United States District Court, S.D. Indiana, Indianapolis Division
EDWARD L. MCVAY, MARY W. MCVAY, ONE STOP STORAGE, INC, Plaintiffs,
THE STORE HOUSE COMPANY, STORE HOUSE OF INDIANAPOLIS LLC, TSHI STORAGE, LLC, DONALD TOLVA, Defendants.
ORDER ON MOTIONS
EVANS BARKER, JUDGE UNITED STATES DISTRICT COURT
currently pending motions were referred to the Magistrate
Judge for a report and recommendation
(“R&R”). Those R&Rs were filed and have
generated various objections, which we address in this order.
Now before the Court are Defendants' Motions to Dismiss
[Docket Nos. 21 & 45] and their corresponding R&Rs
[Docket Nos. 39 & 61], as well as Plaintiffs/Counter
Defendants' Motion to Dismiss Defendants'
Counterclaim [Docket No. 58] and its corresponding R&R
[Docket No. 68].
reasons explained herein, Defendants' First Motion to
Dismiss [Docket No. 21] is DENIED as moot, and the
Magistrate Judge's R&R on that motion [Docket No. 39]
is VACATED as moot. The Magistrate Judge's
R&R on Defendants' Second Motion to Dismiss [Docket
No. 61] is MODIFIED & ADOPTED, and
Defendant's Motion to Dismiss [Docket No. 45] is thus
GRANTED in part and DENIED in part. The
Magistrate Judge's R&R on Plaintiffs/Counter
Defendants' Motion to Dismiss Defendants'
Counterclaim [Docket No. 68] is ADOPTED in full, and
Plaintiffs/Counter Defendants' Motion to Dismiss [Docket
No. 58] is therefore GRANTED.
action stems from a contract dispute between Plaintiffs
Edward and Mary McVay, and One Stop Storage Inc. (“One
Stop”) (collectively, “Plaintiffs”) and
Defendants The Store House Company (“Store
House”), Store House of Indianapolis L.L.C.
(“SHI”), TSHI Storage L.L.C.
(“TSHI”), and Donald Tolva (collectively,
“Defendants”). Plaintiffs assert they owned
property at 2425 N. Mitthoeffer Road in Indianapolis, Indiana
(the “Property”) on which they operated a storage
business from March 2003 to 2007. Dkt. 42 at ¶¶
14-18. In 2007, Plaintiffs entered into negotiations with
Defendants to sell the Property to them. Id. at
¶¶ 19-20. Plaintiffs allege that during the
negotiations, Defendants interacted solely and concertedly
with Mary who was unrepresented by counsel, unfamiliar with
the business, and unaware of the true value of the Property.
Id. at ¶ 23, 27. Their negotiations culminated
in the execution of a Purchase Agreement for Industrial Real
Estate (“Purchase Agreement”) which set out the
terms of the sale. Id. at ¶ 24.
Purchase Agreement describes two payments to be made to
Plaintiffs in purchasing the Property: the first, a one-time
payment of $1, 950, 000.00 which was due at closing,
Id. at ¶ 30, 46, and the second, a payment to
be made pursuant to a Contingent Consideration Payment clause
(“Contingent Payment” clause) in the contract.
Id. at ¶ 47-48. The Contingent Payment clause
provides, in part, as follows:
Seller shall be eligible to receive future contingent earned
equity (“Contingent Payment”) at the rate of 50%
of any funds available after payment of all “Priority
Debt” upon the sale or refinance of the property.
[“Priority Debt” shall mean and include all
secured and unsecured debt of the property and the LLC or
other entity holding title to the Property; and shall include
all costs associated with the sale or refinance of the
Dkt. 42-1 at ¶ G. Plaintiffs allege that on or around
December 18, 2007, the parties to the contract executed an
Amendment to the Purchase Agreement (the
“Amendment”). Dkt. 42 at ¶ 49. This
Amendment purportedly obligated Store House to provide
written notice to the Plaintiffs of any subsequent sale or
refinance of the Property that would trigger the Contingent
Payment. Id. at ¶ 51. Plaintiffs allege that on
December 27, 2007, Store House refinanced the mortgage on the
Property for $3, 060, 000.00, thus triggering the Contingent
Payment clause, and neither paid the Contingent Payment nor
notified Plaintiffs of the refinance as it was contractually
obligated to do. Id. at ¶¶36-58. Further,
Plaintiffs allege that Store House sold the Property to SHI
at an unknown date, who then sold it to TSHI on or about May
20, 2014, who refinanced the Property on that same date.
