REI Holdings, LLC v. Marcus

REI HOLDINGS, LLC, Plaintiff, v. EDWARD MARCUS A/K/A EDWARD L. MARCUS D/B/A THE MARCUS LAW FIRM, Defendant.

No. 3:20-cv-01178 (VLB)

United States District Court, D. Connecticut

July 27, 2021

RULING ON DEFENDANT'S MOTION TO DISMISS, [ECF NO 13]

Vanessa L. Bryant, United States District Judge.

Before the Court is a Motion to Dismiss the Plaintiffs' Complaint, [ECF No. 1], pursuant to Federal Rule of Civil Procedure 12(b)(6), brought by Defendant Edward Marcus A/K/A Edward L. Marcus D/B/A The Marcus Law Firm (“Marcus” or “Defendant”). [ECF No 13].

Specifically Defendant moves to dismiss Counts One, Two, and Six of Plaintiffs' Complaint, for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of implied contract, respectively, as an improper attempt to recast tort claims into ones arising under contract. Defendant also moves to dismiss Counts Three for breach of fiduciary duty, Seven and Eight for fraudulent and negligent non-disclosure, and Count Nine (violation of the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § 42110b et seq. (“CUTPA”)), as time-barred. Defendant moves to dismiss Count Five for unjust enrichment should the Court deny Defendant's motion to dismiss the breach of contract claim, or, in the alternative, moves to dismiss it owing to Plaintiff's unreasonable delay in bringing suit. Finally, Defendant moves to dismiss Count Four for legal malpractice as time-barred “to the extent it relies upon or arises from alleged acts and/or omissions during Defendant's alleged representation of Plaintiff during it[s] purchases of the Tax Lien Portfolios.” [ECF No. 13 at 1-2].

For the reasons set forth herein Defendants' Motion to Dismiss will be GRANTED-IN-PART.

I. STANDARD OF REVIEW

To survive a motion to dismiss, a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In considering a motion to dismiss for failure to state a claim, the Court should follow a “two-pronged approach” to evaluate the sufficiency of the complaint. Hayden v. Paterson, 594 F.3d 150, 161 (2d Cir. 2010). “A court ‘can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.'” Id. (quoting Iqbal, 556 U.S. at 679). “At the second step, a court should determine whether the ‘wellpleaded factual allegations,' assumed to be true, ‘plausibly give rise to an entitlement to relief.'” Id. (quoting Iqbal, 556 U.S. at 679). “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (internal quotations omitted).

In general, the Court's review on a motion to dismiss pursuant to Rule 12(b)(6) “is limited to the facts as asserted within the four corners of the complaint, the documents attached to the complaint as exhibits, and any documents incorporated by reference.” McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007). The Court may also consider “matters of which judicial notice may be taken” and “documents either in plaintiffs' possession or of which plaintiffs had knowledge and relied on in bringing suit.” Brass v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir. 1993); Patrowicz v. Transamerica HomeFirst, Inc., 359 F.Supp.2d 140, 144 (D. Conn. 2005).

II. PROCEDURAL HISTORY

Although the Court will set out Plaintiff's allegations in the instant matter in detail, infra, the Court summarizes here to make the following procedural background understandable.

In 2015, Plaintiff, a Utah-based limited liability company, purchased two portfolios of tax liens on Connecticut properties. First, in February 2015, Plaintiff purchased the “Optimum Portfolio” for $3, 912, 852.35 from Optimum Asset Management, LLC (“Optimum”), and second, in July 2015, Plaintiff purchased the “LienClear 0001 Portfolio” for $370, 298.33 from LienClear0001, LLC (“LienClear0001”). [ECF No. 1 ¶¶ 14, 15]. Optimum and LienClear0001 were owned by Thomas McOsker (“McOsker'), Donald Byrne (“Byrne”), and Dan Friedman (“Friedman”). Id. ¶ 7. Plaintiff engaged Defendant Edward Marcus d/b/a The Marcus Law Firm for legal services associated with the purchase of the two lien portfolios and for services associated with collecting or enforcing the liens contained therein. Id. ¶¶ 1-31.

Plaintiff alleges that it discovered that the lien portfolios were worth far less than it assumed, allegedly due to fraud and other misconduct by Defendant and McOsker, Byrne, and Friedman and their related business entities. Id. ¶¶ 1829.

On June 12, 2017, Plaintiff brought suit in an eight count Complaint in the District of Utah against LienClear0001, McOsker, Byrne, and Friedman, three other entities owned by McOsker, Byrne, and Friedman named BCMG, LLC, BFNH, LLC, and BLOXTrade, LLC, another involved individual named Ben Edwards, and “Whitney Avenue, ” d/b/a The Marcus Law Firm, i.e. Defendant here, who was at that time retained by Plaintiff to enforce and otherwise execute on the two Connecticut lien portfolios. REI Holdings, LLC v. LienClear-0001, No. 2:17-cv-00564, [ECF No. 1] (D. Utah June 12, 2017).

