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OCD Telluride LLC v. Blaney McMurtry LLP

United States District Court, D. Colorado

January 13, 2016

OCD TELLURIDE LLC, a Colorado limited liability company, Plaintiff,
v.
BLANEY MCMURTRY LLP, an Ontario limited liability partnership, Defendant.

ORDER

KATHLEEN M TAFOYA UNITED STATES MAGISTRATE JUDGE

The matter before the court is “Defendant’s Motion to Dismiss Plaintiff’s RICO Conspiracy Claim.” (“RICO Mot.” [Doc. No. 29], filed Apr. 8, 2015.) Plaintiff filed its Response on April 8, 2015 (“RICO Resp.”) [Doc. No. 30], and Defendant filed its Reply on April 29, 2015 (“RICO Reply”) [Doc. No. 39]. Defendant moves to dismiss Plaintiff’s Racketeer Influenced and Corrupt Organizations Act (“RICO”) claim for failure to state a claim upon which relief can be granted, arguing that Plaintiff’s Complaint fails to allege that Defendant, the law firm employing attorney Alvin Meisels, participated in or conspired to participate in racketeering activity. (RICO Mot. at 1-2.)

Also before the court is “Defendant’s Motion to Dismiss for Lack of Standing and for Summary Judgment” (“Standing Mot.” [Doc. No. 47], filed July 17, 2015.) Plaintiff filed its response on August 6, 2015 (“Standing Resp.”) [Doc. No. 49], and Defendant filed its reply on September 3, 2015 (“Standing Reply”) [Doc. No. 53]. Here, Defendant Blaney moves for dismissal or for judgment against OCD Telluride, LLC (“OCD Telluride”), arguing that Plaintiff lacks standing to sue Defendant for its failure to establish an “injury-in-fact.” (Standing Mot. at 1-2.)

STATEMENT OF THE CASE

Plaintiff, OCD Telluride, is a Colorado limited liability company organized to develop a real estate project in Telluride, Colorado. (Compl. [Doc. No. 1] at ¶ 4.) Vincent DiNapoli, Charles E. Dewey, Jr. and Anthony T. Conforti are among the members of OCD Telluride. (Letter from Attorney Anthony T. Conforti, October 15, 2009 [Doc. No. 48-2], hereinafter “Conforti 2009 letter.”) A related entity with overlapping members, O.C.D., LLC, was the owner of the land upon which the development project was to be built and was alleged to have been “contractually bound to convey the property to [Plaintiff] OCD Telluride, LLC.” (Conforti 2009 letter; see also Affidavit of Anthony T. Conforti [Doc. No. 49-1], hereinafter “Conforti Aff.” at ¶ 2).[1]

This matter began in the early fall of 2009 when Plaintiff sought a loan to fund its planned Telluride development. (Compl. at ¶ 26.) A loan broker working with Plaintiff and its members located a lender, First Central Mortgage Funding, Inc. (“FCMF”), that appeared capable of making a loan of the size and nature required by Plaintiff. (Id. at ¶ 27.) The loan broker, on behalf of Plaintiff, made contact with FCMF and requested a reference. FCMF, through Sandy Hutchens, using the alias Moshe Ben Avraham, provided the name and contact information of Canadian attorney Alvin Meisels as its reference. (Id. at ¶¶ 27, 11.) Defendant Blaney McMurtry LLP (“Blaney”) is a Canadian law firm that had hired attorney Meisels less than a month previous to his name being provided as a reference.[2] (Id. ¶ 5, 16.)

In early October 2009, upon receiving the reference from FCMF, Vincent DiNapoli directly telephoned Meisels, who assured DiNapoli that FCMF had made many loans in the United States and that it had the capacity to fund a $20 million loan. (Id. at ¶ 28.) On or about October 5, 2009, after FCMF had issued a $20 million loan commitment, another member of the Plaintiff, Attorney Anthony Conforti, also telephonically spoke to Meisels who repeated what he had told DiNapoli, to wit: that FCMF had made many loans in the United States and that it had the capacity to fund a $20 million loan. (Id. at ¶ 29.) According to the Plaintiff, Meisels did not reveal to DiNapoli or to Conforti that the founder and owner of FCMF, Sandy Hutchens a/k/a Moshe Ben Avraham, was actually a felon whose most recent conviction occurred four years previous in April 2005 on four counts of fraud and one count of drug distribution, nor did Meisels reveal that Hutchens/Avraham was on probation and/or under house arrest on those convictions when FCMF was founded. (Id. at ¶¶ 8-9, 45(g).)

Relying on Meisels’ representations, Plaintiff executed an amended loan commitment on October 19, 2009, showing OCD Telluride as the borrower on the loan. (Id. at ¶ 31.) Ultimately, Plaintiff paid FCMF over $200, 000.00 in fees via three separate wire transfers attempting to get the loan closed. (Id. at ¶ 31.) The following payments were made to satisfy conditions of the FCMF loan: October 15, 2009, $7, 450.00 paid by Vincent DiNapoli via wire transfer from an O.C.D. bank account; October 27, 2009, $110, 000.00 paid by Vincent DiNapoli via wire transfer from Attorney Conforti’s trust account; and December 2, 2009, $81, 000.00 paid by Vincent DiNapoli via wire transfer from Attorney Conforti’s trust account. (Id. at ¶ 32; see also Standing Resp., setting forth the accounts from which the payments were made.) Plaintiff also paid $3, 000 for an appraisal to meet the requirements of its loan agreement with FCMF. (Compl. at ¶ 33.)

After receiving Plaintiff’s payments, however, FCMF refused to fund the loan based on allegedly pretextual reasons including Plaintiff’s failure to comply with conditions that were not included within the several written loan commitment letters and FCMF’s determination that the development had a low fair market value according to an appraisal procured by Hutchens. (Id. at ¶ 34.)

