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Smith v. Federal Title & Escrow Co.

United States District Court, District of Columbia

June 20, 2018

SEAN SMITH & ERIN WRONA, Plaintiffs,
v.
FEDERAL TITLE & ESCROW COMPANY, et al., Defendants.

          MEMORANDUM OPINION

          Royce C. Lamberth, United States District Judge

         Now before the Court is the partial motion to dismiss [ECF No. 9] by Defendants Close It! Title Services, Inc ("Close It!") d/b/a Federal Title & Escrow Company ("Federal Title"), Todd Ewing, and Melina Schifflett (collectively "Federal Title Defendants") and the plaintiffs' Motion for Extension of Time to Serve Certain Defendants [ECF No. 16]. Upon consideration, the Federal Title Defendants' motion is GRANTED IN PART and DENIED IN PART and the plaintiffs' motion is DENIED AS MOOT. For additional reasons outlined below, the Court dismisses the case in toto without prejudice.

         I. Background[1]

         Plaintiffs Sean Smith and Erin Wrona ("Plaintiffs") are married residents of the District of Columbia. ECF No. 1, at ¶ 5. In May of 2017, the couple entered into a sales contract to purchase a home located at 3673 Upton Street, N.W., Washington, D.C. 20008 for $1, 738, 750.00. Id. at ¶ 15. To assist with closing, they contracted with Federal Title, a title company organized under the laws of Washington, D.C. with its principal place of business also located in Washington, D.C. Id. at ¶¶ 7, 15.

         On May 4, 2017, Melina Schifflett, a settlement coordinator with Federal Title, reached out to Plaintiffs instructing the couple to wire $200, 000 to Federal Title as an earnest money deposit. Id. at ¶¶ 17, 18. The couple complied and received an email confirmation from Federal Title confirming the money was received. Id. at ¶¶ 18-19. Several days later, Plaintiffs received an email forwarding a request from Schifflett with instructions for wiring the remaining balance (shown in the email as $1, 572, 097.70) to a Chase bank account in the name of Federal Title with further credit to JMZ Equities, LLC, a Florida limited liability company owned by Jeff Zorbo.[2] Id. at ¶¶ 21-22. Prior to completing the transaction, Smith reached out to Schifflett to ask why the bank account number was different from the account where he wired the deposit. Id. at ¶ 24. Schifflett explained that Federal Title used different accounts for different amounts and Smith moved forward with the wire transfer. Id. at ¶ 26. The following day, Plaintiffs received an email from Schifflet confirming that their funds had been received. Id. at ¶ 27.

         On June 19, 2017, Plaintiffs reported to Federal Title's offices to close the transaction. Id. at ¶ 31. The closing would be conducted by Todd Ewing, founder of Federal Title and a licensed attorney. Id. at ¶¶ 8, 32. Midway through closing, Ewing inquired about Plaintiffs wiring the remaining balance on the total purchase price. Id. at ¶ 34. When Plaintiffs told Ewing that the funds had already been wired, Ewing left the room to confer with other Federal Title personnel. Id. at ¶ 35. At first, Ewing told the Plaintiffs that their email had been hacked and that the only way to close the transaction would be to come up with an additional $1.57 million. Id. at ¶¶ 36- 37. Distraught and yet determined to close the deal, Plaintiffs and their family wired the additional funds. Id.

         The FBI was contacted immediately, and it was determined that the money the Plaintiffs previously wired had been wired out of the Chase bank account to which they sent the money. Id. at ¶ 38. Several days later, Ewing contacted Smith and stated that it was Federal Title's email, not that of the Plaintiffs, that was hacked. Id. at ¶ 39. Someone had commandeered Federal Title's computer services, learned about Plaintiffs' transaction, and sent, from Schifflett's email account, the wiring instructions that led to the theft of Plaintiffs' funds. Id.

         Plaintiffs have yet to recover the $1.57 million that was wired for the home and seek relief in this Court. Id. at ¶ 40. Specifically, Plaintiffs allege: (i) violations of the Racketeering Influenced and Corrupt Organizations Act ("RICO") against all defendants; (ii) conversion against all defendants; (iii) civil conspiracy against all defendants; (iv) negligence against the Federal Title Defendants; (v) breach of contract against Federal Title and Close It!; (vi) breach of implied covenant of good faith and fair dealing against Federal Title and Close It!; (vii) breach of fiduciary duty against Federal Title, Close It!, and Ewing; and (viii) legal malpractice against Ewing.

         II. Defendants' Partial Motion to Dismiss

         The Federal Title Defendants move, pursuant to Federal Rule of Civil Procedure Rule 12(b)(6), to partially dismiss Plaintiffs' complaint for failure to state a claim as to certain causes of action against certain parties. Specifically, the Federal Title Defendants seek to dismiss the causes of action related to RICO, conversion, civil conspiracy, and legal malpractice. For the reasons outlined below, the Court need only address the motion as it relates to the RICO claim.

         A. Legal Standard

         To survive a Rule 12(b)(6) motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). When considering a motion to dismiss under Rule 12(b)(6), "the court must assume 'all the allegations in the complaint are true (even if doubtful in fact), ' and the court must give the plaintiff the benefit of all reasonable inferences derived from the facts alleged.'" Aktieselskabet AF 21. Nov. 2001 v. Fame Jeans Inc., 525 F.3d 8, 17 (D.C. Cir. 2008) (internal citations omitted).

         B. The RICO Claim

         A violation of § 1962(a) of the RICO Act consists of four elements: "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." W. Assocs. Ltd. P'ship v. Mkt Square Assocs.,235 F.3d 629, 633 (D.C. Cir. 2000) (citing Sedima, S.P.R.L. v. Imrex Co.,473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985)). Because Plaintiffs fail to allege sufficient facts to plausibly plead ...


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