OBF-Carlson sue SJB

8/6/2019 OBF-Carlson sue SJB

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CASE 0:09-cv-00907-DSD-JJG Document 1-1 Filed 04/20109 ~'t~~@'O) D50/CJJb

CASE TIPE: CONTRACtSTATE OF MINNESOTA DISTRICT COURTCOUNTY OF HENNEPIN FOURTH JUDICIAL DISTRICT

OPPORTUNITY BRIDGE FUNDING,LLC, a Delaware limited liability company,and THE GERMAINE TOMLINSONINSURANCE TRUST, a Delaware Trust;

FileNo.:

Plaintiffs,VS. SUMMONSSJB INVESTMENTS, LLC, a Nevadalimited liability company and J .A . lVmS C .BURCHARD, individually and as managingpartner of sm Investments, LLC,

Defendants.

THE STATE OF MINNESOTA TO THE ABOVE-NAMED DEFENDANT:YOU ARE HEREBY SUMMONED and required to serve upon Plaintiffs' attorney an

Answer to the Complaint, which is herewith served upon you, within twenty (20) days of thedate of service of this Summons upon you, exclusive of the day of service. If you fail to do so,judgment by default will be taken against you for the relief demanded in the Complaint.

Please take notice that all civil cases are subject to alternative dispute resolution (ADR)processes as provided in Rule 114 of the Minnesota General Rules of Practice.

SCANtJ(DAPR 2a z~ og .

U.S . D/Sl 'RJcr CO !-S

EXH IB IT A


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------------------------------.-.-- - .

vs, SUMMONS

CASE 0:09-cv-00907-DSD-JJG Document 1-1 Filed 04/20109 Page 2 of 20

CASE TYPE: CONTRACTSTATE OF MINNESOTA DISTRICT COURTCOUNlY OF HENNEPIN FOURTH JUDICIAL DISTRICT

OPPORTUNITY BRIDGE FUNDING,LLC, a Delaware limited liability company,and THE GERMAfNE TOMLINSONINSURANCE TRUST, a Delaware Trust;

File No.:

Plaintiffs,

SJB INVESTMENTS, LLC, a Nevadalimited liability company and JAMES C.BURCHARD, individually and as managingpartner of SJB Investments, LLC,

Defendants.

THE STATE OF MINNESOTA TO THE ABOVE-NAMED DEFENDANT:YOU ARE HEREBY SUMMONED and required to serve upon Plaintiffs' attorney an

Answer to the Complaint, which is herewith served upon you, within twenty (20) days of thedate of service of this Summons upon you, exclusive of the day of service. If you fail to do so,judgment by default will be taken against you for the relief demanded in the Complaint.

Please take notice that all civil cases are subject to alternative dispute resolution (ADR)processes as provided in Rule 114 of the Minnesota General Rules of Practice.


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Dated: March ~ 2009 M E A " ? i P L L PBY:~ ~

Charles E. Jones, # 0202708


Dated: March I!,2009 WINTHROP & WEINSTINE, P.A.

~~-Michael J. Rothman, #0195479Aimee D. Dayhoff, #0319041225 South Sixth StreetSuite 3500Minneapolis, Minnesota 55402Telephone: (612) 604-6400Attorneys for PlaintiffOpportunity Bridge Funding, LLC

33 South Sixth StreetSuite 4200Minneapolis, MN 55402Telephone: (612) 347-9140Attorneys for PlaintiffThe Germaine Tomlinson Insurance Trust

Dated: March_, 2009 MC CROSSON &ASSOCIATES, P.C.Dennis F. McCrosson[Motion for pro hac vice to be filed]6249 U.S. Highway 31 South, Suite AIndianapolis, IN 46227Telephone: (3i) 791-7800Attorneys for PlaintiffThe Germaine Tomlinson Insurance Trust

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CASE TYPE: CONTRACTSTATE OF MINNESOTA DISTRICT COURTCOUNTY OF HENNEPIN FOURTH JUDICIAL DISTRICT

OPPORTUNITY BRIDGE FUNDING,LLC, a Delaware limited liability company,and THE GERMAINE TOMLINSONINSURANCE TRUST, a Delaware Trust;

FileNo.:

Plaintiffs,VS. COMPLAINTSJB INVESTMENTS, LLC, a Nevadalimited liability company and JAMES C.BtJRCHARD, individually and as managingpartner ofSm Investments, LLC,

Defendants.

