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Meklir v. J.C. Penney Co.7/5/2005
UNPUBLISHED
Before: Gage, P.J., and Cavanagh and Griffin, JJ.
Plaintiffs appeal as of right from the trial court's order granting summary disposition in favor of defendants J.C. Penney Company, Inc., Stanley Feldman, and Stanley Ltd., Inc. (Stanley). We affirm in part, reverse in part, and remand.
Plaintiffs invested in the "J.C. Penney Investment Program," which was organized by defendants Feldman and Robert J. Ball, a retired J.C. Penney executive. Plaintiffs believed this was a legitimate program that had been organized for temporarily financing the purchase of merchandise pending its resale to defendant J.C. Penney Company, Inc. Ball and Feldman allegedly advised investors that J.C. Penney orders its merchandise from manufacturers outside the United States and that it had a strict cancellation policy whereby orders were automatically cancelled if the merchandise did not arrive by the scheduled date. In that instance, the manufacturers were left with the merchandise. According to plaintiffs, Ball and Feldman explained to them that J.C. Penney would still accept the late merchandise if it could purchase it at a discount from a third party, who first acquired it from the manufacturers. Ball acted as the intermediary in these transactions and created defendant RJB Sales, Inc. to conduct the transactions. Ball and Feldman informed plaintiffs that Thomas Hutchens, J.C. Penney's president and chief operating officer, was participating in this operation on behalf of J.C. Penney.
In their complaint, plaintiffs explained how their contributions were to be used to finance these transactions:
K) Inasmuch as JC Penney would not pay for the merchandise for about six or seven weeks after RJB's cash purchase from the vendors, RJB would finance these transactions by getting investors. Accordingly, RJB needed investors to finance the cash purchases for the initial six to seven week period.
L) The JC Penney Investment Program was created as a means to finance these purchases until JC Penney would reimburse Ball/RJB for the transaction.
M) According to the JC Penney Investment Program, each investor would receive a 4% return on their investment for each transaction or seven week cycle, and an additional 1% would go to Feldman for administrative costs.
N) Depending on the availability of JC Penney merchandise purchase transactions, the total amount of returns would be approximately 28% over a period of one year.
O) Feldman would provide each investor a post-dated check for the profit, dated approximately six to seven weeks after the investment. At any time, an investor could either demand the return of their principal upon two weeks notice or just roll the principal amount over into the next merchandise purchase transaction.
P) Occasionally, JC Penney would demand a special quick turn around purchase which would generate a 4% return within one month followed by another 4% return the following month, totaling 8% return in an eight week period. Such opportunities occurred rather infrequently and on short notice, therefore, an investor would have to make an immediate decision to take advantage of such a transaction if it was presented.
Plaintiffs alleged that Feldman assured them that in the event the investment program ended, they would receive one hundred percent of their investment back without delay.
Plaintiffs allege that the investment program was in reality a Ponzi scheme and that none of their money was ever invested in the program. In May 2000, plaintiffs were advised that RJB Sales had terminated operations. Although plaintiffs made formal demands for the retu
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