IN THE SUPREME COURT OF OHIO

WELLS FARGO BANK, N.A.,

Plaintiff,

V.

FUSCO PROPERTIES, LLC, et al.,

Defendants-Third-Party Plaintiffs- Appellees,

[v.

MARCUS & MILLICHAP REAL ESTATEINVESTMENT SERVICES, INC., et al.,

Third-Party Defendants-- Appellants.]

Case No.

Appeal from the Cuyahoga CountyCourt of Appeals, Eighth AppellateDistrict

Court of Appeals Case No. 92689

MEMORANDUM IN SUPPORT OF JURISDICTION OF APPELLANTSMARCUS & MILLICHAP REAL ESTATE INVESTMENT SERVICES, INC.,

MARCUS & MILLICHAP REAL ESTATE INVESTMENT SERVICES OF OHIO, INC.,AND MARCUS & MILLICHAP CAPITAL CORPORATION

Alan P. DiGirolamoJohn P. SlagterBUCKINGHAM, DOOLITTLE &BURROUGHS, LLP1375 East Ninth Street, Suite 1700Cleveland, OH 44114adi girolamo@bdblaw.comjslagter@hdblaw.com

Attorneys for Appellees Fttsco Properties, LLC,CK Fusco Properties, LLC, Carlo Fusco, Sr.,Mariano Fusco, Anthony Digati, Angie Digati,and Giuseppe Fusco

Chad Readler(0068394)Eric E. Murphy (0083284)JONES DAY325 John H. MeConnell Blvd., Suite 600P.O. Box 165017Columbus, OH 43216Telephone: (614) 469-3939Facsimile: (614) 461-4198careadler@jonesday.comeemurphy@,jonesday.com

Brian J. Murray (pro hac vice pending)

(Connselof Record)JONES DAY77 West Wacker Driver, Suite 3500

Chicago, Illinois 60601-1692Telephone: (312) 782-3939Facsimile: (312) 782-8585bjmurray@jonesday.com

Attorneys for Appellants Marcus & MillichapReal Estate Ittvestment Services, Inc., Marcus

,sg Millichap Real Estate Investinent Services

C?apital Corporation

Ohio, Inc., and Marcus & Millichap

TABLE OF CONTENTS

TABLE OF AUTHORITIES ...... ................................................................................................... ii

STATEMF.N"I' OF PUBLIC AND GRF,A'f GENERAL 1NTEREST ........................................... 1

1. The Requirenients Of Civil Rule 9(B) ................................................................... 2

2. I'he Requirements Of Civil Rule 12(B)(6) . ........................................................... 4

3. The Proper Reading Of Ohio Real Estate Law ...................................................... 6

S'I'ATEMENT OF TI IE CASE AND FAC1'S ...... ........................................................................ 8

ARGUMENT IN SUPPORT OF PROPOSITIONS OP LAW .................................................... I I

Proposition Of Law No. 1: Civil Rule 9(B) Requires A Party AssertingFraud To Identify The Who, What, When, Where, And How OfThe Alleged Fraud, Including "I'he Particular Individual Who MadeThe Allegedly False Statement ................................................................ 11

Proposition Of Law No. 2: To Siuvive A Motion To Dismiss Under Civil

Rule 12(B)(6), A Complaint Cannot Rely On UnsupportedConclusions But Must Set Forth Factual Allegations That Show A

Plausible Entitlement 'I'o Relief . .............................................................. 13

Proposition Of Law No. 3: Separate Corporations With Separate Broker'sLicenses Can Never Constitute Dual Agents Under Ohio RealEstate I,aw . ............................................................................................... 14

CONCLUSION ............................................................................................................................ 15

CERTIFICATE OF SERVICE

APPENDIX

TABLE OF AUTHORITIES

CASES

Page

Advanced Pr•oduetion Center, Inc. v, Einco Mafer Corp.(5th Dist.), 2003-Ohio-6206 ................................................................................................3, 12

Ashcroft v. Iqbal(2009), 129 S. Ct. 1937 ..............................................................................................1, 5, 13, 14

Bell Atlantic Corp. v. Twombly(2007), 550 U.S. 544 ..........................................................................................1, 4, 5, 6, 13, 14

Byrd v. Paber(1991), 57 Ohio St.3d 56 ..................................................................................................2, 4, 12

Colby v. Urnbrella, Inc.(Vt. 2008), 955 A.2d 1082 .........................................................................................................6

Conley v. Gibson(1957), 355 U.S. 41 ......................................................................................................4, 5, 6, 13

Coors v. Fifth Third Bank(lst Dist.), 2006-Oliio-4505 .......................................................................................................5

Cullen v. Auto-Owners Insurance Co.(Ariz. 2008), 189 P.3d 344 .........................................................................................................6

Dura Pharmaceuticals, Inc. v. Broudo(2005), 544 U.S. 336 ..................................................................................................................6

First Bank of Marietta v. Mascrete, Inc.(1997), 79 Ohio St.3d 503 ..........................................................................................................4

I-Iabeeb v. Ohio Department of Commerce(8th Dist.), 2004-Ohio-138 ........... .............................................................................................8

Haddon View Investment Co. v. Coopers & Lybrand(1982), 70 Ohio St.2d 154 ......................................................................................................2, 4

Iannacchino v. Ford Motor Co.(Mass. 2008), 888 N.F.2d 879 ...................................................................................................6

Keenan v. Adecco Employment Services, Inc.(3d Dist.), 2006-Ohio-3633 ......................................................................................................12

Korodi v, Minot(10th Dist. 1987), 40 Ohio App.3d I ...................................................................................2, 12

ii

Loveday v. Essential Ileating Cooling & Ref •igeration, Inc.(4th Dist. 2008), 2008-Ohio-4756 .............................................................................................5

Mitchell v. Lawson Milk Co.(1988), 40 Ohio St.3d 190 ..................................................................................................13, 15

Moore v. Daw(5th Dist. Dec. 22, 2000), Nos. CT-2000-0014, CT-2000-0017, 2000 WL 1886257 ...............7

Morr•ow v. Reminger & Reminger Co. L. P.A.(10th Dist.), 183 Ohio App.3d 40, 2009-Ohio-2665 ..................................................................5

NicSand, Inc. v. 3MCo.(C.A. 6 2007), 507 F.3d 442 (en banc) ....................................................................................14

Noland v. Bryant(10th Dist. Jan. 12, 1984), No. 83AP-31, 1984 WL 4593 .........................................................2

O'Brien v. University Community Tenants Union(1975), 42 Ohio St.2d 242 ....................................................................................................4, 13

Public Employees Retirement Association of^Colorado v. Deloitte & Touche LLP(C.A. 4 2009), 551 F.3d 305 ......................................................................................................3

Reinglass v. Morgan Stanley Dean Witter, Inc.(8th Dist.), 2006-Ohio-1542 ....................................................................................................12

Schmiedebusch v. Rako Realty, Inc.(5th Dist.), 2005-Ohio-4884 ................................................................................................3, 14

Sisney v. Best, Inc.(S.D. 2008), 754 N.W.2d 804 ....................................................................................................6

State v. Consilio,114 Ohio St.3d 295, 2007-Ohio-4163 ......................................................................................15

State ex rel. Neffv. Corrigan(1996), 75 Ohio St.3d 12 ..........................................................................................................15

Tackett Tire Sales, Inc. v. Bank One Dayton, Ine.(2d Dist. June 21, 1996), No. 15595, 1996 WL 339944 ............................................................2

Tripp v. Beverly Enterprises-Ohio, Inc.(9th Dist.), 2003-Ohio-6821 ..........................................................................................3, 12, 13

Vagas v. City of Hudson(9th Dist.), 2009-Ohio-6794 .... ................................................................................................14

iii

Vess v. Ciba-Geigy Corp. USA(C.A. 9 2003), 317 F.3d 1097 ..................................................................................................11

W.K. v. Farrell(2d Dist.), 167 Ohio App.3d 14, 2006-Ohio-2676 .....................................................................6

