United States District Court, N.D. Illinois, Eastern Division
WILLIAM HOWE, an Individual, and D & D AUTO RESORT, LLC, an Illinois limited liability company, Plaintiffs,
ALEXANDR SHCHEKIN a/k/a ALEXANDRE SHCHEKIN, an Individual, Defendant.
MEMORANDUM OPINION AND ORDER
Z. Lee United States District Judge
William Howe (“Howe”) and D&D Auto Resort,
LLC (“D&D”) (together,
“Plaintiffs”) filed suit against Defendant
Alexandr Shchekin (“Shchekin”), alleging that
Shchekin violated federal securities law and committed common
law fraud in connection with selling Howe membership units in
ReadOz, LLC (“ReadOz”). Shchekin now moves to
dismiss Plaintiffs' Amended Complaint under Federal Rule
of Procedure (“Rule”) 12(b)(6). For the reasons
that follow, Shchekin's motion  is granted.
in May 2008, Shchekin-an owner and manager of digital
publisher ReadOz-began soliciting Plaintiffs' investment
in the company. Am. Compl. ¶¶ 8, 16, ECF No. 47.
His solicitation was successful. On three occasions,
Plaintiffs purchased “membership units” in
ReadOz. First, on May 27, 2008, D&D purchased 47, 666 and
2/3 units for $71, 500.00. Id. ¶ 17. Later, on
September 15, 2009, Howe made an individual investment of an
undisclosed amount and received 21, 399.92 units.
Id. ¶ 19. Finally, on April 8, 2011, Howe made
another individual investment of an undisclosed amount and
received 8750 units in return. Id. ¶ 22.
connection with these purchases, Plaintiffs allege that
Shchekin made a number of misrepresentations and omissions
“[b]etween April 2008 and present.” Id.
¶ 25. First, in connection with all three sales,
Shchekin failed to advise Plaintiffs that the units were not
registered with the Securities Exchange Commission (SEC).
Id. ¶ 25(a). He also “never presented or
delivered” a prospectus and “failed to ensure
that [Plaintiffs] were accredited investors.”
Id. ¶¶ 25(b), 45.Additionally, in connection
with the 2009 and 2011 sales, Shchekin “failed to
advise Howe that ReadOz could only accept investments over
$50, 000.” Id. ¶ 25(c).
also identify a number of misrepresentations that Shchekin
made on various dates from on or about February 17, 2010, to
August 1, 2011, in the course of securing their investments.
See Id. ¶ 25. In general terms, the statements
sought to reassure Plaintiffs of ReadOz's growth and
solvency. See, e.g., id. ¶ 25(m)
(“In the same August, 17, 2010 correspondence, Shchekin
claimed that ReadOz was experiencing 1, 000% growth and in
excess of 750, 000 readers on the ReadOz site
monthly.”). Plaintiffs further allege that, following
their investments, Shchekin continued to reassure them of
ReadOz's value. Id. ¶¶ 26-27.
According to Plaintiffs, their “suspicions of fraud
were confirmed in 2015 when they discovered Shchekin's
continued efforts to solicit additional investment.”
Id. ¶ 28.
filed their initial complaint before this Court on October 1,
2015. On May 13, 2016, the Court granted Plaintiffs'
motion to file an amended complaint, and Plaintiffs filed
their amended complaint thereafter, naming Shchekin and
Andrew Menasce as Defendants. Andrew Menasce has since been
dismissed. Plaintiffs' Amended Complaint contains two
counts. Count I, brought solely by Howe, is titled
“Violation of § 10(b)(5) of the Securities Act of
1934” and is based on Howe's April 8, 2011
investment in ReadOz. Count II is titled “Common Law
Fraud” and is based on each of Plaintiffs'
investments in ReadOz.
survive a motion to dismiss pursuant to Rule 12(b)(6), a
complaint must “state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). “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.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
Additionally, when considering motions to dismiss, the Court
accepts “all well-pleaded factual allegations as true
and view[s] them in the light most favorable to the
plaintiff.” Lavalais v. Vill. of Melrose Park,
734 F.3d 629, 632 (7th Cir. 2013) (citing Luevano v.
Wal-Mart Stores, Inc., 722 F.3d 1014, 1027 (7th Cir.
2013)). At the same time, “allegations in the form of
legal conclusions are insufficient to survive a Rule 12(b)(6)
motion.” McReynolds v. Merrill Lynch & Co.,
Inc., 694 F.3d 873, 885 (7th Cir. 2012) (citing
Iqbal, 556 U.S. at 678). As such,
“[t]hreadbare recitals of the elements of the cause of
action, supported by mere conclusory statements, do not
suffice.” Iqbal, 556 U.S. at 678.
ruling on a motion to dismiss pursuant to Rule 12(b)(6), a
district court should not require a plaintiff to
“anticipate or overcome affirmative defenses such as
those based on the statute of limitations.”
O'Gorman v. City of Chi., 777 F.3d 885, 889 (7th
Cir. 2015). But where a plaintiff “plead[s] himself out
of court by including factual allegations that establish that
the plaintiff is not entitled to relief as a matter of law,
” the court can dismiss the complaint accordingly.
Count I: Section 10(b) of the Securities and Exchange Act of
Statute of Repose
initially moves to dismiss Count I to the extent it relies on
fraudulent misrepresentations or omissions occurring prior to
October 1, 2010. He argues that any such reliance is barred
by the applicable statute of repose. Claims under Section
10(b) of the Securities and Exchange Act of 1934 are subject
to the limitations and repose ...