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Raab v. Wendel

United States District Court, E.D. Wisconsin

March 6, 2019

RUDOLPH RAAB, et al., Plaintiffs,
v.
MICHAEL C. WENDEL, et al., Defendants.

          DECISION AND ORDER

          WILLIAM E. DUFFIN U.S. MAGISTRATE JUDGE

         1. Introduction

         At its core this lawsuit seems to be an unexceptional dispute about the management of a hotel. Nonetheless, it has already spanned nearly five years, three courts, and three complaints. The plaintiffs in their second amended complaint assert 24 claims, ranging from claims seeking the appointment of a receiver, three different varieties of misrepresentation, various iterations of theft, breach of fiduciary duty, conspiracy, and every sort of racketeering.

         Aside from its scattershot allegations, the second amended complaint lacks clarity on the most basic elements, such as who the defendants are and against whom each claim is made. Some purported defendants are named in the body of the complaint although not identified as defendants in the caption. Other entities are identified in the caption under the designation “d/b/a, ” which is simply a means to indicate an alternate identity of another defendant. But at times in the body of the complaint it seems as if the plaintiffs believe they have named these “d/b/a” entities as separate defendants. Most claims purport to be against all defendants, even though it seems obvious that certain claims aren't really, and maybe even couldn't be, asserted against at least some of the defendants.

         The plaintiffs and the defendants have both moved for summary judgment on some of the plaintiffs' claims, and the plaintiffs move for summary judgment on all of the defendants' counterclaims. The motions have been fully briefed and are ready for a resolution. All parties have consented to the jurisdiction of a magistrate judge.

         1.1. Facts

         In 1998, plaintiff Rudolph Raab and defendant Wendel Investments, Inc. formed R&W Lodging, LLC (ECF No. 91, ¶ 1) for the construction and ownership of a hotel in East Troy, Wisconsin (ECF No. 86, ¶ 2). Raab owned 80 percent of R&W and Wendel Investments, which was soon succeeded by defendant Wendel Enterprises, LLC, owned 20 percent. (ECF No. 91, ¶¶ 1, 2.) R&W agreed to have defendant The Wendel Group, Inc. manage and maintain the hotel. (ECF No. 91, ¶¶ 4, 5.) The man behind each of the three Wendel defendant entities is defendant Michael C. Wendel. (ECF No. 91, ¶¶ 1, 19; see also ECF No. 68, ¶¶ 2, 4.)

         In 2007, The Wendel Group merged with defendant Sand Companies, Inc., which began to manage the hotel in place of The Wendel Group. (ECF No. 91, ¶¶ 7, 8.) Sand Companies also used certain of its subsidiaries in the management of the hotel. (ECF No. 91, ¶ 9.) For example, payroll and human resources management were provided by defendant SCI Hotels, LLC (ECF No. 91, ¶¶ 11-12), and defendant Sand Procurement by Design, LLC “assisted in providing furniture and furnishings for the Hotel after it sustained water damage” (ECF No. 91, ¶ 13).

         Michael Wendel, purportedly acting on behalf of R&W, entered into an agreement with Sand Hospitality whereby Sand Hospitality would manage R&W's East Troy hotel effective January 1, 2012. (ECF No. 91, ¶ 15.)

         1.2. Claims in the Second Amended Complaint

         In their second amended complaint (ECF No. 17) the plaintiffs allege 24 causes of action: (1) appointment of a receiver pursuant to Wis.Stat. § 813.16; (2) appointment of a receiver pursuant to Wis.Stat. ch. 128; (3) intentional misrepresentation; (4) strict liability misrepresentation; (5) negligent misrepresentation; (6) conversion; (7) theft by contractor in violation of Wis.Stat. § 779.02(5); (8) civil theft in violation of Wis.Stat. §§ 779.02(5), 895.446, and 943.20; (9) declaration that the hotel management agreement is unenforceable; (10) breach of contract; (11) breach of fiduciary duty; (12) breach of loyalty, good faith, and fair dealing; (13) tortious interference with contract as to Leo Sand and the Sand entities; (14) accounting; (15) civil conspiracy; (16) civil conspiracy pursuant to Wis.Stat. § 134.01; (17) violation of RICO under 18 U.S.C. § 1962(a); (18) violation of RICO under 18 U.S.C. § 1962(b); (19) violation of RICO under 18 U.S.C. § 1962(c); (20) violation of RICO under 1962(d); (21) violation of Wisconsin's Organized Crime Control Act (WOCCA) under Wis.Stat. § 946.83(3); (22) violation of WOCCA under Wis.Stat. § 946.83(2); (23) violation of WOCCA under Wis.Stat. § 946.83(1); (24) contribution or subrogation as to Michael Wendel and the Wendel entities.

