Revocable Living Trust of Stewart I. Mandel v. Lake Erie Utilities Company et al
Memorandum Opinion and Order: Defendants' motion for judgment on the pleadings is granted with respect to Plaintiff's claims for damages due to the lost sales of the contiguous lots and those related expenses, but the motion is denie d with respect to Plaintiff's damages based on attorney's fees. I also hold in abeyance a ruling on this motion with respect to Plaintiff's state-law claims. Telephone conference set for Monday, May 16, 2016 at 2:30 PM. Counsel to call the Court's bridge line at (877) 411-9748, access code 1231873.Related document 41 . Judge Jeffrey J. Helmick on 05/12/2016. (S,AL)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
The Revocable Living Trust of
Stewart I. Mandel, Morris Mandel, Trustee,
Case No. 3:14-cv-02245
MEMORANDUM OPINION AND
Lake Erie Utilities Company, et al.,
Before me is Defendants’ motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) (Doc. No. 41), which I converted to a motion for judgment on the pleadings during the
telephone conference I conducted on July 2, 2015 (Doc. No. 46). Defendants also filed a statement
of the issues presented in their motion to dismiss. (Doc. No. 48). Plaintiff filed an opposition (Doc.
No. 56) and Defendants replied (Doc. No. 59). Plaintiff then filed a sur-reply (Doc. No. 62), to
which Defendants replied (Doc. No. 63).1 For the reasons that follow, Defendants’ motion for
judgment on the pleadings is denied in part and granted in part.
On October 8, 2014, Plaintiff Revocable Living Trust of Stewart I. Mandel, Trustee Morris
Mandel, filed suit against Defendants Lake Erie Utilities Company (LEU), Burgundy Bay
Association (BBA), Robert Beach, Eric Halterman, Krissy Hart, Bill Lodermeier, Greg Meyers, Rich
As part of their reply, Defendants provided an updated judgment entry entered by the probate
court. (Doc. No. 59-1). Defendants provide this in an attempt to show the state court found
Defendants had not placed liens upon Plaintiff’s property. As the state-court proceedings were
referenced in the amended complaint and are central to Plaintiff’s claims, I may consider the
amended judgment entry provided by Defendants without converting the motion for judgment on
the pleadings into a motion for summary judgment. See Bassett v. Nat’l Collegiate Athletic Ass’n, 528
F.3d 426, 430 (6th Cir. 2008). But I find it unnecessary to consider the updated judgment entry at
this time, as an allegedly contrary finding with respect to the liens will have no bearing on the
outcome of this decision.
O’Loughlin, John Fargo, Jeff Clark, Mike Cummings, Kay Dickerson, John Held, Mark Lawless,
Charles Meck, and Jennifer Oetting. (Doc. No. 1). Plaintiff later amended its complaint to add
Defendant David M. Buda. (Doc. No. 3). Plaintiff brings suit pursuant to 18 U.S.C. § 1964(c),
alleging Defendants violated the civil Racketeer Influenced and Corrupt Organizations (RICO), 18
U.S.C. § 1962(c). (Doc. No. 1). Plaintiff also alleges two counts of state-law tortious interference
with contract rights. (Doc. No. 3 at 17-18).
Plaintiff brings these claims based on a matter already litigated before the probate court.
Stewart I. Mandel owned three lots located in the Burgundy Bay Subdivision. (Doc. No. 3 at ¶ 27).
With respect to two of these lots, Mr. Mandel signed a contiguous lot agreement. (Doc. No. 3 at ¶
28). Per the agreement, Mr. Mandel agreed not to develop the contiguous lots, and Defendants
BBA and LEU agreed to waive all fees related to the contiguous lots. (Doc. No. 3 at ¶ 28). Mr.
