Levon v. Marlborough Estates, LLC

TODD LEVON, Plaintiff,

v. MARLBOROUGH ESTATES, LLC, F&M CONSTRUCTION, INC.,MARLBORO DETROIT, LLC, ROCHESTER ESTATES OF PINECREEK, LLC,THE MATTEO FERRO LIVING TRUST, MATTEO FERRO AS TRUSTEEOF THE MATTEO FERRO LIVING TRUST, FORTZA INVESTMENTS,LLC, MATTEO FERRO and FRANK FERRO Defendants.

CIVIL ACTION NO. 11-15663

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

Dated: July 18, 2012

DISTRICT JUDGE NANCY G. EDMUNDS

MAGISTRATE JUDGE MARK A. RANDON

REPORT AND RECOMMENDATION TO GRANT DEFENDANTS'

MOTION TO DISMISS (DKT. 11), TO DENY, AS MOOT, PLAINTIFF'S

MOTION FOR 60 DAYS TO FILE AN AMENDED COMPLAINT (DKT. 15)

AND TO DENY PLAINTIFF'S MOTION FOR LEAVE TO AMEND (DKT. 20)

I. INTRODUCTION

This is a case brought pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA") (29 U.S.C. § 1002 et seq.). Plaintiff Todd Levon ("Plaintiff") alleges, generally, that Defendants Marlborough Estates, LLC; F&M Construction, Inc.; Marlboro Detroit, LLC; Rochester Estates of Pinecreek, LLC; The Matteo Ferro Living Trust; Matteo Ferro, as Trustee of the Matteo Ferro Living Trust; Lortza Investments, LLC; Matteo Ferro; and Frank Ferro (collectively "Defendants") violated ERISA by failing to make distributions into a Simplified Employee Pension Individual Retirement Arrangement ("SEP IRA") that Plaintiff created on behalf of Defendant Marlborough Estates, LLC ("Marlborough Estates"). Plaintiff also bringsvarious state law claims, related to allegedly fraudulent real-estate transactions amongst Defendants.

This matter is before the Court on Defendants' motion to dismiss (Dkt. 11), Plaintiff's motion for 60 days to file an amended complaint (Dkt. 15) and Plaintiff's motion for leave to amend (Dkt. 20). Judge Nancy G. Edmunds referred all pre-trial proceedings to this Magistrate Judge pursuant to 28 U.S.C. § 636(b)(1) (Dkt. 10). The motions have been fully briefed (Dkts. 16, 17, 18, 21 and 22), and the Court heard oral argument on May 10, 2012 (on Defendants' motion to dismiss) and on June 28, 2012 (on Plaintiff's motion for leave to amend).

For the reasons indicated below, this Magistrate Judge finds that Plaintiff fails to state a viable ERISA claim against Defendants. Therefore, it is RECOMMENDED that Defendants' motion to dismiss be GRANTED, that Plaintiff's motion for 60 days to file amended complaint be DENIED AS MOOT (since Plaintiff subsequently filed a motion for leave to amend within 60 days), that Plaintiff's motion for leave to amend be DENIED AS FUTILE and that Plaintiff's ERISA claims be DISMISSED WITH PREJUDICE. Furthermore, the Court should decline to exercise supplemental jurisdiction over Plaintiff's remaining state law claims, and such claims should be DISMISSED, WITHOUT PREJUDICE.

II. BACKGROUND

The following facts are taken from Plaintiff's Complaint (Dkt. 1) and Plaintiff's proposed Amended Complaint (Dkt. 20). Plaintiff and Defendant Frank Ferro are members of Defendant Marlborough Estates, a Michigan limited liability company incorporated in 2001 (Dkt. 20; Amed. Compl. ¶ 2). Marlborough Estates develops residential real estate in the City of Detroit, and has been operating since 2001 (Id.). The crux of the dispute between the parties revolvesaround Plaintiff's contention that Marlborough Estates and Frank Ferro owe Plaintiff distributions from Marlborough Estates. The case is in this Court because Plaintiff contends that a portion of those unpaid distributions should have been directed to a retirement plan that Plaintiff purportedly set up, on behalf of Marlborough Estates. Plaintiff alleges that Defendants violated ERISA by not making the retirement contributions he demanded (Dkt. 1).

The Court notes that Plaintiff performed no services for Marlborough Estates after 2003, because in 2003, Plaintiff was convicted of conspiring to manufacture 1,000 or more marijuana plants at various houses in Detroit and was sentenced to 120 months in federal prison, which he served in Milan, Michigan and Fort Dix, New Jersey. See United States v. Levon, 127 Fed. App'x. 865, 867 (6th Cir. 2005); Levon v. Zickefoose, Case No. 09-6515 (RBK), 2010 WL 3025135 (D.N.J., July 30, 2010).¹ Plaintiff's "release date [was] October 23, 2011," assuming that he received all available good conduct time. Zickefoose at * 6. In the final months of his sentence, Plaintiff was placed in a Residential Re-Entry Center or half-way house. See Zickefoose at * 12. During the time Plaintiff was in the half-way house, he attempted to create two Simplified Employee Pension plans ("SEP plans") in his capacity as a "member" of Marlborough Estates, by filling out two forms: 5305-SEP and 5305A-SEP (Dkt. 1; Compl. ¶ 19).