         1.3. Parties

         The caption of the second amended complaint identifies the plaintiffs as “Rudolph Raab d/b/a Raab Investments, and R&W Lodging, Limited Liability Company.” Aided by the further description provided in the first and second paragraphs of the second amended complaint, the court understands there to be two plaintiffs-Rudolph Raab and R&W Lodging, LLC. Raab Investments is merely a further description of Rudolph Raab and is not a separate party.[1]

         It is much more complicated, however, to identify who the defendants are. The persons or entities Raab and R&W name as defendants in the caption of the second amended complaint are Michael C. Wendel (three separate times), West Bend Hospitality, Inc., Leo M. Sand (twice), Sand Hospitality, LLC, Sand Companies, Inc., SCI Hotels, LLC, Sand Procurement by Design, and HW West Bend Properties, LLC. Raab and R&W also identify various entities as a d/b/a of a named defendant.

         Sand Companies, Inc., Sand Hospitality, LLC, SCI Hotels, LLC, and Sand Procurement by Design are named as defendants and are also identified as a d/b/a of Michael C. Wendel and/or Leo M. Sand. West Bend Hospitality, Inc. is named as a defendant and is also identified as a d/b/a of Michael C. Wendel. Because each of these entities is identified as a defendant both in the caption and in the body of the second amended complaint (ECF No. 17, ¶¶ 6, 8-11), there is no confusion that each is a defendant, notwithstanding the fact that each is also identified as a d/b/a of Wendel and/or Sand.

         However, whether The Wendel Group Inc., Wendel Companies LLC, Wendel Enterprises LLC, Wendel Investments LLC, Wendel Hospitality LLC, and Wendel Investments Inc. are defendants is unclear. None is named in the caption of the second amended complaint other than as a d/b/a of Michael C. Wendel. But the d/b/a designation simply further describes a party; it is not a means by which to name a distinct entity as a defendant. Cf. Paul Davis Restoration of S.E. Wis., Inc. v. Paul Davis Restoration of Ne. Wis., 2013 WI 49, ¶5, 347 Wis.2d 614, 831 N.W.2d 413. Adding to the confusion, two of the Wendel entities-The Wendel Group Inc. and Wendel Investments Inc.-are identified as defendants in the body of the second amended complaint (ECF No. 17, ¶¶ 4, 5) despite not being named as defendants in the caption. It appears that the defendants (who are collectively defending this case) are under the impression that The Wendel Group Inc. and Wendel Investments Inc. are defendants (see, e.g., ECF No. 67 at 10-11, (discussing whether The Wendel Group Inc. and Wendel Investments Inc. owed fiduciary duties to the plaintiffs)). Therefore, notwithstanding plaintiffs' failure to identify them as such in the caption of the second amended complaint, the court will regard these entities as defendants.

         However, the remaining Wendel entities identified only as a d/b/a of Michael C. Wendel-Wendel Companies LLC, Wendel Investments LLC, and Wendel Hospitality LLC-are not identified either in the caption or in the body of the complaint as defendants. Therefore, the court does not regard these entities as parties.

         The court is inclined to reach the same conclusion regarding Wendel Enterprises, LLC, which like Wendel Companies LLC, Wendel Investments LLC, and Wendel Hospitality LLC, is not identified as a defendant in the caption or in the body of the second amended complaint. However, it is clear that the defendants again regard Wendel Enterprises, LLC as a proper defendant. Significantly, Wendel Enterprises, LLC alleges a counterclaim against Raab. (ECF No. 48 at 38-41.) In doing so it repeatedly refers to itself as a “Defendant, ” and it obviously could not have brought a counterclaim unless it was. Therefore, the court accepts that the plaintiffs have constructively amended their second amended complaint to include Wendel Enterprises, LLC as a defendant.

         1.4. Claims Against Certain Defendants

         In addition to the lack of clarity as to who the parties are, it is often unclear against whom the plaintiffs are making a claim. Nearly all of the 24 claims in plaintiffs' second amended complaint purport to be against all of the defendants. (ECF No. 17.) In briefing the summary judgment motions, the parties regularly refer to “the defendants” and “the plaintiffs, ” collectively. Because more specificity is often impossible given the state of the record, the court finds itself often forced to likewise use such generalities. However, at times it seems clear that some of the claims are not properly asserted against some of the defendants. For example, notwithstanding the plaintiffs including “(All Defendants)” following the title of most claims, in some instances the substantive allegations in support of the claim identify only one or a few specific defendants.

