# Adam v. Nakhle

> District Court, N.D. Ohio · November 17, 2023

URL: https://www.frixlaw.com/law-library/cases/10372836

## Case

- **Court:** District Court, N.D. Ohio
- **Decided:** November 17, 2023
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

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## How later opinions describe it (automated extraction)

- discussing rule in the context of proceedings filed in Cuyahoga County Court of Common Pleas and Municipal Court of Cleveland
- discussing rule in the context of proceedings filed in Franklin County Court of Common Pleas and the Hocking County Court of Common Pleas
- discussing jurisdictional priority rule in the context of proceedings filed in Cuyahoga County Court of Common Pleas and Summit County Court of Common Pleas
- discussing rule in the context of proceedings filed in Cuyahoga County Court of Common Pleas and Parma Municipal Court

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO

Dror Adam, et al. Case No. 1:22CV2183

Plaintiffs,

-vs-
JUDGE PAMELA A. BARKER

George Nakhle, et al.,

Defendants. MEMORANDUM OPINION & ORDER

Currently pending is the Motion of Defendants George Nakhle; Samir Nakhle; Richard Russel
Gutzky; GS & M, LLC; Nadam, LLC; RG Holdings Delaware, LLC; RG Holdings Perm, LLC; RG
Holdings Perm II, LLC; RSN Holdings I, LLC; RSN Holdings II, LLC; RSN Holdings 4, LLC; RSN
Holdings XV, LLC; RSN Holdings XXI, LLC; RSN Holdings Delaware, LLC; R.S.N. Properties
LLC; United Synergy Group, LLC; 6395 Pearl Road LLC; and Park Knoll, LLC (referred to
collectively as the “Moving Defendants”) to Dismiss the First Amended Complaint pursuant to Fed.
R. Civ. P. 12(b)(6). (Doc. No. 62.) Plaintiffs Dror Adam; Adam Beres LLC a/k/a Adam Beres One
LLC (“ABO”); Beres Adam One LLC (“BAO”); D. Mody Properties, Ltd.; RSN Finance, LLC;
Shnizel OH LLC; Zuk Domestic Holdings, Inc.; and Zuk Marble Products, Ltd. (referred to
collectively as “Plaintiffs”) filed a Brief in Opposition on May 26, 2023, to which the Moving
Defendants replied on June 9, 2023. (Doc. Nos. 70, 73.)
For the following reasons, the Moving Defendants’ Motion to Dismiss (Doc. No. 62) is
GRANTED with respect to Plaintiffs’ claim for violation of the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. § 1962(c), as set forth in Count I of the First Amended
Complaint. The Court declines to exercise supplemental jurisdiction over Plaintiffs’ remaining state
law claims set forth in Counts II through XXXVII.
I. Factual Allegations
Plaintiffs allege that, between 2017 and 2019, the Moving Defendants engaged in multiple,
overlapping schemes involving over 200 real properties in Northeast Ohio to defraud the Plaintiffs
out of millions of dollars. Specifically, Plaintiffs allege that the Moving Defendants engaged in the

following five separate schemes:
(1) the “Property Fraud” scheme -- a complex real estate fraud scheme in which
Defendants George and Samir Nakhle (referred to collectively as “the Nakhles”) and
Defendant Gutzky fraudulently acquired over 190 properties from 80 investors, the
majority of whom allegedly assigned their claims to Plaintiff Shnizel OH LLC
(“Plaintiff Shnizel”),

(2) the “JV Fraud” scheme -- a real estate fraud scheme in which the Nakhles set up
a joint venture entity (Plaintiff RSN Finance, LLC) to acquire an additional 29
properties but then fraudulently registered those properties to various entities
controlled by the Nakhles and Gutzky,

(3) the “Nadam Fraud” -- a real estate fraud scheme in which the Nakhles set up an
entity (Defendant Nadam LLC) with Plaintiff Dror Adam that bought a certain
property and then fraudulently transferred that property to Defendant RG Delaware,
LLC,

(4) the “Loan Fraud” -- a fraudulent scheme in which the Nakhles fraudulently
induced Plaintiff Adam to provide them with three loans which were never repaid, and

(5) the “Bavaria MF Fraud” -- a real estate fraud scheme involving the transfer of
one piece of fire-damaged real estate to Defendant George Nakhle for which he never
paid the full purchase price.

(Doc. No. 10 at ¶ 5.) In the First Amended Complaint, Plaintiffs allege the factual predicates of these
schemes at some length, with over five hundred paragraphs of allegations spanning over 100 pages.
(Doc. No. 10.) Considering the voluminousness of this pleading, the Court will not attempt at the
2
outset to detail all the specific factual allegations set forth in the First Amended Complaint.1 Rather,
the Court will begin by presenting an overview of the Plaintiffs’ factual allegations and will discuss
specific allegations relating to the parties’ legal arguments, as necessary, infra.
A. The Property Fraud and Loan Fraud
The Property Fraud relates to 192 rental properties located in Cuyahoga County, Ohio
(referred to collectively as “the Property Fraud Properties”). (Doc. No. 10 at ¶¶ 54, 55.) Eighty (80)

limited liability companies with Israeli citizens as their principals invested in these properties and
decided to sell them as a portfolio.2 (Id. at ¶¶ 54, 58.) At some point in 2017, the Nakhles and Gutzky
offered to purchase all the Purchase Fraud Properties on an “as is” basis. (Id. at ¶ 59.)
On August 10, 2017, the Nakhles executed a Letter of Agreement (the “Property LOA”) with
the managers of the Property Fraud investors, in which the Nakhles agreed to purchase the Property
Fraud Properties for certain prices delineated in that Agreement.3 (Id. at ¶ 66, 67.) The Nakhles also
signed a personal guaranty to secure payments pursuant to the Property LOA. (Id. at ¶ 67.) According
to Plaintiffs, the Property LOA provides that one of the Nakhles’ “Controlled Entities”4 “would enter

1 The Court notes that, in their briefing regarding the instant Motion to Dismiss, neither the Plaintiffs nor the Moving
Defendants sufficiently present the factual allegations set forth in the First Amended Complaint. By way of example, the
“Factual Background” section of Plaintiffs’ Brief in Opposition contains only a brief, generalized description of the instant
action and fails to direct this Court’s attention to a single paragraph in the First Amended Complaint. (Doc. No. 70 at pp.
2-3.) This is neither helpful nor appropriate.

2 Plaintiffs allege that these investors later assigned their claims to Plaintiff Shnizel. (Id. at ¶ 55.)

3 Plaintiffs do not attach a copy of the Property LOA to the First Amended Complaint because it contains a confidentiality
provision. (Id. at ¶ 66.) However, Plaintiffs attach a full list of the Property Fraud Properties to the First Amended
Complaint as Exhibit 1. (Doc. No. 10-1.)

4 Plaintiffs identify the Nakhles’ “Controlled Entities” as Defendants GS&M, LLC (“GS&M”); Nadam, LLC (“Nadam”);
RG Holdings Delaware, LLC (“RG Delaware”); RG Holdings Perm, LLC (“RG Perm”); RG Holdings Perm II, LLC
(“RG Perm II”); RSN Holdings I, LLC (“RSN I”); RSN Holdings II, LLC (“RSN II”); RSN Holdings 4, LLC (“RSN 4”);
RSN Holdings Delaware, LLC (“RSN Delaware”); RSN Properties, LLC (“RSN Properties”); United Synergy Group,
3
into a land installment contract for each Property Fraud Property which envisioned an installment
sale for each property paid for out of profits earned from managing the property.” (Id. at ¶ 68.) The
Property LOA also “envisioned that the Controlled Entities would begin to acquire the Property Fraud
Properties by August 10, 2018 and complete all purchases within 5 years of the effective date of each
Land Contract.” (Id. at ¶ 69.) In the event of a breach by the Controlled Entities, the Property LOA
gave the Property Fraud Investors the right to terminate the underlying Land Contracts, retain

liquidated damages, and recover the underlying Property Fraud Properties. (Id. at ¶ 70.)
After the Property LOA was executed, the Nakhles indicated that the Controlled Entities
would immediately assume management of the Property Fraud Properties. (Id. at ¶ 77.) However,
the Nakhles and Gutzky delayed the Controlled Entities’ assumption of “even nominal management”
for at least three months following the execution of the Property LOA, which resulted in unpaid rents,
bills, and property damages. (Id. at ¶¶ 78, 79.)
On November 2, 2017, Defendant George Nakhle approached Plaintiff Adam and represented
that he needed a loan to assist in preparing the Property Fraud Properties for refinancing. (Id. at ¶
84.) Adam’s company, Plaintiff BAO, extended a loan to one of the Controlled Entities, Defendant
RSN I, in the amount of $125,000 with principal repayment due after two years (hereinafter referred

to as the “First Loan”). (Id.) This Loan is the first of three loans that comprise the “Loan Fraud.”
Also in November 2017, Defendant George Nakhle convinced Plaintiff Adam (acting through
his company, Plaintiff ABO) and the principals of Plaintiffs D. Mody Properties, Ltd. (“D. Mody”)
and Zuk Domestic Holdings, LLC (“Zuk”) to form a joint venture limited liability company, which

LLC (“United Synergy”); 6395 Pearl Road, LLC (“Pearl Road”); Park Knoll, LLC (“Park Knoll”); RSN Holdings XV,
LLC (“RSN XV”); and RSN Holdings XXI, LLC (“RSN XXI”). (Doc. No. 10 at Preliminary Statement, pp. 3-4.)
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came to be named Plaintiff RSN Finance, LLC (“Finance”). (Id. at ¶ 86.) George Nakhle represented
that Finance “would acquire, improve, sell, and lease real estate, and finance and refinance real estate
transactions.” (Id. at ¶ 87.) Each party was to advance their own funds to get Finance started, with
George Nakhle (through his entity Defendant RSN Properties) to contribute last. (Id. at ¶¶ 87, 88.)
The joint venture was finalized on December 13, 2017 in a second Letter of Agreement (hereinafter
“the JV LOA.”) (Id.) The JV LOA, and the overall management of Finance, form the basis of the

JV Fraud, which is discussed in more detail infra.
In sum, then, Plaintiffs allege that “[a]s 2018 began, the Nakhles and Gutzky, through their
Controlled Entities, had put into place a mechanism to acquire the Property Fraud Properties (the
Property LOA), a joint venture entity that was going to acquire and manage properties (such entity
being Finance), and drawn on a loan to provide them with the means of paying the bills associated
with executing the Property Fraud and JV Fraud (such loan constituting the first part of the Loan
Fraud).” (Id. at ¶ 105.) The “next step” was to execute the individual Land Contracts. (Id. at ¶ 106.)
The Land Contracts were “almost all executed in January 2018 and recorded between
February and April 2018.” (Id.) Among other things, the Land Contracts obligated the acquiring
Controlled Entity to assume all responsibility for payments (including tax payments) and

maintenance of the property; pay the full purchase price within 36 months of signing; and make
interest payments on the outstanding purchase price. (Id. at ¶¶ 109, 110, 111.) The Land Contracts
provided that, in the event of a default, the Property Fraud Investor had the right to “(i) retain all
payments made to date as liquidated damages, (ii) rescind the transfer and recover the related Property
Fraud Property, (iii) become entitled to 12 months of interest on the Property Fraud Property, or (iv)
become entitled to 10% of the purchase price.” (Id. at ¶ 113.)

5
Plaintiffs allege that, after executing the Land Contracts, the Nakhles “misrepresented to the
Property Fraud Investors that they would need to finance their purchases even though the Land
Contracts did not specify any mortgage contingency.” (Id. at ¶ 126.) The Nakhles “falsely
represented to the Property Fraud Investors that the only way for the Controlled Entities to obtain
financing to cover the full purchase price for the Property Fraud Properties would be for the Property
Fraud Investors to transfer title for the Property Fraud Properties officially to the Controlled Entities.”

(Id. at ¶ 127.) The Nakhles further represented that the Property Fraud Investors “needed to transfer
the Land Contracts themselves in order to receive the full purchase price.” (Id. at ¶ 139.)
In late 2018, the Controlled Entities agreed to close on the purchase of the first 40 (later
reduced to 37) Property Fraud Properties. (Id. at ¶ 138.) Plaintiffs refer to this group of properties
as “Lot One.” (Id.) “Based on the misrepresentations made [by the Nakhles], the Property Fraud
Investors in Lot One transferred title pursuant to the Land Contracts” so that the Controlled Entities
could obtain financing. (Id. at ¶ 139.) The Property Fraud Investors in Lot One also transferred the
Land Contracts themselves to the Controlled Entities. (Id. at ¶ 140.)
The Nakhles and Gutzkky obtained financing from Corevest American Finance Lender, LLC
(“Corevest”), “a financial institution that agreed to issue mortgages for the Property Fraud

Properties.” (Id. at ¶ 131.) The Nakhles and Gutzky falsely told the Property Fraud Investors that,
when they applied for mortgages for the Lot One properties, they were informed that they could not
obtain 100% financing for the Lot One properties. (Id. at ¶ 142.) Plaintiffs allege that, based on this
misrepresentation, “the Nakhles returned to the Property Fraud Investors for Lot One and agreed with
the Property Fraud Investors that the initial payments pursuant to the related Land Contracts would
provide approximately 65% of the total purchase prices for the Lot One properties, termed ‘release

6
prices,’ with the financing proceeds, and then pay the balance plus all other amounts due pursuant to
the Land Contracts paid over time.” (Id. at ¶ 144.)
The Lot One Investors subsequently executed a letter setting forth the “release prices” for
each of the Lot One properties. (Id. at ¶ 146.) Thereafter, the Lot One investors and the Nakhles and
Gutzky (acting through Defendants RSN I and GS&M) entered into a supplemental agreement in
December 2018, setting forth the terms for the repayment of the remaining amounts due and payable
under the Land Contracts.5 (Id. at ¶ 153.) Plaintiffs refer to this agreement as the “Lot One

Supplemental Agreement.” (Id.) Plaintiffs allege that Defendant George Nakhle personally
guaranteed the purchasers’ obligations under the Lot One Supplemental Agreement. (Id. at ¶ 154.)
The Controlled Entities paid the “release prices” for Lot One by the end of 2018. (Id. at ¶
147.) However, “unbeknownst to the Lot One investors, the Nakhles and Gutzky in their applications
for loans from Corevest had stated the fair market values of the Property Fraud Properties in Lot One
as being in excess of the total purchase price for the properties, obtaining in some cases an amount
that was in excess of 100% financing of the full purchase price for the properties, which were
themselves much higher than the ‘release prices’ that the Nakhles had offered to pay.” (Id. at ¶ 148.)
Although the Nakhles and Gutzky paid the “release prices” to the Lot One investors, they “transferred

the rest of the money received [from the Corevest loans] to themselves.” (Id. at ¶ 152.)

