Datasets:

AbeHou

/

CLERC-passage

like 0

of Herriman v. Bell, 590 F.3d 1176, 1181 (10th Cir.2010). . Bones v. Honeywell Int’l, Inc., 366 F.3d 869, 875 (10th Cir.2004). . Wright ex rel. Trust Co. of Kan. v. Abbott Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir.2001) (citing Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir.1998)). . Thomas v. Metro. Life Ins. Co., 631 F.3d 1153, 1160 (10th Cir.2011) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). . Spaulding v. United Trasp. Union, 279 F.3d 901, 904 (10th Cir.2002) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). . Adams v. Am. Guar. & Liab. Ins. Co., 233 F.3d 1242, 1246 (10th Cir.2000) (citing Adler, 144 F.3d at 671); see also Kannady v. City of Kiowa, 590 F.3d 1161, 1169 (10th Cir.2010). . Anderson, 477 U.S. at 256, 106 S.Ct. 2505; Celotex, 477 U.S. at 324, 106 S.Ct. 2548; Spaulding, 279 F.3d at 904 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). . Anderson, 477 U.S. at 256, 106 S.Ct. 2505; accord Eck v. Parke, Davis & Co., 256 F.3d 1013, 1017 (10th Cir.2001). . Mitchell v. City of Moore, Okla., 218 F.3d 1190, 1197-98 (10th Cir.2000) (quoting Adler, 144 F.3d at 671); see Kannady, 590 F.3d at 1169. . Adams, 233 F.3d at 1246. . Fed.R.Civ.P. 56(c)(4). . Id.; Argo v. Blue Cross & Blue Shield of Kan., Inc., 452 F.3d 1193, 1199 (10th Cir.2006) (citation omitted). . James Barlow Family Ltd. P'ship v. David M. Munson, Inc., 132 F.3d 1316, 1319 (10th Cir.1997) (citation omitted). . Celotec, 477 U.S. at 327, 106 S.Ct. 2548 (quoting Fed.R.Civ.P. 1). . Conaway v. Smith, 853 F.2d 789, 794 (10th Cir.1988). . Conf. Comm. Rep. Br., H. Bill 2075, at 8-9 (May 12, 2011). . Id. at 1. . 505 U.S. 833, 112 S.Ct. 2791, 120 L.Ed.2d 674 (1992). . Id. at 846, 112 S.Ct. 2791. . Id. . Id. . Id. at 874, 112 S.Ct. 2791 . Id. (emphasis added). . Jane L. v. Bangerter, 102 F.3d 1112, 1116 n. 5 (10th Cir.1996) (citing Casey, 505 U.S. at 877, 112

1348, 89 L.Ed.2d 538 (1986)). . Anderson, 477 U.S. at 256, 106 S.Ct. 2505; accord Eck v. Parke, Davis & Co., 256 F.3d 1013, 1017 (10th Cir.2001). . Mitchell v. City of Moore, Okla., 218 F.3d 1190, 1197-98 (10th Cir.2000) (quoting Adler, 144 F.3d at 671); see Kannady, 590 F.3d at 1169. . Adams, 233 F.3d at 1246. . Fed.R.Civ.P. 56(c)(4). . Id.; Argo v. Blue Cross & Blue Shield of Kan., Inc., 452 F.3d 1193, 1199 (10th Cir.2006) (citation omitted). . James Barlow Family Ltd. P'ship v. David M. Munson, Inc., 132 F.3d 1316, 1319 (10th Cir.1997) (citation omitted). . Celotec, 477 U.S. at 327, 106 S.Ct. 2548 (quoting Fed.R.Civ.P. 1). . Conaway v. Smith, 853 F.2d 789, 794 (10th Cir.1988). . Conf. Comm. Rep. Br., H. Bill 2075, at 8-9 (May 12, 2011). . Id. at 1. . 505 U.S. 833, 112 S.Ct. 2791, 120 L.Ed.2d 674 (1992). . Id. at 846, 112 S.Ct. 2791. . Id. . Id. . Id. at 874, 112 S.Ct. 2791 . Id. (emphasis added). . Jane L. v. Bangerter, 102 F.3d 1112, 1116 n. 5 (10th Cir.1996) (citing Casey, 505 U.S. at 877, 112 S.Ct. 2791). . Id. at 1118. . Id. at 1116. . Mazurek v. Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997). . Id. ("If the motion at issue here were a defendant's motion for summary judgment, and if the plaintiff's only basis for proceeding with the suit were a claim of improper legislative purpose, one would demand some evidence of that improper purpose in order to avoid a nonsuit.”). . 815 F.Supp.2d 1204, 1216 (D.Kan.2011). . Id. at n. 7 (citing Casey, 505 U.S. at 877, 112 S.Ct. 2791) (emphasis added). .Casey, 505 U.S. at 886, 112 S.Ct. 2791 (emphasis added). . 815 F.Supp.2d at 1216. . Casey, 505 U.S. at 877-878, 112 S.Ct. 2791. . Jane L., 102 F.3d at 1116 n. 5 (citing Casey, 505 U.S. at 877, 112 S.Ct. 2791). . Doc. 66, at 31. . 448 U.S. 297, 316, 100 S.Ct 2671 65 L.Ed.2d 784 (1980). . Id. at 317-18, 100 S.Ct. 2671. . 432 U.S. 464, 474, 97 S.Ct. 2376, 53 L.Ed.2d 484 (1977). . Casey, 505 U.S. at 895, 112 S.Ct. 2791. But see Planned Parenthood of Rocky Mountains Serv.,

S.Ct. 2791). . Id. at 1118. . Id. at 1116. . Mazurek v. Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997). . Id. ("If the motion at issue here were a defendant's motion for summary judgment, and if the plaintiff's only basis for proceeding with the suit were a claim of improper legislative purpose, one would demand some evidence of that improper purpose in order to avoid a nonsuit.”). . 815 F.Supp.2d 1204, 1216 (D.Kan.2011). . Id. at n. 7 (citing Casey, 505 U.S. at 877, 112 S.Ct. 2791) (emphasis added). .Casey, 505 U.S. at 886, 112 S.Ct. 2791 (emphasis added). . 815 F.Supp.2d at 1216. . Casey, 505 U.S. at 877-878, 112 S.Ct. 2791. . Jane L., 102 F.3d at 1116 n. 5 (citing Casey, 505 U.S. at 877, 112 S.Ct. 2791). . Doc. 66, at 31. . 448 U.S. 297, 316, 100 S.Ct 2671 65 L.Ed.2d 784 (1980). . Id. at 317-18, 100 S.Ct. 2671. . 432 U.S. 464, 474, 97 S.Ct. 2376, 53 L.Ed.2d 484 (1977). . Casey, 505 U.S. at 895, 112 S.Ct. 2791. But see Planned Parenthood of Rocky Mountains Serv., Corp. v. Owens, 287 F.3d 910, 919 (10th Cir.2002) (“Casey ... prescribes a showing that the state abortion regulation operates in a large fraction of the cases ... as a substantial obstacle to a woman's choice to undergo an abortion.”) (citations and quotation marks omitted). . Casey, 505 U.S. at 895, 112 S.Ct. 2791. . Id.

OPINION AND ORDER CARMAN, Judge: Before the Court is a motion to dismiss filed by Defendant Tenacious Holdings, Inc. (“Tenacious”), formerly known as Ergodyne Corporation (“Ergodyne”). Tenacious asks the Court to dismiss the case pursuant to USCIT Rule 12(b)(5) for failure to state a claim upon which relief can be granted. In brief, Tenacious argues that the claims underlying the suit of the United States were required to be brought, pursuant to USCIT Rule 13(a), as compulsory counterclaims in a separate case at the Court of International Trade (“CIT”)—the action Ergodyne, Inc. v. United States, Court No. 10-00200 (“the Ergodyne case”). Tenacious reasons that the government’s failure to assert the penalty claims underlying this case as counterclaims in Ergodyne requires that the Court dismiss the present case. The Court finds that USCIT Rule 13(a) does not prevent the government’s penalty suit from going forward, and the motion to dismiss will therefore be denied. Background To resolve Tenacious’s motion to dismiss, it is first necessary to set forth the proceedings that have occurred in this case and the interrelated case of Ergodyne. On July 14, 2010, Tenacious filed the Ergodyne case, naming the United States as defendant. See Summons, Court No. 10-00200, ECF No. 1. Tenacious initiated the Ergodyne case by the filing of a summons, but no complaint — an option permitted by USCIT Rule 3(a). Under USCIT Rule 83, cases initiated by the filing of a summons without a complaint may be placed on the Court of International Trade’s (CIT) reserve calendar for a period of 18 months, or longer if the Court grants an extension, before a complaint must be filed. The Ergodyne case was permitted to remain on the reserve calendar without the filing of a complaint until July 30, 2012 on consent of the United States. On June 22, 2012, while the time for filing a complaint in the Ergodyne case was under extension, the government filed this penalty case as Court No. 12-00173 (the “Tenacious case”). About one month after the government filed the Tenacious case, Tenacious sought an extension until the end of 2012 for the Ergodyne case to remain on

Ergodyne. On July 14, 2010, Tenacious filed the Ergodyne case, naming the United States as defendant. See Summons, Court No. 10-00200, ECF No. 1. Tenacious initiated the Ergodyne case by the filing of a summons, but no complaint — an option permitted by USCIT Rule 3(a). Under USCIT Rule 83, cases initiated by the filing of a summons without a complaint may be placed on the Court of International Trade’s (CIT) reserve calendar for a period of 18 months, or longer if the Court grants an extension, before a complaint must be filed. The Ergodyne case was permitted to remain on the reserve calendar without the filing of a complaint until July 30, 2012 on consent of the United States. On June 22, 2012, while the time for filing a complaint in the Ergodyne case was under extension, the government filed this penalty case as Court No. 12-00173 (the “Tenacious case”). About one month after the government filed the Tenacious case, Tenacious sought an extension until the end of 2012 for the Ergodyne case to remain on the reserve calendar. The government opposed the motion. The Court nevertheless granted a partial extension in the Ergodyne case, delaying Tenacious’s deadline for the filing of its complaint until November 13, 2012 (later extended until December 13, 2012 on the consent of the government). During the second extension of time for the Ergodyne case to remain on the reserve calendar, Tenacious filed the motion to dismiss the Tenacious case that is currently before the Court. Tenacious argues by its motion that the penalty claims asserted by the government must be dismissed because they are actually counterclaims that may only be pleaded in the Ergodyne case. The government filed its opposition to Tenacious’s motion to dismiss the Tenacious case on November 7, 2012, and Tenacious filed a reply in support of the motion on December 3, 2012. The motion has been under submission to the Court for decision since December 17, 2012. On December 22, 2012, five days after Tenacious filed its motion to dismiss the Tenacious case, Tenacious moved for a stay of all proceedings in the

the reserve calendar. The government opposed the motion. The Court nevertheless granted a partial extension in the Ergodyne case, delaying Tenacious’s deadline for the filing of its complaint until November 13, 2012 (later extended until December 13, 2012 on the consent of the government). During the second extension of time for the Ergodyne case to remain on the reserve calendar, Tenacious filed the motion to dismiss the Tenacious case that is currently before the Court. Tenacious argues by its motion that the penalty claims asserted by the government must be dismissed because they are actually counterclaims that may only be pleaded in the Ergodyne case. The government filed its opposition to Tenacious’s motion to dismiss the Tenacious case on November 7, 2012, and Tenacious filed a reply in support of the motion on December 3, 2012. The motion has been under submission to the Court for decision since December 17, 2012. On December 22, 2012, five days after Tenacious filed its motion to dismiss the Tenacious case, Tenacious moved for a stay of all proceedings in the Ergodyne case until such time as its motion to dismiss the Tenacious case was decided. The government opposed. The court denied Tenacious’s request for a stay and set February 22, 2013 as the deadline by which Tenacious was required to file its complaint in the Ergodyne case. Tenacious timely filed its Ergodyne complaint and the United States answered on May 9, 2013. Jurisdiction & Standard of Review The Court has jurisdiction over this case pursuant to 28 U.S.C. § 1582 (2006). Tenacious’s motion to dismiss is brought pursuant to USCIT Rule 12(b)(5), which per mits a party to assert, in motion form, the defense of “failure to state a claim upon which relief can be granted.” In deciding such a motion, “the Court assumes that all well-pled factual allegations are true, construing all reasonable inferences in favor of the nonmovant.” Cisco Systems, Inc. v. United States, 804 F.Supp.2d 1326, 1330, 35 CIT -, - (2011) (internal quotations and citations omitted). The Supreme Court has indicated that, “[t]o survive a motion to dismiss, a complaint must contain sufficient

Ergodyne case until such time as its motion to dismiss the Tenacious case was decided. The government opposed. The court denied Tenacious’s request for a stay and set February 22, 2013 as the deadline by which Tenacious was required to file its complaint in the Ergodyne case. Tenacious timely filed its Ergodyne complaint and the United States answered on May 9, 2013. Jurisdiction & Standard of Review The Court has jurisdiction over this case pursuant to 28 U.S.C. § 1582 (2006). Tenacious’s motion to dismiss is brought pursuant to USCIT Rule 12(b)(5), which per mits a party to assert, in motion form, the defense of “failure to state a claim upon which relief can be granted.” In deciding such a motion, “the Court assumes that all well-pled factual allegations are true, construing all reasonable inferences in favor of the nonmovant.” Cisco Systems, Inc. v. United States, 804 F.Supp.2d 1326, 1330, 35 CIT -, - (2011) (internal quotations and citations omitted). The Supreme Court has indicated that, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Discussion I. Contentions of the Parties A. Tenacious 1. Penalty Claims Are Compulsory Counterclaims Tenacious starts from the premise that, as to the 35 entries whose classification is disputed in the Ergodyne case and upon which the United States also seeks to impose penalties in the current case, the government can only seek to recover civil penalties for negligent misclassifieation by filing its penalty claim as a counterclaim in the Ergodyne case. Def.’s Mem. of Law in Supp. of Def.’s Mot. to Dismiss (“Def. Mem.”) at 3-4, ECF No. 10-2. Tenacious claims this despite the fact that (as of the time Tenacious filed this motion) it had not yet filed a complaint in the Ergodyne case; in Tenacious’s view, the absence of a complaint in the Ergodyne case was a difficulty

factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Discussion I. Contentions of the Parties A. Tenacious 1. Penalty Claims Are Compulsory Counterclaims Tenacious starts from the premise that, as to the 35 entries whose classification is disputed in the Ergodyne case and upon which the United States also seeks to impose penalties in the current case, the government can only seek to recover civil penalties for negligent misclassifieation by filing its penalty claim as a counterclaim in the Ergodyne case. Def.’s Mem. of Law in Supp. of Def.’s Mot. to Dismiss (“Def. Mem.”) at 3-4, ECF No. 10-2. Tenacious claims this despite the fact that (as of the time Tenacious filed this motion) it had not yet filed a complaint in the Ergodyne case; in Tenacious’s view, the absence of a complaint in the Ergodyne case was a difficulty that the government was obliged to overcome by forcing Tenacious to file its complaint. Def. Mem. at 4. As statutory support for this theory, Tenacious invokes 28 U.S.C. § 1583, which vests exclusive jurisdiction in the CIT to enter judgment on “any counterclaim” in a civil action filed at the CIT, if the counterclaim “involves the imported merchandise that is the subject matter of such civil action” or “is to recover upon a bond or customs duties relating to such merchandise.” Id. at 4. Tenacious also cites US-CIT Rule 13(a), which states: “A pleading must state as a counterclaim any claim that — at the time of its service — the pleader has against an opposing party if the claim (1) involves the imported merchandise that is the subject matter of the civil action, or (2) is to recover on a bond or customs duties relating to such merchandise.” Tenacious suggests that § 1583, taken in conjunction with Rule 13(a), requires that “a claim must be pleaded as a counterclaim in the CIT if it involves

that the government was obliged to overcome by forcing Tenacious to file its complaint. Def. Mem. at 4. As statutory support for this theory, Tenacious invokes 28 U.S.C. § 1583, which vests exclusive jurisdiction in the CIT to enter judgment on “any counterclaim” in a civil action filed at the CIT, if the counterclaim “involves the imported merchandise that is the subject matter of such civil action” or “is to recover upon a bond or customs duties relating to such merchandise.” Id. at 4. Tenacious also cites US-CIT Rule 13(a), which states: “A pleading must state as a counterclaim any claim that — at the time of its service — the pleader has against an opposing party if the claim (1) involves the imported merchandise that is the subject matter of the civil action, or (2) is to recover on a bond or customs duties relating to such merchandise.” Tenacious suggests that § 1583, taken in conjunction with Rule 13(a), requires that “a claim must be pleaded as a counterclaim in the CIT if it involves the imported merchandise that is the subject matter of [the] civil action.” Def.’s Reply in Supp. of Def.’s Mot. to Dismiss (“Reply”) at 3, ECF No. 19 (emphasis added, internal quotations omitted). Tenacious reasons that the government’s penalty claims in the Tenacious case involve “the imported merchandise that is the subject” of the Ergodyne case because they stem in large part from the classifications Tenacious gave to entries that are the focus of the Ergodyne classification case. Def. Mem. at 6-7 (internal quotations omitted). It was therefore mandatory, according to Tenacious, for the government to bring those claims as counterclaims in the Ergo-dyne case, and to avoid initiating a separate penalty case as the government did in commencing the Tenacious case. Id. at 7. 2. Failure to Assert Penalty as Counterclaim Requires Dismissal Tenacious urges the Court to dismiss the government’s complaint as to the 35 entries that overlap with the Ergodyne case, claiming that such a consequence is required for violation of the compulsory counterclaim rule. Id. at 9-11. Tenacious gets to this conclusion by claiming

the imported merchandise that is the subject matter of [the] civil action.” Def.’s Reply in Supp. of Def.’s Mot. to Dismiss (“Reply”) at 3, ECF No. 19 (emphasis added, internal quotations omitted). Tenacious reasons that the government’s penalty claims in the Tenacious case involve “the imported merchandise that is the subject” of the Ergodyne case because they stem in large part from the classifications Tenacious gave to entries that are the focus of the Ergodyne classification case. Def. Mem. at 6-7 (internal quotations omitted). It was therefore mandatory, according to Tenacious, for the government to bring those claims as counterclaims in the Ergo-dyne case, and to avoid initiating a separate penalty case as the government did in commencing the Tenacious case. Id. at 7. 2. Failure to Assert Penalty as Counterclaim Requires Dismissal Tenacious urges the Court to dismiss the government’s complaint as to the 35 entries that overlap with the Ergodyne case, claiming that such a consequence is required for violation of the compulsory counterclaim rule. Id. at 9-11. Tenacious gets to this conclusion by claiming that, “[b]ecause the Government’s claims are barred, the Court cannot grant relief thereupon” and that “[t]he principles of judicial economy, expediency, and fairness weigh heavily in favor of dismissing this action, rather than allowing two duplicative lawsuits ... to move forward on separate tracks.” Id. at 10. 3. Dismissal Required as to Entries Not Overlapping Ergodyne Case The penalty claims in the Tenacious case are based on allegedly negligent misclassification of the 35 entries underlying the Ergodyne case, as well as 16 other entries. Id. at 11. Tenacious suggests that the complaint in the Tenacious case should be dismissed in its entirety, and not just as to the 35 entries that overlap, “without prejudice to the filing of a new, properly-pleaded action,” apparently as a punishment “because there was no reasonably [sic] excuse for the government’s disregard of the applicable rules.” Id. Tenacious supports this aspect of its argument by citing USCIT Rules 3(a) and 13(h), along with case law. Since the Ergodyne case was formally “commenced,” within the meaning of USCIT Rule 3(a), by the filing of

that, “[b]ecause the Government’s claims are barred, the Court cannot grant relief thereupon” and that “[t]he principles of judicial economy, expediency, and fairness weigh heavily in favor of dismissing this action, rather than allowing two duplicative lawsuits ... to move forward on separate tracks.” Id. at 10. 3. Dismissal Required as to Entries Not Overlapping Ergodyne Case The penalty claims in the Tenacious case are based on allegedly negligent misclassification of the 35 entries underlying the Ergodyne case, as well as 16 other entries. Id. at 11. Tenacious suggests that the complaint in the Tenacious case should be dismissed in its entirety, and not just as to the 35 entries that overlap, “without prejudice to the filing of a new, properly-pleaded action,” apparently as a punishment “because there was no reasonably [sic] excuse for the government’s disregard of the applicable rules.” Id. Tenacious supports this aspect of its argument by citing USCIT Rules 3(a) and 13(h), along with case law. Since the Ergodyne case was formally “commenced,” within the meaning of USCIT Rule 3(a), by the filing of a summons, argues Tenacious, the government should have known that it had to file any penalty claims in that action. Id. at 12. And while Tenacious admits that it filed no complaint in the Ergo-dyne case, and therefore the government could not yet file a counterclaim, Tenacious insists that the government was nevertheless barred from filing a separate penalty action. Id. Instead, Tenacious suggests that the government should have subjected Tenacious to motion practice in order to force Tenacious to file its complaint in the Ergodyne case, allowing the government to bring its penalty action via counterclaims there. Id. at 12-13. Specifically, Tenacious argues that the government had to employ USCIT Rule 13(h), which provides a mechanism by which a defendant “may file a motion demanding that the plaintiff file a complaint” which, “[i]f the court grants” the motion, would result in the plaintiff being obliged to file the complaint within 30 days. Id. at 13-14. Tenacious claims that the government’s failure to force the filing of a complaint in the Ergodyne case as a

a summons, argues Tenacious, the government should have known that it had to file any penalty claims in that action. Id. at 12. And while Tenacious admits that it filed no complaint in the Ergo-dyne case, and therefore the government could not yet file a counterclaim, Tenacious insists that the government was nevertheless barred from filing a separate penalty action. Id. Instead, Tenacious suggests that the government should have subjected Tenacious to motion practice in order to force Tenacious to file its complaint in the Ergodyne case, allowing the government to bring its penalty action via counterclaims there. Id. at 12-13. Specifically, Tenacious argues that the government had to employ USCIT Rule 13(h), which provides a mechanism by which a defendant “may file a motion demanding that the plaintiff file a complaint” which, “[i]f the court grants” the motion, would result in the plaintiff being obliged to file the complaint within 30 days. Id. at 13-14. Tenacious claims that the government’s failure to force the filing of a complaint in the Ergodyne case as a means to file its penalty claims in that action was tantamount to “wastfing] judicial resources” and the Tenacious case should be dismissed because the government “wantonly disregarded the Court’s rules.” Id. at 14-15. B. United States 1. Penalty Claims Are Not Compulsory Counterclaims The government, in countering Tenacious’s position, starts by noting the following language in USCIT Rule 13(a): “a pleading must state as a counterclaim any claim that — at the time of its service — the pleader has against an opposing party.” Pl.’s Resp. to Def.’s Mot. to Dismiss, ECF No. 16, at 5 (emphasis in original). The government views this language as indicating only “that parties must include in their answers any claims that they have at that time,” rather than providing any “limitations whatsoever on a party’s conduct pri- or to the filing of its answer.” Id. (emphasis in original). The government states that “neither USCIT Rule 13(a), nor any other authority, considers our already-filed penalty claims to be compulsory counterclaims to Ergodyne’s as-yet unfiled complaint.” Id. at 6. 2. Litigating Penalty Claims in Ergodyne

means to file its penalty claims in that action was tantamount to “wastfing] judicial resources” and the Tenacious case should be dismissed because the government “wantonly disregarded the Court’s rules.” Id. at 14-15. B. United States 1. Penalty Claims Are Not Compulsory Counterclaims The government, in countering Tenacious’s position, starts by noting the following language in USCIT Rule 13(a): “a pleading must state as a counterclaim any claim that — at the time of its service — the pleader has against an opposing party.” Pl.’s Resp. to Def.’s Mot. to Dismiss, ECF No. 16, at 5 (emphasis in original). The government views this language as indicating only “that parties must include in their answers any claims that they have at that time,” rather than providing any “limitations whatsoever on a party’s conduct pri- or to the filing of its answer.” Id. (emphasis in original). The government states that “neither USCIT Rule 13(a), nor any other authority, considers our already-filed penalty claims to be compulsory counterclaims to Ergodyne’s as-yet unfiled complaint.” Id. at 6. 2. Litigating Penalty Claims in Ergodyne Would Be Inefficient The government admits that penalty claims and classification claims may have “some overlap when, as here, the basis for a penalty allegation is an incorrect classification asserted on entry documents,” but argues that “there is not always overlap between a classification challenge and a penalty claim based on misclassification.” Id. at 7. The two kinds of actions also differ in jurisdictional bases, elements, and jury trial rights, the government asserts. Id. at 8. All of this would lead to inefficiency if the two kinds of claims were forced to be litigated in one action. Id. at 6-7. The government points out that the entries underlying the two claims also may differ, as they do here, requiring an additional action to cover the non-shared entries. Id. at 8. 3.The Government Cannot Force Filing of Complaint The government also rejects Tenacious’s claim that the government could have forced the filing of a complaint in the Ergodyne case by filing a USCIT Rule 13(h) motion, so that the government could then have brought its penalty claims in that

