DOUGLAS et al v. LALUMIERE et al

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
JOEL DOUGLAS, et al., 	)
)
Plaintiffs, 	)
)
v. 	) 2:20-cv-00227-JDL
)
SCOTT LALUMIERE, et al., 	)
)
Defendants. 	)
ORDER ON DAVID HIRSHON & LOSU, LLC’S MOTION TO DISMISS
Joel Douglas, Steven Fowler, and James Lewis (collectively, “Plaintiffs”) bring
this action against Scott Lalumiere and twenty-five other defendants (collectively,
“Defendants”), asserting seventeen claims arising out of an alleged scheme to defraud
the Plaintiffs and obtain control or ownership of their real estate properties for the
purpose of borrowing against the properties’ equity. 	In total, the Defendants have
filed thirteen motions to dismiss the First Amended Complaint (the “Complaint”)
(ECF No. 11) for failure to state a claim upon which relief can be granted pursuant
to Federal Rule of Civil Procedure 12(b)(6).1 	This Order addresses David Hirshon
and LOSU, LLC’s motion to dismiss the claims asserted against them under the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C.A. §§ 1961-
1968 (West 2021), and Maine contract law (ECF No. 70). For the reasons that follow,
1 The following defendants filed have motions to dismiss: Androscoggin Savings Bank (ECF No. 37);
Camden National Bank (ECF No. 61); TTJR, LLC, LH Housing, LLC, and Eric Holsapple (ECF No.
65); LOSU, LLC and David Hirshon (ECF No. 70); Bangor Savings Bank and Robert Burgess (ECF
No. 98); Wayne Lewis (ECF No. 110); Machias Savings Bank (ECF No. 111); Coastal Realty Capital,
LLC, Michael Lyden, and Shawn Lyden (ECF No. 118); Andre Bellucci (ECF No. 147); BLR Capital,
LLC (ECF No. 197); F.O. Bailey Real Estate, LLC and David Jones (ECF No. 203); Russell Oakes (ECF
No. 223); and David Clarke (ECF No. 225). 	Only Defendants Scott Lalumiere, MECAP, LLC, and
Birch Point Storage, LLC have not filed motions to dismiss.
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I grant David Hirshon and LOSU, LLC’s Motion to Dismiss, deny the Plaintiffs’
Motion for Limited Discovery,2 and deny as moot the Plaintiffs’ objection to the
Magistrate Judge’s order denying the Plaintiffs’ Motion for Limited discovery.
I. BACKGROUND
The Complaint alleges the following facts, which I treat as true for purposes of
ruling on this Motion to Dismiss.
The Complaint asserts that Scott Lalumiere and other defendants engaged in
three distinct but intertwined schemes to defraud the Plaintiffs. In the first scheme,
the Complaint alleges that Scott Lalumiere, funded by various banks and private
lenders, fraudulently induced several vulnerable individuals, including Plaintiffs
Steven Fowler and Joel Douglas, who lacked access to conventional credit, to enter
into unfavorable lease/buy-back agreements. Under the terms of the agreements, the
title of the victim’s property would be transferred to a corporate entity controlled by
Lalumiere with the victim, as the lessee, retaining a purchase option. The Lalumiere-
controlled entity would subsequently mortgage the property to banks and private
lenders, and, when the entity defaulted on its loan, the mortgagees foreclosed on the
property, frustrating the victim’s option to purchase.
In 	the 	second 	alleged 	scheme, 	Fowler 	entered 	into 	an 	agreement 	with
Lalumiere whereby he would provide labor and materials at a discounted rate to
renovate certain properties controlled by Lalumiere, with the understanding that
2 I recognize that Magistrate Judge John C. Nivison denied the Motion for Limited Discovery on
January 21, 2021 (ECF No. 156). His order expressly recognized, however, that the Plaintiffs’ request
for limited discovery should be revisited as part of the Court’s assessment of the Motion to Dismiss.
Accordingly, I have treated the earlier order denying the motion as a deferral of action on the motion.
