Thomas v. Parviz Daneshgari, Harold Breslin, Samir Shabender & Computer Bus. World, LLC
| Decision Date | 14 February 2014 |
| Docket Number | Case No. 13–10378. |
| Citation | 997 F.Supp.2d 754 |
| Parties | Eugene THOMAS and Walter Jamil, Plaintiffs, v. Parviz DANESHGARI, Harold Breslin, Samir Shabender and Computer Business World, LLC, Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
OPINION TEXT STARTS HERE
James R. Acho, Ronald G. Acho, Cummings, McClorey, Livonia, MI, for Plaintiffs.
Christopher G. Bovid, The Bovid Law Firm, Roger L. Myers, Myers & Myers, PLLC, Howell, MI, Kenneth F. Neuman, Leif K. Anderson, Neuman Anderson, Birmingham, MI, for Defendants.
This case arises from a long-standing business dispute between Plaintiffs Eugene Thomas and Walter Jamil (collectively “Plaintiffs”) and Defendants Parviz Daneshgari, Harold Breslin, Samir Shabender and Computer Business World, LLC (collectively “Defendants”). The procedural history of this dispute is recounted in greater detail below. Briefly, Plaintiffs sold several business entities to Daneshgari for $2,000,000 in cash, a $700,000 promissory note and the assumption of $1,371,237.85 in debt. Several months after the sale, Daneshgari came to believe that Plaintiffs had misrepresented certain allegedly fraudulent practices of the businesses. Daneshgari sued Plaintiffs, and the parties arbitrated their claims in front of arbitrator Edward Pappas. Daneshgari prevailed in the arbitration, and obtained a $2,800,000 award, which was later confirmed in the Oakland County Circuit Court and reduced to a civil judgment against Plaintiffs. Daneshgari then sought to collect this judgment and, in response, Plaintiffs filed for bankruptcy. The Bankruptcy Judge, Honorable Steven Rhodes, ruled that the $2.8 million judgment was non-dischargeable. See Computer Business World v. Jamil (In re Jamil), 409 B.R. 866 (Bankr.E.D.Mich.2009). Plaintiffs appealed this ruling, but Judge Rhodes's decision was affirmed by Honorable Arthur J. Tarnow of this Court. Plaintiffs also sought appellate relief through the state court system, but the civil judgment was affirmed by the Michigan Court of Appeals. This lawsuit is based on Plaintiffs' contention that “newly discovered evidence” indicates that Defendants perjured themselves in the arbitration proceedings.
Currently before the Court are: Plaintiffs' motion for leave to file a second amended complaint (Dkt. 41), and Defendants' motions to dismiss (Dkt. 24) and for sanctions (Dkt. 25). For the reasons stated below, Plaintiffs' motion for leave to amend is DENIED, Defendants' motion to dismiss is GRANTED and Defendants' motion for sanctions is DENIED. More specifically, the Court finds that Plaintiffs' two federal claims—under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and the Fair Debt Collection Practices Act (“FDCPA”)—fail to state a claim upon which relief can be granted. Therefore, these claims are DISMISSED WITH PREJUDICE. As to Plaintiffs' remaining state law claims, the Court declines to exercise supplemental jurisdiction over them, and thus they are DISMISSED WITHOUT PREJUDICE. Finally, Plaintiffs also filed a motion to compel discovery from Defendants (Dkt. 29). Since the Court dismisses all pending claims, Plaintiffs' motion to compel is DENIED AS MOOT.
After a review of the pleadings, the relevant facts, taken in a light most favorable to Plaintiffs, are as follows.
In 1999, Plaintiffs founded a company called Computer Builders Warehouse—with several subsidiaries and related entities—the primary business of which was retail computer sales ). After achieving some success with their business, in July 2006, Plaintiffs sold the company and most of its attendant entities to Defendant Parviz Daneshgari (“Daneshgari”). Id. at ¶¶ 68–71. To run this new business, Daneshgari founded Defendant Computer Business World, LLC (“CBW”) and kept at least two of Plaintiffs' former employees on staff, specifically, Defendants Harold G. Breslin, (“Breslin”) and Samir Shabander (“Shabander”). Id. at ¶¶ 68–74.
Plaintiffs were supposed to retain a minority interest in the business, and were under contract to perform services for the business for 1 year after the sale. Id. Shortly after the sale, however, Daneshgari made a series of business decisions that Plaintiffs claim were intended to cheat them out of the benefits of their minority interest in the company. Id. at ¶¶ 74–93. In particular, Plaintiffs allege that Daneshgari, Breslin, and Shabander “conspired to bleed the business and drain the assets of CBW.” Id. at ¶ 185. This bleeding of the business, according to Plaintiffs, consisted of Daneshgari increasing the company's line of credit, liquidating inventory, moving assets between retail locations, adjusting the working capital downward by almost $700,000 1 and intentionally paying above market rents and exorbitant consulting fees to himself and his other entities. Id. ¶¶ 74–93.