Would Be Inefficient The government admits that penalty claims and classification claims may have “some overlap when, as here, the basis for a penalty allegation is an incorrect classification asserted on entry documents,” but argues that “there is not always overlap between a classification challenge and a penalty claim based on misclassification.” Id. at 7. The two kinds of actions also differ in jurisdictional bases, elements, and jury trial rights, the government asserts. Id. at 8. All of this would lead to inefficiency if the two kinds of claims were forced to be litigated in one action. Id. at 6-7. The government points out that the entries underlying the two claims also may differ, as they do here, requiring an additional action to cover the non-shared entries. Id. at 8. 3.The Government Cannot Force Filing of Complaint The government also rejects Tenacious’s claim that the government could have forced the filing of a complaint in the Ergodyne case by filing a USCIT Rule 13(h) motion, so that the government could then have brought its penalty claims in that action. The government gives four reasons this claim should fail: Rule 13(h) does not indicate that a failure to file a Rule 13(h) motion waives claims; Rule 13(h) permits the filing of a motion for the lodging of a complaint, but does not require it; since the Court can deny a Rule 13(h) motion, using such a motion to force filing of a complaint cannot be a mandatory prerequisite for asserting a claim; and even the granting of a Rule 13(h) motion would not always result in the filing of a complaint, since the plaintiff could voluntarily dismiss its complaint instead and thereby prevent the filing of a counterclaim. Id. at 10-11. 4.Tenacious’s View of Rule IS Encourages Inefficiency The government also points out that adopting the view of Rule 13 espoused by Tenacious would encourage gamesmanship by litigants before the CIT. Id. at 11. An importer anticipating a penalty claim, for instance, could file a classification claim and subsequently delay filing its complaint as long as possible “in the hope that the statute of limitations would

action. The government gives four reasons this claim should fail: Rule 13(h) does not indicate that a failure to file a Rule 13(h) motion waives claims; Rule 13(h) permits the filing of a motion for the lodging of a complaint, but does not require it; since the Court can deny a Rule 13(h) motion, using such a motion to force filing of a complaint cannot be a mandatory prerequisite for asserting a claim; and even the granting of a Rule 13(h) motion would not always result in the filing of a complaint, since the plaintiff could voluntarily dismiss its complaint instead and thereby prevent the filing of a counterclaim. Id. at 10-11. 4.Tenacious’s View of Rule IS Encourages Inefficiency The government also points out that adopting the view of Rule 13 espoused by Tenacious would encourage gamesmanship by litigants before the CIT. Id. at 11. An importer anticipating a penalty claim, for instance, could file a classification claim and subsequently delay filing its complaint as long as possible “in the hope that the statute of limitations would expire before the Government could file an answer.” Id. This and other potential gamesmanship permitted by Tenacious’s view of Rule 13 would reduce litigation fairness and efficiency. Id. 5.Authorities Counter Tenacious’s View of Rule 13 The government also notes that case law from this court has rejected prior attempts by importers to preclude later penalty actions based on prior classification decisions on the same entries, and to forestall or compel penalty actions. Id. at 12 (citing cases). Similarly, the government notes that 19 U.S.C. § 1621 allows five years for the filing of a penalty action, and that requiring such actions to be asserted as compulsory counterclaims to classification cases brought far earlier would nullify that statute of limitations. Id. at 13. Finally, the government notes that it already attempted to elicit a complaint in the Ergodyne case by opposing a request for an additional six month extension for the filing of a complaint, and suggests that taking such a step was effectively the same as filing a Rule 13(h) motion. Id. at 13-14. II. Analysis According to USCIT Rule

expire before the Government could file an answer.” Id. This and other potential gamesmanship permitted by Tenacious’s view of Rule 13 would reduce litigation fairness and efficiency. Id. 5.Authorities Counter Tenacious’s View of Rule 13 The government also notes that case law from this court has rejected prior attempts by importers to preclude later penalty actions based on prior classification decisions on the same entries, and to forestall or compel penalty actions. Id. at 12 (citing cases). Similarly, the government notes that 19 U.S.C. § 1621 allows five years for the filing of a penalty action, and that requiring such actions to be asserted as compulsory counterclaims to classification cases brought far earlier would nullify that statute of limitations. Id. at 13. Finally, the government notes that it already attempted to elicit a complaint in the Ergodyne case by opposing a request for an additional six month extension for the filing of a complaint, and suggests that taking such a step was effectively the same as filing a Rule 13(h) motion. Id. at 13-14. II. Analysis According to USCIT Rule 13(a), “[a] pleading must state as a counterclaim any claim that — at the time of its service — the pleader has against an opposing party if the claim (1) involves the imported merchandise that is the subject matter of the civil action, or (2) is to recover on a bond or customs duties relating to such merchandise” (emphasis added). The Court of International Trade rule parallels the compulsory counterclaim rule under the same number in the Federal Rules of Civil Procedure. As the Supreme Court has explained in the context of the Federal Rules, the compulsory counterclaim requirement “was designed to prevent multiplicity of actions and to achieve resolution in a single lawsuit of all disputes arising out of common matters. The Rule was particularly directed against one who failed to assert a counterclaim in one action and then instituted a second action in which that counterclaim became the basis of the complaint.” Southern Construction Co., Inc. v. Pickard, 371 U.S. 57, 60, 83 S.Ct. 108, 9 L.Ed.2d 31 (1962). This would typically take the form

13(a), “[a] pleading must state as a counterclaim any claim that — at the time of its service — the pleader has against an opposing party if the claim (1) involves the imported merchandise that is the subject matter of the civil action, or (2) is to recover on a bond or customs duties relating to such merchandise” (emphasis added). The Court of International Trade rule parallels the compulsory counterclaim rule under the same number in the Federal Rules of Civil Procedure. As the Supreme Court has explained in the context of the Federal Rules, the compulsory counterclaim requirement “was designed to prevent multiplicity of actions and to achieve resolution in a single lawsuit of all disputes arising out of common matters. The Rule was particularly directed against one who failed to assert a counterclaim in one action and then instituted a second action in which that counterclaim became the basis of the complaint.” Southern Construction Co., Inc. v. Pickard, 371 U.S. 57, 60, 83 S.Ct. 108, 9 L.Ed.2d 31 (1962). This would typically take the form of a defendant in hypothetical Lawsuit # 1 failing to plead an intimately connected claim as a counterclaim, then later initiating (as the plaintiff) hypothetic Lawsuit # 2 against the plaintiff in Lawsuit # 1 on the basis of the very claim never raised in Lawsuit #1. A litigant’s violation of Rule 13(a) in this manner, by failing to assert claims as compulsory counterclaims, “is usually applied in subsequent litigation on res judicata or estoppel principles.” Handy v. Shaw, Bransford, Veilleux & Roth, 325 F.3d 346, 350 (D.C.Cir.2003) (citing cases). In other words, referring back to the hypothetical example above, rather than asking the court to prevent Lawsuit #2 from continuing via an injunction or order of dismissal, the defendant in Lawsuit # 2 may claim that the matter has already been resolved in Lawsuit # 1 and avoid entry of a further judgment on the underlying transaction or occurrence via res judicata. See id. at 350-51. The current case is complicated by the Court of International Trade’s unique procedures for initiation of a suit brought

of a defendant in hypothetical Lawsuit # 1 failing to plead an intimately connected claim as a counterclaim, then later initiating (as the plaintiff) hypothetic Lawsuit # 2 against the plaintiff in Lawsuit # 1 on the basis of the very claim never raised in Lawsuit #1. A litigant’s violation of Rule 13(a) in this manner, by failing to assert claims as compulsory counterclaims, “is usually applied in subsequent litigation on res judicata or estoppel principles.” Handy v. Shaw, Bransford, Veilleux & Roth, 325 F.3d 346, 350 (D.C.Cir.2003) (citing cases). In other words, referring back to the hypothetical example above, rather than asking the court to prevent Lawsuit #2 from continuing via an injunction or order of dismissal, the defendant in Lawsuit # 2 may claim that the matter has already been resolved in Lawsuit # 1 and avoid entry of a further judgment on the underlying transaction or occurrence via res judicata. See id. at 350-51. The current case is complicated by the Court of International Trade’s unique procedures for initiation of a suit brought pursuant to 28 U.S.C. § 1581(a) or (b). Under the Federal Rules of Civil Procedure, “[a] civil action is commenced by filing a complaint with the court.” Fed.R.Civ.P. 3. In contrast, an action in the CIT to challenge Customs’ denial of a protest is initiated by filing of a summons only, which comprises the initial pleading in such actions. 28 U.S.C. § 2632(b); USCIT Rule 3(a)(1); DaimlerChrysler Corp. v. United States, 442 F.3d 1313, 1317-18 (Fed.Cir.2006) (concluding that “the initial pleading in actions to contest the denial of a protest is the summons”). The Ergodyne case, in which Tenacious is the plaintiff under its former name of Ergodyne, challenges Customs’ denial of a protest and was, accordingly, initiated by the filing of a summons as the initial pleading, even though no complaint was filed at that time. See Docket, Court No. 10-00200. This unique procedure for initiating suit made a difference here because, under US-CIT Rule 7(a)(2), an answer can only be filed in response to a complaint and thus cannot be filed until such time

pursuant to 28 U.S.C. § 1581(a) or (b). Under the Federal Rules of Civil Procedure, “[a] civil action is commenced by filing a complaint with the court.” Fed.R.Civ.P. 3. In contrast, an action in the CIT to challenge Customs’ denial of a protest is initiated by filing of a summons only, which comprises the initial pleading in such actions. 28 U.S.C. § 2632(b); USCIT Rule 3(a)(1); DaimlerChrysler Corp. v. United States, 442 F.3d 1313, 1317-18 (Fed.Cir.2006) (concluding that “the initial pleading in actions to contest the denial of a protest is the summons”). The Ergodyne case, in which Tenacious is the plaintiff under its former name of Ergodyne, challenges Customs’ denial of a protest and was, accordingly, initiated by the filing of a summons as the initial pleading, even though no complaint was filed at that time. See Docket, Court No. 10-00200. This unique procedure for initiating suit made a difference here because, under US-CIT Rule 7(a)(2), an answer can only be filed in response to a complaint and thus cannot be filed until such time as a complaint is filed. Eastalco Aluminum Co. v. United States, 14 CIT 724, 734, 750 F.Supp. 1135, 1142-43 (1990). Indeed, suits are initiated by complaint in the district courts and defendants may file an answer in response as soon as they like, but a plaintiff in a CIT classification case may, by rule, delay filing its complaint for over 18 months after commencement of suit. USCIT Rule 83(a) (providing 18 months for filing complaint, calculated from end of month in which summons was filed). This lengthy period for filing of a complaint can also be extended, with no explicit time limitations imposed on such extensions. USCIT Rule 83(d). In the Ergodyne case, the time for filing of a complaint was extended repeatedly — on one occasion, over the government’s opposition; the complaint was not filed until February 22, 2013, after the present motion was under submission to the Court for decision. See Docket, Court No. 10-00200. In the case before the Court, these procedural features of CIT classification lawsuits conspired to create a dilemma for

as a complaint is filed. Eastalco Aluminum Co. v. United States, 14 CIT 724, 734, 750 F.Supp. 1135, 1142-43 (1990). Indeed, suits are initiated by complaint in the district courts and defendants may file an answer in response as soon as they like, but a plaintiff in a CIT classification case may, by rule, delay filing its complaint for over 18 months after commencement of suit. USCIT Rule 83(a) (providing 18 months for filing complaint, calculated from end of month in which summons was filed). This lengthy period for filing of a complaint can also be extended, with no explicit time limitations imposed on such extensions. USCIT Rule 83(d). In the Ergodyne case, the time for filing of a complaint was extended repeatedly — on one occasion, over the government’s opposition; the complaint was not filed until February 22, 2013, after the present motion was under submission to the Court for decision. See Docket, Court No. 10-00200. In the case before the Court, these procedural features of CIT classification lawsuits conspired to create a dilemma for the government: while the Ergodyne case sat dormant for well over two years, the statute of limitations for the government to sue for recovery of civil penalties expired as to several of Tenacious’s entries that were allegedly misclassified by negligence. This meant that the government faced the need to take action to preserve its access to legal remedies. The government then initiated this penalty suit. The government presents a tempting but ultimately flawed argument: that the language of USCIT Rule 13(a) only imposes requirements at the moment a pleading is filed, and therefore could not apply to the government because its time to answer in the Ergodyne case did not arise under May 9, 2013 (its deadline to answer). This argument appears at first blush to be supported by this passage in USCIT Rule 13(a): “a pleading must state as a counterclaim any claims that — at the time of its service — the pleader has against an opposing party” (emphasis added). This language lends itself to a reading that the rule’s obligation is strictly pinned

the government: while the Ergodyne case sat dormant for well over two years, the statute of limitations for the government to sue for recovery of civil penalties expired as to several of Tenacious’s entries that were allegedly misclassified by negligence. This meant that the government faced the need to take action to preserve its access to legal remedies. The government then initiated this penalty suit. The government presents a tempting but ultimately flawed argument: that the language of USCIT Rule 13(a) only imposes requirements at the moment a pleading is filed, and therefore could not apply to the government because its time to answer in the Ergodyne case did not arise under May 9, 2013 (its deadline to answer). This argument appears at first blush to be supported by this passage in USCIT Rule 13(a): “a pleading must state as a counterclaim any claims that — at the time of its service — the pleader has against an opposing party” (emphasis added). This language lends itself to a reading that the rule’s obligation is strictly pinned to the moment of service of the answer and does not exist at other times. Such is the reading offered by the government. But the reading cannot be correct, because such an interpretation would undercut the core reason that the rule was implemented in the first place. As the Supreme Court stated in Southern Construction, Rule 13(a) of the Federal Rules of Civil Procedure “was designed to prevent multiplicity of actions,” and in particular to prevent a party that failed to assert a counterclaim from later initiating separate litigation on the basis of that claim. 371 U.S. at 60, 83 S.Ct. 108. But if the time of the Rule 13(a) obligation were read narrowly, the rule could no longer serve its purpose; every defendant could commence a collateral lawsuit based on the same imported merchandise, so long as it filed the collateral suit between the commencement of the primary suit and the deadline for answering. A too-narrow reading of the timing of Rule 13(a) would thus render the rule void, and must be rejected as

to the moment of service of the answer and does not exist at other times. Such is the reading offered by the government. But the reading cannot be correct, because such an interpretation would undercut the core reason that the rule was implemented in the first place. As the Supreme Court stated in Southern Construction, Rule 13(a) of the Federal Rules of Civil Procedure “was designed to prevent multiplicity of actions,” and in particular to prevent a party that failed to assert a counterclaim from later initiating separate litigation on the basis of that claim. 371 U.S. at 60, 83 S.Ct. 108. But if the time of the Rule 13(a) obligation were read narrowly, the rule could no longer serve its purpose; every defendant could commence a collateral lawsuit based on the same imported merchandise, so long as it filed the collateral suit between the commencement of the primary suit and the deadline for answering. A too-narrow reading of the timing of Rule 13(a) would thus render the rule void, and must be rejected as counter to the underlying purpose of the rule. It is likely for this reason that courts have indicated that the counterclaim obligation arises upon commencement of suit, so that all claims must be asserted in the first-commenced action. Yet this reading, espoused by Tenacious, also leads to absurd results: when combined with the procedure for commencement of suit by summons, defendants are left unable to answer for over 18 months and are thus unable to assert any counterclaims as the statute of limitations period winds down. Tenacious offers a solution: the defendant with a counterclaim that cannot be brought should be required to file a US-CIT Rule 13(h) motion for a court order forcing the plaintiff to file its complaint, after which the defendant will be able to answer and assert its counterclaim. The Court rejects this reading of USCIT Rule 13 as manifestly unfair, since it would perversely allow plaintiffs to force defendants into motion practice just for the opportunity to file an answer. The Court agrees with the government that such an interpretation would open

counter to the underlying purpose of the rule. It is likely for this reason that courts have indicated that the counterclaim obligation arises upon commencement of suit, so that all claims must be asserted in the first-commenced action. Yet this reading, espoused by Tenacious, also leads to absurd results: when combined with the procedure for commencement of suit by summons, defendants are left unable to answer for over 18 months and are thus unable to assert any counterclaims as the statute of limitations period winds down. Tenacious offers a solution: the defendant with a counterclaim that cannot be brought should be required to file a US-CIT Rule 13(h) motion for a court order forcing the plaintiff to file its complaint, after which the defendant will be able to answer and assert its counterclaim. The Court rejects this reading of USCIT Rule 13 as manifestly unfair, since it would perversely allow plaintiffs to force defendants into motion practice just for the opportunity to file an answer. The Court agrees with the government that such an interpretation would open the door to procedural abuses in which plaintiffs could attempt to quell their defendants’ claims by delaying the defendants’ ability to answer and forcing them to incur the costs of motion practice simply to be able to answer the suit against them. The Court also agrees with the government that there is further cause for rejecting this argument because USCIT Rule 13(h) provides no guarantee that a motion brought to force the filing of a complaint will be granted. The Court has not located any authority directly on point to resolving this issue, and the parties have not alerted the Court to any such authority. However, other courts have resolved disputes requiring application of USCIT Rule 13(a) (or its analog in the Federal Rules of Civil Procedure) in circumstances that make those opinions instructive. Perhaps most relevant is Southern Construction. In Southern Construction, the Supreme Court addresses a situation created by a specific statutory arrangement under which the plaintiff “was required ... to split [his] claims and to bring two separate actions in two different districts.”

the door to procedural abuses in which plaintiffs could attempt to quell their defendants’ claims by delaying the defendants’ ability to answer and forcing them to incur the costs of motion practice simply to be able to answer the suit against them. The Court also agrees with the government that there is further cause for rejecting this argument because USCIT Rule 13(h) provides no guarantee that a motion brought to force the filing of a complaint will be granted. The Court has not located any authority directly on point to resolving this issue, and the parties have not alerted the Court to any such authority. However, other courts have resolved disputes requiring application of USCIT Rule 13(a) (or its analog in the Federal Rules of Civil Procedure) in circumstances that make those opinions instructive. Perhaps most relevant is Southern Construction. In Southern Construction, the Supreme Court addresses a situation created by a specific statutory arrangement under which the plaintiff “was required ... to split [his] claims and to bring two separate actions in two different districts.” 371 U.S. at 60, 83 S.Ct. 108. The court decided that Rule 13(a) of the Federal Rules of Civil Procedure “did not compel this counterclaim to be made in whichever of the two suits the first responsive pleading was filed.” Id. at 61, 83 S.Ct. 108. To reach this conclusion, the court noted that Rule 13(a) “was designed to prevent multiplicity of actions,” and in particular to prevent a party that failed to assert a counterclaim from later initiating separate litigation on the basis of that claim. Id. at 60, 83 S.Ct. 108. Considering the policy and purpose behind Rule 13(a), the court permitted the claim to go forward because it found no sign of the “circuity of action that Rule 13(a) was aimed at preventing,” since the plaintiffs bringing of multiple actions was required by statute. Id. at 61, 83 S.Ct. 108. Southern Construction shows that it is the purpose of the compulsory counterclaim rule that must be the ultimate touchstone in resolving a case in which procedural idiosyncrasies cloud proper application of the rule.

371 U.S. at 60, 83 S.Ct. 108. The court decided that Rule 13(a) of the Federal Rules of Civil Procedure “did not compel this counterclaim to be made in whichever of the two suits the first responsive pleading was filed.” Id. at 61, 83 S.Ct. 108. To reach this conclusion, the court noted that Rule 13(a) “was designed to prevent multiplicity of actions,” and in particular to prevent a party that failed to assert a counterclaim from later initiating separate litigation on the basis of that claim. Id. at 60, 83 S.Ct. 108. Considering the policy and purpose behind Rule 13(a), the court permitted the claim to go forward because it found no sign of the “circuity of action that Rule 13(a) was aimed at preventing,” since the plaintiffs bringing of multiple actions was required by statute. Id. at 61, 83 S.Ct. 108. Southern Construction shows that it is the purpose of the compulsory counterclaim rule that must be the ultimate touchstone in resolving a case in which procedural idiosyncrasies cloud proper application of the rule. Here, as in Southern Construction, statutory quirks make straight-forward application of Rule 13(a) impossible. In Southern Construction, those quirks required filing of actions in separate districts. In this case, a perfect storm was created by the requirement that a complaint be filed before a counterclaim may be lodged, the compulsory counterclaim rule, and the extensive delay provided in the rules between commencement of the action and filing of the complaint in the Ergodyne case. And here, as in Southern Construction, there are two lawsuits related to the same underlying substance, but there is no circuity of action by the party who has failed to lodge its claims as counterclaims. Given the lack of activity in the Ergodyne case, the Court rejects any notion that the government filed the Tenacious case as a means of opening multiple parallel litigation to engage in the gamesmanship that Rule 13(a) was designed to eliminate. The Court will therefore deny Tenacious’s motion to dismiss. This result also accords with the generally agreed upon principal that Rule 13(a) operates by res judicata to

Here, as in Southern Construction, statutory quirks make straight-forward application of Rule 13(a) impossible. In Southern Construction, those quirks required filing of actions in separate districts. In this case, a perfect storm was created by the requirement that a complaint be filed before a counterclaim may be lodged, the compulsory counterclaim rule, and the extensive delay provided in the rules between commencement of the action and filing of the complaint in the Ergodyne case. And here, as in Southern Construction, there are two lawsuits related to the same underlying substance, but there is no circuity of action by the party who has failed to lodge its claims as counterclaims. Given the lack of activity in the Ergodyne case, the Court rejects any notion that the government filed the Tenacious case as a means of opening multiple parallel litigation to engage in the gamesmanship that Rule 13(a) was designed to eliminate. The Court will therefore deny Tenacious’s motion to dismiss. This result also accords with the generally agreed upon principal that Rule 13(a) operates by res judicata to bar future suits pursued after judgment, but does not serve as a basis for preventing the government from pursuing its claims prior to either case reaching judgment. See Handy, supra, 325 F.3d at 350-51 (citing cases to support conclusion that compulsory counterclaim rule is applied in “subsequent litigation on res judicata or estoppel principles”). The Court also points out that, to the extent either party still wishes to litigate the issues in the Ergodyne and Tenacious cases together, that party may file a motion requesting that the Court consolidate the actions under USCIT Rule 42(a)(2). Given that Rule 42 provides an avenue for merging the two cases and treating them together, it appears that Tenacious will not be prejudiced by any error, however unlikely, that may exist the Court’s denial of the present motion to dismiss. Conclusion The Court has carefully considered the remainder of the contentions of the parties and does not believe they require further discussion. As a result of the considerations detailed above, the Court holds that USCIT Rule 13(a) does not bar the government

bar future suits pursued after judgment, but does not serve as a basis for preventing the government from pursuing its claims prior to either case reaching judgment. See Handy, supra, 325 F.3d at 350-51 (citing cases to support conclusion that compulsory counterclaim rule is applied in “subsequent litigation on res judicata or estoppel principles”). The Court also points out that, to the extent either party still wishes to litigate the issues in the Ergodyne and Tenacious cases together, that party may file a motion requesting that the Court consolidate the actions under USCIT Rule 42(a)(2). Given that Rule 42 provides an avenue for merging the two cases and treating them together, it appears that Tenacious will not be prejudiced by any error, however unlikely, that may exist the Court’s denial of the present motion to dismiss. Conclusion The Court has carefully considered the remainder of the contentions of the parties and does not believe they require further discussion. As a result of the considerations detailed above, the Court holds that USCIT Rule 13(a) does not bar the government from pursuing its penalty claims via the Tenacious case. In consequence of that finding, it is hereby ORDERED that Defendant’s motion to dismiss is denied. . Because Tenacious is the successor in interest to Ergodyne, the parties will both be referred to in this opinion as “Tenacious” for ease of reference. . The Ergodyne case is currently pending on the CIT reserve calendar and has not yet been assigned to a judge. . For the description of the history of the Ergodyne case, see generally Docket, Court No. 10-00200. . At the time Tenacious asserted this argument in its motion to dismiss the Tenacious action, the Ergodyne action lay dormant on the reserve calendar, no complaint having been filed. This was a direct result of the Court’s grant of Tenacious’s motion for an extension in the Ergodyne case over the government’s objection. .Unless otherwise specified, all statutes are cited to the 2006 edition of the United States Code. . In the United States district courts, "[a] pleading must state as a counterclaim any claim that — at the time of its service

from pursuing its penalty claims via the Tenacious case. In consequence of that finding, it is hereby ORDERED that Defendant’s motion to dismiss is denied. . Because Tenacious is the successor in interest to Ergodyne, the parties will both be referred to in this opinion as “Tenacious” for ease of reference. . The Ergodyne case is currently pending on the CIT reserve calendar and has not yet been assigned to a judge. . For the description of the history of the Ergodyne case, see generally Docket, Court No. 10-00200. . At the time Tenacious asserted this argument in its motion to dismiss the Tenacious action, the Ergodyne action lay dormant on the reserve calendar, no complaint having been filed. This was a direct result of the Court’s grant of Tenacious’s motion for an extension in the Ergodyne case over the government’s objection. .Unless otherwise specified, all statutes are cited to the 2006 edition of the United States Code. . In the United States district courts, "[a] pleading must state as a counterclaim any claim that — at the time of its service — the pleader has against an opposing party if the claim: (A) arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim; and (B) does not require adding another party over whom the court cannot acquire jurisdiction.” Fed.R.Civ.P. 13(a).

