Layani v. Ouazana, Civil Action No. ELH-20-420

CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)
Writing for the CourtEllen L. Hollander United States District Judge
PartiesGERARD LAYANI, et al. Plaintiffs, v. ISAAC OUAZANA, et al., Defendants.
Decision Date03 March 2021
Docket NumberCivil Action No. ELH-20-420

GERARD LAYANI, et al. Plaintiffs,
ISAAC OUAZANA, et al., Defendants.

Civil Action No. ELH-20-420


March 3, 2021


This putative class action concerns an alleged scheme to defraud investors in rental properties in Baltimore. Plaintiffs Gerard Layani; Britt Investment Baltimore LLC; Yehuda Ragones; and RDNA Investments, LLC filed a "Class Action Complaint for Damages and Injunctive Relief." ECF 1 (the "Complaint"). They sued multiple defendants: Isaac Ouazana; Benjamin Ouazana; I&B Capital Investments LLC; WAZ-Brothers, LLC; WAZ Investments, LLC; WAZ-Management, LLC; and "John and Jane Doe(s) and John Doe Entities" (collectively, the "Doe Defendants"). Id. ¶¶ 10-20. Plaintiffs allege that over a period of years, defendants "implemented a scheme to defraud passive investors in and owners of Baltimore real estate of money, property, and benefits of monetary value through false pretenses and representations." Id. ¶ 38.

According to the Complaint, "Defendants' scheme to defraud can be broadly divided into two types: (a) Fraud in Marketing/Selling the Baltimore real estate; and (b) Property-Management-related Looting, Concealment, and Related Fraud." Id. ¶ 39. As to the first type, plaintiffs allege that defendants induced investors to purchase interests in Baltimore rental properties and to contract with defendants to manage the properties. Id. ¶ 40. But, defendants allegedly misrepresented key information about the properties, such as the value and quality of the property

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and the identity of the seller. Id. ¶¶ 40-43. With respect to the second category of fraud, plaintiffs assert that defendants' "deception" took "numerous forms," and generally involved "hiding or misrepresenting information about the operation and the condition of the properties under their control." Id. ¶ 46. Among other things, defendants allegedly withheld rental income and charged plaintiffs for repairs that were never performed. Id. ¶¶ 79, 104, 162, 187, 213, 236, 265.

The Complaint, which is 125 pages in length, contains ten counts and concerns twelve properties. Plaintiffs allege violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962 (Count One), as well as conspiracy to engage in conduct prohibited by RICO, in violation of § 1962(d) (Count Two). In addition, plaintiffs bring eight claims arising under Maryland law, as follows: Negligence (Count Three); Negligent Supervision (Count Four); Common Law Fraud (Count Five); Constructive Fraud (Count Six); Breach of Contract (Count Seven); Conversion (Count Eight); Unjust Enrichment (Count Nine); and Accounting (Count Ten). Id. at 83-121. Counts Three and Four are lodged only against the Doe Defendants. Id. at 112, 114. All other claims are lodged against all defendants. Id. at 83-121.

Plaintiffs assert all counts on behalf of themselves and a putative class. Id. ¶ 26. The Complaint defines the putative class "as all persons who," id. ¶ 27:

a. Purchased a full or fractional interest in properties sold directly or indirectly by Defendants, and whom, within four years before the filing of this action, Defendants misled or defrauded, or attempted to mislead or defraud, irrespective of whether they were in fact misled or defrauded; or

b. Entered into a written or implied property management services agreement with Defendants, and whom, within four years before the filing of this action, Defendants misled or defrauded, or attempted to mislead or defraud, irrespective of whether they were in fact misled or defrauded.

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According to plaintiffs, the Court has subject matter jurisdiction based on the RICO claims (Counts One and Two), pursuant to 28 U.S.C. §§ 1331, 1337. Id. ¶ 21.1 And, they assert that the Court "is vested with supplemental jurisdiction" as to the claims arising under State law (Counts Three to Ten), pursuant to 28 U.S.C. § 1367. Id. ¶ 22. Alternatively, plaintiffs assert that the Court has jurisdiction over all claims pursuant to 28 U.S.C. § 1332(d). Id. ¶ 23. Although the Complaint does not invoke the Class Action Fairness Act ("CAFA") by name, it cites the pertinent statutory provision, § 1332(d), and states that the elements of the provision are satisfied. Id. ¶ 23.

Defendants have moved to dismiss the Complaint (ECF 18), supported by a memorandum of law (ECF 19) (collectively, the "Motion to Dismiss" or the "Motion"). They rely on Fed. R. Civ. P. 12(b)(1), 12(b)(6), and 9(b). And, they seek dismissal of the class action allegations pursuant to Fed. R. Civ. P. 23.

