Revocable Living Trust of Stewart I. Mandel v. Lake Erie Utilities Company et al
Memorandum Opinion and Order: Plaintiff's motion to amend is granted in part and denied in part. Defendants' motion to clarify is denied. Plaintiff's motion for reconsideration is denied. Plaintiff has until October 13, 2017, to file an amended complaint consistent with the rulings I set forth in this opinion. re 67 69 . Judge Jeffrey J. Helmick on 9/26/2017. (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-2245
Lake Erie Utilities Company, et al.,
Before me is Defendants’ motion to clarify the order I issued ruling on their motion for
judgment on the pleadings. (Doc. No. 65). Also before me is Plaintiff’s motion to amend its
complaint. (Doc. No. 69). This motion contains in it a motion for reconsideration, as Plaintiff asks
me to reconsider and vacate part of my earlier order. (Id. at 5-7). Defendants responded (Doc. No.
72), and Plaintiff replied (Doc. No. 75).
For the reasons that follow, Plaintiff’s motion to amend is granted in part and denied in part.
(Doc. No. 69). Defendants’ motion to clarify is denied. (Doc. No. 67). Plaintiff’s motion for
reconsideration is denied. (Doc. No. 69).
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 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 18 U.S.C. § 1962(c), the civil Racketeer Influenced and Corrupt
Organizations Act. (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 Ottawa County
Court of Common Pleas, Probate Division. See Revocable Living Trust of Stewart I. Mandel v. Lake Erie
Utils. Co., No. 20139003A. 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 these
two 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
On May 14, 2015, Defendants filed a motion to dismiss, which I converted to a motion for
judgment on the pleadings. (Doc. Nos. 41 & 46). I issued my decision on May 12, 2016, granting
the motion with respect to Plaintiff’s claims for damages due to the lost sales of the contiguous lots
and related expenses and denying the motion with respect to Plaintiff’s damages based on attorney’s
fees. (Doc. No. 65 at 15). I held in abeyance a ruling on the motion with respect to Plaintiff’s statelaw claims. (Id.).
MOTION TO AMEND
Plaintiff now seeks leave to amend its complaint in order to correct the deficiencies
identified in my ruling. (Doc. No. 69). Plaintiff proposes adding claims of RICO conspiracy,
attempted Hobbs Act extortion, and Hobbs Act conspiracy, as well as adding facts to its existing
Federal Rule of Civil Procedure 15(a)(2) provides that, outside amending as a matter of
course, a party may only amend its pleading with the written consent of the opposing party or with
the court’s leave. “The court should freely give leave when justice so requires.” Fed. R. Civ. P.
15(a)(2). “If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject
of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of
any apparent or declared reason—such as undue delay, bad faith or dilatory motive on the part of
the movant, repeated failure to cure deficiencies by amendments previously allowed, undue
prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment,
etc.—the leave sought should, as the rules require, be ‘freely given.’” Foman v. Davis, 371 U.S. 178,
182 (1962). Typically, delay alone will not justify denying leave to amend. Morse v. McWhorter, 290
F.3d 795, 800 (6th Cir. 2002). But “a party must act with due diligence if it intends to take
advantage of the Rule’s liberality.” United States v. Midwest Suspension & Brake, 49 F.3d 1197, 1202
(6th Cir. 1995). Denial of a motion to amend requires that I find “at least some significant showing
of prejudice to the opponent.” Duggins v. Steak ‘N Shake, Inc., 195 F.3d 828, 834 (6th Cir. 1999)
(citing Moore v. City of Paducah, 790 F.2d 557, 562 (6th Cir. 1986)).
As a threshold matter, Defendants contend Plaintiff’s request to amend should be denied,
because Plaintiff did not ask for leave to amend until after I ruled upon the motion for judgment on
the pleadings. (Doc. No. 72 at 6). Defendants point out that Plaintiff had a year during which it
could have sought leave to amend its complaint based on the deficiencies Defendants identified in
their motion. (Id.). Instead, Plaintiff waited and now wants a “do-over,” using my previous opinion
as a “how to guide.” (Id. at 7) (internal quotation marks omitted).
Plaintiff denies it lacked diligence in correcting the errors identified by Defendants, as those
challenges were found by me to be meritless. (Doc. No. 75 at 1-2). Plaintiff believes I sua sponte
identified two pleading deficiencies, which it should now be allowed to correct. (Id. at 3). Plaintiff
claims it is entitled to an opportunity to amend the deficiencies I found when ruling on the motion.
(Doc. No. 69 at 8).