MEMORANDUM OPINION AND ORDER JEFFREY COLE, United States Magistrate Judge. The plaintiff, Hach Company (“Hach”), seeks to hold the defendants, John Ichiro Takayama and Hakuto Co., Ltd. (“Hakuto Japan”), liable for their claimed breach of an indemnification agreement that Hakuto Japan’s purported alter ego, Hakuto America, had with Hach. Hach had purchased a company, Anatel, from Hakuto America (and others) and was promptly sued for patent infringement on the basis of Anatel products. Six months after the infringement suit was filed, Hakuto America was dissolved. Hach eventually settled with the patent holder and wants Hakuto Japan to follow through on its former subsidiary’s obligations. It also charges Mr. Takayama, a former Hakuto America director, with violating Illinois law by failing to notify creditors that Hakuto America was being dissolved. On October 14, 2010, defendants both filed motions to dismiss for lack of personal jurisdiction. (Dkt.# 29, # 32). The hearing on the motion was set for October 19, 2010, at which time Hach would have pointed out that the motions were based on the affidavits of defendants Mr. Takayama and Hakuto Japan’s vice president, Shinkichi Suzuki and, therefore, it needed discovery to respond. Judge Manning canceled the hearing on the motion, however, and ordered Hach to respond to defendants’ dismissal motions by November 9, 2010. (Dkt. # 35). It is important at the outset to emphasize that this is a matter about discovery into the question of personal jurisdiction; it is not about determining whether personal jurisdiction exists, whether Hach has failed to state a claim against either of the defendants, or whether the defendants have a valid motion to dismiss under Fed. R.Civ.P. 12(b)(2). The defendants’ 12(b)(2) motion was already denied, although without prejudice, and was never even fully briefed. In other words, the parties’ positions have never even had the benefit of a full development. The motion to dismiss and the question of personal jurisdiction are not a part of the referral, nor could they have been. See 28 U.S.C. § 636(b)(1)(A); Fed.R.Civ.P. 72. I am without authority to decide those questions and, as it turns out, need not do so to

Takayama and Hakuto Japan’s vice president, Shinkichi Suzuki and, therefore, it needed discovery to respond. Judge Manning canceled the hearing on the motion, however, and ordered Hach to respond to defendants’ dismissal motions by November 9, 2010. (Dkt. # 35). It is important at the outset to emphasize that this is a matter about discovery into the question of personal jurisdiction; it is not about determining whether personal jurisdiction exists, whether Hach has failed to state a claim against either of the defendants, or whether the defendants have a valid motion to dismiss under Fed. R.Civ.P. 12(b)(2). The defendants’ 12(b)(2) motion was already denied, although without prejudice, and was never even fully briefed. In other words, the parties’ positions have never even had the benefit of a full development. The motion to dismiss and the question of personal jurisdiction are not a part of the referral, nor could they have been. See 28 U.S.C. § 636(b)(1)(A); Fed.R.Civ.P. 72. I am without authority to decide those questions and, as it turns out, need not do so to resolve a discovery dispute. It is necessary to take note of the limited nature of my jurisdiction and of Judge Manning’s referral because the defendants have focused a good deal of their arguments on these types of extraneous matters, rather than focusing exclusively on the narrower matter at hand. 1. For the most part, the background facts of this dispute are drawn from Hach’s second amended complaint. Hakuto Japan was Hakuto America’s parent corporation. Hakuto America was an Illinois corporation with its principle place of business in Illinois. Mr. Takayama was on its board of directors during the period pertinent to the allegations of Hach’s second amended complaint. Hach claims that Hakuto Japan fraudulently refused to fulfill contractual indemnification obligations incurred by its wholly owned subsidiary, Hakuto America, after having appropriated to itself the millions of dollars that the subsidiary received in consideration for that obligation. Because Hakuto Japan dissolved Hakuto America over 5 years ago, it could not be served or sued. But as Hach would have it, Hakuto Japan is Hakuto America’s alter ego for

resolve a discovery dispute. It is necessary to take note of the limited nature of my jurisdiction and of Judge Manning’s referral because the defendants have focused a good deal of their arguments on these types of extraneous matters, rather than focusing exclusively on the narrower matter at hand. 1. For the most part, the background facts of this dispute are drawn from Hach’s second amended complaint. Hakuto Japan was Hakuto America’s parent corporation. Hakuto America was an Illinois corporation with its principle place of business in Illinois. Mr. Takayama was on its board of directors during the period pertinent to the allegations of Hach’s second amended complaint. Hach claims that Hakuto Japan fraudulently refused to fulfill contractual indemnification obligations incurred by its wholly owned subsidiary, Hakuto America, after having appropriated to itself the millions of dollars that the subsidiary received in consideration for that obligation. Because Hakuto Japan dissolved Hakuto America over 5 years ago, it could not be served or sued. But as Hach would have it, Hakuto Japan is Hakuto America’s alter ego for purposes of the indemnity obligations. As a director of Hakuto America, Defendant Takayama was obligated by Illinois law to notify creditors of Hakuto America’s dissolution. He failed to give that notice, perpetuating by omission, so the plaintiffs theory goes, the misleading impression that Hakuto America would meet its obligations. All this began with a stock purchase transaction between Hach and Hakuto America about ten years ago. On May 20, 2001, Hach acquired Anatel Corporation (“Anatel”), a Colorado high-tech manufacturer, in a stock purchase agreement with the four largest Anatel shareholders. The largest was Hakuto America, which acquired its Anatel stock from its parent corporation, Hakuto Japan. Hakuto America paid no consideration for the stock. The decision to sell to Hach came directly from Hakuto Japan — Hakuto America played no part in it. (Second Amended Complaint, ¶ 39). As part of the transaction, the four largest Anatel shareholders agreed to indemnify Hach for a variety of claims and liabilities, including patent infringement suits. Hach paid Hakuto America in excess of $6 million for its Anatel stock

purposes of the indemnity obligations. As a director of Hakuto America, Defendant Takayama was obligated by Illinois law to notify creditors of Hakuto America’s dissolution. He failed to give that notice, perpetuating by omission, so the plaintiffs theory goes, the misleading impression that Hakuto America would meet its obligations. All this began with a stock purchase transaction between Hach and Hakuto America about ten years ago. On May 20, 2001, Hach acquired Anatel Corporation (“Anatel”), a Colorado high-tech manufacturer, in a stock purchase agreement with the four largest Anatel shareholders. The largest was Hakuto America, which acquired its Anatel stock from its parent corporation, Hakuto Japan. Hakuto America paid no consideration for the stock. The decision to sell to Hach came directly from Hakuto Japan — Hakuto America played no part in it. (Second Amended Complaint, ¶ 39). As part of the transaction, the four largest Anatel shareholders agreed to indemnify Hach for a variety of claims and liabilities, including patent infringement suits. Hach paid Hakuto America in excess of $6 million for its Anatel stock and its indemnification. Besides Hakuto America, there were three other indemnifying shareholders: Howard Selby, Michael Stranahan, and Jack Yama mori. Hakuto America also entered into a contribution and administration agreement with those three individual shareholders, promising that in the event of an indemnification claim by Hach, Hakuto America would pay its proportionate share of defense costs and any judgment. (Second Amended Complaint, ¶¶ 11-19, 42; Dkt. # 42, Exs. 6-8). In 2002, Hach was sued in Colorado federal court for patent infringement, along with Anatel. Sievers Instruments, Inc. v. Hach Company et al., Civil Action No. 02-K-0775. The parties eventually settled. (Second Amended Complaint, ¶¶ 28-36). When Hach wrote to the indemnifying shareholders designated representative, James Leidich, requesting they make good on their promises, it was rebuffed. Moreover, although Hakuto America had already been dissolved at the time, Mr. Leidich indicated he was acting on behalf of Hakuto America and the three individual shareholders. He closed his communication by referring Hach to “Thomas McMenamin, special counsel to Hakuto America, for further correspondence.” (Dkt. #42, Exs. 10-11).

and its indemnification. Besides Hakuto America, there were three other indemnifying shareholders: Howard Selby, Michael Stranahan, and Jack Yama mori. Hakuto America also entered into a contribution and administration agreement with those three individual shareholders, promising that in the event of an indemnification claim by Hach, Hakuto America would pay its proportionate share of defense costs and any judgment. (Second Amended Complaint, ¶¶ 11-19, 42; Dkt. # 42, Exs. 6-8). In 2002, Hach was sued in Colorado federal court for patent infringement, along with Anatel. Sievers Instruments, Inc. v. Hach Company et al., Civil Action No. 02-K-0775. The parties eventually settled. (Second Amended Complaint, ¶¶ 28-36). When Hach wrote to the indemnifying shareholders designated representative, James Leidich, requesting they make good on their promises, it was rebuffed. Moreover, although Hakuto America had already been dissolved at the time, Mr. Leidich indicated he was acting on behalf of Hakuto America and the three individual shareholders. He closed his communication by referring Hach to “Thomas McMenamin, special counsel to Hakuto America, for further correspondence.” (Dkt. #42, Exs. 10-11). Hach filed suit against all four of the shareholders in Colorado state court for breach of contract and only then discovered that Hakuto America had been dissolved shortly after the Sievers lawsuit began. Hach had to dismiss Hakuto America as a defendant in the Colorado suit and was left to pursue its remedy against the remaining three shareholders. That suit has since been resolved, but Hach does not indicate the outcome. (Second Amended Complaint, ¶ 33-35). Hakuto America was dissolved on September 26, 2002, seventeen months after the sale of its Anatel stock. The articles of dissolution were signed by Tokiashi Hirai as president of the corporation. (Dkt.# 42, Ex. 9). Hach alleges that Hakuto Japan’s president and founder, Shigeo Takayama, was the ultimate decision-maker as to Hakuto America’s activities. CSecond Amended Complaint, ¶ 38). According to the testimony of the man who preceded Mr. Hirai as President of Hakuto America, Thomas Kastner — Hakuto America’s president — Mr. Hirai was, at the same time, the president of Hakuto Japan as well. (Dkt. # 42, Ex.

Hach filed suit against all four of the shareholders in Colorado state court for breach of contract and only then discovered that Hakuto America had been dissolved shortly after the Sievers lawsuit began. Hach had to dismiss Hakuto America as a defendant in the Colorado suit and was left to pursue its remedy against the remaining three shareholders. That suit has since been resolved, but Hach does not indicate the outcome. (Second Amended Complaint, ¶ 33-35). Hakuto America was dissolved on September 26, 2002, seventeen months after the sale of its Anatel stock. The articles of dissolution were signed by Tokiashi Hirai as president of the corporation. (Dkt.# 42, Ex. 9). Hach alleges that Hakuto Japan’s president and founder, Shigeo Takayama, was the ultimate decision-maker as to Hakuto America’s activities. CSecond Amended Complaint, ¶ 38). According to the testimony of the man who preceded Mr. Hirai as President of Hakuto America, Thomas Kastner — Hakuto America’s president — Mr. Hirai was, at the same time, the president of Hakuto Japan as well. (Dkt. # 42, Ex. 5, at 35-36). Mr. Takayama, the son of Hakuto Japan’s founder and then-chairman, was also a director of Hakuto America at this time. (Dkt. # 42, Ex. 5, at 41). Other Hakuto America board members also served on the board of Hakuto Japan, although they were “figureheads.” (Dkt. #42, Ex. 5, at 42-43). In fact, Hach believes that, at the time of Hakuto America’s dissolution, all of its directors were directors or officers of Hakuto Japan — but this is one of the items about which Hach hopes to gain discovery. Mr. Kastner also testified that the proceeds from the Anatel sale went to Hakuto America and then were “dividended” to Hakuto Japan. (Dkt. # 42, Ex. 5, at 37). Hach hopes to gain discovery regarding this. The individual shareholders were left in the dark as well. Colorado counsel for the individual indemnifying shareholders had informed Hach’s counsel that as late as 2008, Hakuto Japan continued to make payments to a legal defense fund, consistent with Hakuto America’s obligations under the Contribution Agreement. (Dkt.# 42, Ex. 14).

5, at 35-36). Mr. Takayama, the son of Hakuto Japan’s founder and then-chairman, was also a director of Hakuto America at this time. (Dkt. # 42, Ex. 5, at 41). Other Hakuto America board members also served on the board of Hakuto Japan, although they were “figureheads.” (Dkt. #42, Ex. 5, at 42-43). In fact, Hach believes that, at the time of Hakuto America’s dissolution, all of its directors were directors or officers of Hakuto Japan — but this is one of the items about which Hach hopes to gain discovery. Mr. Kastner also testified that the proceeds from the Anatel sale went to Hakuto America and then were “dividended” to Hakuto Japan. (Dkt. # 42, Ex. 5, at 37). Hach hopes to gain discovery regarding this. The individual shareholders were left in the dark as well. Colorado counsel for the individual indemnifying shareholders had informed Hach’s counsel that as late as 2008, Hakuto Japan continued to make payments to a legal defense fund, consistent with Hakuto America’s obligations under the Contribution Agreement. (Dkt.# 42, Ex. 14). After Hakuto America’s dissolution, some Hakuto entity — presumably Hakuto Japan — had to have been communicating with Masuda Funai in Illinois and directing that these payments be made. Hach predicts that discovery from the Colorado law firm — Ireland Staple-ton — will confirm that years after Hakuto America’s dissolution, Hakuto Japan continued to fulfill Hakuto America’s obligations to the other indemnifying shareholders. Hakuto Japan argues that Hach cannot establish personal jurisdiction over it because: Hakuto Japan does not conduct business in Illinois; it has no place of business in Illinois; it has no employees in Illinois; it owns no property or assets in Illinois; it does not sell goods or services in Illinois; it pays no taxes in Illinois; and it was not a party to or involved in the negotiation of the stock purchase agreement or indemnification provisions that underlie this litigation. (S. Suzuki Declaration). Similarly, they assert that Mr. Takayama: has never lived or worked in Illinois; has resided and been employed exclusively in California; has never owned a business in Illinois; has

After Hakuto America’s dissolution, some Hakuto entity — presumably Hakuto Japan — had to have been communicating with Masuda Funai in Illinois and directing that these payments be made. Hach predicts that discovery from the Colorado law firm — Ireland Staple-ton — will confirm that years after Hakuto America’s dissolution, Hakuto Japan continued to fulfill Hakuto America’s obligations to the other indemnifying shareholders. Hakuto Japan argues that Hach cannot establish personal jurisdiction over it because: Hakuto Japan does not conduct business in Illinois; it has no place of business in Illinois; it has no employees in Illinois; it owns no property or assets in Illinois; it does not sell goods or services in Illinois; it pays no taxes in Illinois; and it was not a party to or involved in the negotiation of the stock purchase agreement or indemnification provisions that underlie this litigation. (S. Suzuki Declaration). Similarly, they assert that Mr. Takayama: has never lived or worked in Illinois; has resided and been employed exclusively in California; has never owned a business in Illinois; has never owned property in Illinois; conducts no business in Illinois. His claims his last visit to Illinois was in March of 2003 to attend a conference held by the American Academy of Pediatrics; and that his only visit to Illinois concerning the business of Hakuto America occurred in 2001 and was entirely unrelated to the subject Stock Purchase Agreement, the sale of Anatel shares, or the other allegations of Hach’s Complaint. (Takayama Declaration). As has been noted, much of this is belied by the allegations of the seconded amended complaint and what little evidence Hach has scraped together without discovery. In order to obtain discovery regarding the issue of personal jurisdiction, “ ‘[a]t a minimum, the plaintiff must establish a colorable or prima facie showing of personal jurisdiction ....’” GCIU-Employer Retirement Fund v. Goldfarb Corp., 565 F.3d 1018, 1026 (7th Cir.2009). It is left to the court’s discretion just what constitutes a “colorable” claim. Id., at 1026. In making that determination, the court must read the plaintiffs allegations liberally, drawing all reasonable inferences in the plaintiffs

never owned property in Illinois; conducts no business in Illinois. His claims his last visit to Illinois was in March of 2003 to attend a conference held by the American Academy of Pediatrics; and that his only visit to Illinois concerning the business of Hakuto America occurred in 2001 and was entirely unrelated to the subject Stock Purchase Agreement, the sale of Anatel shares, or the other allegations of Hach’s Complaint. (Takayama Declaration). As has been noted, much of this is belied by the allegations of the seconded amended complaint and what little evidence Hach has scraped together without discovery. In order to obtain discovery regarding the issue of personal jurisdiction, “ ‘[a]t a minimum, the plaintiff must establish a colorable or prima facie showing of personal jurisdiction ....’” GCIU-Employer Retirement Fund v. Goldfarb Corp., 565 F.3d 1018, 1026 (7th Cir.2009). It is left to the court’s discretion just what constitutes a “colorable” claim. Id., at 1026. In making that determination, the court must read the plaintiffs allegations liberally, drawing all reasonable inferences in the plaintiffs favor. Central States, Southeast and Southwest Areas Pension Fund v. Phencorp Reinsurance Co., Inc., 440 F.3d 870, 878 (7th Cir.2006). In a situation like this one, where the discovery is being sought from a foreign corporation based on its relationship to its American subsidiary, the Seventh Circuit has held that the plaintiff must at least “show[ ] that the [parent corporations] exercised an unusually high degree of control over [the subsidiary] or that corporate formalities were not substantially observed, or that [the parent] provided [more than] standard administrative services to [the subsidiary].” Reimer, 230 F.3d at 947. Absent that showing, there is not “a colorable basis for jurisdiction.” Id. The court has stressed that “[fjoreign nationals usually should not be subjected to extensive discovery in order to determine whether personal jurisdiction over them exists.” Reimer, 230 F.3d at 946. In Reimer, almost all of the plaintiffs evidence showed only that the foreign defendants were affiliated with ITCL, a Canadian corporation doing extensive business in the United States, without any showing that the defendants exercised an unusually

favor. Central States, Southeast and Southwest Areas Pension Fund v. Phencorp Reinsurance Co., Inc., 440 F.3d 870, 878 (7th Cir.2006). In a situation like this one, where the discovery is being sought from a foreign corporation based on its relationship to its American subsidiary, the Seventh Circuit has held that the plaintiff must at least “show[ ] that the [parent corporations] exercised an unusually high degree of control over [the subsidiary] or that corporate formalities were not substantially observed, or that [the parent] provided [more than] standard administrative services to [the subsidiary].” Reimer, 230 F.3d at 947. Absent that showing, there is not “a colorable basis for jurisdiction.” Id. The court has stressed that “[fjoreign nationals usually should not be subjected to extensive discovery in order to determine whether personal jurisdiction over them exists.” Reimer, 230 F.3d at 946. In Reimer, almost all of the plaintiffs evidence showed only that the foreign defendants were affiliated with ITCL, a Canadian corporation doing extensive business in the United States, without any showing that the defendants exercised an unusually high degree of control over ITCL or that corporate formalities were not substantially observed or that anything other than standard administrative services were pro vided to ITCL. That was not enough, the Seventh Circuit held. We begin with the case against Hakuto Japan. Distilling all of plaintiffs charges, it would seem that Hakuto Japan placed at least some of its directors on the board of Hakuto America. Having common directors or officers is generally a prerequisite to piercing the corporate veil, but it is not sufficient in and of itself. Judson Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec, 529 F.3d 371, 381 (7th Cir.2008). Beyond that, however, Hakuto Japan, through Shigeo Takayama, controlled Hakuto America’s activities, Anatel stock passed between Hakuto Japan and Hakuto America without payment, and Hakuto Japan controlled Hakuto America’s Anatel deal with Hach. These are factors to be considered in piercing the corporate veil. See Laborers’ Pension Fund v. Lay-Com, Inc., 580 F.3d 602, 611 (7th Cir.2009). Once it was consummated, Hakuto Japan siphoned off the proceeds of the deal with Hakuto America.