Woods v. Caterpillar, Irzc.(6th Dist.), 2005-Ohio-4170 ......................................................................................................2

York v. Ohio State Ilighway Patrol(1991), 60 Ohio St.3d 143 ..........................................................................................................3

STATUTES

R. C. 473 5.51(B) .........................................................................................................................7, 15

R. C. 473 5 .62 ....................................... . ..........................................................................................14

R.C. 4735.70(B) .........................................................................................................................6, 15

R.C. 4735.71 ....................................................................................................................................6

R.C. 4735.72 ....................................................................................................................................6

R.C. 4735.72(F) .................. .............................................................................................................8

OTIIER AUTHORI'1'IES

Civil Rule 8(A) ..............................................................................................................................13

Civil Rule 9(B) .......................................................................................................1, 2, 3, 10, 11, 12

Civil Rule 12(B)(6) ................................................................................................1, 4, 6, 10, 13, 14

Evidence Rule 201(B)(2) ...............................................................................................................15

Random House Webster's Unabridged Dictionary (2d ed. 2001) .................................................11

Wright & Miller, Federal Practice & Procedure (3d ed. 2004) ....................................................11

iv

STATEMENT OF PUBLIC AND GREAT GENERAL INTEREST

The Eighth District's decision below-which reversed the dismissal of two claims, and

purported to reach out and "reverse" the dismissal of a third claim not even appealed-highlights

a federal and state divide over Civil Rules 9(B) and 12(B)(6) and their federal counterparts. The

Eighth District took a broad view of what pleadings satisfy these threshold rules. As to Rule

9(B), a Rule over which the lower courts admit they have been confused, the Eighth District

rejected decisions that require a fraud complaint to name the individual alleged to have made the

assertedly false statement. As to Rule 12(B)(6), the Eighth District refused to follow a body of

law-including recent decisions in Bell Atlantic Cor•p. v. 7ivombly, (2007), 550 U.S. 544, and

Ashcrofl v. Iqbal, (2009), 129 S. Ct. 1937-in holding that unsupported conclusions could save a

complaint. Remarkably, despite the significance of these pleading issues and their recurring

nature, the Court has not yet had the opportunity to authoritatively address the conflicting

standards. Today's case is an appropriate vehicle for resolving these important issues.

The Appellees here-a group of Californians ("the Fuscos")-bought an apartment

building and defaulted on the mortgage. In the throes of foreclosure, the Fuscos decided the best

defense was a good offense; they claimed that they were misled into buying the building by all

involved. They filed a tliird-party complaint against: (1) the building's sellers, Brenda Niederst

and her companies ("the Sellers"); (2) the Sellers' real estate brokerage, Marcus & Millichap

Real Estate Investment Services of Ohio, Inc. ("MMOH") (alleging breach of fiduciary duty and

indemnity); (3) the Fuscos' real estate brokerage, Marcus & Milliehap Real Estate Investment

Services, Inc. ("MMREIS") (alleging breach of fiduciary duty and indemnity); and (4) the

Fuscos' mortgage broker, Marcus & Millichap Capital Corporation ("MMCC") (alleging fraud

and indemnity). The trial court granted a motion to dismiss by MMOH, MMREIS, and MMCC.

The Eighth District's reversal addressed tliree issues that require this Court's attention.

1. The Reguirements Of Civil Rule 9(B). The Fuscos' fraud claim against MMCC

was based entirely on a form attached to the complaint, which appears to have been signed by

plaintiff Giuseppe (Joe) Fusco himself and submitted to the bank to procure financing. The

complaint alleged that the form was actually evidence of MMCC's fraud on the Fuscos. They

claimed that MMCC "falsely represented" to thein facts about the apartment building. (R.72, 2d

Am. Compl. ¶ 19, 24-31.) Yet the claim did not specify who among the many MMCC agents

was alleged to have made the misrepresentations. The trial court thus dismissed the claim

pursuant to Civil Rule 9(B), which requires fraud to be pleaded with particularity.

Reversing, the Eighth District found that Rule 9(B) was satisfied because the coniplaint

alleged that the corporation made inisstatements. Its holding merits review to clarify what must

be pleaded to survive a Rule 9(B) motion to dismiss. Because Rule 9(B) governs all complaints

alleging fraud or mistake, courts frequently have been, and will continue to be, called upon to

apply the Rule. See, e.g., Woods v. Caterpillar, Inc. (6th Dist.), 2005-Ohio-4170, at ¶ 11-20;

Tackett Tire Sales, Irte. v. Bank One Dayton, Inc. (2d Dist. June 21, 1996), No. 15595, 1996 WL

339944, at *3; Korodi v. Minot (10t1r Dist. 1987), 40 Ohio App.3d 1, 4. Yet, altliough the Rule

dates back to 1970, this Court has never provided a definitive intcrpretation of it, or what exactly

it requires. Cf. Byrd v. Faber• (1991), 57 Ohio St.3d 56, 61; Haddon View Invest. Co. v. Coopers

& Lybrand (1982), 70 Ohio St.2d 154, 158-59. Given the number of cases to which the Rule

applies, and the lack of prior guidance, a decision here could bring clarity to these issues.

And clarity is sorely needed. "[C]ourts have frequently been eonfiised when called upon

to apply [Rule I 9(B)." Korodi, 40 Ohio App.3d at 4. As a result, "[w]hat constitutes compliance

with the particularity rule ... has given rise to conflict." Noland v. Bryant (10th Dist. Jan. 12,

1984), No. 83AP-31, 1984 WL 4593, at *2; see Korodi, 40 Ohio App.3d at 4("[T]here is little

2

agreement in practice as to when a complaint sufficiently meets [Rule 9(B)]."). Confirming this

general confusion, iederal courts likewise "have interpreted [the analogous federal rule] in

conflicting ways, creating distinctly different standards among the circuits." Pub. Emp.

Retirement. Assn, of Colo. v. Deloitte & Touche LLP (C.A. 4 2009), 551 F.3d 305, 311 (internal

quotation marks omitted). This conflict underscores the need for review.

'1'he Eighth District's decision only adds to the conflict, making authoritative resolution

all the more important. That court found the Fuscos' complaint sufficient even though it did not

identify any specific MMCC agent. (App. 14-15.) Its holding stands in sharp contradistinction

to the holdings of other districts. See 'I'ripp v. Beverly L'nterprises-Ohio, Inc. (9th Dist.), 2003-

Ohio-6821, at ¶ 64; Advanced Prod. Ctr., Inc. v. Ernco Maier Corp. (5th Dist.), 2003-Ohio-6206,

at ¶ 16. In Advanced Prodtiction C'enter, the Fifth District dismissed a fraud claim against a

corporation because it did not "set forth the individual" in the corporation "who made the

false representation." 2003-Ohio-6206, at ¶ 16; see Schmiedebusch v. Rako Realty, Inc. (5th

Dist.), 2005-Ohio-4884, at ¶ 31 (complaint failed because it did not "identify the individual

giving the false representation"). In Tripp, the Ninth District dismissed a fraud claim for the

same reason. 2003-Ohio-6821, at ¶ 64. Since "[a] corporation can only act through its

employees," the court conctuded, "[a]n allegation that ... some part of a corporate entity made

an allegedly fraudulent statement is simply not enough to inform [the defendants] of the speci$c

claim against them." Id.

The rampant conflict in the courts as to the meaning of Rule 9(B), and the lack of clear

guidance from this Court, are concerning given the important policies at stake. As this Court has

recognized, "sound public policy mandate[s] that the claims involved [with Rule 9(B)] receive

intense scrutiny from the beginning." York v. Ohio State Ilighway Patrol (1991), 60 Ohio St.3d

143, 145. This is simple common sense: The Rule "protect[s] defendants from unfounded

charges of wrongdoing which may injure their reputations," and reflects a policy judginent that

such concerns are "important enough to require that facts be pled with particularity." Byrd, 57

Ohio St.3d at 61. And "[t]he need for this protection is most acute where the potential

defendants are professionals," such as the mortgage brokers at MMCC, "whose reputations...

are most sensitive to slander." Haddon, 70 Ohio St.2d at 158 (internal quotation marks omitted).

