United States District Court, D. Minnesota
ORDER ON DEFENDANTS' MOTION TO DISMISS
E. Brasel United States District Judge
Marie Ward bought a home from Defendants Riaz Shad and 2595
Bryant, LLC, on contract for deed, and brings a claim under
the Truth in Lending Act. The Truth in Lending Act applies
only to creditors defined specifically under the statute, and
it includes a numerical requirement for the number of credit
extensions made by the purported creditor. Defendants here
bring a motion to dismiss, arguing they do not meet the
numerical requirement, and thus the definition of
“creditor, ” under TILA. For the reasons stated
below, the Court denies the motion to dismiss.
Complaint alleges the following facts:
Marie Ward is an elderly, vulnerable adult with a fifth-grade
education. [ECF No. 1 (“Compl.”) at
¶¶7, 10-14.] ¶ 2013, Ward agreed to buy a home
on contract for deed from Defendant Riaz Shad through his
company, 2959 Bryant, LLC (“2595 Bryant”).
(Id., ¶¶77, 95, 248.) The agreed upon
purchase price was $80, 000, though Shad had purchased it
three years earlier for $25, 000 and made no improvements.
(Id., ¶¶34, 64, 78, 184(c), (e)-(f).) Shad
took Ward to the bank by herself and had her execute a
contract for deed for $180, 000, not $80, 000. At the same
time, he had her sign a quit claim deed signing away any
rights she had received under the contract for deed back to
2959 Bryant. (Id., ¶¶88-89, 96-97, Ex. N.)
The terms of the contract for deed included payment of $650
per month, but Shad demanded and collected $1, 050 or $1, 100
per month instead. (Id., ¶¶101(a)-(b).)
103, 106-107, Ex. M.) Defendants then attempted to evict Ward
by recording the quit claim in the property records in 2018,
and filed a complaint in Hennepin County housing court
alleging breach of a verbal lease agreement. (Id.,
¶¶130- 135, 139, Exs. N, R.)
suit alleges violations of TILA and several state law claims.
Ward argues that Shad meets the definition of creditor under
TILA because he is a sophisticated real estate operator who
has owned many properties through various limited liability
companies. (See id., ¶¶17-19, tbl.) From
2009 through 2017, he purchased many North Minneapolis
properties through LLCs created expressly for those
purchases, even naming the LLCs for the specific addresses.
(Id.) At least three other family members or
business associates were involved in some of Shad's real
estate purchases. (See id., ¶19, tbl.) Around
the time Ward executed the contract for deed, Shad had
interest in at least 12 houses in North Minneapolis.
(Id.) The scheme Ward asserts under TILA is that
Shad enters into contracts for deed and has the buyers
execute quit claim deeds back to the sellers, his LLCs,
before the buyer defaults on the contract, for the purpose of
avoiding contract for deed cancellation requirements.
(Id., ¶¶25-28, tbl.) Ward asserts at least
six such contracts for deed between 2011 and 2015.
(Id., ¶27, tbl.) In addition, Ward alleges
Defendants were interchangeable, in that Shad wrote money
orders out to himself personally rather than to 2959 Bryant,
and obtained a rental license in his own name rather than as
2959 Bryant. (Id., ¶¶43, 50, 104, 125, Ex.
also masks interest in inflated purchase prices and lump sum
payments due about a year into the contracts, despite
claiming the contracts for deed are “no interest”
loans. (Id., ¶228.) This hidden interest is
present in Ward's loan in the form of an inflated
purchase price, a $10, 000 lump sum payment due one year into
the contract, and a demand from Shad for $400-$450 more per
month than the contract required. (Id., ¶214.)
Ward asserts that Shad has spread his real estate holdings
among family, business associates, and separate LLCs, all in
an attempt to avoid responsibility as a
“creditor” under TILA. (Id.,
STANDARD OF REVIEW
12(b)(6) of the Federal Rules of Civil Procedure provides
that a defendant may move to dismiss a claim if, on the
pleadings, a party has failed to state a claim upon which
relief may be granted. In reviewing a motion to dismiss under
Rule 12(b)(6), the Court must accept as true all factual
allegations and view them in the light most favorable to the
plaintiff. Schaller Tel. Co. v. Golden Sky Sys.,
Inc., 298 F.3d 736, 740 (8th Cir. 2002). When
“addressing a motion to dismiss, the court may consider
the pleadings themselves, materials embraced by the
pleadings, exhibits attached to the pleadings, and matters of
public record.” Mulvenon v. Greenwood, 643
F.3d 653, 656-57 (8th Cir. 2011) (quotation and citation
Federal Rule of Civil Procedure 8(a)(2), a pleading must
contain a “short and plain statement of the claim
showing that the pleader is entitled to relief.” To
state a claim, a plaintiff must plead facts sufficient to
“raise a right to relief above the speculative
level.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2008); see also Schaaf v. Residential Funding
Corp., 517 F.3d 544, 549 (8th Cir. 2008). “A claim
has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (citing Twombly, 550 U.S. at 556). Whether a
complaint states a claim is a matter of law. Morton v.
Becker, 793 F.2d 185, 187 (8th Cir. 1986). A motion to
dismiss must be granted when the complaint does not allege
“enough facts to state a claim to relief that is
plausible on its face, ” rather than merely
conceivable. Twombly, 550 U.S. at 570;
Iqbal, 556 U.S. at 678-79.
Shad's Declaration is Excluded.
“matters outside the pleadings are presented to and not
excluded by the court” a motion to dismiss “must
be treated as one for summary judgment.” Fed.R.Civ.P.
(12)(d). But a “court may consider the pleadings
themselves, materials embraced by the pleadings, exhibits
attached to the pleadings, and matters of public
record” without converting a motion to dismiss as one
for summary judgment. Mulvenon v. Greenwood, 643
F.3d 653, 656-57 (8th Cir. 2011) (citation and quotation
submitted a declaration with his moving papers, asserting
that he made no personal loans and was involved in only four
sales of real property between 2012 and 2013. [ECF No. 20
(“Shad Decl.”) at ¶¶4-5.] Attached to
the declaration are exhibits of contract for deeds for those
sales. (Id., ¶¶9, 13, 22.) While the
exhibits are matters of public record, Shad's statements
that he made no personal loans and was involved in only four
sales are not part of the public record, nor are they
embraced by the Complaint. Considering these statements would
require the Court to treat the motion as one for summary
judgment, which the Court declines to do. See Fed.
R. Civ. P. 56(d); Iverson v. Johnson Gas Appliance
Co.,172 F.3d 524, 530 (D. Minn. 1999) ...