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REI Holdings, LLC v. Lienclear 0001, LLC

United States District Court, D. Delaware

August 5, 2019


          Joseph B. Cicero, Gregory E. Stuhlman, Stephanie H. Dallaire, Chipman Brown Cicero & Cole, LLP, Wilmington, DE - Attorneys for Plaintiff.

          Andrew L. Cole, LeClairRyan, PLLC, Wilmington, DE - Attorneys for Defendants.



         Before the Court is a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, filed by Defendants LienClear - 0001, LLC (“LienClear0001”), [1] LienClear, LLC (“LienClear”), BCMG, LLC (“BCMG”), BLOXTrade, LLC (“BLOXTrade”), Thomas McOsker (“McOsker”), and Donald Byrne (“Byrne”) (collectively, “Defendants”) (D.I. 15), asserting that the Amended Complaint (D.I. 13) filed by Plaintiff REI Holdings, LLC (“REI” or “Plaintiff) fails to state a claim with respect to Counts I, II, IV, V, VI, and VII and fails to state a claim against BLOXTrade with respect to all claims. For the reasons set forth below, Defendants' motion to dismiss the Amended Complaint will be GRANTED-IN-PART and DENIED-IN PART.

         I. BACKGROUND

         REI is in the business of purchasing and reselling tax lien portfolios. (D.I. 13 ¶¶ 1, 21). According to the Amended Complaint, “Defendants are a part of an elaborate enterprise of purchasing and securitizing tax lien assets in order to broker sales and sell tax lien portfolios to buyers throughout the United States and Puerto Rico, and to service the sale of these portfolios to buyers.” (Id. ¶ 3). Plaintiff alleges that in November of 2015, McOsker and Byrne, on behalf of BCMG, approached REI about purchasing a portfolio of certain Ohio tax liens (“the Tax Liens”). (Id. ¶ 22). McOsker informed Plaintiff that foreclosure actions had been commenced for all the Tax Liens and assured Plaintiff “that there was substantial value in the Tax Liens and the properties subject thereto.” (Id. ¶ 23). “On November 9, 2015, McOsker informed REI that the transfers of the Tax Liens, and the acquisition and servicing of properties resulting therefrom, would be handled by Byrne through LienClear” and another person. (Id. ¶ 24). The next day, a vice president for BCMG shared a spreadsheet with Plaintiff detailing certain tax liens. (Id. ¶ 25). This spreadsheet was later modified to identify “approximately 383 [Tax Liens] with a purported redemptive value of $1, 893, 437.07 and recoverable attorney's fees in the amount of $614, 881.35.” (Id. ¶ 26). On December 22, 2015, LienClear0001 and REI entered into a Tax Lien Purchase and Sale Agreement (“Sale Agreement”). (Id. ¶ 29, Ex. B). Under the Sale Agreement, Plaintiff purchased the Tax Liens for $1, 921, 997.16, which included the costs of brokerage, escrow, and other transaction and service fees. (Id.). The Sale Agreement states, in pertinent part:

The Tax Lien Purchase Agreement (this “Agreement”) is made as of 12-22-2015 (the “Effective Date”) by and among LienClear - 0001, LLC (the “Seller”) and REI Holdings (the “Buyer”).
Section 3.02. Closing. The “Closing Date” with respect to the purchase and sale of the Tax Liens shall be the date on which ownership of all Tax Liens (excluding and Excluded Tax Liens[2], as applicable) has been transferred to Buyer through the execution, endorsement, delivery and filing of all applicable documents and certificates as is required by the applicable taxing authority and under Applicable Laws as such is certified by Servicer in accordance with the Servicing Agreement. Upon delivery of the foregoing and certification thereof by Servicer, the Purchase Price (as adjusted by subtracting that portion of the Purchase Price allocable to any Excluded Tax Liens as set forth on the Tax Lien Schedule (as applicable) and net of Seller's Brokerage Fee and Transaction Fees) shall be disbursed to Seller . . . .
Section 3.03 Collections Received On or After the Effective Date. To the extent Seller receives any Collections in respect of the Tax Liens on or after the Effective Date, Seller shall hold such amounts in trust for the Buyer.
Section 3.05 Assurance of Further Action. From time to time after the Closing Date and without further consideration, each of the parties to this Agreement shall execute and deliver, or cause to be executed and delivered, such further instruments and agreements, and shall take such other actions, as any other party may reasonably request in order to more effectively effectuate the transactions contemplated by this Agreement.
Section 4.01. Seller's Limited Representations. Seller hereby represents and warrants that: (a) the Seller, it's [sic] affiliated subsidiary, or its wholly owned subsidiary is the owner of the Tax Liens, with good and valid title thereto, and with full right to sell and transfer the same; (b) the Seller has the authority to sell the Tax Liens to Buyer; (c) the Tax Liens will be transferred to Buyer free and clear of all encumbrances; (d) to the Seller's knowledge the Tax Liens are validly issued under Applicable Law;
Section 5.07. Merger and Integration. This agreement contains all of the terms and conditions relating to its subject matter to which the parties have agreed. All prior understandings of any kind are superseded by this Agreement.
(e) once the Purchase Price has been paid by the Buyer and delivered to the Seller in accordance with the terms hereof, the Seller shall have no further rights or claims to the Tax Liens;
(f) the Seller intends to convey to the Buyer legal title to all of the Tax Liens;
(g) Seller has the full right, power and authority, without the consent of any other persons, to execute and deliver this Agreement and to perform its obligations under this Agreement and the transactions on its part contemplated hereby.

(D.I. 13, Ex. B). Attached to the Sale Agreement, as Schedule 1, was a chart listing each of the 383 Tax Liens and a representation of the redemptive value thereof. (D.I. 13 ¶ 34). Plaintiff alleges that total redemptive value of the Tax Liens in Schedule 1 was $2, 508, 318.42. (D.I. 13 ¶ 26). REI, LienClear, and LienClear0001 also executed a Servicing Agreement (“Servicing Agreement”). (D.I. 13, Ex. D). The Servicing Agreement states, in pertinent part:

THIS SERVICES AGREEMENT (this “Agreement”) is made this 12-22-2015 (“Date”), by and among LienClear - 00001, LLC (the “Seller”), REI Holdings (the “Buyer”) LienClear, LLC (“Servicer”).
1. Services. Servicer shall provide the services to Buyer and Seller as set forth on Exhibit A hereto (the “Services”) in accordance with the Agreement.
21. Authority to Execute. Each person executing this Agreement represents and warrants that it is duly authorized to execute this Agreement by the party on whose behalf it is so executing.

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