ASI, Inc. v. Aquawood, LLC

Background

ASI, Inc., formerly known as Aviva Sports, Inc. (“Aviva”), sued multiple individuals and companies. Aviva sought to collect an $8,588,931.59 judgment entered against Manley Toys, Ltd. in an earlier Minnesota federal case. Manley Toys, Ltd. was not a defendant in this action.

Aviva alleged that the defendants operated an interconnected group called the “SLB Enterprise” and shifted assets, sales, and business relationships among different companies to avoid paying the judgment. The complaint asserted claims for civil fraud, abuse of process, civil conspiracy, and violations of the Racketeer Influenced and Corrupt Organizations Act, commonly called RICO.

Three groups of defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(2), for lack of personal jurisdiction, and Rule 12(b)(6), for failure to state a legally sufficient claim. The motions also raised arguments concerning the law-of-the-case doctrine, claim and issue preclusion, pleading requirements, and statutes of limitations.

Personal Jurisdiction

The court denied the Rule 12(b)(2) motions.

The court found specific personal jurisdiction over Samson Chan, Alan Chan, Lisa Liu, Brian Dubinsky, and Toy Quest Ltd. Aviva alleged that these defendants directed or participated in conduct aimed at Minnesota, including a sham motion in earlier Minnesota litigation, allegedly false statements or affidavits submitted to the Minnesota court, and allegedly fraudulent transactions involving a Minnesota company. The court concluded that these allegations established sufficient contacts with Minnesota and a sufficient connection between those contacts and Aviva’s claims.

The court found conspiracy-based personal jurisdiction over Richard Toth, Michael Wu, Peter Magalhaes, Aquawood, LLC, Banzai International Limited, Dollar Empire LLC, Park Lane Solutions Ltd., and Wellmax Trading Ltd. The court relied on its jurisdiction over certain alleged conspirators and allegations that acts furthering the conspiracy occurred in Minnesota.

The court also found personal jurisdiction over MGS International, LLC for the RICO claims under 18 U.S.C. § 1965(b). The court concluded that the “ends of justice” supported bringing MGS into the same action because it already had jurisdiction over the other RICO defendants.

The court rejected the defendants’ arguments that the earlier Minnesota litigation prevented jurisdiction under the law-of-the-case doctrine, claim preclusion, or issue preclusion. The court explained that the defendants had been nonparty respondents in a post-judgment sanctions proceeding, not parties to the earlier action, and that the jurisdictional issue in the two proceedings was not the same.

Pleading Requirements and RICO Claims

The court denied the motions under Rules 8 and 9(b). Although the complaint was long, confusing, and contained many counts, the court held that it provided sufficient notice of the claims. The court also held that Aviva pleaded the fraud-based allegations with the particularity required by Rule 9(b), which generally requires details about who made the alleged misrepresentation, what was said or done, where and when it occurred, and how it was fraudulent.

The court rejected the defendants’ statute-of-limitations arguments concerning the RICO claims. RICO claims have a four-year limitations period, generally beginning when the plaintiff discovered or should have discovered the injury. The court held that Aviva plausibly alleged that the relevant injury occurred in 2015 or 2016, when the defendants allegedly moved Manley’s assets. Because the complaint did not establish the time bar on its face, dismissal was not appropriate at this stage.

The court held that Aviva sufficiently alleged a RICO injury. Aviva alleged that it held a valid judgment, attempted to collect it, and was prevented from doing so by the defendants’ alleged RICO activity. The court followed what it described as the majority view that the lost opportunity to collect a judgment can qualify as a RICO injury when those circumstances are adequately alleged.

The court also held that Aviva sufficiently alleged RICO predicate acts involving the individual and corporate defendants. It concluded, among other things, that the complaint alleged enough facts concerning allegedly false litigation documents, mail or wire fraud, concealment of assets, and related conduct. The court rejected arguments based on litigation privileges and the alleged lack of extraterritorial application for the claims involving conduct in Hong Kong. It further held that Aviva adequately alleged a connection between the alleged conspiracy and its inability to recover on the judgment.

Abuse of Process and Civil Conspiracy

Wellmax argued that Aviva’s abuse-of-process claim was time-barred. The court stated that Minnesota law had not clearly established the applicable limitations period and therefore assumed, for purposes of the motion, that the longer six-year period applied. Because the time bar was not apparent from the complaint, the court denied dismissal on that ground.

The court also denied dismissal of the civil-conspiracy claim. It reasoned that the fraud and abuse-of-process claims underlying the conspiracy claim had not been dismissed, leaving a sufficient basis for the conspiracy claim at the pleading stage.

Disposition

The court’s order states: “Defendants’ Motions to Dismiss [Docket Nos. 80, 88, and 97] are DENIED.” The decision allowed Aviva’s claims to proceed past the motion-to-dismiss stage. It did not determine whether the allegations were true or whether Aviva would ultimately prevail.