Focus 15, LLC v. NICO Corporation

Background

Focus 15 alleged that NICO Corporation entered four promissory notes between 2016 and 2017 totaling $225,000, and that NICO failed to repay the loans. Hannula and Haller guaranteed each note. Focus 15 sued NICO, Hannula, and Haller for civil racketeering under the Racketeer Influenced and Corrupt Organizations Act, breach of contract, money had and received, unjust enrichment, and unfair competition under California Business and Professions Code § 17200.

The defendants filed a second amended third-party complaint against Donadi, Cassano, and Advanced Accounting Solutions, Inc. They sought indemnity, contribution, and declaratory relief. Cassano and Advanced Accounting Solutions moved to dismiss, and Donadi separately moved to dismiss. The defendants also moved for judgment on the pleadings against Focus 15’s claims. A motion for judgment on the pleadings tests whether the pleaded facts state a legally plausible claim, using essentially the same standard as a motion to dismiss for failure to state a claim.

Third-Party Claims

The court granted Cassano and Advanced Accounting Solutions’ motion to dismiss without prejudice. The parties had clarified that payments were made before April 2017, and the defendants did not oppose dismissal of the claims against those third-party defendants.

The court rejected Donadi’s argument that contribution and indemnity claims were premature because no money judgment had yet been entered. The court concluded that Federal Rule of Civil Procedure 14 permits related third-party claims to be brought in the same action even when the claims have not yet accrued under the governing substantive law.

The court denied Donadi’s motion to dismiss the contribution claim. The defendants alleged that Donadi owned 30% of NICO and personally guaranteed the 2016 promissory notes, which was enough to state a contribution claim at the pleading stage.

The court granted Donadi’s motion to dismiss the equitable-indemnity claim. Equitable indemnity generally requires a basis for tort liability and resulting damages for which the proposed indemnitor is equally responsible. The court found that the defendants’ allegation that Donadi was “in some way tortiously responsible” was conclusory and that the claim rested only on his status as a co-guarantor.

The court denied dismissal of the declaratory-relief claim because it declined to dismiss the contribution claim on which that request was based.

Judicial Notice

The court granted Donadi’s motion to take judicial notice of two exhibits: the second amended third-party complaint and a state-court complaint. Judicial notice allows a court to recognize certain undisputed facts or public records without ordinary proof. Here, the court recognized the existence of the documents and the similar allegations in the state-court complaint, but not the truth of disputed facts asserted in that complaint.

Focus 15’s Racketeering Claims

The court granted the defendants’ motion for judgment on the pleadings on Focus 15’s civil racketeering claims under 18 U.S.C. § 1962(c) and (d). Focus 15 based those claims on alleged mail and wire fraud arising from the loans.

The court held that Focus 15 did not plead the alleged fraud with the particularity required by Federal Rule of Civil Procedure 9(b). The complaint’s assertion that the defendants entered the notes while never intending to repay the loans was conclusory. The court also noted that payments had been made on two of the loans. In addition, the court held that Focus 15 alleged only one scheme involving one victim over less than a year, which did not establish the required continuing pattern of racketeering activity. Either defect independently supported dismissal of the racketeering claims.

Money Had and Received and Unjust Enrichment

The court denied the motion for judgment on the pleadings on the money-had-and-received and unjust-enrichment claims, subject to a limitations ruling on the money-had-and-received claim.

For money had and received, the court applied a two-year statute of limitations and the continuous-accrual theory. Under that theory, each missed recurring payment can start its own limitations period. The court held that nonpayments within two years before the complaint was filed on March 17, 2021, remained actionable, while claims based on nonpayments before March 17, 2019, were barred.

For unjust enrichment, the court treated the claim as based on the written promissory notes and the alleged failure to pay under those notes. It applied a four-year limitations period and found that no conduct fell outside that period. The unjust-enrichment claim therefore was unaffected by the statute of limitations at this stage.

Unfair-Competition Claim

The court granted the defendants’ motion for judgment on the pleadings on Focus 15’s claim under California Business and Professions Code § 17200. The court held that Focus 15 had not sufficiently pleaded fraud or a racketeering claim and had alleged only conduct based on breach of contract. Those allegations did not provide a sufficient basis for the unfair-competition claim.

Disposition

The order granted in part and denied in part Donadi’s motion to dismiss: it granted dismissal of the indemnity claim and denied dismissal of the contribution and related declaratory-relief claims. It granted Cassano and Advanced Accounting Solutions’ motion to dismiss without prejudice. It granted the defendants’ motion for judgment on the pleadings as to the racketeering and California Business and Professions Code claims, and denied that motion as to the money-had-and-received and unjust-enrichment claims, except that the money-had-and-received claim was partially barred by the two-year statute of limitations. The order disposed of Docket Nos. 42, 44, and 47.