Yellow Brick Rd., LLC v. Childs
| Decision Date | 06 August 2014 |
| Docket Number | Civil No. 13–2266 JRT/LIB. |
| Citation | 36 F.Supp.3d 855 |
| Parties | YELLOW BRICK ROAD, LLC, Plaintiff, v. John CHILDS et al., Defendants. |
| Court | U.S. District Court — District of Minnesota |
Christian A Brandt, Kelly Hadac, Murnane Brandt, PA, St. Paul, MN, for plaintiff.
Alexandra J. Olson, Todd Werner, Carlson Caspers Vandenburgh Lindquist & Schuman PA, Minneapolis, MN, for defendant John Childs.
Richard Hall, Huntsville, AL, pro se defendant.
Greg Botolino, St. Augustine, FL, pro se defendant.
Kevin M. Decker, Clair Joseph, Briggs & Morgan, PA, Minneapolis, MN, for defendants Larry Busch and Busch Law Center, LLC.
ORDER ADOPTING REPORT AND RECOMMENDATION
Based upon the Report and Recommendation of United States Magistrate Judge Leo I. Brisbois, and after an independent review of the files, records and proceedings in the above-entitled matter, it is ORDERED:
1. That Defendant Greg Botolino's Motion to Dismiss, [Docket No. 12], is GRANTED.
2. That Defendants Larry Busch and Busch Law Center, LLC's Motion to Dismiss, [Docket No. 25], is GRANTED.
3. That Defendant Richard Hall's Motion to Dismiss, [Docket No. 40]; is GRANTED.
4. That Defendant John Childs's Motion to Dismiss, [Docket No. 85], is GRANTED.
5. That Plaintiff's Complaint as alleged against these Defendants is dismissed without prejudice.
This matter came before the undersigned United States Magistrate Judge upon Defendant Greg Botolino's Motion to Dismiss, [Docket No. 12]; Defendants Larry Busch and Busch Law Center, LLC's Motion to Dismiss, [Docket No. 25]; Defendant Richard Hall's Motion to Dismiss, [Docket No. 40]; and Defendant John Childs's Motion to Dismiss, [Docket No. 85]. The Honorable John R. Tunheim, United States District Judge for the District of Minnesota, has referred the present motions to the undersigned Magistrate Judge for report and recommendation, pursuant to 28 U.S.C. § 636(b)(1) and Local Rule 72.1. (Orders of Reference [Docket Nos. 43, 92] ). The Court held two hearings on the present motions; the Court heard oral argument for Defendants Botolino's and Hall's respective motions on June 5, 2014, and the Court heard oral argument for the Busch Defendants' and Defendant Childs's respective motions on July 3, 2014. For the following reasons, the Court recommends GRANTING Defendant Greg Botolino's Motion to Dismiss, [Docket No. 12]; GRANTING Defendants Larry Busch and Busch Law Center, LLC's Motion to Dismiss, [Docket No. 25]; GRANTING Defendant Richard Hall's Motion to Dismiss, [Docket No. 40]; and GRANTING Defendant John Childs's Motion to Dismiss, [Docket No. 85].
The present case involves allegations of investment fraud and conspiracy. Plaintiff Yellow Brick Road, LLC (“Plaintiff”) alleges that numerous Defendants, in various capacities and positions, acted and/or conspired to defraud Plaintiff out of $300,000. Plaintiff alleges one count of common law fraud—fraud in the inducement against Defendants John Childs, Scott A. Koster, Alicorn Capital Management, LLC, Richard Hall, Christine Wong–Sang, and Berea, Inc.; one count of civil conspiracy to commit fraud against all Defendants; one count of aiding and abetting fraud against Defendants Success Bullion USA, LLC, Greg Botolino, Larry Busch, and Busch Law Center, LLC; one count of civil theft in violation of Minn.Stat. § 604.14 against all Defendants; and one count of conversion against all Defendants. (Compl. [Docket No. 1], Counts I–V).1
Plaintiff alleges2 that in or about early March 2010, Plaintiff became aware of a purported investment opportunity, as presented by Defendant Alicorn Capital Management, LLC in conjunction with Defendant Berea, Inc. (Id. ¶¶ 23, 25). Defendant Botolino allegedly pitched the investment to Plaintiff. (Id. ¶ 23). The investment pitch consisted of an opportunity to lease a “standby letter of credit” or “SBLC” in exchange for one payment of $300,000. (Id. ¶ 24). Renting the SBLC would allegedly return 15% per placed trade on the $10 million principle amount of the SBLC. (Id. ) Defendant Hall of Berea, Inc. brokered Plaintiff's lease for Defendant Berea, Inc., to use as collateral for commodities investments. (Id. ¶ 25).
