Young v. Wells-Lucas (In re Wells-Lucas)

IN RE: ADRIAN MARIE WELLS-LUCAS, Debtor.

SHANNON M. YOUNG, Plaintiff, v. ADRIAN MARIE WELLS-LUCAS, Defendant.

CASE NO. 20-68333-JWC

ADVERSARY PROCEEDING NO. 20-06196-JWC

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

March 31, 2021

IT IS ORDERED as set forth below:

CHAPTER 7

MEMORANDUM OPINION AND ORDER

THIS MATTER is before the Court on Defendant's Motion to Dismiss Amended Complaint and Memorandum of Law in Support (Doc. No. 6) (the "Motion") filed by Adrian Marie Wells-Lucas ("Debtor" or "Defendant") pursuant to Rule 12(b)(6).¹

I. BACKGROUND

Debtor filed for relief under chapter 7 of the Bankruptcy Code² on July 22, 2020. The deadline to object to discharge and challenge the dischargeability of certain debts was October 26, 2020. On that date, Shannan M. Young ("Plaintiff") timely filed a Complaint (Doc. No. 1) (the "Initial Complaint") to except from discharge debts allegedly owed to Plaintiff pursuant to §§ 523(a)(2)(A) and (B), 523(a)(4), 523(a)(6), and 727(a)(4) and (7). Defendant filed a motion to dismiss the Initial Complaint on November 24, 2020. Plaintiff filed the Amended Complaint for Nondischargeability of Debt on December 8, 2020 (Doc. No. 4) (the "Amended Complaint") adding various factual and legal allegations but seeking to except debts from discharge on the same grounds as the Initial Complaint. Defendant then filed the instant Motion seeking dismissal of the Amended Complaint in full with prejudice for failing to state a claim for which relief can be granted. Plaintiff filed a Memorandum of Law in Opposition to the Motion on January 4, 2021 (Doc. No. 7) (the "Response"). For the reasons stated below, the Court will grant the Motion in part and deny the Motion in part.

II. STANDARD OF REVIEW

Dismissal of a complaint is appropriate if it fails "to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). This Rule is construed with Rule 8(a), which provides the "normal" pleading standard that a pleading contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This standard "does notrequire 'detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Id. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)). The complaint must contain "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' 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." 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). It is not sufficient that the pleadings merely "le[ave] open the possibility that the plaintiff might later establish some set of undisclosed facts to support recovery." Twombly, 550 U.S. at 561. "[D]etermining whether a complaint states a plausible claim is context specific, requiring the reviewing court to draw on its experience and common sense." Iqbal, 556 U.S. at 679.

Rule 9(b) provides for a "heightened" pleading standard in the case of fraud. Allegations concerning fraud must be pled with particularity, but "[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b). "Rule 9(b) is satisfied if the complaint sets forth '(1) precisely what statements were made in what documents or oral representations or what omissions were made, and (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) same, and (3) the content of such statements and the manner in which they misled the plaintiff, and (4) what the defendants obtained as a consequence of the fraud.'" Tello v. Dean Witter Reynolds, Inc., 494 F.3d 956, 972 (11th Cir. 2007) (quoting Ziemba v. Cascade Int'l, Inc., 256 F.3d 1194, 1202 (11^th Cir. 2001)). The Eleventh Circuit, however, has "acknowledged that 'alternative means are also available to satisfy the rule' in substantiating fraud allegations." Tello, 494 F.3d at 972-73.

The Court restricts its inquiry to the legal feasibility of the allegations in the complaint and whether they set forth facts as opposed to labels or mere conclusory statements when consideringa motion to dismiss. See Howell v. U.S. Foods (In re Bilbo), 2014 WL 689097, at *3 (Bankr. N.D. Ga. Feb. 5, 2014) (citing Iqbal, 556 U.S. at 678). After determining which allegations in a complaint are well-pled facts and which are legal conclusions, a court must accept all well-pled facts as true and must construe those facts and the complaint in the light most favorable to the plaintiff. Mink v. Smith & Nephew, Inc., 860 F.3d 1319, 1324 (11th Cir. 2017); Fourth Estate Pub. Benefit Corp. v. Wall-Street.com, LLC, 856 F.3d 1338, 1339 (11th Cir. 2017).

