GemCap Lending I, LLC v. Shane William Pertl
2:19-cv-02481
D. Kan.Dec 16, 2019Background
- GemCap, a California commercial lender, loaned Pertl entities over $14 million in 2017; Pertl later defaulted and a receiver was appointed.
- GemCap alleges Pertl obtained funds by fraudulent misrepresentations and that certain defendants (including Pertl’s attorney Jonathan W. Davis and his firm Van Osdol, PC) participated in or facilitated the fraud.
- Key alleged misconduct by Davis: advising Pertl to remove projected cattle/hay sales from a cash-flow forecast, confirming a purported $500k+ Cargill cattle sale later admitted to be fabricated, and corroborating an information memorandum that included the fake sale.
- GemCap asserts multiple claims against Davis and Van Osdol, including RICO, fraud, ordinary negligence, professional (legal) negligence, and a California unlawful business-practices claim (Bus. & Prof. Code § 17200).
- Davis moved to dismiss under Rule 12(b)(6); the court applied Kansas law for malpractice issues and evaluated pleading sufficiency under Twombly/Iqbal.
- The court dismissed RICO, ordinary negligence, and the California unfair-practices claim as to Davis/Van Osdol, but allowed fraud and professional-negligence claims to proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| RICO (Count I): whether alleged scheme shows the required continuity/pattern | Defendants engaged in a multi-act, year-long scheme to defraud GemCap—satisfies pattern and continuity | The scheme was a closed, discrete objective (obtain loans); no threat of ongoing racketeering | Dismissed: no RICO continuity; discrete one-time scheme insufficient for RICO |
| Fraud (Count IV): sufficiency under Rule 9(b) | Davis made specific false statements (Cargill sale, forecasts, info memo) intended to induce GemCap | Allegations lack particularity and do not identify required facts | Denied: fraud pleaded with adequate particularity to proceed |
| Negligence (Count V): whether Davis owed a duty to GemCap as a Pertl officer | Davis acted as de facto Pertl officer and decision-maker, creating a duty to GemCap | Davis was Pertl’s attorney/advisor, not an officer; lawyer’s duties run to client, not creditor | Dismissed: as a matter of law Davis did not owe duty to GemCap in his role as Pertl’s attorney/advisor |
| Professional negligence (Count VI): whether attorney owed duty to third-party lender | Davis directly advised GemCap and intended GemCap to rely on his confirmations | Defense disputes existence of direct advice/foreseeable reliance by GemCap | Denied (allowed to proceed): allegations suffice that Davis directly advised/expected reliance, so professional-negligence claim may go forward |
| California UCL §17200 (Count XII): applicability to Kansas defendants/acts | GemCap is a California business and invokes California statutory remedy | Conduct occurred in Kansas by Kansas-licensed attorney; extraterritorial application improper | Dismissed as to Davis/Van Osdol: statute not applied extraterritorially to Kansas conduct/defendants |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (establishes plausibility standard for pleadings)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim)
- H. J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (RICO continuity and pattern analysis)
- Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158 (RICO enterprise/person distinction)
- Torwest DBC, Inc. v. Dick, 810 F.2d 925 (single-objective schemes do not satisfy RICO continuity)
- Berneike v. CitiMortgage, Inc., 708 F.3d 1141 (documents properly considered on motion to dismiss)
- George v. Urban Settlement Servs., 833 F.3d 1242 (RICO pleading elements and causation)
- Bank IV Wichita v. Arn, 827 P.2d 758 (Kansas rule on when borrower’s attorney may owe duty to lender)
- Nelson v. Miller, 607 P.2d 438 (attorney’s primary duty is to client)
- Alires v. McGehee, 85 P.3d 1191 (elements of actionable fraud under Kansas law)