Am. Biocare, Inc. v. Howard & Howard Attorneys, PLLC
| Decision Date | 30 September 2016 |
| Docket Number | No. 14-cv-14464,14-cv-14464 |
| Parties | AMERICAN BIOCARE, INC., et al., Plaintiffs, v. HOWARD & HOWARD ATTORNEYS, PLLC; JIRA LLC; JIRA III, LLC; REDEMPTION HEALTH CARE, LLC; and SHCC SERVICES TX, LLC, Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
Hon. Gerald E. Rosen
OPINION AND ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISSI. INTRODUCTION
Plaintiffs American Biocare, Inc. ("ABI") and various ABI "subsidiaries" have brought this suit alleging that Howard & Howard Attorneys PLLC ("Howard & Howard"), four of the firm's current or former clients -- JIRA, LLC ("JIRA"), JIRA III, LLC ("JIRA III"), Redemption Health Care, LLC ("Redemption") and SHHC Services TX, LLC ("SHHC") (collectively the "JIRA Defendants") -- and various non-party individuals and entities engaged in racketeering activity, and converted property that ABI claims it owned. Plaintiffs' 76-page, 275-paragraph First Amended Complaint contains three substantive counts: a claim against all of the defendants for violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq., ("RICO") (Count I); a claim under state law for conversion against the JIRA Defendants (Count IV), and a claim against Howard & Howard for aiding and abetting that conversion (Count V).1
Howard & Howard and the JIRA Defendants now move, in separately-filed motions, to dismiss all of Plaintiffs' claims against them. Both Howard & Howard and the JIRA Defendants seek dismissal pursuant to Fed. R. Civ. P. 12(b)(6). The JIRA Defendants also seek dismissal pursuant to Fed. R. Civ. P. 12(b)(1). Responses, Reply Briefs, and Supplemental Briefs have been filed.
Having reviewed and considered the parties' briefs, supporting documents, and the entire record of this matter, the Court has determined that oral argument is not necessary. Therefore, pursuant to Eastern District of Michigan Local Rule 7.1(f)(2), this matter will be decided on the briefs. This Opinion and Order sets forth the Court's ruling.
Plaintiff American Biocare, Inc. ("ABI") has been embroiled in litigation with Howard & Howard and clients of the law firm since early 2013. ABI is a holding company allegedly formed to raise capital for the acquisition of home health care agencies. In 2011, various entities owned by ABI or in which ABI had some interest (the "ABI Entities")2 purchased several home health care agencies in Michigan, Tennessee and Texas. To finance the purchase, the ABI Entities borrowed $3.9 million from Citizens Bank (the "Loan") and another $4.3 million in private financing from Peachtree Equity Partners. ABI itself was not a borrower but it guaranteed repayment of the Loan. To secure the guaranty, ABI and the ABI Entities pledged the Entities' assets, membership interests and shares in the ABI Entities (the "Pledged Assets") as collateral.3
Less than a year after the Loan closing, the Loan was in default and ABI and theABI Entities defaulted on their guaranty. FirstMerit Bank ("FirstMerit"), as successor to Citizens Bank, foreclosed on the Pledged Assets and sold them at a UCC private foreclosure sale to Defendants JIRA, JIRA III, and SHHC as follows:
[See JIRA Defendants' Ex. D; Howard & Howard Ex. H]
Shortly after JIRA, JIRA III and SHHC purchased the assets and membership interests in the New Plaintiffs, they were assigned to Redemption Health Care, LLC ("Redemption"), another party-defendant in this action. Id.
Meanwhile, on April 29, 2013, i.e., between the time of ABI's default on the Loan guaranty and FirstMerit's November 2013 asset foreclosure sale, ABI filed a lawsuit in Oakland County Circuit Court against Kevin Ruark, Jamin Ruark, Jason Laing (the"Ruark Individuals"), certain companies owned by them, and other individuals.4 See American Biocare, Inc. v. Kevin Ruark, et al., Oakland County Circuit Court No. 2013-133540-CK. The case was assigned to Judge Colleen O'Brien.5 In Judge O'Brien's case, ABI alleged that Kevin Ruark made misrepresentations to ABI that caused ABI to purchase certain other home health care companies -- including JIRA and several other entities named as parties in this action, some of which were companies in which Kevin Ruark had an interest -- and that after the acquisition, the Ruark Individuals violated non-competition agreements with ABI.6 Howard & Howard represented the defendants in the O'Brien case.