Plaintiffs Opportunity Bridge Funding, LLC ("OBF') and The Germaine TomlinsonInsurance Trust (the ''Trust'') (collectively referred to as "Plaintiffs"), as and for their Complaintagainst 8JB Investments, LLC ("SJB") and James C. Burchard ("Burchard") (collectivelyreferred to as "Defendants"), state and allege as follows:

PARTIESI. OBF is a Delaware limited liability company with its principal place of business

located at 220 South 6th Street, Suite 1200, Minneapolis, Minnesota 55402.2. The Trust is a Delaware statutory trust created under a Trust Agreement dated

January 23, 2006, as amended, with its situs located at III Barksdale Professional Center

Newark, DE 19711.3. SJB I S a Nevada limited liability company with its principal place of business at

7545 West Sahara, Suite 210, Las Vegas, Nevada 89117.


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FACTUAL BACKGROUND

THE OBF SENIOR LOAN7. On or about October 3,2008, SJB, by its managing partner, Burchard, and acting

as a broker, presented an opportunity to, solicited, and induced OBF to make a short-term loan,or bridge loan, to refinance a premium finance loan from LaSalle Bank, N.A. ("LaSalle Loan"),which was secured by a first priority perfected security interest in an underlying $15 millioninsurance policy. By then, the LaSalle Loan, with a maturity date of September 30, 2008, hadgone into default.

8. In reliance upon SJB's and Burchard's representations and statements, OBPagreed to make a bridge loan to the Trust. During the bridge-loan transaction until its closing, allcommunication between OBF and the Trust went through SIB and Burchard. On or aboutOctober 8, 2008, OBF sent bridge-loan documentation to SJB and Burchard, for execution by theTrust.


4. On information and belief, James C. Burchard ("Burchard") is an individualresiding in Las Vegas, Nevada 89117, and is SJB's managing partner .

.JURISDICTION AND VENUE5. Jurisdiction is proper in the State of Minnesota because Defendants have had

sufficient minimum contacts with Minnesota to the extent that subjecting them to personaljurisdiction in this state does not violate the principles of fairness and substantial justice.Defendants have purposefully availed themselves by initiating, soliciting and transactingbusiness within this state, which has caused substantial injury within this state.

6. Venue is proper because the causes of action or some part thereof arose in andtook place in Hennepin County.

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9. On or about October 13, 2008, SJB and Burchard returned the bridge-loandocuments executed by the Trust's Co-Trustee to OBF, and thereafter, on October 14, 2008,OBP sent by wire transfer $1,273,902.17 to pay-off the LaSalle Loan.

10. Pursuant to that certain Letter Agreement for Bridge Financing dated October 8,2008 executed by and between the Trust (the "Borrower") and OBF ("Senior Lender") (the"Senior Loan Agreement"), OBF documented a bridge loan to Borrower in the original principalamount of One Million Two Hundred Seventy-Three Thousand Nine Hundred Two andI7/100ths Dollars ($1,273,902.17) (the "Senior Loan").

11. The obligation of Borrower to repay amounts advanced under the Senior Loan isevidenced by a Promissory Note dated October 8, 2008 executed by Borrower in favor of OBF inthe original principal amount of the Senior Loan (the "Senior Note" including any amendment,modification, supplement, extension, renewal, replacement or restatement thereof). The maturitydate of the Senior Note was January 11, 2009. The Senior Note executed by the Trust grants toOBF, among other things, a first priority perfected security interest in the Policy.

12. As set forth in the Senior Note, Borrower pledged and granted to OBF firstpriority perfected security interest in, and a right of set-off against the underlying collateral, a lifeinsurance policy and all proceeds thereof (the "Borrower's Collateral") and the rights thereto ascollateral for the full and prompt payment, performance and discharge when due of allindebtedness and responsibilities of Borrower arising under the Senior Note. (The LetterAgreement and Senior Note, together with all other documents and instruments evidencing andsecuring the OBF Loan, are hereinafter collectively referred to as the "Senior Loan Documents."The Trust's Collateral and the Additional Collateral are hereinafter collectively referred to as the


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"Senior Collateral.") A copy of the OBP Senior Loan Documents are attached hereto asExhibit A.

13. There presently exists certain Events of Default under the Senior LoanDocuments, including, without limitation, that Borrower failed to provide OBP a first priorityperfected security interest in the Policy and pay principal and interest due on January 11, 2009.Accordingly, the Trust owes additional amounts for default under the Senior Loan Documents.

