Oginsky v. Paragon Properties of Costa Rica Llc
| Decision Date | 16 May 2011 |
| Docket Number | Case No. 10–21720–CIV. |
| Parties | Anita OGINSKY, et. al, Plaintiffs,v.PARAGON PROPERTIES OF COSTA RICA LLC, a Florida limited liability company, et al., Defendants. |
| Court | U.S. District Court — Southern District of Florida |
OPINION TEXT STARTS HERE
Matthew S. Sarelson, Maxwell Miller Nelson, Sarelson Law Firm, P.A., Paul Bernard Kunz, Bander & Associates, Miami, FL, for Plaintiffs.David H. Charlip, Charlip Law Group, Aventura, FL, Joseph Ross Gibson, Joseph Ross Gibson, PA, Cooper City, FL, Jeffrey Allen Tew, Spencer Allen Tew, Tew Cardenas LLP, Miami, FL, for Defendants.Murray Linder, Miami, FL, pro se.Stephen Tashman, Fort Lauderdale, FL, pro se.Lyle Wexler, Hollywood, FL, pro se.Larry Webman, Hallandale, FL, pro se.David Valentine, Fort Lauderdale, FL, pro se.William Gale, Hollywood, FL, pro se.Chester Potash, Miami Federal Correctional Institution, Miami, FL, pro se.
ORDER GRANTING MOTIONS TO DISMISS WITHOUT PREJUDICE
THIS CAUSE comes before the Court upon three Motions to Dismiss the Amended Complaint filed by ten defendants. Defendants Costa Rican Land & Development, Inc., Judith Gale, LTS Management, Inc., Julian Siegel, Lisa Tashman, and Mariland Tashman filed a Consolidated Motion to Dismiss Plaintiff's Second Amended Complaint (DE # 91) September 27, 2010. Defendants All Star Consulting Group, Inc. and Bruce Goldberg filed their Motion to Dismiss Second Amended Class Action Complaint (DE # 118) December 6, 2010. The Court has been fully briefed on the matters raised in both Motions.1 Although the Motions moved for dismissal of both the federal-law and state-law causes of action asserted in the Second Amended Complaint, the Court heard oral argument on the federal law claims only on January 27, 2011. (DE # 122). At the conclusion of the hearing, the Court reserved ruling on the Motions, and ordered counsel for Defendants to prepare a proposed order granting the motions to dismiss, raising all the issues argued at the hearing, within twenty days. Id. The Court further ordered that Plaintiffs would have ten days thereafter to respond. Defendants timely submitted a proposed order on February 16, 2010, and Plaintiffs responded March 2, 2011. (DE # 125).
The third motion to dismiss was filed by Defendants Charles L. Neustein, P.A., Law Offices of Charles L. Neustein, P.A., and Charles L. Neustein (DE # 77). The Court has been fully briefed on the matters raised therein,2 but did not hear oral argument.
This case centers around a massive fraud relating to the sale of properties in Costa Rica.3 The fraud was orchestrated by a few key individuals who allegedly operated a Ponzi scheme to bilk would-be purchasers of Costa Rican land out of hundreds of thousands of dollars in pre-construction deposits. In short, Defendants solicited supposedly refundable deposits and installment payments from land purchasers, and then refused to either refund the monies upon request, or transfer title to the purchased property when the balance was paid in full. Instead, Defendant diverted the funds to personal accounts and to other people for purposes wholly unrelated to the project. At first, Defendants were able to pay refunds to disgruntled purchasers out of funds solicited from new buyers. However, when Defendants ran out of money from new buyers to pay refunds to earlier buyers, the entire operation simply shut down.
The individual Defendants allegedly used the sixteen entity Defendants to carry out the Ponzi scheme. The first named Defendant-entity is Paragon Properties of Costa Rica, LLC, and the Plaintiffs have dubbed Defendants' entire fraudulent scheme the “the Paragon enterprise.” (DE # 64 ¶ 1). The Defendant entities are collectively referred to in the Complaint as “Paragon” or “the Paragon entities.” Id. According to Plaintiffs, “Paragon” marketed and sold vacant lots in Costa Rica through the individual Defendant-entities. One of the entities was listed as the seller on each of the sales contracts. The lots themselves were supposedly part of large subdivision projects which had not yet begun construction. Purchasers were required to make a substantial deposit to consummate the sale. Additionally, Paragon frequently solicited additional installment payments beyond the initial deposit by offering a discount off the final purchase price if the installment was paid prior to the closing date. All of these payments were supposedly refundable upon request. All payments were made to Defendants' escrow agent, Charles L. Neustein, P.A., which is also named as a Defendant in this action. Charles L. Neustein, P.A. was an entity run by Defendant Charles L. Neustein, a Florida lawyer who previously served as a North Miami Municipal Judge. Brochures and other materials sent to investors emphasized Defendant Neustein's judicial experience.