5 Pursuant to the Lot One Supplemental Agreement these Defendants “agreed to pay the outstanding and unpaid portion
of the purchase price for the Lot One properties as follows: (a) 65% as the ‘release price’ pursuant to which title was
transferred, (b) approximately 2.5% additionally upon closing and transfer of title, (c) 2.5% of the purchase price for the
Lot One properties, or $47,247, no later than January 20, 2019, (d) $235,886 no later than August 31, 2019, and (e)
$485,347 no later than December 31, 2019.” (Id. at ¶ 154.)

7
Meanwhile, the Nakhles (through Defendant RSN I) failed to make several payments on the
First Loan, including the first payment which was due in February 2018. (Id. at ¶ 123.) Subsequently,
in January 2019, Plaintiff BAO “covered an obligation by RSN I in the amount of $11,000 against
RSN I’s promise to pay the same in February 2019” (hereinafter referred to as the “Second Loan”).
(Id. at ¶ 195.) Defendant RSN I did not repay this loan, either in February 2019 or at any point in
time thereafter. (Id.) In addition, the Controlled Entities failed to make the first payment on the Lot

One Supplemental Agreement in January 2019. (Id. at ¶ 173.) Plaintiffs were concerned by this
series of defaults but “did not take action” because the Nakhles represented that “all would be well
as soon as the sales of the Property Fraud Properties were finalized.” (Id. at ¶¶ 171, 173.)
Thus, “the Nakhles and Gutzky set out in early 2019 to close a second lot of Property Fraud
Properties, totaling 107 Properties.” (Id. at ¶ 175.) Plaintiffs refer to these properties as “Lot Two.”
(Id.) As they did with the Lot One investors, the Nakhles and Gutzky made fraudulent
misrepresentations to the Lot Two investors regarding the need to transfer title in order for the
Controlled Entities to obtain financing. (Id. at ¶ 176.) The Lot Two investors transferred title to the
Lot Two properties, after which the Controlled Entities obtained financing from Corevest. (Id. at ¶
177.) As they allegedly did with the Lot One properties, “the Nakhles and Gutzky stated a fair market

value of the Lot Two properties in excess of the purchase price, again obtaining mortgages in excess
of 100% of the purchase price.” (Id.) Corevest recorded mortgages on the Lot Two properties “to
secure loans that exceeded the purchase prices.” (Id. at ¶ 181.) The Nakhles then negotiated
“conveyance prices” for Lot Two, which Plaintiffs allege was “effectively the same as the ‘release

8
prices’ for Lot One.” (Id. at ¶ 182.) The Lot Two investors cancelled and/or assigned6 the related
Land Contracts for the Lot Two properties. (Id. at ¶¶ 183, 185.)
In March 2019, the Nakhles and Gutzky (through Defendants RSN I, RSN 4, and GS&M)
executed a Lot Two Supplemental Agreement. (Id. at ¶ 187.) Pursuant to this Agreement, each Lot
Two investor was to be paid $22,750 at the time of transfer of title, with the remainder of the purchase
price to be paid over 42 months. (Id. at ¶ 188.) The first payment (in the amount of $256,225) was

due on February 28, 2020, with additional payments due in August 2020, February and August 2021,
and February and August 2022. (Id. at ¶ 189.) The Lot Two Supplemental Agreement was secured
by a personal guaranty from George Nakhle. (Id. at ¶ 188.) Plaintiffs allege that “the initial payment
was the only money they would ever see” on the Lot Two properties. (Id. at ¶¶ 190, 192.)
In April 2019, Plaintiff Adam entered into a loan agreement with Defendants George Nakhle
and RSN I. (Id. at ¶ 197.) Pursuant to this agreement, Adam personally loaned $144,000 to Defendant
RSN I (hereinafter referred to as the “Third Loan”). (Id. at ¶¶ 197, 199.) Adam had previously
borrowed funds from third parties to make available to Defendants RSN I and George Nakhle to help
them finish the transfers of the Property Fraud Properties. (Id. at ¶ 197.) Defendant RSN I agreed to
pay $3,080 per month on this loan, and to make the payment directly to Adam’s lenders. (Id. at ¶

199.) Plaintiffs allege that RSN I made interest payments on the Third Loan through September 2019,
but then ceased making payments. (Id. at ¶ 200.) Defendant RSN I’s default, in turn, caused Plaintiff
Adam to default on his loans from third party creditors. (Id. at ¶ 201.)

6 The First Amended Complaint is confusing on this point. In one paragraph (¶ 183), Plaintiffs state that the investors
“cancelled” the Land Contracts. Several paragraphs later (¶ 185), Plaintiffs state that the investors “assigned” their Land
Contracts. At other points in the First Amended Complaint, Plaintiffs allege that the investors “transferred” their Land
Contracts. It appears that Plaintiffs are using these terms interchangeably, but it is not entirely clear.

9
At some point in 2019, the Nakhles and Gutzky agreed to close on the purchase of another 50
properties, of which 48 are Property Fraud Properties for whom Plaintiff Shnizel is an assignee. (Id.
at ¶ 212.) Plaintiffs refer to these properties as “Lot Three.” (Id.) The Nakhles and Gutzky made
fraudulent misrepresentations to the Lot Three investors regarding the need to transfer title for the
Controlled Entities to obtain financing. (Id. at ¶ 213.) The Lot Three investors transferred both the
title and the Land Contracts relating to the Lot Three properties to the Controlled Entities, after which

the Controlled Entities obtained financing from Corevest. (Id. at ¶¶ 214, 220, 222, 223.) As with the
Lot One and Lot Two properties, the Nakhles and Gutzky “stated the fair market value of the Lot
Three properties as being in excess of the purchase price, again obtaining valuations in excess of
100% of the stated purchase prices.” (Id. at ¶ 214.) Despite this, the Nakhles “represented to the
investors that they were unable to receive full financing and could not pay for the Lot Three properties
in full upon transfer.” (Id. at ¶ 215.) The Nakhles then negotiated “conveyance prices” for the Lot
Three properties, which were less than the full purchase price. (Id. at ¶¶ 221, 224.) Plaintiffs allege
that the Lot Three Investors “would never see a penny of their money.” (Id. at ¶ 225.)
Plaintiffs allege that the Lot One, Lot Two, and Lot Three Investors were never alerted to the
fact that, by transferring title and assigning/transferring the Land Contracts to the Controlled Entities,

they were “essentially handing over their rights in exchange for nothing.” (Id. at ¶ 224.) Specifically,
Plaintiffs claim that the Property Fraud Investors were not told that “by assigning the Land Contracts,
any rights to payment over time would be the right of the assignee, not the assignor Property Fraud
Investor.” (Id. at ¶ 186.) See also Doc. No. 10 at ¶ 141.
Plaintiffs allege that “the Nakhles and Gutzky continue to own and operate the 192 Property
Fraud Properties valued at over $10 million, for which [they] only paid a fraction of the purchase

10
price.” (Id. at ¶ 253.) In addition, the Nakhles and Gutzky “continue collecting the substantial rents
generated by the Property Fraud Properties but refuse to pay the balances of the purchase prices,
deferred rents, interest or fees due the Covered Investors.” (Id. at ¶ 256.)
B. JV Fraud
Meanwhile, and as noted above, the creation of the joint venture limited liability company
Finance was finalized on December 13, 2017 via the execution of the JV LOA. (Id. at ¶ 88.) Pursuant

to this Agreement, Plaintiff ABO held 30% of the ownership of Finance; Plaintiff D. Mody held 20%,
Defendant RSN Properties held 30%, and Plaintiff Zuk held 20%. (Id. at ¶ 89.) George Nakhle
convinced Plaintiffs ABO, D. Mody, and Zuk “that capitalization of Finance should be staggered,
with D. Mody and Zuk providing $1,000,000 each in the first year in the form of loans, ABO would
provide a $1,000,000 loan after Finance was in existence for one year, and RSN Properties would
provide a $1,000,000 loan within two years.” (Id. at ¶ 90.)
In January 2018, Plaintiffs D. Mody and Zuk’s affiliate, Plaintiff Zuk Marble Holdings LLC
(“Zuk Marble”) executed cognovit promissory notes and loan agreements for $1,000,000 each to
Finance pursuant to the JV LOA, which amounts were fully funded by October 2018. (Id. at ¶ 96.)
In the meantime, Plaintiff ABO and Defendant RSN Properties “were required to advance $100,000

annually to Finance until they funded their obligations, which would be treated as a 10% annual yield
on their delayed loans.” 7 (Id. at ¶ 95.) Defendant George Nakhle was named Finance’s initial
manager and Plaintiff Dror Adam was named second manager. (Id. at ¶¶ 89, 102.)

7 In addition, ABO and RSN Properties each issued guarantees to D. Mody and Zuk to cover their respective deferred
obligations. (Id. at ¶ 97.)

11
The JV LOA contained several provisions “that the members believed would protect their
interests: (a) the affirmative vote of both managers (George Nakhle and Adam) were required to make
all managerial decisions; (b) the affirmative vote of all four members were required to sell, exchange,
or convey any real property; (c) all real and personal property was to be acquired in the name of
Finance, and title to any such property was to vest in Finance; (d) the managers were tasked with
discharging their duties and the affairs of Finance in a prudent and businesslike manner, devoting

such time as reasonably necessary to manage such affairs; and (e) the managers were liable to Finance
and its members for their actions to the extent that such actions involved fraud, willful misconduct,
gross negligence or breach of fiduciary duty.” (Id. at ¶ 103.)
However, over the course of 2018 (while the Land Contracts for the Lot One properties were
being executed and transferred to the acquiring Controlled Entities), George Nakhle “embezzled
money from Finance, taking $5,000 in August 2018 and $8,500 per month thereafter, and making
large withdrawals, such as a $26,000 withdrawal on July 24, 2018, $37,900 on December 24, 2018,
and $9,780 on December 31, 2018.”8 (Id. at ¶ 124.) In addition, in November 2018, George Nakhle
took a personal loan from Finance in the amount of $50,000 with a 45-day repayment schedule, but
never repaid this loan. (Id. at ¶ 169.)

Meanwhile, neither Plaintiff ABO nor Defendant RSN Properties paid their respective
$100,000 annual advances or $1,000,000 contribution, as required by the JV LOA. (Id. at ¶¶ 159,
160, 234.) However, the Nakhles and Gutzky had decided to purchase Plaintiff ABO’s properties

8 Plaintiffs allege that, “[b]ecause Adam is an Israeli citizen and not present in the United States, and because George
Nakhle misrepresented the purposes of the withdrawals and never provided Adam with documentary evidence regarding
the withdrawals, both Adam and the members of Finance did not know, and could not have known, that this money was
being stolen and pocketed by George Nakhle.” (Id. at ¶ 124.)

12
through the Land Contracts in Lot One and George Nakhle “agreed that the proceeds would be paid
directly to Finance” and “would be sufficient both to cover [ABO’s] $100,000 advance and ABO’s
$1,000,000 contribution/loan to Finance.”9 (Id. at ¶ 159.) Plaintiffs allege that “George Nakhle failed
to pay the full purchase prices as agreed, and he failed to provide any financing documents to D.
Mody, Zuk or ABO.” (Id. at ¶ 236.)
Contemporaneously, George Nakhle used the money that had been contributed by Plaintiffs

D. Mody and Zuk Marble to fund Finance, to purchase twenty-nine (29) properties (“the JV
Properties”). (Id. at ¶ 162.) Plaintiffs ABO, D. Mody, and Zuk later learned that “Nakhle already
owned 24 of the 29 properties he purportedly purchased for Finance and many of the properties were
in bad condition.” (Id.) Plaintiffs allege that “George Nakhle actually used the money [contributed
by D. Mody and Zuk] to pay off and pay down his loans, and to pay himself hundreds of thousands
of dollars.” (Id.) None of the JV Properties were registered in the name of Finance and, instead, they
were registered as being owned by Controlled Entities RG Delaware, RG Perm, RSN II, United
Synergy, Pearl Road, Park Knoll, and RSN XV, all of which are owned by the Nakles and Gutzky.
(Id. at ¶¶ 162, 163.) Four of the JV Properties were subsequently foreclosed and sold at Sheriff’s
Sale. (Id. at ¶ 166.) Another 18 of the JV Properties “are significantly delinquent on real estate

taxes.” (Id.)
Plaintiffs allege that “George Nakhle’s purchases of the JV Properties with Finance funds
were made without receiving the proper authorizations because they were not in fact purchased by

9 Specifically, George Nakhle misrepresented to the members of Finance that “if D. Mody and Zuk would release their
mortgage interest on the ABO-owned properties which they were holding to secure ABO’s interest in Finance, George
Nakhle could finance his purchase of the properties and the proceeds could be used to fulfill ABO’s commitments to
Finance. D. Mody and Zuk agreed.” (Id. at ¶ 235.)
13
Finance, nor did Finance receive the benefit from the same other than some sporadic rental payments
that George Nakhle deposited with Finance in order to fool the members of Finance into believing
Finance owned the JV Properties.” (Id. at ¶ 167.) Plaintiffs allege that “[t]he purchase by Controlled
Entities of the JV Properties effectively caused a transfer of property of Finance without the required
approval of Adam as manager or ABO, D. Mody and Zuk as members.” (Id.) In addition, “George
Nakhle shut out Adam as a co-manager of Finance, by (among other things) placing Finance’s real

estate and financial assets out of Adam’s reach, by failing to keep Adam informed and provide
requested information and documents, by making decisions without Adam’s agreement, and by
refusing to restore Adam as a signatory on Finance’s Chase bank account.” (Id. at ¶ 168.)
According to Plaintiffs, “at least a part of the money stolen from Finance by George Nakhle
in 2018 was used to meet the ‘release prices’ on the Lot One properties, thus using the JV Fraud as a
means of partially funding the Property Fraud.” (Id. at ¶ 170.) In addition, some of the money stolen
by George Nakhle from Finance was used to “establish a $10 million line of credit that Corevest was
supposed to issue Finance, but which George Nakhle instead took out in the name of a Controlled
Entity and subsequently used to purchase over 100 properties unrelated to the frauds described in this
Complaint.” (Id.)

