DOUGLAS et al v. LALUMIERE et al

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
JOEL DOUGLAS, et al., 	)
)
Plaintiffs, 	)
)
v. 	) 2:20-cv-00227-JDL
)
SCOTT LALUMIERE, et al., 	)
)
Defendants. 	)
ORDER ON DAVID CLARKE’S MOTION TO DISMISS
Joel Douglas, Steven Fowler, and James Lewis (collectively, “Plaintiffs”) bring
this action against Scott Lalumiere and 25 other defendants, asserting 17 claims
arising out of an alleged scheme to defraud the Plaintiffs and obtain control or
ownership of their real property for the purpose of borrowing against the properties’
equity. I have granted or granted in part many of the defendants’ motions to dismiss
the amended complaint (the “Complaint”) (ECF No. 11) for failure to state a claim
upon which relief can be granted pursuant to Federal Rule of Civil Procedure
12(b)(6).1 	This order addresses the motion to dismiss filed by David Clarke (ECF
No. 225) 	seeking 	the 	dismissal 	of 	the 	claims 	asserted against 	him 	under 	the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C.A. §§ 1961-
1968 (West 2022), and Maine contract law. 	For the reasons that follow, I grant
1 I granted motions to dismiss filed by Androscoggin Savings Bank (ECF No. 238); Bangor Savings
Bank and Robert Burgess (ECF No. 239); Andre Bellucci (ECF No. 240); Camden National Bank (ECF
No. 241); Coastal Realty Capital, LLC, Michael Lyden, and Shawn Lyden (ECF No. 242); David
Hirshon and LOSU, LLC (ECF No. 243); BLR Capital, LLC (ECF No. 244); and Machias Savings Bank
(ECF No. 245). I granted in part motions to dismiss filed by Eric Holsapple; TTJR, LLC; LH Housing,
LLC; Wayne Lewis; and Russell Oakes (ECF No. 244). 	Another motion to dismiss (ECF No. 203),
which I address separately, has been filed by F.O. Bailey Real Estate LLC and David Jones.
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Clarke’s motion to dismiss, and I also deny the Plaintiffs’ Motion for Limited
Discovery (ECF No. 230).2
I. BACKGROUND
The Complaint alleges the following facts, which I treat as true for purposes of
ruling on this motion to dismiss.
The Complaint asserts that Scott Lalumiere and other defendants engaged in
three distinct but intertwined schemes to defraud the Plaintiffs. In the first scheme,
the Complaint alleges that Lalumiere, funded by various banks and private lenders,
fraudulently induced several vulnerable individuals, including Plaintiffs Steven
Fowler and Joel Douglas, who lacked access to conventional credit, to enter into
lease/buy-back agreements. 	Under the terms of the agreements, the title of the
victim’s real property would be transferred to a corporate entity controlled by
Lalumiere with the victim, as the lessee, retaining a purchase option. The Lalumiere-
controlled entity would subsequently mortgage the property to banks and private
lenders, and, when the entity defaulted, the mortgagees foreclosed, frustrating the
victim’s option to purchase.
In 	the 	second 	alleged 	scheme, 	Fowler 	entered 	into 	an 	agreement 	with
Lalumiere whereby Fowler would provide labor and materials at a discounted rate to
renovate certain properties controlled by Lalumiere, with the understanding that
Fowler could purchase the properties upon the completion of the renovations.
2 I recognize that Magistrate Judge John C. Nivison denied the Motion for Limited Discovery on
August 11, 2021 (ECF No. 237). His order expressly recognized, however, that the Plaintiffs’ request
for limited discovery should be revisited as part of the Court’s assessment of the motion to dismiss.
Accordingly, I have treated the earlier order denying the motion as a deferral of action on the motion.
Further, I have considered the merits of the motion and, for the reasons explained herein, I deny the
motion.
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However, 	Lalumiere 	frustrated 	Fowler’s 	right 	to 	purchase 	the 	properties 	by
defaulting on the mortgages, causing the mortgagees to foreclose on the properties.
In the third alleged scheme, several of the defendants agreed to pay-off and
discharge Plaintiff James Lewis’s defaulted mortgage and to lend him money to make
improvements to his property in exchange for him deeding the property to a
corporation and making certain payments. 	After the title was transferred, certain
defendants refused to loan him the money and subsequently foreclosed on the
property.
The Complaint contains scant details regarding Clarke’s participation in these
schemes. 	The 	Complaint 	merely 	alleges 	that 	Clarke 	is a person 	residing 	in
Westbrook, Maine; that he “realized the proceeds” of other defendants’ misconduct;
and that he was “informed of the fraudulent conduct in late November 2019.” 	ECF
No. 11 ¶¶ 174, 179. The Complaint also alleges that “Clarke extraction [sic] of equity”
from two homes in a way that caused unjust enrichment. ECF No. 11 ¶ 255.
