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GLD Foremost Holdings LLC v. Michael

United States District Court, M.D. Pennsylvania

March 9, 2017

GLD FOREMOST HOLDINGS, LLC, Plaintiff
v.
RALPH C. MICHAEL, et al., Defendants

          Kane Judge.

          MEMORANDUM

         This matter is presently before the Court on a motion to dismiss Counts III and IV of Plaintiff GLD Foremost Holdings, LLC's amended complaint. (Doc. No. 29.) Having considered the arguments raised by the parties in their respective briefs, and upon review of the applicable law, for the reasons provided herein, the Court will grant Defendants' motion for partial dismissal of Plaintiff's amended complaint.

         I.BACKGROUND[1]

         The above-captioned action was initiated upon the filing of a five-count complaint by Plaintiff GLD Foremost Holdings, LLC (“GLD”), on November 20, 2015, asserting, inter alia, claims of breach of contract, fraudulent inducement and unjust enrichment against Defendants Ralph C. Michael (“Michael”), Laurie A. Myers (“Myers”), and Don E. Myers. An amended complaint was subsequently filed on June 20, 2016. (Doc. No. 26.)

         This action concerns numerous alleged misrepresentations made by Michael and Myers in the course of negotiations for the sale of Foremost Industries, Inc.-a modular home manufacturing company headquartered in Franklin County, Pennsylvania (“Company”)-to GLD. According to the amended complaint's allegations, in the years following the 2008 financial crisis, the Company suffered millions of dollars in financial losses, all of which were funded by the sale of certain Company assets as well as personal contributions by Michael, the Company's president and chief executive officer. (Doc. No. 1 ¶ 8.) Consequently, Michael resolved during this period to sell the Company, utilizing an investment banking firm to market the Company to potential buyers. (Id. at ¶ 14.) On or about December 14, 2014, Michael sent Dan Gordon (“Gordon”) a letter, wherein Michael proposed that Gordon visit the Company's facilities in Franklin County and suggested that he would make Gordon a “special offer” to purchase the Company if Gordon agreed to a visit. (Id. at ¶¶ 16, 17.)

         On February 15, 2015, Michael entered into exclusive negotiations with Gordon for the purchase of Michael's interest in the Company as a result of having exhausted his personal funds to cover the Company's operating losses. (Id. at ¶ 18.) In March of 2015, Gordon presented Michael with a draft Stock Purchase Agreement that outlined the terms and conditions of the anticipated purchase of all issued and outstanding shares of capital stock of the Company from Michael.[2] (Id. at ¶ 19.) As alleged in the amended complaint, Michael was “especially eager” to consummate a transaction given the Company's ongoing financial losses and his inability to continue to fund the Company's cash flow deficits. (Id. at ¶ 23.) In an effort to accelerate the transaction, Michael directed his counsel and Myers-Michael's daughter as well as controller and treasurer of the Company-to provide financial information regarding the Company, which was subsequently incorporated into the schedules of the Stock Purchase Agreement. (Id. at ¶ 24.) GLD contends that the information provided in the schedules that were later incorporated into a finalized Stock Purchase Agreement were “knowingly and intentionally misleading and/or incorrect.” (Id. at ¶ 25.)

         On or about May 29, 2015, Michael and GLD entered into the Stock Purchase Agreement, pursuant to which GLD purchased all of the issued and outstanding shares of capital stock of Foremost from Michael in exchange for, inter alia, $3 million due at closing. (Id. at ¶ 26.) GLD alleges that had it been made aware of certain misrepresentations regarding the Company's compliance with a number of laws and regulations, its present operations, and its financial position, it would not have signed the Stock Purchase Agreement or consummated the transaction. (Id. at 10-20.)

         Defendants have moved to dismiss Counts III and IV of the amended complaint, which assert violations of 18 U.S.C. §§ 1962(c) and (d), respectively, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. This motion has been fully briefed and is now ripe for disposition.

         II. LEGAL STANDARD

         Federal notice and pleading rules require the complaint to provide the defendant notice of the claim and the grounds upon which it rests. Phillips v. Cnty. of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008). The plaintiff must present facts that, accepted as true, demonstrate a plausible right to relief. Fed.R.Civ.P. 8(a). Although Federal Rule of Civil Procedure 8(a)(2) requires “only a short and plain statement of the claim showing that the pleader is entitled to relief, ” a complaint may nevertheless be dismissed under Federal Rule of Civil Procedure 12(b)(6) for its “failure to state a claim upon which relief can be granted.” See Fed.R.Civ.P. 12(b)(6).

         When ruling on a motion to dismiss under Rule 12(b)(6), the Court must accept as true all factual allegations in the complaint and all reasonable inferences that can be drawn from them, viewed in the light most favorable to the plaintiff. See In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 314 (3d Cir. 2010). The Court's inquiry is guided by the standards of Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009). Under Twombly and Iqbal, pleading requirements have shifted to a “more heightened form of pleading.” See Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). To prevent dismissal, all civil complaints must set out “sufficient factual matter” to show that the claim is facially plausible. Id. The plausibility standard requires more than a mere possibility that the defendant is liable for the alleged misconduct. As the Supreme Court instructed in Iqbal, “where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not ‘show[n]' - ‘that the pleader is entitled to relief.'” Iqbal, 556 U.S. at 679 (citing Fed.R.Civ.P. 8(a)(2)).

         Accordingly, to determine the sufficiency of a complaint under Twombly and Iqbal, the United States Court of Appeals for the Third Circuit has identified the following steps a district court must take when determining the sufficiency of a complaint under Rule 12(b)(6): (1) identify the elements a plaintiff must plead to state a claim; (2) identify any conclusory allegations contained in the complaint “not entitled” to the assumption of truth; and (3) determine whether any “well-pleaded factual allegations” contained in the complaint “plausibly give rise to an entitlement to relief.” See Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010) (citation and quotation marks omitted).

         In ruling on a Rule 12(b)(6) motion to dismiss for failure to state a claim, “a court must consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents.” Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010) (citing Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993)). A court may also consider “any ‘matters incorporated by reference or integral to the claim, items subject to judicial notice, matters of public record, orders, [and] items appearing in the record of the case.'” Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006) (quoting 5B Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure § 1357 (3d Ed. 2004)).[3]

         III. ...


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