George Nakhle also borrowed approximately $183,000 of funds from Finance to complete the
renovation of a property on Lake Shore Boulevard in Cleveland, Ohio that he said he would transfer
to Finance. (Id. at ¶ 237.) Instead, “this money was used to pay other debts, and no portion of this
loan was ever repaid to Finance, nor was the property transferred as promised.” (Id.) Lastly, George
Nakhle and RSN Properties rented a property purchased with Finance funds to his parents and

14
allowed them to break their lease with several years remaining without penalty and without finding a
replacement tenant. (Id. at ¶ 241.)
Plaintiffs allege that, despite repeated requests, George Nakhle “refused to provide any
adequate accounting or status report of actions taken ultra vires by him as manager of Finance.” (Id.
at ¶ 242.) Plaintiffs ABO, D. Mody and Zuk “became aware of the full extent of George Nakhle’s
misconduct in the JV Fraud in the Fall of 2019 when the Lot Three investors failed to receive

payment.” (Id.) ABO, D. Mody and Zuk later discovered that “George Nakhle had cleaned out all
remaining funds in the Finance account that had been contributed by ABO, D. Mody and Zuk.” (Id.)
C. The Nadam Fraud
Meanwhile, in February 2018 (shortly after all the Land Contracts were executed), George
Nakhle convinced Plaintiff Adam to form yet another joint venture enterprise (hereinafter referred to
as “Nadam”), this one solely between Plaintiff ABO and George Nakhle personally. (Id. at ¶ 118.)
The purpose of Nadam “was to acquire, manage and sell real estate investment properties, much the
same as Finance, but on a smaller scale and with fewer properties.” (Id. at ¶ 119.) The Nadam
Operating Agreement gave George Nakhle managerial authority, but no sale of real property was
permitted without the approval of ABO as well as George Nakhle. (Id. at ¶ 120.)

The initial property identified by Nadam was the property located at 13802-13810 Byron
Avenue in Cleveland, Ohio (hereafter referred to as “the Byron Property”). (Id. at ¶ 121.) The Byron
Property was one of the Property Fraud Properties then-under contract in one of the Land Contracts
executed in January 2018. (Id.) Nadam agreed to purchase the Byron Property for $140,000, with
$100,000 to be paid to the seller and $40,000 paid to cover delinquent taxes and closing costs. (Id.
at ¶ 227.) Plaintiff ABO contributed $17,000 to Nadam to cover a portion of the taxes and closing

15
costs and an additional $50,000 to fully renovate the Byron Property and turn it into an investment
property capable of generating $100,000 in annual gross revenues. (Id. at ¶ 228.) George Nakhle
committed to pay $23,000 to cover the balance of delinquent taxes and closing costs and agreed to
obtain financing to pay the $100,000 due to the seller for the Byron Property. (Id. at ¶ 229.)
Although title to the Byron Property was transferred to Nadam, Plaintiff alleges that “[t]here
is no evidence that [George Nakhle’s] $23,000 payment was made.” (Id.) In addition, Plaintiff claims

George Nakhle “never paid the balance of the purchase price to the seller.” (Id. at ¶¶ 230, 233.)
Instead, George Nakhle transferred title to the Byron Property from Nadam to Defendant RG
Delaware. (Id. at ¶ 231.) Following the transfer of the Byron Property to RG Delaware, “the Nakhles
and Gutzky obtained a mortgage on the Byron Property, distributed the cash proceeds to themselves,
and have been collecting rent for their own benefit.” (Id. at ¶ 232.)
D. The Bavaria MF Fraud
The final fraudulent scheme alleged in the First Amended Complaint is the so-called Bavaria
MF Fraud. Plaintiffs allege that, on December 30, 2018, Defendant RSN I10 entered into an
agreement to purchase from Bavaria MF, LLC (“Bavaria MF’) a property located at 17568 Lake
Shore Boulevard in Cleveland, Ohio (the “Bavaria Property”). (Id. at ¶ 203.) Plaintiff Adam is the

alleged assignee of the claims in the Bavaria MF Fraud. (Id. at ¶ 19.)

10 The First Amended Complaint alleges that Defendant RG Delaware entered into this agreement to purchase the Bavaria
Property. (Id. at ¶ 203.) The Bavaria Agreement, however, states that it is between Bavaria MF, LLC and RSN Holding
I, LLC (i.e., Defendant RSN I). (Doc. No. 10-22 at PageID# 767.)

16
The Bavaria Property is a multi-dwelling residential property with 12 residential units and 2
commercial units11 that had suffered significant damage in a fire on June 11, 2018, following which
6 units were unusable. (Id. at ¶ 204.) Bavaria MF asked Plaintiff Adam to discuss transferring the
property with George Nakhle and Adam agreed to act as guarantor of the purchaser’s obligations due
to his ongoing relationship with the Nakhles and the Controlled Entities. (Id.)
The Bavaria Agreement “envisioned that the purchaser, RSN I, would either purchase the

property or the owner, Bavaria MF, LLC, and assume a $150,000 loan that had to be repaid for repairs
to the property.” (Id. at ¶ 205.) An additional $78,000 was due upon transfer, with $400,000 more
due on July 31, 2019. (Id.) Until such time as the purchase price was paid in full, RSN I agreed to
pay $3,000 per month in interest, with an optional extension of the payment of the purchase price to
August 31, 2019, but with $5,000 in interest for August 2019. (Id.) If the purchase price was not
paid in full by such time, Bavaria MF had the option of repurchasing the Bavaria Property (or Bavaria
MF itself if that were sold) for $1. (Id.)
The Bavaria Property was transferred on or about May 24, 2019, but RSN I never paid the
down payment. (Id. at ¶ 207.) RSN I subsequently applied for a mortgage from Corevest and received
$455,000. (Id.) RSN I used $215,000 to cover the cost of renovations and then the Nakhles and

Gutzky distributed $240,000 to themselves. (Id.) According to Plaintiffs, “[n]o further money was
paid and the Nakhles and Gutzky ignored Bavaria [MF]’s demand to repurchase the Bavaria Property
when only $25,000 was paid in August 2019 as a partial payment, and that only when a second check
was issued after an initial check was dishonored.” (Id. at ¶ 208.) The present fair market value of

11 The Bavaria Agreement states that the property contains 13 residential units and a store front (rather than 12 residential
units and 2 commercial units, as alleged by Plaintiffs). (Doc. No. 10-22 at PageID# 767.)
17
the Bavaria Property following restoration is “estimated to be in excess of $700,000 and potentially
$1,000,000.” (Id. at ¶ 211.)
II. Procedural Background
The parties’ business dealings have spawned at least three lawsuits in state court and two in
federal court, including the instant action. The Court will provide brief overviews of the state and
federal court proceedings separately, below.

A. State Court Proceedings
1. First State Court Case
On May 29, 2020, Plaintiffs ABO, Zuk, D. Mody, and Finance filed a Complaint in the Court
of Common Pleas of Cuyahoga County, against George Nakhle, RSN Properties, United Synergy,
RG Delaware, RG Perm, RSN II, and Pearl Road. See Adam Beres, LLC, et al. v. George Nakhle,
et al., Case No. CV-20-932929 (Cuy. Cty. Ct. Cmn. Pl.) (hereinafter “First State Court Case.”)
Plaintiffs ABO, Zuk, D. Mody, and Finance filed a First Amended Complaint on June 23, 2020
against the same defendants as well as newly added defendant Corevest.
Broadly speaking, the First State Court Case relates to what Plaintiffs herein refer to as the
JV Fraud. Specifically, in the First State Court Case, Plaintiffs ABO, Zuk, D. Mody, and Finance

alleged facts regarding the formation of Finance in late 2017 and the terms of the JV LOA, including
the respective ownership percentages, staggered funding requirements, appointment of managers, and
managerial responsibilities and duties, discussed supra. See Adam Beres, LLC, Case No. CV-20-
932929 (Cuy. Cty. Ct. Cmn. Pl.) (First Amended Complaint). Plaintiffs alleged that the defendants
therein (“the First State Court Case Defendants”) breached their contractual and fiduciary duties by
operating Finance for their own benefit, including (but not limited to) by (1) exercising exclusive

18
control over properties acquired by Finance funds; (2) failing to “turn over RSN Finance funds” and
using those funds for defendants’ exclusive benefit, (3) failing to advance funds required by the JV
LOA; (4) making significant withdrawals and borrowing funds from Finance without repaying them;
and (5) failing to provide an accounting and “shutting out” Adam as a co-manager. Id.
Plaintiffs ABO, D. Mody, Zuk, and Finance asserted claims against the First State Court Case
Defendants for breach of statutory and fiduciary duties, breach of contract, civil conspiracy, right to

books and records, declaratory judgment, and quiet title. Id. Plaintiffs sought compensatory damages
in excess of $3,000,000, punitive damages, preliminary and permanent injunctive relief, attorney’s
fees, and costs. Id. Additionally, on August 28, 2020, Plaintiffs filed a Motion for Appointment of
a Receiver to manage the affairs and finances of Finance and to perform an accounting. Id. (state
court docket.)
On September 9, 2020, the First State Court Case Defendants filed an Answer and
Counterclaims against ABO. Id. (Answer and Counterclaim). In their Counterclaims, these
Defendants allege, generally, that ABO “acted as an intermediary between the [Defendants] and
certain Israeli-based sellers but has steadfastly refused to disclose the specific nature and terms of its
arrangements with these foreign-based sellers.” Id. at p. 13. The First State Court Case Defendants

allege that ABO “has refused to account for money that the [Defendants] have paid to related persons
and entities; refused to accept payments into United States bank accounts; and demanded
questionable and unexplained international wire transfers—all of which has exposed the [Defendants]
to potential liability, in addition to the significant time and expense related to the instant action.” Id.
The First State Court Case Defendants asserted counterclaims for breach of fiduciary duty, slander
of title, abuse of process, and declaratory judgment. Id. at pp. 20-23.

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2. Second State Court Case
Meanwhile, on June 23, 2020, Plaintiffs Adam, BAO, and ABO filed a Complaint in the
Cuyahoga County Court of Common Pleas, against George Nakhle, RSN Holdings, RSN Delaware,
RSN 4, RG Delaware, Nadam, and Corevest. See Adam, et al. v. George Nakhle, et al., Case No.
CV-20-933677 (Cuy. Cty. Ct. Cmn. Pl.) (hereinafter referred to as “the Second State Court Case.”)
The Second State Court Case relates to what the Plaintiffs herein refer to as the “Loan Fraud”

and the “Nadam Fraud.” Specifically, in the Second State Court Case, Plaintiffs Adam, BAO, and
ABO alleged facts regarding the First Loan, Second Loan, and Third Loan, as well as facts regarding
the formation of Nadam, the Nadam Operating Agreement, and the purchase of the Byron Property.
See Adam, et al., Case No. CV-20-933677 (Cuy. Cty. Ct. Cmn. Pl.) (Complaint). As to the Loan
Fraud, Plaintiffs asserted claims for (1) breach of contract (Counts I, III, VI); (2) unjust enrichment
(Counts II, V, VII); and (3) promissory estoppel as to the Second Loan only (Count IV). Id. As to
the Nadam Fraud, Plaintiffs alleged claims for (1) breach of operating agreement (Count VIII); (2)
breach of statutory and fiduciary duties (Count IX); (3) civil conspiracy (Count X); and (4)
declaratory judgment (Count XI). Id. Plaintiffs sought compensatory damages in excess of $300,000,
as well as punitive damages, attorney’s fees, and costs. Plaintiffs also sought preliminary and

permanent injunctive relief. Id.
On September 9, 2020, Defendants George Nakhle, RSN Holdings, RSN Delaware, RSN 4,
RG Delaware, and Nadam (the “Second Court Case Defendants”) filed an Answer and Counterclaims
alleging facts similar to those set forth in their Counterclaims in the First State Court Case. These
Defendants asserted counterclaims for declaratory judgment, breach of fiduciary duty, slander of title,
civil conspiracy, and abuse of process. Id. (Answer and Counterclaim).

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On November 24, 2020, a different and larger group of defendants (Defendants George
Nakhle, Samir Nakhle, RSN Properties, RSN Delaware, RG Delaware, RG Perm, RG Perm II, RSN
I, RSN II, RSN 4, United Synergy, and Pearl Road), moved the state court to consolidate the First
and Second Court Cases. Id. (Motion to Consolidate). Plaintiffs opposed the motion, arguing that
consolidation “would make these proceedings cumbersome and extraordinarily difficult to manage.”
Id. (Plaintiffs’ Brief in Opposition to Motion to Consolidate at p. 1.) On January 25, 2021, the state

court granted Defendants’ Motion to Consolidate. Id. (state court docket).
4. Third State Court Case
At roughly the same time that the First and Second State Court Cases were consolidated,
Plaintiff Shnizel filed a Complaint in the Cuyahoga County Court of Common Pleas, against
Defendants George Nakhle, Samir Nakhle, RSN I, GS&M, RSN 4, RG Delaware, RG Perm, RSN
Delaware, RG Perm II, Corevest, and CAF Borrower GS LLC. See Shnizel Ohio LLC v. George
Nakhle, et al., Case No. CV-21-943024 (Cuy. Cty. Ct. Cmn. Pl.) (hereinafter referred to as the “Third
State Court Case”). Plaintiff Shnizel filed a First Amended Complaint on March 17, 2021 against
the same Defendants.
The Third State Court Case relates to what the Plaintiffs herein refer to as the Property Fraud.

Specifically, in the Third State Court Case, Shnizel alleged facts regarding the August 2017 Property
LOA; the execution and terms of the Land Contracts for Lots One, Two, and Three; the Nakhles’
fraudulent representations that the Lots One, Two, and Three investors needed to transfer both title
and the Land Contracts themselves for the Defendants to obtain financing; and Defendants’ failure
to pay the purchase prices for the properties at issue despite receiving substantially more in financing
proceeds for the properties than the purchase prices. See Shnizel Ohio LLC., Case No. CV-21-943024

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(Cuy. Cty. Ct. Cmn. Pl.) (First Amended Complaint). Shnizel alleged claims for fraud, breach of
contract, unjust enrichment, promissory estoppel, civil conspiracy, declaratory judgment, fraudulent
transfers, and piercing the corporate veil. Id. Shnizel sought compensatory damages in excess of
$7,570,000, as well as punitive damages, attorney’s fees, and costs. Id. Plaintiffs also sought
preliminary and permanent injunctive relief, the imposition of a constructive trust, and an accounting.
Id.