Here, Plaintiff's claims under § 523(a)(2)(A) and (B) and the claims of fraud or defalcation while acting as a fiduciary under § 523(a)(4) are governed by the heightened pleading standards of Rule 9. Plaintiff's claims for larceny and embezzlement under § 523(a)(4) and the claims under § 523(a)(6) are governed by Rule 8. Plaintiff's claims under § 727(a)(4) and (7) are governed by a mix of Rule 8 and Rule 9, but the distinction is not relevant to this opinion.

III. FACTS³

Plaintiff was introduced to Debtor by Plaintiff's best friend. Plaintiff attended an "AirBnB cashflow seminar" given by Debtor and had a follow-up conversation on April 9, 2019. During that conversation, Debtor explained that by renting a property in her company's "winning" platform, Plaintiff could receive an immediate return on her investment without having to establish her own property. By making an investment in a property, Debtor could make upgrades to achieve "AirBnB plus status" faster to further increase profits and bookings. Such transition was the primary goal of Debtor's program. Plaintiff began considering a specific property on the platform and was given information that the property had over fifty reviews, immediate and consistent cash flows, and generated approximately $30,840.62 in the first three months of 2019 excludingoverage from the Super Bowl. Debtor stated that an established property reassured minimal to no risk in the investment and that a "Set Up Fee" from Plaintiff would allow Debtor to make upgrades to the property, including new furniture, that would significantly increase the value of the property and possibly increase monthly income by $2,000 to $4,000. The improvements were to begin immediately upon payment of the Set Up Fee. Debtor encouraged Plaintiff to move forward soon to take advantage of the peak months of May through August. When exactly these conversations and representations took place is unclear, but, construing the facts in the light most favorable to Plaintiff, the Court can reasonably infer they all occurred sometime between April 9 and April 15, 2019.

Plaintiff performed a thorough internet search of Debtor, which revealed numerous events and seminars hosted by Debtor and numerous testimonials, reviews, and videos describing Debtor as a powerhouse, a former CBS affiliate, and a well-spoken, well dressed, educated "mompreneur" providing the best in luxury services. Debtor told Plaintiff she wanted to empower and teach young minorities how to succeed in real estate and business to gain generational wealth and become their own bosses. Satisfied with her research and Debtor's pitch, Plaintiff proceeded with a potential investment.

The Amended Complaint alleges "[o]n April 12, 2019, the Plaintiff/Creditor and Debtor/Defendant entered into a contract setting out the scope of our business relationship including a breakdown of the business venture." A footnote in the Amended Complaint references an "Exhibit 'B' Contract." The attached Exhibit B includes two contracts titled (1) "The Lucas Luxury Group aka the Wells Luxury Group, LLC Rental Arbitrage Agreement" (the "RentalAgreement") and (2) "Arbitrage Co-Host-Hosting Agreement" (the "Hosting Agreement"⁴). Both attached contracts, however, are dated April 15, 2019—not April 12—and the only parties to the contracts are Plaintiff and The Lucas Luxury Group aka the Wells Luxury Group, LLC ("Luxury Group")—not Debtor. The exact relationship between Debtor and Luxury Group is not clear, but the Amended Complaint alleges the property in which Plaintiff ultimately invested was through Debtor's company.

On April 14, Plaintiff viewed the property in which she would ultimately invest. On April 15, Plaintiff and her friend emailed Debtor detailing Plaintiff's expenses and a projected breakeven analysis using "worst case scenario" numbers and asking if her projections were accurate. Debtor responded that "the breakeven point would be a lot faster even with more conservative numbers." Plaintiff expressed concern with the language of the presented contracts and spelled out other concerns, including Plaintiff's need to have a return on her investment, the need to recover the $15,000 Set Up Fee and $7,200 Deposit as soon as possible, and that Plaintiff was not working full time, was starting her own business, and took out a personal loan to make the investment. Debtor responded that she was confident in her ability to produce results, referencing her time and energy devoted to building her "winning" brand. During a follow up phone call Debtor agreed to change her fee from a 70/30 split to an 80/20 split so Plaintiff could recoup her investment more quickly and achieve a win-win for everyone. Based on this conversation, Debtor sent a new contract, which Plaintiff accepted on or about April 15. It appears the contracts attached to the Complaint are the contracts signed on April 15, which again raises the question of whether any contract was signed on April 12. Plaintiff paid $8,500 via PayPal on April 15 and wired "her"$16,850 on April 16 for a total of $25,000. The...