Further, I have considered the merits of the motion and, for the reasons explained herein, I deny the
motion.
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Fowler could purchase the properties back upon the completion of the renovations.
However, 	Lalumiere 	frustrated 	Fowler’s 	right 	to 	purchase 	the 	properties 	by
defaulting on the mortgages, causing the mortgagees to foreclose on the properties.
In the third alleged scheme, several of the Defendants agreed to pay-off and
discharge Plaintiff James Lewis’s defaulted mortgage and to lend him money to make
improvements to his property in exchange for him deeding the property to a
corporation and making certain payments. 	After the title was transferred, they
refused to loan him the money and subsequently foreclosed on the property.
The 	Complaint 	contains 	scant 	details 	regarding 	Hirshon’s 	and 	LOSU’s
participation in Lalumiere’s schemes. The Complaint merely alleges that Hirshon “is
a person residing in Freeport Maine” and LOSU “is a Maine corporation doing
business in the State of Maine,” and that they “realized the proceeds” from the RICO
enterprise and “knew about the fraud” in the first scheme noted above. ECF No. 11
¶¶ 19, 27, 174, 178.
The Plaintiffs filed a Motion for Limited Discovery from Hirshon in connection
with their response to the Motion to Dismiss. On January 21, 2021, Magistrate Judge
John C. Nivison entered an order denying the Plaintiffs’ limited discovery request
without prejudice, stating that “[t]he Court will consider Plaintiffs’ [discovery]
requests as part of the Court’s assessment of each defendant’s motion to dismiss.”
ECF No. 156 at 3. On January 28, 2021, the Plaintiffs filed a timely objection to the
Magistrate Judge’s order (ECF No. 162). Below, I address the Plaintiffs’ Motion for
Limited Discovery and the Plaintiffs’ objection to Magistrate Judge Nivison’s order
as it relates to Hirshon and LOSU’s Motion to Dismiss.
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II. LEGAL ANALYSIS
In reviewing a motion to dismiss for failure to state a claim, a court must
“accept as true all well-pleaded facts alleged in the complaint and draw all reasonable
inferences therefrom in the pleader’s favor.” 	Rodríguez-Reyes v. Molina-Rodríguez,
711 F.3d 49, 52-53 (1st Cir. 2013) (quoting Santiago v. Puerto Rico, 655 F.3d 61, 72
(1st Cir. 2011)). 	To survive a motion to dismiss, the complaint “must contain
sufficient factual matter to state a claim to relief that is plausible on its face.” Id. at
53 (quoting Grajales v. P.R. Ports Auth., 682 F.3d 40, 44 (1st Cir. 2012)). Additionally,
a court may consider inferences “gleaned from documents incorporated by reference
into the complaint, matters of public record, and facts susceptible to judicial notice.”
Id. (quoting Haley v. City of Boston, 657 F.3d 39, 46 (1st Cir. 2011)).
To assess the complaint’s adequacy, courts apply a “two-pronged approach,”
Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011): First, the court
must “isolate and ignore statements in the complaint that simply offer legal labels
and conclusions or merely rehash cause-of-action elements,” and second, the court
will “take the complaint’s well-pled (i.e., non-conclusory, non-speculative) facts as
true, drawing all reasonable inferences in the pleader’s favor, and see if they plausibly
narrate a claim for relief,” Schatz v. Republican State Leadership Comm., 669 F.3d
50, 55 (1st Cir. 2012). 	To determine the plausibility of a claim is “a context-specific
task that requires the reviewing court to draw on its judicial experience and common
sense.” 	Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). 	Although conclusory legal
statements may “provide the framework of a complaint, they must be supported by
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factual allegations.” 	Id. 	The court must determine whether the factual allegations
“plausibly give rise to an entitlement to relief.” Id.
In addition, the Plaintiffs’ fraud-related claims are subject to Federal Rule of
Civil Procedure 9(b), which requires that a complaint “state with particularity the
circumstances constituting fraud.” 	To satisfy this requirement, the complaint must
set forth the “time, place and content of an alleged false representation.” 	Howell v.