         The defendants argue that Wendel Companies, LLC, Wendel Hospitality, LLC, Wendel Investments, LLC, and HW West Bend Properties, LLC “never transacted business with R&W.” (ECF No. 67 at 28.) And “[i]t is undisputed that Leo Sand never received any money from R&W.” (ECF No. 67 at 28.) Finally, “[t]here is also no evidence that Wendel Investments, Inc. or Wendel Enterprises, LLC engaged in any wrongful conduct.” (ECF No. 67 at 28.)

         As noted above, because they were identified only as a d/b/a of Michael Wendel and were not properly named as defendants in the second amended complaint, Wendel Companies LLC, Wendel Investments LLC, or Wendel Hospitality LLC are not defendants in this action. Beyond that, the plaintiffs have not asserted any claims against any of them. (See also ECF No. 91 ¶¶ 23-24, 27.) Therefore, even if the court were to conclude that these entities were properly named as defendants, it would dismiss them. The plaintiffs also failed to respond to the defendants' argument regarding HW West Bend Properties, LLC. Therefore, HW West Bend is dismissed as a defendant.

         Wendel Investments, Inc. was an original member of R&W but soon was succeeded by Wendel Enterprises, LLC. Wendel Investments, Inc. is referenced in the plaintiffs' response to the defendants' summary judgment motion only when they allege that it, along with various other entities, “had a fiduciary relationship with Plaintiffs and owed Plaintiffs fiduciary duties.” (ECF No. 87 at 12.) But that does not explain what Wendel Investments, Inc. allegedly did wrong. The only allegation the court has identified regarding conduct occurring when Wendel Investments, Inc. was a member of R&W is made in connection with the plaintiffs' misrepresentation claims- specifically, that “from 1998 through 2014 the Defendants made false representations to R&W and Raab regarding payments made from R&W to Michael, Wendel Entities and Sand Entities ….” (ECF No. 17, ¶¶ 97, 104, 109.) As discussed below, the evidence the plaintiffs proffer in defense of these claims does not refer to Wendel Investments, Inc. There is no evidence that Wendel Investments, Inc. had any further involvement in this matter after it was no longer a member of R&W. Therefore, Wendel Investments, Inc. is also dismissed as a defendant.

         As for Wendel Enterprises, LLC, as noted above, although not named as a defendant in the second amended complaint, the court found the plaintiffs to have constructively amended their complaint to include Wendel Enterprises, LLC as a defendant. Nonetheless, the defendants contend that Wendel Enterprises, LLC should be dismissed as a defendant. The court agrees with the defendants that the plaintiffs have done an exceedingly poor job articulating what claim or claims they are asserting against this defendant. While generally referring to all defendants collectively, the most specific the plaintiffs tend to get is to refer to “the Wendel Entities, ” which they describe as including “Wendel Enterprises, Wendel Investments, Wendel Group.” (ECF No. 87 at 12.) But these entities had vastly different roles, with Wendel Enterprises taking over for Wendel Investments as the member of R&W, and The Wendel Group being the entity hired to manage the hotel. With regard to many allegations in the second amended complaint, they are unlikely to apply equally to each entity.

         Despite the plaintiffs' troubling lack of specificity, the court will reluctantly decline to dismiss Wendel Enterprises, LLC as a defendant. As the other member of R&W, the court can recognize how certain of the plaintiffs' claims apply to Wendel Enterprises, LLC. Therefore, the court finds it inappropriate to dismiss Wendel Enterprises, LLC as a defendant.

         Finally, the defendants argue that there is no evidence of wrongdoing with respect to Leo Sand. They argue there is no allegation that he ever personally engaged in any wrongful conduct, and the plaintiffs' allegation that he is an alter ego of one or more defendant entity is empty. (ECF No. 67 at 28.) For the reasons discussed below, the court cannot say that it is appropriate to wholly dismiss Sand as a defendant. Unlike certain of the other defendants, the plaintiffs have made allegations specific to Sand.

         2. Summary Judgment Standard

         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is “material” only if it “might affect the outcome of the suit” and a dispute is “genuine” only if a reasonable factfinder could return a verdict for the non-movant. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986). In resolving a motion for summary judgment, the court is to “construe all evidence and draw all reasonable inferences from the evidence in” favor of the non-movant. E.Y. v. United States, 758 F.3d 861, 863 (7th Cir. 2014) (citing Gil v. Reed, 535 F.3d 551, 556 (7th Cir. 2008); Del Raso v. United States, 244 F.3d 567, 570 (7th Cir. 2001)). “The controlling question is whether a reasonable trier of fact could find in favor of the non-moving party on the evidence submitted in support of and [in] opposition to the motion for summary judgment.” White v. City of Chi., 829 F.3d 837, 841 (7th Cir. 2016).

