Fremont Reorganizing Corp. v. Duke
811 F. Supp. 2d 1323
E.D. Mich.2011Background
- Fremont Reorganizing Corp. alleges Ronnie Duke orchestrated a mortgage fraud scheme (2003–2007) defrauding banks of over $20 million via straw and ghost loans and forged documents.
- Amended complaint identifies 59 fraudulent loans and roles of entities including Real Estate One, Baker, and others; Chase Bank is named as a depository bank in the scheme.
- Plaintiff asserts RICO violations, common law fraud, civil conspiracy, negligence, and aiding/abetting claims arising from mail/wire fraud and money laundering predicates.
- Defendants Real Estate One, Timothy Baker, KeyAppraisers.com, OwnerRealty.com, and JP Morgan Chase Bank move to dismiss; Baker/KeyAppraisers/OwnerRealty argue noncompliance with court’s RICO guidelines.
- Court grants in part and denies in part: Real Estate One partially granted/denied; Baker defendants’ motion denied; Chase Bank’s motion granted (Count XVII dismissed).
- Court finds Baker defendants’ RICO claim survives; Real Estate One liable for RICO and fraud but not for civil conspiracy or negligent hiring/retention; Chase claims are dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the amended complaint states a cognizable RICO claim against the Baker defendants | Baker defendants adequately alleged enterprise, predicate acts, and pattern under Rule 9(b). | Plaintiff failed to satisfy the court’s RICO guidelines and pleading particularity. | RICO claim against Baker defendants survives; motion denied. |
| Whether Real Estate One can be liable under RICO and for fraud, and whether related civil conspiracy claims survive | Real Estate One aided the scheme via its agents and is an actor within the enterprise. | Real Estate One’s agents were independent contractors; conspiracy claims lack specificity and sufficiency. | RICO and fraud claims survive; civil conspiracy, negligent hiring, and negligent retention claims dismissed. |
| Whether Chase Bank is liable for negligence or aiding and abetting breach of fiduciary duty | Chase knew or should have known of fraudulent activity and assisted by processing transactions. | No duty of care owed to third parties; aiding/abetting requires actual knowledge and substantial assistance. | Negligence and aiding/abetting claims against Chase are dismissed. |
Key Cases Cited
- Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (U.S. 1985) (establishes elements of a RICO claim)
- Moon v. Harrison Piping Supply, 465 F.3d 719 (6th Cir. 2006) (RICO pattern requirement; pleading standards)
- Davis v. Mutual Life Insurance Co. of New York, 6 F.3d 367 (6th Cir. 1993) (distinctness and vicarious liability under RICO)
- El Camino Res., Ltd. v. Huntington Nat'l Bank, 722 F. Supp. 2d 875 (W.D. Mich. 2010) (actual knowledge and substantial assistance in aiding/abetting fiduciary claims)
- United States v. Turkette, 452 U.S. 576 (U.S. 1981) (definition of RICO enterprise)