SJB'S FRAUDULENT CONDUCT14. On or about January 6, 2009, SJB orally represented to OBP that SJB had

obtained a Collateral Assignment from the Trust and had submitted the Collateral Assignment tothe insurance carrier to secure a loan from SJB to the Trust in the amount of approximately $1.85million. While SJB advised OBP in December 2008 that SJB had "money" into this matter, SJBcontended it had nothing to do with the OBP Senior Loan. SJB also had never previouslydisclosed to OBP that it had obtained a Collateral Assignment to secure a loan from SJB to theTrust.

15. On or about January 8, 2009, at OBF's request to gain further information aboutSJB's loan, the Trust's attorney provided OBP a copy of certain SJB loan documents, whichrevealed that SJB impermissibly and fraudulently attempted to gain senior-loan status overOBF's Senior Loan Documents. Subsequently, on or about January 14, 2009, at OBF's request,SJB's counsel at Lewis & Roca also sent certain SJB's loan documents, which confirmed to aBPthat SJB had attempted to gain senior loan status over OBF's Senior Loan.

16. Pursuant to a purported SJB Master Promissory Note (the "SJB Note") executedby the Trust and several other Borrowers (collectively, the "Debtors") on October 10, 2008, and


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back-dated by sm to October 7, 2008, Debtors agreed to pay to sm $1,850,000.00 (the "smLoan").

17. Payment of the sm Note and performance of the obligations of the Debtors ispurportedly secured in part by Assigrunent of Life Insurance Policy as Collateral and Securitydated October 10, 2008 (the "Policy Collateral Assignment") which purportedly assigns to SJBall of Borrower's right, title and interest in and to the Policy and to any all net proceeds of thePolicy due to the death of the insured.

18. The purported assignment of the Policy and purported grant of a security interestin the Policy to SJB is further evidenced by purported UCC-l Financing Statements naming eachof the Debtors as debtor and sm as the secured party which UCC Statements were filed onOctober 10, 2008 in the offices of the Secretary of State of the State of Indiana and the Secretaryof State of the State of Delaware. (The SJB Note, together with all other documents andinstruments evidencing and securing the 8JB obligation, are hereinafter collectively referred toas the "8JB Loan Documents.")

19. On information and belief, the sm Loan Documents were prepared by Lewis &Roca for 8JB and at the direction of Burchard.

20. On information and belief, sm delivered its Policy Collateral Assignment to theinsurance carrier in order for sm to be recognized as the purported assignee of the insurancepolicy.


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21. Upon further investigation, 8JB and Burchard, as 8m's managing partner,schemed against and defrauded OBP and the Trust by creating, substituting, and presentingSJB's loan documents before and instead of OBF's Senior Loan Documents, and inducingTrust's execution of the SJB Note in advance of the OBF Senior Loan Documents thereby


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CASE 0:09-cv-00907-DSD-JJG Document 1-1 Filed 04/20109 .Page 9 of 20

attempting to gain senior loan status over OBP's Senior Loan Documents, putting the trust inimmediate default in its agreement with OBF.

22. Subsequently, in order to obtain the Trust's execution of OBF's Senior LoanDocuments, sm and Burchard misrepresented to the Trust that the OBF Senior Loan Documentsconstituted necessary additional documentation for the bridge loan financing.

23. SJB intentionally misrepresented and mischaracterized the nature of the SJB LoanDocuments and misrepresented, mischaracterized, withheld, and suppressed the OBF SeniorLoan Documents to the Trust in an effort to induce the Trust to execute the SJB Loan Documentsfirst so to achieve priority in the SJB loan over the OBF Senior Loan.

24. Contrary to OBF's and the Trust's true intention, SJB purportedly claims that theSJB Loan Documents and security interest have priority over the OBF Senior Loan Documentsand security interest which priority status is the product of fraud.

COUNT IFRAUDIRESCISSION(SJB and Burchard)

25. Plaintiffs restate and reallege the preceding paragraphs as though fully set forthherein.

26. sm and Burchard, acting as a broker, induced OBF to make a bridge loan to theTrust to pay off the Lasalle Loan.

27. sm and Burchard, acting as a broker, intentionally misrepresented to OBP thatOBP would be granted a first priority perfected security interest in the Policy.

28. The OBP Note grants to OBF, among other things, a first priority perfectedsecurity interest in the Policy.


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37. OBF entered into the OBF Senior Loan Documents dated October 8, 2008.