         3. Analysis of Plaintiffs' Claims 3.1. Plaintiffs' RICO Claims

         The Racketeer Influenced and Corrupt Organizations Act (RICO) prohibits four categories of activities: (a) a person using proceeds from a pattern of racketeering activity in an enterprise, 18 U.S.C. § 1962(a); (b) a person controlling an enterprise through a pattern of racketeering activity, 18 U.S.C. § 1962(b); (c) a person employed by or associated with an enterprise conducting that enterprise through a pattern of racketeering activity, 18 U.S.C. § 1962(c); and (d) a person conspiring to do any of these things, 18 U.S.C. § 1962(d). In the seventeenth, eighteenth, nineteenth, and twentieth causes of action in the second amended complaint, the plaintiffs allege that “All Defendants” violated each of these provisions. (ECF No. 17, ¶¶ 183-207.) The defendants have moved for summary judgment on all of the plaintiffs' RICO claims. (ECF No. 67 at 16-26.)

         The court finds the plaintiffs have fallen woefully short of adequately supporting their RICO claims. The cautioning words of the Court of Appeals for the Seventh Circuit are directly applicable here:

[C]ivil RICO plaintiffs persist in trying to fit a square peg in a round hole by squeezing garden-variety business disputes into civil RICO actions. While it is clear that the scope of civil RICO extends beyond the prototypical mobster or organized crime syndicate, it is equally evident that RICO has not federalized every state common-law cause of action available to remedy business deals gone sour.

Gamboa v. Velez, 457 F.3d 703, 710 (7th Cir. 2006) (quoting Midwest Grinding Co. v. Spitz, 976 F.2d 1016, 1025 (7th Cir. 1992)).

         A person familiar with RICO law who reads the plaintiffs' second amended complaint or response to the defendants' motion for summary judgment would immediately recognize that the plaintiffs' RICO claims fail for a number of reasons. For example, claims under § 1962(a) and (b) “require that the actual investment of the racketeering income in the enterprise, or the actual acquisition or maintenance of the enterprise, injured plaintiff's business or property” rather than merely that the plaintiffs were allegedly injured by the underlying racketeering acts. Lewicky v. Chou, No. 91 C 7088, 1993 U.S. Dist. LEXIS 4127, at *13 (N.D. Ill. Mar. 30, 1993) (discussing cases). “It is insufficient to allege that the defendants merely reinvested the racketeering proceeds in their ongoing business activities, thus permitting the alleged violations to continue. ‘If this remote [reinvesment] connection were to suffice, the use-or-investment injury requirement would be almost completely eviscerated.'” Id. at *14 n.4 (quoting Brittingham v. Mobil Corp., 943 F.2d 297, 305 (3d. Cir. 1991)). Yet the plaintiffs allege only that they were injured by the pattern of racketeering activity. (ECF No. 17, ¶¶ 195, 199.)

         Under 1962(c), the plaintiffs must identify both the enterprise and a separate person who allegedly conducted the enterprise's affairs through a pattern of racketeering activity. Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001). The plaintiffs offer only disjunctive suggestions as to possibilities of what the enterprise might be. (See, e.g., ECF No. 17, ¶¶ 188, 189.) That is not enough. Cf. Stachon v. United Consumers Club, Inc., 229 F.3d 673, 675 (7th Cir. 2000) (“[A] RICO complaint must identify the enterprise.”). Having failed to identify what the alleged enterprise is, the court has no basis for concluding that an enterprise exists, as opposed to merely a group of people who allegedly commit racketeering activity. See id. Nor do the plaintiffs ever articulate who they allege the “person” is that conducted the enterprises' affairs-i.e., who the defendant is. Rather, they refer to the defendants collectively. (ECF No. 17 at 35, 38, 39 (alleging RICO claims against “All Defendants”).)

         Separately, the plaintiffs' RICO claims under § 1962(a) through (c) fail to adequately identify “a pattern of racketeering activity.” To state a RICO claim against a defendant, the plaintiff must identify at least two racketeering acts in which each defendant allegedly engaged. 18 U.S.C. § 1962; Pelfresne v. Vill. of Rosemont, 22 F.Supp.2d 756, 764 (N.D. Ill. 1998); Pulphus v. Sullivan, No. 02 C 5794, 2003 U.S. Dist. LEXIS 7080, at *27 (N.D. Ill. Apr. 25, 2003); Feinstein v. Resolution Tr. Corp., 942 F.2d 34, 41 (1st Cir. 1991); Banks v. Wolk, 918 F.2d 418, 421 (3d Cir. 1990) (“no defendant can be liable under RICO unless he participated in two or more predicate offenses sufficient to constitute a pattern”); see also Jennings v. Emry, 910 F.2d 1434, 1439 (7th Cir. 1990).