The Third State Court Case Defendants filed an Answer and Counterclaims on July 19, 2021.
In their Counterclaims, these Defendants alleged (among other things) that Shnizel (and others
associated with Shnizel, including Adam) falsely represented the occupancy rates of the Property
Fraud Properties and failed to apply certain payments made by entities owned by George Nakhle to
the amounts due and owing under the Land Contracts. Id. (Answer and Counterclaims). The Third
State Court Case Defendants asserted claims for fraud, civil conspiracy, slander of title, abuse of
process, and negligence. Id.
Although the Third State Court Case was filed on the same date as the consolidation of the
First and Second State Court Cases, the Third State Court Case was not consolidated with those cases
until much later, in January 2023. Id. (state court docket). In the meantime, the Third State Court

Case was presided over by a different state trial court judge, who conducted a status conference and
set case management deadlines for fact discovery, expert discovery, and dispositive motions.12 Id.

12 In addition, the state court granted leave to intervene to FIG OH18, LLC (“FIG”), which had acquired an interest in the
delinquent taxes of several of the properties at issue. The state court docket reflects that FIG filed an Answer,
Counterclaim and Crossclaim in June 2022, asserting that its Tax Certificates on the properties at issue were good and
valid first liens and seeking foreclosure as to those properties. FIG then successfully moved for the joinder of Pacific
Western Bank; the State of Ohio, Department of Jobs & Family Services; the Cleveland Municipal Court—Criminal
Division; and CAF Bridge Borrower MS, LLC, on the grounds that these entities held liens on the properties on which
FIG sought foreclosure.

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4. Consolidated State Court Proceedings
Meanwhile, the First and Second State Court Cases proceeded. On February 9, 2021, the
parties participated in a settlement conference but were unable to resolve the consolidated cases at
that time. See First State Court Case, docket sheet. Shortly thereafter, on February 19, 2021, the
state court was advised of ongoing settlement negotiations and held all pending motions in abeyance.
Id. On July 30, 2021, the parties in the First and Second State Court Cases advised the state court

that they had reached a settlement. Id. On that date, the state court issued a Judgment Entry stating
(in relevant part) as follows: “Parties have reached a settlement and case is dismissed subject to a
more definitive journal entry to follow.” Id.
However, on February 25, 2022, Plaintiffs filed a “Motion to Set Aside the July 30, 2021
Journal Entry and to Reinstate Case.” Id. (Motion to Set Aside Journal Entry). Plaintiffs asserted
that “[w]hile the parties were able to reach common ground on some of the disputes between them,
they did not reach an agreement on all material terms.” Id. at p. 1. Plaintiffs indicated that the parties
“did not finalize and execute a written settlement agreement or agree on a more definitive journal
entry” and “are no longer negotiating.” Id. Defendants opposed Plaintiffs’ Motion. See First and
Second State Court Docket Sheets. On July 26, 2022, the state court granted Plaintiffs’ Motion and

reinstated the First and Second Court Cases. Id.
Shortly thereafter, on August 9, 2022, Plaintiffs filed Notices of Voluntary Dismissal without
Prejudice in the consolidated First and Second State Court Cases. See First and Second State Court
Case Docket Sheets. On that same date, Plaintiff Shnizel filed a Motion to Dismiss its First Amended
Complaint without prejudice in the Third State Court Case. See Shnizel Ohio LLC., Case No. CV-
21-943024 (Cuy. Cty. Ct. Cmn. Pl.) (Motion to Dismiss without Prejudice). In that Motion, Plaintiff

23
Shnizel explained that “Plaintiff, along with the plaintiffs in two related cases [i.e., the First and
Second State Court Cases], have since determined they have grounds to pursue a single, consolidated
civil RICO claim in federal court against the Nakhles, Gutzky and their controlled entities due to their
systematic, ongoing fraud perpetrated against many parties over several years.” Id. at p. 1.
On August 15, 2022, the state court dismissed Plaintiffs’ claims in the First and Second State
Court Cases. On August 22, 2022, the state court granted Plaintiff Shnizel’s Motion to Dismiss

without prejudice in the Third State Court Case. In these cases, the state courts noted (in subsequent
Judgment Entries) that, despite Plaintiffs’ dismissals, the cases were on the active docket because
Defendants’ Counterclaims remained pending.
Subsequently, on December 14, 2022, the parties filed a Joint Motion to Consolidate the Third
State Court Case with the already consolidated First and Second State Court Cases. See Docket
Sheets for First, Second, and Third State Court Cases. The Joint Motion was granted in January 2023.
Id. The state court thereafter held a pretrial conference on February 1, 2023, at which time it set
deadlines for fact discovery, expert discovery, and dispositive motions. Id. The state court also
scheduled a Final Pretrial for January 10, 2024, and a trial date of February 12, 2024. Id.
On October 3, 2023, Plaintiffs filed a “Motion to Stay Defendants’ Counterclaims pending

the Resolution of the Federal RICO Lawsuit.” Id. Defendants filed a Brief in Opposition on October
23, 2023. Id. On November 1, 2023, the state court denied Plaintiffs’ Motion to Stay. Id.
B. Federal Proceedings
1. First Federal Case
Meanwhile, Plaintiffs D. Mody and Zuk Marble filed a Complaint in this Court on July 21,
2021, against RSN Properties, LLC and RSN Finance, LLC. See D. Mody Properties, LTD, et al., v.

24
RSN Finance, LLC, Case No. 1:21CV1395 (N.D. Ohio) (Doc. No. 1) (hereinafter referred to as “the
First Federal Case”). As set forth supra, at the time the First Federal Case was filed in this Court, the
parties had just advised the state court that they had reached a settlement in the First and Second State
Court Cases.
In the First Federal Case, D. Mody and Zuk Marble allege facts relating to certain aspects of
what Plaintiffs herein refer to as the JV Fraud. Specifically, D. Mody and Zuk Marble alleged that,

on January 17, 2018, they each loaned RSN Finance $1,000,000 and that RSN Properties executed
an Unconditional and Absolute Continuing Guaranty of both loans. (Id.) D. Mody and Zuk Marble
alleged that they fully funded the loans but that both RSN Finance and RSN Properties failed to
perform their obligations under Loan Agreement and Guaranty, respectively. (Id.) D. Mody and Zuk
Marble alleged claims for (1) Breach of Promissory Notes and Loan Agreements; and (2) Breach of
Guaranty. (Id.) The case was assigned to District Judge Dan Polster.
Defendants filed an Answer on January 24, 2022, and Judge Polster set a Case Management
Conference (“CMC”) for March 16, 2022. Prior to the CMC, Plaintiffs and Defendants filed separate
Reports of Parties’ Planning Meetings. (Doc. Nos. 12, 13.) In Defendants’ Report, Defendants RSN
Finance and RSN Properties stated that “Plaintiffs have indicated that they will be seeking leave to

file an Amended Complaint, which will substantially and materially alter the proceedings before this
Court.” (Doc. No. 12 at p. 2.) Defendants advised that “the proposed Amended Complaint includes
39 counts and is over 500 paragraphs long in addition to adding additional parties and raising
additional claims.” (Id.) Defendants asserted that “this case was settled and is related to” the First
State Court Case. (Id.) Defendants further advised that “[o]n February 25, 2022, parties affiliated
with Plaintiffs in the instant matter filed a Motion to Set Aside July 30, 2021 Journal Entry and

25
Reinstate Case” in the First State Court Case. (Id.) Defendants indicated that they “believe, but
Plaintiffs dispute, [that] how Judge Fuerst rules on the Motion to Vacate would have direct impact
on the instant case.” (Id.) In Plaintiffs’ Report, Plaintiffs confirmed they “are seeking leave to file
an Amended Complaint to add additional parties to this action and raise additional claims.” (Doc. No.
13 at p. 1.) Plaintiffs further stated that “Plaintiffs and Defendants attempted to settle this case as
part of the global settlement of other cases in the Cuyahoga County Court of Common Pleas but were

unable to do so.” (Id. at p. 3.)
Judge Polster conducted the CMC on March 16, 2022. (Doc. No. 15.) In a “Minutes & Order”
issued that date, Judge Polster found as follows:
All parties confirmed that the claims raised in this case are part of the same dispute
which they previously litigated in state court. The state court case was dismissed
because the parties were working toward a resolution. The state court is in the best
position to enforce the parties’ agreement or to reactivate litigation between these
parties. All of the parties’ claims should be resolved in the same litigation, and the
most appropriate forum is state court.

Because the parties should resolve all of their claims in the same forum, and they have
already begun this process in state court, the Court hereby DISMISSES the captioned
case, without prejudice.

(Id.) As discussed above, the state court subsequently granted Plaintiffs’ Motion to Set Aside the
July 30, 2021 Judgment Entry and reinstated the First and Second State Court Cases to the active
docket. Plaintiffs voluntarily dismissed their claims in August 2022, however, the First and Second
State Court Defendants’ Counterclaims remained (and continue to remain) pending.
2. Second Federal Case
On December 5, 2022, Plaintiffs Adam, ABO, BAO, D. Mody, Finance, Shnizel, Zuk, and
Zuk Marble filed the instant action in this Court. (Doc. No. 1.) Plaintiffs thereafter filed a First
Amended Complaint on January 17, 2023, against the Moving Defendants as well as Defendants
26
Lima One Capital, LLC13 and Lieberman, Dvorin & Dowd, LLC.14 (Doc. No. 10.) Plaintiffs allege
the following thirty-seven (37) claims for relief:
(1) Civil RICO (18 U.S.C. § 1962(c)) (Count I),
(2) Fraud (Counts II, XIII, XXIII, XXVII, XXXII),
(3) Breach of Contract (Counts III, XIV, XXIV, XXVIII, XXXIII),
(4) Rescission/Constructive Trust (Count IV),

(5) Unjust Enrichment (Counts V, XXX),
(6) Promissory Estoppel (Counts VII, XVIII, XXXI, XXXIV),
(7) Civil Conspiracy (Counts VIII, IX, XIX, XX, XXVI, XXIX, XXXV, XXXVI),
(8) Breach of Statutory and Fiduciary Duties (Counts XVI, XXV),
(9) Restitution under the Faithless Servant Doctrine (Counts VI, XV),
(10) Piercing the Corporate Veil (Count XXXVII),
(11) Fraudulent Transfers (Counts XI),
(12) Quiet Title (Counts XII, XXII),
(13) Declaratory Judgment (Counts X, XXI), and

13 Defendant Lima Capital One, LLC (“Lima One”) filed an Answer on March 13, 2023. (Doc. No. 58.) Lima is named
as a Defendant in Counts X (Declaratory Judgment) and XII (Quiet Title) of the First Amended Complaint. Defendant
Lima One did not join in the instant Motion to Dismiss.

14 Defendant Lieberman, Dvorin & Dowd LLC (“Lieberman”) filed an Answer and Motion for Judgment on the Pleadings
on March 13, 2023. (Doc. Nos. 59, 60.) Plaintiffs filed a Brief in Opposition to the Motion on April 26, 2023, to which
Lieberman replied on May 17, 2023. (Doc. Nos. 63, 68.) Thereafter, on July 6, 2023, Plaintiffs filed a “Motion to Drop
Defendant Lieberman without Prejudice pursuant to Fed. R. Civ. P. 21.” (Doc. No. 75.) Lieberman filed a Response on
July 12, 2023. (Doc. No. 77.) On July 12, 2023, this Court granted Plaintiffs’ Motion and dismissed Defendant
Lieberman without prejudice, as set forth in that Order. (Doc. No. 78.) This results in the dismissal of certain Counts in
the First Amended Complaint which are directed solely towards Defendant Lieberman, i.e., the civil conspiracy claims
set forth in Counts IX, XX, and XXXVI.

27
(14) Right to Books and Records (Count VXII).
(Id.)15 Plaintiffs seek “judgment for damages in an amount in excess of $12.8 million in the aggregate,
plus additional damages as they continue to accrue, plus pre- and post- judgment interest.” (Id. at p.
100.) Plaintiffs also seek the following: (1) punitive damages, (2) preliminary and permanent
injunctive relief, (3) imposition of a constructive trust over certain Property Fraud Properties and JV
Properties, (4) appointment of a receiver; (5) a judgment declaring that certain deed transfers and

subsequent mortgages are unenforceable, invalid, and void ab initio; (6) a judgment rescinding certain
deed transfers and restoring title to certain properties in the name of Plaintiffs; (7) restitution; (8) a
complete accounting related to the Controlled Entities; (9) pre- and post-judgment interest; (10)
attorney’s fees; and (11) costs. (Id. at pp. 100-102.)
The Moving Defendants filed a Motion to Dismiss Plaintiffs’ First Amended Complaint on
April 12, 2023. (Doc. No. 62.) Plaintiffs filed a Brief in Opposition on May 31, 2023, to which the
Moving Defendants replied on June 9, 2023. (Doc. Nos. 70, 73.) On June 6, 2023, Plaintiffs filed a
Notice of Filing of Verification of the First Amended Complaint. (Doc. No. 72.) Lastly, on October
23, 2023, the Moving Defendants filed a document captioned “Supplemental Authority in Support of
Motion to Dismiss. (Doc. No. 83.)

15 Count I is a Civil RICO claim “for all Frauds made by all Plaintiffs against the Nakhles, Gutzky, and all of the
Controlled Entities.” (Doc. No. 10 at p. 57.) Counts II through XII are brought by Plaintiff Shnizel and assert claims
relating to the Property Fraud. Counts XIII through XXII assert claims relating to the JV Fraud. Counts XXIII through
XXVI assert claims relating to the Nadam Fraud. Counts XXVII through XXXI assert claims relating to the Loan Fraud.
Counts XXXII through XXXVI assert claims relating to the Bavaria MF Fraud. Lastly, Count XXXVII asserts a claim
for Piercing the Corporate Veil “for all Frauds by all Plaintiffs against the Controlled Entities.” (Id. at p. 99.)

