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Mineo v. McEachern

United States District Court, D. New Jersey

May 27, 2014

CLAUDE T. MINEO, Plaintiff,
v.
GERMAINE McEACHERN, et al., Defendants.

OPINION

WILLIAM J. MARTINI, District Judge.

Plaintiff Claude T. Mineo brings this action alleging that he was the victim of a complex real estate investment scheme. This matter comes before the Court on Plaintiff's motion seeking default judgment against Defendant Carl Gensib. There was no oral argument. Fed.R.Civ.P. 78(b). For the reasons set forth below, the motion is DENIED, the entry of default as to Gensib is VACATED, and the Complaint is DISMISSED WITHOUT PREJUDICE.

I. BACKGROUND

Plaintiff filed this action against several Defendants, alleging that they defrauded him out of hundreds of thousands of dollars as part of a complex real estate investment scheme. Following the Court's dismissal of two Defendants for lack of personal jurisdiction, and Plaintiff's stipulation of dismissal as to several other Defendants, only Defendant Gensib remains. Both Plaintiff and Gensib are New Jersey residents. Compl. ¶¶ 1, 5.

Plaintiff was close friends for many years with Defendant Trevor Lavine. Compl. ¶ 104. In early 2007, Lavine introduced Plaintiff to Defendant Germaine McEachern. Compl. ¶¶ 20, 105. McEachern held himself out as a successful real estate investor, and asked Plaintiff if he would be interested in participating in a joint venture with himself (McEachern) and Lavine. Compl. ¶¶ 24, 27. McEachern told Plaintiff that the joint venture would operate by using each participant's credit on a rotating basis for the purchase of multiple investment properties. Compl. ¶ 28. First, one of the participants would use his credit to obtain the mortgage for an investment property. Id. The participant whose credit was used would take a larger stake in the profit from the property, while the two other participants took a smaller stake. Id. Once the first property was resold, the next participant would use his credit to obtain the mortgage on a new property, and so on. Id. After speaking with McEachern, Plaintiff agreed to purchase an investment property as part of the joint venture. See Compl. ¶ 29.

McEachern identified a property in Santa Rosa Beach, Florida for Plaintiff to purchase. Compl. ¶ 29. In connection with the purchase of the property, Plaintiff signed a "fraudulent mortgage loan application" that falsely stated that Plaintiff "earned a monthly income of $16, 680.00 in addition to his actual gross monthly income of approximately $8, 250.00." Compl. ¶¶ 33, 37. Plaintiff alleges that McEachern was the one who filled out the application, and that McEachern "encouraged [Plaintiff] to sign the loan application documents without reading the[m]." Id. The bank approved Plaintiff's application and issued a mortgage note on November 23, 2007 in the amount of $766, 400.00. Compl. ¶ 38. At the closing, Plaintiff executed the mortgage note. Compl. ¶ 39.

The Complaint alleges that McEachern recruited Gensib to act as Plaintiff's attorney for the fraudulent transaction. Compl. ¶ 40. One of the documents needed for the closing was a U.S. Department of Housing and Urban Development Uniform Settlement Statement (the "HUD-1"). Plaintiff alleges that Gensib "drafted, reviewed and approved... the HUD-1, " and that "McEachern, as an agent of Gensib, instructed Plaintiff to sign the closing documents." Compl. ¶¶ 44, 61, 69. Plaintiff then executed the HUD-1, even though it "falsely and fraudulently stated that Mineo tendered in cash $236, 568.53 at the time of closing to Defendants Clark and Sanders." Compl. ¶¶ 41-42. In reality, "Mineo never made any down payment or tendered any money at the time of closing, " and "only $179, 458.51 was disbursed to the sellers." Compl. ¶¶ 43, 67. Additionally, the HUD-1 listed an incorrect sale price and failed to disclose several disbursements made from the sellers' proceeds to various Defendants in connection with the sale. Compl. ¶ 64. After Mineo signed the closing documents, Gensib sent them to the sellers in Florida for their signatures, and the sale was completed. Compl. ¶¶ 41, 52-53. Mineo paid Gensib $5, 067.00 for legal services related to the real estate transaction. Compl. ¶ 55.

