Decatur Ventures, LLC v. Stapleton Ventures, Inc.

• Decision Date: 21 March 2005
• Docket Number: No. 1:04-CV-0562-JDT-WTL.,1:04-CV-0562-JDT-WTL.
• Citation: 373 F.Supp.2d 829
• Parties: DECATUR VENTURES, LLC, an Indiana Limited Liability Company, and Trent D. Decatur, an individual, Plaintiffs, Triage Realty Investment, Inc., an Indiana Corporation; Jamie K. Goetz, an individual; Tonya S. (Blythe) Harvey, an individual; and Mona Orkoulas, an individual, Intervenor Plaintiffs, v. STAPLETON VENTURES, INC., an Indiana Corporation; Novastar Home Mortgage, Inc., a Delaware Corporation; Michael W. Stapleton, an individual; Courtenay Stocker, an individual; Phil Miller, an individual; Jeremy L. Stow, an individual; Michael L. Johnson, an individual; Lisa F. Phillips, an individual; and Kimberly Daniel, an individual, Defendants.
• Court: U.S. District Court — Southern District of Indiana

373 F.Supp.2d 829

DECATUR VENTURES, LLC, an Indiana Limited Liability Company, and Trent D. Decatur, an individual, Plaintiffs Triage Realty Investment, Inc., an Indiana Corporation; Jamie K. Goetz, an individual; Tonya S. (Blythe) Harvey, an individual; and Mona Orkoulas, an individual, Intervenor Plaintiffs, v. STAPLETON VENTURES, INC., an Indiana Corporation; Novastar Home Mortgage, Inc., a Delaware Corporation; Michael W. Stapleton, an individual; Courtenay Stocker, an individual; Phil Miller, an individual; Jeremy L. Stow, an individual; Michael L. Johnson, an individual; Lisa F. Phillips, an individual; and Kimberly Daniel, an individual, Defendants.

No. 1:04-CV-0562-JDT-WTL.

United States District Court, S.D. Indiana, Indianapolis Division.

March 21, 2005.

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Matthew S. Tarkington, Wood Crapo LLC, Salt Lake City, UT, Hannah Kaufman, Peter S. French, Lewis & Kappes, Indianapolis, IN, for plaintiffs.

Terry L. Monday, Monday Rodeheffer Jones & Albright, Indianapolis, IN, for Stapleton Ventures, Inc., Michael W. Stapleton, defendants.

Steven Kenneth Huffer, Huffer & Weathers, Indianapolis, IN, for Courtenay Stocker, defendant.

Donald F. Foley, Jennifer S. Milligan, Robert M. Frye, Foley & Pool, LLP, Indianapolis, IN, for Phil Miller, Jeremy Stow, defendants.

Robert D. Zink, Goodin Abernathy & Miller, Indianapolis, IN, for Michael L. Johnson, defendant.

Gregory H. Coleman Clark Coleman & Freeman, Indianapolis, IN, for Lisa F. Phillips, defendant.

Michael W. Phelps, Kopka, Pinkus, Dolin & Eads, Indianapolis, IN, Bradley W. Skolnik, Stewart & Irwin, Indianapolis, IN, Andrew R. Wolf, Hunt Suedhoff Kalamaros, South Bend, IN, for Kimberly Daniel, defendant.

ENTRY ON MOTIONS TO DISMISS FILED BY DEFENDANTS NOVASTAR HOME MORTGAGE, INC., COURTENAY STOCKER, PHIL MILLER, AND JEREMY STOW (DOCKET NOS. 97, 112)

TINDER, District Judge.

This case serves as yet another example of the great burden that is placed on the fair administration of justice when a plaintiff, under the protective guise of notice pleading, chooses to plead with volume rather than precision. When a party decides to throw a bucketful of claims against the wall in the hopes that some will stick, or simply repackages versions of the same claim over and over in redundant counts, not only is the court required to exert a great deal of time and effort into tidying up the matter, but the litigants themselves are left to endure the costs and delays in resolution caused by such cluttered tactics. No one wins when the practice of artful pleading falls by the wayside.

Plaintiffs Decatur Ventures, LLC ("DV"), and Trent D. Decatur filed an amended complaint against Defendants Stapleton Ventures, Inc. ("SVI"); NovaStar Home Mortgage, Inc. ("NovaStar"); Michael W. Stapleton; Courtenay Stocker; Phil Miller; Jeremy L. Stow; Michael L. Johnson; Lisa F. Phillips; and Kimberly Daniel. The amended complaint sets forth sixteen counts as follows: I: substantive and conspiratorial violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., by all Defendants; II: violations of Indiana's "baby RICO" statute by all Defendants; III: breach of contract by SVI; IV: breach of contract by NovaStar; V: negligence by SVI; VI: negligence per se by Stapleton (and/or SVI); VII: negligence by NovaStar; VIII: constructive and actual fraud by Stapleton (and/or SVI) and NovaStar; IX: civil deception by all Defendants; X: civil conversion by all Defendants; XI: check deception by SVI; XII: unjust enrichment by all Defendants; XIII: promissory estoppel against Stapleton; XIV: promissory estoppel against NovaStar; XV: request for an accounting of SVI; and XVI: negligence by Miller, Stow, Johnson, Phillips, and Daniel.