The Plaintiffs have filed a Motion for Limited Discovery as to Clarke in
connection with their response to the motion to dismiss. 	Magistrate Judge John C.
Nivison entered an order on August 11, 2021 denying the Plaintiffs’ limited discovery
request 	without 	prejudice, 	stating 	that 	“[t]he 	Court 	will 	consider 	Plaintiffs’
[discovery] request as part of the Court’s assessment of Defendant’s pending motion
to dismiss.” 	ECF No. 237 at 2. 	The Plaintiffs did not file an objection. 	Below, I
address the Plaintiffs’ Motion for Limited Discovery as it relates to Clarke’s motion
to dismiss.
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II. LEGAL ANALYSIS
In reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) for failure to state a claim, a court must “accept as true all well-pleaded facts
alleged in the complaint and draw all reasonable inferences therefrom in the pleader’s
favor.” 	Rodríguez-Reyes v. Molina-Rodríguez, 711 F.3d 49, 52-53 (1st Cir. 2013)
(quoting Santiago v. Puerto Rico, 655 F.3d 61, 72 (1st Cir. 2011)). To survive a motion
to dismiss, the complaint “must contain sufficient factual matter to state a claim to
relief that is plausible on its face.” Id. at 53 (quoting Grajales v. P.R. Ports Auth., 682
F.3d 40, 44 (1st Cir. 2012)). 	Additionally, a court may consider inferences “gleaned
from documents incorporated by reference into the complaint, matters of public
record, and facts susceptible to judicial notice.” Id. (quoting Haley v. City of Bos., 657
F.3d 39, 46 (1st Cir. 2011)).
To assess the complaint’s adequacy, courts apply a “two-pronged approach,”
Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011): First, the court
must “isolate and ignore statements in the complaint that simply offer legal labels
and conclusions or merely rehash cause-of-action elements,” and, second, the court
will “take the complaint’s well-pled (i.e., non-conclusory, non-speculative) facts as
true, drawing all reasonable inferences in the pleader’s favor, and see if they plausibly
narrate a claim for relief,” Schatz v. Republican State Leadership Comm., 669 F.3d
50, 55 (1st Cir. 2012). 	To determine the plausibility of a claim is “a context-specific
task that requires the reviewing court to draw on its judicial experience and common
sense.” 	Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). 	Although conclusory legal
statements may “provide the framework of a complaint, they must be supported by
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factual allegations.” 	Id. 	The court must determine whether the factual allegations
“plausibly give rise to an entitlement to relief.” Id.
In addition, the Plaintiffs’ fraud-related claims are subject to Federal Rule of
Civil Procedure 9(b), which requires that a complaint “state with particularity the
circumstances constituting fraud.” 	To satisfy this requirement, the complaint must
set forth the “time, place and content of an alleged false representation.” 	Howell v.
Advantage Payroll Servs., Inc., No. 2:16-cv-438, 2017 WL 782881, at *6 (D. Me. Feb.
28, 2017) (quoting Hayduk v. Lanna, 775 F.2d 441, 444 (1st Cir. 1985)). 	The
Plaintiffs’ RICO claim is based in part on predicate acts of mail and wire fraud that
“must satisfy the particularity requirements of Rule 9(b).” Ahmed v. Rosenblatt, 118
F.3d 886, 889 (1st Cir. 1997).
The Plaintiffs’ claims against Clarke are: (A) a RICO claim and (B) an unjust
enrichment claim. I address each in turn.
A. 	RICO (Count IV)
The Complaint asserts that Clarke participated in a RICO conspiracy under
18 U.S.C.A. § 1962(d) (West 2022). 	“To prove a RICO conspiracy offense, the
[plaintiff] must show that ‘the defendant knowingly joined the conspiracy, agreeing
with one or more coconspirators “to further the endeavor, which, if completed, would
satisfy all the elements of a substantive RICO offense.”’” United States v. Velazquez-
Fontanez, 6 F.4th 205, 212 (1st Cir. 2021) (alterations omitted) (quoting United States
v. Rodríguez-Torres, 939 F.3d 16, 23 (1st Cir. 2019)). 	It is not necessary to “prove
that the defendant or his co-conspirators committed any overt act in furtherance of
the conspiracy.” United States v. Leoner-Aguirre, 939 F.3d 310, 317 (1st Cir. 2019).
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Here, the Complaint alleges that Clarke conspired to violate 18 U.S.C.A.