`1'he Eighth District's crabbed view tbreatens to undermine these important considerations.

2. The Reguirenients Of Civil Rule 12(B)(6). The Eighth District's decision also

presents a critical issue on the standard of review for motions to dismiss under Rule 12(B)(6).

This State's Civil Rules are similar to their federal counterparts. See Tirst Bank of Marietta v.

Mascrete, Inc. (1997), 79 Ohio St.3d 503, 508. Accordingly, in O'Brien v. University

Community Tenants Union (1975), 42 Ohio St.2d 242, the Court adopted the federal standard

established by Conley v. Gibson (1957), 355 U.S. 41, for evaluating motions under Rule

12(B)(6). Under Conley, "`a complaint should not be dismissed for failure to state a claim unless

it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which

would entitle him to relief."' O'Brien, 42 Ohio St,2d at 245 (quoting Conley, 355 U.S. at 45).

In the intervening years, tension has arisen across the country as to what Conley requires.

Some courts have relied on "a focused and literal reading of Conley's `no set of facts"' standard

under which conelusory allegations suffice so long as undisclosed facts would permit recovery.

Twombly, 550 U.S. at 561. The Eighth District's decision represents a classic illustration of this

view, as shown by its handling of the indemnification count against MMOH, MMREIS, and

MMCC. The trial court dismissed that count because the Fuscos did not allege facts illustrating

an entitlement to relief under the two ways to recover for indemnification-an express contract

4

or an implied contract involving joint tortfeasors. (See App. 14.) The Fuscos did not appeal that

dismissal. But the court of appeals reached out to suggest that the complaint adequately pleaded

indemnification because it did not negate the claim on its face-specifically, it "did not indicate

that there [was] no express contract of indcmnity and [did] not demonstrate the absence of an

implied agreement of indemnity." (Id. at 15); see Loveday v. Essential Healing Cooling &

Refrigeration, Inc. (4th Dist. 2008), 2008-Ohio-4756, at ¶ 13 ("[A] plaintiff is not required to

provide specific facts or elements at the pleading stage.").

Other cases have held that the appropriate standard requires a certain minimum threshold

of factual detail for a complaint to plead a cause of action. Courts adopting this approach hold

that "[u]nsupported conclusions are not deemed true, nor are they sufficient to withstand a

dismissal motion." Coors v. Fifth Third Bank (1 st Dist.), 2006-Ohio-4505, at ¶ 12; see Morrow

v. Reminger & Reminger Co. L.P.A. (10th Dist.), 183 Ohio App.3d 40, 2009-Ohio-2665, at ¶ 7

("The court need not ... accept as true unsupported legal conclusions in the complaint."). Under

this standard, the Fuscos' indemnification claim could not possibly have survived because the

complaint pleaded no facts illustrating any basis for that type of relief.

Which of these views is coirect has recently been the subject of intense debate. In the

last three years, the United States Supreme Court has twice rejected an interpretation of Conley

similar to the Eighth District's. 7bvombly, 550 U.S. at 562-63; see Iqbal, 129 S. Ct. at 1949-52.

According to Twotnbly, the "no set of facts" test represents "an incomplete, negative gloss on an

accepted pleading standard: once a claim has been stated adequately, it may be supported by

showing any set of facts consistent with the allegations in the cornplaint." 550 U.S. at 563. As

such, "[flhreadbare recitals of the elements of a cause of action, supported by mere conclusory

statements" no longer suftice. Iqbal, 129 S. Ct. at 1950. Many Supreme Courts in States with

5

similar rules have endorsed Twombly. See lannacehino v. Ford Motor Co. (Mass. 2008), 888

N.E.2d 879, 889-90; Sisney v. Best, Inc. (S.D. 2008), 754 N.W.2d 804, 808-09. Others, however,

liave rejected it. See Colby v. Umbrella, Inc. (Vt. 2008), 955 A.2d 1082, 1087 n.1; Cullen v.

Auto-Owners Ins. Co. (Ariz. 2008), 189 P.3d 344, 345. This Court has yet to decide the issue.

It should do so here because Civil Rule 12(B)(6)'s standards are a matter of great interest.

'1'hey affect every civil case. And they represent the gateway to the costly discovery process.

The financial stakes are high. Indeed, the United States Suprenie Court rejected a reading of

Conley similar to the Eightli District's because "the threat of discovery expense will push cost-

conscious defendants to settle even anemic cases before reaching [summaryjudgment]

proceedings." Twombly, 550 U.S. at 559; Dura Plzarm., Inc. v. Broudo (2005), 544 U.S. 336,

347 (court should not allow plaintiff to take "up the time of ... other people, with the right to do

so representing an in terrorem increment of the settlement value"). The same concerns have

been expressed in Ohio. W.K. v. Farrell (2d Dist.), 167 Ohio App.3d 14, 2006-Ohio-2676, at

¶ 31 ("We are aware that the discovery process is often the most expensive and time-consuming

facet of civil litigation."). This issue, too, cries out for the Court's guidance.

3. The Proper Reading Of Ohio Real Estate Law. Finally, besides these two crucial

pleading issues, the Eiglitlz District's decision implicates a pure question of law with potentially

dramatic consequences for real estate agents. The issue concerns the statutory definition of a

"dual agent'." Ohio law places restrictions on such a "dual agent," which is defined as "a

brokerage that represents both the purchaser and the seller as clients in [a] transaction."

R.C. 4735,70(B); see R.C. 4735.71-.72. Here, the Fuscos' complaint alleged that their real estate

brokerage was MMREIS, whereas the Sellers had a separate brokerage, MMOH. (R.72, 2d Am.

Compl. ¶ 10-11, 18.) Yet, the complaint sought to hold MMOH, the Sellers' brokerage, liable

6

for a breach of a fiduciary duty allegedly owed by MMOH to the Fatscos, the party on the

opposite side. The Fuscos did so by arguing that MMREIS and MMOH, separate defendants,

constituted a "dual agent." (Id. 1112, 67, 69.) 1'he court of appeals ruled that these separate

corporations could perhaps constitute a dual agent under some (unidentified) set of facts because,

though the complaint named separate defendants (MMREIS and MMOH), "the relationship, if

any, among the various Marcus & Millichap third-party defendants [was] unclear." (App. 16.)

This holding requires review now, as it has the potential to plunge the Ohio real estate

industry into uncertainty. Prior to the Eighth District's decision, no court had ever held that

separate corporations could constitute a single brokerage for "dual agency" purposes. Cf. Moore

v. Dow (5th Dist. Dec. 22, 2000), Nos. CT-2000-0014, CT-2000-0017, 2000 WL 1886257, at *8

(noting that "no dual agency was contemplated" where agents of same brokerage parfieipated in

transaction "because neither agent acted as the exclusive representative for both the buyer and

the seller"). While the Eighth District's decision conteinplated such a rule, it failed to provide

guidancc on the kind of "relationship" necessary to create this dual agency-especially under a

complaint that on its face pleaded that the two brokerages were separate. Indeed, the only thing

common to these two corporations is that the beginnings of their names sound the same. (App.

16.) Surely, even the Eighth District would not allow GMAC real estate brokers to be sued by

someone who bought a defective GM automobile. But the court's decision makes no effort to

draw the line of demarcation anywhere short of that implausibility.

Nor does the statutory language fill in the gaps of the Eighth District's decision. To the

contrary, it defines "brokerage" to include a single "corporation ... issued a broker's license,"

R.C. 4735.51(E); it does not contemplate separate corporations with separate licenses qualifying

as a single entity for dual-agency purposes. As a general matter, therefore, the Eightli District's

7

decision leaves real estate brokerages in the dark as to when the statute's dual-agency limits

might apply, an untenable situation that demonstrates the need for the Court's review.

