Wilson et al v. 5 Choices, LLC et al
ORDER GRANTING 41 MOTION to Dismiss Second Amended Complaint and to Compel Arbitration filed by Education Defendants Yancey LLC, Insider's Financial Education, LLC, Yancey Events LLC and setting hearing as to 43 MOTION to Dismiss Second Amended Complaint and Enforce Settlement Agreement :( Motion Hearing set for 6/28/2017 02:00 PM before District Judge Robert H. Cleland) Signed by District Judge Robert H. Cleland. (LWag)
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
REBECCA K. WILSON, et al.,
Case No. 16-10659
5 CHOICES, LLC, et al.,
ORDER GRANTING EDUCATION DEFENDANTS’ MOTION TO DISMISS AND TO
COMPEL ARBITRATION, DISMISSING WITHOUT PREJUDICE PLAINTIFFS’
CLAIMS AGAINST EDUCATION DEFENDANTS AND SETTING HEARING
The court had scheduled a hearing on a Motion to Dismiss for June 7, 2017,
which it now cancels having deemed it unnecessary in light of the briefings and a
hearing on a previous motion in the same case presenting substantially similar issues.1
Pending before the court are three motions to dismiss the second amended complaint
or transfer venue, and this court previously granted a similar motion. Three Defendants,
American Cash Funding, Income Property USA, LLC, and Insiders Cash, LLC (“Lending
Defendants”), filed a motion to dismiss (Dkt. #40), which the court granted (Dkt. #55).2
Defendants Insider’s Financial Education, LLC, Yancey Events LLC, and Yancey LLC
(“Education Defendants”), also filed a motion to dismiss (Dkt. #41.) Another joint motion
was filed by Defendants 5 Choices, LLC, BuyPD, LLC, DLS Properties, LLC, EZ Street
Should the parties determine that good reason exists for additional argument
that has not been raised in their briefs, they may request a status conference apprising
the court of such grounds.
Plaintiffs have filed a motion for reconsideration of that order. (Dkt. #58.)
Properties, LLC, Expansion Properties, LLC, FrontSide Properties, LLC, Green Apple
Homes, LLC, Improvement Homes, LLC, Interactive Homes, LLC, Malibu Breeze
Properties, LLC, Max Ultra, LLC, Patriot Homes, LLC, Property Direct, LLC, Ready
Prop, Red Apple Homes, LLC, Red List Homes, LLC, Screaming Eagle Properties, LLC,
Scree 44, LLC, Silver Tie Homes, LLC, (“Property Defendants”). (Dkt. #43.) Finally,
John Graham, Inc., (“JGI”) has filed a motion to dismiss, (Dkt. #45), to which Plaintiffs
have responded, (Dkt. #47), and he has filed reply, (Dkt. #51). For the following
reasons, the court will grant Education Defendant’s motion and will scheduling a new
hearing for Property Defendants’ motion on June 28, 2017 at 2:00 P.M.
This court’s earlier order, familiarity with which is presumed, summarized the
alleged facts of this case. (Dkt. #55.) In the interest of judicial economy, the court will
not restate them here but will instead move directly to its summary of the pertinent
The Education Defendants contend that the court must dismiss Plaintiffs’ claims
because they are all subject to mandatory and binding arbitration pursuant to
agreements signed by the parties. Since Plaintiffs cannot show fraud in the inducement
of the arbitration clause as required by Supreme Court precedent, Defendants argue,
Plaintiffs cannot avoid enforcement of the arbitration clause. They assert that to the
extent that Plaintiffs have alleged fraudulent inducement, they have not done so with
sufficient particularity under Federal Rule of Civil Procedure 9(b). Further, the fact that
Plaintiffs were aware of these contracts justifies an award of fees and costs.
Plaintiffs respond that Education Defendants are not really distinct entities from
the other members of what they view to be a coordinated scheme to trick the unwary.