Advantage Payroll Servs., Inc., No. 2:16-cv-438-NT, 2017 WL 782881, at *6 (D. Me.
Feb. 28, 2017) (quoting Hayduk v. Lanna, 775 F.2d 441, 444 (1st Cir. 1985)). 	The
Plaintiffs’ RICO claims are based in part on the predicate acts of mail and wire fraud,
which 	“must 	satisfy 	the 	particularity 	requirements 	of 	Rule 	9(b).” 	Ahmed 	v.
Rosenblatt, 118 F.3d 886, 889 (1st Cir. 1997).
The Plaintiffs’ claims against Hirshon and LOSU are: (A) the RICO claim and
(B) the unjust enrichment claim. The RICO claim includes a single count against the
alleged enterprise operating the conspiracy. The unjust enrichment claim stands for
itself. I address each in turn.
A. 	RICO Claim (Count IV)3
The Complaint asserts that David Hirshon and LOSU participated in a RICO
conspiracy under 18 U.S.C.A. § 1962(d) (West 2021). 	“To prove a RICO conspiracy
offense, the [plaintiff] must show that ‘the defendant knowingly joined the conspiracy,
agreeing 	with 	one 	or 	more 	coconspirators 	“to 	further 	the 	endeavor, 	which, 	if
completed, would satisfy all the elements of a substantive RICO offense.”’” 	United
3 It is unclear whether the Complaint asserts a RICO count against LOSU. Count IV specifically
names Hirshon but not LOSU; however, Count IV includes allegations against LOSU. For purposes
of this motion, I accept that Count IV asserts a claim against both Hirshon and LOSU.
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States v. Velazquez-Fontanez, 6 F.4th 205, 212 (1st Cir. 2021) (alterations omitted)
(quoting United States v. Rodríguez-Torres, 939 F.3d 16, 23 (1st Cir. 2019)). It is not
necessary to “prove that the defendant or his co-conspirators committed any overt act
in furtherance of the conspiracy.” United States v. Leoner-Aguirre, 939 F.3d 310, 317
(1st Cir. 2019).
Here, the Complaint alleges that David Hirshon and LOSU conspired to violate
18 U.S.C.A. § 1962(a), which makes it unlawful to use or invest income derived from
a pattern of racketeering activity under certain circumstances:
It shall be unlawful for any person who has received any income derived,
directly or indirectly, from a pattern of racketeering activity . . . in which
such person has participated as a principal . . . to use or invest, directly
or indirectly, any part of such income, or the proceeds of such income, in
acquisition of any interest in, or the establishment or operation of, any
enterprise which is engaged in . . . interstate or foreign commerce.
An “enterprise” includes “any individual, partnership, corporation, association, or
other legal entity, and any union or group of individuals associated in fact although
not a legal entity.” 	18 U.S.C.A. § 1961(4) (West 2021). 	“To establish a pattern of
racketeering, a plaintiff must show at least two predicate acts of ‘racketeering
activity’, as the statute defines such activity, and must establish that the ‘predicates
are related, and that they amount to or pose a threat of continued criminal activity.’”
McEvoy Travel Bureau, Inc. v. Heritage Travel, Inc., 904 F.2d 786, 788 (1st Cir. 1990)
(quoting H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239). 	“Racketeering activity”
encompasses mail fraud under 18 U.S.C.A. § 1341 (West 2021), wire fraud under
18 U.S.C.A. § 1343 (West 2021), and money laundering under 18 U.S.C.A. § 1956
(West 2021). 	18 U.S.C.A. § 1961(1). 	A plaintiff asserting a § 1962(a) claim must
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further prove that he was “injured ‘in his business or property by reason of’ the
defendant’s violation.” 	Compagnie De Reassurance D’Ile de France v. New England
Reinsurance Corp., 57 F.3d 56, 91 (1st Cir. 1995) (quoting 18 U.S.C.A. § 1964(c) (West
2021)).