On September 29, 2011, Plaintiff filled out a Form 5305-SEP, entitled "Simplified Employee Pension - Individual Retirement Accounts Contribution Agreement," which is the form an employer fills out to create a SEP plan (Dkt. 11; Ex. D, Simplified Employee Pension--Individual Retirement Accounts Contribution Agreement). The next day, September 30, 2011, Plaintiff established an IRA account for himself with JPMorgan Chase Bank, N.A. (Dkt. 11; Ex. E, Traditional IRA Adoption Agreement). On October 1, 2011, Plaintiff filled out a Form 5305A-SEP, entitled "Salary Reduction Simplified Employee Pension - Individual Retirement Accounts Contribution Agreement," which is the form employers used before 1996 to create "SARSEP plans" (Dkt. 11; Ex. F, Salary Reduction Simplified Employee Pension - Individual Retirement Accounts Contribution Agreement). That same day, Plaintiff informed Marlborough Estates that he had set up the SEP plan and the IRA account, and demanded from Marlborough Estates a $200,000 distribution and a $49,000 SEP contribution (Dkt. 11; Ex. G).

On December 28, 2011, Plaintiff filed a pro se Complaint alleging that Defendants Frank Ferro, Marlborough Estates, and multiple additional, seemingly unrelated, Defendants owe him $200,000 in "distributions," $49,000 of which should be contributed to the SEP IRA that Plaintiff attempted to create in September/October 2011 (Dkt. 1, ¶¶ 20-22). The other Defendants are F & M Construction, Inc.; Marlboro Detroit, LLC; Rochester Estates of Pinecreek, LLC; and Fortza Investments, LLC. Plaintiff does not allege that any of these Defendants employed him, nor does Plaintiff allege that these Defendants were members of Marlborough Estates or that these Defendants had any relation to the retirement plans that Plaintiff allegedly created.

Plaintiff also sued The Matteo Ferro Living Trust (Matteo Ferro is Frank Ferro's father), Matteo Ferro as Trustee of the Matteo Ferro Living Trust, and Matteo Ferro, individually. The Complaint does not allege that these Defendants employed Plaintiff, or had any involvement with the alleged SEP or SARSEP plan. In fact, Plaintiff alleged only that Marlborough Estates was a signatory (solely through Plaintiff) to the SEP and SARSEP plans at issue, and that Marlborough Estates is required to make contributions to the SEP and/or SARSEP plan that he attempted to create on September 29 and October 1, 2011 (Dkt. 1 ¶¶ 19-20). Thus, Plaintiff's claims against Defendants other than Marlborough Estates and Frank Ferro appear to involve purely state law claims (i.e., claims relating to alleged fraudulent transfers of real estate amongst Defendants). On January 27, 2012, Defendants responded to Plaintiff's Complaint by filing a motion to dismiss (Dkt. 11).

On March 13, 2012, after Defendants filed their motion to dismiss the Complaint, Plaintiff filed a "request for 60 days to file an amended complaint" (Dkt. 15). Then, after briefing was complete on Defendants' motion to dismiss and two days before oral argument was held on that motion, Plaintiff filed a motion for leave to file an amended complaint with a proposed Amended Complaint attached (Dkt. 20). In his proposed Amended Complaint, Plaintiff raises new arguments based on a form that he filled out on April 11, 2012, entitled "Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)-Not for Use With a Designated Financial Institution." (Dkt. 20-2 at 3-8 CM/ECF pagination, 5304-SIMPLE form). In filling out this form, Plaintiff purported to create a "SIMPLE IRA" plan on behalf of Marlborough Estates, pursuant to which the employees of Marlborough Estates may elect to have a portion of their compensation withheld and placed into a financial institution of their choice.At the same time he created the SIMPLE IRA plan, Plaintiff elected to have 25% of his salary - or $14,000 - withheld from his pay for each pay period and contributed to his SIMPLE IRA. On the 5304-SIMPLE form, Plaintiff indicated that he wanted his salary reduction contributions to start April 12, 2012.

In his motion for leave to amend, Plaintiff conceded that he has no valid ERISA claim based upon the 5305-SEP and 5305A-SEP forms he filled out on in September/October 2011 (Dkt. 20 ¶ 5). Thus, the only ERISA claim Plaintiff is continuing to pursue involves the 5304-SIMPLE form that Plaintiff completed on April 11, 2012.

III. ANALYSIS

A. Standard For Motion To Dismiss

Fed. R. Civ. P. 12(b)(6) provides for dismissal of a complaint for failure to state a claim upon which relief can be granted. As the Supreme Court has recently made clear, "to survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, 'to state a claim for relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (holding that "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.") (quoting Bell Atlantic v. Twombly, 550 U.S. 544 (2007)).

A court may consider a document that is not formally incorporated by reference or attached to a complaint if the document(s) is referred to in the complaint and is central to the plaintiff's claim. See Greenberg v. Life Ins. Co. of Virginia, 177 F.3d 507, 514 (6th Cir. 1999). The Court's consideration of...