Simultaneously with the filing of their complaint in the O'Brien case, ABI sought injunctive relief by bringing a motion for a temporary restraining order to prohibit the Ruark Individuals from engaging in further competition with ABI and its affiliated companies.
On July 11, 2013, in order to resolve ABI's motion for a TRO, the parties in the O'Brien case stipulated to the entry of a limited Status Quo Order which provided, in relevant part:
[See Howard & Howard Ex. E.]
Thereafter, on November 6, 2013, Judge O'Brien granted Howard & Howard's clients' motion for partial summary disposition, dismissing four counts of the complaint -- including ABI's claim for fraud/misrepresentation -- in their entirety.
Subsequently, on January 17, 2014, ABI filed a motion in the case asking the Court to hold Howard & Howard and its clients in contempt of court. ABI argued that JIRA, JIRA III and SHHC's purchase of the Pledged Assets from FirstMerit following ABI's default on the acquisition Loan constituted a violation of the Status Quo Order entered in July 2013 because the Ruark Individuals owned or controlled one or more of the entities that purchased the Pledged Assets, and these entities were engaged in thehome health care business in Michigan.
Judge O'Brien apparently agreed with ABI because on February 19, 2014, she entered an order finding Kevin Ruark, Jamin Ruark and Jason Laing to be in civil contempt for violating the Status Quo Order, reserving the issue of damages for violation of the Order for trial. (Howard & Howard was not held in contempt.) No trial, however, was ever held because on March 28, 2014, Kevin Ruark filed for Chapter 7 bankruptcy, and on April 7, 2014, ABI and the other parties stipulated to administratively close the case in its entirety, without prejudice, due to the bankruptcy. The case remains closed to this date.
Not long after stipulating to administratively close the O'Brien case, on July 22, 2014, ABI filed a new lawsuit in Oakland County Circuit Court, this time naming as defendants Howard & Howard, JIRA, JIRA III, and Redemption, i.e., the same entities named as defendants in this case. See American Biocare, Inc. v. Howard & Howard Attorneys PLLC, et al.,Oakland County Circuit Court No. 2014-141991-CZ. The case was initially assigned to Judge Michael Warren but then was re-assigned to Judge James Alexander. The Complaint in Judge Alexander's case alleged that the defendants (excluding Howard & Howard) were liable for conversion by purchasing the PledgedAssets from FirstMerit, and that Howard & Howard aided and abetted this conversion.7 However, shortly after filing the second Oakland County lawsuit, ABI voluntarily dismissed the case on September 5, 2014.
Two months later, on November 21, 2014, ABI filed its Complaint in this matter, making substantially the same allegations against the same parties and alleging the same conversion claims it made in the second Oakland County lawsuit, but adding SHHC as a party-defendant, and adding a RICO violation claim.8
Defendants now move to dismiss this action in its entirety.
III. DISCUSSION
Fed. R. Civ. P. 12(b)(1) is the applicable procedural rule for challenging lack of subject matter jurisdiction. "When subject matter jurisdiction is challenged under Rule 12(b)(1), the plaintiff has the burden of proving jurisdiction in order to survive the motion." Madison-Hughes v. Shalala, 80 F.3d 1121, 1130 (6th Cir. 1996).
Motions to dismiss for lack of subject matter jurisdiction fall into two general categories: facial attacks and factual attacks. United States v. Ritchie, 15 F.3d 592, 598(6th Cir. 1994). A facial attack on subject matter jurisdiction goes to whether the plaintiff has properly alleged a basis for subject matter jurisdiction, and in such a case, the trial court takes the allegations of the complaint as true. Ohio Nat'l...
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