Defendants used virtually identical sales contracts, called Agreements for Deed, for all the sales. Among other things, the Agreements for Deed provide that Paragon would provide roads, electricity, water and sewer service within two years of signing the agreement. The Agreements for Deed require the buyer to pay the balance of the purchase price within five years from the date of signing the Agreement, and the seller to transfer title to the property within a reasonable time after payment of the full purchase price. The Agreements also contain a unique clause: If the entire balance is not paid within the five-year period, any amounts that have been paid by the purchaser are fully refundable.4 The Agreements for Deed provided the procedure for payment by purchasers. All payments were to be made to the escrow holder, Defendant Charles L. Neustein, P.A. The escrow holder was supposed to disburse purchasers' deposits to the seller upon receipt of the deposit and a signed Agreement for Deed. Charles L. Neustein, P.A., as escrow holder, was also supposed to disburse the balance to the seller upon receipt of a registered deed to the subject property.
However, according to Plaintiffs, “Paragon, like the paradise it purported to sell, is a myth.” (DE # 64 ¶ 4). The promised infrastructure improvements were never made, refund requests have gone unanswered, and valid deeds have not been provided to buyers who made full payments. Plaintiffs allege that the promises contained in the Agreements for Deed were false when made, and are therefore fraudulent. Accordingly, they assert claims for breach of contract, fraudulent inducement, civil RICO, civil theft, breach of fiduciary duty, restoration of lost document, violation of the Interstate Land Sales Full Disclosure Act (“ISFDA”), and fraudulent transfers.
The Complaint is divided into three sections. Section I is an introduction that describes the scheme generally, identifies the parties, and includes jurisdiction and venue allegations. (DE # 64 at ¶¶ 1–132). Section II describes the transactions entered into between Defendants and individual named Plaintiffs. Id. ¶¶ 133–772. Section II also contains class action allegations. Id. ¶¶ 773–80. Section III alleges the above-mentioned causes of action in nine counts. Id. ¶¶ 781–865. Defendants move to dismiss the entire Complaint on the ground that it is a shotgun pleading, and move to dismiss all of the individual counts except for Count VII, which seeks restoration of a lost document on behalf of Plaintiffs who do not have an executed copy of their Agreements for Deed in their possession.
Rule 8 of the Federal Rules of Civil Procedure requires that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). To survive a motion to dismiss, a complaint must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). This plausibility requirement outlined by the Supreme Court “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955.
“For the purposes of a motion to dismiss, the Court must view the allegations of the complaint in the light most favorable to Plaintiff, consider the allegations of the complaint as true, and accept all reasonable inferences therefrom.” Omar ex rel. Cannon v. Lindsey, 334 F.3d 1246, 1247 (11th Cir.2003). However, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Iqbal, 129 S.Ct. at 1949. Thus, courts determining the sufficiency of a complaint engage in a two-pronged analysis: “(1) eliminate any allegations in the complaint that are merely legal conclusions; and (2) where there are well-pleaded factual allegations, ‘assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.’ ” Am. Dental Assoc. v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir.2010) (quoting Iqbal, 129 S.Ct. at 1950).
III. DISCUSSIONA. Shotgun Pleading
Defendants argue the Complaint should be dismissed as an impermissible “shotgun pleading.” According to Defendants, the Complaint “bears an uncanny resemblance” to the complaint described by the Eleventh Circuit in Magluta v. Samples, 256 F.3d 1282, 1284 (11th Cir.2001):
The complaint is a quintessential “shotgun” pleading of the kind we have condemned repeatedly, beginning at least as early as 1991. It is in no sense the “short and plain statement of the claim” required by Rule 8 of the Federal Rules of Civil Procedure.... It names fourteen defendants, and all defendants are charged in...
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