This uncertainty deserves immediate attention, moreover, because of the potentially dire

consequences for violating dual-agency rules. Real estate brokers could suffer suspensions or

fines, notwithstanding good-faith niisinterpretations of the law. See Habeeb v. Ohio Dept. of

Commerce (8th Dist.), 2004-Ohio-138, at ¶ 13 (rejecting "misunderstanding of the law" defense

for dual-agency provisions). And, under eertain circumstances, the dual-agency provisions allow

clients to rescind agreements with real estate brokers after the fact, and thus avoid paying their

commissions, for teclmical violations. See R.C. 4735.72(F). Given these significant stakes for

the industry, the Court should step in to restore badly needed clarity.

* * *

In suni, any one of these three high-stakes legal questions would merit the Court's

review. That they are presented in one case makes the need for review even more compelling.

'I'he Court should accept jurisdiction over these questions of public and great general interest.

STATEMENT OF THE CASE AND FACTS

This case stems from the sale of Hedgewood Apartments, an apartment complex on

Cleveland's west side. (R.72, 2d Am. Compl. ¶ 9.) The Sellers in the transaction were

represented by Gary Cooper, a real estate agent with MMOH. (Id. ¶ 11, 18.) The Fuscos (the

Appellees), a group of Californians and related entities, were represented by Kevin Blitz, a real

estate agent with MMREIS. (Id. 10, 18.) The Fuscos used MMCC as the mortgage broker to

help finance their purchase. (Id. ¶ 14.) LaSalle Bank, N.A., provided the financing, but it

assigned its interests in the mortgage to Wells Fargo Bank, N.A. (Ia'. at Ex. A. ¶ 9-11, 14.)

The Fuscos assumed ownership on December 28, 2005. (Id. ¶ 22.) Within two years, as

the commercial real estate market in Cleveland cooled, they stopped paying their mortgage. (Id

9

at Ex. A¶ 17.) Wells Fargo tlius initiated foreclosure proceedings against tliem. (Id at Ex. A.)

Apparently without good defenses to their failure to pay (the court granted summary

judgment to Wells Fargo), the Fuscos began looking to shift the blame for their default. They

ultimately settled on a strategy to claim that they were duped into buying Hedgewood by just

about everybody involved in the real estate deal. They filed a third-party complaint against not

only the Sellers, but also the Sellers' real estate broker (MMOI1), and even the Fuscos' own real

estate (MMREIS) and mortgage (MMCC) brokers. After a full round of written discovery,

including interrogatories and document requests, the Fuscos filed a second amended complaint.

As relevant here, that complaint alleged that MMCC committed fraud. (Id. ¶ 24-31.)

Specifically, it alleged tliat, on December 20, 2005, an miidentified MMCC representative falsely

"certilied to [the Fusoos] and [LaSalle] Bank ... that the average monthly occupancy rate at

Hedgewood was ninety-seven percent ...." (Id 1[ 19.) The claim is based on a document

attached to the coniplaint, which appears to be a "Rent Roll" form provided to the Bank to secure

the mortgage, and appears to have been signed by plaintiff Joe Fusco himself. The form

indicates a certain occupancy rate for I-Iedgewood; the complaint asserts that it constitutes a

misrepresentation of occupancy by some (unnanied) MMCC broker to the Fuscos. (Id. at Ex. E.)

The complaint also asserts a breach of fiduciary duty count against MMOH and

MMREIS, alleging that each "advocated and negotiated the interest of one party ... over the

interests of the other party." (Id. ¶ 18.) That is, perhaps, not surprising; the complaint itself

alleges that MMOI-I represented the Sellers, while a distinct brokerage and named defendant,

MMREIS, represented the Fuscos. (Id. ¶ 10-11, 18.) It makes sense that MMOH would

represent its client. Yet the complaint alleges that, in doing just that, MMOH breached liduciary

duties owed the Fuscos. (Id. ¶ 66-77.) To paper over the problem with the claim against

9

MMOH, the cotnplaint adds a naked allegation that some entity called "Marcus & Millichap"

(which is not a named defendant) was a "dual agent" in the deal-trying to elide the corporate

distinction between the two similarly named, but separate, brokerages.

Finally, the complaint added an "indenviification" count against MMREIS, MMOH, and

MMCC. (Id. ^ 59-62.) Nowhere did it allege any factual or legal basis on the part of any of

these entities to indemnify the Fuscos.

MMOH, MMREIS, and MMCC moved to dismiss the Fuscos' claims under Rules 9(B)

and 12(B)(6). (R.76, Mot. to Dismiss Compl.) First, MMCC moved to dismiss the fraud count

for failure to plead fraud with specificity. (Id. at 8-10.) Second, MMOH moved to dismiss the

breach-of-fidueiaiy-duty count because, as the Sellers' broker, it owed no fiduciary duty to the

Fuscos. (Id at 5-8.) Third, they all moved to dismiss the Fuscos' indenmification count because

Ohio law only permitted indemnification where (1) an express contract called for it or (2) one

tortfeasor should be liable for another's acts under vicarious-liability principles. The complaint

alleged neither situation. (Id, at 4-5.) The trial court granted the motion. (R. 117, Order.)

The Fuscos appealed after the trial court entered summary judgment against them in the

foreclosure proceedings. They challenged the dismissal of the fraud count against MMCC and

the breach-of-fiduciary-duty count against MMOH, but not the indemnification count, The

Eighth District reversed on the appealed issues, and inexplicably discussed the unappealed claim.

(App. 14-16.) Starting with the fraud count, the court found that the complaint sufficed

because- -although it did not identify the individual who made the alleged false statement-it

specified "the statements claimed to be false, the time and place where the statements were

made, and identif[ied] the [corporate] defendant [MMCC] claimed to have made them." (App.

15.) Turning to the breach-of-fiduciary-duty count, the court found a lack of "certainty" as to

10

whether MMOH and MMREIS could constitute a dual agent because "the relationship, if any,

among the various Marcus & Millichap third-party defendants [was] unclear"-even though the

complaint itself specified tliat the entities were distinct. (App. 16.) Finally, although the

indemnification claim was not before it, the court suggested it should have survived because the

complaint "[did] not indicate that there [was] no express contract of indemnity and [did] not

demonstrate the absence of an implied agreement of indemnity." (App. 15.)

ARGUMENT IN SUPPORT OF PROPOSITIONS OF LAW

Proposition Of Law No. 1: Civil Rule 9(B) Requires A Party Asserting Fraud To Identify

The Who, What, When, Where, And How Of The Alleged Fraud, Including The Particular

Individual Who Made The Allegedly False Statement.

The court below eiTed in holding that the Fuscos adequately pleaded fraud against

MMCC. Civil Rule 9(B) mandates that "the circurnstances constituting fraud ... be stated with

particularity." Under any definition, "the reference to `circunistances"' includes not only

"matters such as the time, place, and contents of the false representations or omissions," but also

"the identity qf the person making the misrepresentation." Wriglit & Miller, Federal Practice &

Procedure § 1297 (3d ed. 2004) (emphasis added); see Random House Webster's Unabridged

Dictionary 376 (2d ed. 2001) (defining "circunistance" as "a condition, detail, part, or attribute,

with respect to time, place, manner, agent, etc., that accompanies, determines, or modifies a fact

or event"). In other words, "[a]verments of fraud must be accompanied by the who what, when,

where, and how of the misconduct charged." Vess v. Ciba-Geigy Corp. USA (C.A. 9 2003), 317

F.3d 1097, 1106 (internal quotation marks omitted).

The Fuscos did not do so here. Most notably, the complaint asserts only that an

unidentified MMCC agent represented to the Fuscos that "the average monthly occupancy rate

over the preceding twelve months at I Iedgewood was ninety-seven percent." (R.72, 2d Am.

