Chaleplis v. Karloutsos

609 F.Supp.3d 341

Gabriel CHALEPLIS, et al. Plaintiffs,

v.Michael KARLOUTSOS, et al., Defendants.

CIVIL ACTION NO. 21-1492

United States District Court, E.D. Pennsylvania.

Signed June 27, 2022

Haralamapo Bobby Kasolas, Thomas Kamvosoulis, Brach Eichler LLC, Roseland, NJ, for Plaintiffs.

Amy Y. Chen, Randall L. Rasey, Barton LLP, New York, NY, Carol S. Harding, Douglas F. Johnson, Earp Cohn PC, Philadelphia, PA, for Defendants Michael Karloutsos, Mak Consulting LLC.

James M. Rodgers, Philadelphia, PA, for Defendants James M. Rodgers, Esq., James M. Rodgers, P.C.

James M. Rodgers, Philadelphia, PA, Douglas F. Johnson, Earp Cohn PC, Philadelphia, PA, for Defendant Rodgers Investments LLC.

MEMORANDUM

EDUARDO C. ROBRENO, District Judge

I. INTRODUCTION

One World, LLC and Gabriel Chaleplis, its sole member (collectively, "Plaintiffs"), bring this action against defendants James M. Rodgers, Esq., Rodgers Investments, and James M. Rodgers, P.C. (collectively the "Rodgers Defendants"), and Michael Karloutsos and his company, MAK Consulting, LLC (collectively the "Karloutsos Defendants").

There are currently four motions pending in this case: (1) a motion to dismiss and strike the Amended Complaint filed by the Karloutsos Defendants; (2) a motion to dismiss and strike filed by the Rodgers Defendants; (3) a motion for an order releasing escrowed funds filed by the Karloutsos Defendants; and (4) a motion to quash a subpoena filed by the Karloutsos Defendants.

For the reasons set forth below, the Karloutsos Defendants’ motion to dismiss and strike will be granted in part and denied in part, the Rodgers Defendants’ motion to strike and dismiss will be denied, the Karloutsos Defendants’ motion for an order releasing escrowed funds will be granted in part and denied in part, and the Karloutsos Defendants’ motion to quash will be granted in part and denied in part.

II. BACKGROUND

Plaintiffs allege that Defendants induced Chaleplis to invest €10,750,000 (approximately $12,000,000) of One World, LLC funds in Greek companies controlled by Defendants’ associates, who then rerouted the funds back to Defendants in the United States where they misappropriated them for personal use. The facts and background of this case are set forth extensively in the Court's prior memorandum on the pending motions to dismiss and will not be fully reiterated here. See Memorandum at 3-14, ECF No. 55. The background relevant to the present motions is set forth briefly below.

Prior to the start of this case, Plaintiffs filed a memorandum of lis pendens in Virginia state court against Karloutsos’ Virginia home. On October 28, 2021, the parties executed an escrow agreement, which this Court enforced as a consent order, pursuant to which Plaintiffs agreed to discharge the lis pendens on Karloutsos’ home to allow Karloutsos to sell the home, and Karloutsos agreed to place the proceeds of the sale in escrow pending the outcome of the case.

After the initial complaint was filed in this case and Defendants moved to dismiss, the Court dismissed three counts of the complaint: Count XI, which sought a declaratory judgment adjudicating that Plaintiffs were the rightful title owners of Karloutsos’ and Rodgers’ homes, was dismissed with prejudice; Count XII, which brought a claim for alter ego, was dismissed without prejudice and with leave to amend; and Count XIII, which brought a claim for fraud, was also dismissed without prejudice and with leave to amend. Pursuant to Federal Rule of Civil Procedure 12(f)(1), the Court also struck Count X, which purported to bring a claim for a constructive trust, because it found that constructive trust was not recognized as an independent claim under Pennsylvania law.