Plaintiff filed the instant action on March 30, 2012. ECF No. 1. According to the Complaint, the Santa Rosa Beach property "is currently undergoing foreclosure proceedings [which is] harming Plaintiff's credit [and] resulting in untold expenses." Compl. ¶ 113. Plaintiff asserts that Defendants were all part of a vast criminal conspiracy to use Plaintiff's good credit to defraud banks and mortgage institutions. Compl. ¶ 26. Plaintiff alleges that Gensib knew that the closing documents, including the HUD-1, contained numerous misrepresentations. Compl. ¶¶ 53, 63, 64. Plaintiff further alleges that, to entice Plaintiff into finalizing the purchase, Defendants falsely led Plaintiff to believe that Gensib was acting as his attorney and had approved the transaction. Compl. ¶¶ 59, 62.

Plaintiff served the Complaint on Gensib on April 10, 2014. ECF No. 4. The time for Gensib to answer or otherwise respond to the Complaint expired. See Fed.R.Civ.P. 12(a). To date, Gensib has failed to answer or otherwise respond to the Complaint. Pursuant to Federal Rule of Civil Procedure 55(a), the Clerk entered a Default against Defendants on May 11, 2012. ECF No. 6. Plaintiff filed the instant motion for default judgment, and served Defendants with notice of the motion, on October 24, 2013. ECF No. 48. No opposition has been filed.

II. LEGAL STANDARDS

Federal Rule of Civil Procedure 55 governs default. After the Clerk's entry of default pursuant to Rule 55(a), a plaintiff may then seek the Court's entry of default judgment under Rule 55(b)(2). Doug Brady, Inc. v. N.J. Bldg. Laborers Statewide Funds, 250 F.R.D. 171, 177 (D.N.J. 2008). "Before imposing the extreme sanction of default, district courts must make explicit factual findings as to: (1) whether the party subject to default has a meritorious defense, (2) the prejudice suffered by the party seeking default, and (3) the culpability of the party subject to default." Id. (quoting Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 74 (3d Cir. 1987)) ("[W]e have further required the district court to make explicit findings concerning the factors it must consider in rendering judgment by default or dismissal, or in declining to reopen such judgment"). "In weighing these factors, district courts must remain mindful that, like dismissal with prejudice, default is a sanction of last resort." Doug Brady, 250 F.R.D. at 177.

A court will deny a default judgment if the complaint fails to state a claim under Federal Rule of Civil Procedure 12(b)(6). Animal Sci. Products, Inc. v. China Nat. Metals & Minerals Imp. & Exp. Corp., 596 F.Supp.2d 842, 848-49 (D.N.J. 2008). Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted. The moving party bears the burden of showing that no claim has been stated. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a motion to dismiss under Rule 12(b)(6), a court must take all allegations in the complaint as true and view them in the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998).

Although a complaint need not contain detailed factual allegations, "a plaintiff's obligation to provide the grounds' of his entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the factual allegations must be sufficient to raise a plaintiff's right to relief above a speculative level, such that it is "plausible on its face." See id. at 570; see also Umland v. PLANCO Fin. Serv., Inc., 542 F.3d 59, 64 (3d Cir. 2008). 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. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). While "[t]he plausibility standard is not akin to a probability requirement'... it asks for more than a sheer possibility." Id.

Additionally, under Federal Rule of Civil Procedure 9(b), a plaintiff alleging fraud must state the circumstances of the alleged fraud with sufficient particularity to place the defendant on notice of the "precise misconduct with which [it is] charged." Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007) (quoting Lum v. Bank of America, 361 F.3d 217, 223-24 (3d Cir. 2004)) (internal quotations omitted). To satisfy this standard, the plaintiff must plead or allege the date, time ...


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