The Plaintiffs’ theory for their RICO claim against Hirshon and LOSU is that
Hirshon and LOSU conspired with the Lalumiere Defendants4 under § 1962(d) to
reinvest the income from a pattern of racketeering activity back into the enterprise.
The alleged racketeering activity was money laundering and mail and wire fraud.
The Complaint contains so few allegations against Hirshon and LOSU that it is
impossible to discern how they might be connected to the Plaintiffs’ claims, let alone
conclude 	that 	they 	agreed 	to 	conspire 	with 	the 	Lalumiere 	Defendants. 	The
Complaint’s only description of Hirshon is that he “is a person residing in Freeport
Maine,” and the only description of LOSU is that it “is a Maine corporation doing
business in the State of Maine.” 	ECF No. 11 ¶¶ 19, 27. 	The only RICO allegations
against Hirshon and LOSU assert that they “realized the proceeds” of the RICO
enterprise and they “knew about the fraud committed by the Enterprise because of
their participation in the transactions for 661 Allen Avenue and 75 Queen Street.”
Id. ¶¶ 174, 178. 	However, the Complaint does not contain any description of how
they participated in the transactions.
The Plaintiffs’ response to Hirshon and LOSU’s Motion to Dismiss sets forth
additional facts not contained in the Complaint, claiming that Hirshon “handled the
4 This term refers to Defendant Scott Lalumiere and the corporate entities he controlled: Defendants
Birch Point Storage, LLC and MECAP, LLC.
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transaction that transferred 75 Queen Street from Mr. Lalumiere to MECAP LLC on
July 24, 2015” and “began investing into the enterprise” in 2019. ECF No. 112 at 4-
5. However, on a Rule 12(b)(6) motion to dismiss, a court’s inquiry is confined to the
allegations in the complaint and its attachments. 	See Foley v. Wells Fargo Bank,
N.A., 772 F.3d 63, 73-74 (1st Cir. 2014) (reversing the district court for improperly
considering evidence beyond the allegations in the pleadings). Thus, I do not consider
the new allegations contained in the Plaintiffs’ response.
Without any further information, the Complaint provides no indication as to
what Hirshon’s and LOSU’s roles in the conspiracy were, whether they knew of
Lalumiere’s fraud, or whether they knowingly agreed to facilitate Lalumiere’s
scheme. For these reasons, I dismiss the RICO count against Hirshon and LOSU.5
B. 	Unjust Enrichment Claim (Count XVII)
The Complaint asserts a claim for unjust enrichment against Hirshon and
LOSU based on the alleged “extraction of equity from the homes at 661 Allen Avenue
and 57 Queen Street.” ECF No. 11 ¶ 255.
A claim for unjust enrichment requires proof that “(1) [the complaining party]
conferred a benefit on the other party; (2) the other party had appreciation or
knowledge of the benefit; and (3) the acceptance or retention of the benefit was under
such circumstances as to make it inequitable for it to retain the benefit without
payment of its value.” 	Knope v. Green Tree Servicing, LLC, 2017 ME 95, ¶ 12,
5 The Complaint fails to plausibly allege that Hirshon and LOSU knowingly joined Lalumiere’s
conspiracy, and for that reason alone, the Plaintiffs’ RICO claim against Hirshon and LOSU fails.
Therefore, I do not address Hirshon and LOSU’s additional argument that the Complaint fails to
sufficiently plead a plausible pattern of racketeering activity.
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161 A.3d 696, 699 (quoting Me. Eye Care Assocs., P.A. v. Gorman, 2008 ME 36, ¶ 17,
942 A.2d 707, 712).
The Complaint’s unjust enrichment claim must be dismissed because the
Complaint fails to allege that a benefit was conferred on Hirshon or LOSU. Although
the Plaintiffs allegedly suffered harm through the loss of their properties, the
Complaint fails to assert facts that would plausibly establish that a resulting benefit
was conferred on Hirshon or LOSU. 	Relatedly, the Complaint does not allege that
Hirshon or LOSU had or should have had “appreciation or knowledge” of the benefit
received. 	There cannot be an unjust enrichment without a “conferred benefit” or
“knowledge of the benefit.”
