CBST Acquisition, LLC v. PNC Bank, N.A.

• Decision Date: 25 June 2019
• Docket Number: Case No. 1:19-cv-06
• Parties: CBST ACQUISITION, LLC, Plaintiff, v. PNC BANK, N.A., et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

CBST ACQUISITION, LLC, Plaintiff, v. PNC BANK, N.A., et al., Defendants.

Case No. 1:19-cv-06

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

June 25, 2019

Dlott, J.

Bowman, M.J.

REPORT AND RECOMMENDATION

Plaintiff CBST Acquisition, LLC ("CBST") initiated this lawsuit on January 2, 2019 against PNC Bank, N.A. and National City Bank n/k/a PNC Financial Services Group, Inc. (collectively "PNC"). The PNC Defendants have moved to dismiss the complaint. (Doc. 8). This case has been referred to the undersigned magistrate judge for preliminary consideration and disposition of all pretrial and post-judgment motions and procedures, whether dispositive or not. (Doc. 2). Pursuant to that referral, the undersigned now recommends that this case be dismissed.

I. Standard of Review

In evaluating the pending motion under Rule 12(b)(6), this Court must "construe the complaint in the light most favorable to the nonmoving party, accept the well-pled factual allegations as true, and determine whether the moving party is entitled to judgment as a matter of law." Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 336 (6th Cir. 2007). At the same time, this Court

need not accept the plaintiff's legal conclusions or unwarranted factual inferences as true. Gregory v. Shelby County, 220 F.3d 433, 446 (6th Cir. 2000). To state a valid claim, a complaint must contain direct or inferential allegations respecting all the material elements under some viable legal theory. Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir. 2005), cert. denied, 547 U.S. 1111, 126 S. Ct. 1911, 164 L.Ed.2d 663 (2006).

Id., 508 F.3d at 336-37. While the determination of whether Plaintiff's allegations state any claim rests primarily upon the allegations of its complaint, "matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint, also may be taken into account." Amini v. Oberlin Coll., 259 F.3d 493, 502 (6th Cir. 2001) (internal quotation and citation omitted); accord Luis v. Zang, 533 F.3d 619, 632 (6th Cir. 2016). Without converting PNC's motion to one for summary judgment,¹ the undersigned considers the allegations in the instant complaint in light of matters of public record (including multiple related cases) and CBST's own exhibits.

II. Background and Key Allegations in CBST's Complaint

PNC's motion to dismiss characterizes the instant civil lawsuit as "the most recent of six lawsuits filed to date by [Orlando] Carter or his associates - this time, on behalf of his company, CBST - in a blatant attempt to collaterally attack his 2009 conviction for bank fraud, mail fraud, bankruptcy fraud and making false statements and oaths." (Doc. 8 at 2, citing United States of America v. Orlando Carter, Case No. 1:08-cr-51).

Carter was the majority owner of Dynus Corporation ("Dynus"). CBST, the named Plaintiff in this case, is a limited liability company that appears to have been operated asa subsidiary of Dynus that is consistently referred to by Carter as "my company." (See Complaint, Doc. 1-1 at 10, Exhibit G).² CBST's complaint alleges: "CBST Acquisition LLC is the company owned by the Debtor [Carter] as referenced by PNC's Senior Corporate Counsel John Wirthlin...." (Doc. 1 at ¶60; see also id. at ¶64, alleging that "CBST informed PNC," through a letter from Carter to Wirthlin, that PNC's description in a creditor's claim filed in Bankruptcy Court in 2006 against Carter for "Funding of lease induced by fraud of Debtor and Debtor's company" was without factual support). In an affidavit attached to the complaint in another recent civil case filed by CBST, Carter similarly states ""I am the owner and founder of CBST Acquisition LLC." See Case No. 1:18-cv-162-SJD-KLL (Doc. 1 at 10, Affidavit of Orlando Carter).

The undersigned agrees that the current lawsuit by CBST should be dismissed based in part upon judicial notice of prior litigation, including but not limited to Carter's criminal conviction. However, the undersigned stops short of construing CBST's civil complaint as yet another form of collateral attack by Carter on his criminal conviction, as if this were a motion filed under 28 U.S.C. § 2255. Instead, the undersigned recommends that PNC's motion to dismiss be granted based upon records that contradict and render wholly incredible many of the allegations in CBST's latest complaint, including an allegation that CBST only recently "discovered" its claims. See generally Rule 201, Fed. R. Evid. Based upon irrefutable notice attributable to CBST, ten of CBST's claims are barred by applicable statutes of limitations. The remaining allegations are legally insufficient to state any claim, for the same reasons stated in prior cases in which virtuallyidentical claims have been dismissed by this Court. In addition, because Carter and CBST are in privity, the undersigned alternatively recommends dismissal of this lawsuit based upon the doctrines of issue preclusion and/or claim preclusion.

