United States District Court, D. Massachusetts
ORDER ON MOTIONS TO DISMISS (DOCS. 25, 29)
SOROKIN UNITED STATES DISTRICT JUDGE
reasons that follow, the Court ALLOWS IN PART and DENIES IN
PART the Motions to Dismiss Defendants' Counterclaims
(Docs. 25, 29). In addition, the Court ORDERS the parties to
submit memoranda of law with respect to a contract question
arising from Counts II and III. Finally, the Court ORDERS (1)
Defendants to submit a memorandum of law, not to exceed ten
pages, addressing the viability of Plaintiffs' RICO
claims and the basis for subject matter jurisdiction if those
claims are dismissed, within 14 days of this Order; and (2)
Plaintiffs to submit a response addressing the same issues
within 14 days of the filing of Defendants' memorandum of
September 1, 2016, Plaintiffs Steven Barlow, Fossa Ltd.
(“Fossa”), and IcelandicPLUS LLC
(“IcelandicPLUS”) filed a Complaint in
Massachusetts Superior Court against Encompass
Communications, Inc. (“Encompass”), which is
doing business as BrandIntent, and I Jian Lin, the
“sole shareholder, director and officer of
BrandIntent.” Doc. 1 at 1; Doc. 1-1 at 7. Barlow and
Lin allegedly formed Fossa and IcelandicPLUS for the purpose
of importing and selling Icelandic natural products,
including lamb horns and fish skins, as dog
treats. Doc. 1-1 at 10. The Complaint alleges
Barlow loaned hundreds of thousands of dollars to Fossa and
IcelandicPLUS, much of which Lin embezzled and gave to
BrandIntent. Id. at 11-13. Plaintiffs sue for,
inter alia, breach of fiduciary duty, breach of
contract, fraud, and violation of the Rackateer Influenced
and Corrupt Organizations Act (RICO), 18 U.S.C. §§
1962(c), (d). See id. at 24-35.
removed this case to federal court based solely on the
federal question jurisdiction arising from Plaintiffs'
RICO claims. Doc. 1-2. Defendants filed their Answer to the
Complaint on November 7, 2016. Doc. 11. On November 28, 2016,
Defendants filed a 114-page First Amended Answer and
Counterclaims. Doc. 13.
their Counterclaims, Defendants sue Plaintiffs as well as
Boston Law Group, P.C. (“BLG”), Valentin Gurvits,
and Sonya Livshits. Doc. 13 at 1. Gurvits is a lawyer and a
principal in BLG and, in that capacity, filed the Complaint
in this case. Id. at 25; Doc. 1-1 at 37. On October
5, 2016, Gurvits and BLG withdrew as counsel for Plaintiffs,
Doc. 8, but Defendants assert that they continue to advise
Plaintiffs. Doc. 13 at 26. Livshits is alleged to be a Fossa
employee hired by Barlow without Lin's consent.
Counterclaims and supporting factual allegations run 90 pages
and are hardly a model of concision, but Defendants
essentially make the following factual allegations:
1. Barlow falsely represented to Lin that Lin would be
“owner of 50% of the Lamb Horn Business and of all
corporate entities associated with the Lamb Horn Business,
” in order to induce Lin and Encompass “to
provide their substantial Icelandic experience, contacts,
ideas, sales, marketing and promotional efforts, and physical
and mental work to build the Lamb Horn Business.”
Id. at 80-81.
2. Barlow “falsely represented to Lin and Encompass
that [he] would not pursue Lin's Fish Skin idea [i.e.,
the idea of importing Icelandic fish skins as dog treats]
without Lin's participation and receipt of 50% of all
revenues there from.” Id. at 81. However,
Barlow did pursue such business without Lin's
participation and without giving him fifty percent of
revenue. See id. at 76-78.
3. Barlow asked Lin to “establish a bank sub-account
(the ‘Sub-Account') for Encompass, into which
Barlow would deposit, inter alia, funds for use in
developing and implementing Lin's idea of the Lamb Horn
Business.” Id. at 7-8. However, in May 2014,
Barlow started making large deposits into the Sub-Account,
then “using his debit card to access those funds for
personal expenses, ” on “information and
belief” to “hide his connection to the funds and
to avoid both taxation and disclosure to his wife, whom he
was in the process of divorcing.” Id. at
4. Gurvits and BLG either currently hold or have transferred
to Barlow at least $36, 091.40 that Defendants suggest
rightfully belongs to them. Id. at 61.