high degree of control over ITCL or that corporate formalities were not substantially observed or that anything other than standard administrative services were pro vided to ITCL. That was not enough, the Seventh Circuit held. We begin with the case against Hakuto Japan. Distilling all of plaintiffs charges, it would seem that Hakuto Japan placed at least some of its directors on the board of Hakuto America. Having common directors or officers is generally a prerequisite to piercing the corporate veil, but it is not sufficient in and of itself. Judson Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec, 529 F.3d 371, 381 (7th Cir.2008). Beyond that, however, Hakuto Japan, through Shigeo Takayama, controlled Hakuto America’s activities, Anatel stock passed between Hakuto Japan and Hakuto America without payment, and Hakuto Japan controlled Hakuto America’s Anatel deal with Hach. These are factors to be considered in piercing the corporate veil. See Laborers’ Pension Fund v. Lay-Com, Inc., 580 F.3d 602, 611 (7th Cir.2009). Once it was consummated, Hakuto Japan siphoned off the proceeds of the deal with Hakuto America. Hystro Products, Inc. v. MNP Corp., 18 F.3d 1384, 1389 (7th Cir.1994) holds that a parent’s use of its subsidiary’s assets as its own supports alter ego theory. Shortly after the deal closed, Hakuto Japan dissolved Hakuto America. That certainly seems suspicious, as if Hakuto America were little more than a conduit for cash flow to Hakuto Japan. Then, while hiding the fact that Hakuto America was no more, Hakuto Japan undertook the dissolved corporation’s obligations to pay into a defense fund under the Anatel stock purchase agreement. This, too, is significant. See Freeland v. Enodis Corp., 540 F.3d 721, 739 (7th Cir.2008) (commingling of affairs a factor in piercing the corporate veil). The cases Hakuto Japan points to do not direct a different result. (Defendants’ Opposition, at 6). None of them is about the showing — the “colorable claim” — that must be made to obtain discovery; all are about what the plaintiff must prove before the court will actually exercise personal jurisdiction. Even so, in McDougal v. Edwards, 1996 WL 385344 (N.D.Ill.1996), the court found

Hystro Products, Inc. v. MNP Corp., 18 F.3d 1384, 1389 (7th Cir.1994) holds that a parent’s use of its subsidiary’s assets as its own supports alter ego theory. Shortly after the deal closed, Hakuto Japan dissolved Hakuto America. That certainly seems suspicious, as if Hakuto America were little more than a conduit for cash flow to Hakuto Japan. Then, while hiding the fact that Hakuto America was no more, Hakuto Japan undertook the dissolved corporation’s obligations to pay into a defense fund under the Anatel stock purchase agreement. This, too, is significant. See Freeland v. Enodis Corp., 540 F.3d 721, 739 (7th Cir.2008) (commingling of affairs a factor in piercing the corporate veil). The cases Hakuto Japan points to do not direct a different result. (Defendants’ Opposition, at 6). None of them is about the showing — the “colorable claim” — that must be made to obtain discovery; all are about what the plaintiff must prove before the court will actually exercise personal jurisdiction. Even so, in McDougal v. Edwards, 1996 WL 385344 (N.D.Ill.1996), the court found that the plaintiff had not even asked for a piercing of the corporate veil in the complaint and refused to find an implied alter ego cause of action. 1996 WL 385344, *7. That is not the case here. And in Continental Insurance Co. v. Loewen Group, Inc., 1998 WL 142380 (N.D.Ill. 1998), the court refused to exercise personal jurisdiction on due process grounds because the plaintiff had alleged only that the parent corporation oversaw certain aspects of its subsidiary’s activities and derived no economic benefit from Illinois. 1998 WL 142380, *12. By contrast, Hakuto Japan extracted a sizeable economic benefit from Illinois when it siphoned off the proceeds of the Anatel sale from Hakuto America. And, as already noted, there are further factors at play. Finally, Judson Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec, 529 F.3d 371 (7th Cir.2008), which the defendants cite for the proposition that “[t]he exercise of personal jurisdiction based on alter ego grounds is not favored,” has nothing to do with personal jurisdiction. It is a summary judgment case where, “after extensive discovery,”

that the plaintiff had not even asked for a piercing of the corporate veil in the complaint and refused to find an implied alter ego cause of action. 1996 WL 385344, *7. That is not the case here. And in Continental Insurance Co. v. Loewen Group, Inc., 1998 WL 142380 (N.D.Ill. 1998), the court refused to exercise personal jurisdiction on due process grounds because the plaintiff had alleged only that the parent corporation oversaw certain aspects of its subsidiary’s activities and derived no economic benefit from Illinois. 1998 WL 142380, *12. By contrast, Hakuto Japan extracted a sizeable economic benefit from Illinois when it siphoned off the proceeds of the Anatel sale from Hakuto America. And, as already noted, there are further factors at play. Finally, Judson Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec, 529 F.3d 371 (7th Cir.2008), which the defendants cite for the proposition that “[t]he exercise of personal jurisdiction based on alter ego grounds is not favored,” has nothing to do with personal jurisdiction. It is a summary judgment case where, “after extensive discovery,” id. at 377, the court determined that the plaintiff was unable to establish its alter ego theory. Of course, all this is not to say that Hach has established personal jurisdiction over Hakuto Japan, but merely that it has made out a colorable claim. Not much more can be asked of it at this time because it has yet to engage in discovery. See Phencorp, 440 F.3d at 878 (“Since [plaintiff] was denied the opportunity to engage in discovery, it is not surprising that it can do little more than suggest that [defendant] currently has minimum contacts .... ”). All that its showing merits is limited discovery, narrowly targeted at this jurisdictional question. That means discovery will be limited to contacts with Illinois, where Hach has chosen to bring suit. Hakuto Japan’s activities throughout the United States — something that Hach says it will be targeting in its discovery— are not a part of this equation. Nor, based on what Hach has related in its motion, are events from as long ago as 1998. The discovery

id. at 377, the court determined that the plaintiff was unable to establish its alter ego theory. Of course, all this is not to say that Hach has established personal jurisdiction over Hakuto Japan, but merely that it has made out a colorable claim. Not much more can be asked of it at this time because it has yet to engage in discovery. See Phencorp, 440 F.3d at 878 (“Since [plaintiff] was denied the opportunity to engage in discovery, it is not surprising that it can do little more than suggest that [defendant] currently has minimum contacts .... ”). All that its showing merits is limited discovery, narrowly targeted at this jurisdictional question. That means discovery will be limited to contacts with Illinois, where Hach has chosen to bring suit. Hakuto Japan’s activities throughout the United States — something that Hach says it will be targeting in its discovery— are not a part of this equation. Nor, based on what Hach has related in its motion, are events from as long ago as 1998. The discovery should be limited to Hakuto Japan’s direction of the activities discussed herein: the Anatel deal, the distribution of the proceeds, the dissolution of Hakuto America, Hakuto Japan’s activities with respect to the defense fund, etc. Hach should redraft its inquiries with this in mind. If there are still disputes, the parties are advised that strict compliance with Fed.R.Civ.P. 37(a)(1) and Local Rule 37.2 will be required before any discovery motions will be entertained. The parties should also agree to deadlines and time limits for this exercise which should not be difficult since Hach represents that its discovery won’t take terribly long. (Memorandum of Law, at 3). As for Hakuto Japan, unamplified boilerplate objections, like “unduly burdensome” or “overly broad”, will be unacceptable, United Auto. Insurance v. Veluchamy, 2010 WL 749980, *5 (N.D.Ill.2010) (collecting cases), as will unsupported accusations of “fishing expedition.” Northwestern Memorial Hosp. v. Ashcroft, 362 F.3d 923, 931 (7th Cir.2004) (“... of course, pretrial discovery is a fishing expedition and one can’t know what one has caught until one fishes.”) (Posner, J.). Cf

should be limited to Hakuto Japan’s direction of the activities discussed herein: the Anatel deal, the distribution of the proceeds, the dissolution of Hakuto America, Hakuto Japan’s activities with respect to the defense fund, etc. Hach should redraft its inquiries with this in mind. If there are still disputes, the parties are advised that strict compliance with Fed.R.Civ.P. 37(a)(1) and Local Rule 37.2 will be required before any discovery motions will be entertained. The parties should also agree to deadlines and time limits for this exercise which should not be difficult since Hach represents that its discovery won’t take terribly long. (Memorandum of Law, at 3). As for Hakuto Japan, unamplified boilerplate objections, like “unduly burdensome” or “overly broad”, will be unacceptable, United Auto. Insurance v. Veluchamy, 2010 WL 749980, *5 (N.D.Ill.2010) (collecting cases), as will unsupported accusations of “fishing expedition.” Northwestern Memorial Hosp. v. Ashcroft, 362 F.3d 923, 931 (7th Cir.2004) (“... of course, pretrial discovery is a fishing expedition and one can’t know what one has caught until one fishes.”) (Posner, J.). Cf Hickman v. Taylor, 329 U.S. 495, 507-508, 67 S.Ct. 385, 91 L.Ed. 451 (1947) (“No longer can the time-honored cry of ‘fishing expedition’ serve to preclude a party from inquiring into the facts underlying his opponent’s case.”); U.S.O. Corp. v. Mizuho Holding Co., 547 F.3d 749, 754 (7th Cir.2008) (“In Japan, the trial itself blends the American trial equivalent with the American discovery equivalent. Granted, even between court hearings Japanese lawyers cannot conduct the indiscriminate and largely unsupervised fishing expeditions that characterize some American discovery.”). 2. That leaves Mr. Takayama. For the most part, Hach bases its personal jurisdiction argument regarding him on the fact that he was on Hakuto America’s board of directors and was, therefore, responsible for the corporation’s violation of Illinois law when it failed to notify creditors of its dissolution. 805 ILCS 5/8.65(2). Defendants argue that Illinois’ fiduciary shield doctrine prevents the court from granting discovery into the issue of personal jurisdiction over him based on his position as a director of Hakuto America because the doctrine prevents Illinois courts from taking personal

Hickman v. Taylor, 329 U.S. 495, 507-508, 67 S.Ct. 385, 91 L.Ed. 451 (1947) (“No longer can the time-honored cry of ‘fishing expedition’ serve to preclude a party from inquiring into the facts underlying his opponent’s case.”); U.S.O. Corp. v. Mizuho Holding Co., 547 F.3d 749, 754 (7th Cir.2008) (“In Japan, the trial itself blends the American trial equivalent with the American discovery equivalent. Granted, even between court hearings Japanese lawyers cannot conduct the indiscriminate and largely unsupervised fishing expeditions that characterize some American discovery.”). 2. That leaves Mr. Takayama. For the most part, Hach bases its personal jurisdiction argument regarding him on the fact that he was on Hakuto America’s board of directors and was, therefore, responsible for the corporation’s violation of Illinois law when it failed to notify creditors of its dissolution. 805 ILCS 5/8.65(2). Defendants argue that Illinois’ fiduciary shield doctrine prevents the court from granting discovery into the issue of personal jurisdiction over him based on his position as a director of Hakuto America because the doctrine prevents Illinois courts from taking personal jurisdiction over individuals who enter the state solely as the fiduciary of another, ISI Intern., Inc. v. Borden Ladner Gervais LLP, 256 F.3d 548, 550 (7th Cir.2001) (citing Rollins v. Ellwood, 141 Ill.2d 244, 278, 152 Ill.Dec. 384, 565 N.E.2d 1302, 1314 (1990)). The Illinois Supreme Court adopted the fiduciary shield doctrine in 1990 in Rollins v. Ellwood, which involved the question of jurisdiction over a Baltimore police officer, Ellwood, sent to Illinois to apprehend a suspect. The Illinois Supreme Court’s conclusion emphasized that it was not articulating some global pronouncement applicable to any corporate employee who came into contact with Illinois. Rather, the court focused on the unique situation that involved the officer’s coming into Illinois.: We find that it is not fair, just, and reasonable for the Illinois courts to assert personal jurisdiction over one in Ellwood’s situation. Ellwood entered into Illinois, and while in Illinois engaged in conduct giving rise to the present cause of action, solely in his capacity as a police officer acting for the Baltimore police department and the State of

jurisdiction over individuals who enter the state solely as the fiduciary of another, ISI Intern., Inc. v. Borden Ladner Gervais LLP, 256 F.3d 548, 550 (7th Cir.2001) (citing Rollins v. Ellwood, 141 Ill.2d 244, 278, 152 Ill.Dec. 384, 565 N.E.2d 1302, 1314 (1990)). The Illinois Supreme Court adopted the fiduciary shield doctrine in 1990 in Rollins v. Ellwood, which involved the question of jurisdiction over a Baltimore police officer, Ellwood, sent to Illinois to apprehend a suspect. The Illinois Supreme Court’s conclusion emphasized that it was not articulating some global pronouncement applicable to any corporate employee who came into contact with Illinois. Rather, the court focused on the unique situation that involved the officer’s coming into Illinois.: We find that it is not fair, just, and reasonable for the Illinois courts to assert personal jurisdiction over one in Ellwood’s situation. Ellwood entered into Illinois, and while in Illinois engaged in conduct giving rise to the present cause of action, solely in his capacity as a police officer acting for the Baltimore police department and the State of Maryland. The nature and quality of his actions in Illinois were characterized by his status as a police officer employed by these entities. Because Ellwood’s conduct in Illinois was a product of, and was motivated by, his employment situation and not his personal interests, we conclude that it would be unfair to use this conduct to assert personal jurisdiction over him as an individual. Rollins, 152 Ill.Dec. 384, 565 N.E.2d at 1318 (emphasis supplied). The police officer, of course, was not in a position remotely comparable to that of a director or corporate officer, with some measure of control over his duties and with some measure of authority over the affairs of his employer. Moreover, the Baltimore police department obviously was not headquartered in Chicago, as was Hakuto America, when Mr. Takayama voluntarily served on its board. Finally, unlike the situation presented in Rollins, there was ongoing sustained activity by Hakuto America (and its corporate officers and directors) in Illinois rather than an isolated contact between an employee with effectively no control over his duties. In

Maryland. The nature and quality of his actions in Illinois were characterized by his status as a police officer employed by these entities. Because Ellwood’s conduct in Illinois was a product of, and was motivated by, his employment situation and not his personal interests, we conclude that it would be unfair to use this conduct to assert personal jurisdiction over him as an individual. Rollins, 152 Ill.Dec. 384, 565 N.E.2d at 1318 (emphasis supplied). The police officer, of course, was not in a position remotely comparable to that of a director or corporate officer, with some measure of control over his duties and with some measure of authority over the affairs of his employer. Moreover, the Baltimore police department obviously was not headquartered in Chicago, as was Hakuto America, when Mr. Takayama voluntarily served on its board. Finally, unlike the situation presented in Rollins, there was ongoing sustained activity by Hakuto America (and its corporate officers and directors) in Illinois rather than an isolated contact between an employee with effectively no control over his duties. In sum, it simply cannot be said that Mr. Takayama is “one in Ellwood’s situation.” Rollins, 152 Ill. Dec. 384, 565 N.E.2d at 1318. 3. Moreover, the fiduciary shield doctrine, as it has often been applied, becomes a curious thing when one takes even a quick at Illinois’s long-arm statute: Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and, if an individual, his or her personal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any of such acts: The performance of duties as a director or officer of a corporation organized under the laws of this State or having its principal place of business within this State; 735 ILCS 5/2-209(a)(12). As alleged, the dissolution claim arises out of Mr. Takayama’s performance of his duties as a director of Hakuto America, which was an Illinois corporation with its principle place of business in Chicago. Hence, on the

sum, it simply cannot be said that Mr. Takayama is “one in Ellwood’s situation.” Rollins, 152 Ill. Dec. 384, 565 N.E.2d at 1318. 3. Moreover, the fiduciary shield doctrine, as it has often been applied, becomes a curious thing when one takes even a quick at Illinois’s long-arm statute: Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and, if an individual, his or her personal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any of such acts: The performance of duties as a director or officer of a corporation organized under the laws of this State or having its principal place of business within this State; 735 ILCS 5/2-209(a)(12). As alleged, the dissolution claim arises out of Mr. Takayama’s performance of his duties as a director of Hakuto America, which was an Illinois corporation with its principle place of business in Chicago. Hence, on the current record, the statute’s requirements for personal jurisdiction over Mr. Takayama are met. See Hollinger Intern., Inc. v. Hollinger Inc., 2005 WL 589000, *12-14 (N.D.Ill.2005). There certainly seems to be some tension between the fiduciary shield doctrine and the long-arm statute — or at least a conflict with the manner in which Mr. Takayama is trying to use it. But the apparent conflict vanishes upon proper analysis. Unfortunately, the defendants’ brief ignores the very existence of Illinois’ long-arm statute, with its uncompromisingly plain language that subjects corporate directors and officers of Illinois corporations to personal jurisdiction. (Defendants’ Opposition, at 4-5). The issue, squarely presented by the facts of this case, has been considered in other cases and in each the court has found the fiduciary shield doctrine inapplicable. See e.g., International Business Machines Corp. v. Martin Property & Cas. Insurance Agency, Inc., 281 Ill. App.3d 854, 862, 217 Ill.Dec. 197, 666 N.E.2d 866, 871 (1st Dist.1996) (finding that “a director and officer of an Illinois corporation ... tacitly accepted both the duties and the benefits conferred upon

current record, the statute’s requirements for personal jurisdiction over Mr. Takayama are met. See Hollinger Intern., Inc. v. Hollinger Inc., 2005 WL 589000, *12-14 (N.D.Ill.2005). There certainly seems to be some tension between the fiduciary shield doctrine and the long-arm statute — or at least a conflict with the manner in which Mr. Takayama is trying to use it. But the apparent conflict vanishes upon proper analysis. Unfortunately, the defendants’ brief ignores the very existence of Illinois’ long-arm statute, with its uncompromisingly plain language that subjects corporate directors and officers of Illinois corporations to personal jurisdiction. (Defendants’ Opposition, at 4-5). The issue, squarely presented by the facts of this case, has been considered in other cases and in each the court has found the fiduciary shield doctrine inapplicable. See e.g., International Business Machines Corp. v. Martin Property & Cas. Insurance Agency, Inc., 281 Ill. App.3d 854, 862, 217 Ill.Dec. 197, 666 N.E.2d 866, 871 (1st Dist.1996) (finding that “a director and officer of an Illinois corporation ... tacitly accepted both the duties and the benefits conferred upon him by Illinois law. His position with [the corporation] and the existence of the Illinois long-arm statute gave fair warning to [him] that he may one day be hailed into court here for his conduct as an officer or director. Indeed, any other conclusion would render meaningless the provisions of section 2-209(a)(12) of the long arm statute which provide explicitly for the exercise of jurisdiction over nonresident directors and officers ....”); Banwell v. Illinois College of Optometry, 981 F.Supp. 1137, 1142-43 (N.D.Ill.1997) (following IBM to find fiduciary shield doctrine inapplicable to directors of an Illinois corporation); People ex rel. Morse v. E & B Coal Co., Inc., 261 Ill.App.3d 738, 747, 199 Ill. Dec. 597, 634 N.E.2d 436, 442-43 (5th Dist. 1994) (fiduciary shield inapplicable where defendant “freely chose to accept a directorship ... with full knowledge that [company] was an Illinois corporation conducting a mining operation in Illinois.”); Household Commercial Financial Services, Inc. v. Trump, 1993 WL 389386, *8 (N.D.Ill.1993) (“... it is doubtful the fiduciary shield doctrine even applies, given that § 2-209(a)(12)

him by Illinois law. His position with [the corporation] and the existence of the Illinois long-arm statute gave fair warning to [him] that he may one day be hailed into court here for his conduct as an officer or director. Indeed, any other conclusion would render meaningless the provisions of section 2-209(a)(12) of the long arm statute which provide explicitly for the exercise of jurisdiction over nonresident directors and officers ....”); Banwell v. Illinois College of Optometry, 981 F.Supp. 1137, 1142-43 (N.D.Ill.1997) (following IBM to find fiduciary shield doctrine inapplicable to directors of an Illinois corporation); People ex rel. Morse v. E & B Coal Co., Inc., 261 Ill.App.3d 738, 747, 199 Ill. Dec. 597, 634 N.E.2d 436, 442-43 (5th Dist. 1994) (fiduciary shield inapplicable where defendant “freely chose to accept a directorship ... with full knowledge that [company] was an Illinois corporation conducting a mining operation in Illinois.”); Household Commercial Financial Services, Inc. v. Trump, 1993 WL 389386, *8 (N.D.Ill.1993) (“... it is doubtful the fiduciary shield doctrine even applies, given that § 2-209(a)(12) specifically provides that personal jurisdiction exists over a director of a corporation organized under the laws of Illinois or having its principle place of business in Illinois .... the fundamental fairness policies of the fiduciary shield doctrine are not implicated in the case of an individual who accepts a directorship of an Illinois company.”). These cases recognize the inherent limitations in the fiduciary shield doctrine— limitations adverted to by the Illinois Supreme Court in Rollins, where it said that neither fairness, justice, nor reasonableness allows for the assertion of personal jurisdiction by the Illinois courts “over one in [Police Officer] Ellwood’s situation.” As discussed above, corporate officers and directors could not be more dissimilarly situated from him. They freely assume their fiduciary duties; they have a range of choices and a freedom of action that, as a practical matter, Officer Ellwood never had. And. as with all volitional choices, there are consequences. By contrast, Officer Ellwood had no choice, at least as a practical matter, and he could not have envisioned, at the time he became

specifically provides that personal jurisdiction exists over a director of a corporation organized under the laws of Illinois or having its principle place of business in Illinois .... the fundamental fairness policies of the fiduciary shield doctrine are not implicated in the case of an individual who accepts a directorship of an Illinois company.”). These cases recognize the inherent limitations in the fiduciary shield doctrine— limitations adverted to by the Illinois Supreme Court in Rollins, where it said that neither fairness, justice, nor reasonableness allows for the assertion of personal jurisdiction by the Illinois courts “over one in [Police Officer] Ellwood’s situation.” As discussed above, corporate officers and directors could not be more dissimilarly situated from him. They freely assume their fiduciary duties; they have a range of choices and a freedom of action that, as a practical matter, Officer Ellwood never had. And. as with all volitional choices, there are consequences. By contrast, Officer Ellwood had no choice, at least as a practical matter, and he could not have envisioned, at the time he became a police officer, being sent into Illinois and thereby subjecting himself to suit in a place far from his home. Corporate officers and directors are fully aware at the time of the assumption of their duties that they will be acting on behalf of an entity that is either incorporated in Illinois or has its principle place of business here. In short, the underlying considerations of fairness that animate the fiduciary shield doctrine are not remotely implicated in cases involving corporate directors and officers. The cases cited above appear to be the only ones that have considered the fiduciary shield’s applicability in light of the long-arm statute’s specific reference in § 2-209(a)(12) to jurisdiction over non-resident officers and directors of Illinois corporations. Defendants have not cited a single case where the interplay between the fiduciary shield doctrine and the long-arm statute has been discussed where the statute did not trump the doctrine when applied to corporate officers and directors. And our independent research has not disclosed one. Cases that have applied the doctrine to directors or

a police officer, being sent into Illinois and thereby subjecting himself to suit in a place far from his home. Corporate officers and directors are fully aware at the time of the assumption of their duties that they will be acting on behalf of an entity that is either incorporated in Illinois or has its principle place of business here. In short, the underlying considerations of fairness that animate the fiduciary shield doctrine are not remotely implicated in cases involving corporate directors and officers. The cases cited above appear to be the only ones that have considered the fiduciary shield’s applicability in light of the long-arm statute’s specific reference in § 2-209(a)(12) to jurisdiction over non-resident officers and directors of Illinois corporations. Defendants have not cited a single case where the interplay between the fiduciary shield doctrine and the long-arm statute has been discussed where the statute did not trump the doctrine when applied to corporate officers and directors. And our independent research has not disclosed one. Cases that have applied the doctrine to directors or officers of Illinois corporations make no mention of the very provision the Illinois legislature enacted to cover these types of situations. See e.g., Denari v. Rist, 2011 WL 332543, *1 (N.D.Ill.2011); Dick Corp. v. SNC-Lavalin Constructors, Inc., 2006 WL 1049724, *4 (N.D.Ill.2006); Benda v. Per-Se Technologies, Inc., 2004 WL 1375361, at *2 (N.D.Ill. June 17, 2004); Interlease Aviation Investors II (Aloha) L.L.C. v. Vanguard Airlines, Inc., 262 F.Supp.2d 898, 910 (N.D.Ill. 2003); Continental Cas. Co. v. Marsh, No. 01 C 0160, 2002 WL 31870531, at *6 (N.D.Ill.2002); Plastic Film Corp. of America, Inc. v. Unipac, Inc., 128 F.Supp.2d 1143 (N.D.Ill.2001); Brujis v. Shaw, 876 F.Supp. 975, 978 (N.D.Ill.1995). This silence is no doubt the result of the parties’ failure to have raised the long-arm statute’s specific provision covering corporate officers and directors. It is simply not conceivable that had the argument been raised, judge after judge would have failed even to have mentioned it — especially when the issue would be outcome-determinative. In Benda, for example, the plaintiff did not even dispute that the fiduciary shield

