Borg v. Warren

• Decision Date: 28 June 2021
• Docket Number: Civil No. 3:21-cv-12 (DJN)
• Court: United States District Courts. 4th Circuit. United States District Court (Eastern District of Virginia)
• Parties: KRISTIN BORG, et al., Plaintiffs, v. CHARLES WARREN et al., Defendants.

KRISTIN BORG, et al., Plaintiffs,
v.
CHARLES WARREN et al., Defendants.

Civil No. 3:21-cv-12 (DJN)

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Richmond Division

June 28, 2021

MEMORANDUM OPINION

Plaintiffs Kristin Borg ("Borg"), Jeannie Rich ("Rich"), John Denning IV ("Denning") and Katherine Collaros ("Collaros") (collectively, "Plaintiffs") bring this action against Defendants Charles D. Warren, Jr., ("Warren"), Jacob M. Dudek-Warren ("Dudek"), Bordeaux Farms, LLC ("Bordeaux Farms"), Charitable Occasion, LLC ("Charitable Occasion") and Marianne Warren ("Marianne" or "Ms. Warren") (collectively, "Defendants"), alleging violations of 18 U.S.C. § 1962(c) and (d) of the Racketeer Influenced and Corrupt Organization Act ("RICO"), Virginia Code § 59.1-196 et seq. (Virginia's Consumer Protection Act ("VCPA")), Florida Statute § 501.201 et seq. (Florida's Deceptive and Unfair Practices Act ("FDUTPA")), California Business and Professional Code § 17200 et seq. (California's Unfair Competition Law ("UCL")), North Dakota Century Code § 51-10-01 et seq. (North Dakota's Deceptive Trade Practice Law ("NDUTPL")) and Ohio Revised Code § 1345.01 et seq. and Ohio Administrative Code 109:4-3-01 et seq. (Ohio's Consumer Sales Practice Act ("OCSPA")), and asserting several state law claims including common law conspiracy, breach of contract, fraud and unjust enrichment.

Page 2

This matter now comes before the Court on the Motion to Dismiss ("Warren-Dudek Mot." (ECF No. 11)) filed by Bordeaux Farms, Charitable Occasion, Dudek and Warren (collectively, the "Warren-Dudek Defendants"), and the Motion to Dismiss ("M. Warren Mot." (ECF No. 17)) filed by Marianne Warren¹. For the following reasons, the Court hereby GRANTS IN PART AND DENIES IN PART the Motions to Dismiss filed by Defendants (ECF Nos. 11, 17). Specifically, the Court GRANTS Defendants' Motions as to Counts Four, Five, Seven, Ten and Eleven as to all parties. The Court DISMISSES WITH PREJUDICE Count Four, but DISMISSES WITHOUT PREJUDICE Counts Five, Seven, Ten and Eleven. Additionally, the Court GRANTS Defendants' Motion as to Counts One, Two and Three as to Defendants Charitable Occasion and Bordeaux Farms alone and DISMISSES WITHOUT PREJUDICE these claims as to these Defendants. Finally, the Court DENIES Defendants' Motion as to Counts One, Two and Three as to Defendants Warren, Dudek and Marianne Warren, as well as Counts Six, Eight and Nine as to all relevant Defendants.

I. BACKGROUND

A. Factual Background

In deciding a motion to dismiss pursuant to Rule 12(b)(6), the Court must accept as true the well-pled factual allegations set forth in Plaintiffs' Complaint (ECF No. 1). Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Against that backdrop, the Court accepts the following facts as alleged for purposes of resolving the instant motion.

Page 3

This case involves an allegedly decade-long criminal enterprise by Defendant Warren and various members of his family — including his mother Marianne Warren and Warren's then-boyfriend, now husband, Jacob Dudek — during which Warren schemed to sell untrained, ill-behaved dogs to "hundreds" of families around the country for tens of thousands of dollars while claiming that the dogs were actually highly trained service dogs. (Compl. ¶¶ 1-10.) This scheme began in October 2010, when Defendant Warren formed and incorporated a Virginia nonstock corporation, Service Dogs by Warren Retrievers, Inc. ("SDWR"). (Compl. ¶¶ 1, 26, 40.) Warren designated himself as President of SDWR and chairman of SDWR's Board of Directors. (Compl. ¶ 40.) Warren also appointed Dudek as Vice-President of SDWR. (Compl. ¶¶ 4, 57.)

According to Plaintiffs, Warren began his criminal scheme by setting up several single-member shell companies to help facilitate the scheme and ensure a mechanism by which Warren and Dudek could launder money out of SDWR that defrauded customers had paid to purchase a dog. (Compl. ¶ 6.) Specifically, in February 2011, Warren formed Bordeaux Farms, LLC, a single-member Virginia Limited Liability Company, for the purposes of purchasing and owning real property. (Compl. ¶ 43.) Warren subsequently purchased real property in Madison County, Virginia (the "Property") on which to conduct his business, and conveyed the Property to Bordeaux Farms for no consideration. (Compl. ¶¶ 6, 44-46.) Through Bordeaux Farms, Warren would lease the Property to SDWR for exorbitant rent. (Compl. ¶ 6.) The money would then flow through the companies directly into Warren's and Dudek's bank accounts. (Compl. ¶ 6.) Also, in May 2012, Warren formed Charitable Occasion, LLC, a single-member Virginia Limited Liability Company, which he also used to own real property and to hold and transfer funds laundered through SDWR and Bordeaux Farms. (Compl. ¶¶ 48-49.)