As to Rule 12(b)(1), which concerns subject matter jurisdiction, defendants argue that this Court lacks jurisdiction under §1331 because plaintiffs' RICO claims fail under Rule 12(b)(6) and Rule 9(b), for various reasons. See ECF 19. Moreover, defendants mount "a pre-discovery challenge to class certification," pursuant to Rule 23. Id. at 39. In their view, because plaintiffs have failed plausibly to allege a class, CAFA jurisdiction is also lacking. Id. at 39-40, 44. And, according to defendants, plaintiffs cannot claim diversity jurisdiction under § 1332(a). Id. at 45.

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Plaintiffs' corrected opposition is docketed at ECF 24 and is supported by seven exhibits. ECF 24-1 to ECF 24-7. Defendants have replied. ECF 26.

Plaintiffs have moved for leave to file a surreply (ECF 27, the "Surreply Motion"). It is supported by a proposed surreply (ECF 27-2) and exhibits. Defendants' opposition is docketed at ECF 28. And, plaintiffs have replied. ECF 29. In addition, plaintiffs have filed a "Motion For Entry of Order Pursuant To The Court's Inherent Authority To Sanction Defendants' Witness Tampering And Other Bad Faith Tactics To Gain A Litigation Advantage." ECF 30 (the "Sanctions Motion"). Defendants oppose the Sanctions Motion. ECF 32. Plaintiffs have replied. ECF 33.

No hearing is necessary to resolve the motions. See Local Rule 105.6. For the reasons that follow, I shall grant defendants' Motion to Dismiss, without prejudice; deny plaintiffs' Surreply Motion; and deny plaintiffs' Sanctions Motion, without prejudice.

I. Factual Background2

The Complaint (ECF 1) was filed on February 19, 2020. It sets forth an extensive summary of the alleged real estate fraud scheme. It also addresses each of the twelve properties implicated in defendants' alleged scheme.

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Plaintiff Gerard Layani is a citizen of Israel. ECF 1, ¶ 10. He is the sole member of Britt Investment Baltimore LLC ("Britt"), a limited liability company with its principal place of business in Baltimore. Id. ¶ 11. Britt was "set up by Plaintiff Layani for the purpose of investing in the real estate ventures sold by Defendants." Id. I shall refer to Britt and Layani collectively as the "Layani Plaintiffs."3

Ragones is also a citizen of Israel and "maintains a U.S. address" in Baltimore. Id. ¶ 12. He is the sole member of RDNA Investments, LLC ("RDNA"), a limited liability company with a principal place of business in Baltimore. Id. ¶ 13.

Isaac Ouazana and Benjamin Ouazana are brothers and residents of Baltimore. Id. ¶¶ 14, 15, 270. I shall refer to them collectively as the "Ouazanas," "Ouazana Brothers," or "Brothers," and individually as I. Ouazana and B. Ouazana. The related corporate defendants are I&B Capital Investments LLC ("I&B"); WAZ-Brothers, LLC ("WAZ-B"); WAZ Investments, LLC ("WAZ-

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I");4 and WAZ-management, LLC ("WAZ-M"). These entites have their principal places of business in Baltimore. Id. ¶¶ 16-19.5

Layani was involved with eight of the properties referenced in the Complaint. Ragones was involved with the other four. The suit gives "Notice of Lis Pendens" as to some of the properties. See id. ¶¶ 1-6. Throughout the Complaint, plaintiffs reference defendants' use of "international wires" and "interstate wires," including "email, telephone, and WhatsApp voice and text chats," to facilitate the fraud scheme. See, e.g., id. ¶¶ 55, 63, 85, 90, 109, 116, 142, 167, 193, 219, 256, 278.

In the section of the Complaint titled "Fraud in the Marketing/Selling the Baltimore Real Estate," plaintiffs allege, id. ¶ 40:

. . . Defendants, acting directly or indirectly, deliberately used false pretenses and representations to attract passive investors located outside Maryland and, in many instances, outside the United states, for the purpose of inducing them to purchase full or fractional interests in rental real properties located in Baltimore, with Defendants offering to furnish the efforts required to fulfill the investors' profit expectation from the real property interest acquired in exchange for a management fee pursuant to a written or implicit management contract with Defendants.[]

According to plaintiffs, defendants deliberately misrepresented the value, characteristics, and quality of the real properties. Id. ¶ 41. Further, plaintiffs assert, id. ¶ 42:

In most instances, Defendants offered to sell the properties to the Plaintiffs and the Class Members, in ready to rent condition, fully compliant with the housing code and having passed all necessary inspections, for a "package price" that included: (a) the sale price for the conveyed interest in the real property, including all transfer taxes and charges; (b) an upfront charge by Defendants for any repair and renovation of the properties; (c) an upfront charge for property taxes for the first

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year of ownership; and (d) an upfront charge for insurance for the first year of ownership.

"[T]ypically," the investors did not attend the "closing[s]" for "the conveyance of the full or fractional interest in the real property," because they "trust[ed] Defendants fully." Id. ¶ 44. At the closings, the Ouazanas allegedly "conspired with" the John Doe Defendants, who include "title agents and title companies," by "falsifying documents . . . in order to help hide from investors that the transactions closed differed materially from the investment terms agreed with the...

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