officers of Illinois corporations make no mention of the very provision the Illinois legislature enacted to cover these types of situations. See e.g., Denari v. Rist, 2011 WL 332543, *1 (N.D.Ill.2011); Dick Corp. v. SNC-Lavalin Constructors, Inc., 2006 WL 1049724, *4 (N.D.Ill.2006); Benda v. Per-Se Technologies, Inc., 2004 WL 1375361, at *2 (N.D.Ill. June 17, 2004); Interlease Aviation Investors II (Aloha) L.L.C. v. Vanguard Airlines, Inc., 262 F.Supp.2d 898, 910 (N.D.Ill. 2003); Continental Cas. Co. v. Marsh, No. 01 C 0160, 2002 WL 31870531, at *6 (N.D.Ill.2002); Plastic Film Corp. of America, Inc. v. Unipac, Inc., 128 F.Supp.2d 1143 (N.D.Ill.2001); Brujis v. Shaw, 876 F.Supp. 975, 978 (N.D.Ill.1995). This silence is no doubt the result of the parties’ failure to have raised the long-arm statute’s specific provision covering corporate officers and directors. It is simply not conceivable that had the argument been raised, judge after judge would have failed even to have mentioned it — especially when the issue would be outcome-determinative. In Benda, for example, the plaintiff did not even dispute that the fiduciary shield applied, 2004 WL 1375361, at *2, and in Denari, the pro se plaintiff argued only that the defendant officers had minimum contacts with the state. Where arguments are not made by the parties, courts have been cautioned that it is not their obligation to research and construct the legal arguments available to parties, Gross v. Town of Cicero, Ill, 619 F.3d 697, 704 (N.D.Ill.2011); United States, v. McLee, 436 F.3d 751, 760 (7th Cir.2006), and that they are not to go beyond the briefs and effectively assume the role of counsel. See Fabriko Acquisition Corporation v. Prokos 536 F.3d 605, 609 (7th Cir.2008); Kay v. Board of Educ. of City of Chicago, 547 F.3d 736, 738 (7th Cir.2008); Hartmann v. Prudential Insurance Co. of America, 9 F.3d 1207, 1214 (7th Cir.1993). Thus, those cases that have applied the fiduciary shield doctrine to corporate officers and directors without considering the inter-relationship between the fiduciary shield doctrine and the Illinois long-arm statute, have no value here, for prior cases have precedential value only when there has been a deliberative

applied, 2004 WL 1375361, at *2, and in Denari, the pro se plaintiff argued only that the defendant officers had minimum contacts with the state. Where arguments are not made by the parties, courts have been cautioned that it is not their obligation to research and construct the legal arguments available to parties, Gross v. Town of Cicero, Ill, 619 F.3d 697, 704 (N.D.Ill.2011); United States, v. McLee, 436 F.3d 751, 760 (7th Cir.2006), and that they are not to go beyond the briefs and effectively assume the role of counsel. See Fabriko Acquisition Corporation v. Prokos 536 F.3d 605, 609 (7th Cir.2008); Kay v. Board of Educ. of City of Chicago, 547 F.3d 736, 738 (7th Cir.2008); Hartmann v. Prudential Insurance Co. of America, 9 F.3d 1207, 1214 (7th Cir.1993). Thus, those cases that have applied the fiduciary shield doctrine to corporate officers and directors without considering the inter-relationship between the fiduciary shield doctrine and the Illinois long-arm statute, have no value here, for prior cases have precedential value only when there has been a deliberative consideration of the issue at hand. Sub-silentio or assumptive resolution is not enough. See United States v. More, 7 U.S. 159, 172, 3 Cranch 159, 2 L.Ed. 397 (1805) (Marshall, C.J.); United States v. Acox, 595 F.3d 729, 731 (7th Cir.2010) (“A handful of opinions in this circuit make what appear to be de novo appellate decisions on the good-cause question.... But the briefs in those cases did not join issue on the standard of appellate review, and the opinions do not discuss this subject ... so they do not establish holdings.”); United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849 (7th Cir.2009); Karraker v. Rent-A-Center, Inc., 492 F.3d 896 (7th Cir.2007); Petrov v. Gonzales, 464 F.3d 800, 802 (7th Cir.2006) (“Because Tunis [v. Gonzales, 447 F.3d 547 (7th Cir.2006) ] did not mention the subject, it does not contain a holding on the issue [citing Supreme Court cases].”). In light of § 2-209(a)(12), the fiduciary shield might cover employees like the police officer in Rollins, but it does not cover directors like Mr.

consideration of the issue at hand. Sub-silentio or assumptive resolution is not enough. See United States v. More, 7 U.S. 159, 172, 3 Cranch 159, 2 L.Ed. 397 (1805) (Marshall, C.J.); United States v. Acox, 595 F.3d 729, 731 (7th Cir.2010) (“A handful of opinions in this circuit make what appear to be de novo appellate decisions on the good-cause question.... But the briefs in those cases did not join issue on the standard of appellate review, and the opinions do not discuss this subject ... so they do not establish holdings.”); United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849 (7th Cir.2009); Karraker v. Rent-A-Center, Inc., 492 F.3d 896 (7th Cir.2007); Petrov v. Gonzales, 464 F.3d 800, 802 (7th Cir.2006) (“Because Tunis [v. Gonzales, 447 F.3d 547 (7th Cir.2006) ] did not mention the subject, it does not contain a holding on the issue [citing Supreme Court cases].”). In light of § 2-209(a)(12), the fiduciary shield might cover employees like the police officer in Rollins, but it does not cover directors like Mr. Takayama, who can be taken to task for the performance or neglect of the corporate duties. See supra at 984; Morse v. E & B, 261 Ill.App.3d at 747, 199 Ill.Dec. 597, 634 N.E.2d at 442-43 (distinguishing between ordinary employer and corporate officers and directors). Defendants have not cited a single case that has precluded jurisdictional discovery based on the fiduciary shield doctrine. The only cases that discuss discovery and the doctrine indicate that it does not shield one from discovery; in fact, discovery is necessary before its applicability can be determined. See Seaga Mfg., Inc. v. Fortune Metal, Inc., 2001 WL 1196184, *1 (N.D.Ill.2001) (concluding that fiduciary shield issue could not be resolved before further discovery); A.I. Credit Corp. v. Legion Insurance Co., Inc., 1998 WL 460271, *2 (N.D.Ill.1998) (fiduciary shield doctrine not designed to thwart discovery; tenor of most cases is that discovery is necessary before applicability of the doctrine can be determined) (collecting cases); Orix Credit Alliance, Inc. v. Taylor Mach. Works, Inc., 1995 WL 109322, *2 (N.D.Ill. 1995) (motion to dismiss

Takayama, who can be taken to task for the performance or neglect of the corporate duties. See supra at 984; Morse v. E & B, 261 Ill.App.3d at 747, 199 Ill.Dec. 597, 634 N.E.2d at 442-43 (distinguishing between ordinary employer and corporate officers and directors). Defendants have not cited a single case that has precluded jurisdictional discovery based on the fiduciary shield doctrine. The only cases that discuss discovery and the doctrine indicate that it does not shield one from discovery; in fact, discovery is necessary before its applicability can be determined. See Seaga Mfg., Inc. v. Fortune Metal, Inc., 2001 WL 1196184, *1 (N.D.Ill.2001) (concluding that fiduciary shield issue could not be resolved before further discovery); A.I. Credit Corp. v. Legion Insurance Co., Inc., 1998 WL 460271, *2 (N.D.Ill.1998) (fiduciary shield doctrine not designed to thwart discovery; tenor of most cases is that discovery is necessary before applicability of the doctrine can be determined) (collecting cases); Orix Credit Alliance, Inc. v. Taylor Mach. Works, Inc., 1995 WL 109322, *2 (N.D.Ill. 1995) (motion to dismiss denied pending completion of discovery related to fiduciary shield doctrine). The Seventh Circuit, which has not spoken directly on subject, has indicated the same thing. Rice v. Nova Biomedical Corp., 38 F.3d 909, 915 (7th Cir.1994) (the court held that a party did not use “ample tools of pretrial discovery” to “turn up material relevant to the fiduciary shield doctrine”). In sum, and without deciding the question of personal jurisdiction over Mr. Takayama, it can be said that Hach has at least a “colorable claim” of jurisdiction, and that is sufficient to allow relevant and limited discovery, subject to the same types of limitations discussed in relation to Hakuto Japan. Since Hach hopes to base personal jurisdiction over Mr. Takayama on his hand in the purported violation of 805 ILCS 5/8.65(2) — see 735 ILCS 5/2-209(a)(12) — discovery should be targeted to that and his contacts with Illinois due to his position with Hakuto America and any involvement he may have had in or knowledge of the sale of the Anatel stock and the movement of

denied pending completion of discovery related to fiduciary shield doctrine). The Seventh Circuit, which has not spoken directly on subject, has indicated the same thing. Rice v. Nova Biomedical Corp., 38 F.3d 909, 915 (7th Cir.1994) (the court held that a party did not use “ample tools of pretrial discovery” to “turn up material relevant to the fiduciary shield doctrine”). In sum, and without deciding the question of personal jurisdiction over Mr. Takayama, it can be said that Hach has at least a “colorable claim” of jurisdiction, and that is sufficient to allow relevant and limited discovery, subject to the same types of limitations discussed in relation to Hakuto Japan. Since Hach hopes to base personal jurisdiction over Mr. Takayama on his hand in the purported violation of 805 ILCS 5/8.65(2) — see 735 ILCS 5/2-209(a)(12) — discovery should be targeted to that and his contacts with Illinois due to his position with Hakuto America and any involvement he may have had in or knowledge of the sale of the Anatel stock and the movement of the sale proceeds to Hakuto Japan. Discovery properly and narrowly focused on the alter ego issue would also be appropriate. As with discovery involving Hakuto Japan, strict compliance with Fed.R.Civ.P. 37(a)(1) and Local Rule 37.2 will be required before any discovery disputes will be heard. Moreover, in the event of further discovery disputes regarding either Mr. Takayama or Hakuto Japan, the parties’ briefs must contain arguments that are fully developed and supported. Conclusory, skeletal, or perfunctory briefing will result in waiver of the issue, as the Seventh Circuit has repeatedly held. See United States v. Collins, 604 F.3d 481, 488, n. 2 (7th Cir.2010); White Eagle Co-op. Ass’n v. Conner, 553 F.3d 467, 476 n. 6 (7th Cir.2009) (collecting cases); Fabriko Acquisition Corporation v. Prokos, 536 F.3d 605, 609 (7th Cir.2008); de la Rama v. Illinois Dept. of Human Services, 541 F.3d 681, 688 (7th Cir.2008); United States v. Hook, 471 F.3d 766, 775 (7th Cir.2006); Thakore v. Universal Mach. Co. of Pottstown, Inc., 670 F.Supp.2d 705, 717 (N.D.Ill.2009) (collecting cases). CONCLUSION The Motion to Conduct Jurisdictional Discovery

the sale proceeds to Hakuto Japan. Discovery properly and narrowly focused on the alter ego issue would also be appropriate. As with discovery involving Hakuto Japan, strict compliance with Fed.R.Civ.P. 37(a)(1) and Local Rule 37.2 will be required before any discovery disputes will be heard. Moreover, in the event of further discovery disputes regarding either Mr. Takayama or Hakuto Japan, the parties’ briefs must contain arguments that are fully developed and supported. Conclusory, skeletal, or perfunctory briefing will result in waiver of the issue, as the Seventh Circuit has repeatedly held. See United States v. Collins, 604 F.3d 481, 488, n. 2 (7th Cir.2010); White Eagle Co-op. Ass’n v. Conner, 553 F.3d 467, 476 n. 6 (7th Cir.2009) (collecting cases); Fabriko Acquisition Corporation v. Prokos, 536 F.3d 605, 609 (7th Cir.2008); de la Rama v. Illinois Dept. of Human Services, 541 F.3d 681, 688 (7th Cir.2008); United States v. Hook, 471 F.3d 766, 775 (7th Cir.2006); Thakore v. Universal Mach. Co. of Pottstown, Inc., 670 F.Supp.2d 705, 717 (N.D.Ill.2009) (collecting cases). CONCLUSION The Motion to Conduct Jurisdictional Discovery [# 41] is granted in part and denied in part as explained above. . The affidavits state in conclusory fashion that neither Hakuto Japan nor Mr. Takayama have any contacts with the state of Illinois, and that Hakuto Japan had essentially nothing to do with Hakuto America. The affidavits were not included in the defendants’ submissions herein, but were instead a part of the previously filed motions to dismiss [Dkt. # 30, 33], which have since been denied. [Dkt. # 53], . They argue again and again that their 12(b)(6) motion is well-taken or that Hach has not made out a claim. These are simply not matters for me and they play no role in this decision. .In his affidavit, Mr. Takayama does not say he wasn’t a director of Hakuto America, but he does say he was never employed by an entity located in Illinois. So there is a contradiction between his assertions and those of Mr. Kastner, Hakuto America’s president. . The relationship between. Hakuto Japan and Hakuto America Mr. Kastner describes is quite a bit closer

[# 41] is granted in part and denied in part as explained above. . The affidavits state in conclusory fashion that neither Hakuto Japan nor Mr. Takayama have any contacts with the state of Illinois, and that Hakuto Japan had essentially nothing to do with Hakuto America. The affidavits were not included in the defendants’ submissions herein, but were instead a part of the previously filed motions to dismiss [Dkt. # 30, 33], which have since been denied. [Dkt. # 53], . They argue again and again that their 12(b)(6) motion is well-taken or that Hach has not made out a claim. These are simply not matters for me and they play no role in this decision. .In his affidavit, Mr. Takayama does not say he wasn’t a director of Hakuto America, but he does say he was never employed by an entity located in Illinois. So there is a contradiction between his assertions and those of Mr. Kastner, Hakuto America’s president. . The relationship between. Hakuto Japan and Hakuto America Mr. Kastner describes is quite a bit closer than the relationship Mr. Suzuki describes in his affidavit. . This testimony directly undermines that of Mr. Suzuki, who claimed that the two companies did not share assets. . In its conclusion, the opinion said "Corporate affiliation with and the provision of standard administrative services to ITCL are not sufficient minimum contacts to exercise specific personal jurisdiction over" the foreign defendants. 230 F.3d at 947. See also id. at 945 (“We adopt the rule that a corporate parent may provide administrative services for its subsidiary in the ordinary course of business without calling into question the separateness of the two entities for purposes of personal jurisdiction.”). . The brief also misreads Kohler Co. v. Kohler Int’l, Ltd., 196 F.Supp.2d 690 (N.D.Ill.2002), as applying the fiduciary shield doctrine “to the President and Secretary-Treasurer of Dimensional Millwork of Chicago, an Illinois based corporation.” (Takayama’s Brief in Opposition to Hack’s Supplemental Brief, at 6). But the case came to precisely the opposite conclusion, finding that "the Edgemons [the President and Secretary-Treasurer] cannot hide behind the fiduciary shield doctrine, because their interests

than the relationship Mr. Suzuki describes in his affidavit. . This testimony directly undermines that of Mr. Suzuki, who claimed that the two companies did not share assets. . In its conclusion, the opinion said "Corporate affiliation with and the provision of standard administrative services to ITCL are not sufficient minimum contacts to exercise specific personal jurisdiction over" the foreign defendants. 230 F.3d at 947. See also id. at 945 (“We adopt the rule that a corporate parent may provide administrative services for its subsidiary in the ordinary course of business without calling into question the separateness of the two entities for purposes of personal jurisdiction.”). . The brief also misreads Kohler Co. v. Kohler Int’l, Ltd., 196 F.Supp.2d 690 (N.D.Ill.2002), as applying the fiduciary shield doctrine “to the President and Secretary-Treasurer of Dimensional Millwork of Chicago, an Illinois based corporation.” (Takayama’s Brief in Opposition to Hack’s Supplemental Brief, at 6). But the case came to precisely the opposite conclusion, finding that "the Edgemons [the President and Secretary-Treasurer] cannot hide behind the fiduciary shield doctrine, because their interests are coextensive with the interests of Dimensional Millwork of Chicago,” id. at 699 (emphasis supplied), and that there was personal jurisdiction over the two officers. Id. at 700. Other similar misreadings of cases are found in the brief. Separating the wheat from the chaff has been needlessly time-consuming. . Hach’s claims, for breach of contract and violation of an Illinois statute, do not arise under federal law. See ISI Intern., Inc. v. Borden Ladner Gervais LLP, 256 F.3d 548, 551 (7th Cir.2001). As this is a diversity case (Second Amended Complaint, ¶ 9), the court has personal jurisdiction only where an Illinois court would have such jurisdiction. Citadel Group Ltd. v. Washington Regional Medical Center, 536 F.3d 757, 760 (7th Cir.2008). . Defendants also argue that the dissolution claim against Mr. Takayama fails as a matter of law and direct me to its motion to dismiss. (Defendants' Opposition, at 5). As I have no authority to rule on any arguments raised in such a motion, 28 U.S.C. § 636(b)(1)(A); Fed. R.Civ.P. 72, it can play no part

are coextensive with the interests of Dimensional Millwork of Chicago,” id. at 699 (emphasis supplied), and that there was personal jurisdiction over the two officers. Id. at 700. Other similar misreadings of cases are found in the brief. Separating the wheat from the chaff has been needlessly time-consuming. . Hach’s claims, for breach of contract and violation of an Illinois statute, do not arise under federal law. See ISI Intern., Inc. v. Borden Ladner Gervais LLP, 256 F.3d 548, 551 (7th Cir.2001). As this is a diversity case (Second Amended Complaint, ¶ 9), the court has personal jurisdiction only where an Illinois court would have such jurisdiction. Citadel Group Ltd. v. Washington Regional Medical Center, 536 F.3d 757, 760 (7th Cir.2008). . Defendants also argue that the dissolution claim against Mr. Takayama fails as a matter of law and direct me to its motion to dismiss. (Defendants' Opposition, at 5). As I have no authority to rule on any arguments raised in such a motion, 28 U.S.C. § 636(b)(1)(A); Fed. R.Civ.P. 72, it can play no part in this determination. Moreover, the motion was denied (without prejudice) in November 2010. [Dkt. # 60]. Briefing was suspended at that time, so these arguments have not even had the benefit of a full development by the parties.

ORDER GRANTING MOTIONS TO DISMISS WITHOUT PREJUDICE JAMES LAWRENCE KING, Senior District Judge. THIS CAUSE comes before the Court upon three Motions to Dismiss the Amended Complaint filed by ten defendants. Defendants Costa Rican Land & Development, Inc., Judith Gale, LTS Management, Inc., Julian Siegel, Lisa Tashman, and Mariland Tashman filed a Consolidated Motion to Dismiss Plaintiffs Second Amended Complaint (DE # 91) September 27, 2010. Defendants All Star Consulting Group, Inc. and Bruce Goldberg filed their Motion to Dismiss Second Amended Class Action Complaint (DE # 118) December 6, 2010. The Court has been fully briefed on the matters raised in both Motions. Although the Motions moved for dismissal of both the federal-law and state-law causes of action asserted in the Second Amended Complaint, the Court heard oral argument on the federal law claims only on January 27, 2011. (DE # 122). At the conclusion of the hearing, the Court reserved ruling on the Motions, and ordered counsel for Defendants to prepare a proposed order granting the motions to dismiss, raising all the issues argued at the hearing, within twenty days. Id. The Court further ordered that Plaintiffs would have ten days thereafter to respond. Defendants timely submitted a proposed order on February 16, 2010, and Plaintiffs responded March 2, 2011. (DE # 125). The third motion to dismiss was filed by Defendants Charles L. Neustein, P.A., Law Offices of Charles L. Neustein, P.A., and Charles L. Neustein (DE # 77). The Court has been fully briefed on the matters raised therein, but did not hear oral argument. 1. BACKGROUND This case centers around a massive fraud relating to the sale of properties in Costa Rica. The fraud was orchestrated by a few key individuals who allegedly operated a Ponzi scheme to bilk would-be purchasers of Costa Rican land out of hundreds of thousands of dollars in pre-construction deposits. In short, Defendants solicited supposedly refundable deposits and installment payments from land purchasers, and then refused to either refund the monies upon request, or transfer title to the purchased property when the balance was paid in full. Instead, Defendant diverted the funds to personal accounts

the hearing, within twenty days. Id. The Court further ordered that Plaintiffs would have ten days thereafter to respond. Defendants timely submitted a proposed order on February 16, 2010, and Plaintiffs responded March 2, 2011. (DE # 125). The third motion to dismiss was filed by Defendants Charles L. Neustein, P.A., Law Offices of Charles L. Neustein, P.A., and Charles L. Neustein (DE # 77). The Court has been fully briefed on the matters raised therein, but did not hear oral argument. 1. BACKGROUND This case centers around a massive fraud relating to the sale of properties in Costa Rica. The fraud was orchestrated by a few key individuals who allegedly operated a Ponzi scheme to bilk would-be purchasers of Costa Rican land out of hundreds of thousands of dollars in pre-construction deposits. In short, Defendants solicited supposedly refundable deposits and installment payments from land purchasers, and then refused to either refund the monies upon request, or transfer title to the purchased property when the balance was paid in full. Instead, Defendant diverted the funds to personal accounts and to other people for purposes wholly unrelated to the project. At first, Defendants were able to pay refunds to disgruntled purchasers out of funds solicited from new buyers. However, when Defendants ran out of money from new buyers to pay refunds to earlier buyers, the entire operation simply shut down. The individual Defendants allegedly used the sixteen entity Defendants to carry out the Ponzi scheme. The first named Defendant-entity is Paragon Properties of Costa Rica, LLC, and the Plaintiffs have dubbed Defendants’ entire fraudulent scheme the “the Paragon enterprise.” (DE # 64 ¶ 1). The Defendant entities are collectively referred to in the Complaint as “Paragon” or “the Paragon entities.” Id. According to Plaintiffs, “Paragon” marketed and sold vacant lots in Costa Rica through the individual Defendant-entities. One of the entities was listed as the seller on each of the sales contracts. The lots themselves were supposedly part of large subdivision projects which had not yet begun construction. Purchasers were required to make a substantial deposit to consummate the sale. Additionally, Paragon frequently solicited additional

and to other people for purposes wholly unrelated to the project. At first, Defendants were able to pay refunds to disgruntled purchasers out of funds solicited from new buyers. However, when Defendants ran out of money from new buyers to pay refunds to earlier buyers, the entire operation simply shut down. The individual Defendants allegedly used the sixteen entity Defendants to carry out the Ponzi scheme. The first named Defendant-entity is Paragon Properties of Costa Rica, LLC, and the Plaintiffs have dubbed Defendants’ entire fraudulent scheme the “the Paragon enterprise.” (DE # 64 ¶ 1). The Defendant entities are collectively referred to in the Complaint as “Paragon” or “the Paragon entities.” Id. According to Plaintiffs, “Paragon” marketed and sold vacant lots in Costa Rica through the individual Defendant-entities. One of the entities was listed as the seller on each of the sales contracts. The lots themselves were supposedly part of large subdivision projects which had not yet begun construction. Purchasers were required to make a substantial deposit to consummate the sale. Additionally, Paragon frequently solicited additional installment payments beyond the initial deposit by offering a discount off the final purchase price if the installment was paid prior to the closing date. All of these payments were supposedly refundable upon request. All payments were made to Defendants’ escrow agent, Charles L. Neustein, P.A., which is also named as a Defendant in this action. Charles L. Neustein, P.A. was an entity run by Defendant Charles L. Neustein, a Florida lawyer who previously served as a North Miami Municipal Judge. Brochures and other materials sent to investors emphasized Defendant Neustein’s judicial experience. Defendants used virtually identical sales contracts, called Agreements for Deed, for all the sales. Among other things, the Agreements for Deed provide that Paragon would provide roads, electricity, water and sewer service within two years of signing the agreement. The Agreements for Deed require the buyer to pay the balance of the purchase price within five years from the date of signing the Agreement, and the seller to transfer title to the property within a reasonable time after payment of the full purchase