11

Compl. 1119, 26.) It does not identify who made this alleged representation, as several courts

have riglitly required. See Tripp, 2003-Ohio-6821, at ¶ 61-62; Advanced Prod. Ctr., 2003-Ohio-

6206, at 1116. That dooms their fraud claim.

Rule 9(B)'s underlying purposes reinforce this conclusion. For one thing, the Rule was

designed to ensure that fraud allegations "are concrete and specific so as to provide defendants

notice." Korodi, 40 Ohio App.3d at 4. The Fuscos' failure to identify the agent who allegedly

provided false information, however, falls short in satisfying this purpose. Allegations listing

unnamed agents force companies "to talk to every single one of their employees to determine

which ones niay have made possible misrepresentations." Tripp, 2003-Ohio-6821, at ¶ 64.

For another, the Rtile was crafted to "inhibit[] the filing of complaints as a pretext for

discovery of unknown wrongs." Reinglass v. Morgan Stanley Dean Witter, Inc. (8th Dist.),

2006-Ohio-1542, at ¶ 20. That the Fuscos cannot even identify the MMCC agent who worked

with them goes a long way in undermining their claim. Among other things, that they cannot

remember their own broker shows that they could not possibly have relied on his or her

assurances. That is confirmed by the fact that the statement their broker allegedly made to thern

comes from a form submitted to the Bank, and signed by none other than Joe Fusco. Instead,

they simply seek to use discovery to uncover their elaim. But "the puipose of discovery is not to

pemiit one party to conduct a`fishing expedition' for evidence to support their claim." Keenan

v. Adecco Employment Servs., Inc. (3d Dist.), 2006-Ohio-3633, at ¶ 15.

For a third, as discussed, the Rlile "protcct[s] defendants from unfounded charges of

wrongdoing which may injure their reputations." Byrd, 57 Ohio St.3d at 61. 'I'o permit the

Fuscos' claim to proceed would disserve that goal because it would pennit the Fuscos to harm

MMCC's reputation without providing the company a fair opportunity to defend itself. Without

12

knowledge of the MMCC actors involved, MMCC would be hindered in telling its side. After

all, "[a] corporation can only act through its employees." Tripp, 2003-Ohio-6821, at 1164.

Proposition Of Law No. 2: To Survive A Motion To Dismiss Under Civil Rule 12(B)(6), AComplaint Cannot Rely On Unsupported Conclusions But Must Set Forth FactualAllegations That Show A Plausible Entitlement To Relief.

Not once, but twice, the court of appeals erroneously accepted timsupported conclusions

as adequate to rebut a motion to dismiss. First, with respect to the breach-of-fiduciary-duty

claim against MMOH, the court relied on the bare allegation that "Marcus & Millichap" was a

dual agent. (App. 16; see R.72, 2d Am. Compl. ¶ 12.) There is no such defendant named. The

two named defendants, while they share those words as part of their name, are alleged to be

separate entities, each of which represented different sides. (Id. ¶ 10-11, 18.) Second, with

respect to the indemnification claim (which, again, the Fuscos did not appeal and was not before

the Eighth District), the court relied on the unsupported conclusion that the Fuscos were entitled

to indemnification. (App. 15-16.) This Court should not permit such conclusory allegations.

To begin, Rule 8(A) requires a"short and plain statement of the claim showing that the

party is entitled to relief." If a complaint contains unsupported conclusions lacking detail, it has

only "alleged-but ... not show[n]-that the pleader is entitled to relief" Iqbal, 129 S. Ct. at

1950 (emphasis added). Proving that point, this Court recognizes that "[u]nsupported

conclusions" "are not taken as admitted by a motion to dismiss and are not sufficient to

withstand such a motion." Mitchell v. Lawson Milk Co. (1988), 40 Ohio St.3d 190, 193.

Finally, this Court has in the past relied on federal law in interpreting the scope of Civil

Rule 12(B)(6), which is modeled on its federal counterpart. See O'Brien, 42 Ohio St.2d at 245

(quoting Conley, 355 U.S. at 45). It should do so again by incoiporating the United States

Supreme Court's Twombly decision into Ohio's pleading rules. Indeed, one Ohio court has

13

already done so. See Vagas v. City of Hudson (9th Dist.), 2009-Ohio-6794, at ¶ 13 & n.1. Under

Twombly, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to

relief that is plausible on its face." Iqbal, 129 S. Ct. at 1949 (internal quotation marks omitted).

It cannot rest on "[t]lireadbare recitals of the elements of a cause o1' action, supported by mere

conclusory statements." Id. The Eighth District thus erred in accepting as true both the Fuscos'

dual-agency allegations and their unexplained assertion that they had an indemnification right.

Proposition Of Law No. 3: Separate Corporations With Separate Broker's Licenses Can

Never Constitute Dual Agents Under Ohio Real Estate Law.

The court of appeals also erred in holding that the Sellers' brokerage (MMOH) could,

under some unidetitified set of facts not in the complaint or Ohio real estate law, owe a fiduciary

duty to the buyers (the Fuscos). (App. 16.) It is black-letter law that a real estate agent and his

brokerage owe fiduciary duties to clients, not to parties on the opposite side. See R.C. 4735.62;

Rako, 2005-Ohio-4884, at ^ 33. I-Iere, after substantial discovery, the Fuscos' amended

complaint pleaded that they "were represented in the purchase of Hedgewood by an agent of

MMREIS" while the Sellers "were represented in th[at] sale" by "an agent of MMOH." (R.72,

2d Am. Compl. ¶ 10-11, 18.) Because the complaint asserts that the Fuscos were clients of

MMREIS, it cannot state a claim for beach of fiduciary duty against MMOH.

The Eighth District rejected this clear analysis, opining that "the relationsliip, if any,

among the various Marcus & Millichap ... defendants [was] unclear." (App. 16.) But it failed

to explain why that matters. It does not. The Fuscos' complaint pleads that MMOH and

MMREIS are separate corporations on opposite sides of the deal. (R.72, 2d Am. Compl. Intro.

¶(identifyingtwo corporations as separate defendants); id. ¶ 10-11.) 1'he court needed only to

accept that pleading to reject the Fuscos' claim, NieSand, Inc. v. 3MCa (C.A. 6 2007), 507

F.3d 442, 457 (en bane) ("While [courts] must accept all... allegations as true at [the 12(B)(6)]

14

stage, that does not mean [courts] must ignore those allegations when they defeat the claim.").

For their part, the Fuscos erroneously argued that the complaint sufficed because it

pleaded that °Marcus & Millichap" was a dual agent. (R.72, 2d Am. Compl. 11 12.) For one

thing, alleging some unidentified entity called "Marcus & Millichap" was a dual agent says

nothing about whether named defendant MMOH was-and the complaint pleads the contrary for

MMOH. Besides, that allegation represents an "[u)nsupported conclusion[]," which is "not

taken as admitted by a motion to dismiss." Mitchell, 40 Ohio St.3d at 193. Whether separate

entities can constitute a dual agent is a matter of statutory interpretation, a legal question for the

Court that can be decided now. State v. Consilio, 114 Ohio St.3d 295, 2007-Ohio-4163, at ¶ 8.

Ohio law defines "dual agent" as a "brokerage that represents both the purchaser and the

seller." R.C. 4735.70(B). "Brokerage," in turn, is defined as a "corporation, partnership, limited

partnersliip, association, limited liability company, limited liability partnership, or sole

proprietorship issued a broker's license." R.C. 4735.51(E). Under this definition, MMREIS and

MMOH can never constitute a dual agent because, as the Fuscos' complaint pleads, they are

separate corporations. Nor is there any dispute about the accuracy of this pleading. MMREIS is

a corporation present in, and licensed to do brokerage in, California, where the Fuscos are from,

while MMOI-I is a corporation present in, and licensed to do brokerage in, Ohio, where the

Sellers reside.' Under no set of circumstances could the Fuscos prove that these separate

brokerages could constitute a single brokerage for the ptirposes of Ohio's dual-agency laws.

