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Steven Edelman v. Belsheim & Bruckert

May 21, 2012

STEVEN EDELMAN, C. BRADFORD JEFFRIES, TRUSTEE OF THE C. BRADFORD JEFFRIES LIVING TRUST, AND WILL FURMAN, TRUSTEE OF THE FURMAN- DOANE FAMILY REVOCABLE TRUST, PLAINTIFFS,
v.
BELSHEIM & BRUCKERT, LLC, BELCO TITLE & ESCROW, LLC, AND ATTORNEYS' TITLE GUARANTY FUND, INC., DEFENDANTS.



The opinion of the court was delivered by: Reagan, District Judge:

MEMORANDUM AND ORDER

A. Introduction

Filed in this United States District Court, the above-captioned case

involves a series of transactions, agreements, documents, and communications relating to the financing for Phase II of a multi-use real estate development called Forest Lakes. Stripped to its essentials, three Plaintiffs (one individual and two trusts, through their trustees) bring claims of negligent misrepresentation and breach of fiduciary duty against a law firm, a title company, and an underwriter.*fn1

The gist of the January 26, 2012 Second Amended Complaint (complaint) is that Plaintiffs collectively loaned three million dollars to a non-party, Caseyville Sport Choice, LLC, in reliance on representations that the loan was secured by a first lien mortgage on a parcel of real property. Several years later, Plaintiffs discovered that their mortgage on the property was in fact subordinate to a $20,000,000 prior mortgage in favor of another entity (Meridian Bank). Meridian Bank foreclosed on the property, and Plaintiffs lost their entire investment.

Plaintiffs sue to recoup their pecuniary losses plus interest, attorney's fees and costs. So, for instance, Plaintiff Edelman sues Belsheim/Bruckert for the $1,000,000 he allegedly lost as a proximate result of Belsheim/Bruckert negligently providing information on which Edelman relied in investing in Phase II of Forest Lakes; Jeffries sues Belsheim/Bruckert to recover $1,400,000 he lost in this transaction; and Furman sues Belsheim/Bruckert to recover $600,000 he lost in this transaction.

More specifically, the claims in the complaint are:

Count 1 -- Negligent Misrepresentation (Edelman v. Belsheim/Bruckert); Count 2 -- Negligent Misrepresentation (Jeffries v. Belsheim/Bruckert); Count 3 -- Negligent Misrepresentation (Furman v. Belsheim/Bruckert); Count 4 -- Breach of Fiduciary Duty (Edelman v. Belco);

Count 5 -- Breach of Fiduciary Duty (Jeffries v. Belco);

Count 6 -- Breach of Fiduciary Duty (Furman v. Belco);

Count 7 -- Breach of Fiduciary Duty (Edelman v. ATG);

Count 8 -- Breach of Fiduciary Duty (Jeffries v. ATG); and

Count 9 -- Breach of Fiduciary Duty (Furman v. ATG).

Defendant Belco answered the complaint (Doc. 37). Defendant ATG moved to dismiss Counts 7, 8, and 9. That motion has been fully briefed (Docs. 27, 39, 42). Defendant Belsheim/Bruckert moved to dismiss Counts 1, 2, and 3. That motion became ripe when the May 3, 2012 reply deadline elapsed (Docs. 35, 36, 38, 45). Enjoying subject matter via the federal diversity statute, 28 U.S.C. 1332, the Court now rules on ATG's dismissal motion.*fn2

B. Applicable Legal Standards

Attorneys' Title Guaranty Fund, Inc. (ATG) seeks dismissal of the three breach of fiduciary claims against ATG (Counts 7, 8, and 9) under Federal Rule of Civil Procedure 12(b)(6). Analysis begins with standards governing Rule 12(b)(6) motions and ...


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