and
abused, or when confidence has been reposed and betrayed.’” Prentis Family Foundaiton, 698
N.W.2d at 908 (quoting Vicencio v. Ramirez, 508, 536 N.W.2d 280, 284 (Mich. Ct. App. 1995)).
Therefore, the cause of action accrues when Plaintiff knows or should have known of the breach
of the fiduciary duty. Id.; see also Boyle v. General Motors, 661 N.W.2d 557, 559 (Mich. 2003)
(holding that a claim for fraud accrues when the fraud is committed not when the plaintiff
discovers it); Stephens v. Dixon¸536 N.W.2d 755, 758 (Mich. 1995) (holding that an action in
negligence accrues when the plaintiff is injured or should know they are injured and not when
the plaintiff later discovers the consequences of the injury).

account or an account where the broker determines what investments are made. First of Mich. Corp. v. Swick, 894 F.
Supp. 298, 301 (E.D. Mich. 1995). In a non-discretionary account, which requires the client to determine the
investments to make, there is a limited duty5 to a client. Davis v. Keyes, 859 F.Supp. 290, 294 (E.D. Mich. 1994).
“No fiduciary relationship arises on the basis of duties owed to non-discretionary account customers.” Id.
In a discretionary account, a broker has a duty to “(1) manage the account in a manner directly comporting with the
needs and objectives of the customer as stated in the authorization papers or as apparent from the customer's
investment and trading history; (2) keep informed regarding the changes in the market which affect his customer's
interest; (3) keep his customer informed as to each completed transaction; and (5) explain forthrightly the practical
impact and potential risks of the courses of dealing in which the broker is engaged.” Davis v. Keyes, 659 F.Supp.2d
290, 294 (E.D. Mich. 1994). However, Plaintiff relies on Michigan common law breach of fiduciary duty. Securities
law is not at issue here.
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As to Plaintiff Miller and Seyburn, their claims for breach of fiduciary duty are not time
barred. This action was filed on May 11, 2011. Miller alleges that when his loan was not repaid
in April 2008, Cirella and/or Russo told him that it would be paid on June 1, 2008. On May 31,
2008, Cirella and/or Russo communicated that the loan would not be repaid as promised. As to
Seyburn, he made a demand on Cirella to provide an accounting in October 2008 and the
demand was not fulfilled. At that time Seyburn should have known that there was a possible
breach of his fiduciary trust and could have brought suit by October 2011. His claim of breach of
fiduciary duty is not time barred.
However, it does appear that Wirth’s breach of fiduciary duty claim is time barred as
against Russo, Cirella, and Laidlaw. Wirth was told that the loan would mature in April 2008 by
Fowler and Regan (who have been dismissed from this action). Wirth communicated with
Gianntonio, Fowler, and Regan from mid-April 2008 until August 2008 inquiring about when
the loans would be repaid. The Court does not have jurisdiction over these defendants. The
majority of Wirth’s communication was with Gianntonio. Wirth should have known in April
2008 that defendants had breached their fiduciary duty to him. If his claim accrued in April 2008,
he would have until April 2011 to file an action. His claim for breach of fiduciary duty is time
barred.
As to Randolph, he alleges a breach of fiduciary duty against Laidlaw and Silverman.
The Court does not have personal jurisdiction over Silverman. As to Laidlaw, the Complaint
only indicates that Randolph made investments in 2006. The Complaint alleges no other actions
that would indicate why Randolph should not have known about the breach of fiduciary duty in
April 2008 when South Pacific did not close. Randolph’s claim against Laidlaw is time barred.
6. Accounting

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Defendants argue that Plaintiffs did not adequately plead a claim for accounting and
know how much they invested and lost. Plaintiffs, however, define their claim for accounting as
simply an action to compel Defendants to account for and pay money owed to them. Plaintiffs
only rely on Black’s Law Dictionary for support.
In Michigan, a claim for accounting is equitable and must “be determined from the facts
pled in the plaintiff's complaint rather than from the prayer for relief.” Boyd v. Nelson Credit
Centers, Inc., 348 N.W.2d 25, 27 (Mich. Ct. App. 1984). A plaintiff may bring an action for
accounting if the plaintiff is uncertain of the amounts he or she is entitled to recover. Basinger v.
Provident Life & Acci. Ins. Co., 239 N.W.2d 735, 738 (Mich. Ct. App. 1976). An accounting
claim requires mutual demands, transactions on one side, and payments on the other side. Id. A
claim for accounting is not actionable if all transactions are one side or when there is a specific
sum due under a contract. Id. Accounting is inappropriate when discovery could determine the
amounts at issue. Id. Additionally, there cannot be a claim for accounting when there is an
adequate remedy at law. Basinger, 239 N.W.2d at 738.
Plaintiffs have not alleged that there is no adequate remedy at law and already know the
exact nature of the amounts lost from the investment. Discovery would determine the exact sum
due even if Plaintiffs were unaware. It appears that Plaintiffs’ claims for accounting are
inappropriate. The Court dismisses all accounting claims.
IV.

CONCLUSION
IT IS ORDERED that the Defendants’ Motion to Dismiss Pursuant to Rule 12(b)(2)

[Docket No. 15, filed August 15, 2011] is GRANTED IN PART. Defendants PETER
SILVERMAN, TED FOWLER, HUGH REAGAN, and STEPHAN GIANNANTONIO ARE
DISMISSED from this action for lack of personal jurisdiction.

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IT IS FURTHER ORDERED that Defendants’ Motion to Dismiss Pursuant to Rules 8,
9, and 12(b)(6) [Docket No. 16, filed August 16, 2011] is GRANTED IN PART. The Court
will give the parties leave to amend their fraud claims [Count I, VI, and XI] and unjust
enrichment claims [Count IV, IX, and XIV] claims. Counts XVI, XVII, and XIX are dismissed.
The Court dismisses Plaintiff Wirth and Randolph’s breach of fiduciary duty [Counts XIII and
XVIII] claims as timed barred. The Court further dismisses all accounting claims [Counts V, X,
XV and XX). The parties must properly amend within 14 (fourteen) days of this order.

Dated: March 29, 2012

s/Denise Page Hood
DENISE PAGE HOOD
UNITED STATES DISTRICT JUDGE

I hereby certify that a copy of the foregoing document was mailed to the attorneys of
record on this date, Thursday, March 29, 2012, by electronic and/or ordinary mail.
s/Julie Owens
Case Manager

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