United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Honorable Thomas M. Durkin, United States District Judge.
JTG Equities (“JTG”) and Joshua Goldstein bring
this action against defendants Joel Greenberg and JG Urban R2
for breach of contract, fraud, and several related claims
based on a loan purchase agreement the parties entered into
in 2013. The defendants filed a motion dismiss the claims
alleging fraud (Counts III-V). For the following reasons, their
motion is denied.
12(b)(6) motion challenges the “sufficiency of the
complaint.” Berger v. Nat. Collegiate Athletic
Assoc., 843 F.3d 285, 289 (7th Cir. 2016). A complaint
must provide “a short and plain statement of the claim
showing that the pleader is entitled to relief, ”
Fed.R.Civ.P. 8(a)(2), sufficient to provide defendant with
“fair notice” of the claim and the basis for it.
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007). This standard “demands more than an unadorned,
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While
“detailed factual allegations” are not required,
“labels and conclusions, and a formulaic recitation of
the elements of a cause of action will not do.”
Twombly, 550 U.S. at 555. The complaint must
“contain sufficient factual matter, accepted as true,
to ‘state a claim to relief that is plausible on its
face.'” Iqbal, 556 U.S. at 678 (quoting
Twombly, 550 U.S. at 570). “‘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.'” Boucher v. Fin. Sys. of Green Bay,
Inc., 880 F.3d 362, 366 (7th Cir. 2018) (quoting
Iqbal, 556 U.S. at 678). In applying this standard,
the Court accepts all well-pleaded facts as true and draws
all reasonable inferences in favor of the non-moving party.
Tobey v. Chibucos, 890 F.3d 634, 646 (7th Cir.
case arises from a loan purchase agreement between defendant
Joel Greenberg and plaintiff JTG. For background, Greenberg
was the sole member of the now dissolved company JG Urban R2,
LLC. R. 1 ¶ 6. The two members of JTG are plaintiff
Joshua Goldstein and JTG Holdings Corp. Id. ¶
2013, Greenberg and JTG entered into a loan purchase
agreement whereby Greenberg agreed to sell a series of
promissory notes to JTG in exchange for $1, 800, 000.
Id. ¶ 12-13. The parties further agreed that
JTG's interest in the notes would be converted into a 35%
voting interest in Urban R2 Development Company (Urban R2),
of which JG Urban R2 was a member. Id. ¶¶
10, 17. Meanwhile, JG Urban R2 would relinquish its 35%
membership interest in Urban R2 and instead assume a 12%
non-voting profit participation interest. Id. ¶
18. In January 2014, JTG paid the final installment of the
purchase price and acquired JG Urban R2's 35% interest in
Urban R2. Id. ¶¶ 21-22.
to entering the agreement, Greenberg provided JTG with a
series of documents purporting to represent Urban R2's
financial condition. Id. ¶ 24. This included a
document Greenberg claimed to be Urban R2's balance sheet
as of February 2013, which listed Urban R2's assets at
$123, 705, 168 and its liabilities as $2, 740, 013.
Id. ¶¶ 25-27. The balance sheet's
• “Accounts Receivable-Q Lotus” in the
amount of $36, 421, 016;
• “Investment in Chicago Fund, LLC” in the
amount of $2, 799, 628;
• “Investment in Wheeling Project” in the
amount of $110, 648;
• “Silica Mining Claim” in the amount of
$84, 000, 000
Id. ¶ 26. Unbeknownst to JTG at the time, these
assets were worthless. Id. ¶¶ 29-33.
Specifically, Urban R2 had already conveyed its interest in
the Chicago Fund to a third party, forfeited its interest in
the Wheeling Project for failing to pay required fees, and
never had any interest or claim to the Silica mining rights.
Id. ¶¶ 31-33. Further, Greenberg owned and
controlled Q Lotus and knew the company had no ability to pay
any portion of the money it owed to Urban R2. Id.
¶ 29. The balance sheet also understated Urban R2's
liabilities, including listing a “Note
Payable-Sterling” in the amount of $640, 000 when Urban
R2 actually owed Sterling over $10, 000, 000. Id.
also provided JTG with a 2011 letter from Green Bear Capital,
LCC that valued Urban R2 between $100 million and $187
million based on its investments in the Wheeling Project and
the Chicago Fund. Id. ¶ 35. Greenberg failed to
disclose Urban R2 no longer held those investments.
Id. In addition, Greenberg gave JTG a business plan