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Song v. Rom

United States District Court, N.D. Ohio, Eastern Division

June 8, 2017




         Before the Court is the motion for summary judgment filed by defendants Davor Rom (“Rom”) and IIP Ohio, LLC (“IIP Ohio”) (collectively, “defendants'). (Doc. No. 115 [“Mot.”].) Plaintiffs have filed their brief in opposition (Doc. No. 125 [“Opp'n”]) and defendants filed a reply (Doc. No. 128 [“Reply”]). For the reasons discussed herein, the motion is denied.

         I. BACKGROUND

         This case has a complicated procedural background, but the factual allegations underlying the remaining claims are fairly straightforward. The third amended complaint is the operative pleading (Doc. No. 67 [“Compl.”]), except that plaintiffs have withdrawn the breach of contract claim in Count 6. (See Opp'n at 4534[1].) There are no pending counterclaims or crossclaims.

         Plaintiff Xudong (Dennis) Song (“Song”) is a Chinese businessman who is the sole member of plaintiff Sunshine International LLC (“Sunshine”) (collectively, “plaintiffs”). Plaintiffs allege that defendants Rom and his company IIP Ohio (through an intricate web of businesses that are not all parties), committed fraud/fraudulent inducement with respect to certain real estate contracts. Plaintiffs claim that defendants identify distressed properties in the United States that they can acquire cheaply. Then, by way of internet real estate portals, they market the properties to foreign investors as newly renovated and professionally managed, with guaranteed return on investment (“ROI”) above 10%. These foreign investors are typically not in a position to evaluate firsthand any property's worth or condition.

         Between 2013 and 2014, Song purchased from defendants[2] 60 real estate parcels located in Cleveland, Akron, and Columbus; he subsequently transferred all the parcels to Sunshine. Song alleges that, unbeknownst to him, he purchased these properties for nearly 150% what defendants had paid. Song alleges that Rom and IIP Ohio promised to lease back and manage the properties for Song, and guaranteed a net return for the first two years of $6, 300 per property payable every three months. Defendants also allegedly represented that all the properties were in prime locations with good local schools, and all were fully tenanted. As it turned out, according to Song, the properties were located in extremely run-down areas, were not renovated and not maintained (having serious problems with leaks, mold, damaged floors/walls/roofs, electrical malfunctions, and broken furnaces); many were vacant; some are facing potential demolition by the cities where they are located. The promised management services were allegedly to include leasing, collecting rents, maintenance of the properties, utilities and services management, repairs, and disbursing funds for mortgage payments and property taxes. Defendants also allegedly assured Song that the income generated from the properties would be sufficient to pay off the existing mortgages. According to plaintiffs, none of that has happened.

         What remains of the complaint are two counts against defendants IIP Ohio and Rom: Count 1 alleging fraud/fraudulent inducement, and Count 5 seeking to pierce the corporate veil as to Rom.[3] The gravamen of Song's claim in Count 1 is that, in buying the properties, entering into the management agreements, and continuing business with defendants, he reasonably relied upon pre-agreement representations. He claims his decisions were substantially based upon defendants' repeated representations regarding the value and condition of the various properties and the ROI that he would realize in the form of immediate cash flow. He alleges that defendants, taking unfair advantage of his lack of fluency with English and utilizing an interpreter in their own employ to conduct the negotiations, knowingly made false representations to induce him to purchase the properties, with no intention of following through on their representations and/or promises.


         A. Summary Judgment Standard

         Under Fed.R.Civ.P. 56(a), when a motion for summary judgment is properly made and supported, it shall be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”

         An opposing party may not rely merely on allegations or denials in its own pleading; rather, by affidavits or by materials in the record, the opposing party must set out specific facts showing a genuine issue for trial. Fed.R.Civ.P. 56(c)(1). Affidavits or declarations filed in support of or in opposition to a motion for summary judgment “must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.” Fed.R.Civ.P. 56(c)(4). A movant is not required to file affidavits or other similar materials negating a claim on which its opponent bears the burden of proof, so long as the movant relies upon the absence of the essential element in the pleadings, depositions, answers to interrogatories, and admissions on file. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

         In reviewing summary judgment motions, this Court must view the evidence in a light most favorable to the non-moving party to determine whether a genuine issue of material fact exists. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); White v. Turfway Park Racing Ass'n., 909 F.2d 941, 943-44 (6th Cir. 1990), impliedly overruled on other grounds by Salve Regina College v. Russell, 499 U.S. 225, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991). A fact is “material” only if its resolution will affect the outcome of the lawsuit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Determination of whether a factual issue is “genuine” requires consideration of the applicable evidentiary standards. Thus, in most civil cases the Court must decide “whether reasonable jurors could find by a preponderance of the evidence that the [non-moving party] is entitled to a verdict[.]” Id. at 252.

         Summary judgment is appropriate whenever the non-moving party fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial. Celotex, 477 U.S. at 322. Moreover, “[t]he trial court no longer has the duty to search the entire record to establish that it is bereft of a genuine issue of material fact.” Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479-80 (6th Cir. 1989) (citing Frito-Lay, Inc. v. Willoughby, 863 F.2d 1029, 1034 (D.C. Cir. 1988)). The non-moving party is under an affirmative duty to point out specific facts in the record as it has been established that create a genuine issue of material fact. Fulson v. City of Columbus, 801 F.Supp. 1, 4 (S.D. Ohio 1992). The non-movant must show more than a scintilla of evidence to overcome summary judgment; it is not enough for the non-moving party to show that there is some metaphysical doubt as to material facts. Id.

         B. ...

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