         Rather than connecting each defendant to alleged racketeering activity, the plaintiffs refer to the defendants collectively, alleging, for example, “Defendants used United States mail …”; “Defendants conducted financial transactions …”; “Defendants travelled in interstate commerce …”; “Defendants promoted …”; “Defendants knowingly engaged in a monetary transaction …”; and “Pursuant to 18 U.S.C. § 1961(5), the Defendants engaged in at least two acts of racketeering activity which occurred within ten years of each other.” (ECF No. 17, ¶¶ 184 a. through f.; 192). Such conclusory allegations do not state a claim against any particular defendant. Jennings, 910 F.2d at 1439; Goren v. New Vision Int'l, 156 F.3d 721, 729 (7th Cir. 1998).

         On summary judgment, where the plaintiffs' burden is substantially higher than on a motion to dismiss, the plaintiffs do not offer materially more than the insufficient allegations in their complaint. In response to the defendants' argument that the plaintiffs failed to present evidence that each defendant engaged in at least two predicate acts, the plaintiffs' only substantive response (see ECF No. 87 at 26-27) is to quote two of its answers to the defendants' interrogatories. They assert:

Wendel, either acting on his own behalf or on behalf of one of the Wendel or Sand Entities, represented to Raab that the Hotel was incurring certain monthly expenses, when Wendel had knowledge or should have known that the Hotel was incurring less in certain monthly expenses than what Wendel represented. Further, Wendel failed to inform Raab that R&W monies were being used for management costs that were neither disclosed nor approved by Raab. Wendel repeatedly represented to Raab that the Hotel needed capital contributions from Raab in order to meet expenses and conduct maintenance and repairs, which is contradicted by the Leo Affidavit at ¶ 4, the Hotel was “being properly run; the hotel is meeting its day-to-day operating expenses, except to Defendants Sand Hospitality, LLC;” and in the twelve months prior to July 14, 2014, the Hotel had “been out-performing its competitive set.”

(ECF No. 87 at 26.) The plaintiffs further assert:

Defendants used numerous intricate, fraudulent schemes using multiple businesses to conceal their actions from Plaintiffs, including, but not limited to: creating a series of interrelated companies and utilizing intercorporate accounting mechanisms and procedures to defraud Plaintiffs; representing that the Hotel was in need of capital contributions for expenses, maintenance and repairs, not using Raab's capital contributions for those intended purposes, and not disclosing to Raab how the capital contribution was utilized; obtaining insurance or load [sic] proceeds for the replacement of mattresses, furniture and pool repairs, and then utilizing the funds for different purposes contrary to the representations made to Plaintiff; utilizing R&W's bank accounts to make payments to Wendel-related entities, such as West Bend Hospitality, Inc., in excess of $70, 000; utilizing the accounting mechanisms and procedures to divert R&W funds as set forth in paragraphs 50 and 51 of the SAC, including all subparts; and entering into transactions and agreements for R&W without Raab's authorization. See also the Rodrigues Report.

(ECF No. 87 at 26-27 (quoting defendants' interrogatory response).)

         These broad statements fall far short of the sort of specificity required to survive a motion for summary judgment. It is not the court's role to disentangle individual defendants from the pile into which the plaintiffs lump them and attempt to discern whether there might be evidence to sustain a claim against any particular defendant. It is the plaintiffs' obligation to present their specific allegations against each defendant; the court's role is merely to determine whether what the plaintiffs present is sufficient. The plaintiffs do not identify which specific defendant allegedly engaged in which racketeering activity, much less provide evidence from which a reasonable finder of fact could so find.

         The only two defendants the plaintiffs specifically reference in responding to the defendants' argument are Michael Wendel and West Bend Hospitality, Inc. The plaintiffs refer to West Bend Hospitality only as an example of one of the “Wendel-related entities” to whom “Defendants” made payments. There is no basis for concluding that, by receiving some unspecified payments, West Bend Hospitality engaged in racketeering activity. See Jubelirer v. Mastercard Int'l, 68 F.Supp.2d 1049, 1053 (W.D. Wis. 1999) (“the law is clear that merely having a business relationship with and performing services for such an enterprise, including financial, accounting and legal services, does not support RICO liability because performance of such services is not the equivalent of participation in the operation and management of the enterprise”); see also Goren v. New Vision Int'l, 156 F.3d 721, 728 (7th Cir. 1998) (“simply performing services for an enterprise, even with knowledge of the enterprise's illicit nature, is not enough to subject an individual to RICO liability under § 1962(c); instead, the individual must have participated in the operation and management of the enterprise itself”).

         As for their allegations against Wendel, again, the plaintiffs do not articulate how Wendel's alleged conduct constituted racketeering activity. For example, in recounting their allegations against Wendel, the plaintiffs never connect his alleged actions to any statute specified in 18 U.S.C. § 1961(1).