Far from supplying training services, Plaintiffs argue that attendance at the nearly
$40,000 “Buying Summit” was a prerequisite to participation in the ill-fated real estate
transactions, and that the terms of the agreements between Plaintiffs and Education
Defendants are really the oral promises made to induce them to participate. They go on
to state that they would be unable to arbitrate their claims against two of the entities with
which they contracted, Yancey Events, LLC, and Insider’s Financial Education, LLC, in
any case, because they technically do not exist. In support of their allegation that a
RICO organization exists, Plaintiffs point to a flier by Yancey Events indicating that one
of the Property Defendants is an affiliate. They also argue that they are not required to
submit their RICO claims to arbitration, even assuming the arbitration clause is valid
and enforceable, because they will not be able to vindicate the statutory cause of action
in that forum as each group of Defendants has separate agreements requiring a
They also argue that Supreme Court precedent holds that the proper vehicle for
enforcement of a forum selection clause is a motion to transfer, under which the court
should consider public interest factors that would favor the current forum as many of the
subject properties, sitting abandoned or without maintenance as a result of the alleged
scheme, are located within Michigan. Plaintiffs further contend that Defendants continue
with their operations affecting Michigan properties to date.
In reply Defendants assert that the purpose of the contracts was clearly
education on real estate transactions, and the Buying Summit was only one component
of that training. They insist that to the extent that Plaintiffs rely on a theory that Yancey
Events, LLC, and Insider’s Financial Education, LLC, lack a formal existence, they
should be dismissed as Defendants. Instead, Defendants claim, Plaintiffs’ confusion
stems from a typographical omission of “LLC” at the end of “Yancey Events” from the
text of a purchase agreement and Plaintiffs’ misreading of Insider Financial, LLC’s
corporate history. Finally, Education Defendants contend that the court should not
excuse Plaintiffs from the enforcement of the mandatory arbitration provisions of the
agreements signed with Education Defendants merely because Plaintiffs entered into
other agreements with other entities performing other transactions which specified a
different forum. Defendants also attack Plaintiffs’ assertions about the level of local
interest in the adjudication of the claims here.
Federal Rule of Civil Procedure 12(b)(6) provides for dismissal for failure to state
a claim upon which relief may be granted. Under the Rule, the court construes the
complaint in the light most favorable to the plaintiff and accepts all well-pleaded factual
allegations as true. League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527
(6th Cir. 2007). This standard requires more than bare assertions of legal conclusions.
Bovee v. Coopers & Lybrand C.P.A., 272 F.3d 356, 361 (6th Cir. 2001). “[A] formulaic
recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007). Any claim for relief must contain “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Erickson v. Pardus,
551 U.S. 89, 93 (2007). “Specific facts are not necessary; the statement need only ‘give
the defendant fair notice of what the . . . claim is and the grounds upon which it rests’”
Id. (quoting Twombly, 550 U.S. at 555).
However, to survive a motion to dismiss, a complaint must provide sufficient facts
to “state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. “The
plausibility standard is not akin to a “probability requirement,’ but it asks for more than a
sheer possibility that defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citing Twombly, 550 U.S. at 556). “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing
Twombly, 550 U.S. at 555.) Additionally, on a motion to dismiss, a court is usually
limited to the complaint and attached exhibits, but it may also consider “public records,
items appearing in the record of the case, and exhibits attached to the defendant’s
motion to dismiss so long as they are referred to in the complaint and are central to the
claims contained therein.” Erie County v. Morton Salt, Inc., 702 F.3d 860, 863 (6th Cir.
2012) (quoting Bassett v. Nat’l Coll. Athletic Ass’n., 528 F.3d 426, 430 (6th Cir. 2008)).
Just as with its previous order, the court views a motion for dismissal as an
appropriate procedural vehicle. See Andrews v. TD Ameritrade, Inc., 596 F. App’x 366,
370 (6th Cir. 2014) (“A district court should dismiss or stay a suit involving an arbitration
clause as follows[. . .]”). “Before compelling an unwilling party to arbitrate, the court
must engage in a limited review to determine whether the dispute is arbitrable,
including, first, whether the parties agreed to arbitrate; and, second, whether the
specific dispute falls within the substantive scope of that agreement.” Moran v. Svete,
366 F. App’x 624, 629 (6th Cir. 2010) (citing Fazio v. Lehman Bros., Inc., 340 F.3d 386,
392 (6th Cir. 2003)).
Just as with the Lending Defendants, Plaintiffs do not dispute that they
transacted with Education Defendants pursuant to the written agreements containing
arbitration provisions. (See Dkts. ##41-3 - 41-24.) However, they allege that the
contracts containing the provisions were fraudulently acquired and do not reflect the
meeting of the minds better evidenced in oral promises. It remains true that “unless the
challenge is to the arbitration clause itself, the issue of the contract’s validity is
considered by the arbitrator in the first instance.” Buckeye Check Cashing, Inc. v.