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III. Standard of Review
The Moving Defendants seek dismissal under Fed. R. Civ. P. 12(b)(6). (Doc. No. 62 at p. 1.)
Under that Rule, the Court accepts the plaintiff’s factual allegations as true and construes the
Complaint in the light most favorable to the plaintiff. See Gunasekara v. Irwin, 551 F.3d 461, 466
(6th Cir. 2009). In order to survive a motion to dismiss under this Rule, “a complaint must contain
(1) ‘enough facts to state a claim to relief that is plausible,’ (2) more than ‘formulaic recitation of a

cause of action's elements,’ and (3) allegations that suggest a ‘right to relief above a speculative
level.’” Tackett v. M & G Polymers, USA, LLC, 561 F.3d 478, 488 (6th Cir. 2009) (quoting in part
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555–556 (2007)).
The measure of a Rule 12(b)(6) challenge — whether the Complaint raises a right to relief
above the speculative level — “does not ‘require heightened fact pleading of specifics, but only
enough facts to state a claim to relief that is plausible on its face.’” Bassett v. National Collegiate
Athletic Ass'n., 528 F.3d 426, 430 (6th Cir.2008) (quoting in part Twombly, 550 U.S. at 555–556).
“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009). Deciding whether a complaint states a claim for relief that is plausible is

a “context-specific task that requires the reviewing court to draw on its judicial experience and
common sense.” Id. at 679.
Consequently, examination of a complaint for a plausible claim for relief is undertaken in
conjunction with the “well-established principle that ‘Federal Rule of Civil Procedure 8(a)(2) requires
only a short and plain statement of the claim showing that the pleader is entitled to relief.’ Specific
facts are not necessary; the statement need only ‘give the defendant fair notice of what the ... claim

29
is and the grounds upon which it rests.’” Gunasekera, 551 F.3d at 466 (quoting in part Erickson v.
Pardus, 551 U.S. 89 (2007). Nonetheless, while “Rule 8 marks a notable and generous departure
from the hyper-technical, code-pleading regime of a prior era ... it does not unlock the doors of
discovery for a plaintiff armed with nothing more than conclusions.” Iqbal, 556 U.S. at 679.
IV. Analysis
The Moving Defendants seek dismissal of Plaintiffs’ First Amended Complaint on several

grounds. (Doc. No. 62.) First, the Moving Defendants argue that Plaintiffs were compelled under
federal and state law to bring their current claims in the pending state court litigation and, therefore,
“this Court is now barred from adjudicating this dispute.” (Id.) Second, the Moving Defendants
argue that Plaintiffs fail to state cognizable claims for violations of RICO, fraud, restitution under the
faithless servant doctrine, and piercing the corporate veil. (Id.) Third, and finally, the Moving
Defendants assert that Plaintiffs lack the requisite standing to bring a derivative claim or the assigned
claims of the Property Fraud Investors or Bavaria. (Id.) Plaintiffs oppose each of the Moving
Defendants’ arguments. (Doc. No. 70.) The Court will address each of the above issues separately,
below.
A. Whether Plaintiffs are Precluded from Bringing the Instant Action in Federal
Court

The Moving Defendants first argue that Ohio Civ. R. 13(A) precludes Plaintiffs from litigating
this dispute in federal court. (Doc. No. 62 at pp. 12-16.) Ohio Civil Rule 13(A) governs compulsory
counterclaims. It provides, in relevant part, that “[a] pleading shall state as a counterclaim any claim
which at the time of serving the pleading the pleader has against any opposing party, if it arises out
of the transaction or occurrence that is the subject matter of the opposing party's claim and does not
require for its adjudication the presence of third parties of whom the court cannot acquire
30
jurisdiction.” Ohio Civ. R. 13(A). This Rule “requires all existing claims between opposing parties
that arise out of the same transaction or occurrence to be litigated in a single lawsuit, regardless of
which party initiates the lawsuit.” Rettig Enters., Inc. v. Koehler, 626 N.E.2d 99, 102 (Ohio 1994).
“Ohio courts apply a two-prong test to determine whether Rule 13(A) bars a claim: (1) did
the claim exist when the pleading was served in the prior case and (2) does the claim arise out of the
transaction or occurrence that is the subject matter of the opposing claim?” Hutchison v. Parent, 773

Fed. Appx. 288, 291 (6th Cir. 2019). In determining the second prong (i.e., whether claims arise out
of the same transaction or occurrence), Ohio courts ask whether the claims are “logically related”—
that is, whether “separate trials on each of their respective claims would involve a substantial
duplication of effort and time by the parties and the courts.” Id. Put another way, “multiple claims
are compulsory counterclaims where they ‘involve many of the same factual issues, or the same
factual and legal issues, or where they are offshoots of the same basic controversy between the
parties.’” Id. (quoting Great Lakes Rubber Corp. v. Herbert Cooper Co., 286 F.2d 631, 634 (3d Cir.
1961)).
Here, the Moving Defendants maintain that Plaintiffs’ claims in the instant action are
compulsory counterclaims under Ohio Civ. Rule 13(A). (Doc. No. 62.) The Moving Defendants

assert that the first prong of the test under Rule 13(A) is satisfied because “Plaintiffs first asserted
their claims in the State Court Cases nearly three (3) years ago” and, therefore, there is no question
that Plaintiffs’ claims existed when certain of the Moving Defendants asserted their counterclaims in
the state court cases. (Id at p. 13.) The Moving Defendants next argue that the second prong of the
test under Rule 13(A) is satisfied because Plaintiffs’ claims herein “are logically related to” and “arise
out the same transactions and occurrences” as the First, Second, and Third State Court Cases, as “all

31
of Plaintiffs’ claims arise from the business relationship that began in 2017 between the Investors,
Adam, the Nakhles, and Gutzky.” (Id. at p. 13-14.) Thus, the Moving Defendants argue that Plaintiffs
“were compelled to bring the claims in the Federal Complaint in response to the counterclaims
pending in the State Court Cases, each of which were compulsory, and are now precluded from doing
so based upon their failure.” (Id. at p. 15-16.)
In response, Plaintiffs argue that Ohio Civ. R. 13(A) does not require dismissal because the

state court has not yet issued a final judgment regarding Plaintiffs’ claims. (Doc. No. 70 at pp. 5-8.)
Citing Quality Assocs. v. Proctor & Gamble Distrib. LLC, 949 F.3d 283 (6th Cir. 2020), Plaintiffs
maintain that this Court cannot enforce Ohio’s compulsory counterclaim rule outside the preclusion
context. (Id.) Because “the previous state cases were voluntarily dismissed,” Plaintiffs assert that
there “have not been judgments issued by any court” and, therefore, Plaintiffs’ claims in the instant
lawsuit are not precluded and this Court lacks authority to dismiss the instant action based on Ohio
Civ. R. 13(A). (Id. at p. 7.) In the alternative, Plaintiffs argue (summarily and without citation to
any authority) that Ohio R. Civ. 13(A) “has no application here” because (1) that Rule only applies
to compulsory counterclaims in state court and “Defendants have not filed any complaints in state
court in response to which Plaintiffs would be required to file any counterclaims;”16 (2) Plaintiffs’

claims herein do not arise out of the same transaction or occurrence as Defendants’ counterclaims in

16 Although the Court need not reach this issue, the Court notes that Plaintiffs’ argument that Ohio Civ. R. 13(A) has no
application here because “Defendants have not filed any complaints in state court” is without merit. As noted supra, the
Moving Defendants have pending counterclaims against Plaintiffs in all three state court actions. In Rettig Enterprises,
Inc. v. Koehler, 626 N.E.2d 99 (Ohio 1994), the Ohio Supreme Court explained that: “It makes no difference to the
application of Civ. R. 13(A) that the opposing claim in the earlier action was a counterclaim rather than a complaint, or
that the present claim was originally filed as a complaint in the earlier action and dismissed without prejudice after the
defendant filed its counterclaim. All existing claims between opposing parties that arise out of the same transaction or
occurrence must be litigated in a single lawsuit pursuant to Civ. R. 13(A), no matter which party initiates the action.” Id.
at 102 (emphasis added) (internal citations omitted).
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state court; and (3) “Ohio Civ. R. 13(A) cannot be raised under Fed. R. Civ. P. 12(b)(6), which looks
only to whether the complaint alleges facts which, if construed as true, would entitle the plaintiff to
relief.” (Id. at p. 8, fn. 1.)
In their Reply Brief, the Moving Defendants argue that Quality Associates is distinguishable
from the instant action because, in that case, the state court denied the plaintiff leave to amend its
pending claims to add the claim it brought in federal court. (Doc. No. 73 at p. 4.) Here, by contrast,

Plaintiffs “have made no such efforts to assert their claims in the State Court Cases after their
dismissal.” (Id.) The Moving Defendants argue that the Sixth Circuit’s decision in Hutchison v.
Parent, 773 Fed. Appx. 288 (6th Cir. 2019) is more directly on point and supports dismissal of the
instant action with prejudice. (Id. at pp. 3-4.) The Moving Defendants maintain that “the Court can
use its discretion now to prevent duplicative litigation and the possibility of inconsistent judgments
by dismissing the [First Amended] Complaint under the authority of Hutchison and Civ. R. 13.” (Id.
at p.5.)
For the following reasons, the Court agrees with Plaintiffs that, under Quality Associates,
supra, this Court lacks the authority to enforce Ohio Civ. R. 13(A) because Plaintiffs’ claims are not
yet precluded. In Quality Associates, Proctor & Gamble (“P&G”) sued Quality Associates, Inc.

(“QAI”) in Ohio state court in early 2017 for breach of contract and injunctive relief. Quality
Associates, Inc., 949 F.3d at 286. QAI answered and asserted counterclaims for breach of contract
and declaratory judgment. Id. Notably, QAI did not assert, in the state court action, a counterclaim
under 42 U.S.C. § 1981 based on racial discrimination. Id.
Subsequently, in February 2018, QAI filed a stand-alone § 1981 claim against P&G in Ohio
federal court. Id. P&G moved to dismiss QAI’s federal complaint, in part, based on the argument

33
that QAI’s § 1981 claim was a compulsory counterclaim in the ongoing state court litigation and,
thus, needed to be resolved in state court. Id. The district court agreed and granted P&G’s motion
to dismiss. Id. QAI appealed to the Sixth Circuit. Id. At the same time, QAI sought leave in state
court to add a § 1981 racial discrimination claim to its counterclaim that was identical to its (then-
dismissed) federal claim. Id. at 287. The state court denied QAI’s request, and the state court action
proceeded on P&G’s claims and QAI’s counterclaims for breach of contract and declaratory

judgment. Id.
Meanwhile, on appeal in the Sixth Circuit, QAI argued that the district court erred by
construing its § 1981 claim as a compulsory counterclaim under Ohio Civ. R. 13(A), arguing that
such claim was not “logically related” to the contract claims at issue in the pending state court
proceeding. Id. The Sixth Circuit agreed with P&G and the district court that QAI's § 1981 claim
is “analytically best classified as a compulsory counterclaim to the state-court proceeding” but
“disagree[d] that that fact alone subjects QAI's claim to dismissal.” Id. Rather, the Sixth Circuit held
that “because a federal court cannot enforce a state compulsory-counterclaim rule against a federal
litigant outside the preclusion context, and because QAI's claim is not yet precluded here (because
the state court has not yet entered a final judgment), the district court lacked authority to base its

judgment of dismissal on this ground.” Id. The Sixth Circuit explained as follows:
As an initial matter, we must explain why a federal court cannot enforce a state
compulsory-counterclaim rule against a federal litigant unless it is part and parcel of
a preclusion ruling. After all, one might ask, if a plaintiff files a claim in federal court
that plainly should have been brought as a counterclaim in a state litigation, why
should it matter whether the claim is precluded? The purpose of Ohio's compulsory-
counterclaim rule is “to avoid a multiplicity of actions and to achieve a just resolution
by requiring in one lawsuit the litigation of all claims arising from common matters.”
Rettig, 626 N.E.2d at 103. Allowing a federal court to enforce the rule, irrespective of
procedural posture, seems to advance that purpose. In fact, one might note, had the
parties’ ongoing litigation been in federal court, rather than state court, federal law
34
would have almost certainly provided the district court a basis on which to dismiss,
consolidate, stay, or transfer the later-filed suit. [internal citations omitted] Why
should the result be any different just because one litigation is in state court and the
other is in federal court?

At least two factors explain the differential treatment. First, in contrast to the purely
federal context, there is no statute or equitable doctrine authorizing a federal
court to enforce state compulsory-counterclaim law or otherwise manage
duplicative state-federal litigation. See Miller, Federal Practice and Procedure §
1418; see also Handy v. Shaw, Bransford, Veilleux & Roth, 325 F.3d 346, 350–52
(D.C. Cir. 2003) (discussing state-federal distinction); Smart v. Sunshine Potato
Flakes, L.L.C., 307 F.3d 684, 687 (8th Cir. 2002) (same). Unsurprisingly, then, we
have “enforced” such law only by way of preclusion doctrine. See, e.g., Hutchison
v. Parent, 773 F. App'x 288 (6th Cir. 2019); Hapgood v. City of Warren, 127 F.3d 490
(6th Cir. 1997). But, for the reasons explained below, P&G cannot invoke preclusion
here. So, in dismissing QAI's claim strictly on the basis of Ohio Rule of Civil
Procedure 13(A), the district court exercised power that it did not have.

Second, as the Supreme Court has recognized, “state-federal concurrent jurisdiction”
is different than “wholly federal concurrent jurisdiction” because federal courts have
a “virtually unflagging obligation ... to exercise the jurisdiction given them.” Colorado
River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 47
L.Ed.2d 483 (1976). Thus, in the state-federal concurrent jurisdiction context, “the
pendency of an action in [a] state court” generally is considered “no bar to
proceedings concerning the same matter in the Federal court having
jurisdiction.” Id. at 817, 96 S.Ct. 1236 (citation omitted). [Citations omitted]. Indeed,
as the Court put it nearly a century ago, in Penn General Casualty Co. v.
Commonwealth of Pennsylvania ex rel. Schnader, “[w]here the judgment sought is
strictly in personam, for the recovery of money or for an injunction compelling
or restraining action by the defendant, both a state court and a federal court
having concurrent jurisdiction may proceed with the litigation, at least until
judgment is obtained in one court which may be set up as res adjudicata in the
other.” 294 U.S. 189, 195, 55 S.Ct. 386, 79 L.Ed. 850 (1935). That this case implicates
compulsory counterclaims does not, in our view, alter the basic federalist principle
undergirding this precedent, namely, that litigants are free to split their claims
between state and federal court and “race to the first judgment,” even if that
stratagem is ill-advised and inefficient.