CONCLUSION

The Court should accept jurisdiction over this case and reverse the decision below.

1 The brokerage licenses are available online. See <http://elicensel-lookup.com.ohio.gov/SearchDetail.asp?idnt=86233&Divisionldnt=I &CredentialIdnt=71653> (MMOI-I Ohio license);<http://www2.dre.ca.gov/PublicASP/pplinfo.asp?License_ id=00530854> (MMREIS Californialicense). The court can take judicial notice of them; their existence is "ca pable of accurate andready determination by resort to sources whose accurac cannot reasonabl y be questioned.Evid. R. 20l(B)(2); State ex rel. Neffv. Corrigan ( 1996^, 75 Ohio St.3d 12, 16.

15

Dated: May 26, 2010 Respectfully submitted,

Chad Readler (0068394)Eric E. Murphy (0083284)JONES DAY325 John H. McConnell Blvd., Suite 600P.O. Box 165017Columbus, OH 43216Telephone: (614) 469-3939Facsimile: (614) 461-4198careadler@j onesday.comeemurpliy@jonesday.com

Brian J. Muiray (pro hac vice pending)(Counsel of Record)JONES DAY77 West Wacker Driver, Suitc 3500Chicago, Illinois 60601-1692Telephone: (312) 782-3939Facsimile: (312) 782-8585bj murray@i onesday. con7

Attorneys for Appellants Marcus &Millichap Real Estate Investment Services,Inc., Marcus & Millichap Real EstaleInves[mentServices ofOhio, Inc., andMarcus & Millichap Capital Corporation

16

CERTIPICATE OF SERVICE

I hereby certify that a true copy of this Memorandum in Support of Jurisdicrion was

served upon the following by electronic mail and UPS overnight delivery this 26th day of May,

2010:

Alan P. DiGirolamo, Esq.John P. Slagter, Esq.BUCKINGIIAM, DOOLITTLE & BURROUGIIS, LLP1375 EastNinth Street, Suite 1700Cleveland, OH 44114adigirolamo@bdblaw.oomjslagter@bdblaw.com

Attorneys for Appellees Fusco Properties, LLC,(:K Fusco Properties, LLC, Carlo Fusco, Sr.,Mariano Fusco, Anthony Digati,Angie Digati, and Giuseppe Fusco

One of the A ttorneysfor Appellants Marcus& Millichap Real Estate InvestmentServices, Inc., Marcus & Millichap RealEstate Investment Services of Ohio, Inc., andMarcus & Millichap Capital Corpor•ation

APPENDIX

APR l ^J' 2010

CCourt of Z[PPea1!6 of QAbiaEIGHTH APPELLATE DISTRICT

COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINIONNos. 92689 and 93164

WELLS FARGO BANK, N.A.

PLAINTIFF-APPELLEE

vs.

FUSCO PROPERTIES, LLC, ET AL.

DEFENDANTS-APPELLANTS

JUDGMENT:AFFIRMED (APPEAL NO. 93164)

REVERSED AND REMANDED (APPEAL NO. 92689)

Civil Appeal froni theCuyahoga County Court of Common Pleas

Case No. CV-644627

BEFORE: Dyke, P.J., Boyle, J., and Jones, J.

RELEASED: April 1, 2010

JOURNALIZED: F%r^ ;e ^ 20^0

7'U' 2 ;10? 2 31App. 1

-i-

ATTORNEYS FOR APPELLANT FUSCO PROPERTIES, LLC, ET AL.

Alan P. DiGirolazno, Esq.Justin M. Alaburda, Esq.John P. Slagter, Esq.Buckingham, Doolittle & Burroughs, LLP1375 East Ninth StreetSuite 1700Cleveland, Ohio 44114

ATTORNEYS FOR APPELLEE WELLS FARGO BANK, N.A.

Elia O. Woyt, Esq.Jennie L. Church, Esq.Marquettes D. Robinson, Esq.Mai.ueen P. Tracey, Esq.Elizabeth A. Davis, Esq.Elizabeth A. Ratliff, Esq.Vorys, Sater, Seymour and Pease, LLP2100 One Cleveland Center1375 East Ninth StreetCleveland, Ohio 44114-1724

Brian Murray, Esq.Jones Day77 West WackerChicago, Illinois 60601-1692

(Continued)

702 PG0232

App. 2

ATTORNEYS FOR MARCUS & MILLICHAP CAPITAL CORP.

Paula G. Shakelton, Esq.1660 West 2nd Street, Suite 1100Cleveland, Ohio 44113

Brian F. Toohey, Esq.Jones DayNorth Point Bttilding901 Lakeside BuildingCleveland, Ohio 44114

APR 12 2010

RS7

11113 11111 II^11I1ll1IIII1II111111111111111I11I11 653CAp9(29316a 62481654

I IIIIII IIIII ICIII INII Nlil If III NIII lllll Ilil IIII

FILED AND JOURNALIZ^EDPER APP.R. 22(C)

CL"RK Ui^f1^E Q^T^ APP P^5BY_

ANNOUNCEMENT OF DECISIONPER APP.R. 22{8) AND 26(A)

RECEIYED

APR 0 1 2010

GERALD E.FUERSTCLERffjOF OURT OF APPEALS

BY-go/ DHP.

N.B. This entry is an announcement of the court's decision. See App.R. 22(B) and26(A); Loc.App.R. 22. This decision will be journaiized and will become the judgmentand order of the court pursuant to App.R. 22(C) unless a motion for reconsiderationwith stapport.ing brief per App.R. 26(A), or a motion for consideration en banc withsupporting brief per Loc.App.R. 25.1(B)(2), is filed within ten days of theannounceinent of the court's decision. The time period for review by the SupremeCourt of Ohio shall begin to run upon the journalization of this court's announcenientof decision by the clerk per App.R. 22(C). See, also, S.Ct. Prac.R. 2.2(A)(1).

^,t 6m,:^70 2 rG^J233

App. 3

-1-

ANN DYKE, P.J.:

In these consolidated appeals, appellants Fusco Properties LLC, CK Fusco

Properties LLC, and individuals Carlo Fusco, Sr., Mariano Fusco, Anthony

Diganti, Angie Diganti, and Giuseppe Fusco' ("appellants") challenge the

judginent of the trial court that service of process was sufficient in the

foreclosure action filed by appellee Wells Fargo Bank N.A. (Appeal No. 93164),

and the order that dismissed appellants' third party claims against Marcus &

Millichap Real Estate Investment Services and Marcus & Millichap Capital

Corp. (Appeal No. 92689). For the reasons set forth below, we affirm Appeal No.

93164 and reverse and remand Appeal No. 92689.

Appellants, the purchasers of the Hedgewood Apartment Complex,

executed a Multifamily Note in the amount of $2,640,000 payable to LaSalle

Sank, N.A. They also executed a Multifamily Mortgage, Assigninent of Rents

and Security Agreement, payable to LaSalle Bank, N.A. In addition, Carlo

Fusco, Sr., Mariano Fusco, Anthony Diganti, Angie Diganti, and Giuseppe Fusco

also executed a Guaranty of Payrnent to LaSalle in their individual capacities.

` Appellants Carlo Fusco, Sr., Mariano Fusco, Anthony Diganti, Angie Diganti,and Giuseppe Fusco are collectively referred to herein as "the individual appellants."

V^LU I il 2 ?b:i L 3 ^lApp. 4

_Z_

On May 1, 2006, LaSalle assigned its interest in this matter to Wells Fargo

Bank, N.A., Trustee for the registered holders of various LaSal.le Commercial

Mortgage Sectu•ities. On December 14, 2007, Wells Fargo filed a complaint for

foreclosure against appellants, and any unknown spouses of the individual

appellants, in connection with the purchase of the Hedgewood Apartment

Complex, alleging, inter alia, that appellants had defaulted on the Multifamily

Note, and that there was due and owing to plaintiff on the note the aggregate

sum of $2,745,206.50. Appellant CK Fusco Properties, LLC was served with

summons and complaint via its statutory agent. The remaining appellants were

served via certified mail at Adirondack Lane in Claremont, California, the

address listed on the General Warranty Deed as the tax mailing address for

defendants. The record contains signed return service receipts for all appellants.

