Williams v. Estates LLC

BRIAN C. WILLIAMS, et al., Plaintiffs, v. THE ESTATES LLC, et al., Defendants.

1:19-CV-1076

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

February 24, 2020

MEMORANDUM OPINION AND ORDER

Catherine C. Eagles, District Judge.

In this antitrust case based on allegations of a conspiracy in furtherance of a bid-rigging scheme on foreclosure sales, the defendants contend the complaint should be dismissed because the plaintiffs' claims are precluded by judgments in earlier state court proceedings or, in the alternative, for failure to state a claim upon which relief may be granted. Because the plaintiff Brian Williams already litigated his Chapter 75 claim based on extortion against the defendants Red Tree, Versa, and Tonya Newell in state court, their motions to dismiss are granted to the extent Williams is asserting in this case an identical Chapter 75 unfair and deceptive trade practices claim. The plaintiffs did not allege any facts to show that The Estates Real Estate Group was unjustly enriched, and this claim will also be dismissed. Otherwise, the motions are denied.

The Conspiracy as Alleged in the Complaint

The Estates, LLC, is a membership organization that, together with The Estates (UT), LLC; The Estates Real Estate Group, LLC; and Timbra of North Carolina, LLC, (collectively the "Estates Defendants"), provides information to its members about foreclosures in North Carolina and coordinates bidding at foreclosure sales between and among its members. Doc. 1 at ¶¶ 1, 9-12, 25. The Estates Defendants maintain an online database that provides real estate information compiled from public data, along with their opinions on the properties and acts as the portal for members to find foreclosure sales and bid on them. Id. at ¶¶ 26-27. Members pay a monthly user fee to access the database, as well as an "acquisition fee" for any property acquired through the database, and they must split any profits with the Estates Defendants. Id. at ¶ 28. Membership in The Estates also requires members to use real estate agents, brokers, and closing attorneys selected or approved by The Estates, and members must establish separate companies to participate in foreclosure sales. Id. at ¶¶ 31-33.

Key to the plaintiffs' claims, all members in The Estates agree that no more than one member may bid on a given foreclosure. Doc. 1 at ¶ 38. Members interested in a property indicate a desire to bid on that property, whereupon The Estates ranks the potential bidders and determines who among its members will be the winning bidder allowed to submit a bid on the property. Id. at ¶¶ 47, 50. The Estates then assigns an "Acquisition Assistant" to attend the foreclosure sale and place the bid for the member chosen to bid on that property. Id. at ¶ 51.

The plaintiffs owned homes in North Carolina that were sold in foreclosure proceedings to a member, or to an entity created by a member, using the services provided by the Estates Defendants. Doc. 1 at ¶ 2. Brian Williams owned a townhome in Durham, North Carolina. Id. at ¶¶ 57-60. In August 2015, the townhome went intoforeclosure after he failed to pay money owed to the homeowners' association. Id. at ¶¶ 58-60. This property was listed in The Estates database. Id. at ¶ 63. The defendant Versa Properties, LLC is either a member of The Estates or was formed by a member at the direction of The Estates for the purpose of buying the Williams property. Id. at ¶ 62. Versa or its members entered into an agreement with The Estates and the other members that only one member could bid on the Williams property. Id. at ¶ 65. Versa was chosen as the member to bid on the property. Id. at ¶ 66. Tonya Newell, an acquisition assistant for The Estates, id. at ¶ 14, placed the bid and paid a deposit on the Williams property on behalf of Versa, and Versa's bid was the highest at the foreclosure sale. Id. at ¶¶ 61, 68. Versa then purported to assign its bid to Red Tree Holdings, LLC, a company set up at the direction of The Estates. Id. at ¶¶ 20, 69.

Following the foreclosure sale, Carolyn Souther, a member of The Estates acting on behalf of Versa, repeatedly contacted Williams and demanded that he pay Versa or Red Tree to walk away from its foreclosure bid. Doc. 1 at ¶¶ 16, 75. Among other things, she tacked a notice on Williams' door that included various misrepresentations intended to pressure Williams into paying Versa or Red Tree. Id. at ¶ 72.

The plaintiffs De Leon and Da Costa owned a townhome in Raleigh and had a similar foreclosure experience. Doc. 1 at ¶¶ 82, 85. Maldives, LLC, another company set up at the direction of The Estates or one of its members, id. at ¶ 20, learned of and bid on the De Leon property through The Estates database and was chosen by The Estates to be the sole bidder on the property. Id. at ¶¶ 86-92. Tonya Newell placed the bid and deposit on the property on behalf of Maldives, and Maldives was the highest bidder. Id.at ¶¶ 86, 91. After the sale, Souther made misrepresentations and demands similar to those made to Williams in an effort to obtain money from the plaintiffs. Id. at ¶¶ 93-97.