§ 1962(a), which makes it unlawful to use or invest income derived from a pattern of
racketeering activity under certain circumstances:
It shall be unlawful for any person who has received any income derived,
directly or indirectly, from a pattern of racketeering activity . . . in which
such person has participated as a principal . . . to use or invest, directly
or indirectly, any part of such income, or the proceeds of such income, in
acquisition of any interest in, or the establishment or operation of, any
enterprise which is engaged in . . . interstate or foreign commerce.
An “enterprise” includes “any individual, partnership, corporation, association, or
other legal entity, and any union or group of individuals associated in fact although
not a legal entity.” 	18 U.S.C.A. § 1961(4) (West 2022). 	“To establish a pattern of
racketeering, a plaintiff must show at least two predicate acts of ‘racketeering
activity’, as the statute defines such activity, and must establish that the ‘predicates
are related, and that they amount to or pose a threat of continued criminal activity.’”
McEvoy Travel Bureau, Inc. v. Heritage Travel, Inc., 904 F.2d 786, 788 (1st Cir. 1990)
(quoting H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239 (1989)). 	“Racketeering
activity” encompasses mail fraud under 18 U.S.C.A. § 1341 (West 2022), wire fraud
under 18 U.S.C.A. § 1343 (West 2022), and money laundering under 18 U.S.C.A.
§ 1956 (West 2022). 18 U.S.C.A. § 1961(1).
Further, a RICO plaintiff “only has standing if, and can only recover to the
extent that, he has been injured in his business or property by the conduct
constituting the violation.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985);
accord 18 U.S.C.A. § 1964(c) (West 2022). 	“Thus, in proving a right to recover for a
RICO violation premised upon § 1962(a), the plaintiffs had to prove that they were
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harmed by reason of [the defendant’s] use or investment of income derived from a
pattern of racketeering activity in some enterprise . . . .” Compagnie De Reassurance
D’Ile de Fr. v. New England Reinsurance Corp., 57 F.3d 56, 91 (1st Cir. 1995). “Even
assuming that [plaintiffs] had been defrauded through the use of the mails or
international wires, that alone is not enough to show that they were harmed
additionally by [a defendant’s] use or investment of the proceeds of that fraud to
establish or operate [an enterprise].” Id. (citation omitted).
The Plaintiffs’ theory for their RICO claim against Clarke is that he conspired
with other defendants in violation of § 1962(d) to reinvest the income from a pattern
of racketeering activity back into the enterprise, a violation of § 1962(a). The alleged
racketeering activity was mail and wire fraud and money laundering. Clarke argues
that the RICO claim should be dismissed because the Complaint merely alleges that
he became aware of wrongdoing and somehow benefitted from it, rather than alleging
that he knowingly participated in a conspiracy. 	The Plaintiffs argue that the
Complaint sufficiently alleges a conspiracy to violate 18 U.S.C.A. § 1962(a) and that
Clarke intended to further its goals. 	For reasons I will explain, the Plaintiffs’
argument is unpersuasive.
The Complaint contains few allegations against Clarke, and it is impossible to
discern how he might be connected to the Plaintiffs’ claims, let alone conclude that
he agreed to conspire with the other defendants. The Complaint’s only description of
Clarke is that he is a person residing in Westbrook, Maine. The sole RICO allegations
against Clarke assert that he “realized the proceeds” of the RICO enterprise and was
“informed of the fraudulent conduct in late November 2019.” 	ECF No. 11 ¶¶ 174,
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179. The Complaint does not contain any description of how Clarke agreed to further
the reinvestment of illicit proceeds back into the enterprise. 	Indeed, the Plaintiffs’
memorandum in opposition to the motion to dismiss concedes that “the amended
Complaint should have included a more specific allegation with respect to Mr. Clarke
providing of [sic] funds to the enterprise.” ECF No. 229 at 4 n.1.
The Plaintiffs’ memorandum sets forth additional facts not contained in the
Complaint, claiming that Clarke “is a sophisticated money lender”; “provided funds
to Scott Lalumiere in exchange for a mortgage on 33 Sanborn Lane,” one of the three
properties at issue in the second scheme, in August 2019; “knew that Mecap LLC was
in the business of selling properties as rent to own and that Mr. Lalumiere did not
have a license to engage in consumer credit transactions”; and “[e]ven after the fraud
became public knowledge Mr. Clarke has treated the mortgage as legitimate” by
continuing to hold the mortgage and waiting for the sale of 33 Sanborn Lane. 	ECF
No. 229 at 4, 13. However, on a Rule 12(b)(6) motion to dismiss, a court’s inquiry is
confined to the allegations in the complaint and its attachments. See Foley v. Wells
Fargo Bank, N.A., 772 F.3d 63, 73-74 (1st Cir. 2014) (concluding that the district court
improperly considered evidence beyond the allegations in the pleadings). But even if
these 	additional 	allegations 	were 	considered, 	the 	Plaintiffs 	would 	not 	have
sufficiently alleged that Clarke conspired to reinvest the enterprise’s illicit proceeds
back into the enterprise. Among other deficiencies, the Plaintiffs merely allege that
Clarke provided his own money to the enterprise before he was informed about the
alleged fraud involving different properties and without being told of any connection
between that fraud and 33 Sanborn Lane. Finally, if Clarke’s conduct could somehow
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be classified as agreeing to reinvest the enterprise’s illicit proceeds, there is no
plausible explanation given for how this reinvestment (as opposed to the original
fraud) harmed the Plaintiffs.