In sum, the Complaint fails to plead facts which, if proven, would establish a
right of recovery based on unjust enrichment.
C. 	Motion for Limited Discovery
A dismissal is not automatic once the lower court determines that Rule 9(b)
has not been satisfied. 	New England Data Servs., Inc. v. Becher, 829 F.2d 286, 290
(1st Cir. 1987). 	Instead, after the Rule 9(b) determination, a “court should make a
second determination as to whether the claim as presented warrants the allowance
of discovery and if so, thereafter provide an opportunity to amend the defective
complaint.” 	Id. 	The plaintiff may have a right to limited discovery, to the extent
necessary to cure a Rule 9(b) defect about “the details of just when and where the
mail or wires were used.” 	Id. 	A court also has “some latitude” to allow discovery
“where a plausible claim may be indicated ‘based on what is known,’ at least where
. . . ‘some of the information needed may be in the control of the defendants.’”
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Menard v. CSX Transp., Inc., 698 F.3d 40, 45 (1st Cir. 2012) (alteration omitted)
(quoting Pruell v. Caritas Christi, 678 F.3d 10, 15 (1st Cir. 2012)).
Here, 	the 	Plaintiffs 	seek 	limited 	discovery 	from 	Hirshon 	to 	reveal
“communications between David Hirshon and the other defendants” who were
allegedly involved in the conspiracy. ECF No. 113 at 3. Under the Plaintiffs’ theory,
Hirshon has exclusive access to communications which are necessary to prove the
elements of fraud. 	Hirshon opposes the motion, asserting the Plaintiffs have failed
to demonstrate a right to limited discovery because they have not pleaded a plausible
claim and limited discovery is generally granted to cure particularity deficiencies, not
plausibility defects.
The decisions in Becher and Menard establish two possible grounds for
granting limited discovery. 	First, under Menard, where modest discovery may
“provide the missing link” to satisfy the Rule 12(b)(6) plausibility standard, the court
may allow limited discovery “at least where . . . ‘some of the information needed may
be in the control of the defendants.’” 698 F.3d at 45 (quoting Pruell v. Caritas Christi,
678 F.3d 10, 15 (1st Cir. 2012)). 	Here, however, the Complaint is not lacking a
“missing 	link.” 	The 	Complaint 	does 	not 	plausibly 	suggest 	that 	Hirshon 	had
information that would provide the “missing link” needed to remedy its deficiencies.
Second, as discussed in Becher, a court may allow discovery as to “the details
of just when and where the mail or wires were used” in a “RICO mail and wire fraud
case.” 	829 F.2d at 290; see also Ahmed v. Rosenblatt, 118 F.3d 886, 890 (1st Cir.
1997). Here, however, additional information as to how the conspiracy used the mail
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or wires would not cure the Complaint’s failure to sufficiently allege that Hirshon
knowingly joined the conspiracy.
Neither Menard nor Becher offers a basis to grant limited discovery for the
Plaintiffs as against Hirshon. Thus, the Motion for Limited Discovery as to Hirshon
is denied, and the Plaintiffs’ objection to the Magistrate Judge’s Order (ECF No. 156)
deferring action on the Motion for Limited Discovery until the Court assessed the
motions to dismiss, is denied as moot.
III. CONCLUSION
For the reasons stated above, it is ORDERED that David Hirshon and
LOSU, LLC’s Motion to Dismiss (ECF No. 70) is GRANTED. 	The Amended
Complaint (ECF No. 11) as to David Hirshon and LOSU, LLC is DISMISSED. The
Plaintiffs’ Motion for Limited Discovery (ECF No. 113) is DENIED and the Plaintiffs’
Objection to the Magistrate Judge’s Order on Limited Discovery (ECF No. 162) is
DENIED AS MOOT as to David Hirshon.
SO ORDERED.
Dated: September 29, 2021
/s/ JON D. LEVY
CHIEF U.S. DISTRICT JUDGE
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