5. Barlow and Livshits have sold lamb horns and deprived Lin
of his rightful fifty-percent share of the proceeds from
those sales. Id. at 92.
6. Barlow, Gurvits, and BLG have “used process in this
matter for an ulterior purpose of forcing Lin out of the Lamb
Horn Business and obtaining Lin's ownership interest in
it.” Id. at 106.
7. In “connection with the sale of lamb horns, ”
Barlow, Fossa, and IcelandicPLUS have used materials to which
“Lin and Encompass own all copyright, ” without
compensating either Defendant. Id. at 110.
sue for, inter alia, fraud, breach of contract,
conversion, violation of RICO, and abuse of process. See
id. at 79-110. Count I alleges fraud by Barlow in the
form of various false representations made to Lin and
Encompass about Barlow's business arrangements and
intentions. Id. At 79-81. Count II alleges that
Barlow breached an oral contract with Lin and Encompass
regarding each parties' respective contributions to,
financial benefits from, and commitments in relation to the
Lamb Horn Business. Id. At 82-83. In Count III,
Defendants claim that Barlow breached an implied covenant of
good faith and fair dealing in connection with the oral
contract alleged in Count II. Id. at 83. Count IV
asserts that Barlow, Gurvits, and BLG willfully and knowingly
engaged in unfair business practices in violation of Mass.
Gen. L. c. 93A, §§ 2 and 11. Id. at 83-86.
mislabel Counts V through XVIII as Counts III through XVI in
their Counterclaims; the Court will refer to them as they
appear sequentially in that filing. Counts V, IX, X, XI, and
XII seek damages based on unjust enrichment, breach of
fiduciary duty, embezzlement and conversion of funds and
inventory, and civil conspiracy in connection with the Lamb
Horn Business. Id. at 86-87 and 90-94. Count XIII
requests equitable relief in the form of a full and complete
accounting by the Counterclaim Defendants. Id. at
XIV alleges that the Counterclaim Defendants and other
co-conspirators violated RICO by acting as an enterprise to
engage in a pattern of racketeering activity involving wire
fraud, monetary transactions in property derived from wire
fraud, money laundering, identity fraud, and theft of trade
secrets. Id. at 95-105. Count XV additionally
alleges RICO conspiracy against Barlow, Gurvits, BLG, and
Livshits. Id. at 105-106.
Count XVI, Defendants claim that Barlow, Gurvits, and BLG
used process in this matter for the ulterior purpose of
forcing Lin out of the Lamb Horn Business and obtaining
Lin's ownership interest in it[.]” Id. at
106-110. Count XVII seeks a preliminary and permanent
injunction to address alleged infringement by Barlow, Fossa,
Ltd., and IcelandicPLUS LLC of certain copyrights owned by
Lin and Encompass. Id. at 110. Finally, Count XVIII
requests declaratory judgment (1) that Lin is a 50% owner of
Fossa, Ltd., IcelandicPLUS LLC, and any other corporate
entity established in connection with the Lamb Horn Business,
including without limitation Fossa Enterprises, Ehf. And
IcelandicPLUS, Ehf., and (2) that Lin is entitled to no less
than 50% of the revenues from those business entities.
Id. at 110-111.
and Livshits have filed a Motion to Dismiss
(“Plaintiffs' Motion”), seeking (1)
dismissal, under Mass. Gen. Laws ch. 231, § 59H, of
Count XIV (Abuse of Process) against Barlow, along with
Barlow's costs and fees “in connection
thereto”; and (2) dismissal of “all other
Counterclaim counts as against” Fossa, Barlow, and
Livshits, under Federal Rules of Civil Procedure 9(b) and
12(b). Doc. 29.
and BLG have also filed a Motion to Dismiss (“BLG's
Motion”), seeking (1) dismissal of Count XVI (Abuse of
Process) under § 59H, supra, along with costs
and fees “in connection thereto”; and (2)
dismissal of Counts XII (Civil Conspiracy), XIV (Civil RICO),
XV (Civil RICO Conspiracy), and XVI (Abuse of Process) for
failure to state a claim under Rules 9(b) and 12(b). Doc. 25.
the instant Motions were filed, Defendants have
“withdraw[n]” Count VI for interference with
contractual relations, Count VII for interference with
prospective contractual relations, and Count VIII for
misappropriation of trade secrets. Doc. 40 at 22.
assessing whether counts in Defendants' Counterclaims
survive a motion to dismiss, the Court treats them the same
way it would treat counts in a plaintiff's complaint.