         To the extent the plaintiffs are relying on ambiguous references to other documents (e.g., “… as set forth in paragraphs 50 and 51 of the SAC, including all subparts, ” or “See also the Rodrigues Report”), or otherwise expecting the court to cobble together evidence that they make a passing reference to in order to understand exactly what their argument is, it is not the role of the court to scour the record in an attempt to uncover relevant facts. “[A] lawsuit is not a game of hunt the peanut.” Greer v. Bd. of Educ., 267 F.3d 723, 727 (7th Cir. 2001).

         Finally, unlike claims under § 1962(a) through (c), claims of conspiring to violate RICO, see § 1962(d), do not require the plaintiff to identify two predicate acts that each defendant allegedly engaged in. See United States v. Glecier, 923 F.2d 496, 500-01 (7th Cir. 1991). However, aside from reciting law generally applicable to RICO conspiracies, the plaintiffs do not develop any evidence that they contend supports their § 1962(d) claim. Rather, they assert, “A s Plaintiffs have demonstrated, in Sections VIII and IX, supra, ample evidence exists from which a finder of fact could reasonably conclude Defendants engaged in a conspiracy, and thus violated § 1962(d).” (ECF No. 87 at 30.) In sections VIII and IX, the plaintiffs discuss their state law conspiracy claims (ECF No. 87 at 16-19), which are the fifteenth and sixteenth causes of action in their second amended complaint (ECF No. 17, ¶¶ 171-82). These state law claims are obviously distinct from a claim under § 1962(d). The plaintiffs having apparently conflated the claims and, having otherwise made no effort to support their claim that the defendants conspired to violate RICO, the court concludes the defendants are entitled to summary judgment on the seventeenth, eighteenth, nineteenth, and twentieth causes of action of the second amended complaint.

         3.2. Supplemental Jurisdiction

         The plaintiffs' RICO claims were the sole basis for this court's subject matter jurisdiction. (ECF No. 1, ¶ 3.)[2] Without them, the court may to decline to exercise supplemental jurisdiction over the remainder of this action and remand it to state court. 28 U.S.C. § 1367(c)(3). In fact, it is “the well-established law of this circuit that the usual practice is to dismiss without prejudice state supplemental claims whenever all federal claims have been dismissed prior to trial.” Groce v. Eli Lilly & Co., 193 F.3d 496, 501 (7th Cir. 1999). The district court, when “considering the factors set forth in 28 U.S.C. § 1367(c), 'should consider and weigh in each case, and at every stage of the litigation, the values of judicial economy, convenience, fairness, and comity.'” Groce, 193 F.3d at 501 (quoting City of Chi. v. Int'l Coll. of Surgeons, 522 U.S. 156, 173 (1997)). Neither party addresses this issue, either to request the court to remand the matter or to encourage the court to retain jurisdiction.

         Weighing in favor of remand is the fact that this matter involves a novel question of state law-whether a minority owner of a limited liability company owes common law fiduciary duties to the majority owner. However, the court finds that concerns of judicial economy counsel against remand. This case has been pending since 2014. It is on its third court, having been originally filed in Waukesha County Circuit Court (ECF No. 1-3, ¶29), then transferred to Walworth County Circuit Court (id.), and then removed to federal court. It is time to bring it to a conclusion. This court has invested significant time educating itself on the parties' claims and is in position to set this matter for a relatively prompt trial. Therefore, the court will exercise its discretion and maintain jurisdiction over the state law claims that remain.

         3.3. Plaintiffs' WOCCA Claims

         Counts twenty-one, twenty-two, and twenty-three of the second amended complaint allege violations of the Wisconsin racketeering statute, Wis.Stat. § 946.83, commonly called the Wisconsin Organized Crime Control Act (WOCCA). As with the plaintiffs' federal racketeering claims, all three of their state racketeering claims are alleged against all defendants.

         Both parties seem to acknowledge that the plaintiffs' state law racketeering claims rise or fall with their RICO claims. (ECF Nos. 67 at 26; 87 at 30.) Having found that the plaintiffs' RICO claims fail, the court will also grant summary judgment in favor of the defendants with respect to the plaintiffs' WOCCA claims for the same reasons.