Plaintiff sued Defendant Marcus specifically in four of the counts for Conspiracy to Commit Fraud (Count II), Fraud (Count V), Breach of Fiduciary Duty (Count VI), and Unjust Enrichment (Count VIII). Id., [ECF No. 5 at 11-12, 15-18].

On August 15, 2017, Plaintiff terminated Defendant's engagement. REI Holdings, LLC v. Marcus, No. 3:20-cv-01178 [ECF No. 1 ¶ 17] (D. Conn. Aug. 13, 2020).

On October 13, 2017, Defendant Marcus, a Connecticut attorney and sole proprietor of a Connecticut law firm, moved to dismiss the District of Utah Complaint for lack of personal jurisdiction, arguing that Plaintiff “fail[ed] to allege any activity within Utah that would establish that [Defendant] ha[d] continuous and systematic contacts with Utah. Furthermore, [Defendant] lacks sufficient minimum contacts to support the exercise of specific personal jurisdiction.”^[1] REI Holdings, LLC v. LienClear-0001, No. 2:17-cv-00564, [ECF No. 24 at 2] (D. Utah Oct. 13, 2017).

The other defendants followed suit, with Friedman, domiciled in North Carolina, and Optimum, a North Carolina LLC, moving to dismiss for lack of personal jurisdiction on November 9, 2017, id., [ECF No. 30], and the remaining defendants, residents of Puerto Rico, Delaware, or New York, moving to dismiss for lack of personal jurisdiction on January 26, 2018. Id., [ECF No. 43].

On September 10, 2018, Plaintiff filed suit in the District of Delaware against LienClear0001, McOsker, Byrne, BCMG, BLOXTrade, and another entity, LienClear, alleging misconduct in the sale of portfolios of tax liens on properties in Ohio. REI Holdings, LLC v. LienClear 0001, LLC, No. 1:18-cv-01401, [ECF No. 1] (D. Del. Sept. 10, 2018).

On February 8, 2019, Judge Clark Waddoups in the District of Utah granted the three groups of Defendants' motions to dismiss for lack of personal jurisdiction, REI Holdings, LLC v. LienClear-0001, No. 2:17-cv-00564, [ECF No. 54] (D. Utah Feb. 8, 2019), analyzing each group of defendants separately and finding, as regards Defendant Marcus, that “Marcus did not ‘purposely direct its efforts' at Utah” and that “[a]ny contacts by Marcus with REI in Utah were only incidental to that representation.” Id. at 13 (quoting Newsome v. Gallacher, 722 F.3d 1257, 1281 (10th Cir. 2013)). Judgment entered for Defendants the same day and the case was closed. Id., [ECF No. 55]. Plaintiff REI did not appeal the court's ruling.

On October 8, 2019, REI filed another suit in the District of Delaware against LienClear0001, McOsker, Byrne, BFNH, Optimum, and another entity, LienClear 0002, LLC, in a five count Complaint alleging fraud in the inducement, breach of contract, and unjust enrichment in that “Defendants intentionally misrepresented the value of the [Optimum and LienClear0001 Connecticut] tax lien portfolios to REI in order to induce REI to purchase the portfolios at inflated prices.” REI Holdings, LLC v. LienClear 0001, LLC, No. 1:19-cv-01913, [ECF No. 1 ¶ 14] (D. Del. Oct. 8, 2019).

On December 2, 2019, the Delaware District Court ordered the two District of Delaware cases, Nos. 1:18-cv-01401 and 1:19-cv-01913, consolidated, with case No. 1:18-cv-01401 designated the lead case. REI Holdings, LLC v. LienClear 0001, LLC, No. 1:18-cv-01401, [ECF No. 35] (D. Del. Dec. 2, 2019]. On December 20, 2019, Plaintiff filed an Amended Consolidated Complaint against all defendants from both cases, for Ohio and Connecticut lien portfolios, alleging fraud in the inducement (Count I - Ohio, Count IV - Connecticut), breach of contract (Counts II, III - Ohio, Counts V, VI, VII - Connecticut), and unjust enrichment (Count VIII -Connecticut, Count IX - Ohio). Id., [ECF No. 36].

On February 21, 2020, the defendants moved to dismiss Plaintiff's claims for fraud in the inducement (Counts I and IV), and unjust enrichment (Counts VIII and IX), id., [ECF No. 42], arguing, inter alia, that the fraud claims were not pled with sufficient particularity under Federal Rule of Civil Procedure 9(b), and that the unjust enrichment claims were not adequately pled in the alternative to the breach of contract claims. Id., [ECF Nos. 42, 43].

On August 13, 2020, Plaintiff sued Defendant Marcus in this District. REI Holdings, LLC v. Marcus, No 3:20-cv-01178 [ECF No. 1] (D. Conn. Aug. 13, 2020). On September 25,...