Amity Digital LLC v. Helix Digital Inc.

Background

Amity Digital LLC sued Helix Digital Inc. and James Waltz. The complaint alleges that Helix operated under the name “Helix Digital Partners, LLC,” although that was not the name of the business actually operating the company. Amity alleges that Waltz and another person entered business agreements with Amity using that name, and that Helix later failed to make the required payments.

The parties entered an agreement requiring Helix to repay $1,544,270.16 in 22 installments. Helix paid the first $50,000 installment, missed a $285,646.15 payment, and later made two additional $50,000 payments that were less than the amounts required. Amity later discovered that the separate entity named Helix Digital Partners, LLC was a Delaware hydroelectric power company with no connection to Defendants.

Amity asserted a civil Racketeer Influenced and Corrupt Organizations Act claim against Waltz, a breach-of-contract claim against Helix, and common-law claims for fraud, fraudulent concealment, negligent misrepresentation, and unjust enrichment against both Defendants. Helix failed to defend the action initially, and the court entered default liability against Helix. Defendants later moved to vacate that default and dismiss the complaint. Amity moved for sanctions against Defendants and their counsel.

Motion to Vacate Helix’s Default

The court applied Federal Rule of Civil Procedure 55(c), which allows a court to set aside an entry of default for good cause. It considered whether Helix’s default was willful, whether vacating it would prejudice Amity, and whether Helix had presented potentially valid defenses.

The court found that the willfulness factor weighed against Helix. Helix was properly served, received the court’s order requiring it to appear, and was represented by Waltz at a hearing where he was told that the company needed a lawyer. Waltz nevertheless did not retain counsel for Helix until several months later. The court stated that the record suggested Helix, through Waltz, may have made a tactical decision to default.

The prejudice factor weighed in favor of vacating the default. The court found that delay and the costs of pursuing the default were not enough, by themselves, to establish the required prejudice. It also found that discovery would not be complicated because the claims against Waltz involved the same underlying facts.

The court found that Helix had not presented a meritorious defense to Amity’s breach-of-contract claim. It noted that Waltz appeared earlier to have indicated that Helix would accept liability for that claim. The court found, however, that Defendants had advanced potentially valid defenses to the fraud and unjust-enrichment claims, including arguments that the alleged misrepresentations were not material, that Defendants lacked fraudulent intent, that the misrepresentations did not cause Amity’s injury, and that unjust enrichment duplicated the contract claim.

The motion to vacate was therefore denied with respect to Helix’s liability for the breach-of-contract claim and granted with respect to all other claims. The court held the final judgment concerning Helix’s contract liability in abeyance until the remaining claims and damages issues were resolved.

Motion to Dismiss

The court denied entirely Defendants’ motion to dismiss. As to the civil RICO claim against Waltz, the court held that Amity had adequately alleged a scheme involving Helix as an enterprise, repeated alleged fraudulent conduct, and injury to Amity’s business or property.

The court acknowledged that the complaint did not identify specific mailings or wire communications for every alleged fraudulent act. It nevertheless found that Amity had pleaded with sufficient detail the September and October 2023 iMessages between Waltz and Amity manager Stephen Magli. Those messages allegedly concerned Helix’s ability and intention to repay its debt and were alleged to have been used to delay Amity from taking legal action. The court found that the allegations were sufficient at the motion-to-dismiss stage to support the required inference of fraudulent intent, materiality, and causation.

The court also denied Defendants’ motion to dismiss the remaining claims for lack of subject matter jurisdiction. It found federal-question jurisdiction over the RICO claim and supplemental jurisdiction over the related state claims. It also found original jurisdiction over the state claims based on the parties’ alleged citizenship and the amount in dispute, while directing Amity to amend the complaint to plead the citizenship of all parties adequately.

Sanctions Motion

The court denied Amity’s motion for sanctions. Under Rule 11, a party generally must serve a sanctions motion and give the opposing party 21 days to withdraw or correct the challenged filing before filing the motion in court. The court found that Amity had not shown compliance with this safe-harbor requirement.

The court separately considered its inherent power to sanction conduct that amounts to fraud on the court. It found that the statements in Waltz’s declaration did not meet that standard because the court could not find clear and convincing evidence of deception, even though some statements appeared inconsistent with information communicated to Waltz during earlier proceedings.

Disposition

The motion to vacate Helix’s default was denied as to the breach-of-contract claim and granted as to all other claims. Defendants’ motion to dismiss the civil RICO claim was denied, and their motion to dismiss the remaining claims for lack of subject matter jurisdiction was denied. Amity’s motion for sanctions was denied. The case was referred to Magistrate Judge Wang for general pretrial management. Judge Laura Taylor Swain signed the memorandum order on March 25, 2025.