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Just U.S. Realtors LLC v. Nudge LLC

United States District Court, D. Utah, Central Division

June 19, 2019

JUST U.S. REALTORS, LLC, on behalf of itself and all others similarly situated, Plaintiff,
v.
NUDGE, LLC, BUYPD, LLC, INCOME PROPERTY USA, LLC, INSIDER'S CASH, LLC, RYAN POELMAN, GUARDIAN LAW, LLC, AMERICAN LEGAL & ESCROW, LLC, INVICTUS LAW, LLC, and BLAIR R. JACKSON, Defendants.

          ORDER AND MEMORANDUM DECISION

          TENA CAMPBELL U.S. DISTRICT COURT JUDGE.

         Plaintiff Just Us Realtors, LLC filed this case, a putative class action, against a number of individuals and limited liability corporations that sold and financed real estate through investor training seminars. Just Us Realtors, which bought a house through the seminars, alleges that the Defendants misrepresented the ownership and value of the real estate it offered for sale and fraudulently induced it and other investors to overpay for property. It brings claims under the Racketeering Influenced and Corrupt Organizations Act (RICO) and state law. The Defendants have filed four motions to dismiss the case under Federal Rule of Civil Procedure 12(b)(6). The court will grant the motions to dismiss, but allow Just Us Realtors to file a motion to amend with a proposed amended complaint to cure the pleading deficiencies discussed below.

         BACKGROUND

         To resolve the Defendants' motions to dismiss, the court accepts the well-pleaded facts of the complaint as true, and draws all reasonable inferences in favor of the Plaintiff. Brokers' Choice of Am., Inc. v. NBC Universal, Inc., 861 F.3d 1081, 1105 (10th Cir. 2017).

         The Defendants in this case fall into one of three categories depending on their role in the alleged scheme to sell real estate: (1) the “Property Defendants”: Nudge, LLC; Buy PD, LLC; Income Property USA, LLC; and Ryan Poelman; (2) the “Cash Defendant”: Insider's Cash, LLC; and (3) the “Attorney Defendants”: Blair R. Jackson and three law firms he allegedly controls or represents-Invictus Law, LLC; Guardian Law, LLC; and American Legal & Escrow, LLC.

         According to the complaint, the Property Defendants canvassed the United States for sellers of distressed real estate. Rather than buy the real estate outright, the Property Defendants entered into contingency agreements to buy the real estate themselves only after securing customers who would buy the same real estate at a significant markup. And to recruit their customers, the Property Defendants organized real estate investment training seminars sponsored by Scott and Amie Yancey from the television show “Flipping Las Vegas.” At the initial free training seminars, the Property Defendants offered attendees the chance to pay for additional seminars that culminated with the “Buying Summit”-an event in Las Vegas at which the Property Defendants would offer “exclusive access” to buy the distressed properties, which they called “turnkey” “performing assets.” (Compl. ¶¶ 12, 44(a), ECF No. 2.)

         In December of 2014, Iris Hoard saw a television commercial advertising a free Yancey-sponsored seminar. She and her partner Douglas Foster (the two members of Just Us Realtors) attended the seminar, called the “Simple Real Estate Program, ” where they were encouraged to attend additional trainings. Later that month, they paid $1, 197 to attend a three-day “Real Estate Workshop.” They then paid $12, 500 to attend a “Boots on the Ground” seminar.

         In January of 2015, shortly after the Boots on the Ground seminar, the Property Defendants began recruiting Ms. Hoard and Mr. Foster to attend the upcoming Buying Summit in Las Vegas. The Property Defendants sent the two a series of emails advertising the event as a place “to get some deals done, ” (id. ¶ 44(a)), and to purchase “performing assets” provided by BuyPD and Income Property USA. (Id. ¶ 72.) Ms. Hoard and Mr. Foster signed up for the Buying Summit by telephone, paying $17, 497 for entry.

         Ms. Hoard and Mr. Foster attended the Buying Summit in February of 2015. At the Summit, the Property Defendants attempted to convince attendees to buy homes it was offering for sale. A workbook provided to attendees represented that the Property Defendants had performed due diligence, conducted market research, and relied on “Trusted Informants” and “Inside Information” to vet the properties. (Id. ¶ 48.) The workbook also represented that the Property Defendants had “Bought” homes from “MOTIVATED SELLERS” and chosen homes with “Positive Cash Flow.” (Id. ¶ 49.) Mr. Poelman made many of these same representations in live presentations at the Summit.

         On February 13, 2015, the second day of the Buying Summit, Ms. Hoard and Mr. Foster met with Jonny Payne, a BuyPD “real estate consultant, ” who showed them on a laptop computer a single-family house available to purchase. Mr. Payne told the two that they had limited time to purchase the property because the “portfolio” would quickly expire and the property would be sold to someone else. (Id. ¶ 80.) Ms. Hoard and Mr. Foster agreed to buy the house, which was located in St. Louis, Missouri, for a purchase price of $54, 200 (a voucher effectively lowered the price to $52, 950, though additional fees ultimately pushed the total price to $56, 792).