None of the Sixth Circuit cases cited by either side require me to deny Plaintiff an
opportunity to amend simply because it did not seek amendment while the pleadings motion was
pending. So, though filing prior to a decision on a dispositive motion is preferable, failing to do so
does not necessarily bar a subsequent request to amend. And to Plaintiff’s point, neither do these
cases stand for the proposition that a plaintiff is entitled to amend its complaint following the grant
of a motion to dismiss or a motion for judgment on the pleadings. Instead, I am required to
consider whether there is “undue delay, bad faith or dilatory motive on the part of the movant,
repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the
opposing party by virtue of allowance of the amendment, futility of amendment” or the like, the
presence of which will lead to denial of the motion to amend. Foman v. Davis, 371 U.S. at 182.
Defendants claim Plaintiff has long known of the existence of its proposed new claims but
has lacked diligence in seeking to amend and now provides no reason for such delay. (Doc. No. 72
at 3, 7-13). Defendants see Plaintiff’s proposed amendments as its attempts to “change direction
within the same lawsuit,” which would cost Defendants “significant amounts of additional money,
time, and effort,” as they will essentially have to re-start this case from the beginning if the
amendments are allowed. (Id. at 11). Defendants further argue that amending the complaint to add
Plaintiff’s proposed Hobbs Act violations is futile, because Defendants’ warnings to Plaintiff
concerning possible litigation cannot form the basis of an extortion claim. (Id. at 12).
Plaintiff argues its existing and proposed claims are closely linked, such that evidence for the
existing claims can be used to support the added claims. (Doc. No. 75 at 6-7). Specifically, Plaintiff
intends to use “the very same evidence and proof” to satisfy the operation and management prong
of the substantive RICO count as it would use to prove the proposed RICO conspiracy count. (Id.
at 7). Thus, claims Plaintiff, there is no risk of unfair prejudice to Defendants. (Id.). Plaintiff also
argues against Defendants’ claim of futility with respect to the proposed Hobbs Act amendments.
(Id. at 8-14).
A look at the timeline of this case is helpful. Plaintiff filed its complaint on October 8, 2014.
(Doc. No. 1). Plaintiff filed its first amended complaint two days later, adding a defendant. (Doc.
No. 3). The parties then began motion practice when Plaintiff, on January 16, 2015, filed for
judgment on the pleadings or, in the alternative, to strike Defendants’ answer. (Doc. No. 27). On
May 5, 2015, I issued a decision denying Plaintiff’s motion and ordering Defendants to amend their
answer. (Doc. No. 37). Defendants filed their amended answer one week later. (Doc. No. 39).
Two days later, Defendants filed their motion to dismiss, which I converted to a motion for
judgment on the pleadings. (Doc. Nos. 41 & 46). Defendants then amended their answer a second
time on May 21, 2015. (Doc. No. 43). After I granted at least one time extension, ordered
Defendants to file a statement of issues related to their motion on the pleadings, and allowed the
parties to file sur-replies, the motion on the pleadings became decisional on November 30, 2015.
(Doc. Nos. 46, 50, 61, & 63). I issued my decision on May 12, 2016. (Doc. No. 65).
So Defendants are correct; there was approximately one year from the filing of their motion
for judgment on the pleadings to my ruling, during which time Plaintiff could have sought leave to
amend its complaint. And I disagree with Plaintiff’s assertion that I sua sponte identified the two
deficiencies it seeks to cure. While the conclusions I came to were not exactly what Defendants
argued, I arrived at those conclusions while analyzing the complaint in light of Defendants’
challenges. Still, I recognize that Plaintiff would not necessarily have been able to anticipate where
my analysis would lead if not to Defendants’ conclusions. So to the extent Plaintiff seeks to cure
those deficiencies by more specifically pleading facts underlying its existing claims and adding the
closely related claim of RICO conspiracy, I am amenable. See Inge, 281 F.3d at 626 (finding no
prejudice to defense in granting leave to amend, “because Plaintiff’s request to amend was a prompt
effort to remedy pleading deficiencies identified by the district court in the dismissal order”).
This case has yet to progress past the point of litigating the pleadings and the exchange of
written discovery, so it is not accurate to say the parties are so far in that amending the complaint in
these two ways would be significantly prejudicial to the defense. The RICO conspiracy and
substantive RICO violation claims are not just closely related; they overlap. Plaintiff plans to plead
the conspiracy claim based on the letter of October 9, 2010 (Doc. No. 70-1 at ¶ 65), a letter Plaintiff
successfully pled as a predicate act of mail fraud under the substantive RICO claim (Doc. No. 3 at ¶
51(b)). And Defendants have been aware of Plaintiff’s reliance on the October 9 letter since at least
the filing of the first amended complaint.