         3.4. Misrepresentation

         The third through fifth causes of action in the second amended complaint allege: (3) intentional misrepresentation; (4) strict liability misrepresentation; and (5) negligent misrepresentation. All three claims allege that, “[b]ased upon an analysis of the incomplete electronic accounting records provided in 2016 by the Defendants, from 1998 through 2014 the Defendants made false representations to R&W and Raab regarding payments made from R&W to Michael, Wendel Entities, and Sand Entities, as set forth herein, knowing that said representations were untrue or recklessly made without caring whether said representations were untrue.” (ECF No. 17, ¶¶ 97, 104, and 109.) The plaintiffs' intentional and strict liability misrepresentation claims allege that “[o]n or about 2012, Defendants Wendel Investments, [The Wendel Group], Sand Hospitality and/or Michael made false representations to R&W and Raab regarding the financial condition of the Hotel, repairs and maintenance expenditures and agreements entered into with Michael's other entities[.]” (ECF No. 17, ¶¶ 98 and 105.) Their negligent misrepresentation claim alleges that “Defendants Wendel Investments, [The Wendel Group], Sand Hospitality and/or Michael negligently disclosed or failed to disclose the material facts regarding the financial condition of the Hotel, repairs and maintenance expenditures and agreements entered into with Michael's other entities[.]” (ECF No. 17, ¶ 110.)

         Three elements are common to all three forms of misrepresentation claims: “1) the defendant must have made a representation of fact to the plaintiff; 2) the representation of fact must be false; and 3) the plaintiff must have believed and relied on the misrepresentation to his detriment or damage.” Tietsworth v. Harley-Davidson, Inc., 2004 WI 32, ¶13, 270 Wis.2d 146, 677 N.W.2d 233. In moving for summary judgment, the defendants argue that the plaintiffs do not have any evidence that the defendants made any false representation to the plaintiffs. (ECF No. 67 at 3, 4.)

         The plaintiffs point to an alleged misrepresentation that occurred during a 2007 meeting following the merger between The Wendel Group and Sand Companies, Inc.- that the hotel would continue to be managed in accordance with the 1998 Management Agreement. In support, they cite only to the defendants' allegation in their counterclaim that, “[a]t the time of the merger [in 2007, between The Wendel Group and Sand Companies, Inc.], Michael C. Wendel (“Michael Wendel”), president of Wendel Group, and Leo M. Sand (“Leo Sand”), then CEO, now chairman of Sand Companies, met with Rudolph Raab and Rudolph Raab's spouse, Diane Raab, to discuss the merger. At that meeting, it was agreed that Sand Companies would take over management of the East Troy Hotel from Wendel Group under the terms of the 1998 Management Agreement.” (ECF No. 48 at 31, ¶ 4.)

         Citing Tibbs v. City of Chi., 469 F.3d 661, 663 n.2 (7th Cir. 2006), the defendants respond that “pleadings are not evidence.” (ECF No. 95 at 1.) However, what the court in Tibbs actually said is, “the entire ‘Statement of Facts' section of Tibbs's appellate brief cites only to his amended complaint; mere allegations of a complaint are not evidence.” Tibbs, 469 F.3d at 663 n.2 (citing Nisenbaum v. Milwaukee County, 333 F.3d 804, 810 (7th Cir. 2003)); but see Ford v. Wilson, 90 F.3d 245, 247 (7th Cir. 1996) (noting that, if made under oath, statements made in a complaint may constitute an affidavit for purposes of summary judgment). In other words, in Tibbs the non-movant plaintiff was relying on the allegations in his own pleadings to demonstrate the existence of a dispute of material fact. Here, the plaintiffs are relying on the defendants' allegations set forth in the defendants' pleading.

         Not only is a defendant's statement in a counterclaim competent evidence on which a plaintiff may rely for purposes of summary judgment, it is “a judicial admission that can determine the outcome of that lawsuit.” Kohler v. Leslie Hindman, Inc., 80 F.3d 1181, 1185 (7th Cir. 1996); see also Haynes v. Ind. Univ., 902 F.3d 724, 731 (7th Cir. 2018); Jackson v. Marion Cty., 66 F.3d 151, 153 (7th Cir. 1995) (“Allegations in a complaint are binding admissions ….”). “A judicial admission trumps evidence.” Murrey v. United States, 73 F.3d 1448, 1455 (7th Cir. 1996).

         The plaintiffs denied the allegations which they now seek to use against the defendants. (ECF No. 49, ¶ 4.) But the defendants have not presented any authority establishing that a judicial admission is negated if denied by the opposing party. Therefore, for purposes of summary judgment, the court accepts that the defendants have admitted that “[a]t [the 2007] meeting, it was agreed that Sand Companies would take over management of the East Troy Hotel from Wendel Group under the terms of the 1998 Management Agreement.” (ECF No. 48 at 31, ¶ 4.) Given the evidence presented, a reasonable finder of fact could conclude that this statement was false.