Id. at 288-289 (emphasis added) (footnotes omitted).
The Sixth Circuit then explained that “[u]nder Ohio law, ‘[t]he doctrine of res judicata
encompasses the two related concepts of claim preclusion, also known as res judicata or estoppel by
35
judgment, and issue preclusion, also known as collateral estoppel.’” Id. at 289 (quoting Anderson v.
City of Blue Ash, 798 F.3d 338, 350 (6th Cir. 2015) (quoting O'Nesti v. DeBartolo Realty Corp., 113
Ohio St.3d 59, 862 N.E.2d 803, 806 (2007)). “However classified, though, preclusion comes into
play only when a state court has entered a final judgment.” Id. (emphasis in original). The Sixth
Circuit explained that QAI’s § 1981 claim was not precluded because “the state trial court's decision
dismissing QAI's § 1981 claim on the merits was not a final judgment.” Id. “Rather, it was an

interlocutory decision—that is, it did not dispose of the entire case, and can therefore be reconsidered
at any point until final judgment.” Id. (emphasis in original). Accordingly, the Sixth Circuit reversed
the district court’s decision and remanded for further proceedings.
Likewise, here, the Court finds that Plaintiffs’ claims in the instant action are not precluded.
As discussed at some length above, Plaintiffs voluntarily dismissed their claims without prejudice in
the First and Second State Court Cases, and Plaintiff Shnizel filed a Motion to Dismiss its claims
without prejudice in the Third State Court Cases. The state trial courts entered the dismissals without
prejudice in August 2022, but expressly noted that the cases were on the active docket because the
counterclaims remained pending.17 It is undisputed that all three state court cases remain pending as

17 In the consolidated First and Second State Court Cases, the state court initially issued a Journal Entry stating that
“pursuant to Pltf’s 8/9/2022 Notice of Voluntary Dismissal without Prejudice, case is hereby dismissed without
prejudice.” See First and Second State Court Cases (docket sheets; Journal Entries dated Aug. 15, 2022.) The following
day, however, the state court issued a Journal Entry stating as follows: “The 8/15/2022 full Dismissal in response to Pltf’s
8/9/2022 Notice of Voluntary Dismissal was in error as counterclaims remain pending. This matter is reinstated to the
active docket and the claims asserted in Pltf’s Complaint only are dismissed without prejudice.” Id. at docket sheets;
Journal Entries dated Aug. 16, 2022. In the Third State Court Case, the state court issued a Journal Entry on August 22,
2022 granting Plaintiff Shnizel’s Motion to Dismiss without Prejudice and stating that the “within Case is dismissed
without prejudice. Final.” See Third State Court Case (docket sheet; Journal Entry dated Aug. 22, 2022). The following
day, however, the state court issued a Journal Entry stating, in relevant part, as follows: “Order clarifying this Court’s
8/22/2022 Order. Defendants’ Counterclaims remain pending. Follow Up Phone Call set.” Id. at docket sheet; Journal
Entry dated Aug. 23, 2022. As discussed supra, the Third State Court Case was later consolidated with the First and
Second State Court Cases in January 2023. All three state court cases are ongoing as of the date of this Opinion.

36
of the date of this decision. The state court, therefore, has not entered a “final judgment” in any of
the three state court cases (either with respect to Plaintiffs’ claims18 or with respect to the cases as a
whole) and Plaintiffs’ claims are not precluded. As such, this Court cannot dismiss the instant action
based on the compulsory counterclaim rule set forth in Ohio Civ. R. 13(A). See Quality Associates,
Inc., 949 F.3d at 285 (concluding that “a federal court cannot enforce a state compulsory-
counterclaim rule against a federal litigant while the relevant state litigation is still pending”)

(emphasis in original). See also TowerCo 2013, LLC v. Berlin Township, 2023 WL 5334633 at * 5
(S.D. Ohio Aug. 18, 2023) (applying Quality Associates, Inc. and rejecting defendant’s argument that
plaintiff’s claims should be dismissed as compulsory counterclaims under Ohio Civ. R. 13(A) where
federal plaintiff had voluntarily dismissed its state court counterclaims from ongoing parallel state
court action).
The Moving Defendants, however, argue that Quality Associates is distinguishable from the
instant action because, unlike here, the state court denied QAI leave to amend its pending claims to
add the § 1981 claim it brought in federal court. (Doc. No. 73 at p. 4.) This is significant, the Moving
Defendants assert, because QAI “was left with no other forum to assert its discrimination claim but
in federal court.” (Id.) The Court finds this argument to be without merit. As the Sixth Circuit has

made clear, the central issue in determining whether a federal court has the authority to enforce a
state compulsory counterclaim rule is whether the federal plaintiff’s claims are precluded under state

18 Under Ohio law, a dismissal under Ohio Civ. R. 41(A)(1)(a) does not typically operate as an adjudication on the merits
and is not generally considered a final, appealable order. See, e.g., Thorton v. Montville Plastics & Rubber, Inc., 902
N.E.2d 482, 487 (Ohio 2009). See also Reinbolt v. National Fire Ins. Co. of Hartford, 816 N.E.2d 1083, 1086 (Ohio
App. 6th Dist. 2004) (“It is well settled that ‘a voluntary dismissal without prejudice normally is not a final, appealable
order because it is not an adjudication on the merits and it leaves the parties as if the action never had been commenced.’”)
(quoting Lovins v. Kroger Co., 782 N.E.2d 1171, 1172 (Ohio App. 2nd Dist. 2002)).
37
law. Thus, the fact that a federal plaintiff did or did not successfully attempt to assert its claims in
the parallel state court action is not material, so long as the federal plaintiff’s claims are not barred
by res judicata or issue preclusion. Here, the Court finds that Plaintiffs’ claims in the instant action
are not precluded because the state court has not issued a final judgment in the First, Second, or Third
State Court Cases, all of which remain pending and are currently being actively litigated. Thus, the
Moving Defendants’ argument that Quality Associates is distinguishable because Plaintiffs herein

failed to seek leave to reassert their claims in the state court post-voluntary dismissal, is without merit
and rejected.
The Court also rejects Defendants’ argument that the Sixth Circuit’s decision in Hutchison v.
Parent, 773 Fed. Appx. 288 (6th Cir. 2019) requires a different conclusion. In that case, plaintiff
Scott Hutchison sued defendant John Parent in state court for breach of fiduciary duty and fraud
involving the operation of their company. Hutchison, 773 Fed. Appx. at 289. Parent counterclaimed,
alleging that Hutchison had misappropriated company funds and failed to repay certain loans. Id.
After three years of litigation in state court and with trial imminent, Hutchison voluntarily dismissed
his claims. Id. Two months later, the parties entered into a consent judgment on Parent’s
counterclaims against Hutchison, awarding Parent $153,000. Id. at 290.

Meanwhile, the day after voluntarily dismissing his state court claims, Hutchison filed a
complaint in federal district court asserting the same claims. Id. Parent filed a motion for summary
judgment, arguing that Ohio Civil Rule 13(A) barred Hutchison from relitigating the claims he
voluntarily dismissed in state court because they were compulsory counterclaims to Parent’s own
counterclaims. Id. The district court denied Parent’s motion, finding that Rule 13(A) did not bar

38
Hutchison’s claims. Id. The matter proceeded to trial, and a jury found Parent liable for breach of
fiduciary duty and fraud. Id.
On appeal, Parent argued that Ohio Civil Rule 13(A) precluded Hutchison's attempt to litigate
his claims in federal court following the consent judgment against him in state court. Id. The Sixth
Circuit agreed, finding that the district court had applied the wrong legal standard in determining
whether the relevant claims were part of the same transaction or occurrence under Rule 13(A). Id. at

291. Applying the proper test (i.e., the “logical relationship” test), the Sixth Circuit found that Parent
had shown a logical relationship between his state court counterclaims for unpaid loans and
misappropriation of funds, and Hutchison's federal claims for breach of fiduciary duty and fraud. Id.
at 292-293. The Sixth Circuit found that “the overlapping factual and legal issues establish such a
logical relationship; therefore, res judicata precluded Hutchison from litigating his dismissed state
court claims in the subsequent federal case.” Id. at 294.
Here, the Moving Defendants argue that Hutchison is directly on point and controls because,
just like the plaintiff in Hutchison, Plaintiffs herein voluntarily dismissed their state court claims after
years of litigation, and then improperly refiled them in federal court. (Doc. No. 62 at p. 12; Doc. No.
73 at p. 3-4.) The Moving Defendants assert that “[j]ust as in Hutchison, Plaintiffs had an opportunity

to litigate their claims in the State Court but elected to dismiss their claims” and “are proceeding
forward with federal court litigation despite the appropriate state court forum.” (Doc. No. 73 at p. 3.)
The Moving Defendants argue that this Court should dismiss the First Amended Complaint “to
prevent the same unnecessary resource expenditures as in Hutchison.” (Id.)
The Court finds that the Moving Defendants’ reliance on Hutchison is misplaced. Although
both the plaintiff in Hutchison and Plaintiffs herein voluntarily dismissed their state court claims and

39
subsequently refiled them in federal court, there is a key distinction between Hutchison and the instant
case. In Hutchison, after plaintiff Hutchison voluntarily dismissed his claims, the parties entered into
a consent judgment on defendant Parent’s counterclaims, thus resolving and closing the state court
action. Hutchison, 773 Fed. Appx. at 289. Thus, the Sixth Circuit was able to enforce Ohio’s
compulsory counterclaim rule because Hutchison’s federal claims were precluded by res judicata.
Id. at 294. By contrast, here, the parties have not resolved the Moving Defendants’ counterclaims in

the First, Second, and Third State Court cases, and those state court actions remain pending. Thus,
Plaintiffs’ claims herein are not yet precluded by res judicata. This is a critical distinction, as this
lack of preclusion strips this Court of the authority to enforce Ohio Civ. R. 13(A). Accordingly, the
Moving Defendants’ argument that Hutchison requires this Court to dismiss the instant action is
without merit and rejected.
Finally, the Court addresses the Moving Defendants’ “Supplemental Authority in Support of
Motion to Dismiss” (Doc. No. 83), which was filed over four months after the Moving Defendants
filed their Reply Brief. Therein, the Moving Defendants present an entirely new argument in support
of dismissal. (Id.) Citing Ohio Supreme Court cases from 1948, 1977, 1985, and 1995, the Moving
Defendants argue, for the first time, that this Court lacks subject matter jurisdiction because “when

there are concurrent courts of competent jurisdiction, the court who first obtains jurisdiction over a
common nucleus of fact retains that jurisdiction to the exclusion of all other courts.” (Id. at p. 1.)
The Moving Defendants assert that, because the state court first obtained jurisdiction over “this same
common nucleus of operative facts” in May 2020, this Court may not exercise jurisdiction over the
instant action. (Id. at p. 2.)

40
The Moving Defendants’ “Supplemental Authority” is both procedurally improper and
incorrect as a matter of law. First, briefing closed on the Moving Defendants’ Motion to Dismiss on
June 9, 2023, when Defendants filed their Reply Brief. (Doc. No. 73.) While parties may file notices
of supplemental authority to direct the Court’s attention to recent authority issued after the conclusion
of briefing, the Moving Defendants’ “Supplemental Authority” in this case does not do so. Rather,
the Moving Defendants’ “Supplemental Authority” relies on state court cases from the 1940’s

through the 1990’s, all of which were clearly in existence at the time of the original briefing on
Defendants’ Motion to Dismiss. More concerningly, the Moving Defendants do not simply direct
this Court’s attention to this “supplemental authority” but also attempt to raise an entirely new legal
argument that was not raised in either their Motion or Reply Brief. This is inappropriate.
As Moving Defendants appear to contest this Court’s subject matter jurisdiction, however,
the Court feels compelled to address Defendants’ argument. Citing Ohio Supreme Court law, the
Moving Defendants assert that this Court lacks jurisdiction under Ohio’s so-called “jurisdictional
priority rule,” which holds that, as between courts of concurrent jurisdiction, the first to acquire
jurisdiction over the action acquires exclusive jurisdiction. For the following reasons, the Moving
Defendants’ argument is without merit.

Although not cited by the Moving Defendants, the Court notes that the Ohio Supreme Court
has clearly held that the jurisdictional priority rule invoked by the Moving Defendants “does not
apply to proceedings in federal court.” See State ex rel. McGirr v. Winkler, 93 N.E.3d 928, 932 (Ohio
2017) (“The jurisdictional-priority rule provides that as between state courts of concurrent
jurisdiction, the tribunal whose power is first invoked acquires exclusive jurisdiction to adjudicate
the whole issue and settle the rights of the parties. The rule does not apply to proceedings in federal

41
court.”) (emphasis added) (internal citations omitted). Moreover, all the cases cited by the Moving
Defendants in their Supplemental Authority relate to state courts of concurrent jurisdiction, i.e., to
claims pending in two different state courts of concurrent jurisdiction. See State ex rel. Racing Guild
of Ohio, Local 304, SEIU v. Morgan, 476 N.E.2d 1060 (Ohio 1985) (discussing jurisdictional priority
rule in the context of proceedings filed in Cuyahoga County Court of Common Pleas and Summit
County Court of Common Pleas); State ex rel. Phillips v. Polcar, 364 N.E.2d 33 (Ohio 1977)

(discussing rule in the context of proceedings filed in Cuyahoga County Court of Common Pleas and
Parma Municipal Court); John Weenick & Sons Co. v. Court of Common Pleas of Cuyahoga County,
82 N.E.2d 730 (Ohio 1948) (discussing rule in the context of proceedings filed in Cuyahoga County
Court of Common Pleas and Municipal Court of Cleveland); State ex rel. Sellers v. Gerken, 647
N.E.2d 807 (Ohio 1995) (discussing rule in the context of proceedings filed in Franklin County Court
of Common Pleas and the Hocking County Court of Common Pleas).
Moreover, the Moving Defendants’ invocation of the jurisdictional priority rule is directly
contrary to the Sixth Circuit’s discussion in Quality Associates, Inc., supra, which explains that “in
the state-federal concurrent jurisdiction context, ‘the pendency of an action in [a] state court’
generally is considered ‘no bar to proceedings concerning the same matter in the Federal court having

jurisdiction.’” Quality Associates, Inc., 949 F.3d at 288 (citations omitted). Rather, “[w]here the
judgment sought is … for the recovery of money or for an injunction compelling or restraining action
by the defendant, both a state court and a federal court having concurrent jurisdiction may
proceed with the litigation, at least until judgment is obtained in one court which may be set up as
res judicata in the other.” Id. at 189 (emphasis added). Even though Quality Associates, Inc. is
discussed extensively in Plaintiffs’ Brief in Opposition, the Moving Defendants fail to acknowledge

42
or address it in their “Supplemental Authority” or otherwise explain how the state law cases cited by
Moving Defendants relate to the Sixth Circuit’s discussion of concurrent federal and state jurisdiction
in Quality Associates, Inc., supra.
Therefore, the jurisdictional priority argument set forth for the first time in Moving
Defendants’ “Supplemental Authority” is without merit as a matter of law. Additionally, the Court
finds, for all the reasons set forth above, that the Moving Defendants are not entitled to dismissal of

Plaintiffs’ First Amended Complaint based on Ohio Civ. R. 13(A).
B. RICO Claim
The Moving Defendants next argue that Plaintiffs have failed to sufficiently plead the
necessary elements of a RICO claim. (Doc. No. 62 at pp. 16-20.) In Count I, Plaintiffs allege that
the Moving Defendants violated the RICO Act, 18 U.S.C. § 1962(c) with respect to the Property
Fraud, Loan Fraud, JV Fraud, Nadam Fraud, and Bavaria MF Fraud. (Doc. No. 1 at ¶¶ 289-312.)
Specifically, Plaintiffs allege that “[t]he Nakhles and Gutzky systematically converted approximately
218 real properties into cash by acquiring them without adequate consideration, mortgaging them and
taking the money, as well as collecting rents and other income from such properties.” (Id. at ¶ 307.)
Plaintiffs allege that “[i]n the process [the Nakhles and Gutzky] borrowed and misappropriated large

amounts of cash in order to finance the other frauds being committed.” (Id.) Plaintiffs further allege
that “these overlapping schemes were timed so that the substantial defaults would all occur around
the same time, namely, the Fall of 2019.” (Id.) Plaintiffs allege that these “overlapping schemes”
were furthered by multiple instances of bank, wire, and mail fraud, including “dozens if not hundreds
of phone calls” and the use of the mail in connection with the execution of “every notarized
document” relating to the Property Fraud Properties. (Id. at ¶¶ 296, 297, 300, 301, 303, 304.)