Mandel created the Stewart I. Mandel Trust and incorporated the lots into that trust. (Doc. No. 3 at
¶ 29). Upon Mr. Mandel’s death, the Trust entered into agreements to sell the contiguous lots, at
which point Defendants interfered in those sales. (Doc. No. 3 at ¶¶ 31-32). Defendants claimed the
contiguous lot agreement represented only a deferment of the fees relating to the contiguous lots
and that Plaintiff Trust breached the agreement, thereby bringing due all the deferred fees. (Doc.
No. 3 at ¶¶ 32-33). Plaintiff initiated proceedings in the state court, and the probate court eventually
found in favor of Plaintiff. (Doc. No. 3 at ¶ 35). Plaintiff then brought the instant action claiming
RICO violations and tortious interference with contract rights.
APPLICABLE LEGAL STANDARD
Motions for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) are
analyzed using the same standard employed for a motion to dismiss under Rule 12(b)(6). Tucker v.
Middleburg-Legacy Place, 539 F.3d 545, 549 (6th Cir. 2008). “For purposes of a motion for judgment
on the pleadings, all well-pleaded material allegations of the pleadings of the opposing party must be
taken as true, and the motion may be granted only if the moving party is nevertheless clearly entitled
to judgment.” JP Morgan Chase Bank, N.A. v. Wignet, 510 F.3d 577, 582 (6th Cir. 2007) (quoting
Southern Ohio Bank v. Merrill Lynch, Pierce, Fenner &Smith, Inc., 479 F.2d 478, 480 (6th Cir. 1973)). A
Rule 12(c) motion “is granted when no material issue of fact exists and the party making the motion
is entitled to judgment as a matter of law.” Paskvan v. City of Cleveland Civil Serv. Comm’n, 946 F.2d
1233, 1235 (6th Cir. 1991).
Federal Civil RICO Claim
“RICO provides a private cause of action for ‘[a]ny person injured in his business or
property by reason of a violation of section 1962 of this chapter.’” Hemi Group, LLC v. City of New
York, N.Y., 559 U.S. 1, 6 (2010) (quoting 18 U.S.C. § 1964(c)). Section 1962(c) makes it “unlawful
for any person through a pattern of racketeering activity . . . to acquire or maintain, directly or
indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which
affect, interstate or foreign commerce.” As such, to state a claim for relief under RICO, the plaintiff
must allege the defendants engaged in “(1) conduct (2) of an enterprise (3) through a pattern (4) of
racketeering activity.” Sedima S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985). Defendants challenge
the sufficiency of Plaintiff’s allegations with respect to each element of the RICO claim, so I will
address each element in turn.
To begin, Plaintiff must adequately allege the existence of an enterprise and the existence of
a person distinct from the enterprise who is conducting the enterprise’s affairs. Cedric Kushner
Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001). An enterprise “includes any individual, partnership,
corporation, association, or other legal entity, and any union or group of individuals associated in
fact although not a legal entity.” 18 U.S.C. § 1961(4). An association-in-fact enterprise is “a group
of persons associated together for a common purpose of engaging in a course of conduct.” Boyle v.
United States, 556 U.S. 938, 946 (2009) (citing United States v. Turkette, 452 U.S. 576, 583 (1981))
(internal quotation marks omitted). An association-in-fact enterprise must have an ascertainable
structure consisting of at least “a purpose, relationships among those associated with the enterprise,
and longevity sufficient to permit these associates to pursue the enterprise’s purpose.” Id.
Additionally, “[t]he association-in-fact enterprise must be separate and distinct from the pattern of
racketeering activity in which it engages, but the enterprise could have been formed solely for the
purpose of engaging in the racketeering activity. Slorp v. Lerner, Sampson & Rothfuss, 587 F. App’x
249, 265 (6th Cir. 2014).
Defendants here claim Plaintiff has failed to adequately plead the existence of an enterprise
by failing to plead the existence of a person distinct from the enterprise. (Doc. No. 59 at 14).
Defendants also claim Plaintiff has failed to adequately plead an association-in-fact enterprise. (Doc.
No. 59 at 16).