Page 4

While Warren used some of the funds laundered through Bordeaux Farms and Charitable Occasion to help pay off the mortgage on the Property, he "wished to pay off the Mortgage faster." (Compl. ¶¶ 50-51.) So, Marianne Warren allegedly agreed to give her son "hundreds of thousands of dollars" to pay off the mortgage. (Compl. ¶ 52.) However, she only joined the scheme, because Warren "agreed to repay her (at a profit to her) with monies generated from the illicit activities he was engaged in through his operation of SDWR." (Compl. ¶ 53.) Thus, Marianne began to profit off of SDWR's scheme. (Compl. ¶ 54.) At various times over the ensuing years, Marianne provided additional funding to the scheme "with the expectation that she would make a profit when Dan Warren paid her back after defrauding consumers, such as the Plaintiffs." (Compl. ¶ 55.)

i. The Diabetic Alert Dog Scheme

Beginning in late 2011 or early 2012, Warren began promoting a Diabetic Alert Dog Program, wherein he and Dudek represented to consumers that SDWR could provide them with specially trained service dogs that would alert when the dogs detected high or low blood sugar levels. (Compl. ¶ 60.) Warren and Dudek targeted a small number of families at the initiation of their scheme who could pay the full purchase price of a dog in one lump sum and to whom Warren and Dudek actually provided a highly trained dog to "give the fraud scheme the appearance of legitimacy." (Compl. ¶ 9.) They then had these families provide positive testimonials for SDWR's website to trick other families into believing that the organization was legitimate and that they would be treated the same. (Compl. ¶ 106.) In addition to representations made on the SDWR website, Warren and Dudek made various representations directly to consumers, including that the organization had "temperament tested" the dogs from a

Page 5

young age, and that the dogs had received "special 'scent' training to 'achieve maximum alert and response ability.'" (Compl. ¶ 61.)

Plaintiffs Denning and Collaros represented two of the customers to whom Warren and Dudek made these representations. (Compl. ¶ 61.) Mr. Denning, a resident of Minot, North Dakota, contracted with SDWR for a diabetic alert service dog, but never received a dog. (Compl. ¶¶ 36-37.) Mr. Denning contacted Warren after he began to have issues with his diabetes while on site for his construction job. (Compl. ¶¶ 156-59.) Specifically, Mr. Denning told Warren that he needed a dog conditioned to loud noises and other distractions, as he would need the dog to function in oil field construction sites. (Compl. ¶ 161.) Warren assured Mr. Denning that for $25,000 SDWR would provide Mr. Denning with a dog that "would receive special training and would be fully trained to alert to blood sugar levels." (Compl. ¶¶ 162-63.) In fact, the dog "would be trained to fit John's specific needs and . . . Warren's trainers would use proprietary methods to customize training to suit John's needs — such as being able to function at a loud construction site around multiple distractions." (Compl. ¶¶ 162-63.) "[H]owever Warren knew none of this was true at the time he made these demonstrably false representations to John." (Compl. ¶ 162.)

Mr. Denning proceeded to make several payments to SDWR beginning in December 2019. (Compl. ¶¶ 165-66.) He mainly made these payments through "Donor Drive," a third-party vendor that facilitates charitable donations. (Compl. ¶¶ 108, 168.) At the end of every business day, these funds were automatically wired to bank accounts controlled by Dudek and Warren. (Compl. ¶¶ 114-15.) Warren and Dudek would then transfer the funds to either their own personal bank accounts, the bank accounts of Warren's shell companies or Ms. Warren's account in repayment for her investment in their scheme. (Compl. ¶ 115.)

Page 6

From December 2019 to March 2020, Mr. Denning received several emails at Warren's or Dudek's direction, encouraging Mr. Denning to continue making payments towards the purchase price of the service dog. (Compl. ¶ 171.) In fact, Mr. Denning paid $16,000 towards his contract with SDWR before learning in May 2020 that SDWR had become insolvent and that he would not receive a dog. (Compl. ¶ 173.) According to Mr. Denning, he never received a dog, Defendants never had any intention of delivering a dog as promised and Warren has refused to return his money. (Compl. ¶¶ 175-76.)

Likewise, Ms. Collaros, a resident of Maineville, Ohio, contracted with SDWR for a diabetic alert service dog but also never received one. (Compl. ¶¶ 38-39.) The Collaros family contacted SDWR in early March 2018 after having issues regulating their child's blood sugar levels at night. (Compl. ¶ 177.) On a phone call between Warren and Ms. Collaros, Warren represented to her that the dog that her family contracted for would receive specialized training for her family's needs including training that "would enable the dog to get medical assistance such as by calling 911 by pushing a special button" and to "automatically alert to blood sugar levels—including, if necessary, arousing the Collaros[es] at night if their child's blood sugar levels dropped."...