Numerous discussions concerning the proposed transaction took place between March and May 2010 between Plaintiff and Defendants Koster (alleged principal and agent of Alicorn), Childs, and Hall. (I d. ¶¶ 27, 28–30). Defendants Koster, Childs, and Hall represented that Defendant Alicorn would obtain the SBLC from Defendant Success Bullion USA, LLC, that Alicorn would be entitled to a finder's fee, and that the remainder of Plaintiff's $300,000 would go to Success Bullion. (Id. ¶ 27). “Under the terms of the proposed transaction, Plaintiff was to deliver $300,000 to an escrow account to be administered by Defendants Larry Busch and the Busch Law Center, LLC and to be released upon the actual delivery of Success Bullion USA, LLC's SBLC by Centerlink, LLC to the financial institution with which Berea, Inc. would be working.” (Id. ¶ 31). At no point in any of these discussions was Plaintiff informed that Alicorn would be unable to obtain an operative SBLC. (Id. ¶ 37).
On May 24, 2010, representatives for Plaintiff and Berea, Inc. executed an asset management agreement, which purported to set forth the terms by which Berea, Inc. would manage the $10 million asset represented by the SBLC that Alicorn would allegedly obtain for Plaintiff. (Id. ¶¶ 39, 40). The agreement provided that Berea, Inc. would “identify and manage the entry of the [SBLC] into an investment opportunity” and would make minimum payments of 15% of the face value of the SBLC on a monthly basis for twelve (12) months. (Id. ¶ 39). Two days later, Plaintiff wired $300,000 to the escrow account controlled by the Busch Defendants. (Id. ¶ 44).
After continued discussions and contractual negotiations, on June 10, 2010, Defendant Childs allegedly falsely represented that an electronic copy of the SBLC had been delivered and asked Defendant Hall to execute a notice of approval of the transaction to allow Defendant Busch to release the remaining $250,000 in escrow to Alicorn. (Id. ¶ 49). However, no real or operative SBLC was ever delivered. (Id. ¶ 51). A flurry of emails was sent between the parties during the month of June concerning the “delivery” or lack thereof of the SBLC. (Id. ¶¶ 54–58). However, the assurances provided in these emails were false, as no “real” SBLC was ever delivered. (Id. ¶ 59).
Finally, on February 3, 2011, Defendant Hall informed Plaintiff by email that Defendant Berea, Inc. had not been able to secure the SBLC, allegedly because of an error in the transmission between Defendant Success Bullion USA, LLC and the financial institution. (Id. ¶ 60).
Several Defendants have now moved for dismissal for lack of personal jurisdiction, including Defendant Botolino, [Docket No. 12], Defendants Busch and Busch Law Center, LLC, [Docket No. 25], Defendant Hall, [Docket No. 40], and Defendant Childs, [Docket No. 85]. On February 25, 2014, the Court granted Plaintiff's Motion for Leave to Conduct Jurisdictional Discovery with respect to Defendants Larry Busch and Busch Law Center, LLC. (Order [Docket No. 121] ). Three days later, on February 28, 2014, the Court granted Plaintiff's Motion for Leave to Conduct Jurisdictional Discovery with respect to Defendant John Childs. (Order [Docket No. 122] ). In so granting leave to conduct this jurisdictional discovery, the Court allowed the affected parties—namely, Plaintiff, the Busch Defendants, and Defendant Childs—the opportunity to submit additional briefing with respect to Defendants Larry Busch and Busch Law Center, LLC's Motion to Dismiss, [Docket No. 25], and Defendant John Childs's Motion to Dismiss, [Docket No. 85], to account for the results of the jurisdictional discovery period.
The present motions to dismiss before the Court variously challenge Plaintiff's Complaint for lack of personal jurisdiction and failure to state a claim upon which relief may be granted, pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6), respectively.
Defendant Botolino, pro se, moves the Court for an order dismissing all claims against him in the present case because (1) the Court does not have personal jurisdiction over Defendant Botolino, and/or (2) Plaintiff's Complaint fails to state a claim upon which relief may be granted against Defendant Botolino. (Botolino Mem. [Docket No. 81], at 1). Defendants Larry Busch and Busch Law Center, LLC move the Court for an order dismissing Plaintiff's Complaint as alleged against the Busch Defendants for (1) lack of personal jurisdiction, and (2) failure to state a claim upon which relief may be granted. (Busch Motion to Dismiss [Docket No. 25] ). Defendant Hall, pro se, moves the Court for an order dismissing all claims against him in the present case because (1) the Court does not have personal jurisdiction over Defendant Hall, and/or (2) Plaintiff's Complaint fails to state a claim upon which relief may be granted against Defendant Hall. (Hall Mem. [Docket No. 40], at 1). Finally, Defendant Childs moves the Court for an order dismissing Plaintiff's Complaint as alleged against Defendant Childs for lack of personal jurisdiction. (Childs Motion to Dismiss [Docket No. 85] ).
Rule 12(b)(2) of the Federal Rules of Civil Procedure provides that a party may move to dismiss claims for lack of personal jurisdiction. Fed.R.Civ.P. 12(b)(2). “To defeat a motion to dismiss for lack of personal jurisdiction, the nonmoving party need only make a prima facie showing of jurisdiction.” Epps v. Stewart Info. Servs. Corp., 327 F.3d 642, 647 (8th Cir.2003) (citing Falkirk Min. Co. v. Japan Steel Works, Ltd., 906 F.2d 369, 373 (8th Cir.1990) ; Watlow Elec. Mfg. v. Patch Rubber Co., 838 F.2d 999, 1000 (8th Cir.198...
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