First, Plaintiff has adequately pled an enterprise and persons distinct from that enterprise.
Plaintiff, in its amended complaint, pled BBA and LEU as Ohio corporations which qualify as
enterprises within the meaning of RICO. (Doc. No. 3 at ¶¶ 38 & 39). Plaintiff then pled the
involvement of fifteen distinct individuals whom Plaintiff alleges took part in the operation or
management of the enterprises BBA and LEU. (Doc. No. 3 at ¶¶ 41 & 42). Under the Supreme
Court’s ruling in Cedric Kushner, Plaintiff has satisfied the distinctiveness requirement because
Plaintiff pled the corporations as the enterprises and the individuals as the distinct persons. 533 U.S.
at 163-64; see also City of New York v. Cyco.Net, Inc., 383 F. Supp. 2d 526, 550-51 (S.D.N.Y. 2005). As
such, “[t]he corporate owner/employee, a natural person, is distinct from the corporation itself, a
legally different entity with different rights and responsibilities due to its different legal status.”
Second, Plaintiff has adequately pled an association-in-fact enterprise between BBA and
LEU. Plaintiff alleged Defendants BBA and LEU conspired to “falsely offer and promise to waive
all dues, fees, and special assessments otherwise chargeable to a contiguous lot, in exchange for the
lot owner’s agreement not to construct a residence on or otherwise develop his or her contiguous
lot.” (Doc. No. 3 at ¶ 15). These offers were false, because BBA and LEU intended, instead of
waiving the charges, to defer those charges until the owner of a contiguous lot attempted to sell one
of the contiguous lots, at which time BBA and LEU would demand payment of the deferred fees.
(Doc. No. 3 at ¶ 15). Plaintiff has thus established the purpose of the alleged association-in-fact, the
common purpose which brought BBA and LEU together. See Boyle, 556 U.S. at 946.
Plaintiff has pled that BBA and LEU launched their scheme in either 1990 or 1991 (Doc.
No. 3 at ¶ 14), thereby establishing the longevity of the enterprise was sufficient to allow the
members of this enterprise to carry out the enterprise’s purpose. See Boyle, 556 U.S. at 946.
Finally, Plaintiff alleges Defendant Buda, Board of Trustees member and legal counsel for
BBA, and non-party Richard Plewacki, Chairman and President of LEU, along with others, worked
together to concoct and then carry through this scheme. (Doc. No. 3 at ¶¶ 13-14, 22). BBA and
LEU together entered into contracts with contiguous lot owners and subsequently used the mails in
furtherance of the scheme (Doc. No. 3 at ¶¶ 16 & 51). These same defendants, according to
Plaintiff, have engaged in similar wrongdoing with respect to other lot owners within the Burgundy
Bay Subdivision (Doc. No. 3 at ¶¶ 20-22 & Doc. No. 3-1). Thus, Plaintiff has adequately pled the
relationship between BBA and LEU with respect to this association-in-fact enterprise. See Boyle, 556
U.S. at 946. Accordingly, Plaintiff has sufficiently pled both an enterprise and an association-in-fact
Upon establishing the existence of a RICO enterprise, Plaintiff must set forth allegations
that the defendants conducted or participated, “directly or indirectly, in the conduct of such
enterprise’s affairs . . . .” 18 U.S.C. § 1962(c). To satisfy this participation requirement, the
defendants must have “participated in the operation or management of the enterprise itself.” Reves v.
Ernst & Young, 507 U.S. 170, 183 (1993). Defendants need only have “some part,” not primary
responsibility, in directing the enterprise’s affairs to satisfy this element. Id. at 179. And the Sixth
Circuit has held that making decisions on behalf of the enterprise or “knowingly carrying out the
orders of the enterprise satisfies the operation or management test.” Ouwinga v. Benistar 419 Plan
Servs., Inc., 694 F.3d 783, 793 (6th Cir. 2012) (internal quotation marks and citation omitted).
