Omega Const. Co., Inc. v. Altman
| Decision Date | 24 July 1987 |
| Docket Number | No. G86-736.,G86-736. |
| Parties | OMEGA CONSTRUCTION COMPANY, INC., a Michigan corporation, Plaintiff, v. Joel L. ALTMAN; Altman Development Corporation, a Michigan corporation; Lakepointe of Jacaranda, Ltd., a Florida limited partnership; Arbor Club at Boca Raton, Ltd., a Florida limited partnership; Arbor Green Limited Dividend Housing Association, a Michigan limited partnership; the Meadows Limited Dividend Housing Association, a Michigan limited partnership; Jointly and Severally, Defendants. |
| Court | U.S. District Court — Western District of Michigan |
COPYRIGHT MATERIAL OMITTED
Peter R. Tolley & Paul Nelson, Tolley, Fisher & Verwys, Grand Rapids, Mich., for plaintiff.
Jack C. Davis, David M. Lick, & Jeffrey W. Bracken, Loomis, Evert, Ederer, Parsley, Davis, & Gotting, Lansing, Mich., for defendants.
There are seven motions pending before the Court for decision in this action: (1) defendants' October 3, 1986 Motion to Dismiss Complaint; (2) defendants' October 6, 1986 Motion for Dismissal or in the Alternative for a Stay; (3) defendants' January 14, 1987 Motion to Dismiss Count V of the Complaint Pursuant to F.R.Civ.P. 12(b)(6); (4) defendants' March 4, 1987 Motion to Dismiss Amended Complaint; (5) defendants' March 4, 1987 Motion for Dismissal of Amended Complaint or in the Alternative for a Stay; (6) defendants' March 4, 1987 Motion to Dismiss Counts V-VII of the Amended Complaint Pursuant to F.R.Civ.P. 12(b)(6); and (7) defendants' January 30, 1987 Appeal of the Magistrate's Orders of January 21, 1987. Defendants' fourth, fifth, and sixth motions have effectively superseded their first three motions, and the Court thus will dismiss the latter motions as being moot. After a brief discussion of the facts of this case, I will discuss the remaining motions in the order in which they are listed above. Preliminarily, I note that defendants' motions require me to consider and to discuss numerous legal principles concerning rule 9(b) of the Federal Rules of Civil Procedure, the prerequisites for claims brought under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), the elements of a claim of fraud, and when a federal district court should dismiss or stay a proceeding in favor of concurrent state court proceedings.
Plaintiff is a Michigan construction company that has its headquarters in Grandville, Michigan. Defendant Joel Altman ("Altman") is a businessman who lives in East Lansing, Michigan. Altman apparently is the sole shareholder of defendant Altman Development Corporation ("ADC") which is, as its name suggests, an organization that engages in various kinds of real estate development projects. In particular, this case concerns various apartment projects that defendants Altman and ADC have constructed and developed. To build these projects, defendants Altman and ADC organized four limited partnerships in which they apparently were among the general and limited partners: (1) Lakepointe of Jacaranda, Ltd. ("Lakepointe"); (2) Arbor Club of Boca Raton, Ltd. ("Arbor Club"); (3) Arbor Green Limited Dividend Housing Association ("Arbor Green"); and (4) Meadows Limited Dividend Housing Association ("Meadows"). Defendant Lakepointe was organized to construct an apartment development in Plantation, Florida; defendant Arbor Club was organized to construct an apartment development in Boca Raton, Florida; defendant Arbor Green was organized to construct an apartment development in Houghton, Michigan; and defendant Meadows was organized to construct an apartment development in Roseville and St. Clair Shores, Michigan. These four limited partnerships also are defendants in this proceeding.
With regard to each apartment complex, defendants Altman, ADC, and the appropriate limited partnership entered into a construction contract with the plaintiff. Plaintiff alleges in its amended complaint that defendants entered into these contracts with the fraudulent intent not to fulfill them, but rather to induce and to defraud plaintiff into constructing apartment complexes that were substantially more valuable and costly than what the defendants had contracted to have plaintiff build. In other words, plaintiff alleges that defendants fraudulently intended to get more for their money from it. Plaintiff further alleges that these fraudulent schemes were simply a part of defendants' overall method of conducting business "through a ... course of conduct involving inducing others to enter into contracts without having the present intention to perform, intending to refuse to pay for work performed under the contract and for changes in the work and intending to unreasonably withhold acceptance of completed work." Amended Complaint ¶ 82.
Plaintiff alleges that defendants engaged in a series of actions designed to implement these fraudulent schemes. With regard to the Lakepointe project, plaintiff alleges that defendants improperly declared it to be in default under the contract and improperly terminated its employment; recognized a commencement date that was improper because plaintiff was lacking the permits it needed to commence construction of the project on that date; wrongfully made material changes in the contract drawings; and refused to acknowledge and to pay for extra work plaintiff had performed on the project. With regard to the Arbor Club project, plaintiff alleges that defendants improperly declared it to be in default under the contract and improperly terminated its employment; fraudulently revised the drawings for the project; refused to recognize the proper commencement date for the project; and engaged in similar fraudulent conduct with other parties involved in the project. With regard to the Arbor Green project, plaintiff alleges that defendants fraudulently had failed to inform it that the engineering firm which had conducted the preliminary subsurface investigation had encountered some bedrock and had recommended that plaintiff's contract include a rock excavation clause. Finally, with regard to the Meadows project, plaintiff alleges that defendants intentionally had modified requests for change orders, which they subsequently submitted to the Michigan State Housing Development Authority for final approval, so as to delete requested increases in the contract price and to indicate that no change in the contract price was required. In this manner, plaintiff alleges, defendants sought to deny it just compensation for work it had performed.
