Article

Note: A Clear Title & Escrow Exchange LLC, SRV Associates LLC and Marek Harrison (Fraudsters) approached investors including Brent Meder (Victim) regarding a real estate investment program (Program). Fraudsters asked Victim to deposit USD250,000 into an escrow account which supposedly was to show capital to banks and potential investors in order to obtain bank guarantees. Fraudsters claimed that the money was safe and “would never be touched or encumbered” by Fraudsters without Victim’s approval, and that the money would be returned following closing.

Following Victim’s requests for a return of funds, it was discovered the money had been misappropriated for the personal benefit of Fraudsters. Victim sued Fraudsters, including Justyna Michalowska (Manager) who worked for Fraudsters. Manager sought dismissal of this action, specifically the charges of 1) breach of fiduciary duty, 2) civil fraud, and 3) civil conspiracy to commit fraud. The United States District Court for the Northern District of Illinois, Eastern Division, Wood, J., dismissed the fraud related charges against Manager, but declined to dismiss the breach of fiduciary duty charge.

Manager sought dismissal, claiming Victim had failed to plead sufficient facts to prove Manager had been specifically involved in the alleged acts. Normally U.S. Federal Civil Procedure Rules only require “a short and plain recitation of the claim” demonstrating the “pleader is entitled to relief.” In fraud cases, the pleader is required to meet the higher standard of pleading “with specificity.” The Judge dismissed the fraud and conspiracy charges, concluding Victim had not pled “with specificity.” The Judge did not dismiss the breach of fiduciary duty claim, as fraud was not an element, and the normal pleading standard had been met.

[ARB]

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