Defendants claim Plaintiff “alleges nothing more than that Defendants engaged in a variety
of ordinary board functions” and that these functions fail to satisfy the operation or management
test. (Doc. No. 41 at 17-18). Taking Plaintiff’s allegations as true, however, Defendants’ alleged
conduct satisfies the operation or management test. Plaintiff has alleged that the individual
defendants, as members of the Boards of Trustees for the two enterprises, have authorized or
directed personnel to “falsely notify the broker and title company handling” the sales of the
contiguous lots that money from the proceeds of those sales was due BBA and LEU, engaged
counsel to enforce payments of these sums, approved the use of corporate funds to take part in
litigation relating to the CLA, and “formulating and/or ratifying the corporation’s false claim” that
the CLA was a deferral agreement that had been breached. (Doc. No. 3 at ¶¶ 41-42). Additionally,
the CLA credits “the BBA’s Board of Trustees and LEU” with having determined that owners of
contiguous lots should be exempt from fees for those lots. (Doc. No. 3-2 at 1). Taking part in these
tasks is enough to establish Defendants’ roles in conducting their enterprises.
“To establish a RICO violation under § 1962(c), a plaintiff must allege that the RICO
enterprise engaged in a pattern of racketeering activity consisting of at least two predicate acts of
racketeering activity occurring within a ten-year period.” Moon v. Harrison Piping Supply, 465 F.3d
719, 723 (6th Cir. 2006) (citing 18 U.S.C. § 1961(5)) (internal quotation marks omitted). Included
within the definition of “racketeering activity” is the predicate act of mail fraud, which Plaintiff has
alleged in this case. 18 U.S.C. § 1961(1); see 18 U.S.C. § 1341. “Mail fraud consists of (1) a scheme
to defraud, and (2) use of the mails in furtherance of the scheme.” United States v. Jamieson, 427 F.3d
394, 402 (6th Cir. 2005). “A scheme to defraud includes any plan or course of action by which
someone uses false, deceptive, or fraudulent pretenses, representations, or promises to deprive
someone else of money.” Id. “The gravamen of the offense is the scheme to defraud, and any
mailing that is incident to an essential part of the scheme satisfies the mailing element.” Bridge v.
Phoenix Bond & Indem. Co., 553 U.S. 639, 647 (2008) (internal quotation marks and citation omitted).
Defendant challenges Plaintiff’s claims on two grounds. First, Defendants claim Plaintiff
has failed to plead the predicate acts of mail fraud with particularity. (Doc. No. 41 at 12).
Defendants aver that Plaintiff, for each incident of mail fraud alleged, must identify the false
statement made in the mailing, who made the statement, and facts showing Plaintiff relied on such
statement. (Doc. No. 41 at 12).
Both the Supreme Court and the Sixth Circuit have held that, in the RICO context, a
plaintiff does not have to plead or prove the plaintiff relied upon the defendant’s alleged
misrepresentations. Bridge, 553 U.S. at 661; Brown v. Cassens Transport Co., 546 F.3d 347, 357 (6th Cir.
2008). The Supreme Court has also declared “that innocent mailings-ones that contain no false
information-may supply the mailing element.” Schmuck v. United States, 489 U.S. 705, 715 (1989)
(internal quotation marks and citation omitted). Because innocent mailings may satisfy the mailing
element, the pleading standard must also be different. I find persuasive, therefore, the approach
followed by other courts in cases where innocent mailings are alleged to have been used in
furtherance of a scheme. In that situation, “a detailed description of the underlying scheme and the
connection therewith of the mail . . . is sufficient to satisfy Rule 9(b).” In re Sumitomo Copper Litig.,