On August 8, 1986 plaintiff filed a five count complaint against defendants. It alleged in counts I, II, III, and IV of the complaint that the actions described above constituted common-law fraud. It alleged in count V of the complaint that defendants had violated the RICO statute by conducting their enterprises through a pattern of racketeering activity, i.e., mail fraud and wire fraud. In October 1986 and January 1987 defendants filed three motions seeking dismissal of plaintiff's claims. In partial response to these motions, plaintiff requested leave to amend its complaint to rectify certain deficiencies. On February 10, 1987 the Court granted plaintiff leave to file an amended complaint, and requested defendants to file supplemental memoranda on their motions to dismiss once plaintiff had filed its amended complaint. Plaintiff filed its amended complaint on February 20, 1987, raising essentially the same claims it had raised in its original complaint, and defendants subsequently supplemented their motions to dismiss. The Court will discuss the facts of this case further as it decides the pending motions.
A court cannot dismiss a complaint under rule 12(b)(6) unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of its claims which would entitle it to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). In making this determination, a court must accept as true all well-pleaded allegations of the complaint and it must draw all inferences from such allegations in plaintiff's favor. Finally, in reviewing the Magistrate's discovery order, rule 72 provides that the Court "shall modify or set aside any portion of the magistrate's order found to be clearly erroneous or contrary to law." FRCP 72(a).
Defendants request the Court to dismiss plaintiff's amended complaint under rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure. Rule 12(b)(6) provides that a court may dismiss a complaint that fails to state a claim upon which relief can be granted. Rule 9(b) provides, in part, that "in all averments of fraud ... the circumstances constituting fraud ... shall be stated with particularity." Defendants argue that the Court should grant its request because plaintiff has failed to allege actionable fraud, and has failed to state with sufficient particularity the circumstances constituting the alleged fraud. Defendants further argue that if the Court dismisses plaintiff's claims of fraud (counts I-IV of the amended complaint), then it also must dismiss plaintiff's RICO claims (counts V-VII of the amended complaint) because the requisite predicate acts for those claims would be lacking.
Defendants also urge the Court not to exercise pendent jurisdiction over plaintiff's fraud claims. I will discuss that motion in the next section of this opinion. For now, I note that I will decline to exercise pendent jurisdiction over plaintiff's state law claims of fraud. I will, however, discuss the merits of defendants' motion to dismiss under rules 9(b) and 12(b)(6) anyway because it raises the issue of whether plaintiff will be able to prove defendants were engaged in a scheme or artifice to defraud. If defendants' actions did not constitute fraud under the common law, then they did not engage in a scheme or artifice to defraud the plaintiff. See Epstein v. United States, 174 F.2d 754, 766 (...
To continue reading
Request your trial
-
Busby v. Crown Supply, Inc.
...687 F.Supp. 177, 181 (E.D.Pa.1988); In re Rexplore, Inc. Sec. Litig., 685 F.Supp. 1132, 1141 (N.D.Cal.1988); Omega Constr. Co. v. Altman, 667 F.Supp. 453, 464 (W.D.Mich.1987); In re Gas Reclamation, Inc. Sec. Litig., 659 F.Supp. 493, 511 (S.D.N.Y.1987). 4 Conversely, several courts have hel......
-
Mid-State Fertilizer v. Exch. Nat. Bank of Chicago
...the view argued by defendant. See P.M.F. Services, Inc. v. Grady, 681 F.Supp. 549, 555-56 (N.D.Ill. 1988); Omega Construction Co. v. Altman, 667 F.Supp. 453, 465 (W.D.Mich. 1987); Airlines Reporting Corp. v. Barry, 666 F.Supp. 1311, 1314-15 (D.Minn.1987); In re Gas Reclamation, Inc. Securit......
-
Mid-State Fertilizer Co. v. Exchange Nat. Bank of Chicago
...F.Supp. 1132, 1141-42 (N.D.Cal.1988); P.M.F. Servs., Inc. v. Grady, 681 F.Supp. 549, 555-56 (N.D.Ill.1988); Omega Constr. Co. v. Altman, 667 F.Supp. 453, 464-65 (W.D.Mich.1987); Airlines Reporting Corp. v. Barry, 666 F.Supp. 1311, 1314-15 (D.Minn.1987); In re Gas Reclamation, Inc. Sec. Liti......
-
GOTHAM PRINT v. AMERICAN SPEEDY PRINTING CENTERS
...Berent v. Kemper Corp., supra, 780 F.Supp. at 446-447; Rose v. Bartle, 871 F.2d 331, 356 (3rd Cir.1989); Omega Construction Co. v. Altman, 667 F.Supp. 453, 465 (W.D.Mich. 1987). Thus, in order to state a viable Section 1962(a) claim, Plaintiff must allege a separate and traceable injury "st......