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Orion Property Group, LLC v. Hjelle

United States District Court, E.D. New York

January 15, 2020

ORION PROPERTY GROUP, LLC, individually and on behalf of all others similarly situated, Plaintiff,
v.
MARK HJELLE, Defendant.

          For Plaintiffs David Slarskey, Esq. Slarskey LLC, Vincent Michael Serra, Esq. Robbins Geller Rudman & Dowd, LLP, Christopher C. Gold, Esq., pro hac vice Rachel L. Jensen, Esq., pro hac vice Bradley Beall, Esq., pro hac vice Robbins Geller Rudman & Dowd LLP, Barbara C. Frankland, Esq., Brennan P. Fagan, Esq., pro hac vice Fagan Emert & Davis, L.L.C. Larkin E. Walsh, Esq. Rex. A. Sharp, Esq. Scott B. Goodger, Esq. Ryan C. Hudson, Esq., pro hac vice, William Skepnek, Esq., pro hac vice

          For Defendant William Edward Vita, Esq. Westerman Ball Ederer Miller & Sharfstein, LLP, Kelly H. Foos, Esq., pro hac vice, Paul A. Williams, Esq., pro hac vice Robert J. McCully, Esq., pro hac vice Shook, Hardy & Bacon L.L.P.

          MEMORANDUM & ORDER

          JOANNA SEYBERT JUDGE

         On December 29, 2017, plaintiff Orion Property Group, LLC (“Plaintiff”), on behalf of itself and all others similarly situated, commenced this putative nationwide civil Racketeering Influenced and Corrupt Organizations Act (“RICO”) class action against defendant Mark Hjelle (“Defendant”), chief executive officer of CSC ServiceWorks, Inc. (“CSC”), in the United States District Court for the District of Kansas, alleging that Defendant orchestrated a fraudulent plan to steal 9.75 percent of gross receipts each month from CSC customers, including Plaintiff. On January 3, 2019, this case was transferred to the United States District Court for the Eastern District of New York. (Transfer Order, D.E. 49.)

         Currently pending before the Court is Defendant's motion to stay this action pending approval of settlement proceedings in a parallel action against CSC in 1050 West Columbia Condominium Association, et al. v. CSC ServiceWorks, Inc., No. 2019-CH-07319 (Circuit Court of Cook County, Illinois) (the “Illinois Action”). (Mot., D.E. 82; Vita Aff., D.E. 82-1, ¶ 3.) For the reasons set forth below, Defendant's Motion is GRANTED.

         FACTUAL BACKGROUND[1]

         I. The Parties

         Defendant is a Maryland resident and an attorney who, on July 14, 2016, was appointed as CSCs Chief Executive Officer. (Am. Compl., D.E. 4, ¶¶ 7-8, 35.) CSC is a Delaware corporation headquartered in Plainview, New York. (Am. Compl. ¶ 35.) CSC leases space from owners of multi-family residential and commercial apartment buildings and other entities to install, maintain, and operate coin-operated and/or card-operated laundry equipment at more than 80, 000 locations across the country. (Am. Compl. ¶¶ 3, 37, 42.) Under the lease agreements, CSC pays “rent” for the leased space most commonly in the form of a portion of the money collected from the equipment. (Am. Compl. ¶¶ 43, 45-49.) Many of the laundry leases at issue here are between putative class members and “Coinmach, ” a division of CSC. (Am. Compl. ¶¶ 3-4.)

         Plaintiff is a limited liability company headquartered in Kansas that manages properties in more than twenty states across the country. (Am. Compl. ¶ 33.) Plaintiff signed a laundry vending machine license agreement with CSC for vend-based laundry equipment at properties Plaintiff manages and also on behalf of another property Plaintiff operates as an agent. (Am. Compl. ¶ 33.)

         II. Defendant's Alleged Fraudulent Scheme

         After his appointment to CEO, Defendant devised a scheme to increase CSC's revenues by imposing an “administrative fee” to siphon off 9.75 percent of gross collections under laundry leases (the “Administrative Fee”). (Am. Compl. ¶¶ 13, 57.) Specifically, on May 17, 2017, Defendant wrote, signed, and mailed a letter to all CSC Customers, including Plaintiff, that misled CSC customers into believing that their lease agreements authorized CSC to charge the Administrative Fee (the “May 17 Letter”). (Am. Compl. ¶¶ 14-15.) The May 17 Letter falsely stated that the Administrative Fee resulted in a “net gain to customers” and that CSC would “waive” other costs that it could have collected, but did not, under existing lease agreements. (Am. Compl. ¶ 23.) Further, the May 17 Letter provided for a purported “additional benefit” of up to $200 to cover events related to vandalism. (Am. Compl. ¶ 16.) In an effort to conceal his scheme, Defendant created a website dedicated to “fee transparency.” (Am. Compl. ¶ 17.) Thereafter, CSC customers' monthly statements and/or payments reflected the improper 9.75 percent Administrative Fee deduction. (Am. Compl. ¶¶ 61-62.)

         PROCEDURAL HISTORY

         I. This Action

         Plaintiff initiated this putative class action on December 29, 2017 (Compl., D.E. 1) in the District of Kansas and filed an Amended Complaint on February 28, 2018 (see Am. Compl.). The Amended Complaint asserts a single cause of action against Defendant for a ...


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