995 F. Supp. 451, 456 (S.D.N.Y. 1998).
That standard is easily met in this case. Plaintiff has alleged, in significant detail, the
existence of a scheme that has targeted both Plaintiff and other residents in the Burgundy Bay
Subdivision. (Doc. No. 3 at ¶¶ 15-29, 32). Plaintiff has described the process by which Defendants
allegedly defrauded residents through the signing of contiguous lot agreements, subsequent claims
that owners selling their contiguous lots had breached those agreements, and claiming to have liens
on the lots being sold. (Doc. No. 3 at ¶¶ 25-29, 32). Plaintiff attached to its complaint the names of
other owners who have entered into these agreements (Doc. No. 3-1) and a copy of the contiguous
lot agreement signed by Plaintiff and Defendants BBA and LEU (Doc. No. 3-2). Plaintiff has also
alleged the successful implementation of this scheme in two instances when contiguous lot owners
simply paid the money Defendants demanded of them once they sold their contiguous lots. (Doc.
No. 3 at ¶¶ 20-21). And Plaintiff has alleged a communication between representatives for both
BBA and LEU celebrating the success of the scheme. (Doc. No. 3 at ¶ 22).
As for the mailings, Plaintiff has alleged one letter containing fraudulent information and
eighteen innocent mailings. (Doc. No. 3 at ¶¶ 33 & 51). The letter Defendant Buda sent on
October 9 to Plaintiff’s counsel is alleged to contain fraudulent claims. Plaintiff, therefore, must
identify the fraudulent statement, name the speaker of the fraudulent statement, state where and
when this statement was made, explain why the statement was fraudulent, and demonstrate scienter.
Heinrich v. Waiting Angels Adoption Servs., Inc., 668 F.3d 393, 404-05 (6th Cir. 2012). Plaintiff may
demonstrate scienter “by showing the defendant acted either with a specific intent to defraud or with
recklessness with respect to potentially misleading information.” Id. Plaintiff alleges Defendant
Buda’s letter falsely conveyed to Plaintiff’s counsel that the contiguous lot agreement was only a
deferral of the fees associated with the contiguous lot agreement and that Plaintiff was responsible
for paying those charges now that it was selling the contiguous lots. (Doc. No. 3 at ¶ 33). Plaintiff
alleges Defendant Buda, as a lawyer and a principal architect of the scheme, knew these claims to be
false and sent this letter making false claims. (Doc. No. 3 at ¶¶ 14, 22, 24, & 33). The probate court
subsequently found the contiguous lot agreements were not deferrals of fees and Plaintiff owed
Defendants no money. (Doc. No. 3 at ¶ 35). The pleading of this letter, as described in detail in
paragraph thirty-three and listed as one of the predicate acts in paragraph fifty-one of the amended
complaint, thus satisfies the heightened pleading requirement of Rule 9(b). See Heinrich, 668 F.3d at
The litigation documents alleged to have been mailed, as well as the initial letter sent by
Plaintiff’s counsel to defendant, are innocent, sent simply in the course of carrying out the overall
scheme. (Doc. No. 3 at ¶ 51a, c-s); see Bridge, 553 U.S. at 647. Plaintiff describes the senders and
recipients of these mailings, as well as the nature of their contents. (Doc. No. 3 at ¶ 51). Plaintiff
connects these mailings to the overall scheme by alleging Defendants threatened to sue Plaintiff if it
did not pay the fees Defendants demanded, which then forced Plaintiff to seek judicial resolution.
(Doc. No. 3 at ¶ 35). Defendants threatened legal action, which necessarily includes the mailing of
documents, as a means of carrying through their scheme. As such, Defendants anticipated using,
and indeed used, mailings to further their scheme. Because Plaintiff has described the underlying
scheme in detail, described the innocent mailings, and connected them to the underlying scheme, I
find Plaintiff has met the pleading requirements for alleging fraud in relation to a civil RICO claim.
Second, Defendants claim the mailing of litigation documents cannot constitute mail fraud
as a RICO predicate act, because the attorneys involved did no more than render legal advice and
because Plaintiffs, not Defendants, instituted the legal proceedings. (Doc. No. 41 at 8-11).