Notwithstanding the extremely close relationship between Carter and Dynus/CBST and the facts underlying Carter's conviction, CBST denies that its most recent case is predicated on any of the prior cases, arguing that it is entitled to file this civil suit in its own right as "a distinct and separate legal entity from Carter." (Doc. 12 at 2). At the same time, CBST repeatedly refers to prior cases both directly and indirectly, including the criminal case against Carter and related civil cases. (See Complaint, Doc. 1 at ¶¶ 5, 7, 32, 38, 40-45, 48, 52, 59, 78, 83-86, 89-90, 103-108, 110).

The undersigned finds the following eight allegations to be central to CBST's current complaint: (1) a $4 million loan between National City Bank (a/k/a "the Bank") and Dynus/CBST never existed, based upon PNC's recent inability to produce documentation to confirm the existence of that loan;³ (2) the Bank changed the amount of a 2003 Note without CBST's consent from $250,000 to $4 million and misled the U.S. Attorney (and others) regarding the existence of the $4 million debt; (3) the Bank wrongfully sent CBST a demand letter for $4 million; (4) the Bank wrongfully filed two claims in bankruptcy court against Carter in 2006, stating that CBST owed PNC $18.3 million and/or $8.8 million; (5) the Bank engaged in "fraudulent concealment" of relevant facts until February 2018; (6) the Bank "currently" is trying to collect the $4 million debt together with another $18.3million debt from CBST; (7) the Bank failed to apply two payments made by CBST from a Fifth Third Bank account in 2004 to the original $250,000 Note; (8) CBST "recently" sought financing that was denied "based on PNC's false claims...regarding outstanding debts allegedly originated and owed by CBST." Based on these central allegations and supported by 13 pages of exhibits, CBST's 29-page complaint sets forth sixteen counts, including 14 causes of action plus two additional counts seeking an emergency temporary restraining order and a declaratory judgment.⁴

Most of CBST's current claims have been previously litigated by Carter and his associates, including by CBST itself. The prior cases provide evidence of constructive notice to CBST of its claims more than a decade ago, in contradiction to CBST's implausible contrary allegations of recent discovery. The prior cases also contain legal analysis of the same claims that the undersigned finds at least persuasive, if not binding.

A. Judicial Notice of the Existence of Related Cases

In August 2009, a jury convicted Orlando Carter of eleven fraud and fraud-related federal offenses. See Case No. 1:08-cr-51 (Doc. 75). Carter unsuccessfully appealed his conviction, and has filed multiple (equally unsuccessful) post-conviction motions. Over the years, Carter and others also have filed numerous civil suits that relate toCarter's conviction.⁵ See e.g., Related Case Memorandum filed in Civil Case 1:18-cv-162 on December 13, 2018, Civil Cases 1:17-cv-508, 1:18-cv-162, 1:18-cv-400, 1:18-cv-825; see also Carter v. United States, Civil Case No. 1:16-cv-530; Carter v. United States, Civil Case No. 1:17-cv-248; Rogers v. PNC Bank, Case No. 1:18-cv-889; Carter v. PNC Financial Servs. Grp., Inc., Case No. 3:18-cv-283 (appeal of dismissal of adversary proceeding in bankruptcy court). Some of Carter's motions and lawsuits have been filed pro se, while others have been filed through the same counsel who represents CBST in this civil case. All direct and collateral challenges to Carter's underlying conviction to date have been denied, and nearly all related civil cases filed to date also have been dismissed. But see Carter v. PNC Bank, Case No. 18-cv-706-SJD-KLL (still-pending case that alleges, similar to the instant complaint, that PNC created a fraudulent $18.3 million debt that Carter is now obligated to pay).

Because of the intertwined nature of the proceedings, the undersigned devotes significant time to summarizing the prior cases, beginning with Carter's criminal and bankruptcy proceedings, and followed by a discussion of related civil cases.

1. United States v. Carter, Criminal Case No. 1:08-cr-51

Carter's criminal case and post-conviction proceedings refute CBST's allegations in this civil case that the $4 million guaranty never existed, and - importantly - that CBST had no notice of that alleged loan or of PNC's demand for repayment.

Carter was indicted on May 7, 2008 by a grand jury on charges that related to multiple schemes occurring primarily between 2004 and 2006, including: (1) a scheme to defraud Long Beach Mortgage Company by submitting or causing to be submitted a false residential mortgage application; (2) a scheme to defraud Fifth Third Bank by submitting false financial statements to support a line of credit for Carter's business, Dynus Corporation and/or CBST, and (3) a scheme to commit bankruptcy fraud by concealing cash transfers to a bank account controlled by Carter's fiancé. See United States v. Car...