White v. Abney

PAUL WHITE, Plaintiff, v. ALBERT ABNEY, et al., Defendant.

17-cv-4286 (EK)(RER)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

September 30, 2020

MEMORANDUM AND ORDER

ERIC KOMITEE, United States District Judge:

Plaintiff Paul White, proceeding pro se, commenced this action in 2017 against several witnesses who had testified against him at his 2014 criminal trial on real-estate fraud charges. In his amended complaint, filed on December 23, 2019, Plaintiff brings claims for fraudulent misrepresentation, fraudulent inducement, tortious interference with business relations, tortious interference with contracts, and unjust enrichment against Sandra Schmidt, who testified against White in the criminal case. Schmidt moves to dismiss for failure to state a claim upon which relief can be granted. For the reasons set forth below, that motion is granted.

I. Background

Plaintiff is currently incarcerated at Five Points Correctional Facility, having been convicted of seven counts of grand larceny and one fraud count at his jury trial in the New York State Supreme Court, Suffolk County. See Amended Complaint ¶ 54, ECF No. 44 (Compl.); see also Spota v. White ("Spota II"), 48 N.Y.S.3d 268, 2016 WL 6427362, at *2 (N.Y. Sup. Ct. 2016).¹ Following trial, Plaintiff was sentenced to twenty-one to sixty-three years in prison and ordered to pay $2.975 million in restitution. See Spota II, 2016 WL 6427362, at *2.

The conviction arose out of a scheme to defraud investors in a real-estate development. See id. at *4. White held himself out as a financial advisor and solicited clients — including Schmidt — to invest by falsely representing "that he was going to invest their money in an income-producing, low-risk investment." Id. He used this money to purchase the "John Cline Reservoir," a 400-acre parcel in North Carolina, using a limited liability company that paid real estate "brokerage commissions" to entities he controlled. Id. After he refused a client's demand that he return their investment, his investors pursued criminal charges against him,² see Spota v. White ("SpotaI"), 997 N.Y.S.2d 101, 2014 WL 2931068, at *2 (N.Y. Sup. Ct. 2014),³ and the case was investigated and prosecuted by the Suffolk County District Attorney's Office. See Compl. ¶ 6; People v. White, Case No. I-2710-2012. Following White's conviction for grand larceny and fraud, Schmidt was awarded restitution in the amount of $297,000 (the amount of her original investment). See Compl. Ex. N (Restitution Judgment Order CPL § 420.10).

In 2016, the District Attorney brought a civil forfeiture action against White and others to recover a total of $2.4 million in proceeds from the scheme. Spota II, 2016 WL 6427362, at *1. In support of his motion for summary judgment, the District Attorney cited trial evidence that White took approximately $2.975 million from his victims and paid approximately $500,000 back to them for an "option" to repurchase their interests in the property. Id. at *4. White's opposition to this motion mainly challenged the trial court's $2.975 million restitution order, on the ground that the trial court failed to consider the value of benefits received by his victims and payments he had made to them. Id. The court rejected this challenge as an improper collateral attack on hiscriminal conviction and held that the District Attorney had prima facie established its entitlement to judgment in the amount of $2.4 million. Id.

In 2017, White notified Schmidt that the North Carolina Superior Court had validated her property deed and she therefore retained a valid ownership interest in the property. Compl. ¶ 56; Ex. O. White contends that the court's finding proves he is "actually innocent," because the basis for his grand larceny conviction was the invalidity of the deeds he sold to investors. Id. ¶¶ 54, 56. He requested that Schmidt sign and file a Satisfaction of Judgment with the Clerk of Court in Suffolk County, and notify the District Attorney of his actual innocence.⁴ Id. ¶ 57. Schmidt did not take these actions. Id. ¶ 58.

Plaintiff subsequently brought this case against Schmidt and others who assisted the District Attorney's Office in the criminal investigation and/or testified before the grand jury, trial court, and civil forfeiture hearings. He contends that the defendants misrepresented material facts to obtain his "unjust criminal conviction . . . and incarceration," including by giving false testimony. Compl. ¶¶ 194, 197. Plaintiff'soriginal complaint alleged claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), civil conspiracy, false arrest, false imprisonment, malicious prosecution, tortious interference with business relationships, and fraud, invoking the court's diversity jurisdiction for his state-law claims.