In determining whether an attorney can violate the mail fraud statute by engaging in
litigation, the Sixth Circuit has noted a difference between attorneys who “simply render legal advice
and file documents in the course of litigation” and attorneys who do “far more” than that. Melton v.
Blankenship, No. 08-5346, slip op. at 3 (6th Cir. Jan. 13, 2009). The court in that case discussed
Handeen v. Lemaire, 112 F.3d 1339 (8th Cir. 1997), a case in which the Eighth Circuit concluded the
plaintiff’s complaint could support a verdict against the defendant law firm for RICO violations
because the complaint alleged the firm played a role in the operation or management of the
enterprise. See Handeen, 112 F.3d at 1349. The Eighth Circuit highlighted the line “between
traditional rendition of legal services and active participation in directing the enterprise.” Id. at 1349.
The Sixth Circuit in Melton adopted the same distinction and affirmed the district court’s dismissal of
a complaint against a law firm it found to only have provided traditional legal services.
Following the distinction adopted by this Circuit, I find Plaintiff has sufficiently alleged
Defendant Buda’s participation in the management and operation of the enterprise such that his
mailing of legal documents in the state-court case qualify as predicate acts of mail fraud. Plaintiff
asserts Defendant Buda was on BBA’s Board of Trustees, in addition to serving as BBA’s legal
counsel. (Doc. No. 3 at ¶ 13). Plaintiff further alleges Defendant Buda was a principal architect of
the scheme to defraud Burgundy Bay landowners and met with trustees and officers of BBA and
LEU to create the scheme. (Doc. No. 3 at ¶ 14). As evidence of Defendant Buda’s participation,
Plaintiff alleges a non-party member of the enterprise sent a letter to Defendant Buda celebrating
the success of the approach the two “hammered out” in assessing and collecting fees from two
landowners who sold their contiguous lots. (Doc. No. 3 at ¶ 22). Defendant Buda subsequently
represented Defendant BBA in the state-court proceedings. (Doc. Nos. 3 at ¶ 7 & 56-1 at 1). Based
on the foregoing, I find Plaintiff has plausibly alleged Defendant Buda was more than a zealous
advocate for Defendant BBA. As such, the mailings sent to and from BBA and Defendant Buda
(Doc. No. 3 at ¶ 51a-d, f-i, l, n-p, & r) qualify as predicate acts of mail fraud. Plaintiff, however, has
no claims against counsel for LEU, giving me no reason to infer LEU’s counsel has done more than
perform typical lawyer duties in its representation of LEU. Therefore, the mailings sent to and from
LEU (Doc. No. 3 at ¶ 51e, j-k, m, q, & s) cannot be predicate acts of mail fraud.
Finally, with respect to Defendants’ point that Plaintiff initiated the state-court proceeding, I
find nothing in the case law that prohibits recovery when the plaintiff in a RICO suit initiated the
original proceedings that led to the injury. Although rare, such a scenario is not unheard of. See
Warnock v. State Farm Mut. Auto. Ins. Co., No. 5:08-cv01-DCB-JMR, 2008 WL 4594129 (S.D.Miss.
Oct. 14, 2008). Therefore, Plaintiff has sufficiently pled the required racketeering acts.
As Plaintiff has adequately alleged thirteen predicate acts of racketeering activity, the
question then becomes whether these acts, if proven, would sufficiently establish a pattern of
racketeering activity. Defendants claim Plaintiff cannot show a pattern of racketeering activity
because “[t]here is only one alleged predicate act of mail fraud, one alleged type of injury claimed,
one alleged victim in the Plaintiff, and seventeen named perpetrators.” (Doc. No. 41 at 21).
To show a pattern, Plaintiff “must show that the racketeering predicates are related and that
they amount to or pose a threat of continued criminal activity.” Heinrich, 668 F.3d at 409 (citing H.J.