Relatedly, Plaintiff has pulled more facts from the October 9 letter to plead a causal link
between the mailing of the letter as an act of mail fraud and the claimed injury of lost sales of the
contiguous lots. (Doc. No. 70-1 at ¶¶ 34& 35). Again, Defendants have been aware of this letter
and its contents, so any prejudice they may face is minimal. As such, I find Plaintiff may amend its
complaint to add additional facts to its existing claims and to add the RICO conspiracy claim.
Having permitted amendment of the complaint, I now find Plaintiff may pursue its claims
for damages from the lost sales of the contiguous lots and related expenses. I previously found that
Plaintiff failed to allege any facts connecting the predicate mail fraud acts to its claimed injury of lost
sales. (Doc. No. 65 at 13-14). So in the absence of those connecting facts, I found the source of
Plaintiff’s lost sales had to be the placement of the liens on the contiguous lots. (Id. at 14). But
Plaintiff has now provided that missing connection between the predicate acts of mail fraud and the
loss of the sales. (Compare Doc. No. 70-1 at 37-38 & ¶¶ 34-35, with Doc. No. 3 at ¶¶ 33 & 35).
Plaintiff has alleged more facts from the letter of October 9, 2010, and has included with the
complaint a copy of the letter. (Doc. No. 70-1 at 37-38 & ¶¶ 34 & 35). Because the October 9 letter
was referenced in the second amended complaints and is central to Plaintiff’s claims, I may consider
the letter, along with the amended complaint, under the Rule 12(b)(6) standard. Bassett v. Nat’l
Collegiate Athletic Ass’n, 528 F.3d 426, 430 (6th Cir. 2008). As pled, Defendant Buda falsely wrote in
the letter to Plaintiff’s counsel that “the deed restrictions automatically create[d] a lien in favor of
LEU for any unpaid charges.” (Doc. No. 70-1 at 37). Thus, the Trustee “believed and relied upon”
this assertion when deciding that proceeding with the pending sales would be futile or would open
up Plaintiff or the Trustee to liability for Plaintiff’s inability to provide clear title to the lots. (Id. at
¶¶ 35-36). As pled, the letter led directly to the injury by causing Plaintiff and the Trustee to believe
the contiguous lots were subject to liens in favor of LEU, thus leading the Trustee to suspend the
sales of the contiguous lots. (Id. at ¶ 36). Accordingly, Plaintiff has successfully pled a direct
connection between the injury in the form of lost sales and subsequent upkeep costs and the
predicate offense of mail fraud. See Hemi Group, LLC v. City of New York, N.Y., 559 U.S. 1, 9 (2010).
Therefore, Plaintiff may pursue its claims for these damages.
As for the proposed Hobbs Act amendments, I find Defendants will be significantly
prejudiced if I permit these late additions. Unlike the RICO conspiracy claim and additional facts
clarifying existing claims, the proposed Hobbs Act additions are based on an entirely new theory of
wrongdoing – extortion. Defendants have not had to consider such a theory this entire time, and
adding it nearly two years after the action was originally filed will require Defendants to start anew in
at least their internal research and defense preparation, further stretching their resources and causing
delay in the case overall. As such, I find Defendants will be significantly prejudiced and deny
Plaintiff’s motion to amend with respect to the Hobbs Act amendments.
MOTION TO CLARIFY
Federal Rule of Civil Procedure 60(a) gives me the power to “correct a clerical mistake or a
mistake arising from oversight or omission whenever one is found in a judgment, order, or other
part of the record,” so long as I do so before an appeal has been taken.
Defendants believe, based on my order of May 12, 2016 (Doc. No. 65), that Defendant LEU
and the individual defendants comprising LEU’s Board of Trustees should have been dismissed.
(Doc. No. 67). In my prior order, I found that Plaintiff could only seek to recover damages based
on attorney’s fees expended in pursuing its rights with respect to the contiguous lots. (Doc. No. 14).
I also narrowed the actionable alleged predicate acts of mail fraud to two letters and litigation
documents sent to and from Defendants Buda and BBA, thus excluding litigation documents sent to
and from LEU. (Id. at 8-11). Defendants interpret these findings to mean I “concluded neither
LEU nor any of its Board Member Defendants were responsible for the predicate acts of mail fraud
necessary for Plaintiff’s claims for damages related to attorney’s fees to go forward.” (Doc. No. 67
at 2). According to Defendants, this logically means those defendants should be dismissed entirely.
(Id. at 2-3).
Contrary to Defendants’ position, I did not conclude LEU and its board members are not
potentially responsible for acts of mail fraud. I concluded there was no reason to believe the
attorney hired by LEU did more than perform “typical lawyer duties” for LEU. (Doc. No. 65 at 11).