Cardegna, 546 U.S. 440, 445-46, (2006). Further, the Sixth Circuit “has specifically
rejected as insufficient allegations that the arbitration agreement was used to further a
fraudulent scheme, where the plaintiff failed to identify any misrepresentations particular
to the arbitration agreement separate from the contract as a whole.” Moran, 366 F.
App’x at 631 (citations omitted). Beyond the general allegedly fraudulent scheme,
Plaintiffs have not alleged facts suggesting that Defendants procured assent to these
arbitration provisions by fraud. (See Dkt. #37, Pg. IDs 1989-90.)
Another question that Plaintiffs raise is whether the parties could truly be said to
have agreed if the proper names of the legal entities did not appear correctly on the
face of the contracts. Whether this was intentional or inadvertent is immaterial, as
“attacks on the validity of an entire contract, as distinct from attacks aimed at the
arbitration clause, are within the arbitrator’s ken.” Moran, 366 F. App’x at 630 (quoting
Preston v. Ferrer, 552 U.S. 346, 353 (2008)). Whether such inconsistencies support
Plaintiffs’ claims is a question for the arbitrator to decide. Thus the court is satisfied that
the first prong of the inquiry has been satisfied; the parties have agreed to arbitrate.
In addressing the second question, whether the claims are covered by the
arbitration agreement, the court first notes that the language of the applicable provisions
is pointedly broad. It states that the Parties agree to arbitrate “any and all disputes that
arise between them concerning the Purchase Order or any terms thereof, or that
concern any aspect of the relationship between the Customer and the Company[.]”
(See, e.g., Dkt. #41-3, Pg. ID 2601.) The allegations of the second amended complaint
certainly fall within the ambit of that provision as described.
Plaintiffs argue that their RICO claims are not subject to arbitration because they
cannot be expected to pursue claims against the different groups of entities in different
fora pursuant to separate arbitration agreements. Plaintiffs cite to Shearson/Am. Exp.,
Inc. v. McMahon, for the proposition that RICO claims are arbitrable only so long as the
Plaintiffs can actually vindicate their rights through arbitration. 482 U.S. 220, 242 (1987).
However, Plaintiffs supply no support for their application of this principle to the facts at
hand to find that a Plaintiff required to proceed in multiple fora is somehow unable to
vindicate his rights.
The Sixth Circuit has suggested under different facts that such a situation does
not preclude mandatory arbitration. Roney & Co. v. Goren, 875 F.2d 1218, 1221 (6th
Cir. 1989) (upholding a requirement to arbitrate Exchange Act claims and concluding
that, in regulating arbitral proceedings, “the SEC has the authority to require multiple
fora”). It also recently held that where mandatory arbitration provisions are written
broadly “the presumption favoring arbitration applies[,]” even as to RICO claims. Willacy
v. Marotta, No. 16-3351, 2017 WL 1104426, at *8 (6th Cir. Mar. 24, 2017). Similarly, to
the extent that Plaintiffs state claims for fraud, breach of fiduciary duties, or other torts,
no reason exists to believe that those cannot also be vindicated through arbitration.
Thus, the court concludes that the second prong of the inquiry is also satisfied. For the
same reasons explained in its previous order, this court will grant dismissal but afford
Plaintiffs the ability to re-file following arbitration rather than stay the case indefinitely.
(See Dkt. #55, Pg. ID 4360.)
Neither party supplied extensive briefing on the issue of attorneys’ fees and
costs. Though the court finds Defendants’ substantive arguments more persuasive in
this instance, Plaintiffs’ arguments were not frivolous and fee-shifting does not seem
IT IS ORDERED that Education Defendants’ Motion to Dismiss And to Compel
Arbitration (Dkt. #41) is GRANTED. Plaintiffs’ complaint is DISMISSED as to Education
Defendants without prejudice.
IT IS FURTHER ORDERED that the court will hold a hearing on Property
Defendants’ motion on June 28, 2017 at 2:00 P.M. at the Federal Building and
United States Courthouse, 526 Water Street, Port Huron, Michigan.
s/Robert H. Cleland
ROBERT H. CLELAND
UNITED STATES DISTRICT JUDGE
Dated: June 2, 2017
I hereby certify that a copy of the foregoing document was mailed to counsel of record
on this date, June 2, 2017, by electronic and/or ordinary mail.
Case Manager and Deputy Clerk
S:\Cleland\JUDGE'S DESK\C2 ORDERS\16-10659.WILSON.DISMISSEDUCATION.bss.RHC.wpd
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