Fleetwood Services, LLC v. Ram Capital Funding, LLC

Background

Fleetwood Services, LLC alleged that it entered into an agreement with Ram Capital Funding LLC that was labeled a purchase and sale of future receivables but functioned as a loan. The agreement called for a $100,000 advance and repayment of $149,900 through daily payments of $1,399. Fleetwood alleged that Richmond Capital Group LLC provided only $50,000 and began withdrawing the daily payments.

Fleetwood claimed that the agreement was a loan because, among other things, repayment came from funds other than purchased receivables, Fleetwood retained the risks and benefits of ownership of its future receipts, Fleetwood remained absolutely liable for repayment, the agreement gave Ram a security interest in substantially all of Fleetwood’s assets, and the payments were fixed. Fleetwood asserted claims for breach of contract, money had and received, violations of Texas and New York usury laws, and violations of the Racketeer Influenced and Corrupt Organizations Act. Fleetwood also alleged that Ram, Richmond, Tsvi Reich, and Robert Giardina operated an association-in-fact enterprise to solicit, fund, service, and collect on allegedly usurious loans.

Richmond brought a counterclaim seeking indemnification from Fleetwood under the agreement. Richmond also brought crossclaims against Ram and Reich for breach of contract and good faith obligations and for indemnification.

Giardina’s Motion to Dismiss

The court denied Giardina’s motion to dismiss Fleetwood’s amended complaint. The court first explained that Giardina could not seek dismissal of claims that Fleetwood did not assert against him. The amended complaint asserted the contract, money, and state-usury claims against Richmond, not Giardina. It asserted the racketeering claim against Giardina and did not assert civil-conspiracy or racketeering-conspiracy claims. The court therefore denied Giardina’s motion to the extent it challenged claims not brought against him.

The court also rejected Giardina’s arguments concerning Fleetwood’s racketeering claim. Because the claim was based on the alleged collection of unlawful debt rather than fraud, the heightened requirement for pleading fraud with particularity did not apply. The court further held that a claim based on collecting unlawful debt did not require proof of two or more collection acts in the same way that a racketeering-pattern claim does. In any event, the complaint described multiple alleged unlawful collections and similar practices involving other merchants.

The court also rejected Giardina’s argument that a settlement agreement released him. The agreement released Ram and Reich and certain persons connected with them, but expressly preserved claims against Richmond and Giardina. The court concluded that Giardina could not rely on the agreement to dismiss Fleetwood’s claims.

Fleetwood’s Motion to Dismiss Richmond’s Counterclaim

The court granted Fleetwood’s motion to dismiss Richmond’s counterclaim for indemnification. The counterclaim relied on Section 1.6 of the agreement, which required the merchant and guarantors to indemnify the “Processor” for certain losses and claims.

The court held that Richmond was not the “Processor” protected by Section 1.6. Reading the agreement as a whole, the court understood that term to refer to the agent processing checks deposited into Fleetwood’s account, not to Richmond, which was alleged to have debited the account and deducted the money. The court also concluded that the alleged claims did not fall within the provision’s specified categories. Ram had not asserted claims in the action, and the complaint did not allege that a processor acted based on fraudulent, misleading, or deceptive instructions from Ram.

Ram and Reich’s Motion to Dismiss Richmond’s Crossclaims

The court granted Ram and Reich’s motion to dismiss Richmond’s crossclaims. The first crossclaim alleged that Ram and Reich breached duties of good faith and fair dealing and improperly withdrew funds. The court held that Richmond did not allege that it was a party to a contract with Ram or Reich, a third-party beneficiary, or otherwise owed a contractual duty by them. The court therefore dismissed that crossclaim for failure to state a claim for relief.

The second crossclaim sought indemnification under the same Section 1.6 provision. The court held that the claim failed for the same reasons as Richmond’s counterclaim against Fleetwood. The provision did not impose an indemnification obligation on Ram or Reich; instead, it imposed obligations involving Fleetwood and the guarantors.

Disposition

The court denied Giardina’s motion to dismiss the amended complaint, granted Fleetwood’s motion to dismiss Richmond’s counterclaim, and granted Ram and Reich’s motion to dismiss Richmond’s crossclaims. Judge Lewis J. Liman directed the Clerk of Court to close the three motions.