In the fall of 2007, Daneshgari began an arbitration proceeding against Plaintiffs, claiming that Plaintiffs fraudulently induced him to purchase the company by hiding certain questionable business practices from him prior to the completion of the sale of the company. Id. at ¶ 94–99. In the present lawsuit, Plaintiffs allege that the arbitration testimony of Daneshgari, Breslin, and Shabander was false with regard to Daneshgari's lack of knowledge of the questionable business practices prior to the sale of the company, his opportunities to learn of such questionable business practices during the due diligence phase of the transaction, and the effects those business practices had on the company's relationship with its suppliers after the sale. Id.
At the conclusion of the arbitration proceeding Daneshgari won a $2.8 million award and the arbitrator's opinion specifically stated that Plaintiffs acted fraudulently with regard to the sale of their business. Id. Daneshgari subsequently had the award confirmed as a judgment in state court. Id. at ¶ 100. Plaintiffs claim that Daneshgari, Breslin, and Shabander all submitted perjured testimony during the arbitration proceeding, and that as such, the arbitration proceeding was secured “fraudulently.” Id. at ¶¶ 96–99. Plaintiffs further allege that the perjured arbitration testimony was submitted with the intent to secure a judgment against them that could be declared non-dischargeable in federal bankruptcy proceedings. Id. ¶ 139. The judgment was, in fact, declared non-dischargeable in federal bankruptcy proceedings. See Computer Business World v. Jamil (In re Jamil), 409 B.R. 866 (Bankr.E.D.Mich.2009).
Daneshgari has aggressively exercised his rights under Michigan's judgment enforcement rules, including attaching and levying much of the personal property of Plaintiffs and their families . Both Plaintiffs and Defendants are now, or in the recent past have been, party to numerous lawsuits relating to the events described herein, including legal malpractice claims, bankruptcy proceedings, and state court appellate proceedings.
On January 30, 2013, Plaintiffs initiated this lawsuit alleging violations of the RICO Act, 18 U.S.C. § 1961 et seq., and the FDCPA, 15 U.S.C. 1692 et seq., along with seven counts of state law claims, ranging from breach of contract to conversion. On February 22, 2013, Honorable Nancy G. Edmunds required Plaintiffs to file a “RICO case statement,” within which Plaintiffs had to “describe in detail” the basis for their RICO claim (Dkt. 8). 2 On February 25, 2013, Plaintiffs filed an Amended Complaint (Dkt. 9). Then, on March 13, 2013, Plaintiffs filed a 57–page (and in many places single-spaced) RICO case statement (Dkt. 10). When describing which “predicate acts” form the basis of Plaintiffs' RICO claim, Plaintiffs stated that they were relying on “acts of perjury, offenses under 18 U.S.C. § 1621, and acts of subordination of perjury, offenses pursuant to 18 U.S.C. § 1622” (Dkt. 10 at 38).
On June 14, 2013, “claiming newly discovered evidence,” Plaintiffs moved for leave to file a Second Amended Complaint (Dkt. 41). Plaintiffs' proposed Second Amended Complaint adds new factual allegations, specifically the fact that Daneshgari did not have standing to bring the arbitration proceeding in the first place because he had relinquished his rights to any assets of CBW after defaulting on a bank loan. The proposed Second Amended Complaint is 62 pages long and contains 355 paragraphs of allegations; however, it contains only new factual allegations, no new counts, or claims (Dkt. 41, Ex. H).
On September 18, 2013, the Court heard oral argument on Defendants' Motion to Dismiss and Plaintiff's Motion to Amend the Complaint.
Rule 15(a)(2) provides that Fed.R.Civ.P. 15(a)(2). However, amendments should not be permitted in instances of “undue delay in filing, lack of notice to the opposing party, bad faith by the moving party, repeated failure to cure deficiencies by previous amendments, undue prejudice to the opposing party, and futility of amendment.” Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). “The test for futility ... does not depend on whether the proposed amendment could potentially be dismissed on a motion for summary judgment; instead, a proposed amendment is futile only if it could not withstand a Rule 12(b)(6) Motion to Dismiss.” Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 421 (6th Cir.2000).
“Rule 12(b)(6) ... allow(s) a defendant to test whether, as a matter of...
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