See, e.g., Riverdale Mills Corp. v. Cavatorta
North Am., Inc., 189 F.Supp.3d 317, 320-21 (D. Mass.
2016). In resolving whether a complaint survives such a
motion, the Court “should begin by identifying and
disregarding statements in the complaint that merely offer
‘legal conclusions couched as fact' or
‘threadbare recitals of the elements of a cause of
action.'” Ocasio-Hernandez v.
Fortuno-Burset, 640 F.3d 1, 12 (1st Cir. 2011) (quoting
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Once
the Court has disregarded such statements, it must then
accept “[n]on-conclusory factual allegations in the
complaint . . . as true, even if seemingly incredible,
” and decide whether the legal claim “has facial
plausibility, ” i.e., whether those allegations,
accepted as true, “allow the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.” Id. at 12 (citations and
internal quotation marks omitted). “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.” Iqbal, 556
U.S. at 678 (citation omitted); see also id. at 679
(stating that a complaint must “permit the court to
infer more than the mere possibility of misconduct”)
(citation omitted). “Determining whether a complaint
states a plausible claim for relief will . . . be a
context-specific task that requires the reviewing court to
draw on its judicial experience and common sense.”
Id. at 679 (citation omitted). However, “the
court may not disregard properly pled factual allegations,
even if it strikes a savvy judge that actual proof of those
facts is improbable.” Ocasio-Hernandez, 640
F.3d at 12 (citations and internal quotation marks omitted).
“The relevant inquiry focuses on the reasonableness of
the inference of liability that the plaintiff is asking the
court to draw from the facts alleged in the complaint,
” not on the Court's assessment of whether the
plaintiff will “find evidentiary support for his
allegations.” Id. at 13 (citation and internal
quotation marks omitted).
addition, for any legal claims whose “core allegations
effectively charge fraud, ” a complaint must, under
Rule 9(b), “state with particularity the circumstances
constituting fraud.” N. Am. Catholic Educ.
Programming Found., Inc. v. Cardinale, 567 F.3d 8, 15
(1st Cir. 2009) (footnote omitted); Fed.R.Civ.P. 9(b). This
particularity requirement means that a complaint must specify
“the time, place, and content of an alleged false
representation.” Doyle v. Hasbro, Inc., 103
F.3d 186, 194 (1st Cir. 1996) (citation and internal
quotation marks omitted). Moreover, the complaint must
“set forth specific facts that make it reasonable to
believe that defendant knew that a statement was materially
false or misleading.” Cardinale, 567 F.3d at
13 (citations and internal quotation marks omitted).
“Where allegations of fraud are explicitly or
implicitly based only on information and belief, the
complaint must set forth the source of the information and
the reasons for the belief.” Universal Commc'n
Sys. Inc. v. Lycos, Inc., 478 F.3d 413, 427 (1st Cir.
2007) (citation and internal quotation marks omitted).
Count One of the Counterclaims, Defendants allege fraud
against Barlow. Doc. 13 at 79. Aside from some boilerplate
law on Rule 9(b)'s requirements, Barlow's argument
for dismissing this count consists of a single sentence:
“Because Lin [sic] not one of the allegations upon
which Lin seeks to base his claim of fraud satisfies the
requirement of Rule 9(b), Count I alleging fraud against
Barlow must be dismissed[.]” Doc. 30 at 8.
“conclusory assertion in the guise of an argument is
waived.” Galvin v. U.S. Bank, N.A., 852 F.3d
146, 161 (1st Cir. 2017) (citation omitted). Issues
“adverted to . . . in a perfunctory manner,
unaccompanied by some developed argumentation, are deemed to
have been abandoned.” Id. (citation and
internal quotation marks omitted). “It is not enough
merely to mention a possible argument in the most skeletal
way, leaving the court to do counsel's work . . .
.” Torres-Arroyo v. Rullan, 436 F.3d 1, 7 (1st
Cir. 2006) (citation and internal quotation marks omitted).
On the contrary, a litigant has an “obligation to spell
out its arguments squarely and distinctly, or else ...