43
Section 1964(c) of RICO provides, in relevant part, that “[a]ny person injured in his business
or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate
United States district court and shall recover threefold the damages he sustains and the cost of the
suit, including a reasonable attorney’s fee.” 18 U.S.C. § 1964(c). As noted above, Plaintiffs herein
assert a claim under Section 1962(c). That Section provides that “[i]t shall be unlawful for any person
employed by or associated with any enterprise engaged in, or the activities of which affect, interstate

or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such
enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.” 18 U.S.C.
§ 1962(c).
A substantive RICO claim brought under Section 1962(c) has four elements: “’(1) conduct
(2) of an enterprise (3) through a pattern (4) of racketeering activity.’” Courser v. Allard, 969 F.3d
604, 621 (6th Cir. 2020) (quoting Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985)). See
also Bachi-Reffitt v. Reffitt, 802 Fed. Appx. 913, 918 (6th Cir. 2020). More specifically, the Sixth
Circuit recently explained that “to state a civil RICO claim, a plaintiff must allege (1) two or more
predicate racketeering offenses, (2) the existence of an enterprise affecting interstate commerce, (3)
a connection between the racketeering offenses and the enterprise, and (4) injury by reason of the

above.” Grow Michigan, LLC v. LT Lender, LLC, 50 F. 4th 587, 594 (6th Cir. 2022) (citing Moon v.
Harrison Piping Supply, 465 F.3d 719, 723 (6th Cir. 2006) and Frank v. D'Ambrosi, 4 F.3d 1378,
1385 (6th Cir. 1993)).
Each of these elements must be satisfied as to each defendant. See, e.g., Compound Prop.
Mgmt., LLC v. Build Realty, Inc., 462 F. Supp.3d 839, 858 (S.D. Ohio 2020); Kerrigan v. Visalus,
Inc., 112 F. Supp.3d 580, 602 (E.D. Mich. 2015). Additionally, a RICO plaintiff must also establish

44
that he suffered an injury to “business or property” because of the defendant's unlawful conduct.
Jackson v. Sedgwick Claims Man. Servs., Inc., 731 F.3d 556, 563-64 (6th Cir. 2013).
In deciding a motion to dismiss a RICO claim, courts are mindful that RICO must be “liberally
construed to effectuate its remedial purposes”—giving redress to those victimized by racketeering
activity. RICO, Pub. L. No. 91-452 § 904(a), 84 Stat. 947. See also Sedima, S.P.R.L., 473 U.S. at
498. But “the statute was never intended to allow plaintiffs to turn garden-variety state law fraud

claims into federal RICO actions.” Jennings v. Auto Meter Prods., Inc., 495 F.3d 466, 472 (7th Cir.
2007); see also Midwest Grinding Co. v. Spitz, 976 F.2d 1016, 1025 (7th Cir. 1992) (“[I]t is equally
evident that RICO has not federalized every state common-law cause of action available to remedy
business deals gone sour.”).
Here, the Moving Defendants argue that “Plaintiffs merely plead in generalities, which is
insufficient to meet the stringent requirements imposed on a RICO Act plaintiff.” (Doc. No. 62 at p.
17.) The Moving Defendants maintain that Plaintiffs failed to sufficiently plead a pattern of
racketeering activity because they failed to plead two or more predicate acts with particularity, a
scheme to defraud, and/or the requisite intent. (Id.) The Moving Defendants further assert that
Plaintiffs’ RICO claim fails because Plaintiffs failed to allege the necessary elements to demonstrate

the existence of an association-in-fact enterprise. (Id.) Plaintiffs oppose the Moving Defendants’
arguments, asserting that the First Amended Complaint sufficiently pleads each element of a RICO
claim under Section 1962(c). (Doc. No. 70.)
1. Pattern of Racketeering Activity
The Court begins by addressing the Moving Defendants’ argument that Plaintiffs failed to
sufficiently plead a pattern of racketeering activity. To establish this element, Plaintiffs must show

45
that the Moving Defendants committed at least two predicate racketeering acts within ten years of
each other that demonstrate criminal conduct of a continuing nature. 18 U.S.C. § 1961(5). The
racketeering predicates must be “related” and “amount to or pose a threat of continued criminal
activity.” Heinrich v. Waiting Angels Adoption Servs., Inc., 668 F.3d 393, 409 (6th Cir. 2012) (citing
H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 237-39 (1989)). Racketeering activity consists
of acts that are indictable under the federal statutes listed in 18 U.S.C. § 1961(1)(B).

In the instant case, Plaintiffs’ RICO claim is premised on the following predicate acts: (1)
bank fraud in violation of 18 U.S.C. § 1344; (2) wire fraud in violation of 18 U.S.C. § 1343; and (3)
mail fraud in violation of 18 U.S.C. § 1341. (Doc. No. 10 at ¶¶ 296, 297, 300, 301, 303, 304, 305.)
a. Bank Fraud
Plaintiffs allege that “[t]he Nakhles and Gutzky, in violation of 18 U.S.C. § 1344, materially
misrepresented the values of the properties acquired by fraud in the Property Fraud, the JV Fraud, the
Nadam Fraud and the Bavaria Fraud in order to obtain mortgages that in many cases were far in
excess of the purchase price for the same.” (Doc. No. 10 at ¶ 303.) Plaintiffs further allege that
“Gutzky in particular additionally agreed to act as guarantor for the mortgages.” (Id.) Plaintiffs
allege that “[t]he mortgages encumber the properties that were involved in such frauds and in some

cases the properties may be deemed ‘underwater’ (worth less than the mortgage).” (Id. at ¶ 304.) As
a result, the Plaintiffs in the Property Fraud, JV Fraud, Nadam Fraud and Bavaria Fraud allege that
they “have suffered direct and proximate damages because they cannot simply demand rescission and
restitution.” (Id.)
The Moving Defendants argue that Plaintiffs lack standing to allege bank fraud as a predicate
act. (Doc. No. 62 at p. 17, fn 7.) As the Moving Defendants correctly note, several district courts

46
within this Circuit have held that “[o]nly defrauded financial institutions have standing to assert bank
fraud as a RICO predicate.” Herrick v. Liberty League Intern., 2008 WL 2230702 at *5 (S.D. Ohio
2008) (collecting cases.) See also Tunne v. Hendrick, 2012 WL 3644825 at * 13 (W.D. Ky. Aug. 24,
2012); Infocision Management Corp. v. Foundation for Moral Law, Inc., 2009 WL 650282 at * 9
(N.D. Ohio Jan. 14, 2009) (collecting cases). Plaintiffs do not acknowledge or address the Moving
Defendants’ argument at any point in their Brief in Opposition. (Doc. No. 70.)

The Court deems Plaintiffs to have waived any opposition to the Moving Defendants’
argument that Plaintiffs lack standing to assert bank fraud as a predicate act under RICO. It is well
established that, if a plaintiff fails to respond or to otherwise oppose a defendant's motion to dismiss,
a district court may deem the plaintiff to have waived opposition. See, e.g., Humphrey v. U.S.
Attorney Gen.'s Office, 279 Fed. Appx 328, 331 (6th Cir. 2008) (finding that a plaintiff's failure to
oppose arguments raised in the defendants’ motion to dismiss is grounds for the district court to
assume that opposition to the motion is waived). See also Kuhlman v. City of Cleveland, 2023 WL
2652585 at * 11 (N.D. Ohio March 23, 2023) (finding that, by failing to respond to defendant’s
motion to dismiss, plaintiff “waived any argument in opposition to the City’s argument that plaintiff’s
state law claims are barred”); Selou v. Integrity Sol. Servs., Inc., 2016 WL 612756 at *3 (E.D. Mich.

Feb. 16, 2016) (“Plaintiff's failure to address any claim but her TCPA claim in response to LiveVox's
motion to dismiss is cause for dismissing those claims.”).
Here, despite having every opportunity to respond to the Moving Defendants’ argument that
Plaintiffs lack standing to allege bank fraud as a predicate act, Plaintiffs failed to do so. The Court,
therefore, deems Plaintiffs to have waived any opposition with respect to this issue. Accordingly, in

47
determining whether Plaintiffs have sufficiently plead a pattern of racketeering activity, the Court
will not consider Plaintiffs’ allegations of bank fraud.
b. Mail and Wire Fraud
Plaintiffs also allege that the Moving Defendants engaged in numerous instances of mail and
wire fraud. (Doc. No. 10 at ¶¶ 296, 297, 300-302.) Specifically, in Count I, Plaintiffs allege that
every notarized document relating to the Property Fraud Properties constitutes an act of mail fraud

because each document contains material misrepresentations and was “signed by sending the
originals through the mails or via courier service.” (Id. at ¶¶ 296, 297.) With respect to wire fraud,
Plaintiffs allege that the Nakhles engaged in “dozens if not hundreds of phone calls” with the
Plaintiffs and Property Fraud Investors, during which the Nakhles made various misrepresentations
relating to the properties and loans at issue. (Id. at ¶¶ 300, 301.)
Mail fraud consists of “(1) a scheme to defraud, and (2) use of the mails in furtherance of the
scheme.” United States v. Jamieson, 427 F.3d 394, 402 (6th Cir.2005). See also Heinrich v. Waiting
Angels Adoption Services, Inc., 668 F.3d 393, 404 (6th Cir. 2012). “The elements of wire fraud are
essentially the same except that one must use the wires in furtherance of the scheme to defraud.”
Heinrich, 668 F.3d at 404 (citing United States v. Daniel, 329 F.3d 480, 486 n. 1 (6th Cir.2003))

(noting that the statutes share the same relevant language and the same analysis should be used for
each).
“A scheme to defraud includes any plan or course of action by which someone uses false,
deceptive, or fraudulent pretenses, representations, or promises to deprive someone else of money.”
Jamieson, 427 F.3d at 402. See also Heinrich, 668 F.3d at 404. “A plaintiff must also demonstrate
scienter to establish a scheme to defraud, which is satisfied by showing the defendant acted either

48
with a specific intent to defraud or with recklessness with respect to potentially misleading
information.” Heinrich, 668 F.3d at 404.
When pleading predicate acts of mail or wire fraud, to satisfy the heightened pleading
requirements of Fed. R. Civ. P. 9(b), a plaintiff must “(1) specify the statements that the plaintiff
contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were
made, and (4) explain why the statements were fraudulent.” Frank v. Dana Corp., 547 F.3d 564, 570

(6th Cir.2008) (quoting Gupta v. Terra Nitrogen Corp., 10 F.Supp.2d 879, 883 (N.D. Ohio 1998)).
See also Heinrich, 668 F.3d at 404. A RICO plaintiff is not required to plead or prove first-party
reliance on an allegedly false statement. See Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639,
648 (2008). To allege a valid RICO claim, however, a plaintiff must show not only that the predicate
act was a “but for” cause of plaintiff's injuries, but also that it was a proximate cause. See Heinrich,
668 F.3d at 404. A plaintiff must show “some direct relation between the injury asserted and the
injurious conduct alleged.” Id. (quoting Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268
(1992)).
In the instant case, the Moving Defendants argue that Plaintiffs fail to satisfy the heightened
pleading requirements of Fed. R. Civ. P. 9(b) because the First Amended Complaint does not identify

the specific time, place, or content of any mailing or internet or telephone communication that
allegedly constitutes mail or wire fraud. (Doc. No. 62 at p. 17.) The Moving Defendants further
assert that Plaintiffs’ RICO claims fail because Plaintiffs do not point to specific statements within
such communications that they contend are fraudulent, and “instead rely on after-the-fact
circumstances to infer a scheme by Movants.” (Id. at p. 18.)