         At the time of the sale, the Defendants made a number of representations concerning the ownership of the St. Louis house. Mr. Payne provided Ms. Hoard and Mr. Foster with a document he prepared, titled “Purchase Details, ” which stated that the house was being “Purchased From” Income Property USA. (Id. ¶ 82.) He also gave them a “Property Analysis Report” containing a “title summary” prepared by Guardian Law. The title summary read that “[t]itle to the Fee Simple estate . . . is at the Effective Date [February 13, 2015] to be vested in: 5 Choices, LLC by Warranty Deed” (5 Choices, a now defunct company, was allegedly controlled by Nudge). (Ex. E to Pl.'s Opp. to Mots. to Dismiss, ECF No. 45-5.[1])

         When Just Us Realtors agreed to buy the house, the Defendants set in motion two sets of transactions. First, the Property Defendants acquired title to the house from the actual owner, Venus Properties, for $39, 000. Guardian Law facilitated the transfer of title from Venus Properties to an entity called American Real Estate Investments, LLC, and then to 5 Choices.

         Second, Insider's Cash, American Legal & Escrow, and Guardian Law (advertised at the Buying Summit as “Strategic Partners”) effectuated the sale of the house to Just Us Realtors- and did so in a way that masked the $39, 000 Venus Properties sale. Insider's Cash provided Just Us Realtors with a three-year, $40, 300 bridge loan, removing the need for a conventional lender that might conduct due diligence into the actual value of the property. Additionally, the Property Defendants required that Just Us Realtors grant American Legal & Escrow power of attorney to complete transaction paperwork, and assigned Guardian Law to act as the title and escrow agent for Just Us Realtors' transaction. In that way, Guardian Law acted as the title and escrow agent for Just Us Realtors as it simultaneously effectuated the “secret” title transfers from Venus Properties to the Property Defendants. As a consequence, Just Us Realtors closed on the St. Louis house without any knowledge of its title history (including the $39, 000 sale) or the house's true value. According to Just Us Realtors, it was left owing more than the house was worth, and unable to refinance its balloon-payment bridge loan.

         In 2016, after Buying Summit attendees began to question the propriety of the Defendants' business practices, Ms. Hoard and other attendees received the following email from Bill Knowlton, an attorney from Defendant Invictus Law:

My name is Bill Knowlton, and our Firm has had the privilege of representing BuyPD for the last 5 years. As you can likely appreciate, I was very surprised to read this e-mail string and some of the comments made by some of my client's customers. It is very unfortunate these frustrations exist-and I would like to offer some insights, and potential resolutions for each and every one of you.
While I do not know all of the facts of your concerns that precipitated the creation of this e-mail, what I do know is that my client has gone above-and-beyond with its clients in the past. I have no doubt that, given the chance, they can (and will) resolve any and all concerns some of you may be having.
My client does everything in its power to ensure the investment properties it sells offer the greatest value to its customers. Despite thousands of happy customers and buyers over the years, occasionally a problem arises.
Unfortunately, real estate is unique. Tenants are not perfect. Contractors can be less than forthright. Misunderstandings and miscommunications occur.
That said, however, my client has a long and distinguished history of dealing with these issues head-on, and addressing them directly in a positive and reasonable manner.
I have no doubts they will do the same here. To that end, I would respectfully request each of you contact me individually to discuss our concerns, and I will work directly with my client to reach a resolution.
I look forward to working with each of you.
Sincerely yours, Bill Knowlton, Esq. Invictus Law, P.C.

(Compl. ¶ 105.)

         Just Us Realtors filed this case as a class action, [2] alleging violations of RICO as well as state law claims of civil conspiracy, breach of fiduciary duty (and aiding and abetting the breach), and fraud against each Defendant.

         The Defendants have arranged themselves into four groups for the purpose of defending this lawsuit: (1) American Legal & Escrow, Invictus Law, and Mr. Jackson (collectively, the “Jackson Defendants”); (2) Insider's Cash; (3) Nudge, BuyPD, Income Property USA, and Mr. Poelman (collectively, the “Poelman Defendants”); and (4) Guardian Law. Each group has filed a motion to dismiss pursuant Federal Rule of Civil Procedure 12(b)(6). The Defendant groups all raise essentially the same arguments concerning the sufficiency of Just Us Realtors' Complaint-that Just Us Realtors has not pled sufficient facts to support RICO or state law claims, and has not pled the alleged fraud with particularity under Federal Rule of Civil Procedure 9(b).

         STANDARD ...


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