CASE 0:09-cv-00907 -DSD-JJG Document 1-1 Filed 04/20109 Page 10 of 20

29. OBF agreed to make the bridge loan in reliance on receiving a first priorityperfected security interest in the Policy.

30. SJB and Burchard, acting as a broker, schemed and conspired so that OBF wouldnot obtain first priority perfected security interest in the Policy.

31. SJB and Burchard, acting as a broker, fraudulently and intentionally postponedthe execution ofOBF Senior Loan Documents in their effort to advance SJB's priority lien statusagainst the policy.

32. SJB and Burchard, acting as a broker, and in violation of their duty to the Trust,induced the Trust to execute the SJB Loan Documents and the Policy Collateral Assignmentprior to the execution of the OBF Senior Loan Documents thereby causing the Trust to be indefault of the OBF Senior Loan Documents immediately upon their execution.

33. As a result ofSJB's and Burchard's fraudulent conduct, OBF has been damagedin an amount in excess of $50,000, the exact amount to be proven at trial.

34. As a result of SJB's and Burchard's conduct, the Trust has been damaged in anamount in excess of $50,000, the exact amount to be proven at trial.

35. Plaintiffs are each entitled to monetary and equitable relief, including, withoutlimitation, rescission of the SIB Loan Documents, based on Defendants' fraud and misconduct.

COUNT IIFRAUDULENT INDUCEMENT(SJB and Burchard)


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38. The Trust entered into the sm Loan Documents on October 10, 2008, whichdocuments were back-dated to October 7, 2008 by SJB.

39. During the course of communications, discussions, negotiations, and course ofdealing between OBF and SJB as regards the OBP Senior Loan Documents, SJB made materialfalse and misleading representations, misrepresentations, and omissions to OBP and SJBincluding, but not limited to, the following:

(a) OBF would be granted a valid first priority perfected security interest inthe Policy; and

(b) Failing to advise OBF of the existence of the SJB Loan Documents,including SJB's Policy Collateral Assigmnent which pre-date the OBPSenior Loan Documents.40. During the course of communications, discussions, negotiations, and course of

dealing between the Trust and sm as regards the SJB Loan Documents, SJB made material falseand misleading representations, misrepresentations and omissions to the Trust including, but notlimited to, the following:

(a) Failing to advise the Trust that OBF was the lender funding the bridgeloan;

(b) That under the terms of the OBP Senior Loan Documents tendered to theTrust by SJB for execution following execution of the 8JB Note, that thebridge loan lender (OBF) was to be granted a valid first priority perfectedsecurity interest in the Policy; and(c) That the SJB loan proceeds were required to pay for preparation ofamendment of the Trust instrument; to cure alleged deficiencies in thedocument; and for fees and charges to the Lender (OBF) for the loan topay the Lasalle Bank Note.

41. 8m knew and intended that OBF and the Trust would rely upon 8JB'smisrepresentations and omissions, and knew that these misrepresentations and omissions werematerial to OBF's and the Trust's decisions to enter into the loan agreements.


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CASE 0:09-cv..,00907-DSD-JJG Document 1-1 Filed 04/20109 Page 12 of 20

42. By its execution of the sm Note, the Trust materially changed its positionregarding the lending in reliance on the representations by SJB and Burchard in the lending.

43. SJB knew the falsity of its representations to OBF and the Trust and of theincompleteness of its statements to OBP and the Trust at the time those statements and omissionswere made, or made those representations without knowledge of the truth of thoserepresentations.

44. 8JB owed OBP and the Trust a duty to disclose all facts material to the subjectmatter of the loan agreements.

45. OBP and the Trust reasonably and justifiably relied to their detriment on thetruthfulness of SJB's representations and on the completeness of SJB's disclosures of materialfacts, and thus OBP and the Trust were induced to enter into the loan agreements.

46. In addition, sm had a special relationship of trust and confidence with both OBFand the Trust, and SIB knew or should have known that OBF and the Trust would so rely onSJB's statements.

47. But for SJB's misrepresentations, omissions, and concealment of facts material tothe participation agreements, neither OBF nor the Trust would have entered into the loanagreements.

48. SJB's misrepresentations to the Trust precipitated Trust's unintentional butmaterial breach and default of the OBP Loan Agreements at their inception.

49. As a direct and proximate cause of SJB's misrepresentations, omissions and/orconcealment of the facts material to the subject matter of the loan agreements, Plaintiffs havebeen injured and damaged in an amount to be determined at trial.