Appellants submitted an answer in which they asserted that appellee did

not state the correct address for the individual appellants. Appellants also

asserted that the court lacked jurisdiction over appellants and that the claims

were barred by insufficiency of service of process.

Appellants filed a third party complaint against Wynn Investments, LLC

and Brenda Niederst claiming that these third-party defendants made false

statements as to the occupancy rate and rent rolls at the complex, and breached

the purchase agreement for the Hedgewood Apartment Complex. In an

App. 5

-3-

amended third-party complaint, appellants also set forth third-party claims

against mortgage broker Marcus & Millichap Capital Corp. ("MMCC"),

Niederst's real estate broker, Marcus & Millichap Real Estate Investment

Services of Ohio ("MMREO") and appellants' real estate broker, Marcus &

Millichap Real Estate Investment Services, Inc. ("MMREI"). In relevant part,

appellants asserted that MMCC "certified to [A.ppellants] and [LaSalle], under

penalty of perjury, that the average monthly occupancy rate at Hedgewood was

ninety-seven percent (97%) over the preceding twelve months." Appellants also

asserted that they entered into the purchase agreement based upon the

representations of Niederst, Ryan Investments, LLC and MMCC, that the

representations were materially false. Appellants set forth a third-party claim

for fraud against MMCC, a claim for indemnification against all of the Marcus

& Millichap entities, and a claim of breach of fiduciary duties against MMREO

and MMREI alleging improper "dual agency."

Wynn Investments, LLC, successor to Ryan Investments, LLC and

Niederst subsequently filed cross-claims for indemnification and contribution

against the Marcus & Millichap third-party defendants.

On August 25, 2008, the Marcus & Millichap third-party defendants filed

a motion to dismiss the third-party claims and cross-claims against them

pursuant to Civ.R. 12(B)(6). In relevant part, the Marcus & Millicliap entities

,`o I ^i r 0 2 rG 0 Z 3 6App. 6

-4-

asserted that the claim for indemnification must fail since there was no express

right of indemnification and there could be no implied right of indemnification

since appellants did not allege that "the Fuscos are related tortfeasors" with the

Marcus & Millichap parties and did not allege that "the Fuscos have been held

vicariously liable for any tort[.]" The Marcus & Millichap parties also asserted

that the claim for breach of fiduciary duties from "dual agency" must fail since

MMREO represented the sellers of the Hedgewood Apartment Complex, not

appellants, and therefore owed appellants no fiduciary duties, and appellants'

broker worked for a different entity, MMREI. In addition, the Marcus &

Millichap parties maintained that the fraud claim must fail for lack of

particularity under Civ:R. 9(B).

On October 28, 2008, the trial court dismissed the third-party claim of

fraud against MMCC, the third-party claim for indemnification against all

Marcus & Millichap defendants, the third-party claim of breach of fiduciaiy duty

against MMREO, and Niederst and Wynn Investment, LLC's cross-claim against

MMREO. Appellants dismissed their remaining third-party claims and filed a

notice of appeal from this ruling in Appeal No. 92689.

With regard to the foreclosure proceedings, Wells Fargo moved for

summary judgment asserting that the Multifamily Note remains unpaid and

that it has a valid first and best lien on the property. The individual appellants

us0237

App. 7

-5-

also znoved for summary judgment and maintained that they were not properly

served. According to these appellants, service of process was not reasonably

calculated to reach them at the Adirondack Lane address in Claremont,

California where service was sent as this is the registered business address for

Fusco Properties but is neither the residence or place of business for the

individual appellants. In opposition, Wells Fargo indicated that the individual

defendants do not deny being served herein, that the Adirondack Lane address

was provided by the appellants in the Warranty Deed for the subject property,

and in the Mailing Address Request from the loan document packet. Wells

Fargo also filed a praecipe for amended service, instructing the clerk of courts

to serve the individual appellants at their residences, and a motion to amend

process nunc pro tunc. Appellants moved to strike this motion.

The trial court subsequently granted Wells Fargo's motion for summary

judgment in the amount of $2,745,206.50, and denied the motion for summary

judgment filed by the individual appellants. The trial court also denied the

motion to amend process nunc pro tunc and concluded that seYVice at the

Adirondack Lane address was reasonably calculated to reach the appellants.

On February 2, 2009, the foreclosu-re magistrate issued a decision in which

he found that "all necessary parties have been served with Summons and

Complaint according to law and that service of process on all Defendants was

App. 8

-6-

sufficient." Appellants objected to this finding. The trial court overruled the

objections and adopted the magistrate's decision. Appellants appeal from this

order in Appeal No. 93164. For the sake of clarity, we shall address Appeal No.

93164 first.

Appeal No. 931.64

Sufficiency of Service of Process

For their sole assignment of error in Appeal No. 93164, appellants state:

"The trial court abused its discretion in adopting the magistrate's decision

by finding that all of the Appellants were served with summons and complaint

according to law and that service of process on all Appellants was sufficient."

The deterniination by the trial court of the question of sufficiency of

service of process is a matter in its sound discretion. Ma.goteaux u. Magoteau.x

(Nov. 26,1986), MiamiApp. No. 86-CA-16, unreported; Lanza u. Lanza (June 11,

1992), Cuyahoga App. No. 60225.

In Money Tree Loan Co. u. Williarns, 169 Ohio App.3d 336,

2006-Ohio-5568, 862 N.E.2d 885, this Court explained:

"Civ.R. 4.1 outlines how a plaintiff may effect proper service of a summons

and complaint upon a defendant. Case law interpreting this rule and defining

the parameters of constitutionally sufficient due process holds that service of

process must be made in a manner reasonably calculated to apprise interested

^r0!!.^IG^ ^u;1239

App. 9

-7-

parties of the action and to afford them an opportunity to respond.

Akron-Canton Regional Airport Auth, v. Swinehart (1980), 62 Ohio St.2d 403,

406, 16 0.O.3d 436, 406 N.E.2d 811, quoting Mullane u. Cent. Hanouer Bank &

Trust C'o. (1950), 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865. In order for

service of process to a business address to be `reasonably calculated' to apprise

an individual of an action, `the party being served must have such a habitual,

continuous or highly continual and repeated physical presence at the business

address that the party ordering the service of process would have reasonable

grounds to calculate that the service would promptly reach the party being

served.' Bell u. Midwestern Educational Serv., Inc. (1993), 89 Ohio App.3d 193,

202, 624 N.E.2d 196.

"The plaintiff in a case bears the burden of achieving proper service on a

defendant. Cincinnati Ins. Co. u. Emge (1997), 124 Ohio App.3d 61, 63, 705

N.E.2d 408. In those instances where the plaintiff follows the Ohio Civil Rules

governing service of process, courts presume that seivice is proper unless the

defendant rebuts this presumption with sufficient evidence of nonservice.

Rafalski [v. Oates (1984), 17 Ohio App.3d 65, 66, 477 N.E.2d 12121, 17 Ohio

App.3d 65, 17 OI3R, 120, 477 N.E.2d 7.212; Grant a. Ivy (1980), 69 Ohio App.2d

40, 23 0.0.3d 34, 429 N.E.2d 1.188. The `party atteinpting to avoid jurisdiction

has the burden of showing a defect or irregularity in the process.' United Ohio

1IP^ ^u 0 2 4 0App. 10

-8-

Ins. Co. u. Rivera (Dec. 11, 1998), Ashtabula App. No. 98-A-0026, 1998 WL

965989. When a party seeking an order to vacate xnakes an uncontradicted

sworn statement that she never received service of a complaint, she is entitled

to have the judgnient against her vacated even if her opponent complied with

Civ.R. 4.6 and had service made at an address where it could reasonably be

anticipated that the defendant would receive it. Jacobs v. Szakal, Suminit App.