         However, this admission by the defendants does not support a misrepresentation claim against all defendants, as the plaintiffs purport to allege in their second amended complaint. At best, it would support a claim against Wendel and Sand. Neither side suggests that Wendel or Sand made this representation in their capacity as representatives of any corporation or company, and thus the court must conclude this claim may be sustained against Wendel and Sand personally. Therefore, the court will deny the defendants' motion for summary judgment on the plaintiffs' misrepresentation claims (the third, fourth, and fifth causes of action) as regards Wendel and Sand but grant it as to all other defendants.

         3.5. Conversion

         The sixth cause of action in the plaintiffs' second amended complaint alleges that “[d]efendants procured R&W property without R&W's consent or authorization []” and “for their own benefit without R&W's consent or authorization.” (ECF No. 17, ¶¶ 115-16.) As a result, plaintiffs were harmed. (Id., ¶ 117.)

         “Under Wisconsin law, the tort of ‘conversion is often defined as the wrongful exercise of dominion or control over a chattel, and conversion may result from a wrongful taking or a wrongful refusal to surrender property originally lawfully obtained.'” Eastman Indus. v. Norlen Inc., 538 F.Supp.2d 1069, 1071 (W.D. Wis. 2008) (quoting Production Credit Assosication v. Nowatzski, 90 Wis.2d 344, 354, 280 N.W.2d 118, 123 (1979)) (brackets omitted). A plaintiff alleging conversion must prove three things: (1) intentional control or taking of property belonging to another; (2) without that person's consent; (3) which resulted in serious interference with that person's right to possess the property. First Weber Grp., Inc. v. Horsfall, 738 F.3d 767, 773 (7th Cir. 2013) (citing H.A. Friend & Co. v. Prof. Stationery, Inc., 2006 WI.App. 141, 294 Wis.2d 754, 720 N.W.2d 96, 100; Methodist Manor of Waukesha, Inc. v. Martin, 2002 WI.App. 130, 255 Wis.2d 707, 647 N.W.2d 409, 412). “The thing that the defendant diverts to his or her own use need not, however, be a chattel; money may also be converted.” Methodist Manor of Waukesha, 2002 WI.App. 130, ¶7 (citing Regas v. Helios, 176 Wis. 56, 59, 186 N.W. 165, 166 (1922) (“Although it has been sometimes held that money is not the subject of conversion, it is not the rule in this state.”)).

         In moving for summary judgment, the defendants argue that the only evidence the plaintiffs have mustered regarding their conversion claim is that certain transactions are “questionable.” (ECF No. 67 at 4.) Even the plaintiffs' own expert witness could not conclude that any defendant converted assets of R&W. (ECF No. 67 at 4.)

         The plaintiffs respond that they have shown that at least $64, 000 was improperly paid to Sand Companies and affiliates for matters not authorized under the 1998 management agreement. (ECF No. 87 at 4.) Moreover, Wendel directed R&W to make payments to himself, without Raab's consent, despite the fact that R&W was never profitable. (ECF No. 87 at 5.)

         In reply, the defendants assert that the plaintiffs offer only the declaration of Paul A. Rodrigues, a forensic accountant whose report the court previously excluded. (ECF No. 95 at 2); see also Raab v. Wendel, No. 16-CV-1396, 2017 U.S. Dist. LEXIS 217704 (E.D. Wis. Dec. 18, 2017). Additionally, Raab received R&W's bank statements and did not object to the company's finances. (ECF No. 95 at 2-3.)

         Although the court previously granted the defendants' motion to exclude Rodrigues from offering his opinion as an expert, the court did not foreclose Rodrigues from testifying as a fact witness as to what he found in the documents he reviewed. Raab, 2017 U.S. Dist. LEXIS 217704, *18. Rodrigues offered a summary of certain of these findings, noting, for example, that R&W was charged fees such as a “payroll administrative fee, ” a “water damage administrative fee, ” and a “system administrator upcharge.” (ECF No. 79-1 at 1.) The plaintiffs allege that these fees were not authorized under the parties' 1998 management agreement.

         The court finds the plaintiffs have presented evidence from which a reasonable finder of fact could return a verdict in favor of the plaintiffs on this claim. The charging of unauthorized fees may constitute conversion under the circumstances presented by the plaintiffs. Cf. Office of Lawyer Regulation v. Gatzke (In re Gatzke), 2016 WI 37, ¶46, 368 Wis.2d 422, 878 N.W.2d 668 (quoting In re Disciplinary Proceedings Against Mulligan, 2015 WI 96, P36, 365 Wis.2d 43, 870 N.W.2d 233) (holding that retention of unearned fees is an example of conversion).

         Although the portion of the defendants' reply addressing the conversion claim is titled “No Evidence of Intent to Convert” (ECF No. 95 at 2), they do not develop any argument as to intent. In the absence of any argument from the defendants, the court accepts that, if the plaintiffs can prove that the defendants charged R&W fees that were not authorized under the 1998 ...


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