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Plaintiffs acknowledge that, to sustain a RICO claim, they must describe the “who, what,
when, where, and how” of the alleged predicate acts of mail and wire fraud. (Doc. No. 70 at p. 8.)
Plaintiffs maintain, however, that they need only delineate “the specific circumstances constituting
the overall fraudulent scheme” with enough detail to put the Moving Defendants on notice as to the
nature of the claim. (Id. at p. 9.) Plaintiffs argue that they have done so here because the First
Amended Complaint makes clear that “Plaintiffs relied on the representations and warranties that

were made in the purchase agreements and associated land contracts, as well as the guarantees issued
by the Nakhles.” (Id. at p.10.) Without directing this Court’s attention to any specific paragraphs in
the First Amended Complaint, Plaintiffs assert that “the Complaint clearly states that these
representations, warranties, and guarantees were made and the documents on their face provide
information as to the time, place and content of their execution,” noting further, that “all documents
were communicated via mail (or courier) and email to the Plaintiffs.” (Id. at p. 10.)
Plaintiffs then argue generally (and, again, without citing to a single paragraph of the First
Amended Complaint) that the Complaint is sufficient because it “runs for dozens and dozens of pages
and provides a step-by-step explanation of how the various frauds were executed.”19 (Id. at p. 11.)
Plaintiffs assert that “[t]o provide the ‘temporal or geographic particulars’ … of each communication

would force the Complaint to engage in a level of granular detail that would expand its scope, already
over 100 pages, into the thousands of pages and essentially force the Plaintiffs to demonstrate the
level of detail expected in trial proceedings rather than at the stage of filing a complaint.” (Id. at pp.
11-12.) Plaintiffs maintain that “now is not the time” for such detail, indicating that they “intend to

19 As noted supra, Plaintiffs also failed to cite a single paragraph of the First Amended Complaint in the “Factual
Background” section of its Brief in Opposition to the Moving Defendants’ Motion to Dismiss.
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present a complete and damning picture of the evidence against Defendants after discovery has been
completed.” (Id. at p. 12.)
The Court will address the parties’ arguments with respect to the alleged predicate acts of
wire and mail fraud separately, below.
i. Wire Fraud
In support of their argument that they have sufficiently plead the predicate act of wire fraud,

Plaintiffs cite Paragraph 301 of the First Amended Complaint. (Doc. No. 70 at p. 11.) That Paragraph
provides as follows:
301. As with the mail fraud, the number of instances in the period of 2017 through
2021 far exceed two acts, as the Nakhles in particular engaged in dozens if not
hundreds of phone calls with the Plaintiffs and Property Fraud Investors,
misrepresenting intentions and inducing (1) the Property Fraud Investors to transfer
their properties without adequate compensation, (2) the members of Finance and Zuk
Marble to invest money that was subsequently embezzled, (3) ABO to invest money
in Nadam that was embezzled, (4) Adam, ABO and BAO to extend loans that were
never repaid and (5) the seller of the Bavaria Property to transfer it without adequate
compensation, in each case with the purpose of defrauding the relevant Plaintiffs.
Many of these phone calls were international, as the principals of all of the Plaintiffs
are Israeli citizens.

(Doc. No. 10 at ¶ 301.) Plaintiffs do not direct the Court’s attention to any allegations in the First
Amended Complaint that identify the specific time and place of any of the alleged “dozens if not
hundreds of phone calls with Plaintiffs and Property Fraud Investors,” and/or the participants and
specific content of any such telephone calls. See Doc. No. 70 at pp. 8-12.
The Court finds that Plaintiffs have failed to sufficiently plead a predicate act of wire fraud.
As stated above, to state a RICO claim, a complaint “must state with particularity the circumstances
constituting [such] fraud” and “at a minimum … allege the time, place, and content of the alleged
misrepresentation …, the fraudulent scheme, the fraudulent intent of the defendants, and the injury
51
resulting from the fraud.” Am. BioCare Inc. v. Howard & Howard Attorneys PLLC, 702 Fed. Appx.
416, 421 (6th Cir. 2017) (quoting Heinrich, 668 F.3d at 403.) The Court finds that Plaintiffs fall far
short of meeting this standard for the following reasons.
Plaintiffs fail to direct this Court’s attention to any specific paragraph(s) of the First Amended
Complaint that state the time, place, participants, or content of any specific allegedly fraudulent
telephone call. Certainly, Paragraph 301 does not allege any of this information. To the contrary,

Paragraph 301 does nothing more than vaguely reference “dozens if not hundreds of phone calls”
over a four-year period and then loosely attribute them to either George and/or Samir Nakhle.
Plaintiffs do not specifically identify when any of these allegedly fraudulent communications
occurred, who precisely participated in them, or what was said. The First Amended Complaint,
therefore, fails to satisfy the requirements of Rule 9(b) as it does not provide either the Moving
Defendants or this Court with sufficient information to understand the basis of Plaintiffs’ wire fraud
allegations.20 See, e.g., Infocision Management Corp v. Foundation for Moral Law, Inc., 2009 WL
650282 at * 8 (N.D. Ohio Jan. 14, 2009) (finding plaintiffs had failed to sufficiently plead predicate
act of wire fraud because “[n]ot only does [plaintiff] fail to describe the dates, times, and actors
involved in the allegedly fraudulent communications, it also neglects to identify the contents of any

(among the thousands of) communications and does not specify what was misrepresented.”)
In their Brief in Opposition, Plaintiffs argue generally that they satisfied Rule 9(b) by pleading
a specific example of the Moving Defendants’ fraudulent conduct. (Doc. No. 70 at p. 14.) Plaintiffs

20 Moreover, because Plaintiffs’ RICO claim is against each of the 18 Moving Defendants, Plaintiffs were required to
allege facts establishing predicate acts of racketeering by each individual defendant. See Compound Prop. Mgmt LLC,
462 F.Supp.3d at 858; Kerrigan, 112 F.Supp.3d at 602. See also Marinac v. Todd, 2022 WL 3904049 at * 12 (N.D. Ohio
Aug. 30, 2022); Infocision Management Corp., 2009 WL 650282 at * 8. Plaintiffs’ generic wire fraud allegation fails to
distinguish between the Moving Defendants and is, therefore, also insufficient for that reason.
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direct this Court’s attention to Paragraphs 259-272 of the First Amended Complaint, which relate to
one specific property identified as the “Willowhurst Property.” (Id.) It is true that courts have held
that “where … a complaint alleges ‘a complex and far-reaching scheme,’ it is sufficient if the pleading
offers examples of specific fraudulent conduct as a representative sample.” Kovach v. Access
Midstream Partners, L.P., 2016 WL 1162061 at * 11 (N.D. Ohio March 23, 2016) (quoting U.S. ex
rel Marlar v. BXST Y-12, LLC, 525 F.3d 439, 445 (6th Cir. 2008)). Assuming arguendo that pleading

facts regarding the Willowhurst Property as a representative sample would be sufficient to satisfy
Rule 9(b) in the instant case,21 the Court finds that Paragraphs 259-272 of the First Amended
Complaint nonetheless fail to sufficiently allege a predicate act of wire fraud. None of those
Paragraphs even mention a telephone call or email message, much less plead the specific dates, times,
participants, or content of any such wire communication, as required by Rule 9(b) and the Sixth
Circuit precedent discussed above. (Doc. No. 10 at ¶¶ 259-272.) Accordingly, the Court rejects
Plaintiffs’ argument that the First Amended Complaint’s allegations regarding the Willowhurst
Property as a “representative sample” are sufficient to plead a predicate act of wire fraud for purposes
of establishing a pattern of racketeering activity.
Plaintiffs also suggest that the Moving Defendants’ Motion should be denied because

allegations regarding the time, place, and content of the Moving Defendants’ allegedly fraudulent
phone calls can be found somewhere in the “dozens of pages” of the First Amended Complaint. (Doc.
No. 70 at p. 11.) Plaintiffs, however, do not direct this Court’s attention to any such allegations and
it is not this Court’s function to pore through the First Amended Complaint to attempt to find them.

21 Although it need not decide this issue, the Court notes that it is not entirely convinced that the First Amended
Complaint’s allegations regarding the Willowhurst Property are sufficient to constitute a “representative sample,” as the
term “sample” implies more than one example of the Moving Defendants’ fraudulent scheme.
53
As the Sixth Circuit has long held, “[a] district court is not required to speculate on which portion of
the record the nonmoving party relies, nor is it obligated to wade through and search the entire record
for some specific facts that might support the nonmoving party's claim.” Interroyal Corp. v.
Sponseller, 889 F.2d 108, 111 (6th Cir. 1989). See also Layne Christensen Company v. City of
Franklin, Tennessee, 449 F.Supp.3d 748, 755 (M.D. Tenn. 2020) (same); Uduko v. Cozzens, 975 F.
Supp. 2d 750, 786 (E.D. Mich. 2013) (same). Here, Plaintiffs had the opportunity to pinpoint specific

allegations in the First Amended Complaint that they believe satisfy Rule 9(b)’s heightened pleading
requirements for allegations of wire fraud, and/or at a minimum to include in Paragraphs 259-272 of
the First Amended Complaint telephone call(s) and/or email message(s), and the date(s) and time(s)
thereof to satisfy Rule9(b) regarding the Willowhurst Property as a representative sample. Plaintiffs
failed to do so and chose, instead, to rely on a sole citation to Paragraph 301 and broad generalities
regarding the complexity of the Moving Defendants’ allegedly fraudulent scheme and the length of
the First Amended Complaint.22 The Court finds this to be insufficient for all the reasons set forth
above.
In sum, then, the Court finds that Plaintiffs failed to sufficiently plead a predicate act of wire
fraud under RICO Section 1962(c).

ii. Mail Fraud
The only remaining potential predicate act plead in the First Complaint, therefore, is mail
fraud. In support of their argument that they have sufficiently plead at least two predicate acts of

22 The Court notes that, in a different section of Plaintiffs’ Brief in Opposition regarding the issue of whether Plaintiffs
sufficiently plead scienter, Plaintiffs cite to several paragraphs of the First Amended Complaint relating to the Lot One
properties. (Doc. No. 70 at pp. 13.) None of these paragraphs sufficiently plead a predicate act of wire fraud, however,
because those paragraphs fail to allege either the date, time, participants, and/or contents of a single telephone call or
email message.
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mail fraud, Plaintiffs cite Paragraph 297 of the First Amended Complaint. (Doc. No. 70 at p. 11.)
That Paragraph (and the Paragraph directly preceding it) provide as follows:
296. Upon information and belief, the Nakhles and Gutzky, acting on their own behalf
and through the Controlled Entities, in violation of 18 U.S.C. § 1341, placed in post
offices or official depositories of the United States Postal Service matter and things to
be delivered by the US Postal Service, caused matter and things to be delivered by
commercial overnight courier services, and received matter and things from the US
Postal Service or commercial overnight courier services, including, but not limited to,
documents containing material misrepresentations that were calculated to defraud the
Plaintiffs in the Property Fraud, the JV Fraud, the Loan Fraud, the Nadam Fraud and
the Bavaria Fraud. The US mail was used to convey material misrepresentations,
willful omissions of material facts, and other acts of fraud.

297. The number of instances of this mail fraud are far in excess of 2 instances in the
period from 2017 through 2021, as every Land Contract, every Supplemental
Agreement, and every other notarized document for 192 properties in the Property
Fraud, every property in the JV Fraud, the property in the Nadam Fraud and the
property in the Bavaria Fraud, were signed by sending originals through the mails or
via courier service.

(Id. at ¶¶ 296-297.) Again, in the section of their Brief in Opposition relating to mail fraud, Plaintiffs
do not direct the Court’s attention to any other allegations in the First Amended Complaint to support
their argument that they sufficiently plead at least two predicate acts of mail fraud. See Doc. No. 70
at pp. 8-12.
For the following reasons, the Court finds that Plaintiffs have failed to sufficiently plead mail
fraud. Plaintiffs’ blanket reference in Paragraph 297 to “every Land Contract, every Supplemental
Agreement, and every other notarized document” relating to the properties at issue is not sufficient
to plead the time, place, and content of the alleged misrepresentations, as required by Rule 9(b). The
First Amended Complaint in this matter contains over 500 paragraphs and attaches over 400 pages
of exhibits. Plaintiffs do not direct this Court’s attention to any specific Land Contract, Supplemental
Agreement, and/or other “notarized document” that allegedly constitutes mail fraud. Nor do Plaintiffs
55
direct this Court’s attention to any paragraph(s) in the First Amended Complaint that identify (1) the
specific Land Contracts, Supplemental Agreements, and/or other notarized documents that allegedly
contain fraudulent misrepresentations; (2) the allegedly fraudulent content of any specific Land
Contract, Supplemental Agreement, and/or other notarized document; and/or (3) how any specific
Land Contract, Supplemental Agreement, and/or other notarized document furthered the alleged
scheme to defraud, as to each Moving Defendant.

Rather, Plaintiffs appear to expect this Court to scour through the First Amended Complaint
and its voluminous Exhibits to identify every notarized document that was allegedly sent through the
mails and, further, to divine from those documents the times, places, and content of each of the
Moving Defendants’ allegedly fraudulently misrepresentations. Essentially, Plaintiffs ask this Court
to locate the supporting allegations in the First Amended Complaint and construct their argument for
them. As discussed above, that is not this Court’s function and the Court declines to do so. See
Interroyal Corp, 889 F.2d at 111; Layne Christensen Company, 449 F.Supp.3d at 755; Uduko, 975
F. Supp.2d at 786.
To the extent Plaintiffs suggest that the First Amended Complaint’s allegations regarding the
Willowhurst Property (i.e., Paragraphs 259 through 272) as a “representative sample” are sufficient

to plead two or more instances of mail fraud, the Court rejects this argument. As an initial matter,
none of the First Amended Complaint’s paragraphs regarding the Willowhurst Property allege that a
document relating to that Property was sent through the mail or via courier service. (Doc. No. 10 at
¶¶ 259-272.) Indeed, the words “mail” or “mail fraud” do not appear in any of those paragraphs.
(Id.) It is true that Paragraphs 259 through 272 of the First Amended Complaint reference certain
documents, including (1) a Land Contract dated January 26, 2018 (Doc. No. 10-30); (2) a Quitclaim

56
Deed dated June 3, 2019 (Doc. No. 10-31); (3) a letter dated August 16, 2019 from an individual
named Ilam Kedem to “George” (Doc. No. 10-27); (4) a document entitled “Termination of Land
Installment Contract” dated November 1, 2019 (Doc. No. 10-32); (5) a General Warranty Deed dated
November 26, 2019 (Doc. No. 10-33); and (6) a financial closing statement dated November 20, 2019
(Doc. No. 10-34.) And it is also true that the First Amended Complaint subsequently alleges that
“every Land Contract . . . and every other notarized document for [the properties at issue] . . .were

signed by sending originals through the mails or via courier service.” (Doc. No. 10 at ¶ 297.)
Reviewing these allegations together, one could perhaps argue that Plaintiffs have sufficiently plead
that at least some of the Willowhurst Property documents referenced in Paragraphs 259 through 272
were sent via the mail.
However, even assuming that to be the case, the Court would nonetheless find that Plaintiffs
have not sufficiently plead a predicate act of mail fraud. Of the Willowhurst Property documents
noted above, only the following four are notarized (and, thus, allegedly sent through the mail): (1)
the January 26, 2018 Land Contract (Doc. No. 10-30); (2) the Quitclaim Deed (Doc. No. 10-31); (3)
the Termination of Land Installment Contract (Doc. No. 10-32); and (4) the General Warranty Deed
(Doc. No. 10-33.) None of the paragraphs in the First Amended Complaint relating to the

Willowhurst Property identify the allegedly fraudulent content of these documents or otherwise
explain why or how Plaintiffs believe any of these particular documents were used to further a
fraudulent s

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10372836. Public record. Not legal advice.