The RICO claims invoke federal-question jurisdiction, and the state law claims are supported by supplemental jurisdiction. On January 13, 2005, this court permitted Triage Realty Investment, Inc. ("Triage"), Jamie K. Goetz, Tonya S. (Blythe) Harvey, and Mona Orkoulas to intervene as Plaintiffs. This case is presently before the court on Fed.R.Civ.P. 12(b)(6) motions to dismiss filed by Defendants NovaStar, Stocker, Miller, and Stow.¹ After carefully reviewing all pleadings and briefs, the court finds as follows:

I. BACKGROUND

Essentially, Plaintiffs claim that they were fraudulently induced into making investment purchases of residential real estate properties. The origins of this case can be traced to May 2003, when Plaintiff Trent D. Decatur and SVI entered into a joint business venture wherein SVI would seek out under-valued residential properties for purchase. SVI would then approach the owners of these properties and negotiate for their sale. Decatur, as buyer, would then enter into "Offer to Purchase Real Estate" agreements with each of the sellers. SVI would front the down payments for each of the purchases.

Over the course of four months, Decatur purchased a total of eight properties (hereinafter the "subject properties") under this basic arrangement. SVI planned to rehabilitate the subject properties, manage them, and find tenants willing to rent them. Decatur took out mortgage loans on the subject properties and was responsible for making all mortgage payments. To finance the monthly mortgage payments, Decatur would invoice SVI, and SVI would then reimburse him from the rent collected on the subject properties and pay him a percentage of the profits above the reimbursement figure, if any.

NovaStar, through its employee Courtenay Stocker, acted as mortgage broker for Decatur with respect to all of the subject properties. NovaStar's primary roles in this capacity were to order and obtain appraisals for each of the subject properties, assist Decatur in securing lenders for the mortgage loans, arrange for title work, and assist in the real estate closings. NovaStar's obligations to Decatur were set forth in two "Mortgage Loan Origination Agreements" dated June 6, 2003 and August 6, 2003.² Pursuant to those agreements, NovaStar arranged for appraisals on the subject properties for the purpose of helping Decatur obtain the necessary financing. The appraisals were obtained from Defendants Miller, Stow, Johnson, Phillips, and Daniel (collectively, the "appraiser Defendants"). NovaStar allegedly "signed off" on the appraisals at the corresponding closings.

In November of 2003, Decatur began to perceive problems with his investment when Stapleton stopped payment on a check for that month's mortgage reimbursement. Decatur made inquires into Stapleton and SVI, but no further mortgage invoices were paid. Stapleton eventually told Decatur that he was no longer in the property management business.

At the heart of this matter are allegations that the subject properties were appraised at amounts far greater than their true market values, and that SVI failed to maintain or improve the properties in accordance with the parties' agreement. As a result, SVI failed to make any payments or reimbursements to Plaintiffs Decatur and DV, leaving them, much to their pecuniary harm, to satisfy the mortgage payments on all eight of the subject properties out of their own pockets. Intervenor Plaintiffs Triage, Goetz, Harvey, and Orkoulas claim to have been victimized by the same basic scheme as that alleged in Decatur and DV's amended complaint. The Intervenor Plaintiffs make allegations against many of the same Defendants named in Plaintiffs' amended complaint, but not all. Specifically, the Intervenor Plaintiffs name as Defendants only SVI, Stapleton, NovaStar, Stocker, Phillips, and Daniel.

II. DISCUSSION

A. Standard of Review

The purpose of a Rule 12(b)(6) motion to dismiss is to test the sufficiency of the complaint, not to resolve the case on the merits. See 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1356 (3d ed.2004). Dismissal is appropriate only if "`it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" Ledford v. Sullivan, 105 F.3d 354, 356 (7th Cir.1997) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984)). The court must accept as true all factual allegations in the complaint and draw all reasonable inferences in favor of the plaintiff. Hentosh v. Herman M. Finch Univ. Of Health Sciences/The Chicago Med. Sch., 167 F.3d 1170, 1173 (7th Cir.1999). Federal courts adhere to a notice pleading regime, and as such a plaintiff need not plead facts so long as the defendant has at least minimal notice of the claim or claims being asserted. Fed.R.Civ.P. 8; Scott v. City of Chicago, 195 F.3d 950, 951 (7th Cir.1999). That being said, "the court is not required to ignore facts alleged in the complaint that undermine the plaintiff's claim." Slaney v. The Int'l Amateur Athletic Fed'n, 244 F.3d 580, 597 (7th Cir.2001). In addition, allegations of fraud (including those in a civil RICO action) are subject to the heightened pleading standard of Fed.R.Civ.P. 9(b) that requires a plaintiff to plead all averments of fraud with particularity. Id.

B. Federal RICO Claims

The Federal RICO statute prohibits various activities associated with the operation of an "enterprise" by means of a "pattern of racketeering activity." 18 U.S.C. § 1962(a)-(d). Plaintiffs in this case allege counts of substantive RICO violations based on § 1962(a) and § 1962(c).³ A § 1962(a) violation "requires `the receipt of income from a pattern of racketeering activity, and the use of that income in the operation of an enterprise.'" Vicom, Inc. v. Harbridge Merch. Serv., Inc., 20 F.3d 771, 778 (7th Cir.1994). By contrast, § 1962(c) provides that "[i]t shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or...