This led me to conclude that the mailing of litigation relating to LEU could not constitute predicate
acts of mail fraud. (Id.).
I also found Plaintiff had sufficiently pled BBA and LEU as enterprises and the fifteen
individuals as distinct persons who took part in operating or managing the enterprises. (Id. at 4). I
further found Plaintiff had sufficiently pled BBA and LEU as two halves of an association-in-fact
enterprise. (Id. at 4-5). Plaintiff bears the burden of proving the RICO enterprise engaged in
racketeering activity. Moon v. Harrison Piping Supply, 465 F.3d 719, 723 (6th Cir. 2006) (internal
quotation marks and citation omitted). But Plaintiff does not have to prove each individual
defendant committed a predicate act. Additionally, one may commit mail fraud by causing the mails
to be used. United States v. Martinez, 588 F.3d 301, 316 (6th Cir. 2009). It is not necessary that each
defendant mail something herself. United States v. Griffith, 17 F.3d 865, 874 (6th Cir. 1994).
So even though I found the mailing of litigation documents relating to LEU does not count
as mail fraud, there were several other mailings that did count. (Doc. No. 65 at 11). Plaintiff pled in
its first amended complaint and now again in its third amended complaint that all the defendants, in
furtherance of their joint scheme to defraud Plaintiff, caused these mailings to be sent. (Doc. Nos. 3
at ¶ 51 & 70-1 at 53). So LEU and its board members remain as defendants who may be found
liable for those predicate acts.
Even were I to find I was wrong in my previous order, I have allowed Plaintiff to amend its
complaint to add a RICO conspiracy claim, which alleges all defendants joined the conspiracy to
defraud Plaintiff. (Doc. No. 70-1 at ¶ 65). A claim of conspiracy to commit a RICO violation also
does not require proof “that each defendant personally committed two racketeering violations or
overt acts in furtherance of the conspiracy.” United States v. Hughes, 895 F.2d 1134, 1141 (6th Cir.
1990). It is enough that participants in the conspiracy “adopt the goal of furthering or facilitating”
the endeavor. Salinas v. United States, 522 U.S. 52, 65 (1997). I therefore deny Defendants’ motion to
MOTION FOR RECONSIDERATION
Plaintiff did not file a separate motion for reconsideration. Instead, Plaintiff included in its
motion for leave to amend a section asking that I “reconsider and vacate” the part of my order
finding the mailing of litigation documents relating to LEU cannot be predicate acts of mail fraud.
(Doc. No. 69 at 7). Defendants argue that Plaintiff failed to establish any appropriate grounds for
reconsideration. (Doc. No. 72 at 13).
There is no Federal Rule of Civil Procedure that provides for motions for reconsideration.
But the Sixth Circuit has determined that “a motion which asks a court to vacate and reconsider, or
even to reverse its prior holding, may properly be treated under Rule 59(e) as a motion to alter or
amend a judgment.” Smith v. Hudson, 600 F.2d 60, 62-63 (6th Cir. 1979). “Motions to alter or
amend judgment may be granted if there is a clear error of law, newly discovered evidence, an
intervening change in controlling law, or to prevent manifest injustice.” GenCorp, Inc. v. Am. Int’l
Underwriters, 178 F.3d 804, 834 (6th Cir. 1999) (internal citations omitted). But the rule is not
designed to give an unhappy litigant an opportunity to relitigate matters already decided; nor is it a
substitute for appeal. Dana Corp. v. United States, 764 F. Supp. 482, 488-89 (N.D. Ohio 1991);
McConocha v. Blue Cross & Blue Shield Mut. Of Ohio, 930 F. Supp. 1182, 1183 (N.D. Ohio 1996).
Plaintiff has cited neither an intervening change in the law nor newly-available evidence
which might serve as the basis for a change in my prior decision. Instead, Plaintiff reargues the
same points and case law it used in defending its pleading of the mail fraud predicate acts against
Defendants’ motion for judgment on the pleadings. (Compare Doc. No. 69 at 6-7, with Doc. No. 56
at 24-28). This is not a proper basis for a motion to reconsider. See McConocha, 930 F. Supp. at
1183. I therefore deny Plaintiff’s motion for reconsideration. (Doc. No. 69).
Accordingly, Plaintiff’s motion to amend is granted in part and denied in part. (Doc. No.
69). Defendants’ motion to clarify is denied. (Doc. No. 67). Plaintiff’s motion for reconsideration
is denied. (Doc. No. 69). Plaintiff has until October 13, 2017, to file an amended complaint
consistent with the rulings I set forth in this opinion.
s/ Jeffrey J. Helmick
United States District Judge
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