installment payments beyond the initial deposit by offering a discount off the final purchase price if the installment was paid prior to the closing date. All of these payments were supposedly refundable upon request. All payments were made to Defendants’ escrow agent, Charles L. Neustein, P.A., which is also named as a Defendant in this action. Charles L. Neustein, P.A. was an entity run by Defendant Charles L. Neustein, a Florida lawyer who previously served as a North Miami Municipal Judge. Brochures and other materials sent to investors emphasized Defendant Neustein’s judicial experience. Defendants used virtually identical sales contracts, called Agreements for Deed, for all the sales. Among other things, the Agreements for Deed provide that Paragon would provide roads, electricity, water and sewer service within two years of signing the agreement. The Agreements for Deed require the buyer to pay the balance of the purchase price within five years from the date of signing the Agreement, and the seller to transfer title to the property within a reasonable time after payment of the full purchase price. The Agreements also contain a unique clause: If the entire balance is not paid within the five-year period, any amounts that have been paid by the purchaser are fully refundable. The Agreements for Deed provided the procedure for payment by purchasers. All payments were to be made to the escrow holder, Defendant Charles L. Neustein, P.A. The escrow holder was supposed to disburse purchasers’ deposits to the seller upon receipt of the deposit and a signed Agreement for Deed. Charles L. Neustein, P.A., as escrow holder, was also supposed to disburse the balance to the seller upon receipt of a registered deed to the subject property. However, according to Plaintiffs, “Paragon, like the paradise it purported to sell, is a myth.” (DE # 64 ¶ 4). The promised infrastructure improvements were never made, refund requests have gone unanswered, and valid deeds have not been provided to buyers who made full payments. Plaintiffs allege that the promises contained in the Agreements for Deed were false when made, and are therefore fraudulent. Accordingly, they assert claims for

price. The Agreements also contain a unique clause: If the entire balance is not paid within the five-year period, any amounts that have been paid by the purchaser are fully refundable. The Agreements for Deed provided the procedure for payment by purchasers. All payments were to be made to the escrow holder, Defendant Charles L. Neustein, P.A. The escrow holder was supposed to disburse purchasers’ deposits to the seller upon receipt of the deposit and a signed Agreement for Deed. Charles L. Neustein, P.A., as escrow holder, was also supposed to disburse the balance to the seller upon receipt of a registered deed to the subject property. However, according to Plaintiffs, “Paragon, like the paradise it purported to sell, is a myth.” (DE # 64 ¶ 4). The promised infrastructure improvements were never made, refund requests have gone unanswered, and valid deeds have not been provided to buyers who made full payments. Plaintiffs allege that the promises contained in the Agreements for Deed were false when made, and are therefore fraudulent. Accordingly, they assert claims for breach of contract, fraudulent inducement, civil RICO, civil theft, breach of fiduciary duty, restoration of lost document, violation of the Interstate Land Sales Full Disclosure Act (“ISFDA”), and fraudulent transfers. The Complaint is divided into three sections. Section I is an introduction that describes the scheme generally, identifies the parties, and includes jurisdiction and venue allegations. (DE # 64 at ¶¶ 1-132). Section II describes the transactions entered into between Defendants and individual named Plaintiffs. Id. ¶¶ 133-772. Section II also contains class action allegations. Id. ¶¶ 773-80. Section III alleges the above-mentioned causes of action in nine counts. Id. ¶¶ 781-865. Defendants move to dismiss the entire Complaint on the ground that it is a shotgun pleading, and move to dismiss all of the individual counts except for Count VII, which seeks restoration of a lost document on behalf of Plaintiffs who do not have an executed copy of their Agreements for Deed in their possession. II. LEGAL STANDARD Rule 8 of the Federal Rules of Civil Procedure requires that a complaint contain “a short and plain

breach of contract, fraudulent inducement, civil RICO, civil theft, breach of fiduciary duty, restoration of lost document, violation of the Interstate Land Sales Full Disclosure Act (“ISFDA”), and fraudulent transfers. The Complaint is divided into three sections. Section I is an introduction that describes the scheme generally, identifies the parties, and includes jurisdiction and venue allegations. (DE # 64 at ¶¶ 1-132). Section II describes the transactions entered into between Defendants and individual named Plaintiffs. Id. ¶¶ 133-772. Section II also contains class action allegations. Id. ¶¶ 773-80. Section III alleges the above-mentioned causes of action in nine counts. Id. ¶¶ 781-865. Defendants move to dismiss the entire Complaint on the ground that it is a shotgun pleading, and move to dismiss all of the individual counts except for Count VII, which seeks restoration of a lost document on behalf of Plaintiffs who do not have an executed copy of their Agreements for Deed in their possession. II. LEGAL STANDARD Rule 8 of the Federal Rules of Civil Procedure requires that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). To survive a motion to dismiss, a complaint must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (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. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). This plausibility requirement outlined by the Supreme Court “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955. “For the purposes of a motion to dismiss, the Court must view the allegations of the complaint in the light most favorable to Plaintiff, consider the allegations of the complaint as true, and accept all reasonable inferences therefrom.” Omar ex rel. Cannon

statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). To survive a motion to dismiss, a complaint must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (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. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). This plausibility requirement outlined by the Supreme Court “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955. “For the purposes of a motion to dismiss, the Court must view the allegations of the complaint in the light most favorable to Plaintiff, consider the allegations of the complaint as true, and accept all reasonable inferences therefrom.” Omar ex rel. Cannon v. Lindsey, 334 F.3d 1246, 1247 (11th Cir.2003). However, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Iqbal, 129 S.Ct. at 1949. Thus, courts determining the sufficiency of a complaint engage in a two-pronged analysis: “(1) eliminate any allegations in the complaint that are merely legal conclusions; and (2) where there are well-pleaded factual allegations, ‘assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.’ ” Am. Dental Assoc. v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir.2010) (quoting Iqbal, 129 S.Ct. at 1950). III. DISCUSSION A. Shotgun Pleading Defendants argue the Complaint should be dismissed as an impermissible “shotgun pleading.” According to Defendants, the Complaint “bears an uncanny resemblance” to the complaint described by the Eleventh Circuit in Magluta v. Samples, 256 F.3d 1282, 1284 (11th Cir.2001): The complaint is a quintessential “shotgun” pleading of the kind we have condemned repeatedly, beginning at least as early as 1991. It is in no sense the “short and plain statement

v. Lindsey, 334 F.3d 1246, 1247 (11th Cir.2003). However, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Iqbal, 129 S.Ct. at 1949. Thus, courts determining the sufficiency of a complaint engage in a two-pronged analysis: “(1) eliminate any allegations in the complaint that are merely legal conclusions; and (2) where there are well-pleaded factual allegations, ‘assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.’ ” Am. Dental Assoc. v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir.2010) (quoting Iqbal, 129 S.Ct. at 1950). III. DISCUSSION A. Shotgun Pleading Defendants argue the Complaint should be dismissed as an impermissible “shotgun pleading.” According to Defendants, the Complaint “bears an uncanny resemblance” to the complaint described by the Eleventh Circuit in Magluta v. Samples, 256 F.3d 1282, 1284 (11th Cir.2001): The complaint is a quintessential “shotgun” pleading of the kind we have condemned repeatedly, beginning at least as early as 1991. It is in no sense the “short and plain statement of the claim” required by Rule 8 of the Federal Rules of Civil Procedure.... It names fourteen defendants, and all defendants are charged in each count. The complaint is replete with allegations that “the defendants” engaged in certain conduct, making no distinction among the fourteen defendants charged, though geographic and temporal realities make plain that all of the defendants could not have participated in every act complained of. Each count incorporates by reference the allegations made in the section entitled “General Factual Allegations”— which comprises 146 numbered paragraphs — while also incorporating the allegations of any count or counts that precede it. The result is that each count is replete with factual allegations that could not possibly be material to that specific count, and that any allegations that are material are buried beneath innumerable pages of rambling irrelevancies. This type of pleading completely disregards Rule 10(b)’s requirement that discrete claims should be plead in separate counts, and is the type of complaint that we have criticized time and again. Magluta, 256 F.3d at 1284. However, Plaintiffs Complaint

of the claim” required by Rule 8 of the Federal Rules of Civil Procedure.... It names fourteen defendants, and all defendants are charged in each count. The complaint is replete with allegations that “the defendants” engaged in certain conduct, making no distinction among the fourteen defendants charged, though geographic and temporal realities make plain that all of the defendants could not have participated in every act complained of. Each count incorporates by reference the allegations made in the section entitled “General Factual Allegations”— which comprises 146 numbered paragraphs — while also incorporating the allegations of any count or counts that precede it. The result is that each count is replete with factual allegations that could not possibly be material to that specific count, and that any allegations that are material are buried beneath innumerable pages of rambling irrelevancies. This type of pleading completely disregards Rule 10(b)’s requirement that discrete claims should be plead in separate counts, and is the type of complaint that we have criticized time and again. Magluta, 256 F.3d at 1284. However, Plaintiffs Complaint differs from the complaint in Magluta and the type of complaint condemned as a “shotgun pleading” in this circuit. “The typical shotgun complaint contains several counts, each one incorporating by reference the allegations of its predecessors, leading to a situation where most of the counts (i.e., all but the first) contain irrelevant factual allegations and legal conclusions.” Strategic Income Fund, L.L.C. v. Spear, Leeds & Kellogg Corp., 305 F.3d 1293, 1295 (11th Cir.2002). See also Whitney Info. Network, Inc. v. Gagnon, 353 F.Supp.2d 1208, 1210-11 (M.D.Fla.2005) (“A party may not incorporate all allegations of each count in every successive count.... The entirety of the counterclaim will be dismissed as a shotgun pleading.”); T.D.S., Inc. v. Shelby Mutual Ins. Co., 760 F.2d 1520, 1545 (11th Cir.1985) (criticizing complaint which “combin[ed] a variety of discrete claims in one count in such a way as to make it difficult to discern which allegations or damages pertained to which theory of recovery”). Unlike the complaints normally characterized as “shotgun pleadings,” the Complaint here incorporates the allegations of Section II

differs from the complaint in Magluta and the type of complaint condemned as a “shotgun pleading” in this circuit. “The typical shotgun complaint contains several counts, each one incorporating by reference the allegations of its predecessors, leading to a situation where most of the counts (i.e., all but the first) contain irrelevant factual allegations and legal conclusions.” Strategic Income Fund, L.L.C. v. Spear, Leeds & Kellogg Corp., 305 F.3d 1293, 1295 (11th Cir.2002). See also Whitney Info. Network, Inc. v. Gagnon, 353 F.Supp.2d 1208, 1210-11 (M.D.Fla.2005) (“A party may not incorporate all allegations of each count in every successive count.... The entirety of the counterclaim will be dismissed as a shotgun pleading.”); T.D.S., Inc. v. Shelby Mutual Ins. Co., 760 F.2d 1520, 1545 (11th Cir.1985) (criticizing complaint which “combin[ed] a variety of discrete claims in one count in such a way as to make it difficult to discern which allegations or damages pertained to which theory of recovery”). Unlike the complaints normally characterized as “shotgun pleadings,” the Complaint here incorporates the allegations of Section II only (allegations relating to named Plaintiffs’ individual transactions) into six of the nine counts. It does not incorporate all the preceding paragraphs in the Complaint into each successive count, and each count states which Defendants it is asserted against. See Flamenbaum v. Orient Lines, Inc., Case No. 03-22549, 2004 WL 1773207, at *15 (“It is hardly a violation in every case for several counts to adopt by reference paragraphs describing the same set of circumstances.”). The collective references throughout the Complaint to “Paragon” and “the Paragon Entities,” however, is problematic. Plaintiffs explain they used the collective reference for the sake of brevity — because the alleged misrepresentations in each Plaintiffs Agreement for Deed are identical, Plaintiffs sought to avoid repeating the same allegations again and again. The collective references are not objectionable in Section I of the Complaint, which describes the overall scheme generally, and even in some instances in Section III, which contains some counts where multiple defendants are alleged to have engaged in identical misconduct. However, such a collective reference is only permissible if Defendants

only (allegations relating to named Plaintiffs’ individual transactions) into six of the nine counts. It does not incorporate all the preceding paragraphs in the Complaint into each successive count, and each count states which Defendants it is asserted against. See Flamenbaum v. Orient Lines, Inc., Case No. 03-22549, 2004 WL 1773207, at *15 (“It is hardly a violation in every case for several counts to adopt by reference paragraphs describing the same set of circumstances.”). The collective references throughout the Complaint to “Paragon” and “the Paragon Entities,” however, is problematic. Plaintiffs explain they used the collective reference for the sake of brevity — because the alleged misrepresentations in each Plaintiffs Agreement for Deed are identical, Plaintiffs sought to avoid repeating the same allegations again and again. The collective references are not objectionable in Section I of the Complaint, which describes the overall scheme generally, and even in some instances in Section III, which contains some counts where multiple defendants are alleged to have engaged in identical misconduct. However, such a collective reference is only permissible if Defendants and the Court can ascertain which Defendants are alleged to have engaged in what wrongdoing. As explained more fully in the sections below, Plaintiffs’ use of the collective reference becomes problematic in Section II. In many instances, Plaintiffs employ the collective reference to “Paragon” or “the Paragon entities” to allege specific transactions between individual named Plaintiffs and specific Defendants. If Plaintiffs wish Section II to serve as the factual basis for the counts pled in Section III, Section II must be pled with the specificity required by Rule 8 and Twombly. Although this Complaint is not as egregious as the “shotgun pleadings” discussed above, the collective references in Section II render many of Plaintiffs’ claims insufficient under Rule 8, and where applicable, Rule 9(b). These pleading deficiencies are discussed in detail in the succeeding sections. B. Fraud-based.Claims In federal court, fraud-based claims must be pled with the heightened level of particularity required by Federal Rule of Civil Procedure 9(b). Rule 9(b) provides: “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud

and the Court can ascertain which Defendants are alleged to have engaged in what wrongdoing. As explained more fully in the sections below, Plaintiffs’ use of the collective reference becomes problematic in Section II. In many instances, Plaintiffs employ the collective reference to “Paragon” or “the Paragon entities” to allege specific transactions between individual named Plaintiffs and specific Defendants. If Plaintiffs wish Section II to serve as the factual basis for the counts pled in Section III, Section II must be pled with the specificity required by Rule 8 and Twombly. Although this Complaint is not as egregious as the “shotgun pleadings” discussed above, the collective references in Section II render many of Plaintiffs’ claims insufficient under Rule 8, and where applicable, Rule 9(b). These pleading deficiencies are discussed in detail in the succeeding sections. B. Fraud-based.Claims In federal court, fraud-based claims must be pled with the heightened level of particularity required by Federal Rule of Civil Procedure 9(b). Rule 9(b) provides: “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed.R.Civ.P. 9(b). To comply with Rule 9(b), a complaint alleging fraud must state: “(1) the precise statements, documents, or misrepresentations made; (2) the time and place of and person responsible for the statement; (3) the content and manner in which the statements misled the Plaintiffs; and (4) what the Defendants gained by the alleged fraud.” Ambrosia Coal & Constr. Co. v. Morales, 482 F.3d 1309, 1316-17 (11th Cir.2007). 1. Count IV: RICO Count IV of the Complaint incorporates Section II of the Complaint (allegations of individual Plaintiffs’ transactions with Defendants), and alleges violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c) (“RICO”). (DE #64 ¶¶ 809-25). Defendants argue Plaintiffs have failed to state a claim for relief under RICO. Upon review of the Complaint, the Court finds that Plaintiffs have failed to comply with Federal Rule of Civil Procedure 9(b) and Local Rule 12.1, which requires the filing of a Civil RICO Case Statement. Count IV will

or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed.R.Civ.P. 9(b). To comply with Rule 9(b), a complaint alleging fraud must state: “(1) the precise statements, documents, or misrepresentations made; (2) the time and place of and person responsible for the statement; (3) the content and manner in which the statements misled the Plaintiffs; and (4) what the Defendants gained by the alleged fraud.” Ambrosia Coal & Constr. Co. v. Morales, 482 F.3d 1309, 1316-17 (11th Cir.2007). 1. Count IV: RICO Count IV of the Complaint incorporates Section II of the Complaint (allegations of individual Plaintiffs’ transactions with Defendants), and alleges violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c) (“RICO”). (DE #64 ¶¶ 809-25). Defendants argue Plaintiffs have failed to state a claim for relief under RICO. Upon review of the Complaint, the Court finds that Plaintiffs have failed to comply with Federal Rule of Civil Procedure 9(b) and Local Rule 12.1, which requires the filing of a Civil RICO Case Statement. Count IV will be dismissed without prejudice. RICO, in relevant part, prohibits the conducting of an enterprise’s affairs through a pattern of racketeering activity. 18 U.S.C. § 1962(c). To satisfy the “pattern of racketeering” element, a RICO plaintiff must prove “at least two acts of racketeering activity” occurred over a pe riod of ten years. 18 U.S.C. § 1961(5). “Racketeering activity,” in turn, is defined as violation of any of a number of statutes listed in section 1961(1). 18 U.S.C. § 1961(1). These include the federal statutes prohibiting mail fraud and wire fraud. Id. In order to state a claim under § 1962, therefore, “a plaintiff must allege facts sufficient to support each of the statutory elements for at least two of the pleaded predicate acts.” Republic of Panama v. BCCI Holdings, (Luxembourg) S.A, 119 F.3d 935, 948 (11th Cir.1997). Defendants argue Plaintiffs have failed to allege facts supporting the predicate acts of mail fraud and wire fraud with the heightened level of specificity required for fraud claims. a. Rule 9(b) RICO predicate acts sounding in fraud must be pled with

be dismissed without prejudice. RICO, in relevant part, prohibits the conducting of an enterprise’s affairs through a pattern of racketeering activity. 18 U.S.C. § 1962(c). To satisfy the “pattern of racketeering” element, a RICO plaintiff must prove “at least two acts of racketeering activity” occurred over a pe riod of ten years. 18 U.S.C. § 1961(5). “Racketeering activity,” in turn, is defined as violation of any of a number of statutes listed in section 1961(1). 18 U.S.C. § 1961(1). These include the federal statutes prohibiting mail fraud and wire fraud. Id. In order to state a claim under § 1962, therefore, “a plaintiff must allege facts sufficient to support each of the statutory elements for at least two of the pleaded predicate acts.” Republic of Panama v. BCCI Holdings, (Luxembourg) S.A, 119 F.3d 935, 948 (11th Cir.1997). Defendants argue Plaintiffs have failed to allege facts supporting the predicate acts of mail fraud and wire fraud with the heightened level of specificity required for fraud claims. a. Rule 9(b) RICO predicate acts sounding in fraud must be pled with the heightened level of specificity required by Federal Rule of Civil Procedure 9(b) for fraud claims generally. Liquidation Comm’n of Banco Intercontinental v. Renta, 530 F.3d 1339, 1355 (11th Cir.2008) (finding that fraud-based predicate acts must be pleaded with specificity, but non-fraud predicate acts need only meet Rule 8 pleading standard). Here, Defendants argue that Plaintiffs have failed to allege the predicate acts of racketeering activity, mail and wire fraud, with the requisite particularity. The offenses of mail and wire fraud are simply the transmission of a misrepresentation through the mail or by wire, respectively. 18 U.S.C. § 1341 (mail fraud); 18 U.S.C. § 1343 (wire fraud). Plaintiffs allege the misrepresentations in this case were the statements in the individual Plaintiffs’ Agreements for Deed that “all monies paid are 100% refundable if the transaction does not close.” (DE # 64). Accordingly, Plaintiffs assert that the “person responsible for the statement” is the seller of the property referenced in each Agreement for Deed. Id. However, Plaintiffs fail to name the seller in Section II of the Complaint

the heightened level of specificity required by Federal Rule of Civil Procedure 9(b) for fraud claims generally. Liquidation Comm’n of Banco Intercontinental v. Renta, 530 F.3d 1339, 1355 (11th Cir.2008) (finding that fraud-based predicate acts must be pleaded with specificity, but non-fraud predicate acts need only meet Rule 8 pleading standard). Here, Defendants argue that Plaintiffs have failed to allege the predicate acts of racketeering activity, mail and wire fraud, with the requisite particularity. The offenses of mail and wire fraud are simply the transmission of a misrepresentation through the mail or by wire, respectively. 18 U.S.C. § 1341 (mail fraud); 18 U.S.C. § 1343 (wire fraud). Plaintiffs allege the misrepresentations in this case were the statements in the individual Plaintiffs’ Agreements for Deed that “all monies paid are 100% refundable if the transaction does not close.” (DE # 64). Accordingly, Plaintiffs assert that the “person responsible for the statement” is the seller of the property referenced in each Agreement for Deed. Id. However, Plaintiffs fail to name the seller in Section II of the Complaint for a number of the transactions described in the Complaint. See, e.g., id. ¶¶ 242-46 (alleging Plaintiff Grant Moody purchased property from “Paragon” without naming individual person or entity who acted as the seller); ¶¶ 247-55 (same, as to transactions with Plaintiff Randall Lipsius); ¶¶ 335-41 (same, as to transactions with Plaintiff Joshua Swedland); ¶¶ 406-10 (same, as to transactions with Plaintiff Frances DeLuca). Plaintiffs argue that Defendants may find this information by referring to the Agreements for Deed themselves, which were filed as Exhibits to the Second Amended Complaint. (DE # 66). However, the Exhibits are 159 pages long and are not indexed or organized in any way to aid in locating the Agreement corresponding to a particular property, plaintiff, or defendant. Id. This failure to identify the particular Defendant responsible for the alleged misrepresentations that constitute mail and wire fraud in the Complaint itself is fatal to Plaintiffs’ RICO claim. In addition, Plaintiffs allege that Defendants made misrepresentations other than those contained in the Agreements for Deed. The Complaint states the following sentence with

for a number of the transactions described in the Complaint. See, e.g., id. ¶¶ 242-46 (alleging Plaintiff Grant Moody purchased property from “Paragon” without naming individual person or entity who acted as the seller); ¶¶ 247-55 (same, as to transactions with Plaintiff Randall Lipsius); ¶¶ 335-41 (same, as to transactions with Plaintiff Joshua Swedland); ¶¶ 406-10 (same, as to transactions with Plaintiff Frances DeLuca). Plaintiffs argue that Defendants may find this information by referring to the Agreements for Deed themselves, which were filed as Exhibits to the Second Amended Complaint. (DE # 66). However, the Exhibits are 159 pages long and are not indexed or organized in any way to aid in locating the Agreement corresponding to a particular property, plaintiff, or defendant. Id. This failure to identify the particular Defendant responsible for the alleged misrepresentations that constitute mail and wire fraud in the Complaint itself is fatal to Plaintiffs’ RICO claim. In addition, Plaintiffs allege that Defendants made misrepresentations other than those contained in the Agreements for Deed. The Complaint states the following sentence with respect to each of the individual Plaintiffs’ transactions with Defendants: “Similar oral misrepresentations were made via wire prior to the execution of the Agreement for Deed.” See, e.g., DE # 64 ¶¶ 138, 145, 162, 175, 273, 294, 319, 381, 431, 639. Plaintiffs allege no facts supporting these statements. To the extent that Plaintiffs wish these “similar oral misrepresentations” to serve as RICO predicate acts, they must allege the misrepresentations made, the person responsi ble for the misrepresentations, the time and place the statements were made, how the statements misled the individual Plaintiffs, and how Defendants gained from them. Ambrosia Coal & Constr. Co. v. Morales, 482 F.3d 1309, 1316-17 (11th Cir.2007). b. RICO Case Statement This Court’s Local Rules reiterate Rule 9(b)’s heightened specificity standard by requiring that all civil RICO plaintiffs file and serve a RICO Case Statement. 5.D.Fla. L.R. 12.1. The RICO Case Statement must “include the facts relied on to initiate the RICO claim.” Id. To ensure that the necessary facts are included, the Case Statement must contain specific information that is listed

respect to each of the individual Plaintiffs’ transactions with Defendants: “Similar oral misrepresentations were made via wire prior to the execution of the Agreement for Deed.” See, e.g., DE # 64 ¶¶ 138, 145, 162, 175, 273, 294, 319, 381, 431, 639. Plaintiffs allege no facts supporting these statements. To the extent that Plaintiffs wish these “similar oral misrepresentations” to serve as RICO predicate acts, they must allege the misrepresentations made, the person responsi ble for the misrepresentations, the time and place the statements were made, how the statements misled the individual Plaintiffs, and how Defendants gained from them. Ambrosia Coal & Constr. Co. v. Morales, 482 F.3d 1309, 1316-17 (11th Cir.2007). b. RICO Case Statement This Court’s Local Rules reiterate Rule 9(b)’s heightened specificity standard by requiring that all civil RICO plaintiffs file and serve a RICO Case Statement. 5.D.Fla. L.R. 12.1. The RICO Case Statement must “include the facts relied on to initiate the RICO claim.” Id. To ensure that the necessary facts are included, the Case Statement must contain specific information that is listed in the Rule, and must be presented in the format laid out in the Rule. Id. RICO claims may be subject to dismissal for failure to comply with Rule 12.1. Platypus Wear, Inc. v. Clarke Model & Co., Case No. 06-20976-CIV, 2008 WL 186637, at *3 (S.D.Fla. Jan. 18, 2008) (“Dismissal of RICO counts for violation of Local Rule 12.1 is discretionary.”); Harrison Enters., Inc. v. Moran, Case no. 97-4362-CIV, 1999 WL 1211753, at *4 (S.D.Fla. Aug. 30, 1999) (warning that continued failure to comply with Local Rule 12.1 would result in dismissal with prejudice). Here, Plaintiffs have included a properly organized RICO Case Statement in the Second Amended Complaint. (DE # 64 ¶¶ 812-25). However, the RICO Case Statement, as filed, omits some of the required information. For example, Rule 12.1(d) requires Plaintiffs to “provide in detail and with specificity ... when and how each victim was injured.” L.R. 12.1(d). However, Plaintiffs only state the names of each Plaintiff along with the sums each Plaintiff claims he or she is owed. (DE #64 ¶ 815(a)-(dddd)).