Inc. v. Nw Bell Tel. Co., 492 U.S. 229, 237-39 (1989)) (internal quotation marks omitted). Predicate
acts are related if they share similar purposes, results, participants, victims, methods of commission,
or if they “are interrelated by distinguishing characteristics and are not isolated events.” Id. Here,
the predicate acts consist of two letters and eleven mailed litigation documents, all sent between the
defendants and the plaintiff and all relating to Defendants’ attempts to assess fees against Plaintiff
for selling its contiguous lots. Accordingly, I find the relationship prong of the pattern test is
Continuity may be satisfied by showing either an open-ended or closed-ended pattern of
activity. Id. at 409-10. A plaintiff shows closed-ended continuity by showing a series of related
predicate acts that have occurred over an extended period of time. Brown, 546 F.3d at 355. There is
no predetermined point at which a period of time becomes “extended,” but case law has established
that seventeen months is too short, Vemco v. Camardella, 23 F.3d 129, 134-35 (6th Cir. 1994), and
more than three years is sufficient. Brown, 546 F.3d at 355. In this case, Plaintiff has alleged a series
of thirteen related predicate acts spanning more than three years. (Doc. No. 3 at ¶ 51). This,
therefore, is sufficient to establish closed-ended continuity. See id. Plaintiff has, therefore,
established a pattern of racketeering activity.
To state a claim for relief under the civil RICO provisions, Plaintiff must show a RICO
predicate offense “not only was a [but-for] cause of his injury, but was the proximate cause as well.”
Hemi Group, LLC, 559 U.S. at 9 (internal quotation marks and citation omitted). Proximate cause
requires a “direct relation between the injury asserted and the injurious conduct alleged.” Id.
(internal quotation marks and citation omitted). Under RICO, the causal link between the alleged
injury and the alleged conduct may “’be too weak to constitute proximate cause – because it is
insubstantial, unforeseeable, speculative, or illogical, or because of intervening causes.’” Slorp v.
Lerner, Sampson & Rothfuss, 587 F. App’x 249, 263 (6th Cir. 2014) (quoting Trollinger v. Tyson Foods,
Inc., 370 F.3d 602, 614 (6th Cir. 2004)).
Here, Plaintiff has alleged thirteen predicate acts of mail fraud in furtherance of Defendants’
alleged scheme. (Doc. No. 3 at ¶ 51). Two of these mailings were letters between some of the
Defendants and Plaintiff’s counsel. (Doc. No. 3 at ¶ 51). The first letter, sent by Plaintiff’s counsel
on October 5, 2010, sought “an explanation as to the source and basis of the liens” that had been
placed on the contiguous lots. (Doc. No. 3 at ¶¶ 33 & 51). The second letter was sent by
Defendant Buda to Plaintiff’s counsel on October 9, 2010, explaining why Defendants had placed
liens on the contiguous lots and threatening legal action if Plaintiff refused to pay the monies due
Defendant. (Doc. No. 3 at ¶ 33 & 51). The remaining mailings consisted of documents sent in the
course of litigation. (Doc. No. 3 at ¶ 51).
As for injuries sustained, Plaintiff claims it was forced to rescind the sales of the two
contiguous lots; lost the opportunity to sell the contiguous lots at advantageous prices; had to pay
for taxes, insurance, and upkeep of the contiguous lots after rescinding the sales; and incurred legal
expenses “in resisting Defendants’ vigorous litigation tactics and false liens . . . .” (Doc. No. 3 at ¶
53). Breaking these into two categories of injury – the first being the rescinded sales and their
attendant costs and the second being the costs of litigating this matter in probate court – I will take
each in turn.
Turning first to the rescinded sales of the contiguous lots, the lost opportunity to sell the lots
for an advantageous price, and the costs Plaintiff incurred as a result of retaining possession of the
contiguous lots after the sales were rescinded, I find Plaintiff has failed to adequately plead that the
predicate acts of mail fraud were the direct and proximate causes of these injuries. According to the
amended complaint, Plaintiff, in response to the threat of legal action made in the October 9 letter,
suspended the sales of the contiguous lots and sought a ruling on the CLA from the probate court.
