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Note: In order to obtain a €35 million loan to purchase an interest in GTherm, Inc., an energy company, and finance it, Peter Sabilia (Investor) entrusted USD 500,000, his life savings and the equity from his home, to Thomas Richmond, Ronald J. Brooks, Patrick Charles, and Tom C. Plummer (Defendants) to be held in escrow. Richmond allegedly claimed to represent Credito Accesible, SA of Costa Rica (CASA) and Plummer to represent The Commercial Depository Trust of Switzerland, a Swiss Corporation.

Defendants allegedly raised obstacles to obtaining the loan in the form of extensive additional steps and eventually returned only USD 28,000 when the loan was not forthcoming.

Investor sued Defendants for fraud, conversion, equitable and promissory estoppel, negligent misrepresentation, conspiracy, aiding and abetting fraud and conversion, breach of contract, and unjust enrichment. Investor also alleged that Richmond was Plummer's agent. Plummer moved to dismiss for failure to state a cause of action under Rule 12(b)(6) and to compel arbitration. The US District Court for the Southern District of New York, Dolinger, Magistrate Judge, recommended that the motion to dismiss be granted with respect to the claimed negligent misrepresentation, civil conspiracy, aiding and abetting fraud and conversion, and equitable estoppel but that the other counts be retained.

Since there was no agreement signed by Investor agreeing to arbitrate disputes, the Magistrate concluded that the motion to compel arbitration was without merit. The Magistrate Judge also noted that the complaint contained sufficiently specific allegations of agency to withstand Plummer's motion to dismiss the alleged agency. The complaint had alleged that a letter to Investor from Plummer was routed through Richmond and that Plummer directed that communications were to be routed through Richmond.

The Magistrate also noted allegations of false statements made by Plummer:

"Plummer (1) 'represented to [Investor] ... that he would provide a €35 million demand guarantee' in exchange for their escrowed $500,000.00; (2) may have drafted a loan agreement outlining the terms for such a transaction; and (3) 'provided a [loan] commitment in the name of the Swiss Shell' that he sent to Brooks in order to obtain [Investor's] escrowed funds. Moreover, [Investor] allege that Plummer 'falsely advised [them] that the $500,000.00 [in] escrow was intact and would be returned to [Investor] upon demand' at a time when the escrow funds had allegedly already been dissipated. [Investor] also alleges that Plummer 'admitted that he made a number of mistakes that prevented the loan from being funded but continued to promise that the loan would be funded, when he had no ability or desire to do so, and made such representations with the intent that [Investor] would be delayed in asserting their rights.' Finally, over several months, Plummer and Richmond 'repeatedly promised to reimburse [Investor] for the escrow that they had converted.'"

The Magistrate also noted that: "The complaint makes several allegations regarding defendants' allegedly fraudulent statements, all of which are intended to create a single narrative: defendants colluded to deceive [Investor] into believing that defendants represented entities capable of funding a €35 million loan in exchange for $500,000.00 from [Investor]. Once [Investor] deposited those funds into escrow, defendants misappropriated those funds while continuing to assure [Investor] that the loan was forthcoming. Defendants allegedly made these assurances in order to prevent [Investor] from seeking the return of the escrowed funds before defendants could dissipate them." These alleged representations included a promise of funding from a Hong Kong bank. Claims were also allegedly made by Richmond "that he was dealing with two European banks, Credit Suisse and Commerzbank, that a bank in Hong Kong would authenticate and fund the loan and guarantee within seven days, that the initial loan disbursements would be made to [Investor] by November 15, 2010, and that CASA would refund [Investor's] $500,000.00 as soon as possible upon [Investor's] request." It was also alleged that "the guarantee that Plummer had provided [Investor] had been increased, which had delayed the delivery of the loan funding by Barclays Bank."

[JEB/dm]

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