No. 22219, 2005-Ohio-2146, 2005 WL 1026685; [Clark v. Marc Glassman, Inc.,

Cuyahoga App. No. 82578], 2003-Ohio-4660, 2003 WL 22053446; Plain Dealer

PublishingCo. v. Percaiz, Cuyahoga App. No. 82205, 2003-Ohio-4347, 2003 WL

21957117(J"

Further, inAkron-Canton RegionalAirport Authority v. Swinehart (1980),

62 Ohio St.2d 403, 406 N.E.2d 811, syllabus, the Ohio Supreme Court held that

"[s]ervice of process may be made at an individual's business address pursuant

to Civ.R. 4.1(1), but such service must comport with the requirements of due

process." `Phe Supreme Court, however., warned of the "inherent risks" involved

in attempting certified mail service at a business address rather than at a

defendant's residence, but explained that each case must be examined "upon its

particular facts." Id. at 407.

In this inatter, the record supports the conclusion that service of process

was made in a manner reasonably calculated to apprise the appellants of the

Vc! 10 0 Z4 ^

App. 11

-9-

action and to afford theni an opportunity to respond because the Adirondack

Lane address was provided by the appellants in the Warranty Deed for the

subject property and in the Mailing Address Request from the loan document

packet. Thus, circumstances are such that successful notification could be

reasonably anticipated using that address.

This assignment of error is therefore without merit.

Appeal No. 93164 is hereby affirmed.

Appeal No. 92689

Dismissal of the Third-Party Complaint against Marcus & Millichap

Appellants' first and second assignments of error are interrelated and

state:

"`1'he trial court erred by dismissing the Appellants' claim for breach of

fiduciary duty against [MMREO] based upon the standards of Civ.R. 8(A) and

Civ.R. 12(B)(6)."

"The trial court erred by disniissing the Appellants' claitn for fraud against

MMCC based upon the standards of Civ.R. 8(A) and Civ.R. 12(B)(6)."

Pursuant to Civ.R. 12(B)(6), a motion to dismiss for failure to state a claini

upon which relief can be granted is p-rocedural and tests the sufficiency of the

complaint. D'Arraore v. Matthews, Cuyahoga App. No. 91420, 2009-Ohio-131.

V„l !u2 ^t^2^+2App. 12

-10-

Such motions should be granted only where the allegations in the

complaint show the court to a certainty that the plaintiff can prove no set of facts

upon which he might recover. Id. In ruling on a motion to dismiss for failure to

state a claim on which relief can be granted, the trial court must "construe the

allegations in the complaint in a light most favorable to the plaintiff and must

presume the truth of any factual allegation as contained in the coinplaint."

Uniuersal Coach, Inc. v. New York City Transit Auth., Inc. (1993), 90 Ohio

App.3d 284, 290, 629 N.E.2d 28. "In order to dismiss a case for failure to state

a clainz upon which relief can be granted, it must appear beyond doubt that tthe

plaintiffJ can prove no set of facts warranting relief, after all factual allegations

of the complaint are presumed true and all reasonable inferences are made in

[the plaintiffs] favor." State ex rel. Hunter u. Summit Cty. Human Resource

Corrtrn. (1998), 81 Ohio St.3d 450, 451, 692 N.E.2d 185.

Civ,R. 8(A)(1) provides that a pleading that sets forth a claim for relief

must contain "a short and plain statement of the claim showing that the party

is entitled to relief." A "heightened standard" of pleading is required when a

party brings a claim for fraud, B,yrd u. Faber (1991), 57 Ohio St.3d 56, 61, 565

N.E,2d 584, as Civ.R. 9(B) provides that "[ijn all averments of xfaud or mistake,

the circumstances constituting fraud or mistake shall be stated with

particularity." Under the particularity requirement, a party must (1) specify the

o L :`'ul)Z4 3App. 13

-11-

statements claimed to be false, (2) state the time and place where the statements

were made, and (3) identify the defendant who claimed to have made them.

Korodi v. Min,ot (1987), 40 Ohio App.3d 1, 4, 531 N.E.2d 318.

With regard to the substantive law regarding the right to indetnnity,

there must be an allegation of some implied or express contract creating a duty

by one party to indemnify the other. Reynolds v. Physicians Ins. Co. of Ohio

(1993), 68 Ohio St.3d 14, 623 N.E.2d 30. An implied contract of indemnity may

be recognized in situations involving related tortfeasors, where the one

committing the wrong is so related to a secondary party as to make the

secondary party liable for the wrongs committed solely by the other. Losito v.

Kruse (1940), 136 Ohio St. 183, 24 N.E.2d 705; Reynolds v. Physiciarts Ins. Co.

of Ohio, supra.

In this matter, with regard to the third-party claim for fraud, the

appellants alleged in their fraud claim that "a representative of MMCC, acting

within the scope of employment, certified to Defendants/Third party Plaintiffs

and the Bank, under penalty of perjury, that the average monthly occupancy

rate over the preceding twelve months at Hedgewood was ninety-seven percent

(97%) [;that] MMCC made the foregoing material misrepresentation as a matter

of present fact with. the intention that Defendant/Third party Plaintiff would rely

on such representation[; ] the representation **" was false [;] * * * and MMCC

„.. 2 G6!:) 2 4 '

App. 14

-12-

either knew that the oral and written representations concerning the occupancy

rate at Hedgewood were false, or they recklessly asserted them as true without

knowing whether they were true or false." Appellants further alleged that if

they had accurate information they would not have agreed to purchase the

complex and that they have sustained damages as the result of the alleged fraud.

These allegations specify the statements claimed to be false, the time and

place where the statements were inade, and identify the defendant claimed to

have made them. They are therefore sufficient to set forth a claim for fraud.

Further, it does not appear beyond doubt that appellants can prove no set of

facts warranting relief, after all factual allegations of the complaint are

presumed true and all reasonable inferences are made in their favor, so the trial

court therefore erred in dismissing the third-party complaint pursuant to Civ.R.

12(B).

With regard to the claim fo: ndemnification, the third-party complaint

does not show the court to a certainty that the third-party plaintiffs can prove

no set of facts upon which they might recover upon the claim for indemnity as

the complaint does not indicate that there is no express contract of indemnity

and does not dernonstrate the absence of an implied ag--,eement of indemnity. It

does not appear beyond doubt that appellants can prove no set of facts

warranting relief, after all factual allegations of the complaint are presumed

J'd'!Iul_ ;0^s2L}5App. 15

-13-

true and all reasonable inferences are made in their favor. The trial court

therefore erred in disxnissing this claim for relief pursuant to Civ.R. 12(B).

Similarly, as to the claim of breach of fiduciary duty for dual

representation, the complaint does not show the court to a certainty that the

third-party plaintiffs can prove no set of facts upon which to recover as the

relationship, if any, among the various Marcus & Millichap third-party

defendants is unclear at this time.

In accordance with the foregoing, the third-party complaint was sufficient

to state claims for fraud and breach of fiduciary duty, and the trial court

therefore erred in dismissing this pleading. The first and second assignments

of error are well-taken.

Appellants' third assignment of error states:

"The trial court erred by not treating the motion to disiniss as a motion for

summary judgment."

In light of our disposition of the first and second assignments of error, the

third assignment of error is moot. App.R. 12(A)(1)(C).

Appeal No. 93164 is affirmed. Appeal No, is 92689 is reversed and

remanded.

;7uG ^r0 2^6App. 16

-14-

It is ordered that appellee and appellant split the costs herein taxed.

The Court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate issue out of this Court directing the

Common Pleas Court to carry this judgment into execution.

A certified copy of this entry shall constitute the mandate pursuant to

Rule 27 of the Rules of Appellate Procedure.

ANN DYKE, PRESIDlG JUDGE

MARY J. BOYLE, J., andLARRY A. JONES, J_, CONCUR

7 0 2. Q 247App. 17