Id. at ¶¶ 60-61. Plaintiffs allege that,
after each of these transactions, Store House neither made a
Contingent Payment to Plaintiffs nor notified Plaintiffs of
the sales and refinances of the Property. Id. at
March 22, 2016, Plaintiffs filed their Complaint, alleging
breach of contract, fraud in the inducement, and fraudulent
conspiracy. Dkt. 1. On May 6, 2016, Defendants filed a Motion
to Dismiss seeking dismissal with prejudice of each of
Plaintiffs' claims. Dkt. 21. On July 27, 2016, the
Magistrate Judge issued a Report and Recommendation granting
Defendants' motion in part without prejudice. Dkt. 39. On
August 10, 2016, Defendants objected to the Report and
Recommendation. Dkt. 41. On August 17, 2016, Plaintiffs filed
an Amended Complaint, repleading the above claims and
asserting new claims of breach of the duty of good faith and
fair dealing, fraud by omission, unjust enrichment, and
breach of fiduciary duty. Dkt. 42. Plaintiffs' Amended
Complaint renders the original Motion to Dismiss [Dkt. 21]
moot, and thereby renders portions of the Report and
Recommendation [Dkt. 39] and Defendants' objection
thereto [Dkt. 41] moot as well. Accordingly, Docket Nos. 21
and 41 are hereby DENIED AS MOOT and Docket No. 39
is VACATED AS MOOT to the extent it addresses
Plaintiffs' breach of contract claims, which are
addressed by the Magistrate Judge in his R&R on
Defendants' second Motion to Dismiss.
August 31, 2016, Defendants filed their second Motion to
Dismiss, seeking dismissal of each of Plaintiffs' claims.
Dkt. 45. On October 24, 2016, the Magistrate Judge issued a
Report & Recommendation on that motion, recommending that
we DENY Defendants' motion regarding
Plaintiffs' breach of contract claims, and GRANT
their motion regarding Plaintiffs' claims of fraudulent
inducement, conspiracy to commit fraud, breach of the duty of
good faith and fair dealing, breach of fiduciary duty, and
unjust enrichment. Dkt. 61. On November 8, 2016, Plaintiffs
filed an Objection to the R&R, contending that the
Magistrate Judge erred in recommending that their claims of
fraud, breach of the duty of good faith and fair dealing, and
breach of fiduciary duty should be dismissed. Dkt. 67.
Defendants responded to the Objection on November 22, 2016,
Dkt. 72. These issues are now ripe for decision by this
72(b) of the Federal Rules of Civil Procedure requires a
party who disagrees with a magistrate judge's report and
recommendation on a dispositive motion to file
“specific written objections to the proposed findings
and recommendations.” Fed.R.Civ.P. 72(b)(2); see
also 28 U.S.C. § 636(b)(1); Johnson v. Zema
Sys. Corp., 170 F.3d 734, 739 (7th Cir. 1999).
“The district court ‘makes the ultimate decision
to adopt, reject, or modify' the report and
recommendation, and it need not accept any portion as
binding; the court may, however, defer to and adopt those
conclusions where a party did not timely object.”
Jamerson v. Colvin, 2013 WL 6119245, at *1 (S.D.
Ind. Nov. 21, 2013). Upon a timely objection, the district
court then determines, de novo, “any part of
the magistrate judge's disposition that has been properly
objected to.” Fed.R.Civ.P. 72(b)(3); see also
28 U.S.C. § 636(b)(1); Remy Inc. v. Tecnomatic,
S.P.A., 2013 WL 1311095, at *1 (S.D. Ind. Mar. 26,
our review of the challenged portions of the magistrate
judge's R&R on Defendants' motion to dismiss is
conducted pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure. Rule 12(b)(6) provides that a plaintiff must
plead “enough facts to state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (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. lqbal, 556 U.S. 662, 678 (2009) (citing
Twombly, 550 U.S. at 556). “The plausibility
standard is not akin to a ‘probability requirement,
' but it asks for more than a sheer possibility that a
defendant has acted unlawfully.” Id. (quoting
Twombly, 550 U.S. at 556).
Report & Recommendation filed on October 24, 2016,
Magistrate Judge Dinsmore reached the following conclusions:
(1) Plaintiffs have stated a facially plausible claim that
Defendants breached the Purchase Agreement by failing to make
appropriate contingent payments, pursuant to the
Agreement's Contingent Payment Clause. Dkt 61 at 5.
(2) Plaintiffs have stated a facially plausible claim that
Defendants committed a breach of contract by failing to
notify Plaintiffs that the priority debt(s) had been
extinguished, pursuant the Amendment to the Purchase
Agreement. Id. at 6.
(3) Plaintiffs' claims of actual fraud and fraud in the
inducement must be dismissed because Plaintiff's Amended
Complaint contained no allegations that Defendants made
material misrepresentations of past or existing fact, but
instead alleged that Defendants failed to fulfill their
alleged promises under the Purchase Agreement. Id.
(4) Plaintiffs' claim of breach of the duty of good faith
and fair dealing and breach of fiduciary duty must be
dismissed because, based on the allegations contained in the
Amended Complaint, no fiduciary ...