(Doc. No. 3 at ¶ 35). Plaintiff next mentions the sales of the contiguous lots in its claim for
damages, when Plaintiff then alleges it was forced to rescind the sales of the contiguous lots. (Doc.
No. 3 at ¶ 53).
Plaintiff, however, fails to allege any facts connecting the predicate acts and its claim of
forced rescission. Instead, Plaintiff later pleads that “Defendants’ false liens clouded the title to the
property and prevented the Trust from conveying clear title to the property.” (Doc. No. 3 at ¶¶ 57
& 64). Plaintiff further claims that “[a]s a direct and proximate result, the Trust was unable to
perform the contract . . . and lost the benefits of that contract.” (Doc. No. 3 at ¶¶ 58 & 65). Here
Plaintiff has connected the dots. Plaintiff’s injuries related to the lost sales of the contiguous lots
and the resulting costs in upkeep were actually the direct result of the liens placed on the lots by
Defendants, not on the predicate acts of mail fraud. Under RICO, however, “the compensable
injury necessarily is the harm caused by predicate acts sufficiently related to constitute a pattern, for
the essence of the violation is the commission of those acts in connection with the conduct of an
enterprise.” Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 497 (1985). Because Plaintiff’s lost sales
and upkeep expenses for the contiguous lots were not directly caused by the predicate acts, Plaintiff
cannot recover for these damages under RICO.
Plaintiff is, however, able to move forward with its claim for attorney’s fees. Plaintiff’s
attorney’s fees are directly related to the predicate acts of mail fraud, as eleven of the thirteen alleged
mailings are documents mailed in the course of litigating this matter before the probate court. (Doc.
No. 3 at ¶ 51). With each document received or mailed, Plaintiff incurred more fees. The remaining
two predicate acts, the letters pre-dating litigation, are the letters in which Plaintiff inquired as to the
reason for the liens being placed on the contiguous lots and Defendants’ response explaining the
liens and threatening legal action. (Doc. No. 3 at ¶ 51). Upon receiving Defendants’ letter, Plaintiff
felt compelled to seek judgment in the state probate court and instituted proceedings. (Doc. No. 3
at 35). Defendant Buda’s letter even threatened legal action, thereby demonstrating that Defendants
anticipated the exact actions that Plaintiff now claims caused it injury. I find these predicate acts are
a “substantial and foreseeable cause” of Plaintiff’s claimed injury. See Trollinger, 370 F.3d at 615.
State Law Claims
Plaintiff raises state-law claims of tortious interference with contract rights against all of the
defendants. (Doc. No.3 at ¶¶ 54-67). Twenty-eight U.S.C. § 1367(c)(3) allows me to decline to
exercise supplemental jurisdiction over state-law claims if I have “dismissed all claims over which
[the court] has original jurisdiction . . . .” I have dismissed Plaintiff’s federal claims as they relate to
Plaintiff’s claimed lost sales of the contiguous lots. Remaining are Plaintiff’s claims with respect to
injuries in the form of money expended in the course of litigation. It would be premature to decide
at this time whether I will exercise supplemental jurisdiction over Plaintiff’s remaining state-law
claims. Accordingly, I will hold in abeyance a ruling on the defendants’ motion for judgment on the
pleadings with respect to Plaintiff’s state-law claims, pending adjudication of Plaintiff’s remaining
Accordingly, Defendants’ motion for judgment on the pleadings (Doc. No. 41) is granted
with respect to Plaintiff’s claims for damages due to the lost sales of the contiguous lots and those
related expenses, but the motion is denied with respect to Plaintiff’s damages based on attorney’s
fees. I also hold in abeyance a ruling on this motion with respect to Plaintiff’s state-law claims.
A follow up telephone conference is set for Monday, May 16, 2016 at 2:30 PM. Counsel to
call the Court’s bridge line at (877) 411-9748, access code 1231873.
s/Jeffrey J. Helmick
United States District Judge
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