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60. Plaintiffs restate and reallege the preceding paragraphs as though fully set forth

CASE 0:09-cv-00907 -DSD-JJG Document 1-1 Filed 04/20109 Page 14 of 20

things, overseeing the timely execution of the OBF Senior Loan Documents ensuring that OBFreceived a first priority perfected security interest in the Policy.

57. As set forth above, sm and Burchard breached the duty of care they owed toPlaintiffs and otherwise failed to exercise reasonable care as a broker by, among other things,negligently and carelessly failing to timely execute the OBF Senior Loan Documents andinstead, unbeknownst to the Trust, had the Trust execute the SJB Loan Documents first.

58. A s.a direct and proximate result of SJB's and Burchard's breach of the duty ofcare they owed to Plaintiffs, and their negligence, Plaintiffs have incurred monetary damageswhich are directly attributable to SJB's and Burchard's negligence.

59. As a result ofSJB's and Burchard's negligence, Plaintiffs have been damaged inan amount in excess of$50,OOO, the exact amount to be proven at trial.

COUNTYINDEMNIFICATION(8JB and Burchard)

herein.61. As a result of SJB's and Burchard's fraudulent and negligent conduct, and

Plaintiffs' reliance thereon to their detriment, Plaintiffs are entitled to be indemnified for

COUNTYIEQUITABLE 8UBORDINATIONIPRIORITY(8JB)

damages.


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72. Accordingly, Plaintiffs seek a determination from the Court that OBF, pursuant tothe OBP Senior Loan Documents, has a first priority perfected security interest in the Policy.

COUNT IXCONSTRUCTIVE TRUST

(SJB)73. Plaintiffs restate and reallege the preceding paragraphs as though fully set forth

herein.74. Due to SJB's and Burchard's fraudulent conduct, Plaintiffs are entitled to and

request that a constructive trust be placed over any of the Policy's proceeds paid or payable toSJB.

COUNT XDISGORGEMENT(8JB)


76. Due to SJB's and Burchard's fraudulent conduct, Plaintiffs are entitled todisgorgement of any payment of the Policy's proceeds to SJB.

COUNT XIFRAUDULENT INDUCEMENT

(8JB)77. Plaintiffs restate and reallege the preceding rhetorical paragraphs as though fully

set forth herein.78. Due to SJB and Burchard's fraud in the inducement regarding the execution of the

SJB Loan Documents, and the consequences thereof, the SJB Loan Agreement with the Trust isvoid or voidable at the election of the Trust.

PRAYER FOR RELIEFWHEREFORE, Plaintiffs request that this Court enter judgment in their favor and against


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10. As to Count IX, adjudging and decreeing that a constructive trust shall be put inplace over any of the Policy's proceeds paid to SJB.

11. As to Count X, adjudging and decreeing that SJB disgorge any proceeds itreceives from the Policy.

12. As to Count XI, adjudging and decreeing that the SJB Loan Agreement with theTrust is void.

13. As to all Counts, awarding Plaintiffs all costs, disbursements and attorneys' feesrelating to the Defendants' unlawful conduct in this action.

14. For such other relief as the Court may deem just and equitable.Dated: March ~ 2009 WINTHROP & WEINSTINE, P.A.

B~ Michael J. Rothman, #0195479Aimee D. Dayhoff, #0319041225 South Sixth StreetSuite 3500Minneapolis, Minnesota 55402Telephone: (612) 604-6400Attorneys for PlaintiffOpportunity Bridge Funding, LLC


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225 South Sixth StreetSuite 3500Minneapolis, Minnesota 55402Telephone: (612) 604-6400


ACKNOWLEDGMENT

The undersigned hereby acknowledges that pursuant to Minn. Stat. 549.211, Subd. 2,costs, disbursements and reasonable attorney and witness fees may be awarded to the opposingparty or parties in this litigation if the Court should find that the undersigned acted in bad faith,asserted a claim or defense that is frivolous and that is costly to the other party, asserted anunfounded position solely to delay the ordinary course of the proceedings or to harass; orcommitted a fraud upon the Court.Dated: March;t, 2009

W~'P'A. . .,'By: '. '. = -

V~95479Aimee D. Dayhoff, #0319041

Attorneys for PlaintiffOpportunity Bridge Funding, LLC

Dated: March If,2009:A~~L.P

Charles E. Jones, # 020270833 South Sixth StreetSuite 4200Minneapolis, MN 55402Telephone: (612) 347-9140Attorneys for PlaintiffThe Germaine Tomlinson Insurance Trust

438S490vl

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