Eventually a class action case was brought against a host of defendants including Blaney, Hutchens, Meisels, and others. See CGC Holding Company et al v. Hutchens et al, Civil Action No. 11-cv-1012-RBJ-KLM (the “CGC Class Action”). Blaney reached a settlement with the class. (RICO Mot. at 4.) The Court certified a settlement class as to Blaney and approved the settlement agreement; however Plaintiff OCD Telluride was one of two opt-outs from the settlement and thereafter brought this separate case. Id. OCD Telluride has now noticed its intent to withdraw its request for exclusion filed in the CGC Class Action, and the parties in this case have stipulated that

2. . . . except as specified herein, OCD Telluride, LLC’s participation as a Class Member in in the Meisels settlement[3] in the Class Action does not release, waive, estop or otherwise impair OCD Telluride LLC’s currently-pending claims against Defendant Blaney McMurtry LLP in the within matter (the “Blaney Claims”)[;] 3.
The parties further stipulate and agree that the amount of any funds distributed to OCD Telluride, LLC in Civil Action No. 11-cv-1012 shall be set-off against the Blaney Claims[; and, ] 4. Defendant Blaney McMurtry LLP does not by this stipulation waive any defenses of any nature whatsoever in this action that existed at any time prior to court approval of the Meisels settlement and Plaintiff’s participation in same. Defendant further affirmatively states that it is not through this stipulation agreeing that Defendant has any vicarious liability for Meisels’ conduct, and Defendant expressly states that it has no such liability.

(“Stipulation Regarding OCD Telluride LLC’s Participation in Settlement” [Doc. No. 63].) It appears OCD Telluride, then, is entitled to share in proceeds coming from payments made by Meisels without jeopardizing its claim against Blaney, at least to the extent it is not made whole by the Meisels’ settlement.

LEGAL STANDARD

I. Fed.R.Civ.P. 12(b)(1), Lack of Subject Matter Jurisdiction

Federal Rule of Civil Procedure 12(b)(1) empowers a court to dismiss a complaint for lack of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). Dismissal under Rule 12(b)(1) is not a judgment on the merits of a plaintiff's case. Rather, it calls for a determination that the court lacks authority to adjudicate the matter, attacking the existence of jurisdiction rather than the allegations of the complaint. See Castaneda v. INS, 23 F.3d 1576, 1580 (10th Cir. 1994) (recognizing federal courts are courts of limited jurisdiction and may only exercise jurisdiction when specifically authorized to do so). The issue of standing is jurisdictional in nature and is reviewed as a question of subject-matter jurisdiction under Rule 12(b)(1). Coalition v. Wenker, 353 F.3d 1221, 1227 (10th Cir. 2004).

The burden of establishing subject matter jurisdiction is on the party asserting jurisdiction. Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974). A court lacking jurisdiction “must dismiss the cause at any stage of the proceedings in which it becomes apparent that jurisdiction is lacking.” See Basso, 495 F.2d at 909. The dismissal is without prejudice. Brereton v. Bountiful City Corp., 434 F.3d 1213, 1218 (10th Cir. 2006); see also Frederiksen v. City of Lockport, 384 F.3d 437, 438 (7th Cir. 2004) (noting that dismissals for lack of jurisdiction should be without prejudice because a dismissal with prejudice is a disposition on the merits which a court lacking jurisdiction may not render).

A Rule 12(b)(1) motion to dismiss “must be determined from the allegations of fact in the complaint, without regard to mere conclusionary allegations of jurisdiction.” Groundhog v. Keeler, 442 F.2d 674, 677 (10th Cir. 1971). When considering a Rule 12(b)(1) motion, however, the Court may consider matters outside the pleadings without transforming the motion into one for summary judgment. Holt v. United States, 46 F.3d 1000, 1003 (10th Cir. 1995). Where a party challenges the facts upon which subject matter jurisdiction depends, a district court may not presume the truthfulness of the complaint's “factual allegations . . . [and] has wide discretion to allow affidavits, other documents, and [may even hold] a limited evidentiary hearing to resolve disputed jurisdictional facts under Rule 12(b)(1).” Id.

II. Fed.R.Civ.P. 56, Summary Judgment

Summary judgment is appropriate if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party bears the initial burden of showing an absence of evidence to support the nonmoving party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). “Once the moving party meets this burden, the burden shifts to the nonmoving party to demonstrate a genuine issue for trial on a material matter.” Concrete Works of Colo., Inc. v. City & County of Denver, 36 F.3d 1513, 1518 (10th Cir. 1994) (citing Celotex, 477 U.S. at 325). The nonmoving party may not rest solely on the allegations in the pleadings, but must instead designate “specific facts showing that there is a genuine issue for trial.” Celotex, 477 U.S. at 324; see also Fed. R. Civ. P. 56(c). A disputed fact is “material” if “under the substantive law it is essential to the proper disposition of the claim.” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir.1998) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A dispute is “genuine” if the evidence is such that it might lead a reasonable jury to return a verdict for the nonmoving party. Thomas v. Metropolitan Life Ins. Co., 631 F.3d 1153, 1160 (10th Cir. 2011) (citing Anderson, 477 U.S. at 248).

When ruling on a motion for summary judgment, a court may consider only admissible evidence. See Johnson v. Weld County, Colo., 594 F.3d 1202, 1209-10 (10th Cir. 2010). The factual record and reasonable inferences therefrom are viewed in the light most favorable to the party opposing summary judgment. Concrete Works, 36 F.3d at 1517. At the summary judgment stage of litigation, a plaintiff’s version of the facts must find support in the record. Thomson v. Salt Lake Cnty., 584 F.3d 1304, 1312 (10th Cir. 2009). “When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court ...


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