Looking only at the materials that can be properly considered at this stage,
there is no plausible allegation that Clarke knowingly joined a conspiracy to reinvest
income derived from a pattern of racketeering activity back into an enterprise. 	For
these reasons, the RICO count against Clarke is dismissed.
B. 	Unjust Enrichment (Count XVII)
The Complaint asserts a claim for unjust enrichment against Clarke based on
the alleged “extraction of equity from the homes at 661 Allen Avenue and 57 Queen
Street,” two of the properties involved in the alleged lease/buy-back fraud. ECF No.
11 ¶ 255. 	A claim for unjust enrichment requires proof that “(1) [the complaining
party] conferred a benefit on the other party; (2) the other party had appreciation or
knowledge of the benefit; and (3) the acceptance or retention of the benefit was under
such circumstances as to make it inequitable for it to retain the benefit without
payment of its value.” 	Knope v. Green Tree Servicing, LLC, 2017 ME 95, ¶ 12,
161 A.3d 696, 699 (quoting Me. Eye Care Assocs., P.A. v. Gorman, 2008 ME 36, ¶ 17,
942 A.2d 707, 712).
The Complaint’s unjust enrichment claim must be dismissed because the
Complaint fails to allege that a benefit was conferred on Clarke relating to the alleged
schemes involving 661 Allen Avenue and 57 Queen Street. 	Although the Plaintiffs
were allegedly harmed through the loss of their properties, the Complaint fails to
assert facts that would plausibly establish that a resulting benefit was conferred on
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Clarke. Relatedly, the Complaint does not allege that Clarke had or should have had
“appreciation or knowledge” of the benefit received.
In sum, the Complaint fails to plead facts that, if proven, would establish a
right of recovery based on unjust enrichment. 	Thus, the unjust enrichment count
against Clarke is dismissed.
C. 	Motion for Limited Discovery
The Plaintiffs seek limited discovery from Clarke to reveal communications
between him and the other defendants that were used to commit the alleged predicate
acts constituting the pattern of racketeering activity that generated the income that
Clarke is alleged to have conspired to reinvest. Clarke opposes the motion, asserting
that the Plaintiffs have failed to demonstrate a right to limited discovery because the
Complaint does not allege that Clarke committed the predicate acts such that
information concerning those crimes would be in his exclusive possession.
Under Menard v. CSX Transportation, Inc., “[w]here modest discovery may
provide the missing link” to satisfy the Rule 12(b)(6) plausibility standard, the court
may allow limited discovery “at least where . . . ‘some of the information needed may
be in the control of the defendants.’” 	698 F.3d 40, 45 (1st Cir. 2012) (alteration
omitted) (quoting Pruell v. Caritas Christi, 678 F.3d 10, 15 (1st Cir. 2012)). 	Here,
however, the communications that the Plaintiffs seek to discover would not provide a
“missing link” needed to remedy the Complaint’s fatal deficiency discussed above: the
failure to plausibly allege that Clarke knowingly joined a conspiracy to reinvest
income from a pattern of racketeering activity. Second, as discussed in New England
Data Services, Inc. v. Becher, a court may allow discovery as to “the details of just
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when and where the mail or wires were used” in a “RICO mail and wire fraud case.”
829 F.2d at 290; see also Ahmed v. Rosenblatt, 118 F.3d 886, 890 (1st Cir. 1997). Here,
however, additional information as to how these defendants used the mail or wires to
commit the alleged predicate acts of fraud would not cure the Complaint’s deficiency.
Neither Menard nor Becher offers a basis to grant limited discovery in this
instance. Thus, the Motion for Limited Discovery is denied.
III. CONCLUSION
For the reasons stated above, it is ORDERED that David Clarke’s Motion to
Dismiss (ECF No. 225) is GRANTED. 	The amended complaint (ECF No. 11) as to
David Clarke is DISMISSED. 	The Plaintiffs’ Motion for Limited Discovery as to
David Clarke (ECF No. 230) is DENIED.
SO ORDERED.
Dated: March 23, 2022
/s/ JON D. LEVY
CHIEF U.S. DISTRICT JUDGE
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