in the Rule, and must be presented in the format laid out in the Rule. Id. RICO claims may be subject to dismissal for failure to comply with Rule 12.1. Platypus Wear, Inc. v. Clarke Model & Co., Case No. 06-20976-CIV, 2008 WL 186637, at *3 (S.D.Fla. Jan. 18, 2008) (“Dismissal of RICO counts for violation of Local Rule 12.1 is discretionary.”); Harrison Enters., Inc. v. Moran, Case no. 97-4362-CIV, 1999 WL 1211753, at *4 (S.D.Fla. Aug. 30, 1999) (warning that continued failure to comply with Local Rule 12.1 would result in dismissal with prejudice). Here, Plaintiffs have included a properly organized RICO Case Statement in the Second Amended Complaint. (DE # 64 ¶¶ 812-25). However, the RICO Case Statement, as filed, omits some of the required information. For example, Rule 12.1(d) requires Plaintiffs to “provide in detail and with specificity ... when and how each victim was injured.” L.R. 12.1(d). However, Plaintiffs only state the names of each Plaintiff along with the sums each Plaintiff claims he or she is owed. (DE #64 ¶ 815(a)-(dddd)). Rule 12.1(e) also requires that civil RICO plaintiffs “describe in detail the pattern of racketeering/criminal activity.” S.D.Fla. L.R. 12.1(e). The Rule further explains that a sufficient description separately lists: the predicate acts and their dates, the participants in the acts, the activity surrounding each predicate act, whether there have been any criminal convictions for any of the predicate acts, the relationship between the predicate acts, and how the predicate acts pose a threat of continued criminal activity. L.R. 12.1(e). Furthermore, section (e) expressly states the predicate offenses of mail fraud and wire fraud “shall be stated with particularity,” and cites Rule 9(b). L.R. 12.1(e)(3). Plaintiffs instead allege, in a single paragraph, a general and vague description of the fraudulent scheme. (DE # 64 ¶ 816). This does not meet the Rule’s requirements. In addition, Plaintiffs have not complied with the Local Rule’s requirements that they “describe in detail the enterprise.” L.R. 12.1(f). To comply with section (f) of the Rule, civil RICO plaintiffs must, among other things, state the names of all individuals and entities constituting

Rule 12.1(e) also requires that civil RICO plaintiffs “describe in detail the pattern of racketeering/criminal activity.” S.D.Fla. L.R. 12.1(e). The Rule further explains that a sufficient description separately lists: the predicate acts and their dates, the participants in the acts, the activity surrounding each predicate act, whether there have been any criminal convictions for any of the predicate acts, the relationship between the predicate acts, and how the predicate acts pose a threat of continued criminal activity. L.R. 12.1(e). Furthermore, section (e) expressly states the predicate offenses of mail fraud and wire fraud “shall be stated with particularity,” and cites Rule 9(b). L.R. 12.1(e)(3). Plaintiffs instead allege, in a single paragraph, a general and vague description of the fraudulent scheme. (DE # 64 ¶ 816). This does not meet the Rule’s requirements. In addition, Plaintiffs have not complied with the Local Rule’s requirements that they “describe in detail the enterprise.” L.R. 12.1(f). To comply with section (f) of the Rule, civil RICO plaintiffs must, among other things, state the names of all individuals and entities constituting the enterprise, “explain how each separate defendant participated in the direction or conduct of the affairs of the enterprise,” and state whether the defendants are the enterprise itself or separate from it. Id. Again, Plaintiffs included a one-paragraph, general description of the fraudulent scheme. (DE# 64 ¶ 817). Again, this does not satisfy the Rule. Finally, Plaintiffs have not alleged how the racketeering activity and the enterprise have merged into one, the benefits each Defendant received as a result of the scheme, and the damages for which each Defendant is liable, as required by Local Rule 12.1(g), (i), and (q), respectively. L.R. 12.1; DE # 64 ¶¶ 818, 820, 825. For these reasons, Plaintiffs RICO claims in Count IV will be dismissed without prejudice for failure to comply with Federal Rule of Civil Procedure 9(b), and Local Rule 12.1. 2. Count VIII: Interstate Land Sales Full Disclosure Act The Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1701 (“ILSFDA”), prohibits fraud in the sale of subdivision property, and requires subdivision developers to disclose certain information to buyers

the enterprise, “explain how each separate defendant participated in the direction or conduct of the affairs of the enterprise,” and state whether the defendants are the enterprise itself or separate from it. Id. Again, Plaintiffs included a one-paragraph, general description of the fraudulent scheme. (DE# 64 ¶ 817). Again, this does not satisfy the Rule. Finally, Plaintiffs have not alleged how the racketeering activity and the enterprise have merged into one, the benefits each Defendant received as a result of the scheme, and the damages for which each Defendant is liable, as required by Local Rule 12.1(g), (i), and (q), respectively. L.R. 12.1; DE # 64 ¶¶ 818, 820, 825. For these reasons, Plaintiffs RICO claims in Count IV will be dismissed without prejudice for failure to comply with Federal Rule of Civil Procedure 9(b), and Local Rule 12.1. 2. Count VIII: Interstate Land Sales Full Disclosure Act The Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1701 (“ILSFDA”), prohibits fraud in the sale of subdivision property, and requires subdivision developers to disclose certain information to buyers of property within subdivisions. 15 U.S.C. § 1703. a. Applicability of ILSFDA As a threshold matter, ILSFDA only regulates the conduct of “developers,” as defined by the statute. 15 U.S.C. §§ 1701, 1703. The statute defines a “developer” as “any person who, directly, or indirectly, sells or leases, or offers to sell or lease, or advertise for sale or lease any lots in a subdivision.” 15 U.S.C. § 1701(5). The Complaint alleges: “Paragon is a developer within the meaning of the Interstate Land Sales Full Disclosure Act,” and “Paragon used a common promotional plan to sell unimproved vacant lots in Costa Rica.” (DE # 64 ¶¶ 850, 851). “Paragon” is defined in the Complaint as an amalgamation of sixteen entities allegedly involved in a single fraudulent scheme. (DE # 64 ¶ 1). Plaintiffs here have thus alleged that this amalgamation of entities constitutes a “developer,” but have not alleged that the individual Defendants named in Count VIII are developers. It is not enough to allege that an individual Defendant is part of a larger conglomerate that is a

of property within subdivisions. 15 U.S.C. § 1703. a. Applicability of ILSFDA As a threshold matter, ILSFDA only regulates the conduct of “developers,” as defined by the statute. 15 U.S.C. §§ 1701, 1703. The statute defines a “developer” as “any person who, directly, or indirectly, sells or leases, or offers to sell or lease, or advertise for sale or lease any lots in a subdivision.” 15 U.S.C. § 1701(5). The Complaint alleges: “Paragon is a developer within the meaning of the Interstate Land Sales Full Disclosure Act,” and “Paragon used a common promotional plan to sell unimproved vacant lots in Costa Rica.” (DE # 64 ¶¶ 850, 851). “Paragon” is defined in the Complaint as an amalgamation of sixteen entities allegedly involved in a single fraudulent scheme. (DE # 64 ¶ 1). Plaintiffs here have thus alleged that this amalgamation of entities constitutes a “developer,” but have not alleged that the individual Defendants named in Count VIII are developers. It is not enough to allege that an individual Defendant is part of a larger conglomerate that is a developer. To assert a cause of action against individual persons or entities under ILSFDA, a plaintiff must allege that the individual persons or entities are themselves developers. See 15 U.S.C. § 1709(a) (providing cause of action under section 1703(a) for purchaser or lessee “against a developer or agent”). Plaintiffs incorporate Section II of the Complaint into Count VIII, and argue that the allegations in Section II sufficiently state that the individual Paragon entities are developers. (DE # 64 ¶ 849). However, as explained in the preceding section, Section II omits key facts with respect to certain Plaintiffs’ transactions, particularly the seller of the properties at issue. Plaintiffs have not adequately alleged that Defendants are developers, triggering the application of ILSFDA. b. Fraud Claims under ILSFDA Even if Plaintiffs had adequately alleged the Defendants are “developers” under the statute, their ILSFDA claims would nonetheless fail. In Count VIII, Plaintiffs incorporate the allegations related to individual Plaintiffs’ transactions, and allege that Defendants’ misrepresentations in the Agreements for Deed constitute violations of four subsections of the statute prohibiting fraud in

developer. To assert a cause of action against individual persons or entities under ILSFDA, a plaintiff must allege that the individual persons or entities are themselves developers. See 15 U.S.C. § 1709(a) (providing cause of action under section 1703(a) for purchaser or lessee “against a developer or agent”). Plaintiffs incorporate Section II of the Complaint into Count VIII, and argue that the allegations in Section II sufficiently state that the individual Paragon entities are developers. (DE # 64 ¶ 849). However, as explained in the preceding section, Section II omits key facts with respect to certain Plaintiffs’ transactions, particularly the seller of the properties at issue. Plaintiffs have not adequately alleged that Defendants are developers, triggering the application of ILSFDA. b. Fraud Claims under ILSFDA Even if Plaintiffs had adequately alleged the Defendants are “developers” under the statute, their ILSFDA claims would nonetheless fail. In Count VIII, Plaintiffs incorporate the allegations related to individual Plaintiffs’ transactions, and allege that Defendants’ misrepresentations in the Agreements for Deed constitute violations of four subsections of the statute prohibiting fraud in the sale of subdivision lots. Plaintiffs’ fraud claims under ILSFDA are insufficient under Rule 9(b) for the same reasons that their RICO claims are insufficient. In Count VIII, Plaintiffs allege: Paragon used fraud and deceit to sell and market the lots in Costa Rica. In particular, Paragon falsely represented that all monies paid toward the land purchases were 100% refundable. These representations were false when made as Paragon was depleting the monies it received in a manner that would make refunds impossible. (DE # 64 ¶ 855). This statement does not allege the “who, what, when and where” that would “alert defendants to the precise misconduct with which they are charged,” as required by Rule 9(b). Ben-Yishay v. Mastercraft Dev., LLC, Case no. 08-14046, 2009 WL 6387928, at *3 (S.D.Fla.2009) (quoting Leisure Founders, Inc. v. CUC Int’l, Inc., 833 F.Supp. 1562, 1575 (S.D.Fla. 1993)); see also Degirmenci v. Sapphire-Fort Lauderdale, LLLP, 693 F.Supp.2d 1325, 1343-44 (S.D.Fla.2010) (applying Rule 9(b) standard to fraud claims under ILSFDA). As discussed above, Section II of the Complaint does not supply the requisite

the sale of subdivision lots. Plaintiffs’ fraud claims under ILSFDA are insufficient under Rule 9(b) for the same reasons that their RICO claims are insufficient. In Count VIII, Plaintiffs allege: Paragon used fraud and deceit to sell and market the lots in Costa Rica. In particular, Paragon falsely represented that all monies paid toward the land purchases were 100% refundable. These representations were false when made as Paragon was depleting the monies it received in a manner that would make refunds impossible. (DE # 64 ¶ 855). This statement does not allege the “who, what, when and where” that would “alert defendants to the precise misconduct with which they are charged,” as required by Rule 9(b). Ben-Yishay v. Mastercraft Dev., LLC, Case no. 08-14046, 2009 WL 6387928, at *3 (S.D.Fla.2009) (quoting Leisure Founders, Inc. v. CUC Int’l, Inc., 833 F.Supp. 1562, 1575 (S.D.Fla. 1993)); see also Degirmenci v. Sapphire-Fort Lauderdale, LLLP, 693 F.Supp.2d 1325, 1343-44 (S.D.Fla.2010) (applying Rule 9(b) standard to fraud claims under ILSFDA). As discussed above, Section II of the Complaint does not supply the requisite particularity, as Plaintiffs argue. As a result, Plaintiffs have failed to plead their fraud claims under ILSFDA with the heightened specificity required by Rule 9(b). c. Disclosure Requirements under ILSFDA Plaintiffs also allege that Defendants sold them subdivision lots without obtaining statements of record and without furnishing property reports to Plaintiffs, as required by ILSFDA. 15 U.S.C. § 1703(a)(l)(A)(B). (DE #64 ¶ 853). The required statements of record and property reports contain descriptive and legal information about the property, including, for example, the names and addresses of persons having an interest in the property, a description of the property including a subdivision map, a statement of the condition of title, and any encumbrances on the property. 15 U.S.C. §§ 1705,1707. To state a claim under this section 1703(a)(1)(A), a plaintiff needs only to allege the property at issue is part of a subdivision, the defendant sold or leased the property to the plaintiff, and no statement of record was in effect at the time of the sale. Count VIII contains no allegations whatsoever that a statement of record

particularity, as Plaintiffs argue. As a result, Plaintiffs have failed to plead their fraud claims under ILSFDA with the heightened specificity required by Rule 9(b). c. Disclosure Requirements under ILSFDA Plaintiffs also allege that Defendants sold them subdivision lots without obtaining statements of record and without furnishing property reports to Plaintiffs, as required by ILSFDA. 15 U.S.C. § 1703(a)(l)(A)(B). (DE #64 ¶ 853). The required statements of record and property reports contain descriptive and legal information about the property, including, for example, the names and addresses of persons having an interest in the property, a description of the property including a subdivision map, a statement of the condition of title, and any encumbrances on the property. 15 U.S.C. §§ 1705,1707. To state a claim under this section 1703(a)(1)(A), a plaintiff needs only to allege the property at issue is part of a subdivision, the defendant sold or leased the property to the plaintiff, and no statement of record was in effect at the time of the sale. Count VIII contains no allegations whatsoever that a statement of record was not in effect for the properties sold to Plaintiffs. (DE # 64 ¶¶ 848-58). Section II, which details the transactions by individual Plaintiffs, similarly lacks any allegations as to statements of record. Because Plaintiffs have not pled any allegations as to one of the elements of this cause of action, the claim is insufficient on its face and must be dismissed. d. Claim Against LTS Management Finally, Plaintiff has failed to state a cause of action against Defendant LTS Management, Inc. (“LTS”). LTS is named as a defendant in Count VIII, but there are no allegations in the Complaint that it engaged in any transactions with any Plaintiffs. (DE # 64). In its Response in Opposition to one of the Motions to Dismiss, Plaintiffs allege for the first time that LTS is a defendant because it is a successor in interest to Paragon Properties of Costa Rica, LLC, which is now defunct. (DE # 103 at 6). To assert a claim against a defendant under a successor liability theory, a plaintiff must allege, “(1) the successor impliedly

was not in effect for the properties sold to Plaintiffs. (DE # 64 ¶¶ 848-58). Section II, which details the transactions by individual Plaintiffs, similarly lacks any allegations as to statements of record. Because Plaintiffs have not pled any allegations as to one of the elements of this cause of action, the claim is insufficient on its face and must be dismissed. d. Claim Against LTS Management Finally, Plaintiff has failed to state a cause of action against Defendant LTS Management, Inc. (“LTS”). LTS is named as a defendant in Count VIII, but there are no allegations in the Complaint that it engaged in any transactions with any Plaintiffs. (DE # 64). In its Response in Opposition to one of the Motions to Dismiss, Plaintiffs allege for the first time that LTS is a defendant because it is a successor in interest to Paragon Properties of Costa Rica, LLC, which is now defunct. (DE # 103 at 6). To assert a claim against a defendant under a successor liability theory, a plaintiff must allege, “(1) the successor impliedly assume[d] the obligations of the predecessor, (2) the transaction is a de factor merger, (3) the successor corporation is a mere continuation of the predecessor, or (4) the transaction is a fraudulent effort to avoid the liabilities of the predecessor.” Orlando Light Bulb Serv., Inc. v. Laser Lighting and Elec. Supply, Inc., 523 So.2d 740, 742 (Fla. 5th DCA 1988). Here, the Complaint alleges only that LTS is “the managing and controlling member of Paragon Properties of Costa Rica LLC” (DE # 64 ¶ 121) and that “by all accounts [Paragon Properties of Costa Rica’s] office is closed.” Id. ¶ 92. These statements do not sufficiently allege successor liability, and would not put LTS on notice of why it was named as a defendant in these counts. Furthermore, these arguments raised for the first time in a Response to a Motion to Dismiss are not properly before the Court. If Plaintiffs wish to claim LTS is liable as a successor in interest, they must properly allege facts supporting that claim in a Complaint. 3. Count II:

assume[d] the obligations of the predecessor, (2) the transaction is a de factor merger, (3) the successor corporation is a mere continuation of the predecessor, or (4) the transaction is a fraudulent effort to avoid the liabilities of the predecessor.” Orlando Light Bulb Serv., Inc. v. Laser Lighting and Elec. Supply, Inc., 523 So.2d 740, 742 (Fla. 5th DCA 1988). Here, the Complaint alleges only that LTS is “the managing and controlling member of Paragon Properties of Costa Rica LLC” (DE # 64 ¶ 121) and that “by all accounts [Paragon Properties of Costa Rica’s] office is closed.” Id. ¶ 92. These statements do not sufficiently allege successor liability, and would not put LTS on notice of why it was named as a defendant in these counts. Furthermore, these arguments raised for the first time in a Response to a Motion to Dismiss are not properly before the Court. If Plaintiffs wish to claim LTS is liable as a successor in interest, they must properly allege facts supporting that claim in a Complaint. 3. Count II: Fraudulent Inducement To state a claim for fraud in the inducement, a plaintiff must show that: “(1) a false statement was made regarding a material fact; (2) the individual who made the statement knew or should have known that it was false; (3) the maker intended that the other party rely on the statement; and (4) the other party relied on the false statement to its detriment.” Taylor Woodrow Homes Florida, Inc. v. 4/46-A Corp., 850 So.2d 536, 542 (Fla. 5th DCA 2003). Claims for fraudulent inducement in federal court are governed by Rule 9(b). Cadow v. Sandals Resorts Int'l, Case No. 10-24092-CIV, 2011 WL 1527555, at *2 (S.D.Fla.2011) (dismissing fraud in the inducement claim because failure to allege identity of person who made misrepresentations constituted noncompliance with Rule 9(b)). In Count II, Plaintiffs again incorporate Section II of the Complaint. (DE # 64 ¶ 64). The insufficiency of those allegations has already been discussed. In addition, Plaintiffs allege in Count II: Paragon knew that it could not and would not fulfill its obligations when it made these