In a Memorandum & Order dated March 21, 2019, Judge Margo K. Brodie found that diversity jurisdiction was lacking because of incomplete diversity of citizenship. Memorandum & Order at 4, ECF No. 28. She construed the complaint as asserting federal claims under RICO, Section 1983 for false arrest, false imprisonment, and malicious prosecution, and civil conspiracy under Sections 1983 and 1985. Id. at 6-7. Judge Brodie held that these federal claims were "patently without merit." Id. at 13. There was thus no basis for the court to exercise supplemental jurisdiction over Plaintiff's state-law claims for tortious interference and fraud, which she dismissed without prejudice.⁵ See id. In his Amended Complaint, Plaintiff dropped the claims against two defendants that were domiciled in New York and brought this diversity action against the remaining defendants, including Schmidt.

Plaintiff alleges defendant Schmidt knowingly made false statements to the Suffolk County District Attorney'sOffice in September 2012; see Compl. ¶¶ 147, 151, 153, 157, 161, 165, 169, 173, 177, 181, 185; before the grand jury in October 2012; see id. ¶¶ 148, 152, 154, 158, 162, 166, 174, 178, 182, 186; to the jury in his criminal trial in October 2014; see id. ¶¶ 149, 155, 159, 163, 167, 171, 175, 179, 183, 187; and to the District Attorney's Office in connection with the civil forfeiture action in October 2016. See id. ¶¶ 150, 156, 160, 164, 168, 172, 176, 180, 184, 188.

The allegedly false statements include the following: that Defendant falsely claimed that she did not sign a Purchase Agreement for an ownership interest in the property in North Carolina known as the John Cline Reservoir; that she did not sign, in connection with her purchase of the ownership interest, a Power of Attorney, a Dual Representation Agreement, a Tenant-in-Common Agreement, and numerous documents with "First National Qualified intermediary"; that she did not authorize an attorney to represent her in purchasing the property; that she did not authorize the attorney to create John Cline Reservoir I LLC on her behalf to purchase the property; and that she did not include the property on her federal and state tax returns, when she had reported it as real estate in which she owned an interest. See id. ¶¶ 147-188.

Plaintiff alleges that Defendant made these false statements for the purpose of misleading the District Attorney'sOffice into bringing criminal and civil actions, and the jury and judges into reaching adverse decisions, id. ¶¶ 196-98; and that she knew and intended that they would prevent Plaintiff from continuing to develop the property and interfere with his contracts with third parties, including other investors, id. ¶¶ 244-45; 278-79.

Plaintiff also alleges that, had he known Defendant would later make these false statements, he would not have transacted business with her in the first place. See id. ¶ 207 ("Had Plaintiff . . . known that Schmidt was knowingly, willfully and intentionally planning to fraudulently misrepresent the material facts, as described in Paragraphs 147 through 188, . . . Plaintiff . . . would not have entered into the SCHMIDT PA [Purchase Agreement] . . . .").⁶

Finally, Plaintiff alleges that, as a result of her false statements, Defendant was unjustly enriched in the amount of $27,720 he paid her for the right to repurchase her interest in the property; $1.1 million that he invested in developing the property; and an additional $30,000 of Plaintiff's assets that were "unjustly seized" based upon her false statements. See id.¶ 290. Plaintiff argues that it is against good conscience to permit Defendant to retain these amounts, particularly in light of his assertion that Defendant received a valid property deed and retains an interest in the property. Id. ¶ 293. Defendant moved to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) as to all of Plaintiff's causes of action.

II. Legal Standards

In reviewing a Rule 12(b)(6) motion, the Court must accept all factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. E.g., Lundy v. Catholic Health Sys. of Long Island Inc., 711 F.3d 106, 113 (2d Cir. 2013). However, only "a plausible claim for relief survives a motion to dismiss." LaFaro v. N.Y. Cardiothoracic Grp., PLLC, 570 F.3d 471, 476 (2d Cir. 2009). A claim is plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Matson v. Bd. of Educ., 631 F.3d 57, 63 (2d Cir. 2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Courts "are not bound to accept as true a legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 678. Nonetheless, in reviewing a pro se complaint, the Court must be mindful that the plaintiff's pleadings should be held "to less stringent standards than formal pleadings draftedby lawyers." Hughes v. Rowe, 449 U.S. 5, 9 (1980) (citation and internal quotation marks omitted); Erickson v. Pardus, 551 U.S. 89, 94 (2007) (same); see also Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009) (noting that the...