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Bartlettt v. Bartlett

United States District Court, S.D. Illinois

November 15, 2017




         This matter comes before the Court on the defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 61.) The plaintiff has filed a timely response to the motion. (Doc. 65.) For the foregoing reasons, the Court GRANTS in part and DENIES in part the motion to dismiss.

         I. BACKGROUND

         i. The Scheme

         The factual and procedural saga of this case is dense and, at times, caustic. Mark and James (“Jim”) Bartlett are brothers. They jointly own nine cash-lending stores via four business entities. These businesses are spread throughout New Mexico, Florida, Illinois, and Wisconsin. Mark manages five of these stores while Jim operates four. The brothers own via two entities the four stores that Jim operates: American Cash Loans, LLC (“American”) and B&B investment Group, Inc. (“B&B”). B&B does business as Cash Loans Now (“Cash Loans”). Mark claims that the two had an agreement to split profits from all nine stores 50/50, with Mark receiving an extra bonus each year for managing one more store than Jim. (Compl. ¶¶ 17-34.)

         According to the complaint, this arrangement continued until 2014-when Jim allegedly devised a complex scheme to cut Mark out of all of the profits from American and Cash Loans. Mark claims that in August 2014, Jim directed his wife, Denise, and his “second-in-command”, Anoosh Motamedi, to resurrect from its tomb Dellano, LLC-a dissolved business corporation- with the “illicit purpose of defrauding Mark”. (Compl. ¶¶ 37-42.) This fraud supposedly occurred through a hide-the-shell game that diverted resources from American and Cash Loans into a new set of cash-lending stores called “Quick Cash”. (Compl. ¶ 46.)

         The alleged organizational scheme in the complaint is complex. Dellano, LLC is the lynchpin: it does business as Quick Cash. The two registered owners of Dellano are The Pathway Group, Inc. (with a 75% ownership share) and Blue Financial, Inc. (with a 25% ownership share): two organizations that the defendants minted in September 2014, shortly after they reanimated Dellano. The shareholders, officers, and directors of Pathway are Evan Bartlett- Jim's son-and Denise. Evan allegedly remits a substantial amount of the profits he receives from the organization back to his parents. The shareholders, officers, and directors of Blue Financial are Denise and Motamedi. The top level of the scheme is Renwel Financial, Inc., of which Denise is the shareholder, officer and director. Mark alleges that Jim and Denise directly invested $155, 000 in Renwel, which Renwel then loaned to Pathway and Blue Financial. Pathway and Blue Financial then invested that money in Dellano, which Dellano used to fund the Quick Cash stores. (Compl. ¶¶ 38-67.)

         Mark alleges that Jim is the “king pin” of this scheme to defraud. (Compl. ¶ 152.) Specifically, Mark claims that Jim set up this scheme to cloak his involvement in Quick Cash, which is critical to the theory of Mark's case: Mark alleges that Jim has illegally funneled customer lists and information, financial data, borrowing and lending protocols, form loan applications, TILA disclosure forms, and ACH authorization forms from American and Cash Loans into the new Quick Cash stores. (Compl. ¶¶ 86-97.)

         Mark has now brought a Racketeer Influenced and Corrupt Organizations Act (RICO) action against Jim, Denise, Evan, Motamedi, and a fifth defendant-Mark Keenan-who allegedly works as an employee for American, Cash Loans, and Quick Cash. Mark claims that the predicate acts giving rise to a valid RICO claim are (1) the previously mentioned theft of trade secrets in violation of 18 U.S.C. § 1832, and (2) mail and wire fraud in violation of 18 U.S.C. §§ 1341 & 1343. Mark believes the wire fraud occurred when (1) the defendants used interstate wires to incorporate Blue Financial, Pathway, and Renwel, and (2) when Jim and Denise wired the $155, 000 loan through Renwel to Blue Financial and Pathway. It is not clear from the complaint when any alleged mail fraud occurred.

         ii. Procedural History

         A similar story has been told in court before. In 2015, Mark filed suit against James in Florida state court alleging breach of contract and breach of fiduciary duty arising from the same set of facts as this case. The Florida court stayed the proceedings, however, when it discovered that the two brothers had filed parallel claims against each other in New Mexico state court. In the New Mexico litigation, Mark had asserted a state law civil RICO counterclaim against James in addition to claims of breach of contract, breach of fiduciary duty, interference with contract, and interference with prospective contracts. Mark voluntarily dismissed the RICO claim, however, several days after he filed this federal RICO action in the United States District Court for the Northern District of Illinois.

         The Northern District of Illinois transferred the case to this Court pursuant to 28 U.S.C. § 1406. (Docs. 30, 31.) Following the transfer, the New Mexico state court held a trial and dismissed all of Mark's claims with prejudice. Although this case may be a candidate for res judicata in the future, that analysis is not ripe until the judgment on the pleadings stage. Carr v. Tillery, 591 F.3d 909, 913 (7th Cir. 2010) (stating that res judicata is an affirmative defense and therefore not appropriate until the judgment on the pleadings stage under Federal Rule of Civil Procedure 12(c)). At this early juncture, the defendants have instead moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim.


         A. Federal Rule of Civil ...

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