Fraudulent Inducement To state a claim for fraud in the inducement, a plaintiff must show that: “(1) a false statement was made regarding a material fact; (2) the individual who made the statement knew or should have known that it was false; (3) the maker intended that the other party rely on the statement; and (4) the other party relied on the false statement to its detriment.” Taylor Woodrow Homes Florida, Inc. v. 4/46-A Corp., 850 So.2d 536, 542 (Fla. 5th DCA 2003). Claims for fraudulent inducement in federal court are governed by Rule 9(b). Cadow v. Sandals Resorts Int'l, Case No. 10-24092-CIV, 2011 WL 1527555, at *2 (S.D.Fla.2011) (dismissing fraud in the inducement claim because failure to allege identity of person who made misrepresentations constituted noncompliance with Rule 9(b)). In Count II, Plaintiffs again incorporate Section II of the Complaint. (DE # 64 ¶ 64). The insufficiency of those allegations has already been discussed. In addition, Plaintiffs allege in Count II: Paragon knew that it could not and would not fulfill its obligations when it made these fraudulent statements. In particular, Paragon knew it could never refund the deposits because it was dispersing the money as it came in to individuals and entities for purposes unrelated to the project. Paragon was not keeping itself capitalized because it had [no] intention of refunding the money it received.... Paragon made the false statements with the intention of inducing the Plaintiffs to enter into Agreements for Deed and to make payments to Paragon. (DE # 64 ¶¶ 791-92). These allegations as to the elements of knowledge and intent are not sufficient to state a claim for fraudulent inducement. The collective references to “Paragon” is fatal to Plaintiffs’ claim. This count is asserted against “each of the Paragon entities that are parties to the contracts (i.e., Agreements for Deed) with the Named Plaintiffs.” Id. ¶ 788. However, to state a claim against each of these defendants, Plaintiffs must allege that each Defendant knew the statements that it made were false, and that each Defendant intended that Plaintiffs would rely on those statements. It is not enough to

fraudulent statements. In particular, Paragon knew it could never refund the deposits because it was dispersing the money as it came in to individuals and entities for purposes unrelated to the project. Paragon was not keeping itself capitalized because it had [no] intention of refunding the money it received.... Paragon made the false statements with the intention of inducing the Plaintiffs to enter into Agreements for Deed and to make payments to Paragon. (DE # 64 ¶¶ 791-92). These allegations as to the elements of knowledge and intent are not sufficient to state a claim for fraudulent inducement. The collective references to “Paragon” is fatal to Plaintiffs’ claim. This count is asserted against “each of the Paragon entities that are parties to the contracts (i.e., Agreements for Deed) with the Named Plaintiffs.” Id. ¶ 788. However, to state a claim against each of these defendants, Plaintiffs must allege that each Defendant knew the statements that it made were false, and that each Defendant intended that Plaintiffs would rely on those statements. It is not enough to allege that “Paragon,” an amalgamation of sixteen separate entities, had the requisite knowledge and intent. Again, Section II of the Complaint does not supply the required specificity. Accordingly, Count II must be dismissed. 4. Count IX: Fraudulent Transfers Plaintiffs allege that four individual Defendants, Judith Gale, Lisa Tashman, Julien Siegel, and Mariland Tashman, were the recipients of fraudulent transfers in violation of Fla. Stat. § 726.105. (DE # 64 ¶¶ 859-65). Section 726.105 is part of Florida’s Uniform Fraudulent Transfers Act (“UFTA”), which lays out a statutory scheme for creditors to set aside a debtor’s transfer of assets to a third party under certain circumstances. Fla. Stat. § 726.101 et seq; Wiand v. Waxenberg, 611 F.Supp.2d 1299, 1318 (M.D.Fla.2009); see also Pearlman v. Alexis, Case No. 09-20865-CIV, 2009 WL 3161830, at *4 (S.D.Fla.2009) (“[UFTA] was adopted to prevent an insolvent debtor from transferring assets away from creditors when the debtor’s intent is to hinder, delay, or defraud any of its creditors.”). Section 726.105(1) of UFTA, invoked by Plaintiffs here, provides: A transfer made or obligation incurred by a debtor

allege that “Paragon,” an amalgamation of sixteen separate entities, had the requisite knowledge and intent. Again, Section II of the Complaint does not supply the required specificity. Accordingly, Count II must be dismissed. 4. Count IX: Fraudulent Transfers Plaintiffs allege that four individual Defendants, Judith Gale, Lisa Tashman, Julien Siegel, and Mariland Tashman, were the recipients of fraudulent transfers in violation of Fla. Stat. § 726.105. (DE # 64 ¶¶ 859-65). Section 726.105 is part of Florida’s Uniform Fraudulent Transfers Act (“UFTA”), which lays out a statutory scheme for creditors to set aside a debtor’s transfer of assets to a third party under certain circumstances. Fla. Stat. § 726.101 et seq; Wiand v. Waxenberg, 611 F.Supp.2d 1299, 1318 (M.D.Fla.2009); see also Pearlman v. Alexis, Case No. 09-20865-CIV, 2009 WL 3161830, at *4 (S.D.Fla.2009) (“[UFTA] was adopted to prevent an insolvent debtor from transferring assets away from creditors when the debtor’s intent is to hinder, delay, or defraud any of its creditors.”). Section 726.105(1) of UFTA, invoked by Plaintiffs here, provides: A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (a) With actual intent to hinder, delay, or defraud any creditor of the debtor; or (b) Without receiving a reasonable equivalent value in exchange for the transfer or obligation, and the debtor: 1. Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or 2. Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due. Fla. Stat. § 726.105(1). Thus, the statute “provides two theories by which a present or future creditor may recover fraudulent transfers: an actual fraud theory, under subsection (a), and a constructive fraud theory, under subsection (b).” Wiand, 611 F.Supp.2d at 1318. There is a split within this Circuit as to whether fraudulent transfer

is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (a) With actual intent to hinder, delay, or defraud any creditor of the debtor; or (b) Without receiving a reasonable equivalent value in exchange for the transfer or obligation, and the debtor: 1. Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or 2. Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due. Fla. Stat. § 726.105(1). Thus, the statute “provides two theories by which a present or future creditor may recover fraudulent transfers: an actual fraud theory, under subsection (a), and a constructive fraud theory, under subsection (b).” Wiand, 611 F.Supp.2d at 1318. There is a split within this Circuit as to whether fraudulent transfer claims must be pled with the particularity required by Rule 9(b). The Court declines to address the issue at this time because Plaintiffs have failed to plead their claim with the specificity required by Federal Rule of Civil Procedure 8(a). Plaintiffs allege an actual fraud claim against Defendants Judith Gale, Lisa Tashman, and Julien Siegel. (DE # 64 ¶ 863). To state a claim for actual fraud under UFTA, a plaintiff must “allege (1) there was a creditor sought to be defraud ed; (2) a debtor intending fraud; and (3) a conveyance of property which could have been available to satisfy the debt.” Nationsbank, N.A. v. Coastal Utils. Inc., 814 So.2d 1227, 1229 (Fla. 4th DCA 2002). Here, Plaintiffs have not adequately alleged the second element, “a debtor intending fraud.” First, Plaintiffs have not adequately identified the “debtors.” The Complaint simply states: “Plaintiffs and members of the class are creditors of the Paragon Entities, by virtue of the monies transferred for the alleged land transactions.” (DE # 64 ¶ 860). Again, the “Paragon Entities” are sixteen separate

claims must be pled with the particularity required by Rule 9(b). The Court declines to address the issue at this time because Plaintiffs have failed to plead their claim with the specificity required by Federal Rule of Civil Procedure 8(a). Plaintiffs allege an actual fraud claim against Defendants Judith Gale, Lisa Tashman, and Julien Siegel. (DE # 64 ¶ 863). To state a claim for actual fraud under UFTA, a plaintiff must “allege (1) there was a creditor sought to be defraud ed; (2) a debtor intending fraud; and (3) a conveyance of property which could have been available to satisfy the debt.” Nationsbank, N.A. v. Coastal Utils. Inc., 814 So.2d 1227, 1229 (Fla. 4th DCA 2002). Here, Plaintiffs have not adequately alleged the second element, “a debtor intending fraud.” First, Plaintiffs have not adequately identified the “debtors.” The Complaint simply states: “Plaintiffs and members of the class are creditors of the Paragon Entities, by virtue of the monies transferred for the alleged land transactions.” (DE # 64 ¶ 860). Again, the “Paragon Entities” are sixteen separate entities. Plaintiffs fail to explain which entities are “debtors” as defined by the statute, which Plaintiffs are creditors of which debtor-entities, and which of the debtors made the transfers to which recipients. Rather, Plaintiffs allege that, “Paragon transferred monies received from Plaintiffs and members of the class ... to Defendants Judith Gale, Lisa Tashman, and Julien Siegel Paragon paid the personal credit cards of Defendants Judith Gale, Lisa Tashman, and Julien Siegel from funds that were supposed to be held in escrow [], and Paragon ordered the direct transfer of funds from Charles L. Neustein, P.A.’s trust fund[] account to Defendants Lisa Tashman and Julien Siegel.” (DE # 64 ¶ 861). These vague assertions do not give Defendants “fair notice of what the claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A defendant included in the “Paragon” or “Paragon Entities” definition in the Complaint can not determine from these allegations what, if any, of its alleged conduct is

entities. Plaintiffs fail to explain which entities are “debtors” as defined by the statute, which Plaintiffs are creditors of which debtor-entities, and which of the debtors made the transfers to which recipients. Rather, Plaintiffs allege that, “Paragon transferred monies received from Plaintiffs and members of the class ... to Defendants Judith Gale, Lisa Tashman, and Julien Siegel Paragon paid the personal credit cards of Defendants Judith Gale, Lisa Tashman, and Julien Siegel from funds that were supposed to be held in escrow [], and Paragon ordered the direct transfer of funds from Charles L. Neustein, P.A.’s trust fund[] account to Defendants Lisa Tashman and Julien Siegel.” (DE # 64 ¶ 861). These vague assertions do not give Defendants “fair notice of what the claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A defendant included in the “Paragon” or “Paragon Entities” definition in the Complaint can not determine from these allegations what, if any, of its alleged conduct is implicated here. Second, Plaintiffs have not adequately alleged the intent element. “Because of the difficulty of proving actual intent, past statutory law, existing case law and the UFTA look to indicia of intent commonly known as ‘badges of fraud.’ ” Amjad Munim, M.D., P.A. v. Azar, 648 So.2d 145, 152 (Fla. 4th DCA 1994); In re XYZ Options, Inc., 154 F.3d 1262, 1271 (11th Cir.1998) (“In determining whether the circumstantial evidence is sufficient to establish fraudulent intent, the court should investigate the transfer for the existence of badges of fraud.”). The UFTA lists eleven nonexclusive “badges of fraud” that may be considered in determining actual intent. Fla. Stat. § 726.105(2). Plaintiffs have not alleged the existence of any of these badges of fraud in Count IX. (DE # 64 ¶¶ 859-65). The only allegation of Defendants’ intent is: “Paragon made the transfers to Defendants Judith Gale, Lisa Tashman, and Julien Siegel with the actual intent to hinder, delay, or defraud Plaintiffs and members of the class from obtaining the monies Paragon owed them.” Id. This is

implicated here. Second, Plaintiffs have not adequately alleged the intent element. “Because of the difficulty of proving actual intent, past statutory law, existing case law and the UFTA look to indicia of intent commonly known as ‘badges of fraud.’ ” Amjad Munim, M.D., P.A. v. Azar, 648 So.2d 145, 152 (Fla. 4th DCA 1994); In re XYZ Options, Inc., 154 F.3d 1262, 1271 (11th Cir.1998) (“In determining whether the circumstantial evidence is sufficient to establish fraudulent intent, the court should investigate the transfer for the existence of badges of fraud.”). The UFTA lists eleven nonexclusive “badges of fraud” that may be considered in determining actual intent. Fla. Stat. § 726.105(2). Plaintiffs have not alleged the existence of any of these badges of fraud in Count IX. (DE # 64 ¶¶ 859-65). The only allegation of Defendants’ intent is: “Paragon made the transfers to Defendants Judith Gale, Lisa Tashman, and Julien Siegel with the actual intent to hinder, delay, or defraud Plaintiffs and members of the class from obtaining the monies Paragon owed them.” Id. This is the type of “formulaic recitation of a cause of action’s elements [that] will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955. Plaintiffs have also failed to state a claim for a constructive fraudulent transfer against Mariland Tashman in Count IX. Count IX contains only the following allegations as to Mariland Tashman: “The Paragon Entities also paid Mariland Tashman monies from the Paragon operating account. There is no evidence that she ever provided services for Paragon.” (DE # 64 ¶ 862). To state a claim for constructive fraud under section 726.105(Z )(b), a plaintiff must allege that a debtor made a transfer or incurred an obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor: (1) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or (2) Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his ability to pay

the type of “formulaic recitation of a cause of action’s elements [that] will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955. Plaintiffs have also failed to state a claim for a constructive fraudulent transfer against Mariland Tashman in Count IX. Count IX contains only the following allegations as to Mariland Tashman: “The Paragon Entities also paid Mariland Tashman monies from the Paragon operating account. There is no evidence that she ever provided services for Paragon.” (DE # 64 ¶ 862). To state a claim for constructive fraud under section 726.105(Z )(b), a plaintiff must allege that a debtor made a transfer or incurred an obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor: (1) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or (2) Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his ability to pay as they became due. Fla. Stat. 726.105(l)(b) (emphasis added). The Complaint contains no allegations as to either of the alternative second elements. Because Plaintiffs have not pled an element of this cause of action, the claim fails to meet Rule 8(a)(2)’s requirements and must be dismissed. C. Non-Fraud Claims 1. Count I: Breach of Contract Plaintiffs allege that the Paragon entities breached the Agreements for Deed by failing to either refund their deposits and installment payments or failing to deliver valid deeds to purchasers who paid the full purchase price. (DE # 64 ¶¶ 781-87). Plaintiffs also allege Defendants breached the contracts by failing to install infrastructure improvements within the promised time period. Id. This count is asserted against “each of the Paragon Entities that are parties to the contracts (i.e., Agreements for Deed with the Named Plaintiffs.” Id. ¶ 781. Count I also incorporates Section II, which contains allegations as to named Plaintiffs’ individual transactions. Id. ¶ 782. The elements of a breach of contract claim are straightforward: “(1) a valid contract; (2) a material breach; and (3) damages.”

as they became due. Fla. Stat. 726.105(l)(b) (emphasis added). The Complaint contains no allegations as to either of the alternative second elements. Because Plaintiffs have not pled an element of this cause of action, the claim fails to meet Rule 8(a)(2)’s requirements and must be dismissed. C. Non-Fraud Claims 1. Count I: Breach of Contract Plaintiffs allege that the Paragon entities breached the Agreements for Deed by failing to either refund their deposits and installment payments or failing to deliver valid deeds to purchasers who paid the full purchase price. (DE # 64 ¶¶ 781-87). Plaintiffs also allege Defendants breached the contracts by failing to install infrastructure improvements within the promised time period. Id. This count is asserted against “each of the Paragon Entities that are parties to the contracts (i.e., Agreements for Deed with the Named Plaintiffs.” Id. ¶ 781. Count I also incorporates Section II, which contains allegations as to named Plaintiffs’ individual transactions. Id. ¶ 782. The elements of a breach of contract claim are straightforward: “(1) a valid contract; (2) a material breach; and (3) damages.” Schiffman v. Schiffman, 47 So.3d 925, 927 (Fla. 3d DCA 2010) (quoting Abbott Labs., Inc. v. Gen. Elec. Capital, 765 So.2d 737, 740 (Fla. 5th DCA 2000)). Here, Plaintiffs allege that the parties entered into Agreements for Deed, the Paragon entities breached them by keeping Plaintiffs’ money without delivering any valid deeds, and that Plaintiffs suffered damages as a result. Defendant All Star Consulting Group, Inc. (“All Star”) does not argue that Plaintiffs have failed to allege the elements for breach of contract; rather All Star argues that Count I should be dismissed because it “lacks the proper specificity.” (DE # 118 at 7). In particular, All Star argues that “Plaintiffs’ failure to identify which Defendants allegedly breached which contracts dooms this count.” Id. Plaintiffs argue that the Agreements for Deed, attached as exhibits to the Complaint, sufficiently identify which Defendants allegedly breached which contracts. (DE # 119 at 2). As an initial matter, All Star is named in Section II of the Complaint as the seller of the property purchased by Plaintiff Anne Smith. (DE

Schiffman v. Schiffman, 47 So.3d 925, 927 (Fla. 3d DCA 2010) (quoting Abbott Labs., Inc. v. Gen. Elec. Capital, 765 So.2d 737, 740 (Fla. 5th DCA 2000)). Here, Plaintiffs allege that the parties entered into Agreements for Deed, the Paragon entities breached them by keeping Plaintiffs’ money without delivering any valid deeds, and that Plaintiffs suffered damages as a result. Defendant All Star Consulting Group, Inc. (“All Star”) does not argue that Plaintiffs have failed to allege the elements for breach of contract; rather All Star argues that Count I should be dismissed because it “lacks the proper specificity.” (DE # 118 at 7). In particular, All Star argues that “Plaintiffs’ failure to identify which Defendants allegedly breached which contracts dooms this count.” Id. Plaintiffs argue that the Agreements for Deed, attached as exhibits to the Complaint, sufficiently identify which Defendants allegedly breached which contracts. (DE # 119 at 2). As an initial matter, All Star is named in Section II of the Complaint as the seller of the property purchased by Plaintiff Anne Smith. (DE # 64 ¶ 163). However, All Star also allegedly entered into Agreements for Deed with Plaintiffs Ronald and Kathleen Erb, and Rhonda Brewer, but All Star is not identified as the property seller in the allegations pertaining to these Plaintiffs in Section II (no seller is identified). (DE # 64 ¶¶ 326-34, 456-60). In addition, the Complaint alleges conduct that would constitute a breach of contract was taken by people and entities other than All Star. For example, the Complaint alleges that Plaintiff Anne Smith requested refunds from Defendants William Gale, Esteban Soto, and Charles L. Neustein, and that those refund requests have gone unanswered. (DE #64 ¶¶ 164-173). The Complaint contains no allegations that these Defendants acted on behalf of All Star, or that All Star refused to pay refunds to these plaintiffs. In addition, with respect to Plaintiffs Ronald and Kathleen Erb and Rhonda Brewer, the Complaint alleges that “Paragon was obligated to put in place infrastructure of roads and electricity,” within a time period that has now passed, and that the infrastructure

# 64 ¶ 163). However, All Star also allegedly entered into Agreements for Deed with Plaintiffs Ronald and Kathleen Erb, and Rhonda Brewer, but All Star is not identified as the property seller in the allegations pertaining to these Plaintiffs in Section II (no seller is identified). (DE # 64 ¶¶ 326-34, 456-60). In addition, the Complaint alleges conduct that would constitute a breach of contract was taken by people and entities other than All Star. For example, the Complaint alleges that Plaintiff Anne Smith requested refunds from Defendants William Gale, Esteban Soto, and Charles L. Neustein, and that those refund requests have gone unanswered. (DE #64 ¶¶ 164-173). The Complaint contains no allegations that these Defendants acted on behalf of All Star, or that All Star refused to pay refunds to these plaintiffs. In addition, with respect to Plaintiffs Ronald and Kathleen Erb and Rhonda Brewer, the Complaint alleges that “Paragon was obligated to put in place infrastructure of roads and electricity,” within a time period that has now passed, and that the infrastructure is not in place. Id. ¶¶ 331-32, 458-59. Again, Paragon is comprised of sixteen entities. It is not clear from this allegation which obligations All Star was allegedly responsible for, and which obligations it allegedly breached. Plaintiffs’ failure to name the sellers of the properties in the relevant sections of the Complaint is addressed above, and, like the claims already discussed, this failure renders the breach of contract claim insufficient. Moreover, Plaintiffs’ failure to allege breaching conduct by All Star rather than non-parties is fatal to Plaintiffs’ claims. Any actions taken by nonparties, even if inconsistent with the contracts, cannot give rise to a cause of action for breach of contract against All Star. See Norfolk S. Ry. Co. v. Groves, 586 F.3d 1273, 1282 (11th Cir.2009) (“It goes without saying that a contract cannot bind a nonparty.”) (quoting Miles v. Naval Aviation Museum Found., Inc., 289 F.3d 715, 720 (11th Cir.2002)). In sum, Plaintiffs have alleged that All Star agreed to build infrastructure improvements and to refund money under certain circumstances, but that other individuals and

is not in place. Id. ¶¶ 331-32, 458-59. Again, Paragon is comprised of sixteen entities. It is not clear from this allegation which obligations All Star was allegedly responsible for, and which obligations it allegedly breached. Plaintiffs’ failure to name the sellers of the properties in the relevant sections of the Complaint is addressed above, and, like the claims already discussed, this failure renders the breach of contract claim insufficient. Moreover, Plaintiffs’ failure to allege breaching conduct by All Star rather than non-parties is fatal to Plaintiffs’ claims. Any actions taken by nonparties, even if inconsistent with the contracts, cannot give rise to a cause of action for breach of contract against All Star. See Norfolk S. Ry. Co. v. Groves, 586 F.3d 1273, 1282 (11th Cir.2009) (“It goes without saying that a contract cannot bind a nonparty.”) (quoting Miles v. Naval Aviation Museum Found., Inc., 289 F.3d 715, 720 (11th Cir.2002)). In sum, Plaintiffs have alleged that All Star agreed to build infrastructure improvements and to refund money under certain circumstances, but that other individuals and a group of entities refused to refund the money and failed to build the promised improvements. As a result, Plaintiffs have not alleged that All Star breached the contracts. To the extent that the same deficiencies are present in allegations for breach of contract against other, non-moving defendants, Plaintiffs should remedy them as well in any amended pleading that is filed. 2. Count III: Alter Ego In Count III, Plaintiffs assert that mov ing Defendant Julien Siegel abused the corporate form of the Paragon entities, and should be held personally liable for wrongdoing committed by the entities. (DE # 64 ¶¶ 796-808). Defendant Siegel moves to dismiss this count on the grounds that alter ego is not an independent cause of action that can be the subject of a separate count, and that Plaintiffs have failed to adequately allege that he abused the corporate form, such that the “corporate veil” should be pierced. As an initial matter, Florida courts permit alter ego allegations to be pled as a distinct cause of action. See, e.g. Acadia Partners, L.P. v.

a group of entities refused to refund the money and failed to build the promised improvements. As a result, Plaintiffs have not alleged that All Star breached the contracts. To the extent that the same deficiencies are present in allegations for breach of contract against other, non-moving defendants, Plaintiffs should remedy them as well in any amended pleading that is filed. 2. Count III: Alter Ego In Count III, Plaintiffs assert that mov ing Defendant Julien Siegel abused the corporate form of the Paragon entities, and should be held personally liable for wrongdoing committed by the entities. (DE # 64 ¶¶ 796-808). Defendant Siegel moves to dismiss this count on the grounds that alter ego is not an independent cause of action that can be the subject of a separate count, and that Plaintiffs have failed to adequately allege that he abused the corporate form, such that the “corporate veil” should be pierced. As an initial matter, Florida courts permit alter ego allegations to be pled as a distinct cause of action. See, e.g. Acadia Partners, L.P. v. Tompkins, 759 So.2d 732, 740 (Fla. 5th DCA 2000). Nonetheless, federal courts require that only separate claims for relief be pled in separate counts. Fed.R.Civ.P. 10(b) (“[E]aeh claim founded on a separate transaction or occurrence ... must be stated in a separate count.”). Accordingly, federal courts generally find that “[a]lter ego is not a separate cause of action for which relief can be granted; rather, ... alter ego serves as a theory to impose liability on an individual for the acts of a corporate entity.” Tara Prods., Inc. v. Hollywood Gadgets, Inc., Case No. 09-CV-61436, 2010 WL 1531489, at *9 (S.D.Fla. April 16, 2010) (dismissing alter ego count with prejudice and requiring plaintiff to re-plead allegations regarding alter ego in the body of the complaint). Count III will be dismissed with prejudice, but Plaintiffs will be permitted to plead allegations related to their alter ego theory in the body of the Complaint. In addition, Plaintiffs have failed to allege the substantive elements required to pierce the corporate veil. In general, “a corporation is a separate legal

Tompkins, 759 So.2d 732, 740 (Fla. 5th DCA 2000). Nonetheless, federal courts require that only separate claims for relief be pled in separate counts. Fed.R.Civ.P. 10(b) (“[E]aeh claim founded on a separate transaction or occurrence ... must be stated in a separate count.”). Accordingly, federal courts generally find that “[a]lter ego is not a separate cause of action for which relief can be granted; rather, ... alter ego serves as a theory to impose liability on an individual for the acts of a corporate entity.” Tara Prods., Inc. v. Hollywood Gadgets, Inc., Case No. 09-CV-61436, 2010 WL 1531489, at *9 (S.D.Fla. April 16, 2010) (dismissing alter ego count with prejudice and requiring plaintiff to re-plead allegations regarding alter ego in the body of the complaint). Count III will be dismissed with prejudice, but Plaintiffs will be permitted to plead allegations related to their alter ego theory in the body of the Complaint. In addition, Plaintiffs have failed to allege the substantive elements required to pierce the corporate veil. In general, “a corporation is a separate legal entity, distinct from the persons comprising [it].” Gasparini v. Pordomingo, 972 So.2d 1053, 1055 (Fla. 3d DCA 2008). However, “the corporate veil may be pierced if the plaintiff can prove both that the corporation is a mere instrumentality or alter ego of the defendant, and that the defendant engaged in improper conduct in the formation or use of the corporation.” XL Vision, LLC v. Holloway, 856 So.2d 1063, 1066 (Fla. 5th DCA 2003). To show that a corporation is the alter ego of a defendant, a plaintiff must allege “the shareholder dominated and controlled the corporation to such an extent that the corporation’s independent existence, was in fact nonexistent and the shareholders were in fact alter egos of the corporation.” Gasparini, 972 So.2d at 1055. Here, Plaintiffs have only alleged that Julien Siegel owns and operates or is the president of Costa Rican Land and Development. (DE # 64 ¶¶ 114, 115, 797, 802). However, “the mere ownership of a corporation by a few shareholders, or even one shareholder, is an insufficient reason to pierce the