On February 18, 2022, Plaintiffs filed their Amended Complaint, which brings eleven counts: (I) conversion as to all defendants; (II) conspiracy to commit conversion as to all defendants; (III) aiding and abetting conversion as to all defendants; (IV) breach of One World LLC operating agreement as to Rodgers; (V) breach of fiduciary duty of loyalty as to Rodgers and Karloutsos; (VI) breach of the fiduciary duty of care as to Rodgers and Karloutsos; (VII) breach of fiduciary duty - usurping corporate opportunity as to Karloutsos and Rodgers; (VIII) unjust enrichment as to all defendants; (IX) accounting as to Rodgers and Karloutsos; and (X) legal fraud and fraud in the inducement as to Rodgers and Karloutsos; and (XI) conspiracy to commit legal fraud and fraud in the inducement as to Karloutsos and Rodgers. Plaintiffs did not elect to replead their alter ego claim, but the "prayer for relief" in the Amended Complaint includes a request for a judgment "piercing the corporate veils of MAK, Rodgers Investments and JMR PC to hold Rodgers and Karloutsos personal[ly] liable for the actions of those companies ...." Am. Compl. at 80 ¶ (g), ECF No. 59.

On March 15, 2022, though discovery had not officially commenced in this case given that no scheduling order had yet been entered, the Karloutsos Defendants filed a motion to quash Plaintiffs’ subpoena. The subpoena in question is directed at Wells Fargo Bank and seeks broad discovery of banking information for the Karloutsos Defendants as well as Karloutsos’ non-party company, Ask4MAK LLC. The Court stayed the subpoena and took the motion under advisement until such time as a scheduling order issued in this case.

The Karloutsos Defendants’ motion to dismiss and strike, motion for release of escrowed funds, and motion to quash, and the Rodgers Defendants’ motion to dismiss and strike are fully briefed and were argued at a hearing on May 31, 2022.

III. LEGAL STANDARDS

A. Motion to Dismiss

A party may move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). When considering such a motion, the Court must "accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the non-moving party." DeBenedictis v. Merrill Lynch & Co., 492 F.3d 209, 215 (3d Cir. 2007) (quoting Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3d Cir. 1989) ).

To withstand a motion to dismiss, the complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). This "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. Although a plaintiff is entitled to all reasonable inferences from the facts alleged, a plaintiff's legal conclusions are not entitled to deference, and the Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986).

The pleadings must contain sufficient factual allegations so as to state a facially plausible claim for relief. See, e.g., Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 190 (3d Cir. 2009). "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." Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). In deciding a Rule 12(b)(6) motion, the Court limits its inquiry to the facts alleged in the complaint and its attachments, matters of public record, and undisputedly authentic documents if the complainant's claims are based upon these documents. See Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994) ; Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).

B. Motion to Strike

Federal Rule of Civil Procedure 12(f) permits a court to "strike from a pleading ... any redundant, immaterial, impertinent, or scandalous matter." "[S]triking a portion of a pleading is a drastic remedy," and Rule 12(f) motions "are viewed with disfavor by the federal courts and are infrequently granted." 5C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1380 (3d ed. 2021). To succeed on a motion to strike, a movant must show that "the allegations being challenged are so unrelated to the plaintiff's claims as to be unworthy of any consideration" and that "their presence in the pleading throughout the proceeding will be prejudicial to the moving party." Id.

IV. DISCUSSION

A. Karloutsos Defendants’ Motion to Dismiss and Strike

The Karloutsos Defendants’ motion to dismiss and strike makes four requests for relief: (1) that the Court dismiss Plaintiffs’ fraud claim, as set forth in Count X of the Amended Complaint, pursuant to Fed. R. Civ. P. 12(b)(6) ; (2) that the Court strike, pursuant to Fed. R. Civ. P. 12(f), any request to impose alter ego liability upon Karloutsos from the Amended Complaint; (3) that the Court strike the portion of Plaintiffs’ prayer for relief that seeks the imposition of a constructive trust; and (4) that the Court strike portions of paragraph 32 and 73 of the Amended Complaint on the grounds that they contain immaterial, impertinent, and scandalous material.

1. Motion to Dismiss Plaintiffs’ Fraud Claim

To state a claim for fraud under Pennsylvania law, a plaintiff must show "(1) a representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or recklessness as to whether it is true or false; (4) with the intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) the resulting injury was proximately caused by the reliance." Gibbs v. Ernst, 538 Pa. 193, 647 A.2d 882, 889 (1994).

Federal Rule of Civil Procedure 9(b) requires a party to plead "with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). Such particularity in pleading must be sufficient to "place the defendants on notice of the precise misconduct...