State Court Litigation

While the foreclosure sales were pending, the plaintiffs filed separate lawsuits in North Carolina state court seeking to set aside the foreclosure sales of their homes and asserting claims for damages. Some months later, after various rulings by the state court, the plaintiffs filed the instant lawsuit in this Court.

Williams

Williams filed a complaint in Durham County Superior Court on August 14, 2019 against Versa, Tonya Newell, Red Tree, and other individuals not party to this suit. Doc. 13-1. He asserted claims to set aside the foreclosure sale of his home, for abuse of process, for unfair trade practices, and for injunctive relief. Id. at ¶¶ 31-63. Specifically, Williams alleged that the trustee of the deed of trust for the foreclosure sale had a conflict of interest because she served as counsel to the property's creditor in addition to trustee, id. at ¶¶ 34-36, and that this gave the creditors an unfair advantage that resulted in an "inadequate sum" on the sale. Id. at ¶ 37. His Chapter 75 unfair trade practices claim was based on allegations that Newell bid on his property through an allegedly non-existent LLC in order to gain access to Williams' property and, along with Red Tree and Versa, to extort money in exchange for relinquishing their bid. Id. at ¶¶ 46-48.

Upon a motion to dismiss for failure to state a claim pursuant to North Carolina Rule of Civil Procedure 12(b)(6), the state court dismissed Williams' claims for abuse ofprocess and unfair and deceptive trade practices on October 9, 2019. Doc. 13-2. The remaining claims to set aside the foreclosure and for injunctive relief are still pending.

De Leon and Da Costa

De Leon and Da Costa filed a complaint in Wake County Superior Court on August 20, 2019, against Maldives and other individuals not party to this suit. Doc. 13-3. They asserted claims similar to those asserted by Williams: to set aside the foreclosure sale, for abuse of process, for unfair and deceptive trade practices, and for injunctive relief. Id. at ¶¶ 28-56. Upon a motion to dismiss for failure to state a claim under N.C. R. Civ. P. 12(b)(6), the state court dismissed with prejudice the claims to set aside the foreclosure sale and for injunctive relief against Maldives. Doc. 13-4 at 4. De Leon and Da Costa voluntarily dismissed their claims for abuse of process and unfair and deceptive trade practices. Id. at 4 n.1.

Overview of Claims and Questions Presented

The three plaintiffs filed the present action in this Court on October 18, 2019, alleging violations of § 1 of the Sherman Act, and N.C. Gen. Stat. § 75-1, as well as a state law claim for unjust enrichment. Doc. 1 at ¶¶ 107-25. It is clear the plaintiffs assert that the defendants engaged in a bid-rigging conspiracy that violates both the Sherman Act and the unfair competition provisions of Chapter 75. It is not clear how the extortion allegations in the complaint relate to these causes of action, but for purposes of this motion the Court assumes that the plaintiffs also assert the defendants engaged in attempted extortions that were both part of the bid-rigging conspiracy and also constituteindependent violations of the unfair and deceptive trade practices provision of Chapter 75.¹

The defendants move to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). First, the defendants contend that the Court lacks subject-matter jurisdiction pursuant to the Rooker-Feldman doctrine, which prohibits federal courts from sitting in review of state court decisions. Doc. 13 at 7-8. Second, they assert that the plaintiffs' claims are precluded under both collateral estoppel and res judicata. Id. at 8-13. Third, they contend that the plaintiffs' claims are barred by the doctrine of election of remedies. Id. at 13-14. Finally, they contend that the Court should abstain from exercising jurisdiction over the plaintiffs' claims or, in the alternative, stay this case pending the outcome of the state court litigation. Id. at 14-16.

In the alternative, all the defendants contend that the plaintiffs have not adequately pled either a Sherman Act violation or unfair competition. Id. at 16-22. The Estates Real Estate Group also moves to dismiss the plaintiffs' unjust enrichment claim for failure to state a claim, Doc. 38 at 7-8, and Carolyn Souther seeks dismissal alleging that she is shielded by North Carolina's corporate immunity laws. Doc. 34 at 8-9.

Analysis

A. Subject Matter Jurisdiction: Rooker-Feldman

The defendants first challenge subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1). A federal court must first "determine that it has subject-matter jurisdiction over the case before it can pass on the merits of that case." Constantine v. Rectors & Visitors of George Mason Univ., 411 F.3d 474, 479-80 (4th Cir. 2005). A court should grant a Rule 12(b)(1) motion "only if...